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In a trading update for the year to end-December, MTN warned that its headline earnings per share could drop by between 60% and 80%.
This was largely due to a slumping Nigerian naira against the dollar, which hiked MTN Nigeria's operating and finance costs. MTN also announced sizeable restatements of MTN Nigeria's accounts, which impacted its bottom line.
The naira has weakened more than 70% against the dollar since the country's central bank liberalised its forex market in June.
From headline earnings per share of 1 154c a year before, MTN now expects earnings of between 231c and 462c for the past year. The foreign exchange losses in MTN Nigeria alone equated to a 593c per share hit – compared to only 52c in the previous year.
While MTN Nigeria saw large losses in dollar, the group reported strong business growth, with data traffic up almost 45% and transaction volumes at its mobile payments business MoMo gaining 49%. In naira, service revenue grew by almost 23%, with an acceleration in the fourth quarter (+25%).
But the naira's weakness took a large toll, especially as MTN Nigeria's lease costs for cellphone towers are indexed to the dollar. This largely resulted in a reported loss after tax of 137.0 billion naira compared to a restated profit after tax of 348.7 billion naira in 2022.
The group said it had to restate its profit after a review of MTN Nigeria's financial statements:
"A review by MTN of the effects of the significant depreciation of the naira on MTN Nigeria's financials, noted that the leases were treated as naira based and only took into account realised foreign exchange losses as invoice payments were made,". MTN Nigeria should have recorded the unrealised foreign exchange losses arising from the remeasurement of the outstanding lease liabilities using the spot exchange rate ruling at the end of each reporting period. As part of the review, MTN Nigeria also identified that significant changes in facts and circumstances relating to MTN Nigeria's options in lease renewals were not taken into account in determining the related lease term.
The impact on MTN Group's results is that its opening total equity balance for the previous financial year will be restated, and lowered by R2.4 billion, to reflect the MTN Nigeria restatements. The group's 2022 profit after tax will be lowered by R407 million.
MTN's share price has lost more than 42% over the past year.
