TNM sees economic turmoil persisting

TNM plc, which shed more than K1 billion (about $2.5 million) in the year ended December 2012 due to foreign exchange losses, sees ‘difficult economic circumstances’ continuing in 2013.

The Malawi Stock Exchange (MSE)—listed telecommunications company has posted a 49 percent drop in after-tax profit to K692.3 million from the previous year’s K1.3 billion.

TNM has blamed the profit drop on devaluation of the kwacha and its subsequent floatation which resulted in a “significant increase in most of the company’s operating expenditure, which are mainly denominated in foreign currencies”.

The currency depreciation resulted in foreign exchange losses of K1.062 billion from K163 million the year before and the net financing cost of K1.015 billion, a jump from last year’s K543 million.

“Although profitability of the business was severely impacted by the economic situation, the company was able to achieve a growth of 15 percent in Ebitda [Earnings before interest, taxes, depreciation and amortisation] with the margin decreasing to 30 percent from 37 percent in 2011,” reads the statement accompanying the financial results jointly signed by chairperson Matthews Chikaonda and managing director Willem Swart.

But the company increased its investment in infrastructure in kwacha terms to K8 billion from last year’s K2.6 billion which mainly consisted of the implementation of core network facilities and redundancy projects.

The company says the high cost of debt financing, foreign exchange losses and high inflation, currently at 35.1 percent, will impact on the profitability of the business.

Despite all this, the company will continue to follow a business consolidation strategy this year with loss capital expenditure and focusing on reducing high debt levels.

TNM’s directors have proposed a final dividend of K301.2 million or an equivalent of three tambala per share for the year ended December 2012.