Financial report for the third quarter of the year 2018 of Zain Telecommunications Company revealed a drop in profits due to the financial performance of the Sudanese branch of the group, which was largely affected by the economic measures adopted by the government early in 2018, together with the collapse of the Sudanese pound as it lost 40% of its value, and the ascending of inflation to record levels since last September. Consequently, the group predicts more losses to come should the economic crisis in Sudan persists.
Operations chief executive officer in the group Scott Gegenheimer said “with specific regard to the third quarter of the year 2018, the steep fluctuation in exchange rates due to the local currency losing 37% of its value in the past three months, had negative impacts on the financial indicators as it cost the group 44 million USD on revenue, 18 million USD on earnings, prior to interest, tax and depreciation deduction and it finally cost 8 million USD on the net profit level”.
Sudan is currently going through an unprecedented economic regression, scarcity of essential goods and services, in addition to an unprecedented liquidity crisis which contributed to the pound losing 40% of its value compared to last year.
The report focused on the negative influence of exchange rate volatility on the financial indicators over nine months of the year 2018 as it stated “the devaluation of the local currency in Sudan by 40% from an average of 16.5 (SDG/USD) from the start of the year 2017 to September 2017 up to 27.1 and from the start of the year 2018 to September 2018, cost the company 16 million USD on net profit”.
Telecommunications companies and other big companies complain about the high prices of hard currency and the difficulty of acquiring it, because of its scarcity on the market and the almost complete non-existence in Bank of Sudan, so the companies are forced to shop for dollars in the black market where it is estimated at $US 1: 65 SDG.
The last financial quarter for Zain Company is speculated to show further and bigger losses due to the wide and continued retraction in Sudan’s economic indicators, increase in exchange rate and operating costs and rise in inflation levels.
It is worth noting that Zain-Sudan is considered the second largest client base in the group as it represent 30% of the total client base of the group according the annual report, which pointed out that the net gain of Zain-Sudan increased by 38% in the past nine months when presented in local currency, but decreased by 13% when calculated in US dollars.
Zain group fears huge losses next year, because of the variability of exchange rate in Sudan, as the chief executive for finance Usama Matthew “unfortunately, things are getting worse for us with regard to this problem, so the central bank of Sudan decided to set exchange rates through a recently established body at $US 1: 47.5 SDG, this could result in hyperinflation in the country. This will negatively affect Zain Company and will be reflected in the coming financial listings”.