Net Foreign Exchange Loss of N656bn Drives MTN Deeper Into Red in Q1

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Net foreign exchange losses hit a new quarterly high of over N656 billion for MTN Nigeria Communications Plc, driving the bottom line deeper into the red and, boring a hole in the balance sheet, about 11 times the sunk equity depth at the end of 2023.

The foreign exchange losses for the quarter already come close to the N740 billion figure the company incurred for the entire 2023 financial year and have beaten the final quarter figure in the region of N508 billion.

Also, an after-tax loss of roughly N393 billion has been built in the first quarter, which is approaching three times the full-year loss of N137 billion for MTN Nigeria for the 2023 full year.

Accumulated losses have climbed from N208 billion to N599 billion in three months of the first quarter and the equity hole of N40.8 billion at the end of last year has plunged about 11 times further to N434.7 billion at the end of March 2024.

The interim financial report of the telecommunications company at the end of March 2024 disclosed that the foreign exchange losses arose largely from the bloating of lease liabilities, borrowings and trade payables.

Forex losses continue to be led by leases, which plunged from N713 million net gain in the same quarter last year to over N289 billion. This is followed by realised and unrealized foreign exchange losses from borrowings totalling N254 billion compared to net gains of N347 million over the same period.

Trade payables account for almost N125 billion of the net foreign exchange losses in the quarter, multiplying from only N3 billion in the same quarter in 2023.

Total net foreign exchange losses for the quarter rose from N4.5 billion in the same quarter in 2023.

Apart from the high and rising foreign exchange losses, MTN Nigeria also continues to face substantial pressure from rising operating costs that keep claiming revenues and squeezing margins.

While sales revenue grew by 32.5 per cent year-on-year to almost N753 billion at the end of the first quarter, several cost lines grew much more rapidly to claim increased proportions of the earnings.

Data services remain the revenue growth driver with an increase of 53.3 percent to N349 billion while voice revenue grew by 14 per cent to N267.5 billion over the review period.

Direct network operating cost – the company’s biggest expense line, grew by 86.7 per cent to about N253 billion – two and two-thirds times the increase in sales revenue.

Other operating expenses nearly doubled at a 98 per cent increase to N54.7 billion and depreciation of property and equipment rose by 37.8 per cent to N68.6 billion.

The cost increases claimed more than all the N185 billion net increase in sales revenue and slashed operating profit by 15.7 per cent to N174 billion at the end of March 2024.

Finance expenses added to the operating pressure – more than doubling at over 115 per cent to N98.7 billion, as balance sheet borrowings remained huge and lease liabilities continued expanding.

Total borrowings amounted to N1.14 trillion at the end of the first quarter, slightly down from the year’s opening figure of N1.17 trillion.

However, lease liabilities have expanded from N1 trillion to N1.32 trillion over the three months.

Net foreign exchange loss swept off what remained of operating profit and plunged the company into a pre-tax loss of N575.7 billion for the first quarter, down from almost N163 billion pre-tax profit in the same quarter last year.

The loss figure for the quarter is well over three times the pre-tax loss of roughly N178 billion for the 2023 full year.

A tax credit of N183 billion lowered the after-tax loss of the company to N392.7 billion, down from an after-tax profit of over N108 billion in the same period in 2023 and looking up to three times the N137 billion after-tax loss at which MTN Nigeria closed its 2023 operations.

Loss per share amounted to N18.63, crashing down from earnings per share of N5.13 the company generated in the same quarter last year.