Q2 / H RESULTS. Investor Presentation. 26 July 2017

Transcription

1 Q2 / H RESULTS Investor Presentation 26 July 2017

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 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 ). VALLOUREC INVESTOR PRESENTATION - JULY

3 H1 2017: IMPROVING FINANCIAL PERFORMANCE Positive Q EBITDA: 3m, + 35m YoY Improved H EBITDA: - 18m, + 86m YoY Continuous focus on Transformation Plan 78m gross savings achieved in H FY 2017 guidance revised upwards: Target to improve EBITDA by + 125m to + 175m vs VALLOUREC INVESTOR PRESENTATION - JULY

4 H1 2017: CONFIRMATION OF THE US REBOUND RIG COUNT AND WTI PRICES ($) US OCTG PRICES ($/t) +26% Source: Baker Hughes and Thomson Reuters Source: PipeLogix (average Seamless pipes) Oil prices fluctuating between 45-50$ US OCTG market recovery confirmed: Active rig count more than doubled since May 2016 (to 952 as of July 14), US OCTG price increase International markets remain weak: IOCs projects starting to be sanctioned progressively NOCs capex stable Still very competitive environment VALLOUREC INVESTOR PRESENTATION - JULY

5 H1 2017: HIGHER VOLUMES SHIPPED QoQ VOLUMES SHIPPED 2013-Q (in Kt) ,159 Kt ,323 Kt ,411 Kt ,281 Kt 2017* 1,013 Kt * Incl. Tianda and VSB full consolidation VALLOUREC INVESTOR PRESENTATION - JULY

6 IMPROVED H1 REVENUE Revenue up 19.7% in H vs. H % at constant scope and exchange rate Industry & Other Europe: revenue up Higher volumes for Mechanical Engineering Brazil: revenue up Higher iron ore prices Increased volumes and prices (heavy vehicles, agricultural machinery) Power Generation +26.4%* (+13.8%**) -16.7%* (-16.3%**) % % % H1 revenue in millions of 1,716 1, % Oil & Gas +23.9%* (+2.4%**) USA: revenue up Higher volumes EAMEA: revenue down Positive scope impact Deliveries at lower prices in the backlog than in H Brazil: revenue up Higher OCTG deliveries required by Petrobras for Libra Conventional and Nuclear: revenue down Lower deliveries in Asia, notably in Q2 Negative scope impact Petrochemicals Revenue up: Positive scope impact 60.3%* (+16.2%**) * H increases in comparison with H shown in % ** at constant Scope and exchange rates VALLOUREC INVESTOR PRESENTATION - JULY

7 Q2 2017: POSITIVE EBITDA VOLUMES SHIPPED (1) (In Ktons) REVENUE (in millions of ) EBITDA (2) (in millions of ) FREE CASH FLOW (3) (in millions of ) (1) Incl. Tianda and VSB full consolidation (2) Earnings Before Interest, Taxes, Depreciation and Amortization (3) Non-GAAP measure defined as cash flow from operating activities minus capital expenditure and plus/minus change in operating working capital requirement VALLOUREC INVESTOR PRESENTATION - JULY

8 H1 2017: EBITDA UP 86M YoY VOLUMES SHIPPED (1) (In Ktons) REVENUE (in millions of ) EBITDA (2) (in millions of ) FREE CASH FLOW (3) (in millions of ) (1) Incl. Tianda and VSB full consolidation (2) Earnings Before Interest, Taxes, Depreciation and Amortization (3) Non-GAAP measure defined as cash flow from operating activities minus capital expenditure and plus/minus change in operating working capital requirement VALLOUREC INVESTOR PRESENTATION - JULY

9 CONTINUOUS FOCUS ON TRANSFORMATION PLAN GROSS SAVINGS (in millions of ) CAPEX (in millions of ) H H SG&A (1) (in millions of ) Generation of 78 million gross savings in H SG&A decrease YoY despite less favorable exchange rate and change in scope (Tianda and VSB) Over H1: Closing of the divestiture of a 60% stake in the Saint Saulve steel mill New organization implemented (1) Selling, General and Administrative costs VALLOUREC INVESTOR PRESENTATION - JULY

10 H NET DEBT (in millions of ) Net Debt as at 31 Dec Net Debt as at 30 Jun Net debt = 34.1% of equity Net debt = 49.6% of equity (1,287) Cash flow from operating activities (160) Change in WCR (1) (104) Gross capital expenditure Dividends paid Asset disposals & other items - (61) (1) (1,613) Free cash flow = -325m (1) Change in Working Capital Requirement, + decrease / (increase) VALLOUREC INVESTOR PRESENTATION - JULY

11 STRONG LIQUIDITY AMORTIZATION OF LONG TERM DEBT (in millions of ) Net debt at 30 June 2017 Gross debt 2.5bn (incl. 1.1bn LT debt: bonds, leasing...) Cash: 0.9bn Net debt: 1,613m LONG-TERM COMMITTED BANK FACILITIES PROFILE (1) (in millions of ) Liquidity at 30 June bn of cash 2.3bn LT committed bank facilities, of which 0.7bn drawn 1.4bn ST debt, incl. 0.7bn of drawing on LT revolving bank facilities LT financing maturity profile Bonds: no significant repayment until 2019 Maturity of most bank facilities beyond 2019 Gearing covenant on LT committed bank facilities for raised from 75% to 100% Tested each December 31 st Renegotiated in March 2017 (1) Subject to gearing covenant tested annually VALLOUREC INVESTOR PRESENTATION - JULY

12 2017 OUTLOOK REVISED UPWARDS North America: Expected higher deliveries in H2 vs. H Price increase as of Q3 Brazil: Lower deliveries expected for offshore drilling in H2 vs. H1 Iron ore prices expected to be below H1 EAMEA: Signs for an upcoming higher tendering activity from IOCs, not impacting 2017 deliveries No significant changes expected in other businesses, still in a very competitive environment Full year 2017 EBITDA targeted improvement: + 125m to + 175m vs m FY 2016 VALLOUREC INVESTOR PRESENTATION - JULY

13 APPENDIX

14 H FINANCIALS VALLOUREC INVESTOR PRESENTATION - JULY

15 H REVENUE +19.7% 26.2% 5.6% -23.8% 11.7% 1,716m 1,434m * Scope effect calculated with regard to restated H revenue VALLOUREC INVESTOR PRESENTATION - JULY

16 H REVENUE BREAKDOWN AS % OF TOTAL GROUP REVENUE REVENUE BY MARKET REVENUE BY REGION Oil & Gas Power Generation North America Rest of the world Petrochemicals * Tianda and 100% of VSB consolidation Industry & Other South America Asia & Middle East* Europe VALLOUREC INVESTOR PRESENTATION - JULY

17 H1 2017: FROM REVENUE TO EBITDA VALLOUREC H1 H1 Change In millions of euros YoY REVENUE 1,716 1, % Cost of sale (1,503) (1,312) 14.6% Industrial margin % (as % of revenue) 12.4% 8.5% +3.9pt SG&A costs (221) (225) -1.8% (as % of revenue) -12.9% -15.7% +2.8pt Other income (expense), net (10) (1) na EBITDA (18) (104) +86m EBITDA up 86m YoY Consolidated revenue up 19.7%, mainly due to: Higher OCTG sales in the US and Brazil, lower in EAMEA Positive scope and forex effect Industrial margin up 74.6%: Revenue increase Savings from transformation Plan Despite raw material costs increase Lower SG&A cost, Efficient cost savings partly offset by negative forex and scope impacts (1) Before depreciation and amortization VALLOUREC INVESTOR PRESENTATION - JULY

18 H1 2017: FROM EBITDA TO NET INCOME VALLOUREC H1 H1 Change In millions of euros YoY EBITDA (18) (104) +86m EBITDA as % of revenue -1.0% -7.3% +6.3pt Depreciation of industrial assets (151) (141) 7.1% Amortization and other depreciations (23) (22) na Impairment of assets - (68) na Asset disposals, restructuring and other 3 (83) na OPERATING INCOME (LOSS) (189) (418) +229m Net financial income (loss) (101) (68) 48,5% PRE-TAX INCOME (LOSS) (290) (486) +196m Income tax na Share in net income (loss) of associates (3) (2) na Net loss reduced by 161m, thanks to: Increased EBITDA and absence of restructuring and impairment charges in H Increased financial charges: Interest expenses up Change in NSSMC shares fair value Change in scope Lower income tax gain CONSOLIDATED NET INCOME (LOSS) (275) (442) +167m Non-controlling interests na NET INCOME (LOSS), GROUP SHARE (254) (415) +161m EARNINGS PER SHARE (in ) (0.6) (2.4) na VALLOUREC INVESTOR PRESENTATION - JULY

19 H FREE CASH FLOW Vallourec H1 H1 Change In millions of euros ( m) Cash flow from operating activities (FFO) (A) (160) (203) +43 Change in operating WCR (B) [+ decrease, (increase)] (104) (41) -63 Gross capital expenditure (C) (61) (73) +12 Free cash flow (A)+(B)+(C) (325) (317) -8 FREE CASH FLOW: (325)m ( * 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 VALLOUREC INVESTOR PRESENTATION - JULY

20 REVENUE BY GEOGRAPHY H1 As % of H1 As % of Change In millions of euros 2017 revenue 2016 revenue YoY Europe % % -8.8% North America % % +73.9% South America % % +45.2% Asia & Middle East % % +38.1% Rest of World % % -44.4% Total 1, % 1, % +19.7% VALLOUREC INVESTOR PRESENTATION - JULY

21 H BALANCE SHEET In millions of euros Assets 30-June 31-Dec 30-June 31-Dec Liabilities Equity, Group share 2,817 3,284 Net intangible assets Non-controlling interests Goodwill Total equity 3,250 3,778 Shareholder loan Net property, plant and equipment 3,277 3,618 Biological assets Bank loans and other borrowings 1,061 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 4,437 4,877 Total non-current liabilities 1,459 1,549 Inventories and work-in-progress 1,162 1,035 Provisions Trade and other receivables Overdrafts and other short-term borrowings 1,419 1,453 Derivatives - assets Trade payables Other current assets Derivatives - liabilities Cash and cash equivalents 867 1,287 Tax and other current liabilities Total current assets 2,908 3,209 Total current liabilities 2,557 2,678 Assets held for sale - 46 Liabilities disposal for sale - 43 TOTAL ASSETS 7,345 8,132 TOTAL EQUITY AND LIABILITIES 7,345 8,132 Net debt 1,613 1,287 Net income (loss), Group share (254) (758) Gearing ratio 49.6% 34.1% VALLOUREC INVESTOR PRESENTATION - JULY

22 CAPITAL EXPENDITURE (in millions of ) VALLOUREC INVESTOR PRESENTATION - JULY

23 Q FINANCIALS VALLOUREC INVESTOR PRESENTATION - JULY

24 Q REVENUE BY MARKET In millions of euros Q2 As % of Q2 As % of Change 2017 revenue 2016 revenue YoY Oil & Gas % % 37.4% Petrochemicals % % 60.5% Oil & Gas, Petrochemicals % % 39.3% Power Generation % % -26.1% Mechanicals % % 10.7% Automotive % % 42.3% Construction & Other % % 10.5% Industry & Other % % 15.8% Total % % 22.3% VALLOUREC INVESTOR PRESENTATION - JULY

25 Q P&L VALLOUREC Q2 Q2 Change In millions of euros YoY REVENUE % Cost of sales (821) (691) 18.8% Industrial margin % (as % of revenue) 12.0% 9.4% +2.6pt SG&A costs (108) (109) -0.9% (as % of revenue) -11.6% -14.3% +2.7pt Other income (expense), net (1) 5 na EBITDA 3 (32) +35m EBITDA as % of revenue 0.3% -4.2% +4.5pt Depreciation of industrial assets (72) (71) 1.4% Amortization and other depreciation (12) (11) na Impairment of assets - (5) na Asset disposals, restructuring and other 3 (9) na OPERATING INCOME (LOSS) (78) (128) +50m Net financial income (loss) (58) (34) 70.6% PRE-TAX INCOME (LOSS) (136) (162) +26m Income tax (1) 18 na Share in net income (loss) of associates (1) - na CONSOLIDATED NET INCOME (LOSS) (138) (144) +6m Non-controlling interests na NET INCOME (LOSS), GROUP SHARE (128) (131) +3m EARNINGS PER SHARE (in ) (0.3) (0.3) na VALLOUREC INVESTOR PRESENTATION - JULY

26 Q FCF Vallourec Q2 Q2 Change In millions of euros ( m) Cash flow from operating activities (FFO) (A) (78) (68) -10 Change in operating WCR (B) [+ decrease, (increase)] Gross capital expenditure (C) (27) (30) +3 Free cash flow (A)+(B)+(C) (105) (78) -27 VALLOUREC INVESTOR PRESENTATION - JULY

27 BUSINESS APPENDIX VALLOUREC INVESTOR PRESENTATION - JULY

28 VALLOUREC AT A GLANCE FY 2016: Sales volume: 1,281 Kt Sales: 2,965 m Worldwide presence with 18,300 employees (1) 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 U.S. 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 2016) 1,920 m 65% 16% 486 m 19% 559 m Key clients GLOBAL LEADER IN PREMIUM TUBULAR SOLUTIONS OPERATING ACROSS DIVERSIFIED END MARKETS AND GEOGRAPHIES (1) At December 31, 2016 (permanent and temporary contracts). Before Tianda acquisition VALLOUREC INVESTOR PRESENTATION - JULY

29 RECOVERY FUNDAMENTALS Global oil production needs ( ) (6.0)% Source: International Energy Agency, Oil Medium Term Market Report February % Demand growth Above and beyond demand, field (per year) depletion is the key factor: 5m Bpd need to be put in production every year to maintain current oil supply Production decline (per year) Demand/supply Balance Rebound in E&P necessary to avoid a new reverse oil shock Oil demand growing, OPEC agreement implemented: supply / demand to rebalance in 2017 Rebound in E&P activity will then be shaped by the large dispersion of projects economics and risk profiles Source: IEA OMR report July 2017 TRANSFORMING THE COMPANY TO BENEFIT FROM THE RECOVERY VALLOUREC INVESTOR PRESENTATION - JULY

30 TRANSFORMATION PLAN: STRATEGIC INITIATIVES FULLY EXECUTED IN 2016 Reshape European operations Closure of four facilities 2 rolling mills: Saint-Saulve and Déville-Lès-Rouen (France) 1 threading line: Mülheim (Germany) 1 heat treatment line: Bellshill (Scotland) Sale of a majority holding in Saint-Saulve steel mill Disposal of Vallourec Heat Exchanger Tubes Develop highly competitive production hubs VSB & VBR merger Shut down of Belo Horizonte s #2 blast furnace Shut down of Belo Horizonte s #1 blast furnace and steel mill 2018 Tianda acquisition Implementation of new routes Strengthen balance sheet by raising c. 1 bn equity Reinforce partnership with NSSMC New organization In line VALLOUREC INVESTOR PRESENTATION - JULY

31 A RESHAPED INDUSTRIAL SET-UP NORTH AMERICA EUROPE Rolling capacity: Rolling capacity: 2014: 750 Kt, i.e. 25% 2014: 1,350 Kt, i.e. 46% 2017: 750 Kt, i.e. 24% 2017: 700 Kt, i.e. 23% BRAZIL CHINA Rolling capacity: Rolling capacity*: 2014: 800 Kt, i.e. 27% 2014: 0 Kt 2017: 1,100 Kt, i.e. 35% 2017: 550 Kt, i.e. 18% (incl. 300 Kt dedicated to NSSMC) (incl. 200 Kt for export) Global capacities rebalanced: Europe down from 65% (2010) to 23% of global capacities** Unique position with state-of-the-art rolling and finishing capacities in every key region New highly competitive routes to supply international O&G markets A COMPETITIVE INDUSTRIAL SET-UP WITH LOW-COST ROUTES PQF only **rolling capacities VALLOUREC INVESTOR PRESENTATION - JULY

32 TRANSFORMATION PLAN: TARGETS CONFIRMED Valens savings to be overachieved: Target : 350m 3 Achieved : 280m 4 Transformation Plan 350m 750m 1,2 Transformation Plan execution fully in line: Savings: Target of 400m over M already achieved in m to generate over 4 years ( ) New production routes and change of scope: Target : 350m confirmed 130m Valens 150m 250m (1) Savings are before inflation (2) 30% of this amount depending on market recovery (3) At 2014 volumes (4) At current volumes IN LINE TO ACHIEVE THE FULL BENEFIT OF OUR TRANSFORMATION PLAN VALLOUREC INVESTOR PRESENTATION - JULY

33 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