Airtel Africa Profit Skids as Weak Currencies Pepper Earnings

Airtel Africa Profit Skids as Weak Currencies Pepper Earnings

Airtel Africa PLC on Thursday said it saw strong interim revenue growth, but profit was held back by the devaluation of certain African currencies. The telecom company reported that the decision to bar calls in Nigeria in addition to the weakening of the local currency weigh on its earnings.

In the half year ended September 30, the Africa-focused telecommunications firm said revenue grew 13% year-on-year to USD2.57 billion from USD2.27 billion. In constant currency, it rose 17%, with appreciation in the Zambian kwacha offset but devaluations in several other currencies.

Finance costs increased by $189 million, largely driven by a $160 million increase in foreign exchange and derivative losses, as a result of a $31 million derivative loss, a Nigerian naira devaluation impact of $30m. CFA (Central African franc) devaluation impact of $45 million and the balance being devaluation in the Malawian kwacha, Ugandan shilling & Kenyan shilling.

Mobile Money revenue saw the strongest growth, rising 28%, with Voice revenue up 7.5%, Data revenue up 18% and other revenue rising 7.9%. READ: Derivative market: NSE, SEC Train Capital Market Operators 

Revenue growth in the half was impacted again by the effect of some voice customers being barred in Nigeria and the loss of tower sharing revenues following the recent sales of towers in Tanzania, Madagascar and Malawi, according to the telecom giant.

Excluding these specific challenges growth for the half would have been around 20.4% in constant currency terms,” Airtel said.

Airtel’s total customer base rose 9.7% to 134.7 million, with the firm noting “increased penetration” across mobile data and mobile money services. Pretax profit fell 9.1% to USD516 million from USD567 million, as the firm recognised USD358 million in net finance costs, compared to USD169 million a year before.

Airtel shares fell 5.4% to 120.21 pence each in London on Thursday morning. Last week, the telecom giant’s share was priced down by about 30% to N1,312.20 after investors spotted buying opportunity with a potential upside in the London market.

In the result released today, its net finance costs including foreign exchange and derivative losses of USD184 million, compared to USD24 million a year before. The rise was “due to a USD31 million derivative loss, Nigerian Naira devaluation impact of USD30 million, Central African Franc devaluation of USD45 million and the balance being devaluation in the Malawian Kwacha, Ugandan shilling & Kenyan shilling”, the firm explained.

Operating profit rose 19% to USD872 million from USD732 million. Airtel declared an interim dividend of 2.18 cents, compared to 2 cents a year before. Airtel said its long-term opportunities are ‘attractive’, and it is working to mitigate its material risks, remaining mindful of currency devaluation and repatriation risks.

Speaking about the result, Segun Ogunsanya, the chief executive officer said, “Airtel Africa continued to deliver strong results as its purpose of transforming the lives of people across sub-Saharan Africa through digital and financial inclusion gained further momentum, with growth accelerating in the second quarter.

“Whilst we are not immune to the current macro-economic challenges and currency devaluation risks, I am pleased to report double-digit reported revenue growth in the period, largely driven by customer growth of 9.7% and ARPU growth of 7.2%, as we increased penetration and usage through our affordable service offerings.

“Our cost efficiency initiatives combined with improving growth trends have also helped offset inflationary pressures on our cost base and expand our EBITDA margin by 38bps in constant currency.

“We continue to de-risk our balance sheet and have further reduced HoldCo debt with the early repayment of $450m of bond in July. We continue to invest for growth and have increased capital expenditure by 27% over the period, alongside a substantial investment into additional spectrum across several markets.

“Following the receipt of the Payment Service Bank and Super-Agent licence in Nigeria during the period, we have launched our mobile money operations.

“We are excited about the opportunity in our biggest market and will continue to build trust and confidence in the brand, whilst investing in distribution to increase access to financial services for underserved communities within the country”

It stated that revenue growth in the half was impacted again by the effect of some voice customers being barred in Nigeria and the loss of tower sharing revenues following the recent sales of towers in Tanzania, Madagascar and Malawi. Excluding these specific challenges growth for the half would have been around 20.4% in constant currency terms.

Total revenue for mobile services and mobile money services combined, grew in Nigeria by 19.7%, East Africa by 16.2% and Francophone Africa by 13.0% over the period. Total tax charges were lower by $46m mainly due to the initial recognition of a deferred tax credit of $42m in Kenya.

Non-controlling interests were lower by $16m due to the buy-back of minorities in Nigeria and lower minority allocation charges in Tanzania, partially offset by the increase in Airtel Money minority shareholdings.

EPS before exceptional items was 6.8 cents, a reduction of 9.5% largely because of higher foreign exchange and derivative losses of $160m. Basic EPS increased to 7.9 cents (up by 3.7%) as a result of deferred tax asset recognition in Kenya.

Leverage improved to 1.3x from 1.5x in the prior period, largely driven by increased cash generation, the growth of EBITDA and proceeds from Airtel Money investments. # Airtel Africa Profit Skids as Weak Currencies Pepper Earnings