New Oriental, a Chinese online tutoring provider, reported substantial losses in its first earnings report after Beijing prohibited profit-making in the $100 billion-a-year private education market.
The education company, which is listed on the New York Stock Exchange, posted a $876 million loss for the six months ended November 30, compared to a $229 million profit a year earlier.
Following China’s crackdown in July as part of a larger government push to lower child care expenses and raise the country’s low birth rate, New Oriental blamed the losses on the “substantial adverse impact” of having to suspend its tutoring services for school-age kids.
As a result of Beijing’s crackdown on the once-profitable tutoring business, the value of US-listed Chinese education technology companies has plummeted. New Oriental’s stock has dropped more than 92% since its high last year, while Tal Education’s stock has dropped 96%.
New Oriental attributed its losses to layoff costs after laying off 60,000 employees and having to pay for the termination of property leases after closing many of its education centers in China.
The announcement came a day after Tal Education announced a $1 billion net loss for the nine months ended November 30, compared to a profit of $53 million a year earlier.
As Beijing intensifies its attempts to stamp out pricey kid extracurriculars that create social inequality, Other Oriental has been looking for new revenue streams, like as adult tutoring services and camping vacations. Yu Minhong, the education group’s chair, advised his surviving employees to be “bold” in seeking “new business prospects” matched with government objectives in January.
As it seeks a future beyond the regulatory onslaught, the corporation has invested in a number of new initiatives in recent months, including a stationery company and a data storage service.
The financial impact of Beijing’s regulatory power has been emphasized by recent losses in the private education industry, as investors continue to dump stocks in some of the country’s major online businesses.
The recent steps, according to Michael Norris, senior research analyst at Shanghai-based consultancy AgencyChina, were a “wake-up call” to investors that China’s regulatory storm was far from finished.
