Foreign exchange loss slashes MTN’s profit by 68% to N27bn in Q2

MTN Nigeria Plc was hit by a foreign exchange (FX) loss of N126.8 billion in the second quarter (Q2), which crashed after-tax profit for the quarter by 67.7 percent year-on-year to N27.4 billion. The figure is more than ten and half times the multiplication of a foreign exchange loss of N12 billion in the same quarter last year.

The Q2 accounts for much of an FX loss of N131.5 billion the telecommunications company has reported at the end of its half-year operations.

The company’s interim financial report for the six months ended June 2023 shows that the FX loss changed its earnings reading from 19.7 percent increase in operating profit at half-year to a drop of 25.4 percent in pre-tax profit to N200.4 billion for the six months of trading — a drop of more than N68 billion.

Rising interest expenses on the company’s huge borrowings and leases added to the pressure from FX losses and jerked up total finance cost more than two and half times year-on-year to N237.6 billion at half-year.

Balance sheet debts swelled by N116 billion over the six-month period to hit over N1,187 billion in borrowings and leases at half-year.

The Q2 accounted for N182 billion or 76.6 percent of the cost of finance at half-year and also led year-on-year growth of the same at 259.8 percent.

Besides the setback of FX losses and rising finance costs, MTN Nigeria is maintaining stable growth in revenue so far in the year, while managing to cope with pressure from operating costs.

The company closed half-year operations with a turnover of N1,158.7 billion, up by 22 percent year-on-year. Revenue from voice services ended only marginally ahead of data at N474 billion compared to N469.4 billion at half-year.

However, earnings from data services grew more than two and half times ahead of voice-generated revenue at 34.8 percent compared to 13.6 percent.

Revenue from data services has, therefore, increased further its contribution from 38 percent of total revenue at the end of 2022 to N40.5 billion at half-year 2023 — a sustaining growth from 21 percent in 2021.

All the company’s revenue lines grew during the period with SMS showing a strong growth of 40 percent to N41.7 billion while digital services advanced by 52.6 percent to N17.4 billion.

The company’s management is not letting costs grow as rapidly as they did in 2022 but margins are still coming under pressure from operating costs.

Direct network operating cost — the main cost line — rose ahead of revenue at 28.3 percent to almost N277 billion at half-year. That, with other rising costs, made an incursion into revenue, which depressed the operating cost margin at 36.4 percent during the period.

Operating profit, therefore, grew at a slower pace than revenue at 19.7 percent to close at N421.6 billion for the half-year. This still represents an additional inflow of N69.3 billion as operating profit for the period.

The increase in operating profit together with finance income of N16.4 billion were consumed by the upsurge in finance cost from N90.7 billion in the same period last year to N237.6 billion at half year.

Finance cost consumed 56.4 percent of operating profit at half-year, rising from 25.8 percent in the same period in the prior financial year.

Pre-tax profit went down by N68.2 billion or 25.4 percent year-on-year to stand at N200.4 billion for the six months of operations while after-tax profit dropped by 29 percent to N128.7 billion over the period.

The company had grown after-tax profit by 28 percent to N181.6 billion over the same period last year. Net profit margin fell from 19.1 percent in the same period in 2022 and from 17.8 percent at the end of the year to 11.1 percent at half-year 2023.

The rate of profit growth slowed down last year from 45.5 percent in the preceding year, 2021, to 20.2 percent to close at N359 billion at the end of 2022. The slowdown has extended to a drop in the current financial year.