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SBO: Strong demand in North America drives sales and positive operating result in the first three quarters of 2017

Published: November 23, 2017; 08:00 · (FriedlNews)

The market environment of the oilfield service industry improved significantly in the first three quarters of 2017. North America turned out to be the driving force for the industry. Internationally, markets were stable but still in stagnation. Schoeller-Bleckmann Oilfield Equipment AG (SBO), which is listed in the ATX segment of the Vienna Stock Exchange, benefited from its strong position in North America and posted high increases in sales, bookings and operating result for the first three quarters of 2017. As announced in October, this business success required an expense posting for the shares of minority shareholders of Downhole Technology impacting the financial result figure.

Quarterly Report

Ternitz/Vienna -
- SBO benefits in its strong position from the upswing in North America
- EBITDA-margin in third quarter of 2017 above long-term average for the first
time in two years of crisis
- Well Completion success increases value of subsidiary and requires expense
booking for shares of minority shareholders

Sales in the first three quarters of 2017 amounted to MEUR 227.6, a significant
increase of 71.0 % compared to the 2016 crisis year (1-9/2016: MEUR 133.1).
SBO's bookings more than doubled to MEUR 241.5, following MEUR 116.5 in the
first three quarters of 2016. As a result, the book-to-bill ratio, which
measures the number of orders coming in compared to sales and serves as an
indicator of medium-term development, was greater than 1. At the end of the
third quarter of 2017, the order backlog totalled MEUR 33.4 (30 September 2016:
MEUR 17.4).

"North America remains the strong driver in the market", comments Gerald
Grohmann, CEO of SBO. "Our strategic positioning through the investment in the
Well Completion business in North America is paying off, as demonstrated by the
development of our figures. Demand for our products once again picked up in the
third quarter."

This development is also reflected in the strong operating result of SBO.
Earnings before interest, taxes, depreciation, and amortisation (EBITDA) clearly
returned to positive territory, from MEUR minus 7.2 in the first three quarters
of 2016 to MEUR 48.5, including one-off income from completed restructuring
measures of MEUR 2.0. The operating result (EBIT) was MEUR 11.0, following MEUR
minus 50.9 in the first three quarters of 2016. The EBITDA margin came to 21.3 %
(1-9/2016: minus 5.4 %), in the third quarter with 28.7 % even above its long-
term average of 24.1 % (financial years 2001-16) for the first time following
two years of crisis. The EBIT margin was 4.8 % (1-9/2016: minus 38.2 %).

"This progress shows that we have achieved the turnaround in our operations.
Business in North America is running at full speed. Our market share gains there
are disproportionately high, and we plan to expand them even further", says Mr.
Grohmann.

Well Completion success increases value of subsidiary, expense posting

This market situation also left its mark on the development of SBO's US-based
subsidiary Downhole Technology. It clearly exceeded the high expectations in
terms of sales and result within the first 1.5 years since its acquisition. In
course of the acquisition, SBO took over 68 % of the shares in Downhole
Technology. The remaining 32 % of the shares may be acquired by SBO, or sold by
the minority shareholders to SBO, by drawing a put/call option. Increased growth
expectations for Downhole Technology have led to a higher than previously
anticipated company value as at 1 April 2019, the earliest possible date for
exercising the option to acquire the shares of minority shareholders. As a
result, the option valuation had to be adjusted in the balance sheet according
to the applicable accounting principles.

Since profit expectations of the fully consolidated company had increased, as
announced in October, a one-off expense posting of MEUR 91.3 having an effect on
result, but not on cash, had to be included in the consolidated income statement
of SBO in the third quarter of 2017 and is shown in the financial result. In the
first three quarters of 2017, the financial result therefore arrived at MEUR
minus 95.5 (1-9/2016: MEUR 14.6). In the same period of last year, one-off
income from the revaluation of option commitments amounting to MEUR 16.9 was
included. Profit before tax stood at MEUR minus 84.5 (1-9/2016: MEUR minus
36.2), and profit after tax at MEUR minus 86.2 (1-9/2016: MEUR minus 22.9).
Before revaluation of option commitments, profit before tax came to MEUR 5.0 (1-
9/2016: MEUR minus 53.2).

"This expense posting is only a short-term drawback, as we will benefit from the
increased value of our subsidiary in the long run. To put it in a nutshell: Our
investment in Downhole Technology was the perfect choice to make. Strictly
speaking, this is a success, and not a profit warning", says Mr. Grohmann.

Sound balance sheet

The option commitment is reflected in the balance sheet of SBO accordingly.
Nevertheless, the company has preserved its sound balance sheet structure: As at
30 September 2017, the equity ratio was 39.3 % (30 September 2016: 54.8 %), and
net debt MEUR 62.8 (30 September 2016: MEUR 56.1). Liquid funds at the end of
the third quarter amounted to MEUR 177.9 (30 September 2016: MEUR 141.6). The
operating cash-flow arrived at MEUR 23.0 (1-9/2016: MEUR 28.9). Spending for
property, plant and equipment and for intangible assets (CAPEX) including
expenditure for the expansion of production capacities increased to MEUR 25.3
(1-9/2016: MEUR 9.4).

Outlook: North America continues strong growth, while transition phase is set to
last internationally

North America will continue on the path of growth. With its expansion of
production capacities at Downhole Technology by relocation to a new site, which
will be completed at the end of the current year as planned, SBO is fully
prepared for further growth. "Our North American activities are highly
profitable, and we will drive this growth further. In the international
business, markets are stagnating at the levels seen the year before. Therefore,
we expect that they will remain in a phase of transition continuing into the
year 2018. But we are ready to participate fully from any form of upswing. This
is what we prepared for in the years of crisis", concludes Mr. Grohmann.
Comparison of SBO's key performance indicators

______________________________________________________________________________
| | | 1-9/2017| 1-9/2016|
|__________________|___________________|___________________|___________________|
|Sales_____________|_______________MEUR|______________227.6|______________133.1|
|Earnings before | | | |
|interest, taxes, | | | |
|depreciation and | MEUR| 48.5| - 7.2|
|amortisation | | | |
|(EBITDA)__________|___________________|___________________|___________________|
|EBITDA_margin_____|__________________%|_______________21.3|______________-_5.4|
|Earnings before | | | |
|interest and taxes| MEUR| 11.0| - 50.9|
|(EBIT)____________|___________________|___________________|___________________|
|EBIT_margin_______|__________________%|________________4.8|_____________-_38.2|
|Profit before tax | | | |
|(before | | | |
|revaluation of | MEUR| 5.0| - 53.2|
|option | | | |
|commitments)______|___________________|___________________|___________________|
|Profit_before_tax_|_______________MEUR|_____________-_84.5|_____________-_36.2|
|Profit_after_tax__|_______________MEUR|_____________-_86.2|_____________-_22.9|
|Earnings_per_share|________________EUR|_____________-_5.41|_____________-_1.43|
|Cash-flow from | | | |
|operating | MEUR| 23.0| 28.9|
|activities________|___________________|___________________|___________________|
|Liquid_funds______|_______________MEUR|______________177.9|______________141.6|
|Equity_ratio______|__________________%|_______________39.3|_______________54.8|
|Headcount_________|___________________|______________1,386|______________1,184|

SBO is a leading supplier of tools and equipment for directional drilling and
well completion applications and the global market leader in the manufacture of
high-precision components made of non-magnetic steel. The product offering
ranges from customer-specific complex components for the oilfield service
industry to high-efficiency solutions and products for the oil and gas industry.
As of 30 September 2017, SBO employed a workforce of 1,386 worldwide (31
December 2016: 1,200), thereof 313 in Ternitz / Austria and 724 in North America
(including Mexico).

Further inquiry note:
Andreas Böcskör, Head of Investor Relations
Schoeller-Bleckmann Oilfield Equipment AG
A-2630 Ternitz, Hauptstraße 2
Phone: +43 2630/315 ext 252, fax ext 101
e-mail: a.boecskoer@sbo.co.at

Ildiko Füredi-Kolarik
Metrum Communications GmbH
Phone: +43 1 504 69 87 ext 351
e-mail: i.fueredi@metrum.at

end of announcement euro adhoc
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issuer: Schoeller-Bleckmann Oilfield Equipment AG
Hauptstrasse 2
A-2630 Ternitz
phone: 02630/315110
FAX: 02630/315101
mail: sboe@sbo.co.at
WWW: http://www.sbo.at
ISIN: AT0000946652
indexes: ATX, WBI
stockmarkets: Wien
language: English

Digital press kit: http://www.ots.at/pressemappe/2917/aom

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