Senegal: Sonatel strengthens its cash reserves, despite declining net profit
October 30th 2020
While in June 2020, it completed a loan of 100 billion FCFA to support its investments, the telecoms group Sonatel found itself with 38 billion FCFA in more cash, due to a drop in its capital expenditure.
Over the first 9 months of 2020, the telecoms operator Sonatel managed to increase its cash reserves by 38 billion FCFA (+ 19.2%), despite a 2% drop in its net profit, we can see from the communications financial statements published by the company on the BRVM website.
Its managers explain this situation by reducing capital expenditure over the same period, but also achieving good operating margins. Sonatel benefited from several favorable factors.
There has been an increase in its customer database which now reaches 34.4 million people, an increase in the users of its Orange Money service which are at 7.9 million active subscribers, up 25.5%. Thus, its turnover for the period reached 895 billion FCFA, an increase of 3.5%.
The reduction in investments over the period under review may however appear contradictory, because in June 2020, Sonatel mobilized 100 billion FCFA on the WAEMU capital market, with the intention of carrying out new investments.
It is not excluded that the company is in the process of building up a maximum cash reserve to meet its future commitments. The company operates in a mature and very competitive market; which does not allow for the strong growth in the meantime.
In the information note for the June bond issue, the group planned to achieve a consolidated net margin of 18.5% over the year 2020. However, in view of current performance, we are only at 15.6%. In addition, Sonatel is in the process of keeping its promise of free cash flow with a current ratio of 26.3% against 25.1% expected.
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