Aradel's Profit Rises Less Than Revenue Due to Rising Costs

Aradel Holdings saw a big increase in sales from January to June, but their profits did not rise as much.

During this time, oil companies around the world made money from the supply chain problems caused by the US-Israeli conflict with Iran. Aradel, which last year bought a majority stake in ND Western, an oil drilling company, saw its revenue jump nearly seven times to ₦2.5 trillion from ₦368.1 billion.

But profits after tax only increased to ₦191 billion from ₦146.4 billion as rising costs took a bite out of revenue.

The conflict in the Middle East, which started in February, has made it hard to supply crude oil globally, especially through the Strait of Hormuz. This strait is vital for transporting about 20 percent of the world's oil and liquefied natural gas.

As a result, oil prices have surged, benefiting energy companies. Big Oil firms like Exxon and Chevron made a combined $26.5 billion due to the war, while Aradel's local competitor Seplat reported a 430 percent surge in half-year profits on Thursday.

According to unofficial accounts released on Friday, Aradel got 77.8 percent of its revenue from crude oil exports during this time. Daily oil production rose by 258 percent, and daily gas output jumped by 1,121 percent.

Aradel's refinery in Ogbele, Rivers State, which can process 11,000 barrels of crude daily, earned ₦129.5 billion from selling refined products, showing an increase of 8.1 percent.

The company's results were affected by other losses, which reached ₦213.1 billion, compared to a gain of ₦8.6 billion last year. Financing costs also rose sharply to ₦326.1 billion from ₦11.1 billion, impacting overall performance.

The EBIT margin improved to 42.4 percent, up from 32.2 percent. However, the profit share from an associate, which was ₦71.3 billion last year, reported nothing this time.

Tax expenses soared by 1,150.4 percent to ₦561.7 billion as current tax increased, putting more pressure on earnings. Profit before tax jumped 293.4 percent to ₦752.7 billion.

"A firmer price environment supported performance, generating net cash from operating activities of ₦975.6 billion and a closing cash balance of ₦1,716.6 billion," said Adegbite Falade, the CEO, in a statement on Friday.

"This reduced net debt to ₦46.5 billion at year’s end, down from ₦475.1 billion the previous year," he added.