Tax Gulps 75% of Aradel Holdings’ Profit, Crumbs for Shareholders

Tax expenses consumed a staggering ₦561.7 billion, or 75 per cent of Aradel Holdings’ enlarged pre-tax profit of ₦752.7 billion at the end of its half-year operations, leaving shareholders with a modest share of the company’s record earnings.

The tax bill was twelve and a half times higher than the previous year’s figure of under ₦45 billion, sharply limiting the profit available for distribution.

The energy company’s interim financial report for H1 2026 showed outstanding increases in both sales revenue and pre-tax profit, but the ballooning tax liability prevented much of these gains from reaching the bottom line.

Of the more than ₦561 billion increase in pre-tax profit year-on-year, less than ₦45 billion flowed down to net profit, lifting after-tax profit to ₦191 billion at half-year.

Second Quarter Dynamics: Oil Boom, Soaring Costs

The tax burden accelerated in Q2, which accounted for about 71 per cent of turnover and over 62 per cent of pre-tax profit, but contributed only 37 per cent of net profit for the half-year.

Q2 was an oil boom period for Aradel: crude oil sales soared to ₦1.45 trillion—16 times higher than the ₦90.6 billion recorded a year earlier. Gas sales also jumped by more than sixteen-fold to ₦240 billion, while sales of refined petroleum products grew by 10.7 per cent to ₦70 billion.

Total sales revenue for the quarter reached ₦1.76 trillion, more than ten times the figure posted in Q2 2025.

Cost of sales rose 541 per cent to ₦579.5 billion, but claimed a reduced share of revenue (under 33 per cent compared to 53.7 per cent a year earlier). The combination of robust sales growth and more moderate cost increases resulted in gross profit for Q2 of ₦1.18 trillion, a 15-fold jump.

However, a series of cost pressures eroded these gains.

Last year’s ₦8 billion in other income turned into a loss of ₦422 billion, primarily due to underlift inventory balances with partners.

Finance expenses ballooned 39-fold year-on-year to nearly ₦220 billion, more than double the ₦82.5 billion recorded in Q1. Tax Expense surged above ₦398 billion—over 33 times the prior year figure—claiming 85 per cent of pre-tax profit for the quarter and making up 71 per cent of the half-year tax bill. As a result, Q2 after-tax profit dropped 37 per cent year-on-year to ₦70.7 billion.

Half-Year Overview: Robust Revenue, Slimmer Margins

Aradel’s half-year results combined a strong Q1 with a revenue-driven yet profit-thinned Q2. At ₦2.49 trillion, H1 sales revenue was up 577 per cent year-on-year and already 3.5 times higher than the company’s 2025 full-year turnover of ₦699.4 billion. Crude oil sales dominated, contributing ₦1.94 trillion, while gas sales soared nearly 23-fold to ₦428 billion.

Production costs, though up 413% to ₦1.05 trillion, grew more slowly than revenue, allowing gross profit to rise nearly ninefold to ₦1.44 trillion. However, other losses of ₦213 billion at half-year (driven by Q2) and a 30-fold rise in finance expenses (to ₦326 billion) took their toll, turning last year’s net finance income of ₦1.4 billion into a net finance cost of ₦302.5 billion for H1 2026.

The company’s interest-bearing debts now exceed ₦1.81 trillion (excluding lease liabilities).

Despite these headwinds, pre-tax profit still expanded 293.5 per cent to ₦752.7 billion. But with tax expenses devouring three-quarters of profits, after-tax profit growth was limited to 30.5 per cent, closing at ₦191 billion. Net profit margin crashed from 40 per cent at H1 2025 to just 7.7 per cent in June 2026.

Earnings per share reflected only a moderate uptick, rising from ₦33.26 to ₦35.37 year-on-year.

The summary of this is that Aradel Holdings delivered record sales and pre-tax profit in H1 2026, but surging tax liabilities and cost pressures sharply limited gains for shareholders, highlighting the challenge of converting top-line growth into sustainable bottom-line returns in Nigeria’s energy sector.