FULL YEAR 2017 RESULTS INVESTOR PRESENTATION

Transcription

1 FULL YEAR 2017 RESULTS INVESTOR PRESENTATION

2 INFORMATION Quarterly financial statements are unaudited and are not subject to any review Half year financial statements are subject to limited review by statutory auditors Full year consolidated financial statements at 31 December are audited Final certification will take place before the Registration Document is filed with the AMF, before the end of March Unless otherwise specified, indicated variations are expressed in comparison with the same period of the previous year FORWARD-LOOKING STATEMENTS This document contains forward-looking statements. These statements include financial forecasts and estimates as well as assumptions on which they are based, statements related to projects, objectives and expectations concerning future operations, products and services or future performance. Although Vallourec s management believes that these forward-looking statements are reasonable, Vallourec cannot guarantee their accuracy or completeness and these forward-looking statements are subject to numerous risks and uncertainties that are difficult to foresee and generally beyond Vallourec s control, which may mean that actual results and developments may differ significantly from those expressed, induced or forecasted in the forward-looking statements. These risks include those developed or identified in the public documents filed by Vallourec with the AMF, including those listed in the Risk Factors section of the Registration Document filed with the AMF on 21 March 2017 (N D ). 2

3 2017 HIGHLIGHTS

4 2017 AT A GLANCE EBITDA AT BREAKEVEN Transformation Plan benefits Significantly higher activity level TRANSFORMATION PLAN Execution moving forward at a very good pace High level of savings ongoing CONTINUOUS FOCUS ON CASH AND LIQUIDITY Additional reduction in working capital Monetization of non-core assets Strengthened liquidity with 800m OCEANE and Bond issuance in Q4 4

5 SAFETY FIRST A core value Commitment to the highest standards of the industry Performance strongly improved over the last years: LTIR 1 : 1.24 vs in 2013 TRIR 2 : 3.13 vs in 2013 Since 2016, these indicators include subcontractors performance No fatality in 2017, 2016 and STRONG IMPROVEMENT OF SAFETY INDICATORS LTIR TRIR LTIR: Lost Time Injury Rate 2 TRIR: Total Recordable Injury Rate 5

6 OIL & GAS MARKET FUNDAMENTALS DEMAND/SUPPLY BALANCE NEW OIL PRODUCTION CAPACITY REQUIRED mb/d mb/d 104 4, , , , , , , ,5-2.5 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Stock Change (R) World Oil Supply World Oil Demand Source: International Energy Agency. Oil Market Report - January 2018 Production decline rate of post-peak conventional oil fields (per year) -2.5 mb/d (-6.0%) +0.4 mb/d (+0.4%) Demand growth New Policies Scenario (per year ) +0.8 mb/d (+0.9%) Demand growth Current Policy Scenario (per year ) Source: International Energy Agency. World Energy Outlook - November 2017 Supply/demand imbalance created by the shale revolution is being progressively resolved Shale potential in the US is insufficient to offset demand growth and worldwide depletion Demand growth higher than current policy scenario Field depletion still high After 3 years of under-investment, a global rebound in E&P CAPEX is needed to avoid an oil counter-shock 6

7 OIL & GAS MARKET TRENDS E&P CAPITAL SPENDING ( bn) RIG COUNT AND WTI PRICES ($) 2, Latin America 2, 100 Russia & Caspian North America 1, Middle East 1, Europe 200 Asia-Pacific Africa Global Capex J-14 M-14 S-14 J-15 M-15 S-15 J-16 M-16 S-16 J-17 M-17 S-17 J Total International US WTI (right) Source: IHS Markit November 2017 Source: Baker Hughes and Thomson Reuters 2, 500 2, 000 1, 500 1, OCTG PRICES ($/t) 0 J-14 M-14 S-14 J-15 M-15 S-15 J-16 M-16 S-16 J-17 M-17 S-17 J-18 Middle East 1(1) Western European 1(1) US 2(2) Source: 1 MBR (OCTG casing L80 premium connection) January PipeLogix (average Seamless pipes) January 2018 After 2 years of significant reduction, E&P CAPEX slightly increased in 2017 mainly thanks to North America WTI price sustained at 50$/b in 2017, and reached c.60$/b early 2018, still volatile Rig count US: recovering to 900+ active rigs in 2017, and moderate increase since the beginning of 2018 International offshore: showing first signs of recovery OCTG prices started recovering in the US 7

8 VOLUMES VOLUMES SHIPPED (Kt) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4* Q1* Q2 * Q3 * Q4 * ,159 Kt 1 Incl. Tianda and VSB full consolidation ,323 Kt ,411 Kt ,281 Kt FY 2017 VS. FY 2016: +76% INCL. TIANDA ACQUISITION AND VSB FULL CONSOLIDATION +25% AT CONSTANT SCOPE, DRIVEN MOSTLY BY NORTH AMERICA ,256 Kt 8

9 FY 2017 FINANCIAL RESULTS 9

10 FY 2017 REVENUE BY MARKET Revenue up 26.5% in 2017 vs % at constant scope and exchange rate Oil & Gas +28.4% 1 (+14.7% 2 ) FY 2017 revenue in millions of Industry & Other +38.6% 1 (+30.4% 2 ) USA: Strong recovery Rebound in onshore volumes, and prices increase in H2 EAMEA: Stable Positive scope impact (VSB & Tianda) Negative price and mix Brazil: Revenue up Higher OCTG deliveries, notably in Q1 2, % 3, % Europe: Higher volumes for Mechanical Engineering Brazil: Higher iron ore prices Increased volumes and prices in Automotive and Mechanical Engineering Petrochemicals % 1 (+76.0% 2 ) % Power Generation -16.0% 1 (-16.3% 2 ) Strong increase Positive scope impact and recovery in the US Low comparison basis in % Conventional and Nuclear revenue down, in a challenging market environment 1 FY 2017 versus FY At constant scope and exchange rate 10

11 2,965m 2017 REVENUE AND EBITDA FY 2016 Volume Currency Translation VALLOUREC 35.0% 0.7% +26.5% -19.8% Price/Mix Scope* 1 FY 2017 FY % 3,750m FY 2016 Change In millions of euros YoY REVENUE 3,750 2, % Cost of sales (3,297) (2,727) 20.9% Industrial margin % (as % of revenue) 12.1% 8.0% 4.1 pts SG&A costs (440) (448) -1.8% (as % of revenue) 11.7% 15.1% -3.4 pts Other income (expense), net (11) (9) na EBITDA 2 (219) + 221m Revenue Strong volume improvement, notably for O&G operations in the US Positive scope impact (VSB & Tianda) More than offsetting negative price/mix, notably in EAMEA as 2017 deliveries were impacted by the low prices of orders registered in 2016 Improved EBITDA: + 221m to 2m Industrial margin up 215m Revenue increase Savings from the Transformation Plan 81m net provision reversal in 2017 Lower SG&A costs Cost savings more than offsetting negative scope and inflation impacts 2017 SG&A at 11.7% of revenue vs. 15.1% in Scope effect is calculated by eliminating the effect of changes in the Group s scope by taking into account on 1 January of Year N-1 the scope variations which have occurred during Year N-1. 11

12 TRANSFORMATION PLAN TRANSFORMATION PLAN EXECUTION ON TRACK Savings delivered ahead of plan: 315m gross savings in 2 years ( 164m in 2017, after 151m in 2016) Compared to a target of 400m over 5 years New routes deployment well engaged: Rationalization of European footprint implemented as planned Tianda acquisition and VBR-VSB merger in Brazil done in 2016 Successful integration of Tianda in 2017, and first commercial successes Large synergies already achieved in Brazil, a highly competitive export base c. 50% of the targeted contribution of 750m to the Group s 2020 EBITDA achieved in 2 years in millions of STRICT CAPEX DISCIPLINE AND WORKING CAPITAL MONITORING Efficient CAPEX management: Reduction in working capital Reduction by 61m, while revenue increased by 26.5% Better efficiencies notably thanks to ReInvent program VALLOUREC IS CONFIDENT THAT IT WILL ACHIEVE THE TARGETED 750m 2020 EBITDA CONTRIBUTION FROM ITS TRANSFORMATION PLAN 12

13 FY 2017: EBITDA TO NET INCOME VALLOUREC FY FY Change YoY In millions of euros m EBITDA 2 (219) +221 EBITDA as % of revenue 0.1% -7.4% +7.5pts Depreciation of industrial assets (297) (283) 4.9% Amortization and other depreciation (44) (49) na Impairment of assets (65) (71) na Asset disposals, restructuring and other (79) (127) na OPERATING INCOME (LOSS) (483) (749) +266 Net financial income (loss) (174) (131) 32.8% PRE-TAX INCOME (LOSS) (657) (880) +223 Income tax na Share in net income (loss) of associates (3) (8) na CONSOLIDATED NET INCOME (LOSS) (560) (808) +248 Non-controlling interests (23) (50) na NET INCOME (LOSS), GROUP SHARE (537) (758) +221 Net loss reduced by 221m Higher EBITDA Non-recurring impairment and assets disposal, restructuring and other, mainly resulting from: Insolvency procedure of Ascoval, Disposal of non-strategic assets, Impairment related to the reduction in the number of projects for coal-fired plants in Asia Financial income impacted by higher interest charges, change in scope, change in fair value of NSSMC shares Higher income tax gain mainly related to recognition of deferred tax assets in Brazil and in the US EARNINGS PER SHARE (in ) (1.2) (2.3)

14 FY 2017 NET DEBT (in millions of ) Net Debt as at 31 Dec Net Debt as at 31 Dec Net debt = 34.1% of equity (1,287) Cash flow from operating activities Change in WCR 1 Gross capital expenditure Asset disposals & other items Net debt = 53.4% of equity (332) 61 (152) 168 (1,542) Free cash flow = - 423m NSSMC shares disposal, Forex 1 Change in Working Capital Requirement, + decrease/(increase) NET DEBT REDUCED BY 103m DURING Q INCREASED BY 255m OVER FY

15 DEBT AND LIQUIDITY Bank & Other Financing (ST) 496m Bonds (ST) 650m AVAILABLE LIQUIDITY AS AT 31 DECEMBER 2017 (in m) 1,021 MATURITIES OF BONDS 1 (in m) & After OCEANE Bonds 31 dec Commercial Papers (ST) 307m -400 GROSS DEBT BREAKDOWN (in m) Bonds (LT) 950m Bank & Other Financing (LT) 171m 2,040 1 LT Market Financing represents 94% of Long Term Debt Commercial Papers (ST) 397m Bank & Other Financing (LT) 102m Bank & Other Financing (ST) 349m OCEANE (LT) 222m dec ,061 Cash Undrawn Long Term Facilities Total Liquidity Bonds (LT) 1,493m Net debt as at 31 December 2017 Gross Debt: 2,563m (83% in Euros) Cash & Cash equivalents: 1,021m Net Debt: 1,542m Liquidity as at 31 December bn of cash 2.0bn undrawn LT committed bank facilities Qualified as strong by S&P LT committed bank facilities Total 2.1bn, of which: 0.1bn maturing in bn maturing in bn maturing in 2021 Gearing covenant: 75% at 31 December 2017 (vs. actual at 47%) 100% for , tested every 31/12 S&P rating: B Outlook negative Liquidity reinforced and maturity extended in m convertible bonds (OCEANE), maturity 2022 at 4.125% Coupon 550m bonds, due 2022 at 6.625% Coupon 15

16 OUTLOOK

17 OUTLOOK FOR 2018 NORTH AMERICA Average rig count expected to moderately increase in 2018, assuming no significant change in WTI OCTG consumption per rig should continue to rise Benefit from this favorable market conditions and FY impact of volume and price achieved in H EAMEA O&G: Increasing tender activity should result in higher bookings with impact on deliveries to materialize mostly as from 2019 Industry: favorable trend in demand should be confirmed Power Generation: declining conventional power plant projects BRAZIL O&G: Petrobras drilling activity expected to remain stable. We target to renew our frame agreement in the course of H Industry: better momentum should be confirmed Group results dependent on consumable prices and forex, which recently demonstrated unusually high volatility and unfavorable evolution Transformation Plan will continue to generate significant gross savings and to reinforce Vallourec s competitiveness 17

18 APPENDIX

19 2017 FINANCIALS 19

20 REVENUE BREAKDOWN REVENUE BY GEOGRAPHIC REGION In millions of euros FY 2017 As % of revenues FY 2016 As % of revenues Change YoY Europe % % -8.2% North America 1, % % 84.8% South America % % 31.0% Asia & Middle East 1, % % 38.6% Rest of World % % -24.3% Total 3, % 2, % 26.5% REVENUE BY MARKET In millions of euros Q Change YoY FY 2017 As % of revenues FY 2016 As % of revenues Change YoY Oil & Gas % 2, % 1, % 28.4% Petrochemicals % % % 107.8% Oil & Gas, Petrochemicals % 2, % 1, % 33.7% Power Generation % % % -16.0% Mechanicals % % % 31.9% Automotive % % % 42.6% Construction & Other % % % 46.9% Industry & Other % % % 38.6% Total 1, % 3, % 2, % 26.5% 20

21 Q REVENUE +27.7% 838m 45.4% -3.8% -19.7% 5.8% 1,070m 1 4Q 2016 Volume Currency Translation Price/Mix Scope* 4Q Scope effect is calculated by eliminating the effect of changes in the Group s scope by taking into account on 1 January of Year N-1 the scope variations which have occurred during Year N-1. 21

22 FY AND Q4 P&L Q Q Change YoY In millions of euros FY 2017 FY 2016 Change YoY 1, % REVENUE 3,750 2, % (944) (778) 21.3% Cost of sales 1 (3,297) (2,727) 20.9% % Industrial margin % 11.8% 7.2% +4.6 pts (as % of revenue) 12.1% 8.0% +4.1 pts 1 Before depreciation and amortization (117) (117) na SG&A costs 1 (440) (448) -1.8% 2 (6) na Other income (expense), net (11) (9) na 11 (63) + 74m EBITDA 2 (219) + 221m 1.0% -7.5% +8.5 pts EBITDA as % of revenues 0.1% -7.4% +7.5 pts (76) (73) 4.1% Depreciation of industrial assets (297) (283) 4.9% (11) (16) na Amortization and other depreciation (44) (49) na (64) (1) na Impairment of assets (65) (71) na (66) (35) na Asset disposals, restructuring and other (79) (127) na (206) (188) - 18m OPERATING INCOME (LOSS) (483) (749) + 266m (34) (31) 9.7% Financial income (loss) (174) (131) 32.8% (240) (220) - 20m PRE-TAX INCOME (LOSS) (657) (880) + 223m na Income tax na - (4) na Share in net income (loss) of associates (3) (8) na (164) (196) + 32m NET INCOME (LOSS) FOR THE CONSOLIDATED ENTITY (560) (808) + 248m - (13) na Non-controlling interests (23) (50) na (164) (183) + 19m NET INCOME (LOSS), GROUP SHARE (537) (758) + 221m (0.4) (0.1) EARNINGS PER SHARE (in ) (1.2) (2.3)

23 BALANCE SHEET (in millions of ) Assets 31-Dec Dec 2016 Liabilities 31-Dec Dec 2016 Equity, Group share 2,426 3,284 Net intangible assets Non-controlling interests Goodwill Total equity 2,885 3,778 Net property, plant and equipment 2,977 3,618 Shareholder loan Biological assets Bank loans and other borrowings (A) 1,817 1,121 Associates Employee benefits Other non-current assets Deferred tax liabilities Deferred tax assets Provisions and other long-term liabilities Total non-current assets 3,966 4,877 Total non-current liabilities 2,105 1,549 Inventories and work-in-progress 1,004 1,035 Provisions Trade and other receivables Overdrafts and other short-term borrowings (B) 746 1,453 Derivatives - assets Trade payables Other current assets Derivatives - liabilities Cash and cash equivalents (C) 1,021 1,287 Tax and other current liabilities Total current assets 2,856 3,209 Total current liabilities 1,811 2,678 Assets held for sale Liabilities disposal for sale TOTAL ASSETS 6,886 8,132 TOTAL EQUITY AND LIABILITIES 6,886 8,132 Net debt (A+B-C) 1,542 1,287 Net income (loss), Group share (537) (758) Gearing ratio 53.4% 34.1% 23

24 FY AND Q4 FREE CASH FLOW Q Q Change ( m) Vallourec In millions of euros FY 2017 FY 2016 Change ( m) (124) (124) - Cash flow from operating activities (FFO) (A) (332) (399) Change in operating WCR (B) [+ decrease, (increase)] (66) (75) +9 Gross capital expenditure (C) (152) (175) +23 (26) (3) (23) Free cash flow 1 (A)+(B)+(C) (423) (395) (28) Cash flow from operating activities improved by 67m Better EBITDA, partly offset by a net reversal in provisions and higher financial charges Better efficiencies in operational working capital management notwithstanding the strong activity recovery in the US Efficient CAPEX management 1 Free cash flow (FCF) is a non-gaap measure and is defined as cash flow from operating activities minus gross capital expenditure and plus/minus change in operating working capital requirement 24

25 CAPITAL EXPENDITURE (in millions of )

26 BUSINESS APPENDIX 26

27 VALLOUREC AT A GLANCE FY 2017 Sales volume: 2,256Kt Sales: 3,750m Worldwide presence with c.19,000 employees in more than 20 countries Over 50 production facilities worldwide delivering a large spectrum of products for diversified applications, geographies and sectors Highly innovative with 6 advanced R&D and 4 connection test centers located in France, Germany, Brazil and the US employing over 500 researchers and technicians A clear and constant strategy: more premium, more local, more competitive Key segments OIL & GAS POWER GENERATION INDUSTRY Revenue share (FY 2017) 2,567m 68.5% 10.9% 408m 20.6% 775m Key clients GLOBAL LEADER IN PREMIUM TUBULAR SOLUTIONS OPERATING ACROSS DIVERSIFIED END MARKETS AND GEOGRAPHIES 27

28 VALLOUREC PRODUCT OFFERING AND APPLICATIONS OIL & GAS POWER GENERATION Copyright: Total Welding CONVENTIONAL POWER PLANT NUCLEAR POWER PLANT Key components for conventional and nuclear power plants Production riser Higher efficiency achieved for ultra super critical conventional coal fired power plants Drill pipe Casing Tubing Flowline Umbilicals Tool joint Connection INDUSTRY Construction Tubular solutions in infrastructure and complex architectural projects Leading-edge solutions for every application in the oil and gas industry OCTG 1 tubes including premium VAM 2 connections designed for oil and gas well equipment Complete range of drill pipes Line pipes and accessories 3 Mechanical Engineering tubes and rings for cranes, axles, hydraulic cylinders, mining and farming machinery Automotive suspension and transmission parts, structural and passive safety components, shock absorbers, bearings for all types of vehicles 4 1 Oil Country Tubular Goods, which entails products, mainly tubes, designed for oil and gas well equipment encompassing casing, tubing and accessories 2 Brand name of seamless pipe connections co-developed by NSSMC and Vallourec 3 For onshore and offshore hydrocarbon transportation as well as tubes for umbilicals 4 Light to off-highway vehicles 28

29 WITH A FULLY INVESTED INDUSTRIAL SET UP A unique position with high-end rolling and finishing capabilities in all regions Two highly competitive routes from Brazil and China for international O&G markets Centre of technological excellence Global capabilities redeployed with a shift from Europe to Asia and the Americas Oil and gas local market supply INDICATIVE ROLLING CAPACITY 25% 20% 25% North America Highly competitive production hub Brazil Europe China New highly competitive production hub 45% 2014 c.3mt/y North America 30% 25% Brazil (excl. NSSMC tonnage) 2017 ~3mt/y Europe 30% China Steel mills Tube mills R&D Finishing unit Sales & Services office Plantation and mine MODERN, FULLY INVESTED FACILITIES WITH LIMITED FUTURE CAPEX REQUIREMENTS NORMATIVE CAPEX ESTIMATED AT C. 350M 29

30 EURONEXT PARIS: ISIN CODE: FR , TICKER: VK USA: AMERICAN DEPOSITARY RECEIPT (ADR) - ISIN CODE: US92023R2094, TICKER: VLOWY Investor Relations Contact - Vallourec Group Tel: investor.relations@vallourec.com