FX Crisis: MTN reports N740 Billion Loss, Shareholder funds wiped Out

FX Crisis: MTN reports N740 Billion Loss, Shareholder funds wiped Out
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MTN Nigeria Plc has announced a significant loss before tax of N177.8 billion, a stark contrast to the pre-tax profit of N518.8 billion recorded the previous year. This loss has led to the complete erasure of shareholders’ funds.

The company attributes this loss primarily to a substantial foreign currency loss of N740 billion, a stark increase from N81 billion in 2022. This marks the company’s first-ever loss since it became publicly listed in Nigeria.

MTN explains that the loss is largely due to operational shifts in the Nigerian Foreign exchange market, particularly the elimination of the segmented/parallel structure announced by the Central Bank of Nigeria (CBN) in June 2023.

Using an official exchange rate of N907.11/$1 as of 31 December 2023, MTN suggests that the loss could potentially widen further if the current exchange rate between the naira and dollar persists until the end of March, when it publishes its Q1 results.

KEY FINANCIAL HIGHLIGHTS

Revenue for 2023 stood at N2.469 trillion, reflecting a 22.69% increase from N2.012 trillion in 2022.

Operating Profit rose to N773.660 billion, up by 5.38% from N734.164 billion in 2022.

Finance Income surged to N25.815 billion, marking an 87.50% increase from N13.768 billion in 2022.

Finance Cost increased to N236.927 billion, up by 60.86% from N147.287 billion in 2022.

Net FX Loss soared to N740.434 billion, an 804.93% rise from N81.822 billion in 2022.

After-tax Loss amounted to -N137.021 billion, a drastic decline from the profit of N348.727 billion in 2022.

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Earnings per share plummeted to -N6.38 from N16.76 in 2022.

Total Borrowing increased to N1.177 trillion, up by 70.69% from N689.673 billion in 2022.

OPERATIONAL HIGHLIGHTS

Total subscribers grew by 5.3% to 79.7 million.

Active data users increased by 12.7% to 44.6 million.

Active mobile money (MoMo PSB) wallets surged by 163.2% to 5.3 million.

EBITDA grew by 12.3% to N1.2 trillion, with EBITDA margin decreasing by 4.5 percentage points to 48.7%.
Consequently, the net loss for the year has led to a depletion of retained earnings and shareholders’ funds to negative N208.0 billion and N40.8 billion, respectively.

Regarding dividends, MTN Nigeria has communicated that due to substantial currency devaluation and its impact on retained earnings, no final dividend payment will be proposed for the year ended December 31, 2023. However, interim dividends of N117.48 billion were approved on July 27, 2023, for the same period.

MTN Nigeria Communications Plc (MTNN) closed at N222.90 on the last day of February, representing a year-to-date loss of 15.6% for shareholders. The stock has lost 19% of its value from February 1st to date.

Despite the losses, MTN emphasized that it maintained strong free cash flow generation, which increased by 11.6% YoY to N631.6 billion.

The company commented on the challenging operating environment in 2023, characterized by rising inflation, currency devaluation, foreign exchange shortages, and geopolitical disruptions. These factors, coupled with cash shortages in Q1 due to a redesign of the naira, created significant challenges for both customers and the business. Inflation reached 28.9% in December 2023, the highest in 18 years, with an average rate of 24.5%. Additionally, the removal of the fuel subsidy in May 2023 led to higher fuel prices, further exacerbating the situation.

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In June 2023, the CBN adopted a more liberal foreign exchange management system, resulting in a 96.7% unfavorable movement in the exchange rate against the US dollar, significantly impacting the cost of doing business in Nigeria, particularly with regard to tower leases for MTN Nigeria.

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