(Nairobi) – Safaricom Plc has reported a 17.7% drop in half-year profits, falling to KSh 28.1 billion from KSh 34.1 billion, largely due to the Ethiopian Birr’s substantial depreciation. This loss, equivalent to a decrease of KSh 6 billion, comes amid Safaricom’s recent entry into the Ethiopian market, where currency devaluation and inflation continue to challenge its financial performance.
Despite the profit decline, Safaricom’s service revenue grew by 12.9% to KSh 177.5 billion, boosted by an increase in customer usage across all services. However, inflation and the Ethiopian currency’s depreciation impacted Safaricom’s earnings significantly, costing the company KSh 17.5 billion due to rising local expenses and foreign exchange losses.
In light of these financial pressures, Safaricom has revised its annual profit expectations downward and increased its capital expenditure projections. Speaking at the earnings announcement, Safaricom CEO Peter Ndegwa expressed cautious optimism about the Ethiopian venture. “Despite the foreign exchange challenges, we remain optimistic about the success of our Ethiopian operations, and we are expanding our efforts to attract customers and innovate for greater value,” he said.
The Ethiopian Birr saw a sharp 106% drop against the U.S. dollar between June and September 2024, falling from 57.69 to 118.99 per dollar. Ethiopia’s recent decision to adopt a floating currency system, aimed at securing IMF funding, has led to this dramatic depreciation. In response to these circumstances, Safaricom has extended its breakeven target for its Ethiopian operations by one year, moving it to March 2027, though it expects the currency impact to ease by year’s end.
While the Ethiopian market presented challenges, Safaricom’s Kenyan operations performed well. The company recorded a 14.1% profit increase in Kenya, reaching KSh 47.5 billion, fueled by revenue growth in several key areas.
In the past six months, M-Pesa revenues surged by 16.6% to KSh 77.2 billion, driven by increased customer engagement. The number of M-Pesa agents rose to 266,070, reflecting the platform’s expanding reach. Voice and messaging services also grew, with revenue from voice increasing by 4.8% and messaging by 8.0%, together making up 26.4% of Safaricom’s service revenue.
Mobile data revenue saw a notable rise of 20.2%, reaching KSh 35.6 billion, which Safaricom attributes to a 10.5% increase in data customers to 28.9 million. Overall, Safaricom’s customer base grew by 7.8%, totaling 52.01 million users. As of June 2024, Safaricom held a dominant 65.4% share of Kenya’s mobile market.
Given these mixed results, Safaricom’s management has revised its earnings guidance for the year. The company now anticipates EBIT (earnings before interest and taxes) to range between KSh 94 billion and KSh 100 billion, down from earlier projections. Capital expenditure expectations have been raised, with spending now projected between KSh 80 billion and KSh 86 billion as the company invests in both Kenya and Ethiopia.
Safaricom, listed on the Nairobi Securities Exchange under the ticker symbol SCOM, remains the largest company by market value on the exchange. On Thursday, its share price dropped by 6.1%, closing at KSh 15.50. The company did not announce an interim dividend for the period.
| Financial Metric | Half-Year Results 2024 | Change |
|---|---|---|
| Net Profit | KSh 28.1 billion | -17.7% |
| Service Revenue | KSh 177.5 billion | +12.9% |
| M-Pesa Revenue | KSh 77.2 billion | +16.6% |
| Voice Revenue | N/A | +4.8% |
| Messaging Revenue | N/A | +8.0% |
| Mobile Data Revenue | KSh 35.6 billion | +20.2% |
| Capital Expenditure (Projection) | KSh 80-86 billion | Increased |
| Projected EBIT | KSh 94-100 billion | Lowered |