Safaricom Plc’s half year profits declined 17.7% to KSh 28.1 billion from KSh 34.1 billion on account of the 106% depreciation of the Ethiopian Birr.
- •Service revenues increased by 12.9% to KSh 177.5 billion on the back of improved performance from all service lines coupled with robust growth in both customers and overall usage.
- •High inflation and currency devaluation in Ethiopia affected earnings, as it cost the telco KSh 17.5 billion in the 6 months by inflating local currency expenses and forex losses
- •Safaricom has lowered its profit expectations for the year and raised capital expenditure guidance as it invests in both Kenyan and Ethiopian operations.
“Despite the impact of foreign exchange regime reforms, we remain optimistic about the commercial success of this venture even as we increase our customer acquisition efforts and continue to innovate to deliver value to our customers,” Peter Ndegwa, Safaricom PLC CEO said in a briefing on Thursday.
The Ethiopian Birr depreciated against the dollar by 106%, closing September at 118.99 from 57.69 in June 2024. Ethiopia adopted a free-floating currency in July aimed at reforming the financial sector to secure funding from the IMF. Safaricom has lengthened its break-even target in Ethiopia by one year to March 2027, although it sees the impact of the birr’s exchange rate correction being much lower in full year results.
On the upside, the Kenyan business saw double digit growth in profits, increasing by 14.1% to KSh 47.5 billion driven by a surge in revenues.
Safaricom Adjusts for Earnings Fall, Higher Capital Expenditure
MPESA revenues rose 16.6% to KSh 77.2 billion in the 6 months to September driven by increased customer usage with M-Pesa agents increasing to 266,070. Voice and messaging revenue grew 4.8% and 8.0% respectively, accounting for 26.4% of the telco’s service revenue.
Mobile data revenue rose 20.2% to KSh 35.6 billion which the telco attributes to an increase in customers, device penetration coupled with personalized offers. Notably, data customers edged higher by 10.5% to 28.9 million compared to the same period last with the customer base increasing 7.8% to 52.01 million. As of June 2024, Safaricom’s market share in Kenya stood at 65.4%.
Given the challenges, Safaricom’s management has lowered its earnings guidance for the year, now expecting EBIT to fall between KES 94 billion and KES 100 billion. On the other hand, capital expenditure is expected to be higher than initially planned, now projected between KES 80 billion and KES 86 billion.
Safaricom is listed at the Nairobi Securities Exchange as the biggest company by market value under the ticker symbol SCOM. The telco traded lower on Thursday, losing 6.1% in a day to KSh 15.50 per share. Safaricom did not declare an interim dividend for the period.
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