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MTN Nigeria Records N740 Billion Forex Losses, Shareholders’ Funds Wiped Out

MTN Nigeria Records N740 Billion Forex Losses, Shareholders' Funds Wiped Out

MTN Nigeria Plc has announced a significant loss before tax of N177.8 billion, marking a stark contrast from the N518.8 billion pre-tax profit recorded a year earlier. This loss has led to a complete wipe-out of shareholders’ funds.

The company attributed this substantial loss primarily to a massive foreign currency loss of N740 billion, a notable increase from the N81 billion reported in 2022. This marks the first-ever loss for the company since it became a publicly traded entity in Nigeria.

MTN highlighted that the loss was largely due to operational changes in the Nigerian foreign exchange market, particularly the abolishment of the segmented/parallel structure announced by the Central Bank of Nigeria (CBN) in June 2023.

Using an official exchange rate of N907.11/$1 as of December 31, 2023, MTN suggested that the losses could potentially widen further if the current exchange rate between the naira and dollar persists by the end of March when it publishes its Q1 results.

Key Highlights:
– Revenue (2023 vs. 2022): N2.469 trillion vs. N2.012 trillion, +22.69% YoY.
– Operating Profit (2023 vs. 2022): N773.660 billion vs. N734.164 billion, +5.38% YoY.
– Finance Income (2023 vs. 2022): N25.815 billion vs. N13.768 billion, +87.50% YoY.
– Finance Cost (2023 vs. 2022): N236.927 billion vs. N147.287 billion, +60.86% YoY.
– Net FX Loss (2023 vs. 2022): N740.434 billion vs. N81.822 billion, +804.93% YoY.
– (Loss)/Profit after tax (2023 vs. 2022): -N137.021 billion vs. N348.727 billion, -139.29% YoY.
– (Loss)/Earnings per share (2023 vs. 2022): -N6.38 vs. N16.76, -138.07% YoY.
– Total Borrowing (2023 vs. 2022): N1.177 trillion vs. N689.673 billion, +70.69% YoY.
– Total subscribers increased by 5.3% to 79.7 million.
– Active data users increased by 12.7% to 44.6 million.
– Active mobile money (MoMo PSB) wallets increased by 163.2% to 5.3 million.
– Earnings before interest, tax, depreciation, and amortisation (EBITDA) grew by 12.3% to N1.2 trillion.
– EBITDA margin decreased by 4.5 percentage points (pp) to 48.7%.
– The net loss for the year resulted in a depletion of retained earnings and shareholders’ fund to negative N208.0 billion and N40.8 billion, respectively.

Other updates MTN Nigeria communicated that due to the substantial currency devaluation and its repercussions on retained earnings, the Directors will not propose a final dividend payment, given the resultant loss for the year ended December 31, 2023.

However, it is important to note that MTN Nigeria had on July 27, 2023, approved interim dividends of N117.48 billion for the year ending December 31, 2023, amounting to N5.60 kobo per ordinary share.

MTN Nigeria Communications Plc (MTNN) closed at N222.90 on the last day of February, representing a year-to-date (YtD) loss of 15.6% for shareholders.

Shareholders’ worries are compounded by the fact that MTNN has lost 19% of the stock’s value from February 1st to date.

MTN also stated that despite the losses, they maintained strong free cash flow generation (up 11.6% YoY to N631.6 billion).

Company Commentary: “2023 witnessed a very challenging operating environment characterised by rising inflation, currency devaluation and foreign exchange shortages, complicated by geopolitical disruptions and cash shortages in Q1 arising from a redesign of the naira.

These factors created severe headwinds for our customers and our business during the year. The inflation rate increased throughout the year, reaching 28.9% in December 2023 – the highest reading in 18 years – with an average rate of 24.5%.

This was further exacerbated by higher fuel prices, arising from the removal of the fuel subsidy in May 2023, with the average prices of diesel and petrol up by 66.4% and 257.1% in 2023 to N1,416.8/litre and N600/litre, respectively. In June 2023, the Central Bank of Nigeria (CBN) adopted a more liberal foreign exchange management system and reintroduced the ‘willing buyer, willing seller’ model.

This has resulted in a 96.7% unfavourable movement in the exchange rate against the US dollar from N461.1/US$ in December 2022 to N907.1/US$ (Nigerian Autonomous Foreign Exchange Market (NAFEM) rate) in December 2023.

This development contributed meaningfully to the upward pressure on the cost of doing business in Nigeria, and for MTN Nigeria in particular, significantly increased the costs in relation to our tower leases.”

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