Market Priced Down MTN Nigeria after Huge Loss
Equities investors rushed for the door as MTN Nigeria Plc announced earnings miscarriage in 2023. Details from the telecom company indicate the 2022 profit was overstated. The company’s market value declined sharply after selloffs that followed its unimpressive earnings performance.
According to data from the local bourse, MTN Nigeria Plc’s valuation fell to N4.2 trillion on Friday on the back of a negative shareholders fund. The company recorded a very steep loss that broke its balance sheet position due to large exposure to foreign currency liabilities. In quick reactions, its shareholders dumped a large volume of their holdings last week, causing about a 19% decline in its market value.
Details from the Nigerian Exchange showed that MTN Nigeria’s market price settled at N200.7o on Friday. The stock opened strong at N247.50 last week before its earnings loss nudged investors to take quick exits. MTN Nigeria lost more than N740 billion to naira devaluation. Unstable local currency increased the company’s risk with more weight than rivalry with its peers in the market.
Its negative performance broke the balance sheet to pieces and shareholders were unimpressive, causing its market value to decline as they exited positions. Exposure to tower lease and other costs drained its earnings strength.
The telecom company’s cost profile worsened amidst rising headline inflation and pressures in the local currency, the naira. It said net finance costs increased by 341.9% to N951.5 billion due to increased borrowings, higher interest rates and a significant devaluation of the naira from N461/$ in December 2022 to N907.1/US$ in December 2023.
This was a result of the liberalisation of the forex market in June 2023. Consequently, forex loss surged sharply to N740 billion from N81.8 billion, while finance costs were up by 60.9% to N236.9 billion.
The company said the underlying net finance cost, excluding the forex loss, increased by 58.1% to N211.1 billion. In 2023, its effective tax rate decreased by 9.8pp to 23.0%, driven mainly by the reported loss before tax and derecognition of deferred tax assets from Y’ello Digital Financial Services.
Overall, MTN Nigeria posted a loss after tax of N137.0 billion. Adjusting for the net forex loss, net profit or PAT would have been N344.5 billion which would been a 14.3% year-on-year decline #Market Priced Down MTN Nigeria after Huge Loss Naira Suffers Big, CBN Goes Ballistic Against FX Whales
