In just two days' rallies, Airtel Africa Plc's share jumped by about 21% to N6.4 trillion, according to data from the Nigerian Exchange. Investors took positions in the stock despite a weak earnings performance spooked by higher net finance costs.

Airtel Africa Gains 21% to N6.4T after Earnings Loss

In just two days’ rallies, Airtel Africa Plc’s share jumped by about 21% to N6.4 trillion, according to data from the Nigerian Exchange. Investors took positions in the stock despite a weak earnings performance spooked by higher net finance costs.

The telecom company is confronted with pressures from a devaluation of the naira, a development that is reflected on its financial scorecard in the first and second quarters of 2024 accounting period.

In its first half of 2024 results, Airtel Africa’s revenue grew marginally by 2.3% to US$2.6 billion from US$2.56 billion in H1 2023. Specifically, its second quarter result showed that total revenue declined by 10% to US$1.25 billion from US$1.38 billion in Q1 2024.

Amidst competition, the telecom giant deepened its footprint in the market as mobile money revenue was the major driver of top-line growth.

Data revenue remained resilient in H1 2024, increasing by 5.9% year on year to US$915 million from US$864 million in the comparable period.

In its note, Airtel Africa said the total customer base grew by 9.7% to 147.7 million, as the penetration of mobile data and mobile money services continued to rise.

The company recorded a 23.0% increase in data customers to 59.8 million and a 23.1% surge in mobile money customers to 36.5 million.

In the period, net finance cost increased by 144.1% to US$873 million in from US$358 million 12 months ago. Analysts said its 0elevated net finance costs mirror the 141.2% increase in finance cost despite a 54.5% rise in finance income.

The pressures came from the company’s exposure to the foreign exchange devaluation in June 2023. CSL Stockbrokers thinks that higher interest on market debt, mostly from spectrum acquisitions and license renewal payments made in the previous year, as well as higher interest on lease liabilities, contributed to the increase in net finance expenses.

This peppered the bottom line as pre-tax profit decreased by 97.7% year on year to US$12 million in H1 2024 from US$330 million. The company recorded a loss position of US$13 million in H1 2024. EPS declined to US$0.01 in H1 2024.

Stock market reaction

By valuation, Airtel Africa Plc has retaken its stock market position as the most valuable listed company. The telecom share price has been rallied after its earnings release this week.

The share price has gained about 20.8% this week, pushing its market valuation higher than the level seen last week before its earnings release.

At the close of the trading session, the Nigerian Exchange placed N6.366trn on the company at a unit price of N1691.01 as investors began to rotate their interest into the telecom industry on an expectation of interim dividend and capital appreciation. 

Stockbrokers hint that interest in dual-listed companies like Airtel Africa helps foreign investors to move funds by selling at the London Stock Exchange.

The stock had crossed N2400 before it nosedived. Thereafter, pressures on earnings recorded in the first quarter kept its share price lower. But now, the price has been climbing after the market spotted an upside in the company’s nine-month financial scorecard.

In a statement, the management said its strong and resilient operating performance across all regions despite foreign exchange headwinds, specifically in Nigeria.

Commenting about the results, Olusegun Ogunsanya, Group chief executive officer said, “I am pleased to report a strong operating performance for the Group despite foreign exchange headwinds in many of our markets and specifically in Nigeria”.

Ogunsanya said the resilient growth in voice, data and mobile money usage levels reflects the inherent demand for these essential services across our footprint, and our six-pillar ‘win-with’ strategy continues to ensure we capture this growth opportunity by expanding our customer base and providing the platform to enable increased usage across the network.

He said the strong momentum is supported by continued cost efficiencies which enabled further EBITDA margin expansion. 

“As reported in July 2023, our results for the first quarter were significantly impacted by the changes to the FX market in Nigeria, introduced by the Central Bank. 

“Whilst the changes are required for the long-term benefit of the Nigerian economy, the immediate impact of the naira devaluation continues to weigh on our reported financial performance in the period.

“Our focus remains to enhance long-term value by continuing to drive sustained and efficient growth. Over the last five years, we have delivered constant currency revenue and EBITDA CAGR of 17.1% and 20.7% respectively, allowing us to further de-risk the balance sheet and improve profitability across the Group.

Looking forward, the delivery of affordable and reliable telecom and mobile money services across our markets remains our key focus.

“Our strong operating performance continues to make us a stronger and bigger company, which is well-positioned to deliver against the growth opportunities these markets offer.

Despite the challenges of rising diesel prices in Nigeria, we aim to limit the impact with continued operational leverage and further cost efficiencies to deliver an improved EBITDA margin in FY’24 versus FY’23.”

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