MTNN 2023FY: Substantial FX Losses Upends Top-Line Gains

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March 1, 2024/Cordros Report

MTN Nigeria Communications Plc (MTNN) released its 2023FY financials this morning, reporting a loss of NGN137.02 billion (vs PAT of NGN348.73 billion in 2022FY), resulting in a loss per share of NGN6.38 (2022FY EPS: NGN16.76). The dip in earnings was underpinned by the marked expansion in net FX losses (+804.9% y/y), highlighting the FX devaluation in the year.

Revenue grew by 22.7% y/y in 2023FY (Q4-23: +25.1% y/y), underpinned by a broad-based increase across the voice (+9.7% y/y), data (+39.8% y/y), digital (+69.9% y/y), fintech (+2.4% y/y) and other services (+26.7% y/y) channels.
As noted in Q3-23, data once again was the main driver of revenue growth. In the press release accompanying the result, management alluded the performance to the revamp of MTNN’s data bundle offerings and sustained investments in network coverage and capacity underpinned the performance of the data channel. As a result, data usage (GB per user) increased by 29.1% y/y to 8.6GB – 4G coverage: +240bps to 81.5% of the population | 5G coverage: 11.3% of the population – and smartphone penetration printed higher at 55.6% (+310bps y/y). In addition, MTNN recorded a 44.9% growth in data traffic, with the 4G network accounting for c. 82.0% of total traffic, while the 5G network contributed 5.2% of total traffic.
Meanwhile, the growth in voice revenue remained steady, increasing by 9.7% y/y on a growth in mobile subscriber base and revamped voice propositions. Pertinently, MTNN’s subscriber base (Q4 net additions: +2.10 million) grew to 79.70 million as of 2023 year-end, indicating the addition of 4.10 million subscribers.
Total expenses for the year grew by 34.4% y/y (Q4-23: +50.7% y/y), following the impact of (1) higher inflation and energy costs, (2) FX devaluation, and (3) the introduction of VAT on tower leases as per the 2023 Finance Act, exacerbated by a NGN30.20 billion additional provision for FIRS VAT assessment.
Consequently, EBITDA margin (-448bps y/y) declined to 48.7% y/y, trailing our 2023FY estimate (49.9%) by 119bps and falling short of management’s medium-term key performance guidance (53.0% – 55.0%).
Net finance costs (+341.9% y/y) presented as MTNN’s biggest pressure point in 2023FY, influenced by a significantly higher foreign exchange loss of NGN740.43 billion, translating to a 9.0x increase from 2022FY outturn (NGN81.82 billion). Notably, we highlight that c.69.0% of the net FX loss print came in Q4-23 (NGN575.59 billion). The higher FX loss points to the impact of the currency devaluation (-49.2% y/y to NGN907.10/USD) on tower lease costs and borrowings.
Overall, MTNN recorded a pre-tax loss of NGN177.89 billion in 2023FY (vs a pre-tax profit of NGN518.82 billion in 2022FY). Following a tax credit of NGN40.87 billion, the total loss for the year came in at NGN137.02 billion (vs profit of NGN348.73 billion in 2022FY).
Management call on Monday (March 4) at 3.00 p.m. Nigerian time. Click here to register.
Comment: MTNN’s performance came in weaker than we envisaged (Click here for our 9M-23 Update), with the variance stemming from the higher-than-expected net FX losses incurred in Q4-23. While there is scope for an improvement in operating performance, we note that the currency devaluation early in the year douses our expectations of a complete rebound in 2024FY. Thus, we still expect to see weak profitability performance in the year ahead. Our estimates are under review.

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