NIGERIA | TELECOMS | AIRTEL AFRICA

Quick take: FX headwinds dampen profitability.

Airtel Africa's FY 2024 financials showed a decline in Revenue by 5.3% to US$4.98bn from US$5.26bn in FY 2023. On a q/q basis, Total Revenue declined by 9.7% to US$1.12bn in Q4 2024 from US$1.24bn in Q3 2024. The company attributed the decline in Revenue to significant currency devaluations in Nigeria, Malawi, Zambia, and Kenya. The company noted that the Nigerian Naira devaluation reduced Revenue by US$1.04bn in FY 2024.

Despite the company reporting increased usage, supported by the enhanced capacity through network expansion and smartphone penetration, Data Revenue declined in FY 2024 by 3.0% y/y to US$1.73bn from US$1.79bn in FY 2023. The company reported that its total customer base grew by 9.0% to 152.7 million y/y, as mobile data and mobile money services penetration continued to rise. Data customers increased by 17.8% y/y to 64.4 million while mobile money customers grew by 20.7% y/y to 38.0 million. Mobile money Revenue also grew significantly by 21.1% in FY 2024 to US$837m from US$692m in FY 2023. Voice Revenue declined by 12.5% y/y to US$2.18bn in FY 2024 from US$2.49bn in FY 2023.

Airtel FY 2024

Source: Company data, CSL Research

Direct Network Operating Costs declined by 9.8% to US$926m from US$1.03bn in FY 2023. Operating Expenses declined by 1.2% y/y to US$1.65bn in FY 2024 from US$1.67bn in FY 2023. Despite the decline in costs, the company's EBITDA decreased by 5.7% y/y to US$2.43bn in FY 2024 from US$2.58bn in FY 2023 due to the decline in Revenue. In addition, EBITDA margin also decreased by 22bps y/y to 48.8% in FY 2024. Operating Profit declined by 6.7% y/y to US$1.64bn in FY 2024 from US$1.76bn in FY 2023, despite a moderate 3.7% increase in Depreciation and amortization to US$788m in FY 2024.

Net Finance Cost increased, up 135.55% y/y to US$1.70bn in FY 2024 from US$723m in FY 2023. The elevated Net Finance Cost mirrors the 131.5% y/y increase in Finance Cost amidst a 31% y/y rise in Finance Income. The company noted that its Net finance cost in FY 2024 was largely impacted by US$1.26bn of derivative and foreign exchange losses (reflecting the revaluation of US dollar-dominated balance sheet liabilities and derivatives) because of the currency devaluation primarily in Nigeria and Malawi. The management further stated that Finance costs excluding derivative and foreign exchange losses increased from US$385m to US$444m in FY 2024 primarily due to a shift of foreign currency debt to local currency debt in the operating entities carrying a higher average interest rate.

Consequently, the company recorded a Pre-tax Loss of US$63m in FY 2024 from a Pre-Tax Profit of US$1.03bn in FY 2023. Tax expense declined by 90.8% in FY 2024 to US$26m from US$284M in FY 2023. The company recorded a Net Income Loss of US$89m in FY 2024 compared with a Net Income Profit of US$750m in FY 2023. Basic EPS was negative (4.4 cents) compared to 17.7 cents in the prior period.

We have a target price of N1,953.4/s with a SELL recommendation on the stock. Current price; N1980/s.

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