AIRTELAFRI | Airtel Africa 9M 2024 Quick Take : FX headwinds dampen profitability

    Airtel Africa’s 9M 2024 financials showed a decline in Revenue by 1.4% to US$3.86bn from US$3.91bn in 9M 2023. On a q/q basis, Total Revenue declined by 0.6% to US$1.24bn in Q3 2024 from US$1.25bn in Q2 2024. The company attributed the decline in Revenue to the impact of currency devaluations in the period. Currencies that depreciated include the Nigerian Naira (64.7%), the Zambian kwacha (22.7%), the Malawi kwacha (21.5%), and the Kenyan shilling (21.1%). The company noted that the Nigerian Naira devaluation reduced Revenue by US$579m during the nine-month period ended 31 December 2023.

    Data Revenue remained resilient in 9M 2024, increasing by 1.9% y/y to US$1.34bn from US$1.32bn in 9M 2023. The growth in Data Revenue could be attributed to increased usage, supported by the enhanced capacity through network expansion and smartphone penetration. The company reported that its total customer base grew by 9.1% to 151.2 million y/y, as mobile data and mobile money services penetration continued to rise. Data customers increased by 22.4% y/y to 62.7 million while mobile money customers grew by 19.5% y/y to 37.5 million. Mobile money Revenue also grew significantly by 22.4% in 9M 2024 to US$631m from US$515m in 9m 2024. Conversely but as expected, Voice Revenue declined by 8.8% y/y to US$1.7bn in 9M 2024 from US$1.87bn in 9M 2023.

    Direct Network Operating Costs declined by 5.7% to US$716m from US$759m in 9M 2023. Operating Expenses declined by 0.6% y/y to US$1.26m in 9M 2024 from US$1.25m in 9M 2023. Despite the decline in costs, the company’s EBITDA decreased by 0.4% y/y to US$1.91bn in 9M 2024 from US$1.92bn in 9M 2023 due to the decline in Revenue. In addition, EBITDA margin also increased by 46bps y/y to 49.4% in 9M 2024. Operating Profit declined by 1.9% y/y to US$1.29bn in 9M 2024 from US$1.32bn in 9M 2023, despite a moderate 2.8% increase in Depreciation and amortization to US$615m in 9M 2024.

    Net Finance Cost increased, up 138.54% y/y to US$1.24bn in 9M 2024 from US$519m in 9M 2023. The elevated Net Finance Cost mirrors the 133.4% y/y increase in Finance Cost amidst a 17.4% y/y rise in Finance Income. The company management noted that its Net finance cost in 9M 2024 was largely impacted by US$748m of derivatives and foreign exchange losses because of the currency devaluations especially the Nigerian Naira devaluation. They noted that a significant portion of this devaluation occurred in June 2023 following the Central Bank of Nigeria (CBN) announcement of changes to the operations in the Nigerian Foreign Exchange (FX) market, leading to a US$447m loss. The continued devaluation of the Naira post-June resulted in further losses of US$214m in Q3 2024.

    Consequently, Pre-tax Profit decreased by 93.1% y/y to US$55m in 9M 2024 from US$801m in 9M 2023. Tax expense declined by 80.9% in 9M 2023 to US$53m from US$278M in 9M 2023. Net Income declined by 99.6% y/y to N2m in 9M 2024 from US$523m in 9M 2023. Basic EPS was negative (1.6 cents) compared to 12.5 cents in the prior period.

    The company has stated its intention to launch a share buy-back programme. Under this programme, which is expected to start in early March 2024, the Company has proposed to purchase up to US$100m worth of the Company’s shares over a 12-month period. The programme is expected to be executed using its cash reserves and in accordance with applicable securities laws and regulations.

    We have a target price of N1.466.8/s with a SELL recommendation on the stock. Current price; N2000/s.


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