Net N740bn Forex Loss Sinks MTN’s Bottomline In Red

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Soaring foreign exchange losses and falling profits across quarters hit the climax for MTN Nigeria Plc in the final quarter, summing up to a net foreign exchange loss of over N740 billion and a huge loss of N137 billion for the year.

The hopes for at least ending the year with a profit drop were dashed by a massive roll in of close to N508 billion net foreign exchange losses in the final quarter – more than twice the closing nine-month figure of less than N233 billion.

The audited financial report of the telecommunications company for the 2023 operations disclosed that the foreign exchange losses arose due to the increase in the US dollar exchange rate from N461.10 to N907.11 to US$1 after the unification of all segments of the Nigerian foreign exchange market during the year, resulting in the collapse of the NAFEM rates.

The report also shows that by volume the company’s forex losses were led by leases and borrowings, which jumped more than 11 times to over N367 billion and seven times to the region of N242 billion respectively during the year.

However, the highest swelling of foreign exchange losses came from trade and other payables that multiplied more than 55 times to roughly N144 billion.

Total foreign exchange losses had soared from less than N91 billion in 2022 to over N834 billion in 2023 while foreign exchange gains rose from N9 billion to about N94 billion over the same period – which works out to the net loss of N740.4 billion in 2023. The net foreign exchange loss figure is made up of realised losses of over N104 billion and unrealized losses of roughly N636 billion.

Apart from the huge foreign exchange losses, MTN Nigeria also came under substantial pressure from rising operating costs that claimed revenues and squeezed margins in the year. While sales revenue grew by 22.7 per cent to about N2.5 trillion in the year, a number of cost lines grew at a much faster pace to claim increased proportions of the earnings.

The company’s biggest expense line – direct network operating cost, grew by 42.6 per cent to N650.6 billion – nearly twice the growth in turnover. Other operating expenses rose by 33.7 per cent to about N140 billion and asset depreciations and amortization rose by 27.5 per cent to N429 billion in the year.

The cost increases claimed much of the gain in sales revenue and permitted only a moderate improvement of 5 per cent in operating profit to N773.7 billion at the end of the year.

Finance expenses also pressured earnings at an increase of almost 61 per cent to about N237 billion, as borrowings jumped from less than N690 billion in 2022 to N1.2 trillion in 2023.  Also, lease liabilities advanced from less than N660 billion to over N1 trillion over the same period.

Added to the hike in finance cost is the net foreign exchange loss of N740.4 billion that is nine times the closing figure of under N82 billion in 2022. The two cost lines consumed more than all the operating profit for the years and created a pre-tax loss of roughly N178 billion, down from a restated pre-tax profit of about N519 billion in the preceding financial year.

A tax credit of close to N41 billion lowered the after tax loss of the company to N137 billion, crashing down from the nine-month profit figure of N232.5 billion and also from a restated after tax profit of N348.7 billion in 2022.

Earnings per share fell from N16.76 at the end of 2022 into a loss of N6.38 per share for MTN Nigeria in 2023.

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