Klarna Australia reports losses of $56m last year

Klarna’s Australia business racked up spiralling losses of $56m last year and auditor Ernst & Young has cast doubt on whether it can continue as a going concern, according to media reports.

Losses in 2021 amounted to four times what they were in 2020, when Klarna launched in Australia, when losses came in at $14m, according to an official audit of Klarna’s performance last year, seen by Australian media.

The losses mark the latest setback to hit Klarna, one of the most well-known fintechs in Europe and last year its highest valued, which has been hit by job cuts and seen billions knocked off its valuation.

The audit of Klarna’s Australia business, which has not been seen by AltFi, was conducted by EY in August and filed with local regulators in October,reports say.

EY's audit also revealed that Klarna’s parent company has been forced to financially support its Australian division.

In the audit, EY partner Michael Byrne said that operating losses and the net asset deficiency caused material uncertainty “that may cast significant doubt on the group’s ability to continue as a going concern”.

But Klarna, headed up by CEO and co-founder Sebastian Siemiatkowski, said the Swedish fintech projected continued improvement in operating results for future years, according to notes attached to the audit.

Klarna also vigorously refuted any suggestion it would be exiting the Australian market.

“A letter of support has been obtained from the company’s parent entity to support the company for at least 12 months from the date of signing of this report,” said notes in the audit dated 19 August.

The audit also reveals that Klarna was hit by a 71 per cent plummet in merchant and consumer commission revenues which came in at $3.1m in 2021, compared to $10.8m the previous year.

Credit loss charges surged $169,271 in 2020 to $8.5m last year.

But experts say that Klarna’s challenges in Australia are part of broader challenges facing the sector, which is being hit by consumers turning away from the sector and Klarna and rivals burning through money.

A spokesperson for Klarna said: “This analysis is inaccurate. 2020 reflects a significant contribution from Klarna Group of more than AUD $10m. Subsequent financial contributions have been in the form of debt which are reflected elsewhere in the accounts in 2021.  

"We are very pleased with our performance in Australia where revenue more than tripled in 2021, and Gross Merchandise Volume increased 5x with continued strong progress in 2022. We now have over 4m consumers and partner with major brands including most recently The Iconic.

"Klarna is committed and dedicated to Australia as ever before and has never exited a market.”