Good morning, and welcome to the conference call of Schoeller-Bleckmann Oilfield Equipment AG, SBO, regarding the financial results of the first 9 months, 2023. For your information, this call will be recorded. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If any participant has difficulty hearing the conference, please press zero hashtag for operator assistance. Schoeller-Bleckmann Oilfield Equipment AG also wants to remind the participants of the conference call that some information in this call, forward-looking statements. A detailed disclaimer is included on page 2 of the presentation. May I now hand you over to Gerald Grohmann, CEO of Schoeller-Bleckmann Oilfield Equipment.
Thank you very much for the introduction. Ladies and gentlemen, welcome to our Q3 2023 conference call, which, as usual, I'm going to hold together with Klaus Mader. Yeah, let's get started right away. First of all, as usual, I would like to start with a brief overview of the org chart of the SBO Group. Reason is twofold. As you know, we have our two divisions, Advanced Manufacturing and Services, as well as Oilfield Equipment. I'm quite sure that it is not a surprise to anybody that Advanced Manufacturing and Services, in short, AMS, who predominantly cover the international markets, is revenue-wise, a little bit ahead of Oilfield Equipment, who predominantly cover the U.S. market.
Now we have basically no changes on the groups reporting to AMS. Group sales total group sales of all AMS companies reaches 57% of group sales, versus Oilfield Equipment is 43%. As we all know, the international markets are kind of booming and show very strong activity, whereas US markets, of course, are a little bit slower for quite a while, but we will provide some color to that later. The second interesting thing, and of course, this has been announced, is that we added also our most recent acquisition, the Praxis Completion Technology company based in Dubai to our chart.
What you will see here on the right-hand side, we have already renamed this company, at least the mother company, so to say, in Dubai, to the WellBoss Company, PCT, which clearly indicates that they are reporting to the WellBoss Company in Houston. Praxis has also a subsidiary in Saudi Arabia, called Praxis Completion Technology Arabia. So these are the new, highly welcomed members in our group portfolio. Highly welcomed because it extends our footprint in the Middle East, which means at the same time that Oilfield Equipment, which historically has, of course, a stronger exposure and a high exposure to the North American, in particular, U.S. market, is now also increasing its international activities.
I think this is an important development going forward, and we are very happy that we were successful in acquiring this company. Now, let's look at the highlights in the first nine months of 2023. We are happy to report that we achieved both strong sales and earnings growth in the first nine months of this year, outpacing an already very successful year, 2020. We will look at the figures on the highlighted figures on the next chart, and of course, Klaus is going to discuss the financial details with you later in the call. On a side note, I would like to mention that AMS division achieved an all-time high in Q3, which also is a clear sign of the strong international business in our industry.
The group, EBIT, adjusted, for foreign exchange effects, significantly increased, reaching, EUR 86.3 million, and this means that on that basis, we achieved almost a 20% operating EBIT margin. Also, operating cash flow improved by EUR 37 million, excuse me, year over year and arrived at, EUR 61 million. Yeah, as I have already mentioned, and as we have already reported, on October 9, we closed the acquisition of, Praxis Completion Technology, and I think this is a very good addition, to our company portfolio. And also early this, early last week, late last week, sorry, we announced that we reached an out-of-court settlement in, the legal dispute with a former minority shareholder of Downhole Technology.
Yeah, and of course, we continue to pursue our Strategy 2030, and we have intensified our search for M&A targets and are looking deeper into available opportunities and targets, but a little bit more color about that later on. Key figures, yeah, I mentioned already, overall, a very successful first nine months. Bookings basically in line with last year bookings. Having said that, is a little bit less, and Klaus, of course, will provide some more color at the booking development, which was a little bit slower in the third quarter. This, in our opinion, is no reason to get concerned.
We saw early unusual surges of purchase orders early this year and end of last year because our customers wanted to secure Schoeller-Bleckmann capacity, which is, I think, a good proof how important we are for the operations and for the strategy of the big oil service companies. And now it's going to start to normalize. But our customers, as well as we, believe that this cycle will remain strong going forward. Yeah, sales, of course, based on the strong backlog that we have in our books is extremely strong. Clearly headed by the record achievements in Q3 by AMS division, and we achieved EUR 437 million, which is 21% more than the comparable time period last year.
EBIT, EUR 103 million for the first three quarters, also ahead. The reported EBIT is masked by foreign exchange effects. And yes, we are ahead of last year, EUR 82 million versus EUR 73 million last year. But the real operating profit and the difference and the growth is much, much higher. And you see that here in this circle on the right-hand side, that the adjusted EBIT, adjusted for foreign exchange effects, developed from EUR 56 million last year to EUR 86 million this year. This is more than 50%, and I think a great achievement, and I congratulate all our team members in the group to that. Profit after tax is in the order of magnitude of last year, and Klaus will explain the reasons why.
Net liquidity went back a little bit because of the acquisition of Praxis. What is notable is that both energy consumption and headcount grew much, much less than revenue, which I think is also a good sign, how efficient we work, both on the use of energy and energy consumption, which means reduction of CO₂ emissions, but also efficiency when it comes to the workforce. Now, Strategy 2030. The Strategy 2030, basically, of course, has not changed. The strategy is the strategy, is the strategy. And we are, of course, clearly and strongly pursuing this strategy, which includes in our core business, both on acquisition. So this box is ticked by the acquisition of Praxis Completion Technologies, a perfect fit to our group, a perfect fit to our WellBoss company.
And on the building a new business segment side, of course, we continue to make inroads in the geothermal path. This industry is growing slowly, but we want to be early movers so that we have access also to early projects here internationally. We continue, of course, to be a strategic supplier with our 3D printing, high alloy steel capacities to the aerospace, in particular, the space industry. And, last but not least, of course, we continue our search for acquisition opportunities in the green tech area, predominant here, hydrogen, hydrogen derivatives.
What is maybe new in comparison, comparable to the last announcement, is that in the past, we mainly have been looking at European-based companies, and now we stretched out our search also to the U.S. because we see there are also interesting targets in the U.S. Of course, Schoeller-Bleckmann, having a strong footprint in the U.S., we are very well familiar with this market and with the culture of North American companies. Industry background, yeah, we are in the lucky situation that we serve a very strong industry. Oil demand is at record highs with 102 million barrels a day, which, of course, is boosting our business, as I said before, mainly internationally.
And here, Middle East, of course, is a very important area. But also for next year, we are confident, and according to the reports of IEA, oil demand, the global oil demand is expected of almost 103 million barrels a day. So it seems that the demand signs, the demand side remains strong for quite some time. And what we also see, of course, in the recent past, but also going forward, that OPEC+ keeps the market in balance and in a certain range. So the expectation is that for next year, oil price should hover between $80-$100 a barrel, which is, I think, a very good sign. Rig count reflects the same story, which I alluded earlier at the beginning.
Internationally, we see strong activities, with step-by-step increasing of the rig count. Also, if we look at the budgets of, let's say, Saudi Aramco, and ADNOC, for the next years, they are very, very ambitious, and we are happy to be part with our group, and can support their growth perspectives. The U.S. market, of course, has moderated in the last year, but we believe that the trough has been reached, and that the U.S. activity is expected to rebound in the next year. Canada, of course, is a seasonal market, strong in the winter, strong in the summer. And then, of course, we have this spring breakup season, in the spring.
But this is something what we can handle very well and is a very typical behavior of this market. Yeah, what I said about strong and high oil demand is also reflected, of course, in the E&P spendings, $500 billion growth of 11%. We do not have accurate numbers for next year, but I think it is fair to expect that also E&P spendings are going to grow in the next year. Yeah, and our expectations about 2030 remain the same.
Here we refer to a Rystad report that just to replace the depletion and to cover the expected oil demand, 63 million new barrels have to be found by 2030 in different areas to cover the need for supply. After this overall view, I would like to hand over the call to Klaus to discuss the financial review.
Gerald, thank you. Ladies and gentlemen, good morning, also from my side. Let's start with the bookings and the sales after the first three quarters and what Gerald already mentioned on the highlights. The bookings for the first three quarters are more or less on the level of the high bookings of the previous year, EUR 427 million compared to the EUR 431 million. In the third quarter, we have seen bookings at a level of EUR 128 million, which is lower than in the previous quarters.
Especially, Q1 of this year was EUR 160 million, and Q4 of the last year was more than EUR 200 million, and it is now normalizing on a high level after unprecedented high bookings at the beginning of this year, end of last year, when customers, what was already mentioned, were securing capacity. No need to be concerned about this decreasing bookings because the backlog with EUR 245 million at the end of September is on a very high and healthy level compared to the same period of the previous year. Sales have already been mentioned 21% above the previous year after three quarters. And not to forget, the previous year was the second best year in SBO history.
So it's fair to assume that this year will be the highest sales development in SBO history. In the third quarter, we have seen, and I, I'm rounding now the figures, sales at about EUR 143 million, which is slightly lower than the EUR 147 million in the second quarter. The decrease is resulting from the sustaining of the US market and, partly or to a, to a high extent compensated by the, by the tremendous performance of the AMS segment in the third quarter with more than EUR 87 million.
When we talk about the segments year to date, the AMS segment, with more than EUR 250 million in sales and contributing 57% to the group sales, is 38% above the same period in the previous year. Driven by the shift of the market to the international and offshore markets, whereas Oilfield Equipment, where we have seen a softening in the third quarter and also some delays in project sales, are 4% ahead of the year-to-date figures compared to the previous year. When we go to the EBITDA, and you may recall that from the half year presentation, we have the reported EBITDA and the adjusted EBITDA. The difference are significant foreign exchange impacts in the previous year compared to this year.
In the previous year, we had, in the first three quarters, a significant gain of EUR 16.16 million, predominantly resulting from the strengthening of the US dollar. The US dollar had its high at 0.96 EUR, where it is 1.09 as of today. This was then compensated in the fourth quarter, but in the first three quarters of the previous year, we had a significant foreign exchange gain, and this year we have a foreign exchange loss of about EUR 4 million. If you take that gap, EUR 20 million, you see that the adjusted EBITDA is increasing from 86, 80.6 in the previous year to 107 this year.
This is the demonstration of the operating performance of the business and also resulting in an EBITDA margin of 24.6% adjusted, compared to 22.3%. This is resulting from a better capacity utilization, predominantly driven by the higher volumes. The same development can be seen on the EBIT level, operating profit. The reported figure goes up from EUR 72.6 million to EUR 82 million. But much more important, the adjusted figure from EUR 56.3 million to EUR 86.3 million, which is an increase of more than 50%. Also in the third quarter, the EBIT was positive with EUR 26 million, based on a sales figure of EUR 143 million.
On the segment level, the significant increase in sales of the AMS division is also taking the EBIT significantly up by 70% from EUR 34 million to EUR 57.5 million. The OE EBIT is on a year-to-date basis slightly below the previous year, but adjusted for foreign exchange on the level of the previous year. Moving on to profit before tax before we talk about the year-to-date figures, is impacted in the third quarter by a one-off charge. You have read about it. We agreed at the weekend or close to the weekend on a settlement in a long-standing legal dispute that goes back to the acquisition of Downhole in the year 2016.
The settlement outcome is more or less that we will pay the purchase price, which was stipulated in the purchase agreement, dated seven years back, and connected to some one-off additional costs and interest, and this is amounting to EUR 8.5 million. This is the number, which comes in addition to what we have already reserved over the years in our balance sheet, and therefore, seen in the line option revaluation in the financial results. Even with that impact of EUR 8.5 million, which is a one-time, and there will be no additional expenses connected to that litigation, the case is settled, is solved, and there is nothing to be expected from now on.
In other words, we paid a purchase price that we initially agreed 7 years ago, now 4.5 years later, than it was usually paid, and the difference is more or less the interest. Even with that one-off charge, the profit before tax is above the previous year level. Profit before tax year to date is increasing from EUR 69.9 to EUR 74.1. A similar development also on the profit after tax with earnings per share of EUR 3.54 compared to EUR 3.52 in the same period of the previous year. Next slide is related to capital expenditures and cash flow. You see that the CapEx with EUR 27 million is higher than in the same period of the previous year.
This is triggered by the fact that we are growing, that we are investing in the future, investing in new technology, investing in our rental fleet, in order to support the growth that we had already this year and that we are also expecting in the future. We are also investing above the depreciation, which is a clear indication that we are optimistically looking into the future. Major CapEx has been into machinery, equipment, and rental fleets. Very positive is the development on the cash flow. You see here the cash flow from operating activities. It is by far more than doubling compared to the same period of the previous year, from EUR 24 million to EUR 61 million. This is triggered by a higher cash flow from profits and a lower increase in working capital.
And also the free cash flow is even taking the acquisition of Praxis into consideration, where we paid at the end of September about EUR 19 million for the majority of the purchase price. The cash flow is tripling from EUR 6 million to EUR 17 million. And without the acquisition of Praxis, the free cash flow is almost EUR 40 million, which means the group is generating positive cash flows. This is resulting in a strong and solid balance sheet. You see the liquid funds standing at EUR 267 million, which is about EUR 20 million lower compared to the beginning of the year. But we were paying a dividend of more than EUR 32 million.
We were paying for the Praxis acquisition, and this means that we were generating cash even with those two events taking into consideration. The equity is and continues to be on a high level with EUR 453 million, compared to EUR 425 million at the beginning of the year. This is even taking the dividend payment into consideration, predominantly coming from the strong earnings contribution during the course of this year. What I would like to discuss with you when looking at this balance sheet is now the impact of this settlement. Because you saw also in the announcement that in Q4 there will be a cash out at SBO, amounting to $128.7 million US dollars, US dollars.
Taking today's conversion into the euro, we are talking about roughly about EUR 118 million. And when looking at this balance sheet and what is the impact, now for calculation purposes, end of September, you need to deduct the liquid funds by about EUR 118 million, which means that we still have EUR 150 million liquid funds available. On the liability side, you need to deduct the EUR 118 million from the current liabilities, from the short-term liabilities. This is decreasing the total assets that you see here now at EUR 958 million-EUR 840 million. And this is taking the equity ratio, because equity is not changing, end of September, to almost 54%.
When we look at the next slide, where we show a net liquidity of EUR 18 million, even taking the Praxis acquisition into consideration, because the majority of this purchase price has already been paid end of September. The impact of the settlement will change the net liquidity position to a net debt position of about EUR 100 million. This will reside in a gearing of about 20%, and a 20% gearing is a very comfortable gearing in among our industry, also giving the current environment of the business. Because we will have a very excellent year in 2023. We are generating a positive cash flow throughout the year, and also the outlook is a positive one.
Therefore, I do not have any understanding that there were some expectations about the dividend cut in a report that I've seen yesterday, because the dividend is based on the 2023 performance. And there is no reason to expect a dividend cut based on this litigation outcome. Just to make that very clear. And with that information, I hand over to Gerald for the outlook.
... Klaus, thank you very much. Let's start with the outlook from the global perspective. As you all know, we unfortunately have some geopolitical hotspots in our world. This is not only the Russian aggression to the Ukraine, it's also the terroristic attack of Hamas on Israel. We see political tensions between the US and China. But amidst these current uncertainties surrounding the global economy, our industry remains intact, and this can be attributed to the increased emphasis on energy security, the growing demand for oil and gas. I mentioned 102 million barrels a day, already all-time high, and of course, a kind of catch-up because of insufficient investment in E&P spending in the past.
So yes, we see strong global demand going forward, not only for this year, but also for next year. And this development will support ongoing high activity in international and offshore markets, as we see already today. But also, the US exploration and production activities are expected to recover next year. And from the current trough, we should see a rebound. Given the industry fundamentals, we believe in a sustained and multi-year increase in global upstream investment, and we also believe that this cycle will be more durable and more robust than previous cycles. And fortunately, we share this belief with our biggest customer also. Now, let's look what does this mean for our company, for SBO? All in all, a very positive outlook.
Our market conditions remain favorable, and we are in an excellent position to take advantage of this environment, as we have been proving in the past many, many times before. We are on track to deliver a very strong performance in 2023. And, with the addition of Praxis to our business portfolio, which strengthens our market position in the important Middle East market, as well as the undertakings of our new business initiatives, like geothermal, for instance, but also by intensifying our search for M&A targets, we are very confidently looking into the future. Now, this normally is the final of the presentation, but, as you all know, this is my last conference call in this esteemed round.
After 22 years of serving the company as CEO, as you know, I'm handing over to the next generation by year-end. A well-known next generation, I have to say. Looking back, it was an amazing and unforgettable journey to run SBO together with my international management team through ups and downs, but always with full power, always with full energy, steaming ahead. So it was really a great, great journey, and I would like to thank everybody who joined me on this journey. I'm confident that SBO, with Klaus Mader and Campbell MacPherson on the helm, is in good hands going forward and will continue the success story that we have been seeing so many years in the past. Thank you, all, everybody.
And, now I don't forget for the Q&A session, and let's get started for the Q&A session.
Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. If you'd like to ask a question, please press nine star on your touchtone telephone. The operator will announce your name when it's your turn to ask a question. In case you wish to cancel your question again, please press nine star again. So please press star, nine star now to state your question. So the first question comes from Tim Wunderlich, from Hauck & Aufhäuser.
Yes, good morning. Thank you for taking my questions. The first one is on the OE segment. Maybe you can first explain, just looking at Q3, the EBIT of the OE segment was particularly weak. So, I'm having EUR 3 million EBIT, 5% EBIT margin, and that compares to that. That is a significant decline, not only year-over-year, but also compared to Q1 and Q2, 2023. So maybe you can give us an explanation for this. And then regarding the comments that you made on the North American market, bottoming out or having found the trough, I mean, what is, where's the confidence coming from? Is that from discussions with your major customers? Are you already seeing a rebound starting in the current quarter?
So any more color you can shed on the OE segment and the North American market in terms of order intake, and also EBIT and sales development, maybe in the next quarter and also 2024, would be greatly appreciated. Thank you.
Fair enough. Thank you very much, Tim. Yeah, OE Q3 was not really our best foot forward. Yes, that is clear. Reason is that on the one hand some projects that were expected to could be invoiced in Q3 have shifted. This is not of concern, but it happens sometimes that the delivery of some project-related material is a little bit later. Second, some of our customers moved their rigs in September and therefore the activity on the rental side was lower than expected. But as we saw in October we got a momentum again. So therefore it seems that this last month of Q3 was a one-off event.
Basically, as you know, of course, clearly, the U.S. market is a little bit slower. We are in the trough, and therefore, if some additional effects happen, then, of course, this is reflected, of course, in the results. Now, your question about the rebound. Where is this confidence coming? Yes, we hear that from our customers. On the one hand, we see that here and there we can gain market share. We just have launched another animal beast on the downhole motor side. As you know, we are leading this market. We rent Porsches and not Volkswagens. And now the Ferrari is launched in the garage, which is stronger.
We hear from the big customers, the drilling companies, the service companies, who have their own motor fleet, that they prefer to run their tools with our motors because they are faster and better. So we are expected to gain market shares there. Also, if you look at the production, U.S. production is quite high. The question is, how sustainable is that production, the existing rig counts also there. We expect that next year we see a rebound in the rig count. This will not be a steep rebound, of course, but slowly, slowly, we should move out of the trough where we currently are.
Okay, yeah, thanks. Just to follow up, in the OE segment, are you seeing any price pressure emerging?
It's a mixed bag. I wouldn't say price pressure, but of course, in a slower market, here and there, you have to make concessions. This goes without saying. At the same time, when we come up with a new motor generation, we are pricing these motors on the high level because the customer has a big advantage, that the penetration rate is higher, which means the drilling to depth is shorter and the companies are saving a lot of money. So looking at the total cost of ownership, these motors contribute to reduce the total cost of ownership, although the price of the motors is higher.
Okay, and just to, just to understand this, with this new rental motor that you're, that you're calling a Ferrari, are you renting them out already now? I mean, is it starting now? Is it starting in early 2024? And what's the capacity, I mean, for this, for this new motor? So what, what, what should the, the mix be regarding the new generation and the, the older generation in 2024?
The mix is difficult to predict because it depends from the rig environment. You don't need a Ferrari on every street. But this is a commercial product, and yes, we have already started to launch the product, and we are going to grow the fleet in 2024.
Okay, thank you so much. And a question on the AMS segment. I mean, this segment performed extremely well in Q3, and as you said, it reached an all-time high. Did this continue? Do you expect this to continue going into Q4 and then also 2024? I mean, margins are extremely strong. We've seen a quite significant uptick in AMS segment revenues. So what are your expectations? Can we see further sequential growth, or are you expecting this to stabilize on a high level? And then also the same question on pricing in the AMS segment. Thank you so much.
Yeah, I think, to be realistic, or let's say it would be not realistic to say every quarter will be a record quarter going forward. That will not be the case. But what we are going to see is that AMS will continue to perform on a high level. And as Klaus mentioned already, in his discussion, this is based on the high backlog that we have. And as you know, backlog is predominantly generated by AMS, because majority of our business is rental business, which by definition, does not have any backlog. So we are confident that AMS will contribute on a very high level. And yes, we enjoy good pricing there, very good pricing. Of course, we enjoy also, because it's a high volume dilution of the fixed cost, that goes without saying.
But also I would say we are not going to overstretch it, yeah? I mean, in AMS, we do business with customers for decades, Schlumberger, Halliburton, Baker Hughes. We are strategic suppliers for them. Yes, we are in the driver's seat. Yes, we use whatever is prudent to use, in pricing power, but we are not going to overstretch it.
Okay, thank you. And then just the last. Just, just one final question. You talked about the backlog. Can you remind me how much of the backlog is gonna be turned into revenue in 2024, approximately?
The majority. Majority.
Okay.
Delivered in 2024. Yeah.
Okay, perfect. Understood. Thank you so much. And, Herr Grohmann, yeah.
... Thank you, sir.
Thank you.
Thank you very much.
Thank you very much. Mr. Kevin Roger from Kepler Cheuvreux, may we have your question, please?
Yes. Good morning. I hope you are doing well. First of all, Gerald, let me wish you all the best for the next journey, because I'm sure that you have things in mind, et cetera. So wish you all the best for your coming many years that you will have. Now coming back on-
Thank you very much, Kevin.
My pleasure. Now coming back on Schoeller, a lot has been already asked. So maybe for me, I will focus on the 2030 transition, first of all. You just said that previously you were focusing on European assets, and that now you are also looking in the U.S. What has driven this change in perception? It is related to the valuation in Europe or to the implementation of the Inflation Reduction Act in the U.S., where clearly carbon capture things, hydrogen things could get traction. What is the key driver, first of all, for this change of geographical approach?
Yeah. Frankly speaking, we always have tried to include the U.S. in our search. But as you know, the U.S. doesn't have things like Companies House, and so looking deeper into private-owned company was extremely difficult, almost impossible. And now we found a source to achieve that, and that made it possible to broaden our search also to the U.S. Because clearly yes, there are many interesting technology companies in Europe, but also at least as many in the U.S. So we are very happy that we have now a broader approach.
Okay. I understood. And maybe just to understand the rationale that you will have also, because now you will have to pay the final cash out for Downhole. So, even if the leverage will remain limited, you will move into a leverage situation like that. So what will be your policy in terms of future leverage, firepower that you reserve for M&A? And will it potentially include a potential capital increase to fill in the way the cash needed for such operation?
Kevin, hello, this is Klaus. Let me take that question. As I said it in my, in my presentation, we are now, after the cash out at the gearing of, about 20%. This is not of a concern at all, because the company is, generating, cash flows now and also in the future, positive cash flows. And, we are having an excellent year. So therefore, also investing into the Strategy 2030 and, finding a financing into the, Strategy 2030, especially if it is a green financing, is, not something to be concerned about, given the environment. And then it depends on the size of the acquisition. If it is a acquisition like Praxis, we paid from cash.
If it is a more sizable one, we do a debt financing, and if it is really a big one, we also have the source of equity financing. So this will very much depend on that, but you can rely on us, that we are taking this very carefully, not too high leveraging the company, and basing it at, basically at the target.
Okay. Okay, I understood directly. And the last point is maybe more product on the technology side in the U.S. Discussing with your investor relation team recently, I understood that, you know, one potential technology issue that personally I was seeing on the U.S. with the plug and the emergence of dissolvable plug from company like Nine Energy Services. I understood that now you have your own dissolvable plug that are getting traction, very well positioned. So can you share a bit more color on that with us, please?
Yeah, actually, we have two generations or technologies of dissolvable plugs, and we make amazing inroads with that, not only in the U.S., also in the Middle East. So it seems that this will be a market changer for us, also for our competition, I'm sure. And we very much look forward to that. Yeah, so it is not a copycat. It is something where we took a complete different approach because dissolvable plugs has their pros and cons, as you know, yeah? And we try to avoid the cons. And we'll very much look forward to that. Still, invitation to you and everybody here in the call is to get more color, maybe, to a personal visit to Ternitz or wherever.
But this is something where we have a strong belief in. And also in combination with this Praxis acquisition, which should help us to launch these products in the Middle East. Because as you know, there is an ongoing activity, not as big as in the US market, yeah, for unconventional production in the Middle East. But the beauty in the Middle East is that the plug price is much, much higher, the price per plug than what we can achieve in the US. And so we are going to also make inroads in this market.
Okay, understood. Thanks for the time, and again, wish you all the best.
Thank you very much, Kevin. Thank you very much.
Thank you. Mr. Oleg Galbur from Raiffeisen Bank, may we have your question, please?
Yes, thank you. Before I ask my questions, Mr. Grohmann, I would like to also use this opportunity and to thank you for the exciting journey we had along all these years, and wish you all the best for with your future projects.
Thank you very much, Oleg.
Now to the questions. I would like to start with a follow-up on the segment performance, and I refer specifically to AMS. Here we see again a strong increase of EBIT to more than EUR 22 million from a quarterly level of EUR 18 million in the previous two quarters. And this will point to a significantly stronger EBIT margin in the third quarter of almost 26% in comparison to the 22%. So of course, my question is: What should we... First of all, maybe Steel, you can once again explain in more detail led to this impressive margin development in the third quarter, and more importantly, guide us what level of margins to expect going forward. That would be my first question.
Yes, Oleg, I remember in the half year's call, you were questioning why the sales in AMS are going down, yeah, compared to the first quarter. Now you are impressed about the sales going up in the third quarter, and therefore, you know, you cannot always nail it down just on the quarter performance. It depends on the working days. It depends also on the invoicing. But basically, the driver of this growth was definitely higher volumes. Higher volumes means higher capacity utilization and also a higher fall through to the bottom line. Product mix in the third quarter also played a role, and also the fact that in the second quarter, and you also were addressing that, we had a negative foreign exchange impact.
And this quarter, meaning the third quarter, was definitely helping in the third quarter. I do not have many more additional comments what Gerald already mentioned, AMS to continue. It will very much depend on in the fourth quarter, you know, this is Thanksgiving, this is Christmas, foreign exchange plays a role, product mix plays a role. Not every quarter is a record quarter, but the underlying assumption that AMS is performing well, performing at record levels, we do not have a reason to believe that this is changing based on the booming of the international and offshore markets. Also, the underlying high backlog is making us promising and positive also for the next quarter.
To give you now a guidance, that the EBIT margin in the fourth quarter will be 24%-26%, is simply at the moment, not possible.
Thank you. I appreciate that. I was rather expecting a comment on the sustainability of the EBIT margin that you reported for the third quarter. That was rather than expecting a clear indication of what level to expect.
Yeah, and it-
for the current quarter next year.
And as I said, it will depend on the capacity utilization on the product mix, but you can expect similar margins also going forward. If it is 1% up or down, this will not make the difference.
Understood. Thank you. And then I have just a few short questions. First of all, on bookings, if you could please tell us how bookings were developing in the fourth quarter so far. Then on the Praxis acquisition, when is it going to be consolidated? Started already in the fourth quarter or as of next year? And lastly, on the income tax rate, it increased in the first nine months of this year to 24% from 21% last year. So I was wondering what level should we expect going forward? That would be it from me. Thank you.
Yeah. Let me answer the bookings question, Oleg. And, as I said, before, bookings have normalized, and are at a lower level than before, but this is not of concern. Our customers were afraid, end of this year, end of last year, sorry, and early of this year, that they couldn't get enough access to our capacity. They need our capacity because we are the biggest player in the market, and there are many tools where we are the sole supplier. So our customers have no alternatives, globally speaking, yeah? And so we had this rush at the beginning, yeah. And now the inventories of our customers are full and are continued to be filled because the backlog is still huge, yeah.
And therefore, it's absolutely normal that we see some months with lower bookings. But again, this is absolutely no reason of concern that this is the beginning of a downturn or whatsoever. We are in very close contact and relationship with all our big customers. And we get the same messages. And I'm sure you read the Q3 announcement of Jeff Miller and Olivier Le Peuch the same as we do, and also Lorenzo, of course. So the market is strong. Everything, everybody believes that this cycle will be longer for stronger or stronger for longer. And therefore, yes, booking will kind of breathing, yeah, but it will kick in again, maybe stronger next year. No reason for concern.
About the consolidation of Praxis, of course, Klaus can answer that, but of course, we consolidate only,
Starting with October.
With October.
Yeah.
Because we close-
Yeah
On ninth of October.
Exactly, yeah.
It's only three months.
Yeah.
The internationalization of WellBoss, at least, is not reflected in the 2023 numbers. And, I'm sure this was the reason also for your question.
Yeah. Yeah. On the income tax rate, yes, Oleg, in the first nine months of the previous year, we had 21%, first nine months of this year, 24%. We're also guiding that the range will be somewhere between 21% and 24%, which is the majority of the company's tax rate, U.S., 21%, Austria, 24%. It is fair to expect, at least for this year, a tax rate closer to the 24% than the 21% last year. In going forward, if you take something for modeling between 21% and 24%, you are fine with.
Thank you very much. That's very helpful. Maybe just one short follow-up on Praxis. Any guidance for what level of contributions to sales or EBIT to be expected on an annual basis?
Yes. The good news on the Praxis acquisition is, and I think when we signed the contract, we said that Praxis was doing EUR 15 million sales in the year 2022. And Praxis will be in the range of EUR 20 million-EUR 25 million for the year 2023, which means it is a growing business. You also know, Oleg, as you know us for many years, that we do normally not guide on a single legal entity, but Praxis is not dilutive to the group margin.
Understood. Thank you very much.
Welcome. You're welcome.
... Thank you very much. Mr. Nicolas Knight from Wiener Privatbank, may we have your question, please?
Yes. Hi, thank you very much. I have another follow-up on the order intake. Maybe another time, just, we had now EUR 128 million in Q3, which was, well, the third consecutive decline. Still, still a good number historically seen, but, the lowest level since I think Q4 2021. Just to make sure, what do you expect now for what maybe I'll see in Q4? Do you expect now a stabilization of the trend or on the current level, or do you think in Q4 we will see another quite small decrease coming maybe from the U.S. market?
Yes, and then maybe another one on the downhole settlement, just to make sure those, the changes in balance sheets in your balance sheet structure, which were showing us, just to make sure there aren't, won't be any consequences we should be aware of coming from that. Like, I don't know, what from your existing debt to the covenants or I don't know, any, anything we haven't thought about yet, maybe. Thank you very much.
You're welcome. Let me ask, let me answer the, your, your first question. First, regarding the bookings, I only can reiterate what I said. We see a kind of normalization there, yeah. It's difficult to predict monthly and quarterly bookings, but you must be aware that our customers now have filled their inventories, and now they say, "Okay, let's see what I need next." Sometimes they have ordered something where they need something in addition to that, so it's always some movement. Again, in our view, no reason for concern. Bookings will, of course, kick in again when these inventories are depleted.
Our customers, and you read it as well as I do, and of course, we hear it, from the mouth, have signed multi-year projects, in particular in the Middle East, but also in Africa. Multi-year project means multi-year tools. So there is a big confidence in this cycle, regardless if the bookings in a quarter are a little bit higher or a little bit lower. Regarding the U.S., I have to... I would like to remind you that the U.S. business is predominantly a rental business, and therefore we do not see really a bookings contribution, from the U.S. So it's mainly AMS, and AMS is mainly serving Schlumberger, Halliburton, Baker, and Weatherford, plus several other companies. So going forward, we are not concerned, about this, current level of bookings.
On the downhole settlement, I continue to confirm, there are no consequences in going forward. We do not have to take up additional loans. It is paid from the cash. This cash was always referred, reserved for a potential settlement. Even after the cash out, the gearing stays in the very low 20s, which is a very comfortable situation. Equity ratio will go up to almost 54% after that, because the total assets, total sum of assets will be reduced with the cash out and with the reduction on the short-term liability. So once again, no consequences on that.
Okay, thank you very much. Also from my side, Mr. Grohmann, thank you very much for the always excellent cooperation in the past and,
Thank you.
Thank you. So the last question as of now comes from Richard Dawson, from Berenberg. Over to you.
Hi. Thank you for the presentation. Most of my question's been answered, but just one from me. In the report, you mentioned that if the positive developments continue, you plan to pay a dividend in line with last year. Could you provide some color on what that means for each of the segments? Does this require both segments to grow or just the oilfield equipment segment?
I'm not 100% sure if I got your question, Richard. The dividend-
Yes.
Yes, on the dividend payment, Richard, we said, and in our press release and also in our quarterly highlights, it does not change the picture with the cash out of the downhole settlement, whether one or the other assumed, because this cash was always reserved. And assuming that the performance of this year is on the same level as the previous year, it is fair to assume that the dividend will be on the same level. This was the clear comment on the dividend, and we made that very clear because we saw yesterday that there were some expectations of a dividend cut, which is not an issue at all. The dividend is based on the year performance. This was on the dividend.
The second part of your question, I'm not sure if I've fully understood it.
No, that, that answers the question quite clearly. Thank you.
Okay.
I say, I guess the follow-up on that is, is there any scope for an increase in the dividend, or is it just going to be in line with if the performance is still strong?
Let's see. When the year then it really is over, yeah, but, but, but, let's, let's live with the guidance that, that we gave, as of today.
Okay. That's fair enough. Thank you. And, I wish you all the best for the future. Thanks very much.
You're welcome.
Thank you very much. As there are no further questions in the Q&A session, I am handing back over to the host.
Yeah, ladies and gentlemen, thank you very much. As always, a pleasure to discuss our qu arterly results with you. All I can say is, stay tuned with SBO and we are looking forward to that. New management is in particular, looking forward to that. Thank you and bye-bye. Have a good day.