Axiata to reduce US dollar debt exposure

KUALA LUMPUR: Axiata Group Bhd, which saw its net profit impacted by forex losses last year, is looking to curtail the situation by bringing down its US dollar debt exposure to a minimal level.
The telco giant saw its net profit plunge by 75.1% to RM657 million for its financial year 2016(FY16) compared with RM 2.6 billion in the previous year, which according to president and group CEO, Tan Sri Jamaludin Ibrahim, was mainly attributable to the strength of the greenback against the ringgit, which lead to the group incurring losses of RM 685 million, due to the US dollar exposed debt from the Ncell acquisition.
The group is planning to bring back dividends from overseas and money from overseas investors to pay its loans. According to Group Financial Officer, Yap Wai Yip, it also has a unhedged fund of US$1.1 billion (RM4.9 billion), which it could deploy, if the situation calls for it depending on the strength of the ringgit this year.
“We are trying to reduce our US dollar loans as much as we can with the dividends,” Jamaludin said citing the group’s more cautious and prudent approach in dividend payouts.
He expects dividend payout this year to be more conservative than the 8 sen declared in 2016. “The reason behind the reduction of the dividend, is to fund our growth for our future,” he said.
Jamaludin said Axiata is looking to go back to the previous dividend payout ratio of almost 85% by 2018.
Going forward, the group also expects heightened competition, currency volatility, and tax and regulatory challenges as well as rising capex for most of its operating companies especially in Malaysia, Singapore and India, and will be embarking on cost optimisation measures to curb this.
“We have built in RM800 million operations expenditure and capex savings in our 2017 plan and we are working towards RM1.5 billion additional savings in 2018 and 2019. This should be reflected in improved margin in 2018 and beyond,” said Jamaludin.
The group has also been affected by aggressive competition in the Indian market and lower contributions from Idea, which only contributed about RM304 million in earnings, as well as the underperformance of some its operating companies, such as Celcom.
In addition to that, the group has also been focusing on strategic investments and mergers and acquisitions (M&A) for its long-term growth, which lead to it incurring several financial costs.
Axiata saw revenue for the year surge 8.5% for the financial year 2016 to RM21.6 billion, while earnings before interest, tax, depreciation and amortisation (ebitda) increased by 10% to RM8 billion. It is looking to achieve a revenue growth of 9-11% and ebitda growth of 7-9% in 2017.
Axiata will inject RM500 million more into its capex for this year as compared to RM6.1 billion in FY16, to predominantly cover operations in Malaysia and Indonesia as well as Bangladesh.
The group is expected to dish out between RM1.2 billion and RM1.4 billion capex for Celcom this year.
Axiata recorded a net loss of RM 309.4 million in the fourth quarter ended Dec 31, 2016 against net profit of RM 467.2 million in the preceeding year’s corresponding quarter. Its revenue however, increased by 8% to RM 5.7 billion compared with RM5.3 billion.