Zain Group's profits drop 12.7% in 2012
Currency fluctuations hit Zain Group's full-year results
Kuwait-based telco, Zain Group, reported a decline in revenues and profits in 2012 as currency fluctuations dented the firm's results.
For the full year 2012, Zain Group generated consolidated revenues of $4.58 billion (KD 1.28 billion), a decline of 4.6% compared to the previous year's revenues of $4.79 billion.
Profits for 2012 were $902 million, a decline of 12.7% compared to full year profits in 2011. Zain Group's subscriber base rose 6% year-on-year to reach 42.71 million by the end of 2012.
Asaad Al Banwan, chairman of the board of directors, Zain Group, said: "2012 has been a challenging year and Zain's financial indicators suffered from sharp currency translation impact in some of the markets in which we operate, which cost Zain's bottom line approximately $109 million."
Al Banwan added that the group's key financial indicators were relatively stable and that the results for 2012 would have been significantly better without the effects of the currency fluctuations. "Consolidated revenues would have been $4.88 billion (KD 1.4 billion), while EBITDA would have been $2.15 billion (KD 601.7 million), and net profits $1 billion (KD 282.6 million)," he said.
Scott Gegenheimer, who was appointed CEO of Zain Group in December, pointed to progress made in a number of the group's opcos, including the launch of LTE in Kuwait and structural changes to Zain KSA, which has long weighed on the group's balance sheet.
"Zain KSA successfully completed its rights issue with a full subscription during the summer; a development that formed part of a wider plan to restructure the company's capital. Zain Group continued to back its Saudi Arabia operation both administratively and financially, having taken the strategic decision to increase its ownership in Zain KSA to 37% in the wake of the company's rights issue," Gegenheimer said.
He added that Zain KSA used the cash generated from the rights issue to repay some debt in addition to investing in network improvements and services. "Additional support from Zain Group ensured the Saudi operator improved its financial performance and results, which led to a reduction in its net loss by 9% year-on-year in 2012," he said.
Zain's operation in Iraq proved more successful, with revenues increasing by 7% year-on-year in 2012, and profits up 6%, Gegenheimer said. "We expect tangible growth opportunities in Iraq, especially on the back of the widespread expansion of our network into the northern regions of the country. This expansion has helped grow the operation's customer base substantially, resulting in a 10% increase in customers during 2012 to reach 13.7 million."
Gegenheimer also highlighted challenges in Sudan, which saw its currency fall by 55% against the US dollar during 2012. "As a result of the political unrest and economic instability in Sudan and South Sudan, Zain Group faced a number of challenges highlighted by the sharp volatility of the exchange rate and the devaluation of the Sudanese pound," Gegenheimer said.
"Zain continues to have confidence that once structural issues in this part of the world are resolved we will again benefit from the substantial growth of our operations there, despite the heightened taxation and fuel costs," he added.