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Axiata swings into the red in Q1 on large forex losses

25/05/2022 09:35 PM

KUALA LUMPUR, May 25 (Bernama) -- Axiata Group Bhd swung into the red with a net loss of RM42.97 million in the first quarter ended March 31, 2022 (Q1 2022), due to foreign exchange (forex) losses of RM476.9 million that were mainly contributed by its mobile operations in Sri Lanka.

The telecommunication group registered a net profit of RM75.56 million in the same period last year.

In a filing with Bursa Malaysia today, Axiata said Dialog Axiata PLC in Sri Lanka incurred forex losses of RM387.4 million primarily from exposure to the greenback from US dollar-denominated loans and liabilities.

“Sri Lanka is engulfed in an economic and political crisis resulting from the impacts of COVID-19, significant tax cuts and large sovereign debt repayments collectively depleting the limited foreign reserves of the country. As a result, the Sri Lankan rupee depreciated by 46 per cent against the US dollar during Q1 2022,” it said.

Meanwhile, in a media statement, Axiata said earnings before interest, taxes, depreciation and amortisation (Ebitda) grew steadily at 7.7 per cent year-on-year (y-o-y) driven by all operating companies except Ncell Axiata Ltd in Nepal despite headwinds in Sri Lanka and macroeconomic uncertainties stemming from the slowing of major economies.

It said profit after tax and minority interest (Patami) slipped into a loss arising from unrealised forex translation losses due to the weakened Sri Lankan rupee and ringgit against the US dollar, as well as higher tax contributions due to the one-off Prosperity Tax.

"Sri Lanka’s economic and political crisis that resulted in the depreciation of its currency against the US dollar since mid-March 2022 has significantly impacted most onshore businesses. 

"At Dialog Axiata PLC, despite the 16.6 per cent increase in revenue ex-device y-o-y attributed to strong growth across all segments, Patami flipped to a loss of 15.8 billion Sri Lankan rupees (1,000 rupees=RM12.14), impacted by non-cash forex loss arising from US dollar-denominated debt. Excluding forex loss, underlying Patami was at 4.3 billion rupees," said the group.

Axiata said it achieved cost excellence through capital expenditure and operational expenditure (opex) savings of RM163 million and RM78 million -- or total savings of RM241 million -- during the quarter under review.

"The group’s balance sheet held steady with gross debt/Ebitda within target limit at 2.49 times, net debt/Ebitda at 1.99 times and a cash balance of RM5.8 billion. 

"Capital structure was well-managed amidst the challenging macroeconomic backdrop, where 45 per cent of loans were in local currency, 60 per cent on fixed-rate and 65 per cent with more than two years maturity," it said. 

Commenting on the latest results, president and group chief executive officer Datuk Izzaddin Idris said Axiata is cautiously optimistic in its outlook for the rest of 2022 as externalities may persist in the medium term. 

"In addition to exercising prudence in our existing businesses through cost and operational efficiencies, we are doubling down to extract value from our deals. 

"These involve the expansion of edotco’s tower business in the Philippines, Boost’s digital bank licence from Bank Negara Malaysia and in Indonesia, the Hipernet Indodata, and proposed Link Net acquisitions,” he said.

In terms of risks, Izzadin said the group is vigilant of the impacts of inflationary pressures, increased energy cost, higher interest rates and currency volatility on macroeconomic factors, as well as sustained supply chain issues. 

"Regionally, Sri Lanka could be facing increased taxes, higher inflation, and forex volatilities, whilst in Indonesia, there is likely a need for opex reinforcement to navigate the hypercompetitive mobile telecommunications market," he added.



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