KUALA LUMPUR: Axiata Group Bhd says the weakening of the US dollar against the ringgit and a lower interest rate are expected to significantly improve the company's balance sheet and profitability.
Axiata group chief executive officer and managing director Vivek Sood said the group currently had US$2.3 billion in debt, and the strengthening of the ringgit would have a positive impact.
"Let's say the ringgit has to strengthen by 5.0 per cent against the US dollar. You get a 5.0 per cent gain coming from the movement of the dollar to ringgit on the balance sheet. That gain would translate into unrealised benefit but on the other level because we paid an interest on that particular revised value of the ringgit.
"That will help us improve both our balance sheets and profitability. For us, I think that that's going to help," he said at Axiata's second quarter (2Q) results briefing today.
Sood also noted that lower interest rates would positively affect the company's infra-businesses, like Link Net and edotco, and ultimately increase their value during fundraising.
He explained that lower interest rates generally boost the valuations of the infra-businesses, which would lead to better outcomes as new investors join these ventures.
"I mean, we have around RM25 billion of debts. A one per cent improvement in the interest rate is actually RM250 million ringgit across. So I think that is the benefit we are going to get once the interest rate starts sliding down," he added.
On the external risks of the outlook, Sood said the company is watchful on the environment in Bangladesh and on the upcoming elections in Sri Lanka.
"These would obviously position risk for us, which I think as a company, we kind of manage it with being very conscious of how much cash we burn, how much capital we do, and how much balance sheet exposure we take in these conditions," he said.
Meanwhile, Axiata returned to profitability with a net profit of RM134.8 million for the second quarter of 2024, against the net loss of RM576.2 million in the same quarter last year.
Its revenue from continuing operations saw a 2.9 per cent growth to RM5.7 billion from RM5.5 billion previously.
The growth was driven by contributions from all of its operating companies, except for its mobile operations in Sri Lanka and fixed broadband operations in Indonesia.
Axiata declared a first interim dividend of 5.0 sen per ordinary share, which was seen as a commitment to shareholders to reach the 10 sen per share target dividend for 2024.
Its earnings before interest, taxes, depreciation, and amortisation (Ebitda) increased 12.9 per cent to RM2.8 billion, while earnings before interest and taxes (Ebit) rose 37.4 per cent to RM946.1 million.