Schlumberger Ltd. (NYSE:SLB)

Net operating profit after taxes (NOPAT)

The net operating profit after taxes exhibited a significant turnaround over the five-year period. In 2020, the figure was deeply negative at -11,275 million US dollars, indicating substantial operating losses. However, from 2021 onwards, the company reported consistent positive NOPAT values, increasing from 2,298 million US dollars in 2021 to 4,815 million US dollars by 2024. This reflects a clear recovery and strengthening of operating profitability, with a marked upward trend in net operating profit after taxes.

Invested capital

Invested capital showed relatively stable growth with some fluctuations throughout the timeframe. Starting at 33,428 million US dollars in 2020, it experienced a slight decrease to 32,896 million US dollars in 2021, followed by a gradual increase each subsequent year, reaching 39,383 million US dollars in 2024. This indicates a moderate expansion in the company’s investment base over the period, suggesting an ongoing commitment to capital deployment supporting business activities.

Return on invested capital (ROIC)

The return on invested capital underwent substantial improvement. In 2020, ROIC was negative at -33.73%, reflecting the operating losses indicated by NOPAT. Starting in 2021, there was a significant recovery as ROIC turned positive at 6.98%, further increasing to a peak of 12.29% in 2023 before slightly declining to 12.23% in 2024. This trend demonstrates enhanced efficiency in generating returns from invested capital, aligning with the improved profitability metrics and suggesting better capital utilization over time.

Overall Insights

The data reveals a company transitioning from a period of heavy operating losses in 2020 to sustained profitability and improved capital efficiency by 2024. The rise in NOPAT alongside stable growth in invested capital and a recovering ROIC indicates successful operational and financial management efforts. The relatively stable ROIC in the last two years may suggest the company has reached a more mature and optimized stage in its capital utilization and profit-generation capability.

Analysis of the financial data reveals notable improvements and trends across the key performance indicators over the five-year period.

Operating Profit Margin (OPM)

The operating profit margin exhibited a significant recovery from a deeply negative figure of -45.46% in 2020 to a positive margin of 12.54% in 2021. Subsequently, it continued to improve modestly to 17.24% by the end of 2023 before experiencing a slight decline to 16.61% in 2024. This pattern indicates a strong turnaround and stabilization in operating efficiency after 2020, maintaining profitability through the most recent years.

Turnover of Capital (TO)

Turnover of capital showed a steady upward trend, increasing gradually from 0.71 in 2020 to 0.92 in 2024. This suggests an improving efficiency in the use of capital to generate revenue, reflecting better asset utilization or operational improvements contributing to higher activity levels each year.

1 – Effective Cash Tax Rate (CTR)

The metric depicting one minus the effective cash tax rate remained consistently high, fluctuating between approximately 79.88% and 81.27% from 2021 onwards after a perfect 100% figure in 2020. The relative stability indicates that the effective cash tax burden has remained largely unchanged throughout the period, suggesting consistent tax management or stable tax rates impacting the cash flows.

Return on Invested Capital (ROIC)

Return on invested capital saw a pronounced recovery from a negative -33.73% in 2020 to positive territory of 6.98% in 2021. Thereafter, it continued to improve, reaching 12.29% in 2023 and stabilizing close to that level (12.23%) in 2024. This demonstrates a successful turnaround in generating returns on capital investments, aligning with the trends in operating profit margin and capital turnover improvements.

Overall, the financial ratios show a marked improvement from a challenging period in 2020 with significant operational losses and negative returns, moving towards sustained profitability and enhanced capital efficiency in subsequent years. The data suggests effective management actions to stabilize and grow operating performance, optimize capital utilization, and maintain a consistent tax strategy. Minor fluctuations in the latest year appear normal in the context of the general positive trend.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes shows a significant recovery over the five-year period. Starting from a substantial loss of 10,729 million US dollars in 2020, the NOPBT shifted to a positive value of 2,876 million in 2021. This upward trend continued steadily, reaching 4,706 million in 2022, then 5,711 million in 2023, and finally 6,026 million in 2024. The consistent increase indicates improving operational efficiency and profitability.

Revenue

Revenue experienced a slight decline from 23,601 million US dollars in 2020 to 22,929 million in 2021. However, this was followed by a continuous upward trajectory, with revenue increasing to 28,091 million in 2022, 33,135 million in 2023, and 36,289 million in 2024. This steady growth suggests expansion in sales or market demand over the recent years.

Operating Profit Margin (OPM)

The operating profit margin underwent a dramatic improvement. In 2020, the margin was deeply negative at -45.46%, reflecting heavy losses relative to revenue. The margin turned positive in 2021, climbing to 12.54%, and continued to improve in the subsequent years, reaching 16.75% in 2022, peaking at 17.24% in 2023, and slightly retracting to 16.61% in 2024. The overall pattern indicates enhanced cost management and increased profitability efficiency.

Revenue Trends

The revenue demonstrated a generally upward trajectory over the five-year period. Starting at 23,601 million US dollars in 2020, it experienced a slight decrease to 22,929 million in 2021. Following this dip, revenue increased substantially each subsequent year, reaching 28,091 million in 2022, then advancing to 33,135 million in 2023, and finally peaking at 36,289 million in 2024. This consistent growth after 2021 suggests improving market conditions or enhanced operational performance.

Invested Capital Movements

Invested capital showed relatively moderate growth throughout the period. It began at 33,428 million US dollars in 2020 and slightly declined to 32,896 million in 2021. From 2022 onwards, there was a steady increase in invested capital, reaching 33,931 million, then rising more significantly to 37,776 million in 2023, and marginally increasing to 39,383 million in 2024. This trend indicates ongoing investment activities and expansion efforts aligned with revenue growth.

Turnover of Capital (TO) Pattern

The turnover of capital ratio, which measures how efficiently the invested capital generates revenue, showed improvement over the period. Starting at 0.71 in 2020, it slightly decreased to 0.70 in 2021, aligning with the minor revenue drop and capital reduction. From 2022 onwards, the ratio increased consistently, moving from 0.83 to 0.88 in 2023, and reaching 0.92 in 2024. This upward trend reflects enhanced efficiency in utilizing invested capital to generate revenues.

Overall Observations

The data reveals a recovery and growth phase beginning in 2022 after a slight downturn in 2021. Revenues grew at a faster pace compared to invested capital, contributing to an improved turnover of capital ratio. The rising efficiency ratio along with increasing revenue suggests enhanced operational effectiveness and possibly better asset management.

Cash Operating Taxes

The cash operating taxes demonstrate a clear upward trajectory over the five-year period analyzed. Beginning at $546 million in 2020, this figure increases consistently each year, reaching $1,211 million by 2024. This steady growth suggests an expanding tax obligation, potentially reflecting higher taxable income or changes in tax regulations applied to the company.

Net Operating Profit Before Taxes (NOPBT)

The NOPBT exhibits a significant turnaround during the time frame. In 2020, the company experienced a substantial loss of $10,729 million. However, this position improves dramatically in subsequent years, turning positive in 2021 with a profit of $2,876 million. Thereafter, profit continues to increase steadily, culminating at $6,026 million by 2024. This trend indicates effective operational recovery and enhanced profitability over the period.

Effective Cash Tax Rate (CTR)

The effective cash tax rate data is available from 2021 onward and remains relatively stable throughout the period. It starts at 20.12% in 2021, slightly dips to a low of 18.73% in 2023, then rises marginally back to just above 20% in 2024. This consistency in tax rate implies that the changes in cash operating taxes align closely with the fluctuations in operating profits, exhibiting no significant tax strategy shifts or anomalies over these years.