Ladies and gentlemen, good morning. Welcome to the conference call of Schoeller-Bleckmann Oilfield Equipment AG, SBO, regarding the financial results of the first quarter, 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 this conference, please press zero and rhombus for operator assistance. Schoeller-Bleckmann Oilfield Equipment AG also wants to remind the participants of the conference call that some information in this call may include forward-looking statements. A detailed disclaimer is included on page 2 of the presentation. May I now hand over to Gerald Grohmann, CEO of Schoeller-Bleckmann Oilfield Equipment. Please go ahead.
Thank you very much for the introduction. Ladies and gentlemen, good morning to our Q1 2023 call. I'm glad that we are back online again together with Klaus Mader, CFO to the company. Let me start with an overview. The first chart after the disclaimer, of course, is very familiar to you. It shows our international footprint and our two business divisions. What is interesting to note is that Advanced Manufacturing & Services group sales or their sales are slightly above the Oilfield Equipment sales. 56% of group sales of AMS versus 44% of group sales of Oilfield Equipment. The reason is that, as you all know, Advanced Manufacturing & Services has more international business.
We see a very strong international growth in our industry. The precursor of that growth has already been seen last year by the bookings in the AMS division. Versus Oilfield Equipment also delivered a solid result. As they are predominantly active on the North American market, they see a little bit more of flattish growth versus the rest of the world. All in all, of course, we are more than happy with the company results which we are going to present, Klaus Mader is going to discuss the financial results in detail with you, of course. Yeah. As said, we are happy to report that after the already excellent financial year 2022, SBO is seamlessly continuing with a strong first quarter 2023.
This, despite global economic uncertainties, we see that the activity outlook in our industry remains resilient. This is underpinned by the rise in bookings that we report by 22%, EUR 257 million, clearly exceeding sales, which grew almost 50%, to EUR 147 million. At the end of the day, it's the profit after tax that counts, and we are happy to report that profit after tax almost doubled to EUR 21.3 million. Of course, these results predominantly stem from our existing core business. Nevertheless, we are proactively pursuing also our Strategy 2030, and I will tell a little bit more about that later on. On the next page, you see the summary of the key figures, which I mentioned already.
Bookings up versus first quarter last year. Sales up by 47%, achieving rounded EUR 147 million. EBITDA margin, more or less the same, in rounded figures of 23%. EBIT increase of 72%, from EUR 15 million to EUR 27 million. Profit after tax, I said already, almost doubled from EUR 11 million to EUR 21 million. Also, the net liquidity improved from EUR 34 million to EUR 42 million. All in all, an excellent start into the new year, and we look very confident into this year.
Interestingly, headcount increased only by roughly 40 heads, from 1,484 by end of 2022 to 1,522 by end of quarter one, which also is a sign of increased efficiency, of course, that we are also gaining in our organization and continuously pursuing. The Strategy 2030, I'm sure everybody is familiar. I introduced the Strategy 2030 early last year already. I think, and the proof is in the given environment. That I think we are very well established in our markets and for the future with this strategy. Which on the one hand says that we maintain our successful core business. Energy security is in everybody's mind.
We have a market-leading position in all our activities in our core business. We are going to grow and defend these market-leading positions, of course. By investing, of course, continue to invest in R&D. Also I would not include any bolt-on acquisitions. Just to make you familiar with the term bolt-on acquisitions, this is something an acquisition that strengthens our already existing core business. This is something that we also, of course, are pursuing if opportunity is popping up. All in all, we run a value strategy in that part of our business. At the same time, we very intensively and proactively also are searching for new acquisition targets for building this new business segment.
Which on the long run should be as big and as successful as our existing core business. What I may say is that I personally, together with many others who are supporting and helping me, we are really searching the market. In some occasions, we do already a deep dive, and we are confident that sooner or later we are going to find the right fit. Building the new business segment out of our core business includes also another activity where we make already some inroads, namely in geothermal, in aerospace, 3D printing, in particular for aerospace. This is a successful business. Revenues are not really big at the moment, but we are very confident that in particular, geothermal has a big future ahead.
The good thing is that actually three of our of the Schoeller-Bleckmann companies and their products can participate in that segment. Which is on the one hand, the drilling downhole motors, of course, doesn't make any difference to drill for oil and gas or to drill for hot wells. Second, the circulation tools we which are also required in several instances. Third, and this is really the positive surprise, also, the rotary steerable tool technology of D-Tech is required because several of these wells are not only vertical but directional and therefore require also this rotary steerable technology. Yeah. If we have a brief look at the industry background, also here we see that we are in a very sound business environment.
Global oil demand is set to rise by about 2 million barrels a day in this year to 102 million barrels a day. The demand growth will be dominated by the Asia-Pacific region, in particular China. As you all know, China was very late in reopening after COVID-19 measures. They held many lockdown requirements up to, I would say, second half of last year. Now, the doors are more open, so to say. We expect that the Chinese industry, the Chinese economy, and therefore also the Chinese energy demand will grow over the year and gain momentum as we move into this year, 2023.
All that is reflected also in the rig count, where in particular the international rig count is growing and even expected to grow further, driven by long-term projects in the Middle East, but also in Latin America and Africa. Really a very broad international growth expected, what we also see in our order books. E&P spending, we have been speaking about that many times, and you all are aware about these many years of underinvestment, which are clearly depicted here in this chart of E&P spendings. Now with all these other with the demand growing, the oil demand growing, all these other long-term projects coming online.
Also at the same time, the search for gas, in particular in the Middle East. In order to compensate the Russian gas, all that is really fostering and the big push for new E&P spendings at a pace that really was unforeseen just a few months ago. Global spending for 23 is expected to grow double digit to above $500 billion. The midterm outlook to 2030 remains basically the same. It is important to note that the expectation is around 63 million barrels of new oil have to be found in order to cover the depletion of the existing field and the expected oil demand increase. This was a brief overview of our industry.
Now I would like to turn over to Klaus to cover the financials.
Gerald, thank you. Good morning, ladies and gentlemen, also from my side. Let us discuss the financials now in more detail. What you have already seen on the highlight sheet is that this was again an excellent quarter in terms of bookings, in terms of sales, in terms of profitability. The bookings, as already mentioned, increased from EUR 129 million rounded to EUR 158 million, which is an increase of 22% on a quarter-to-quarter comparison with the first quarter of the previous year. This also means that the high level of bookings continued also in the first quarter of this year. You may recall our record bookings in the year 2022 amounting to more than EUR 640 million.
If you take the monthly average, sorry, the quarterly average, you arrive at an amount of EUR 160. Here we are also in the first quarter of this year. The book-to-bill ratio continues to be above one, with 158 in bookings and 147 in sales. This is taking the backlog to rounded EUR 270 million by the end of the first quarter. The sales increased compared to the previous year quarter by almost 50%. 47% from EUR 100.5 to EUR 147.3. Increased also compared to the previous quarter, meaning the fourth quarter of 2022, by another 5%. This means that SBO is now growing since 10 quarters.
10 quarters, since the fourth quarter of 2020, we generated a sequentially sales growth. On the segment level, Gerald mentioned already and provided also the reasons for the 56% to 44% sales contribution to the group sales, 56% AMS and 44% Oilfield Equipment. In numbers, AMS achieved EUR 82 million in the first quarter, which is 67% more than in the first quarter of 2022, and also more than 20% growth compared to the fourth quarter of 2022, so the previous quarter. OE generated more than EUR 65 million in sales, which is also 27% above the first quarter of 2022, slightly below the fourth quarter, as the fourth quarter included tool sales.
Tool sales is a project business, you cannot expect it on a linear basis, and therefore, the sales has been slightly below the fourth quarter of 2022. Moving to the operating results. The EBITDA in absolute figures increased by more than 40%, from EUR 23.5 million to EUR 33.4 million. What are the primary drivers? It is the sales increase of almost 50%. It is a higher output, and this also results in a better capacity utilization. It also demonstrates that we continue to be in the position to hand over cost increases on our input cost in sales prices, and compensating those cost increases.
What you see is a slight decrease of the EBITDA margin compared to the first quarter of the previous year, and this needs to be explained. The explanation is foreign exchange impacts. You know, you noticed that the dollar was weakening in the first quarter of this year, and this had a negative impact of $3.8 million on the EBITDA compared to a $1.8 million foreign exchange gain in the first quarter of the previous year. If we take the operating performance and adjust by those foreign exchange impacts, the EBITDA margin was increasing from 21.6% to 25.3% when comparing the two quarters. On the EBIT level, the increase from 15.5 to 26.7 is significant. It is more than 70%.
The explanations are the same with EBITDA. Of course, also the EBIT was impacted by exchange losses. The EBIT margin of the first quarter, the reported one of 18.1% is adjusted by foreign exchange losses, 20.7%. Continues to be strong in performance with an adjusted EBIT margin of more than 20%. Also, on the division level, we see a strong performance. AMS EBIT more than doubled from EUR 8 million to EUR 17.5 million in the first quarter of 2023, and also the Oilfield Equipment EBIT increased by more than 50% from EUR 7.6 million to EUR 11.7 million when comparing the first 2 quarters of the 2 years. We see a similar development, of course, on the level of profit before tax, almost doubled from EUR 14 million to EUR 27 million.
What you will notice is that the profit before tax, with $27 million is even higher than the EBIT of $26.7 million. This is related to the temporary situation that our US dollar deposits deliver and generate higher interest income than the interest expenses that we pay on our bank liabilities, as the majority of those bank liabilities are fixed interest rates and are below the interest level that we get currently on the US dollar deposits. The financial result was with $0.3 million, even positive, compared to more than $1 million negative in the previous year quarter.
The profit after tax almost doubled from EUR 11.4 to EUR 21.3. This can be seen also in the earnings per share that also almost doubled from EUR 0.72 to EUR 1.35. Moving on to CapEx and operating cash flow. CapEx are slightly above the level with EUR 7 million compared to the first quarter of the previous year. Major CapEx have been into machinery equipment and also rental fleet that is needed, especially in the downhole drilling tools portfolio. Rental fleet is needed as we do not only generate sales but also rental income with our products and services. Good news. Clearly good news on the cash flow side.
The operating cash flow multiplied from EUR 4 million to EUR 20 million in the first quarter of this year. Although the working capital continued to increase and the continuation of the increase is simply the higher business activity because the DSO and the inventory days remained unchanged. This means that the big contribution from the operating cash flow is coming from the cash flow from profits. In addition, also the free cash flow is clearly positive with almost EUR 13 million after a negative free cash flow in the comparable period and quarter of the previous year. Also good news on the cash flow side, which results in a continued strong balance sheet. Liquid funds are above EUR 300 million from EUR 288 million at the beginning of the year.
Primary driver is the strong cash flow generation. Equity increased by EUR 13 million, which is coming from EUR 21 profit after tax and -EUR 8 from currency translations due to the weaker US dollar. The equity ratio remained on a high level of 47.1% also at the end of March. I close my financial presentation with the status of net liquidity and gearing. All what I've said on cash flow and balance sheet resides in a continued net liquidity position that also increased in the first quarter, from rounded EUR 34 million to rounded EUR 42 million. This is also further improving the gearing ratio, from -8.1% to -9.5%.
What I want to note is, that tomorrow we will pay our dividends, of almost EUR 32 million, and this will of course impact, the net liquidity figure in the second quarter. With that information, I hand over, to Gerald again for the outlook.
Klaus, thank you very much.
Welcome.
Yeah. outlook. Let's start with the global view on the market. Here I think it is fair to note that despite global economic uncertainties and elevated recession risks in some economies. We expect the supply and demand balance in the global oil markets to tighten over the course of the year, and I expected this previously in the demand and supply chart. I also would like to remind you that even in the last, I think, two calls, I mentioned the decoupling of our industry from the development of the global economy. The reason is that energy security remains a main topic and priority for most countries, and will be driving E&P spending, which are expected to grow not only in this year, but also beyond.
As I said before, the Chinese economy and energy demand is expected to gain momentum in the second half of the year. It is also important to note that internationally, we see the initiation of long-cycle projects in many geographic areas, predominantly in the Middle East and in international offshore basins. All that is a very sound signs. Given these industry fundamentals, we continue to believe that this spending cycle is more durable, more robust than previous cycles. As Klaus said before, we have already been growing in the last 10 quarters successfully. As we see it, for now, this cycle continues stronger for longer. What does this mean for our company? Well, we are clearly geared towards taking advantage of the momentum of this cycle.
You all know that we are strong and good in riding the cycles, be it up or down. Now, now we enjoy, of course, the momentum of the upcycle, and our organization is prepared for that. Our order books are well-filled, visibility is strong, and in some areas already reaching into 2024. I would say roughly 10% of our backlog is already for the next year. This is a situation, although I run this company for 22 years, we never had before. We not only focus on our existing core business, we also continue to pursue our Strategy 2030 proactively and intensively by searching for innovative technologies in the areas of energy transition and green tech.
As I said before, we take already many deep dives into certain opportunities, and we are confident that sooner or later we find the right fit. Ladies and gentlemen, this was our input and presentation for the first quarter 2023. Now we are happy to take your questions.
Ladies and gentlemen, if you would like to ask a question, please press nine and the star key on your telephone keypad. In case you wish to cancel your question, press nine and the star key again. Please press nine and the star key now to state your question. The first question comes from Oleg Galbur. Please go ahead.
Yes, good morning, and thank you for the presentation. I hope you can hear me well.
Thank you, Oleg. Yes.
Yes. I have two questions. The first one very short. If you could explain the decrease of the depreciation expense in the first quarter versus the first quarter last year, but also quarter-over-quarter. What levels should we expect going forward for the next quarters? Second question refers to the development in the U.S. market. Could you please comment or share with us how do you see and how do you explain the decline of the rig count in the U.S. and both oil but also gas rig count was declining since last November, October, if I'm not wrong. What are the main triggers, in your opinion, behind this trend? Would you see this trend continuing?
How or what impact would you expect on the demand for SBO services and equipment in the U.S.? That would be my second question. Thank you.
Yeah. Oleg, let me start with the second question, and then I hand over to Klaus for the first question. Yes, the US market, as I said before, had a little bit as lower growth than the rest of the world. Really, this is not a big surprise to us and also not a big concern to us. I mean, gas US hub is now really down this price. Of course that means that several gas rigs are put out of service. Some of them are moved into oil-rich areas like the Permian. Yes, this is going to happen, and we see a slight decrease in the US rig count.
As I said, not a big surprise, not a big concern, because for couple of years, and I'm sure you remember that, Oleg, and you know that, spending discipline became more important in the U.S., where I believe basically it's a good thing. In the past, 10 years ago and earlier, we saw the U.S. market always extremely volatile. When the oil price was up, we had the heydays and nobody had enough capacity to fulfill the demand. When the oil price went down, rig count fell over the cliff, and everybody stopped spending. Now we have a more stable, continuous development where I believe it is not a bad thing, yeah.
What does it mean to us and why do I say, well, we are not really concerned? If I look at the performance of our U.S. exposed companies, like BICO, for instance, in months and weeks where I see the rig count dropping, I see the revenue going up, yeah. That means on the one hand, we are gaining market share. On the second hand, what you also should know, we just launched in this year a new extremely powerful downhole motor. Remember, I always compared our motors with the Porsche versus the commoditized motors are the Volkswagen. I think now they put a Ferrari on the on the set. It's interesting to see how eager our customers are to get access to this motor.
Even companies who have an own rental fleet rent this new motor from us, because it has really excellent performance rating. You see with a good marketing, with a good product development, end to end, we can compensate this reduction in rig count even by a slight increase of sales, gaining market share, end to end. On the long run, I believe spending discipline is here to stay. Gas is an interesting thing, yes. Probably, once all these LNG hubs, which are in construction actually, or planned, are in operation, we should also see, of course, again, a new momentum in the gas market. I think this describes the US market very well.
Yes, it is a little bit slower growth, but from our perspective, no concern. What I would like to add in this point is that all our U.S. related businesses, which basically is BICO and WellBoss and D-Tech to a certain extent, yeah, they all, of course, have strong internationalization initiatives in place, yeah. We see opportunities in Argentina. We pursue opportunities in Middle East. WellBoss, for instance, just recently got approval of a certain plug from Saudi Aramco, a very important player, as we all know, yeah.
things are going on, and not only that, we can handle this flattish development in the U.S., we also continue our focus on the international market and try to have a broader market approach for the OE companies. Klaus, may I hand over to for the other questions?
For the depreciation question.
Mm-hmm.
Oleg, the reduction in depreciation in the first quarter of this year is for me twofold. On the one hand, it is the impact and the effect of the lower CapEx that we have done also in the pandemic year of 2021, 2022, where we clearly invested below the depreciation. To some extent, also part of the depreciation is in intangible assets, based of the acquisition from Downhole Technology, now WellBoss. Those impacts, you know, competition rights, customer rights, etc., also more and more decreasing. That's the explanation and the first answer to your question. Second, where do I see it going forward is difficult because our CapEx are...
As we do not give a CapEx guidance, I cannot give a depreciation guidance, because it very much depends how much we do invest. It is a matter of fact, that in that environment, CapEx should be above depreciation again, as we invest in machinery equipment, as we invest, also in the rental fleet. Therefore, this low figure in the first quarter should go up over the time. I hope this helps. Understood. Thank you very much.
Welcome.
Okay. At the moment there seem to be no further questions. If you would like to state another question, please press 9 and the star key again on your telephone keypad. The next question comes from Felix Weinlein. Please go ahead.
Yes. Hi, gentlemen. This is Felix Weinlein, SFO. I hope you're well. Just a couple of questions, and I'm sorry I dialed in a bit late. Probably you covered that already. I mean, orders have been very strong in the first quarter. I just want to hear whether you can give an update on how April and May were proceeding also in relationship to Oleg's question about the rig count development, and just generally the mood from your customers. That's the first questions. Thank you.
Yeah. Thank you, I'm happy to answer that question. Of course, I am in very close contact to our customers, but not only me. All our organization, of course, are very well connected with our customers, and we test the water every day where they are. They are very confident. They are very confident about this cycle. They are confident not only about this year, also already about next year. The proof is in the pudding, and the proof is in the backlog for the next year. I mentioned it already, about 10% of our backlog is already for 2024, and an unforeseen situation or not seen situation in the past.
The reason is that this the rising demand in oil and gas in certain areas, also the underinvestment, energy security is now top priority. All that together is clearly not clearly clear signs for the future. What we have not seen in the last years, many years, is the launch of new big offshore projects. What you have to know is an offshore project to launch that from the financial investment decision until it's up and running and producing, it's many, many years, and you spend really unbelievable amounts of U.S. dollars to get such an offshore platform in operation. We haven't seen that in the last years, and now more and more deepwater offshore projects come on stream.
That it shows you that the industry is very confident about the future.
That's very interesting to hear and also, maybe a follow-up on that topic from your expert perspective. I remember that two, three years ago, we all discussed about funding for traditional oil and gas projects being difficult due to ESG and regulation for banks, private equity, et cetera. Has that changed? Has funding actually improved for projects like offshore oil and gas?
Yes, we know that certain banks or financial investors have some ESG restrictions that put it like this. This is a fact, and we cannot deny it. At the end of the day, if you look who is the investor of these long-term offshore projects, they do not depend on funding because this is companies like Saudi Aramco, ADNOC, Petrobras, Pemex. These are the national oil companies, and they act more or less independent from possible funding restrictions here and there. What we can say, and Klaus can confirm that much better than I do, we being in the oil and gas industry, although we have our Strategy 2030, which I think is very helpful and clearly understood also from the financial market.
We do not have any funding restrictions at all. Klaus?
Not at all. Not at all. We took up some loans, kind of a refinancing. You may know that we have repayments of loans of EUR 60 million this year. We have done already some of the refinancing. Based on our performance, based on our improvement of our key financial ratios, we got very attractive conditioning also on those funding. I can confirm that no issues at all.
Fantastic. Thank you. Just two other areas of questions, please. The first one, the more interesting one on Downhole Technology. Is there anything new to report with regards to the litigation, et cetera?
There is nothing new to report, and we are in the appeal process. It can take time. It is something which there are no time limits for the appeal judges when at which length they handle this case. No news at the moment.
Right. Thank you very much. The last issue that I wanted to bring up also with regards to the remaining quarters of the year, obviously, currency. I think, I just want to make sure everybody's on the same page. Q2 last year had a significant benefit, right, from FX. I think about EUR 10 million, if I'm correctly so. We should expect a certain headwind on EBIT for the second quarter this year. That would be my assumption. What's your view on that?
When you compare it to the second quarter of the previous year, I agree to it because I do not expect that we come up with a $10 million exchange gain as we did in the second quarter of the previous year. It will very much depend how the US dollar develops. As of today, as of today is May 24th, the US dollar is stronger than end of March. Yeah? That being said, we would have, if we would close the second quarter now, have an exchange gain again, but we have more than a month. You do not know what is happening on the US dollar, also based on all the discussions with their budget topics and so on.
The EUR 10 million exchange gain from the second quarter of the previous year, we will not see. What we will see will very much depend on the next five weeks. The operating performance remains strong, continues to be strong, and here we are very confident.
Fantastic. Great. Thank you very much for the clarification and good luck and you're doing an excellent job. Thank you very much.
Okay. Thank you.
Appreciate it. Thank you.
Thank you.
The next question comes from Simon Jork. Please go ahead.
Yeah. Good morning, ladies and gentlemen. May you elaborate the decrease of the OE EBIT margin quarter-over-quarter, please? Furthermore, what are the reasons for the decrease in gross profit margin quarter-over-quarter?
Yes, absolutely. I think one example I gave already during my presentation that the fourth quarter in OE was outstanding. Yeah. It was the tool sales that I mentioned, also the sales were higher, and when you have higher sales, you also have higher margins. Compared to the third quarter, OE was benefiting from exchange gains, yeah. Because we had three quarters, we had exchange gains, and this quarter it was suffering from exchange losses. I think last year I said, the OE margin is in the range between 18% and 20% when you exclude all those exchange rate impacts and we had 19% in the first quarter of this year.
This answers to some extent also the second question that in the with the margin discussion, that is impacted by exchange rate effects, and that answers the question, Simon.
Okay. Thank you.
Okay. Since we received no further questions, let me hand back over to Mr. Grohmann for some closing remarks.
Ladies and gentlemen, as always, it was our pleasure to discuss the quarterly results with you. Thank you very much for your interest. We look forward to meeting you soon. Thank you. Have a good day.