KUALA LUMPUR: Axiata Group Bhd
is confident of sustaining its minimum dividend payout of 10 sen a share this year as it returned to a profit after three consecutive quarters of losses.
The group had paid 10 sen dividend for the financial year ended Dec 31, 2023 (FY23), while maintaining that its financial position remained strong operationally, despite the losses.
Higher foreign-exchange (forex) losses and finance costs had put a lid on the group’s profits as it slid by some 19% year-on-year (y-o-y) in its recently reported first quarter despite revenue growing by some 13% y-o-y.
Chairman Tan Sri Shahril Ridza Ridzuan said the company is committed to sustainable earnings which was seen in the first quarter of FY24, which highlights its steady operational performance and path to being a sustainable dividend company.
“With the financial figures, the dividends are really coming from the group’s cash generation – we have some RM4bil cash in the group. In the first quarter, there was some RM400mil in cash generated.
“All these forex losses do not have any implication on the cash levels. As far as retained earnings are concerned – we are fairly well placed on this,” Axiata’s group chief executive officer and managing director Vivek Sood said at a press briefing after its AGM yesterday
“Following the first-quarter results, we are on track with our financial numbers being in line with our targets.
“As such, the target this year is still to continue with the 10 sen per share payout,” its chief financial officer Nik Rizal Kamil Nik Ibrahim Kamil said.
Vivek noted the group, which reports its final financial numbers in the ringgit and operates in various countries overseas, would also be affected by currency movements vis-a-vis the ringgit.
“The movements in the currency actually have a two-fold impact on the profit and loss side since the reporting currency is in the ringgit.
“Any reported results generated from a foreign currency to the ringgit would mean it shows higher figures,” Nik Rizal said.
“But on the balance sheet, a lower ringgit would see the borrowings look a bit higher.
“This is why on a quarter-on-quarter basis, in the first quarter we saw the ringgit borrowings growing by 2.8% but out of this, 2.3% was due to forex movements,” he added.
Vivek explained some of these borrowings were due to earlier management decisions for the group to borrow at low coupon rates some years back.
“We had borrowed back in 2020 when interest rates were low for 10 and 30 years which gives us a coupon that was extremely low.
“The cash outflow (due to the coupon rate) is low, for example the 30 years is 3.06%. Whereas at the current rate for two years is more than 4.5% or 5%.
“This was the big impact we had on financing costs, and these are all fixed coupons, not fluctuating,” Vivek said.
“Having said this, the cost of any such hedge for such a long-term debt is expensive.
“So we keep these open, and when this is done there is an unrealised currency impact – positive or negative depending on the ringgit moves vis-a-vis the ringgit.
“As of now, we have had a downside effect due to the weakness in the ringgit, but if it strengthens going forward then this will reverse,” he added.
Vivek also pointed out that its financials were impacted on a mark-to-market basis without any cashflow implication since its cashflow generation is still considered very strong in its recent first-quarter results.
