- Flour Mills profit shrinks to N6.98bn in Q1, 2024
Leading Nigerian telco, MTN Nigeria Communications Plc, reported a loss after tax of N126.36 billion in the second quarter of the financial year ending December 31, 2024.
According to the telco, the impact of currency devaluation has continued to inhibit margin growth and drive losses.
Year-on-Year, net loss declined from N194.02 billion recorded in the second quarter of 2023, following a tax credit of N49.24 billion (Q2-23: N88.32 billion).
Pre-tax loss amounted to N175.60 billion (vs pre-tax loss of N282.35 billion in Q2-23), while loss after tax printed N126.36 billion (vs loss after tax of N194.02 billion in Q2-23).
Meanwhile, Service revenue grew by 33.1 percent y/y in Q2-24 (H1-24: +32.6% y/y) following a broad-based increase across MTNN’s value channels – Voice (+10.0% y/y), Data (+56.0 y/y), Digital (+107.9% y/y), Fintech (+22.2% y/y) and others (+55.6% y/y).
According to management, voice revenue growth (+10.0% y/y | 40.1% of total revenue) was supported by increased usage of voice services, and a higher subscriber base.
Specifically, MTNN’s subscriber count increased by 2.9 percent in H1-24 to 79.40 million, with the addition of 2.3 million customers (Q2-24: net addition of 1.70 million) showing management’s efforts to retain customers affected by the Nigerian Communication Commission’s (NCC) directive on NIN-SIM linkage.
Likewise, growth in data revenue (+56.0% y/y | 48.4% of total revenue) was driven largely by increased usage and an expanded data subscriber count (+11.2% y/y in H1-24 to 45.60 million net addition of 1.10 million in Q2-24).
Management highlighted that this was supported by a strong demand for data with total data traffic increasing by 42.6%, and data usage (GB per user) increasing to 10.6GB (+30.5% y/y).
Total expenses in the quarter grew by 92.0 percent y/y (H1-24: +82.2% y/y) owing to (i) naira depreciation, (ii) higher energy costs, and (iii) VAT payment on tower leases. Consequently, EBITDA margin declined by 20.90 ppts y/y to 31.9 percent.
Accordingly, H1-24 EBITDA margin fell by 17.44 ppts y/y to 35.6 percent. Stripping out the effects of currency weakness on operating performance, management noted that EBITDA margin in H1-24 would have printed 50.9 percent.
Net finance costs (+60.4% y/y) rose markedly during the quarter owing to a 48.6% y/y increase in finance costs.
The higher finance cost balance was as a result of higher interest expense on leases (+28.6% y/y) and a jump in prepaid transactions costs (Q2-24: NGN26.07 billion | Q2-23: NGN927.00 million).
Meanwhile, net FX loss declined by 48.6 percent y/y in Q2-24 but increased by 95.2% y/y in H1-24 highlighting the substantial exchange loss incurred in Q1.
Nonetheless, Analysts at Cordros Research cited the reduction in outstanding Letter of Credit ( LC) obligations (H1-24: USD100.00 million December 2023: USD416.60 million) as a net positive as this limits the telco’s exposure to future currency pressures.
Looking ahead, Cordros remains positive on MTNN’s operational performance but we maintain our stance on subdued earnings till at least 2025FY.
FlourMills profit shrinks to N6.98bn in Q1, 2024
Also, Flour Mills Nigeria Plc, Nigeria’s largest flour milling group recorded a drop of 25.3 percent from N9.34 billion in the first quarter of 2023 to N6.98 billion in the first quarter of 2024 ended June 30.
Pre-tax profit of N7.36 billion was posted as against a pre-tax loss of N9.34 billion in Q1-24. The Group announced a tax expense of N385.91 million.
Earnings per share of N1.94 compared to a loss per share of N2.49 in Q1-24, was underpinned by robust revenue performance (+ 67.2% y/y) in the period.
Revenue grew by 67.2 percent y/y in Q1-2024, driven by substantial growth across the Food (+61.2% y/y | 64.15 of revenue), Agro-Allied (+68.0% y/y), Sugar (+92.2% y/y | 16.7% of revenue), and Support Services (+85.4% y/y | 1.5 percent of revenue) business segments.
Analysts attributed the top-line increase to volume growth and a favourable mix.
The higher volumes were likely due to (1) increased penetration into new markets and enhanced distribution following the company’s full launch into the Apapa free trade zone in 2024FY, and (2) gains from recently launched products such as Golden Penny chocolate spread, Mayonnaise, Chin-chin, in the North, along with new flavours (Goat Pepper Soup and Jollof Hot Hot) in the Noodles line, which were reportedly well-received by the market. On a quarter-on-quarter basis, revenue grew slowly by 4.2 percent.
Gross margin expanded to 11.4 percent (+36bps y/y), following the strong revenue expansion (+67.2% y/y).
Meanwhile, the cost of sales increased by 66.5 percent y/y due to pressures from currency depreciation and a highly inflationary environment, leading to a 67.0 percent y/y rise in raw material costs during the period.
Consequently, EBIT margin (+4bps y/y) increased slightly to 6.4 percent, amid a 70.8 percent y/y rise in operating expenses.
Net finance costs increased slightly by 9.2 percent y/y, following a 24.6 percent y/y increase in FX loss amid an 841.7 percent y/y increase in finance income.
