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Uruguayan fintech dLocal looks for acquisitions, considering buybacks

By Sarah Morland

(Reuters) - Uruguayan digital payments company dLocal said on Tuesday it is looking at possible acquisitions aimed at boosting its commercial distribution, services and geographic footprint.

The emerging markets focused company reported fourth quarter results on Monday and said co-CEO Sebastian Kanovich would step down and join a committee focusing on potential acquisitions.

"We expect there is going to be consolidation in the market," said dLocal Chief Executive Pedro Arnt said on a call.

"Many companies that don't have a good financial model are running out of cash. We're getting many offers to purchase companies but we want to be careful," Arnt added.

After dLocal reported some $536 million in cash and equivalents at the end of last year, company executives said on Tuesday that it was also considering share buybacks.

Although its quarterly earnings increased, they missed analysts forecasts and dLocal's stock slumped 18% in early trading, knocking around $950 million from its market value.

Analysts at JPMorgan noted "another polluted quarter" as 2024 guidance also implied slower growth than hoped.

"This is a lumpy business," Arnt said, noting that some emerging market merchants, while slow to ramp up, would then track aggressive growth. Chinese e-commerce firms targeting Latin American markets marked some of this growth, he said.

Customers of dLocal include China's Shein, Temu and Didi, as well as Amazon, Google and Spotify.

Meanwhile in Argentina, dLocal forecast that cross-border transactions would pick up in the medium-term as President Javier Milei's government pursues a project to lift capital controls.

Executives at dLocal said it also invested in new government bonds to shield funds from currency changes amid Argentina's worst economic crisis in decades.

Asked about an Argentine tax probe announced last year, Arnt said there were no significant updates and dLocal was being treated as a source of information, not an investigated party.

"We've been through a lot in the last year," Kanovich said, adding dLocal had nevertheless grown its customer base.

"We are very, very optimistic from what we've seen in 2023 and what we're seeing for the future," he added.

(Reporting by Sarah Morland and Natalia Siniawski; Editing by Alexander Smith)