Kwacha devaluation rodes firms’ profits

Kwacha devaluation rodes firms’ profits

The recent 25 percent devaluation of the kwacha has affected performance of listed companies in the telecoms sector, with all indicating they are anticipating lower profits in the first half of this year.

Published statements from the two Malawi Stock Exchange (MSE)-listed counters, TNM plc and Airtel Malawi plc, show that the companies incurred foreign exchange losses in view of the weakened kwacha.

Airtel Malawi plc, for instance, has forecast that profit-after-tax for the half year period will be lower than the same period last year because of the performance of the economy in the wake of the devaluation.

Telecom firms affected by
kwacha devaluation

Reads the trading statement: “Airtel Malawi Plc accordingly advises that the company’s profit-after-tax for the period ended June 30 is expected to be approximately between 20 percent and 25 percent less than the profit reported in the previous corresponding period.

“The adverse deviation has arisen from foreign exchange loss suffered from the recent kwacha devaluation.”

TNM plc company secretary Christina Mwansa indicated in a cautionary statement that its profit-after-tax for the first six months will be 130 percent lower than that of the same period last year on account of foreign exchange losses due to the devaluation.

But Malawi Stock Exchange (MSE) operations manager Kelline Kanyangala on Tuesday painted a good picture for the market, saying the outlook for the market remains positive despite significant downside risks mainly emanating from the macroeconomic environment. 

“As of June 2022 we saw that more companies are expecting to register an increase in their reported profits for the half year ended June 2022 compared

to those that will register a decline.

“Of course we are aware that most of the risks became more prominent towards the end of June and so perhaps the impact may not be fully reflected in the results, nonetheless we are confident with the momentum we are seeing on the market,” she said.

During the same period last year, TNM plc recorded a 19 percent growth in profit-after-tax to K4.5 billion up from K3.7 billion recorded in the six month-ending June 30 2020.

Airtel plc, on the other hand, posted an after tax profit of K11.3 billion slightly below K11.4 billion recorded in the six month-ending June 30 2020. Reserve Bank of Malawi devalued the kwacha by 25 percent against the dollar in May this year, which according to the central bank was necessary to align the foreign exchange supply to the macroeconomic fundamentals as well as ensure supply in the formal market.

This saw the local unit fall to K1 030 per dollar from the previous K825. Presently the kwacha is trading at K1 036 to the dollar.

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