Q2 & H Financial Results. Investor Presentation July 30, 2013

Transcription

1 Q2 & H Financial Results Investor Presentation July 30, 2013

2 Information Full year consolidated financial statements at 31 December are audited Half year financial statements at 30 June 2012 and 30 June 2013 are subject to limited audit review Quarterly statements are unaudited and are not subject to any review Unless otherwise specified, indicated variations are expressed in comparison with the same period of the previous year Information and Forward-Looking Reflections This document contains forward-looking reflections and information. By their nature, these reflections and information include financial forecasts and estimates as well as the 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 reflections and information are reasonable, Vallourec cannot guarantee their accuracy or completeness and investors in Vallourec are hereby advised that these forward-looking reflections and information are subject to numerous risks and uncertainties that are difficult to foresee and generally beyond Vallourec s control, which may mean that the actual results and developments differ significantly from those expressed, induced or forecasted in the forward-looking reflections and information. 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 Registered Document filed with the AMF on April 24, 2013 (N D ) / 2

3 Agenda Q2 & H at a glance Sales review by segment Financial results and outlook Appendix / 3

4 Q2 & H at a glance

5 Q2 & H highlights Q2 and H results improved YoY: Revenues, EBITDA and EBITDA margin Q2 & H results in line with expectations Strong increase in Oil & Gas sales: 65% of H sales Positive mix impact on Group sales and EBITDA margin Further improved operational efficiency and ongoing cost reduction FY 2013: the Group continues to target an increase of volumes, sales and EBITDA margin / 5

6 Q2 & H Results Sales volume (kt) Sales ( million) flat 1,032 1, % % 2,527 2,590 1,328 +4% 1,377 H H Q Q H H Q Q EBITDA ( million) / EBITDA margin (%) Net income, Group share ( million) +23% pb 13.6% % % % 16.7% +230 pb % % 62 H H Q Q H H Q Q / 6

7 Sales review by segment

8 Sales breakdown in H Sales by geographic area (by destination) Sales by activity 2,527M 2,590M 2,527M 2,590M North America 28% 26% South America 25% 23% Oil & Gas 60% 65% Energy 78% Energy 81% Asia and Middle East Rest of the World Europe 16% 24% 8% 7% 23% 20% H H Petrochemicals Power Generation Mechanicals Automotive Construction & other 7% 6% 11% 10% 10% Non 8% 5% Energy 22% 4% 7% 7% H H Non Energy 19% / 8

9 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 # active rigs Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 # active rigs Oil & Gas key market indicators as of June O&G in the US Predominance of horizontal drilling (1) but rig count stability Horizontal: 61% Directional: 14% Vertical: 25% Oil vs. Gas in the US (1) Oil: 80% Gas: 20% # active rigs $/bbl Oil (WTI) Oil (Brent) US Gas (Henry Hub) O&G Prices (2) Oil& Gas International rig count: Land & Offshore (1) Land: 75% Offshore: 25% $/Mbtu (1) Baker Hugues end of June 2013 (2) Thomson Reuters data collected at the end of June 2013 / 9

10 Oil & Gas / Petrochemicals Sales O&G in North America Sales up YoY in Q2 and down YoY in H1 2013: Stable prices in Q vs. Q but below 2012 level Higher volumes Strong market position to serve the shale oil plays Oil & Gas sales evolution ( million) 1, % +12% 1, % of total consolidated sales O&G in the Rest of the World Strong growth YoY in Q2 and H1 2013: Good product mix in the Middle East Good mix in Brazil driven by the domestic offshore market Petrochemicals Sales down YoY in Q2 and H1 2013: Very competitive environment 6% of total consolidated sales Q2 Q1 O&G in the US H H Full Year 2013 trends No recovery of the US gas drilling activity O&G in the Rest of the World Sustained demand expected in Brazil and in the rest of the world / 10

11 Power Generation Sales evolution ( million) Power Generation sales down YoY in Q and in H % -14% % of total consolidated sales Conventional power plants Market remained weak Nuclear power plants: Rescheduling of some projects over 2014 Q2 Q H H Full Year 2013 trends Power Generation: No improvement expected / 11

12 Industry & other Sales evolution ( million) Globally: Market remained weak Prices under pressure Mechanicals sales down: Weaker mining sector Automotive sales up YoY in Q2 2013: Heavy vehicles rebound in Brazil Construction & other sales up YoY in Q and down in H1 2013: Iron ore sales up compared to Q1 and up YoY in Q2 Agricultural business up Q2 Q % -21% H H % of total consolidated sales Q2 Q1-2% -4% Full Year 2013 trends Economic conditions continue to be challenging in Europe Iron ore contract prices down in H % Q2 Q % H H Mechanicals Automotive Construction & Other 66 H H / 12

13 Financial results and outlook

14 Q from Sales to EBITDA in million Q Q restated (1) YoY change (%) Q QoQ change (%) Sales volumes (k tons) % % Sales 1,377 1, % 1, % Q EBITDA: improved performance Cost of sales (2) % % As % of sales 72.0% 73.7% -1.7pt 73.0% -1pt SG&A (2) % % As % of sales 10.2% 11.4% -1.2pt 10.9% -0.7pt Other income / expense, net na - 4 na EBITDA % % As % of sales 16.7% 14.4% +2.3pt 15.7% +1pt Lower costs of sales as % of sales: Better mix with higher proportion of Oil & Gas sales Improved SG&A in value and as % of sales at 10.2% (1) Figures for the year 2012 have been restated with the impact of the change in method of accounting for actuarial gains and losses on employee benefits (revised standard IAS 19) (2) Before depreciation and amortization / 14

15 Q from EBITDA to Net Income in million Q Q restated (1) YoY change (%) Q QoQ change (%) EBITDA up 20.4% (+ 39M) to 230M EBITDA % % Depreciation of industrial assets Other (amortization, exceptional items, impairment, restructuring) % % na - 37 na Operating Income % % Financial Income % % Income before tax % % Income tax % % Net income of equity affiliates na 4 na Total net Income % % Minority Interests % % Net Income, Group share % % (1) Figures for the year 2012 have been restated with the impact of the change in method of accounting for actuarial gains and losses on employee benefits (revised standard IAS 19) EBITDA margin up 230 bp to 16.7%: Higher proportion of O&G sales Efficient cost control Positive effect from new mills ramp-up Better exchange rate on hedged sales Higher D&A due to recent CAPEX Lower financial costs Effective tax rate at 35.9% Net income, Group share up 8.8% to 62M / 15

16 Cash flow H million Net Debt as of Dec. 31, 2012 Net Debt as of June 30, 2013 Gross cash flow from operations Change in WCR (1,614) 300 Net debt = 31.4% of equity (202) Gross capex (198) Dividends Asset disposals & other elements (52) 12 (1,754) Net debt = 34.6% of equity / 16

17 Financial resources as of June 30, 2013 Strong diversified financial structure Optimized cost of financing Approx. 72% of gross debt raised on capital markets Bank & other debt 23% Commercial Paper Bond debt 42% Cost of gross debt decreased to less than 4.5% in H1 88% of gross debt is at fixed rate* * Including commercial paper drawn with a 1-12 month maturity 88% Variable rate 12% Fixed rate 3,500 3,000 2,500 2,000 1,500 1, Close to 3bn committed financing Undrawn commited financing Drawn committed financing A strong financial structure Standard & Poor s rating at BBB+ Gearing ratio at 34.6% Net debt expected to be slightly up in 2013: Higher working cap due to the ramp up of the new mills FY 2013 capex expected at approx. 650M 0 Jun - 13 Dec - 13 Dec - 14 Dec - 15 Dec - 16 Dec - 17 / 17

18 Outlook for 2013 Activity Based on current market conditions, the Group targets volumes and sales to increase and the EBITDA margin to improve Oil & Gas market indicators well oriented: Operations No signs of recovery in the US gas drilling activity + Dynamism in Brazil and the Rest of the World Demand for non Oil & Gas remains subdued with low visibility Additional cost reduction and continuous improvement of operational efficiency Additional volumes and sales from new mills (USA & Brazil) / 18

19 Appendix

20 A worldwide leader A worldwide presence and regional leadership strategies to offer premium solutions always closer to our customers Over 23,000 employees A presence in more than 20 countries Over 50 production facilities worldwide 6 advanced R&D centers located in France and internationally Key figures ,092 kt Sales volume 5,326m Sales 786m EBITDA / 20

21 At the heart of the most complex industrial applications Oil & Gas 2. Power generation 3. Petrochemicals 4. Mechanical engineering 5. Automotive 6. Construction & other / 21

22 Bringing our premium solutions closer to our customers 2,900 9,900 8,150 2,250 Over 23,000 employees* 5 steel mills 14 pipe mills Sales & services Forest & mine * At December 31, 2012 > 50 production facilities 38 finishing units 6 R&D centers / 22

23 Regional leaderships Europe Strengthen our technological leadership and our operational excellence Be the top local supplier North America Be Chinese in China China Leverage a unique position Brazil Leverage local presence Middle-East / Africa / Asia / 23

24 Our innovation network: Leverage our technological leadership Aulnoye, France Riesa, Germany (Rolling competence center) Houston, USA (VAM connection technology testing center) Düsseldorf, Germany Belo Horizonte, Brazil Rio de Janeiro, Brazil Increase in R&D expenses (+19% to 93m in 2012) Extension of testing development capacities for Group s key technologies More than 500 R&D engineers and technicians 16 patents registered in 2012 / 24

25 Our strategy More local presence Customer intimacy Local leadership Local content More premium Added value Technology Service More competitiveness New capacities Economies of scale Operational excellence / 25

26 Partnering with our customers to answer their most complex challenges Oil & Gas Powergen Industry / 26

27 Mtoe Major challenges to address Energy worldwide demand forecasts Challenges to address Other renewables Growing energy demand Growing demand for energy with a predominant share of Oil & Gas Biomass Hydro Modifier Nuclear Gas Oil Coal Complexity of new Oil & Gas reservoirs Evolution of clients requirements Reliability Environment Innovation Local content Services and lead times Source: IEA / 27

28 Oil & Gas Premium products for all applications Development of corrosionresistant steel tubes and threaded connections that deliver high performance even in extreme conditions Deep wells Corrosive environments Deviated and horizontal wells High-temperature High-pressure Offshore drilling Deep Water Extended Reach Deep Well Shale Gas VAM SG HPHT Arctic LT Grades CLEANWELL Salt Dome VAM RISER Hydroclean, VAM Express VAM HTF VAM 21 Expandable VAM HP VAM 21 VM 125 SS HC Grades VAM MUST / 28

29 Ideally positioned to serve the Brazilian market Long term partnership with Petrobras (since 1954) Fully integrated local production A complete product offering Premium OCTG VAM connections Drill pipes Risers and flowlines Dedicated pre-salt project team 2 R&D Centers Belo Horizonte Rio de Janeiro (2013) 6 logistics and services bases MINAS GERAIS VMB Belo Horizonte VSB São Paulo Espirito Santo Basin Campos Basin Santos Basin / 29

30 Our ideal position to serve the Oil & Gas market in the USA Oil & Gas Shale Plays Vallourec operations Casper, WY Youngstown, OH Muskogee, OK Houston,TX Houma, LA Image: Hart Energy Long-term relationships with distributors, large independents and international majors Strong reputation of VAM products and services Image: Statoilhydro / 30

31 Unconventional drilling technologies require more premium OCTG Breakthrough technologies enable access to non-conventional shale reserves, requiring more tons of OCTG and more premium connections Difference between conventional drilling (vertical) and unconventional drilling (horizontal) Image: Devon Type of well Measured depth % Seamless (1) % Premium connections (1) OCTG Tons per well (1) % Small OD < 7 (1) Horizontal (Unconventional) 13,000 60% 30% % Vertical (Conventional) 3,000 35% < 5% 45 25% (1) Theoritical estimates, based on Vallourec assumptions / 31

32 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 $/mt Raw materials Iron ore spot prices (1) Scrap price evolution (2) Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q $ 350 $ 300 $ 250 $ 200 $ 150 $ 100 $ 50 $ 0 $ France : E40 (33) in euro/t hors taxes USA : Steel Scap n 1 Heavy Melting, in $ per long t. Raw material prices rather stable or slightly decreasing Decrease in iron ore prices during H with no rebound expected Sources: (1) Platts Iodex fines 62% Fe CRF North China $/mt (2) E40 = FFA French Steel Association; SS n 1 = USA American Metal Market / 32

33 Market environment in 2012 and into 2013e e Oil Demand (1) (Bbl/d) Oil price: (1) Brent ($/bbl) International benchmark Gas price: (1) Henry Hub ($/bcf) Worldwide E&P spending (2) $566bn $617bn $678bn +10% World GDP (3) (Change YoY) +3.0% +2.5% +2.5% World Industrial Production (3) (Change YoY) Eurozone +1.5% -0.5% -0.7% Brazil +2.7% +0.9% +2.6% +3.6% +1.8% +2.2% Eurozone +2.5% -2.7% -1% High levels of E&P spending as oil prices expected to remain high Oil demand growth +0.9% in 2012 and +0.9% in 2013 Expected Industrial Production growth in most parts of the world Government (PAC) Growth Acceleration Program in Brazil US and EU scrap prices expected to be flat vs average Brazil +0.3% -2.6% +1.5% Iron Ore: avge CIF China ($/t) Scrap: E40 France ( /t) Sources: (1) IEA, June 2013 and EIA and Major Banks for 2013e (2) Barclays Capital, June 2013 (3) IHS Global Insight, June 2013 Economic conditions in Europe remain challenging Iron ore price sharp decrease in 2012, further decrease now expected in 2013

34 Trends for other markets The IMF (1) expects the Global growth to remain subdued, and projects economic growth of 3.1% in 2013, and 3.8% in Ifo Business Survey: June 2013 Manufacturing industry Ifo Business Climate Index (2) for industry and trade in Germany continued to rise in June. Although assessments of the current business situation are slightly less positive, firms are increasingly optimistic with regard to their future business outlook. The German economy holds its course. The German VDMA (3) announced that machinery and tools orders were down 5% in May compared to the same prior year period after the first plus of the year in April. According to the VDMA, there is no clear signal of expansion on the global investment front. Focus report (4) : industrial production in Brazil in In Brazil, the business outlook was revised downward but remains positive. The forecast for 2013 GDP growth fell from +3.2% to +2.3% in July (4). Sources: (1) International Monetary Fund (IMF) Survey 9 July 2013 (2) Ifo Business Climate Index June 2013 (3) VMDA: Verband Deutscher Mashchinen und Anlagenbau 28 June 2013 (4) Banco Central do Brasil Focus Report 8 July 2013 / 34

35 Safety and health: everyone s responsibility The Group is committed and mobilized for the safety and health of its employees Safety performance from 2007 to target LTIR (1) TRIR (2) Agreement signed to prevent hardness at work 35,000 safety inspections in continuous improvement teams (CIT) focused on safety in % of substances identified as CMR (3) replaced at the end of 2012 (1) LTIR: Lost time injury rate per million hours worked (2) TRIR: Total recorded number of injuries per million hours worked. (3) CMR: Carcinogenic, mutagenic and reprotoxic / 35

36 H from Sales to EBITDA in million H % of sales H restated (1) % of sales YoY change (%) Sales 2,590 2, % H EBITDA: improved performance YoY Cost of sales (2) - 1, % - 1, % -0.4% SG&A (2) % % -7.8% Other income / expense, net EBITDA % % +22.7% Lower Cost of sales: Better mix with a higher proportion of O&G sales Continued cost reductions SG&A improvement: Lower commercial, administrative costs Reduction in R&D expenses due to completion of certain projects (1) Figures for the year 2012 have been restated with the impact of the change in method of accounting for actuarial gains and losses on employee benefits (revised standard IAS 19) (2) Before depreciation and amortization / 36

37 H from EBITDA to Net Income in million H % of sales H restated (1) % of sales YoY change (%) EBITDA up 22.7% (+ 78m) to 421m EBITDA % % +22.7% Depreciation of industrial assets Other (amortization, exceptional items, impairment, restructuring) % na Operating Income % % +15.1% Financial Income % Income before tax % % +18.5% Income tax % Net income of equity affiliates 1 6 na Total net Income % % +4.5% Minority Interests % Net Income, Group share % (1) Figures for the year 2012 have been restated with the impact of the change in method of accounting for actuarial gains and losses on employee benefits (revised standard IAS 19) EBITDA margin up 270 bp to 16.3%: Better sales mix with higher proportion for O&G Efficient cost control Positive effect from new mills ramp-up Better exchange rate on hedged sales Improved EBITDA partly offset by: Increased D&A due to recent CAPEX Exceptional item Effective tax rate at 35.7% Net income, group share up 14.1% at 97m 37 / 37

38 H Balance sheet in million 30 June Dec restated (1) Non current assets 1 5,957 6,034 in million 30 June Dec /31/12 restated (1) restated (1) Shareholders' equity 4,660 4,729 Inventories and word in progress 1,579 1,430 Minority interests Equity capital 1 5,075 5,144 Trade receivables 1, Financial instruments Other current assets Cash & cash equivalents Provisions and deferred tax Bank debt 2,598 2,160 Financial instruments Trade payables Other current liabilities Total assets 9,725 9,241 Total liabilities 9,725 9,241 Net Debt 1,754 1,614 Net Debt / Equity 34.6% 31.4% (1) Figures for the year 2012 have been restated with the impact of the change in method of accounting for actuarial gains and losses on employee benefits (revised standard IAS 19) / 38

39 Capital expenditure million ~ (est.) / 39

40 Dividend for year % 39.7% Average pay-out ratio in the last 4 years: 38.7% 38.6% % Earning per share Dividend per share Pay-out ratio (1) Dividend payable in cash or in shares at shareholders option Subscription price of the dividend payable in shares: Option period: 6-18 June 2013 Payment date: 25 June 2013 (1) Dividend / Earning per share / 40

41 Leader in Premium Tubular Solutions Save the date: Investor Day in Pittsburgh, PA on September 26 and 27, 2013 Investor Relations Contact - Vallourec Group Tel: / investor.relations@vallourec.fr