Airtel Africa Posts Negative EPS as FX Loss Damaged Results
Earnings plunged as telecommunication company Airtel Africa Plc.’s nine months of the financial year 2024 financials showed a 1.4% decline in revenue to US$3.86 billion from US$3.91 billion posted in the comparable period in 2023, details from its financial statement showed.
Its earnings per share came negative, closing at $1.6 per share at the end of 9 months of its 2024 financial year scorecard due to the impact of currency depreciation in major African markets. On a quarterly comparison basis, total revenue declined by 0.6% to US$1.24 billion in Q3 2024 from US$1.25 billion in Q2 2024.
The company attributed the decline in revenue to the impact of currency devaluations across African countries where the telecom company operates. Currencies that depreciated include the Nigerian Naira (64.7%), the Zambian kwacha (22.7%), the Malawi kwacha (21.5%), and the Kenyan shilling (21.1%), the company said.
Airtel Africa noted that the Nigerian Naira devaluation reduced Revenue by US$579 million during the nine months ended 31 December 2023. Data revenue remained resilient in 9M 2024, increasing by 1.9% year on year to US$1.34 billion from US$1.32 billion in the comparable period in 2023.
The growth in data revenue, according to analysts, could be attributed to increased usage, supported by enhanced capacity through network expansion and smartphone penetration. The company reported that its total customer base grew by 9.1% to 151.2 million year on year, as mobile data and mobile money services penetration continued to rise.
Data customers increased by 22.4% to 62.7 million while mobile money customers grew by 19.5% to 37.5 million. Mobile money revenue also grew significantly by 22.4% to US$631 million from US$515 million in 9m 2024. Conversely, voice revenue declined by 8.8% year on year to US$1.7 billion in 9M 2024 from US$1.87 billion in 9M 2023.
Direct network operating costs declined by 5.7% to US$716 million from US$759 million in 9M 2023. Operating Expenses declined by 0.6% y/y to US$1.26m in 9M 2024 from US$1.25m in 9M 2023. Despite the decline in costs, the company’s EBITDA decreased by 0.4% y/y to US$1.91bn in 9M 2024 from US$1.92bn in 9M 2023 due to the decline in Revenue.
In addition, EBITDA margin also increased by 46bps y/y to 49.4% in 9M 2024. Operating Profit declined by 1.9% year on year to US$1.29 billion in 9M 2024 from US$1.32bn in 9M 2023, despite a moderate 2.8% increase in Depreciation and amortization to US$615 million in 9M 2024.
Net Finance Cost increased, up 138.54% year on year to US$1.24 billion in 9M 2024 from US$519 million in 9M 2023. The elevated net finance cost mirrors the 133.4% year-on-year increase in finance cost amidst a 17.4% rise in finance income. This was largely impacted by US$748 million of derivatives and foreign exchange losses because of the currency devaluations, especially the Nigerian Naira devaluation.
The company hinted that a significant portion of this devaluation occurred in June 2023 following the Central Bank of Nigeria (CBN) announcement of changes to the operations in the Nigerian Foreign Exchange (FX) market, leading to a US$447 million loss. The continued devaluation of the Naira post-June resulted in further losses of US$214m in Q3 2024. Consequently, Pre-tax Profit decreased by 93.1% year on year to US$55 million in 9M 2024 from US$801 million in 9M 2023.
Tax expense declined by 80.9% in 9M 2023 to US$53 million from US$278 million in 9M 2023. Net income declined by 99.6% year on year to $2 million in 9M 2024 from US$523 million in 9M 2023. EPS was negative (1.6 cents) compared to 12.5 cents in the prior period. The company has stated its intention to launch a share buy-back programme.
Under this programme, which is expected to start in early March 2024, the Company has proposed to purchase up to US$100m worth of the Company’s shares over 12 months. The programme is expected to be executed using its cash reserves and under applicable securities laws and regulations.
In reaction to the results, Olusegun Ogunsanya, Group chief executive officer said, “We remain focussed on the execution of our growth strategy and, combined with our strong operational execution, this has ensured that we continue to see sustained, positive growth momentum across the business, despite the inflationary and currency headwinds.
“Demand remains resilient, highlighting the vital nature of the voice, data and mobile money services we provide to our customers across the region, and has resulted in a strong 20.2% constant currency revenue growth over the period, with an increase in EBITDA margins.
“This strong operating performance has limited the impact that currency movements have had on the Group. In this regard, whilst further currency devaluation, particularly in Nigeria, has weighed on our reported financial performance, it will not affect the execution of our growth plans”.
Airtel Africa Chief said, “I am pleased to note that our sustained focus on capital allocation priorities will enable us to fully repay HoldCo debt when due in May 2024, ensuring the continued success of our balance sheet de-risking strategy.
“This will allow us to continue investing in our strategic priorities to provide affordable and reliable services to customers across our markets, whilst also enabling us to capitalise on new business opportunities, such as our new data centre business, Nxtra by Airtel, which we launched in December.
“In light of our consistent strong operating performance and given current leverage, the Board intends to launch a share buy-back programme of up to $100m, starting early March 2024 over 12 months. Banks Face Risks over 24hrs FX Positions Sell Down
“We continue to be well positioned to deliver on the attractive growth opportunities our markets offer and despite the challenge of rising diesel prices, ongoing currency devaluation and inflationary pressures across some of our markets, we remain focussed on margin resilience”.
