Big trouble for MTN

MTN is expecting to report a significant loss in the first half of the current financial year, with the group anticipating a massive 150% reduction in headline earnings.

In a trading statement published near to the close of trading on Wednesday (7 August), the group said that it expects to report a headline loss per share of between 271 and 217 cents (a drop of between 140% and 150% from H1 23) for the six months ending June 2024.

This is a decline of between 759 and 813 cents per share.

On an adjusted basis—removing what the group calls “non-operational and once-off items” amounting to 629 cents per share—the group says it will maintain profitability, but still see HEPS reduce by 45% to 52%.

These “adjustments” include:

• Hyperinflation adjustments of -57 cents (2023: -38 cents);
• Foreign exchange losses of -519 cents (2023: -169 cents), which includes naira depreciation impact of -389 cents (2023: -123 cents);
• Deferred tax charge/asset reversal of -28 cents (2023: nil); and
• Other non-operational items of -25 cents (2023: nil).

The main reason for the massive decline in HEPS is the negative impact of the devaluation in the naira against the US dollar, which impacted MTN Nigeria’s financials.

This is despite the business posting “a strong underlying operational performance” in its H1 24 release, the group said.

The other negative impacts are the translation impact on reporting currency (rands) arising from the devaluation of most local currencies, particularly the naira in MTN’s portfolio against the rand, as well as operational challenges in Sudan due to the ongoing conflict in the country.

“The naira devaluation drove higher operating and net finance costs for MTN Nigeria, which are
expected to impact the Group H1 24 financial performance,” the group said.

The factors contributing to the losses include:

• The naira devaluation on MTN Nigeria’s operating expenses, which are estimated to reduce the Group H1 24 results by 90 cents (2023: 4 cents).

• The foreign exchange losses in MTN Nigeria’s financial results, which are estimated to reduce Group H1 24 results by a further 389 cents (2023: 123 cents).

• In terms of the foreign currency translations affecting reporting currency results, this includes impacts from certain subsidiaries, which are estimated to reduce H1 24 results by approximately 310 cents;

• Losses amounting to –16 cents (2023: 19 cents profit) from MTN Sudan, where business operations were severely impacted by the ongoing conflict.

MTN said it was making progress in initiatives to mitigate the negative effects of the macro environment on the business.

Accordingly, MTN expects to report:

• A decrease in EPS of between -185% and -175% (or -945 cents and -894 cents). Considering the
  reported EPS for H1 23 of 511 cents, this translates to a range of -434 cents to -383 cents for H1 24.

• A decrease in HEPS of between -150% and -140% (or -813 cents to -759 cents). Considering the
  reported HEPS of 542 cents for H1 23, this translates to a range of -271 cents to -217 cents for H1
  24.

MTN said it is currently finalising its results for the period.

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