Klarna Australia has added to the already disastrous set of reporting from its main company by reporting $56 million in losses last year.
The result has been described as “catastrophic” with questions now being raised over the viability of the business.
Klarna has had billions knocked off its global valuation this year, while it sacked 10% of its workforce in an effort to cut costs in May.
The audit of the 2021 financial accounts for Klarna Australia conducted by Ernst & Young and lodged with local regulators has identified real concerns that the Australian arm may not survive.
The accounts revealed that Klarna Australia had posted a 12 month net loss of $56 million, which was four times bigger than when it launched in the country in 2020, when it reported a $14 million loss.
The audit revealed that it had suffered a 71% slide in merchant and consumer commission revenue to only $3.1 million in 2021, compared to $10.8 million the previous year.
It also saw a blowout in credit loss charges from $169,271 in 2020 to $8.5 million, while it spent a whopping $27 million on marketing costs.
The accounts also indicated Klarna had only a 1.1% share of the national BNPL market despite the marketing budget.
The company also had a net asset deficiency of more than $70 million on 31 December last year and the audit revealed that the parent company has been forced to prop up the Australian arm.
Ernst and Young partner Michael Byrne said in the audit 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”.
Klarna’s woes are a reflection of the broader trend in the sector, with warnings there is potential “carnage” coming as BNPL providers burn through cash, bad debts balloon and customers retreat from using the service.
Popular providers such as Afterpay and Zip are facing immense pressure in the current economic climate with Zip’s shares plummeting an extraordinary 76% this year, while Afterpay posted a staggering mid-year loss just months after being acquired for $39 billion.
