August 01, 2025/InvestmentOne Report

Aradel Holdings Plc delivered commendable top-line growth in H1:2025, with revenue reaching NGN368.08bn, representing a 37.18% increase from NGN268.31bn in H1:2024. This growth primarily stemmed from higher crude oil output and expanded refined product sales. Despite this revenue growth, the company faced significant margin compression, evidenced by a modest 1.06% increase in gross profit to NGN163.16bn from NGN161.45bn, due to a substantial rise in cost of sales, which surged by 94.57% to NGN204.92bn. Consequently, gross profit margins contracted notably from 60.17% to 44.33%. Operating profit declined by 21.10% to NGN118.62bn (H1:2024: NGN150.27bn), driven by heightened operating expenses, including a 184.10% spike in general and administrative expenses, largely reflecting increased staffing and overhead costs due to operational scale-up and new acquisitions. 

We anticipate sustaining strong operational momentum into the second half of 2025. Efforts to optimize production, particularly through expanded activities at the Ogbele and Omerelu fields and the introduction of a new refining train, will support revenue and profitability. Cost management initiatives remain crucial, optimizing operational efficiencies, and prudent staff management to normalize cost growth. Associate investments are expected to continue contributing significantly to the company’s earnings, particularly with the full-period contribution from newly acquired assets. Strategic capital deployment remains central to our growth strategy, reinforcing Aradel s resilience and capacity to deliver sustained shareholder value. Consequently, we place an OVERWIGHT recommendation on ARADEL.

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