Difficult operating environment typified by rash foreign exchange policy measures as well as heightening insecurity, among others have impacted negatively on the operations of some major companies in Nigeria resulting in harvest of losses for their half year earnings.
While Dangote Cement incurred N103.8 billion in forex losses, with earnings decline by 14% YoY, MTN Nigeria incured N131.4 billion in forex losses with earnings decline by 64%.
According to Nairametrics, Dangote Cement Plc reported its 2023 second-quarter results showing pre-tax profits fell 14% to N93 billion. Consequently, its half-year pre-tax profits was down to N239.9 billion against N264.8 billion same period last year. Infact, the Cement giant also reported an exchange rate loss of N103.8 billion in the second quarter of the year due to the unification of the naira. The Key highlights for the half year result showed 2023 revenue of N544.1 billion +37.8%, operating profit N93 billion +64.9%, finance cost N130.1 billion +385% and exchange rate loss of N103.8 billion.
Other indicators showed short-term loans of N683.4 billion vs N338 billion (2023 Q1), long-term loans N370.7 billion vs N342 billion (2023 Q1).
Working capital of N233.7 billion vs N126.2 billion (2023 Q1), gross margins 59.7% vs 57.4% YoY, operating profit margin 41% vs 34.3% Earnings per share N3.95 vs N3.92, net cash flow from operating activities N355.2 billion and production volume of 6,909 vs 6, 749
Although, the company reported strong operating profit earnings in the second quarter of the year represented by a 65% increase in operating profits, but like most corporates, they also incurred N103.8 billion in foreign exchange losses. The forex component of Dangote Cement’s loans is N217.4 billion made up of letters of credit.
The loans are at a Secured Overnight Financing Rate (SOFR) plus 10%.
Similarly, MTN Nigeria Plc released its 2023 second-quarter results showing pre-tax profits falling a whopping 64% to N44.6 billion.
This took its half-year profits to N200.3 billion compared to N268.6 billion same period in 2022. The company also suffered a foreign exchange loss of N131.4 billion which dragged profits down. Some of the key highlights for quarter two results showed revenue of N590.6 billion +23.3% YoY, gross profit N393.5 billion +22.9% YoY, operating Profits N214.9 billion +24.3% YoY, Pre-tax profits N44.6 billion -64.3% YoY and Forex losses of N131.4 billion.
Also, finance cost N182 billion +259% YoY, while total debts was N855 billion vs N689.6 billion (December 2022).
Net Assets of N258.2 billion vs N355.6 billion (December 2022) and working capital of N588.7 billion. Gross margins 2023 Q2 66.64% vs 66.84% YoY, operating profit margin 2023 Q2 36.4% vs 36.1% YoY earnings per share 2023 Q2 N1.35 vs N4.17 YoY Proposed dividends N5.6/share
Other key details within 5he period under review are: EBITDA Half year N614.5 billion +20.6% YoY grew by 20.6% to N614.5 billion EBITDA margin (half year) declined by 0.6 percentage points (pp) to 53.0% Mobile subscribers 77.1 million +4% YoY Data users 41 million +11.5% Active mobile money (MoMo PSB) wallets 3.1 million, +1.1 million YoY Total data traffic +45.6%,4G traffic constituted 82.5% (up by 5.2pp) and 5G constituted 21% on all 5G-colocated clusters.
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According to the Company, the Central Bank of Nigeria’s recent forex operations changes caused a significant 60% movement in the exchange rate to N756.24/US$ by the end of June 2023. Although the immediate impact resulted in unrealized forex losses for H1, the company believes that the liberalization of the forex regime and removal of the fuel subsidy will attract international capital, drive foreign direct investment, and have a net positive effect on their longer-term outlook.
The EBITDA margin was not materially impacted in H1 due to the nature of their tower contracts, but the full exchange rate impact is expected to be felt in H2.
A 10% exchange rate movement could directly reduce the EBITDA margin by approximately 1.3 percentage points. The impact on finance costs in H2 will depend on further exchange rate variations during that period.
The unification of the exchange rate had an adverse effect on MTN’s results, leading to a significant paper loss of N131.4 billion, the company believes that these losses are yet to be realized, but that accounting regulations necessitate their recognition due to the potential likelihood of them materializing.
Despite this challenge, MTN’s report highlighted robust operating profit margins, indicating the strength of its business model.