SLB N.V. (NYSE:SLB)

The period under review demonstrates a fluctuating pattern in financial performance as measured by Return on Invested Capital (ROIC). Net operating profit after taxes (NOPAT) and invested capital both increased over the initial three years, but NOPAT experienced a decline in the final year presented.

ROIC Trend

ROIC exhibited an upward trend from 2021 to 2023, increasing from 6.98% to 12.29%. This indicates improving efficiency in generating profits from invested capital. However, ROIC decreased to 7.99% in 2025, suggesting a decline in profitability relative to the capital employed.

NOPAT Analysis

NOPAT increased significantly from US$2,298 million in 2021 to US$4,641 million in 2023, representing substantial growth in operating profitability. The subsequent decrease to US$3,544 million in 2025 warrants further investigation to determine the underlying causes, such as changes in revenue, operating costs, or tax rates.

Invested Capital Analysis

Invested capital consistently increased throughout the period, rising from US$32,896 million in 2021 to US$44,371 million in 2025. This growth suggests ongoing investment in the business, potentially through capital expenditures or acquisitions. The continued increase in invested capital, coupled with the decline in NOPAT in 2025, contributed to the decrease in ROIC during that year.

The initial improvement in ROIC, driven by increases in NOPAT, was subsequently offset by a decline in NOPAT while invested capital continued to rise. This suggests that while the company was expanding its capital base, it was less effective at generating profits from that capital in the most recent year.

The period demonstrates fluctuations in return on invested capital, driven by changes in operating profitability, capital efficiency, and the impact of taxes. Overall, a peak in ROIC is observed in 2023, followed by a decline projected into 2025.

Operating Profit Margin (OPM)

The operating profit margin increased from 12.54% in 2021 to a high of 17.24% in 2023, indicating improved operational efficiency and pricing power. A subsequent decrease to 16.61% in 2024 and a more pronounced drop to 13.33% in 2025 suggests potential pressures on profitability, possibly from increased costs or competitive factors.

Turnover of Capital (TO)

Turnover of capital, a measure of asset utilization, exhibits an upward trend from 0.70 in 2021 to 0.92 in 2024, signifying increasing efficiency in generating revenue from invested capital. However, a decrease to 0.80 is projected for 2025, potentially indicating a slowdown in revenue growth relative to the capital employed.

Effective Cash Tax Rate Adjustment

The factor representing one minus the effective cash tax rate remains relatively stable between 2021 and 2023, fluctuating between 79.88% and 81.27%. A notable decline to 74.47% is projected for 2025, suggesting a potential reduction in the effective tax burden, which could partially offset declines in operating profitability.

Return on Invested Capital (ROIC)

Return on invested capital increased significantly from 6.98% in 2021 to 12.29% in 2023, reflecting the combined positive effects of improved operating margins and capital turnover. While remaining high at 12.23% in 2024, a substantial decrease to 7.99% is projected for 2025. This projected decline is likely attributable to the combined effect of decreasing operating profit margin and turnover of capital, partially mitigated by the anticipated reduction in the effective cash tax rate.

The interplay between these factors suggests that while the entity experienced improvements in profitability and capital efficiency through 2023, future performance is projected to be impacted by potential challenges in maintaining these levels. The projected decrease in ROIC in 2025 warrants further investigation into the underlying drivers of the declining operating margin and capital turnover.

The operating profit margin exhibited a generally positive trend from 2021 to 2023, followed by a decline in the subsequent two years. Net operating profit before taxes also demonstrated an increasing pattern over the initial three years, before decreasing in the final two.

Operating Profit Margin (OPM)

The operating profit margin increased from 12.54% in 2021 to 16.75% in 2022, representing a substantial improvement in profitability. This upward trajectory continued into 2023, reaching a peak of 17.24%. A slight decrease to 16.61% was observed in 2024. However, 2025 saw a more pronounced decline, with the operating profit margin falling to 13.33%. This suggests a weakening in operational efficiency or increased cost pressures in the most recent year.

Net Operating Profit Before Taxes (NOPBT) and Revenue Relationship

Net operating profit before taxes increased consistently from US$2,876 million in 2021 to US$5,711 million in 2023, mirroring the rise in the operating profit margin. Revenue also increased throughout this period, from US$22,929 million to US$33,135 million. The growth in NOPBT was supported by revenue expansion. However, in 2024 and 2025, while revenue continued to increase to US$36,289 million before slightly decreasing to US$35,708 million, NOPBT decreased to US$6,026 million and then to US$4,759 million, respectively. This divergence indicates that the rate of profit generation did not keep pace with revenue growth in the latter years, contributing to the decline in the operating profit margin.

The period between 2021 and 2023 demonstrates a positive correlation between revenue growth and profitability. The subsequent period, 2024 and 2025, indicates a potential shift in this relationship, with revenue growth not translating into proportional profit gains, resulting in a reduced operating profit margin.

The period under review demonstrates a generally positive trend in the turnover of capital, followed by a recent decline. Revenue consistently increased from 2021 to 2023, with a slight decrease in 2025. Invested capital also exhibited a consistent increase throughout the period. However, the rate of revenue growth outpaced the growth in invested capital for the first three years, leading to improvements in capital efficiency, before leveling off and then declining.

Turnover of Capital (TO)

The turnover of capital ratio increased from 0.70 in 2021 to 0.92 in 2023, indicating improving efficiency in generating revenue from invested capital. This suggests the company was becoming more effective at utilizing its capital base to drive sales. However, in 2024 and 2025, the ratio decreased to 0.92 and 0.80 respectively. This decline suggests a reduced efficiency in capital utilization, potentially due to slower revenue growth relative to invested capital, or an increase in capital tied up in less productive assets.

The increase in invested capital from 2021 to 2025 is notable. While initially supporting revenue growth and improved capital turnover, the continued investment did not translate into proportional revenue gains in the later years, contributing to the observed decrease in the turnover of capital ratio. Further investigation would be required to determine the specific drivers of this shift, such as changes in asset composition, operational inefficiencies, or external market factors.

The peak turnover of capital in 2023 suggests a period of optimal capital allocation and efficient revenue generation. The subsequent decline warrants attention and a detailed examination of the underlying factors impacting capital utilization.

The effective cash tax rate exhibited a generally decreasing trend from 2021 to 2023, followed by increases in the subsequent two years. Cash operating taxes increased consistently throughout the period, while net operating profit before taxes fluctuated.

Effective Cash Tax Rate (CTR)

The CTR began at 20.12% in 2021. A slight decrease was observed in 2022, with the rate falling to 19.23%. This downward trend continued into 2023, reaching a low of 18.73%. However, the CTR increased to 20.09% in 2024 and rose more substantially to 25.53% in 2025. This represents the largest year-over-year change in the observed period.

Cash Operating Taxes

Cash operating taxes demonstrated consistent growth over the five-year period, increasing from US$579 million in 2021 to US$1,215 million in 2025. The rate of increase appeared relatively stable, with annual increments ranging from US$86 million to US$141 million.

Net Operating Profit Before Taxes (NOPBT)

NOPBT increased significantly from 2021 to 2023, rising from US$2,876 million to US$5,711 million. A further increase was seen in 2024, reaching US$6,026 million. However, NOPBT decreased in 2025 to US$4,759 million, representing a decline of approximately 21.2% from the prior year. This decrease in NOPBT, coupled with the increased cash operating taxes, contributed to the substantial rise in the CTR in 2025.

The interplay between NOPBT and cash operating taxes significantly influenced the CTR. While cash taxes consistently rose, the fluctuations in profitability impacted the overall tax burden as a percentage of pre-tax income. The substantial increase in the CTR in 2025 warrants further investigation to determine the underlying drivers of both the decreased profitability and the higher tax expense.