MTN Nigeria surmounts macroeconomic headwinds as profit margins surge

MTN Nigeria Plc has surmounted the tempest brought on by poor regulatory environment and economic lethargy as it recorded a stellar performance.

This means the telecommunications giant has the financial strength to reward shareholders and investors in form of share appreciation and steady dividend payments as evidenced by strong cash from operating activities and robust earnings.

Companies are going through trying times as decrepit infrastructure, double taxation, and low consumer purchasing power continues to undermine growth.

The country hasn’t recovered from the precipitous drop in crude oil price of mid 2014 that stoked a severe dollar scarcity that saw it slip into its first recession in 25 years.

While the introduction of a new foreign exchange by the central bank and rebound in crude oil price and output helped the country exist a recession in the last quarter of 2017, over half of its 200 million live below $1.98 dollar a day.

Nigeria is ranked 146 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings.

Lack of policy direction on the part of the federal government has led to investors dumping Naira assets, hence, resulting in outflow of investment.

Amid these monument challenges, like a flower that blooms under the sun, MTN Nigeria continues to thrive as evidenced in a solid working capital position, steady growth in revenue and profit, and reduction in debt.

For instance, the telecommunication giants’ sales increased by 17.11 percent to N1.03 trillion in December 2018 from N887.17 billion the previous year.

A breakdown of top lines shows income from Airtime and Subscriptions were up 21.52 percent to N676.38 billion in December 2018 as against N556.57 billion the previous year. Income from data was up 41.41 percent to N165.17 billion as at December 2017.

MTN Nigeria is cost leader and its ability to curtail costs is responsible for improved margins and profitability. It successfully reduced commission-to-sales ratio, due to shift to digital airtime sales.

Also, operating expenses (direct and indirect cost) ratio fell to 75.33 percent in December 2108 from 78.01 percent the previous year: this means the company has spent less on costs to generate each unit of revenue.

Total operating expenses were up 13.07 percent to N782.62 billion in the period under review, slightly higher than April inflation figure.

The telecoms giant is leveraging on the proliferation of smartphone device and the country’s growing population as profit after tax increased by 79.69 percent to N145.68 billion in December 2018 from N81.01 billion as at December 2017.

It is generating more in earnings before interest, taxes, depreciation, and amortization, as a percentage of revenue, which means it has a strong operating efficiency.

Earnings before interest and taxation (EBIT) moved by 35.38 percent to N266.13 billion in the period under review from N195.92 billion as at December 2017.

NTN Nigeria has utilized the resources of shareholders in generating higher profit while it is has also been able to turn top line (sales) impressive performance into bottom line (profit) growth.

Net margin increased to 14.02 percent in the period under review from 9.13 percent the previous year. EBIT margins, otherwise known as operating profit margin increased to 25.61 percent in December 2018 from 22.08 percent the previous year.