Johannesburg - Africa’s biggest cellphone network operator MTN yesterday flagged a drop in profits in the half year to June owing to exchange rate fluctuations.
The weakness in the Nigerian naira, coupled with that of the Iranian rial against the US dollar during the period under review, were the main drivers of the currency fluctuations.
The announcement caused the company’s shares to fall by 5.98 percent on the JSE to close at R200.30 yesterday.
MTN said headline earnings a share would decline by between 10 percent and 15 percent to a range between 656c and 620c. Attributable earnings a share were also expected to slump by between 10 percent and 15 percent to between 658c and 621c for the six months ended June, the company said.
“Adverse exchange rate (and cross rate) movements impacted both the rate at which revenues and earnings before interest, taxes, depreciation, and amortisation (Ebitda) were translated, as well as resulting in increased forex (foreign exchange) losses when compared to the prior comparable period,” the company said.
MTN reported headline earnings a share and earnings a share of between 729c and 731c per share, respectively during the previous comparative period last year.
Sibonginkosi Nyanga, an analyst at Imara SP Reid, said the exchange rate fluctuations arose from the conversion of various local currencies to the US dollar.
He added that greater rand weakness against the US dollar would have been a buffer for the company, compared with other currencies.
The rial weakness hurt state-owned Irancell earnings, in which MTN owns a 49 percent stake.
Nigeria is a key market for MTN with more than 60 million users, but the naira fell to its lowest level earlier this year.
MTN operates in 22 countries in the Middle East and Africa.
Sanctions
Last week’s decision by the UN Security Council and the EU to approve a nuclear deal with Iran is expected to lead to the lifting of sanctions imposed by Europe and the US.
Credit ratings agency Moody’s said last week that the lifting of the sanctions was good news for the company as it would now be able to repatriate trapped funds of up to $1.1 billion (R13.9bn) as of the end of December.
The 21 year-old cellular giant appointed Mteto Nyati as the MTN South Africa chief executive earlier this month, after experiencing a four-week strike marred by violence and the resignation of former chief executive Ahmad Farroukh.
Business Report