Q2: MTN Nigeria Loses ₦126.8bn To FX Crisis

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MTN Nigeria Plc had a ₦126.8 billion foreign exchange (FX) loss in the second quarter (Q2), reducing after-tax profit by 67.7 percent year on year to ₦27.4 billion.

The sum is more than 10 and a half times the multiplier of a ₦12 billion foreign exchange loss in the same period last year, according to a financial statement published on the Nigerian Exchange Group (NGX)

The second quarter accounts for the majority of the telecommunications company’s ₦131.5 billion FX loss at the end of its half-year operations.

According to the company’s interim financial report for the six months ended June 2023, the FX loss reduced earnings from a 19.7 percent increase in operating profit at half-year to a drop of 25.4 percent in pre-tax profit to ₦200.4 billion for the six months of trading — a drop of more than ₦68 billion.

Rising interest expenditures on the company’s massive borrowings and leases compounded the pressure from FX losses, pushing overall finance costs up more than two and a half times year on year to ₦237.6 billion at the half-year mark.

Balance-sheet debts increased by ₦116 billion in six months to exceed ₦1,187 billion in borrowings and leases at the half-year mark.

The second quarter accounted for ₦182 billion, or 76.6 percent of the half-year cost of finance, and also led year-on-year growth of the same at 259.8 percent.

Despite the setbacks of FX losses and increased finance costs, MTN Nigeria has maintained constant revenue growth so far this year, while coping with pressure from operating costs.

The corporation completed its half-year operations with a turnover of ₦1,158.7 billion, a 22 percent increase year on year. Voice services revenue finished slightly ahead of data revenue, at ₦474 billion versus ₦469.4 billion at the half-year mark.

However, earnings from data services climbed more than two and a half times faster than voice-generated revenue, at 34.8 percent vs 13.6 percent.

Income from data services has thus raised its contribution from 38 percent of total income at the end of 2022 to ₦40.5 billion at the half-year 2023 — a sustainable growth from 21 percent in 2021.

All of the company’s revenue lines increased over the time, with SMS increasing by 40% to N41.7 billion and digital services increasing by 52.6 percent to ₦17.4 billion.

The company’s management is not allowing costs to expand as quickly as they did in 2022, but operating costs continue to put pressure on profitability.

Direct network operational costs — the primary cost line — increased by 28.3 percent at half-year to about ₦277 billion. This, together with other rising costs, resulted in a revenue loss, lowering the operating cost margin to 36.4 percent throughout the time.

As a result, operating profit increased at a slower rate than revenue, growing 19.7 percent to ₦421.6 billion for the half-year. This still implies an ₦69.3 billion increase in operational profit for the period.


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