Airtel Africa Earnings Break over Huge FX Loss

Airtel Africa Earnings Break over Huge FX Loss

Airtel Africa recorded a loss after tax of $151 million in the first quarter of 2024 as a result of the Naira devaluation that triggered a $471 million exchange rate loss, its unaudited financial statement submitted to the regulator showed.

In its result, the company told the Nigerian Exchange that it scored red in profit performance because of its balance sheet exposure to function in foreign exchange resulting in a loss of $471 million in the period.  The telecom company recorded a loss per share of 4.5 cents.

Airtel Nigeria maintained steady growth in revenue, increasing by 9.9% year on year to US$1,384 million in the first quarter of 2024. Its healthy revenue growth was propelled by voice and data revenue growth.

In the period, the telecom company’s capital expenditure was flattish at $140 million. It said In July 2022, the Group prepaid $450 million of outstanding external debt at HoldCo.

The remaining debt at HoldCo is now $550 million, according to Airtel Africa, falling due in May 2024.  However, Airtel Africa appears to remain cash-rich, according to its financial statement. Its unaudited report showed that the company cash at the holding companies was $505 million at the end of the period.

The telecom company’s leverage of 1.3x in June 2023, was broadly stable despite over $500 million of spectrum investment in the last fiscal year and the renewal of 2100 MHz spectrum licence in Nigeria in the period.

In Q1 2024, Airtel Africa grew its total customer base by 8.8% to 143.1 million, as the penetration of mobile data and mobile money services continued to rise, driving a 22.0% increase in data customers to 56.8 million and a 24.3% increase in mobile money customers to 34.3 million.

It said mobile money transaction value increased by 47.2% in constant currency, with a Q1-2024 annualised transaction value of $107 billion in reported currency. In the period, its revenues up by 9.6% to $1,377 million. It noted in the result that each segment’s reported currency revenue growth was impacted by currency devaluation,

Speaking to the result, Olusegun Ogunsanya, chief executive officer, on the trading update said, ‘The Group delivered a strong operating performance with improvement in both constant currency revenue growth and EBITDA margin despite the challenging macro environment.

“The acceleration in voice, data, and mobile money revenue growth is a testament to the success of our six-pillar ‘win-with’ strategy. Our continuing investment in network and distribution enabled us to expand our customer base further, driving increased usage on our network.

“This strong momentum is supported by a continued focus on cost efficiencies, which enabled us to expand our EBITDA margins in the quarter. Despite the strong operating performance, our results have been impacted by foreign exchange headwinds”.

Airtel Africa’s chief said this quarter saw the announcement of the change to the FX market in Nigeria which resulted in a significant naira devaluation.

“We have welcomed this reform as very positive for the medium and long-term development of our business in Nigeria, our largest market. The country offers significant untapped growth potential, underpinned by highly attractive fundamentals.

“This has supported and sustained a strong operating performance which has seen a five-year revenue and EBITDA cumulative average growth rate (CAGR) of 23.5% and 27.3% in constant currency, respectively.

“We expect the FX reforms to improve liquidity over time, thereby alleviating the challenges faced by international businesses over the last few years associated with accessing US dollars and thus hindering accelerated growth”.

However, in the reporting period, the devaluation has had a material impact on our results.

Ogunsanya said over the last few years, the company has actively reduced FX exposure across the Group, adding that this will continue to be a focus area in the future to limit the impact of any future devaluation.

“Our focus remains on areas which we can control: the provision of reliable telecom and mobile money services, at affordable rates across our 14 sub-Saharan markets in Africa where demand for these services remains significant.

“The excellent operating performance over the last quarter highlights this success, and we are well positioned to deliver against the growth opportunities these markets offer, with a continued focus on margin resilience”, Airtel Africa CEO said.  Despite its huge loss, its share price was steadied at N1319.90 per share in the local bourse on Thursday.

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