Despite recording what it termed a ‘healthy’ increase in revenue in 2016, Malaysian telecoms group Axiata has reported a more than 80% drop in net profit for its most recent fiscal year.
In the year ended 31 December 2016 Axiata generated a total turnover of MYR21.565 billion (USD4.84 billion), up 8.5% year-on-year, with the increase attributed in the main to positive fourth quarter contributions across most of the group’s operating companies. Group EBITDA meanwhile increased by 10.0% y-o-y to MYR8.013 billion, with margin improving by 0.6 percentage points to 37.2% for the year on the back of higher revenues. However, Axiata said that net profit – which declined to MYR504 million – had been impacted by three significant factors, those being: ‘unprecedented external events’; strategic investments for long term growth, including merger and acquisition (M&A) related costs which were mostly one-offs; and the underperformance of some its subsidiaries. With regards to external factors, the company pointed specifically to the depreciation of the local currency, the Ringgit, which it said resulted in it recording ‘unprecedented foreign exchange losses’ of MYR685 million, which was mainly due to the US dollar exposed debt incurred from the acquisition of Nepal’s Ncell. In addition, it cited aggressive competition in India linked to the entry of a ‘disruptive new player, at an unheard off scale’; this development, it said, had resulted in considerably lower contribution from its associate company in that country by MYR304 million.
Commenting on the full year results, Axiata chairman Tan Sri Azman Hj. Mokhtar said: ‘Globally, the telecoms sector has been experiencing greater competitive market pressures and regulatory challenges. As a regional Group operating under a multitude of conditions, Axiata was not spared. The Group’s 2016 profitability was impacted by foreign currency losses due to the weakened Ringgit, a function of the geopolitical and macroeconomic uncertainties that persisted, as well as by one-off M&A charges and performance in some of our key markets.’
Looking ahead, Axiata has said that for 2017 it expects revenue growth of between 8% and 10% (at constant currency levels), while EBITDA is forecast to increase between 6% and 8%. Capital expenditures for the year meanwhile have been pegged at MYR6.4 billion, up from the MYR6.1 billion it spent in 2016.