MTN faces massive drop in profit due to Nigeria currency devaluation

MTN office on 14th Ave in Fairland Johannesburg. Picture: Timothy Bernard/ Independent Newspapers

MTN office on 14th Ave in Fairland Johannesburg. Picture: Timothy Bernard/ Independent Newspapers

Published Mar 4, 2024


MTN Group’s share price ended lower on Friday after it predicted that its annual results to December wilhard hit by the sharp devaluation in Nigeria’s naira against the US dollar, despite a good operational performance by Africa’s biggest cellphone operator.

The foreign exchange losses in subsidiary MTN Nigeria's financials were estimated to be a whopping 593 cents (2022: 52c). This is more than half the entire group’s 1071c earnings per share reported by MTN in the 2022 financial year.

MTN now expects its 2023 earnings per share to decline by between 90 and 70%, or by 964c and 750c, to between a range of 107c to 321c, the group said in a trading update Friday. The final results are expected to be released on March 25.

“The group anticipates reporting a resilient underlying operational performance…in a challenging operating environment,” but the currency devaluation in Nigeria had caused higher operating and finance costs for the group’s Nigerian subsidiary, the group directors said.

The share price ended 0.7% lower at R84.06 on Friday. The price is only slightly higher than R80.32 a year ago.

The sliding earnings per share forecast includes impairment losses that mainly relate to investments, goodwill, property, plant and equipment and remeasurement of non-current assets held for sale, totalling about -40c per share (-44c).

It also included an impairment loss on remeasurement of disposal groups of -50 cents (-70 cents), a net gain on the disposal of SA towers of 3 cents (22 cents) and the net loss on disposal of property, plant and equipment and intangible assets of -1 cents (9 cents).

MTN’s headline earnings per share (Heps) were expected to decline by between -80% and -60%, to a range of 231 cents to 462 cents.

Heps was negatively impacted by some non-operational items of about -889c including hyperinflation adjustments of -151c and foreign exchange losses of -715c, which includes the naira depreciation impact.

Remeasurement of deferred tax assets of nil (-65c); and other non-operational items of -23c, were also included.

MTN Nigeria said on Friday that it saw “pleasing user base expansion” across its connectivity business and platforms over the past year, and there had been strong growth in key commercial metrics – including data traffic (up 44.9% year-on-year) and MoMo PSB transaction volume (49.2%) – both of which drove robust local currency service revenue growth of 22.7%, with a 25% acceleration in the fourth quarter,.

However, the foreign exchange devaluation meant it reported a taxed loss of N137 billion (R1.65bn) compared with the N348.7bn taxed profit in 2022.

“This resulted in negative retained earnings and total equity at the end of December 2023 of N208bn and N40.8bn, respectively.” MTN Nigeria, nevertheless, saw strong free cash flow generation (up 11.6% y/y to N631.6bn).

In June 2023 the Central Bank of Nigeria (CBN) had introduced changes to Nigerian forex operations, which required the immediate collapse of all segments of the market into the investor and exporter (I&E) window and reintroduced the 'willing buyer, willing seller' model to improve forex liquidity.

This led to a 96.7% devaluation in the exchange rate since the announcement to N907.1/US$ (NAFEM rate) at the end of December 2023.

Due to a restatement of finance lease costs for MTN’s towers in Nigeria, the 2022 full year taxed profit was restated lower by N10.2bn to N348.7bn, resulting in a closing total equity of N262.5bn from N335.7bn.


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