Q3 9M 2017 RESULTS. Investor Presentation. 9 November 2017

Transcription

1 Q3 9M 2017 RESULTS Investor Presentation 9 November 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 - NOVEMBER

3 9M 2017 AT A GLANCE Improved financial performance in each of the 3 quarters : Higher Oil & Gas revenues in the US Realized benefits from the Transformation Plan Q EBITDA: + 9m, + 61m YoY 9M 2017 EBITDA: up 147m YoY, to - 9m EBITDA (1) (in millions of ) Range for FY 2017 EBITDA target revised upwards to - 30m and - 10m Strengthened liquidity: 800m raised through successful bond and convertible bond issuances (1) Earnings Before Interest, Taxes, Depreciation and Amortization VALLOUREC INVESTOR PRESENTATION - NOVEMBER

4 MARKET TRENDS GENERAL OVERVIEW US OCTG market recovery confirmed: Active rig count more than doubled since May 2016, plateauing at high level since this summer US OCTG price increase: +28% compared to the trough in May 2016 International OCTG market: NOCs capex stable IOCs progressively starting to sanction new projects RIG COUNT AND WTI PRICES ($) OCTG PRICES ($/t) Source: Baker Hughes and Thomson Reuters Sept Source: (1) OCTG casing J/K 55 (btc connection) - MBR Sept (2) PipeLogix (average Seamless pipes) Sept VALLOUREC INVESTOR PRESENTATION - NOVEMBER

5 9M 2017: CONTINUOUS VOLUME IMPROVEMENT VOLUMES SHIPPED 2013 Q (Kt) ,159 Kt ,323 Kt ,411 Kt ,281 Kt ,601 Kt 9M 2017 vs. 9M 2016: +77%, incl. Tianda acquisition and VSB full consolidation +31% at constant scope, driven mostly by North America * Incl. Tianda and VSB full consolidation VALLOUREC INVESTOR PRESENTATION - NOVEMBER

6 IMPROVED 9M 2017 REVENUE +26.0% 30.7% 2.5% 12.4% 2,680m 2,127m -19.6% REVENUE UP 26% THANKS TO HIGHER VOLUMES IN O&G AND SCOPE EFFECT * 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. VALLOUREC INVESTOR PRESENTATION - NOVEMBER

7 9M 2017 REVENUE GROWTH MAINLY DRIVEN BY O&G Revenue up 26.0% in 9M 2017 vs. 9M % at constant scope and exchange rate Industry & Other +27.5%* (+19.7%**) Europe: revenue up Higher volumes for Mechanical Engineering Brazil: revenue up Higher iron ore prices Increased volumes and prices, notably in automotive % % % 9M 2017 revenue in millions of 2,680 1, % Oil & Gas USA: revenue up Rebound in onshore volumes +32.3%* (+13.0%**) EAMEA: revenue down Positive scope impact 2016 orders delivered at low price and mix Brazil: revenue up Higher OCTG deliveries, notably in Q1 Power Generation -15.5%* (-15.8%**) Conventional and Nuclear: revenue down Petrochemicals 81.3%* (+43.8%**) Revenue up Positive scope impact Low comparison basis in 2016 * 9M 2017 versus 9M 2016 ** at constant scope and exchange rates VALLOUREC INVESTOR PRESENTATION - NOVEMBER

8 Q P&L POSITIVE EBITDA VALLOUREC Q3 Q3 Change In millions of euros YoY REVENUE % Cost of sales (850) (637) 33.4% Industrial margin % (as % of revenue) 11.8% 8.1% 3.7 pts SG&A costs (102) (106) -3.3% Other income (expense), net (3) (3) na EBITDA 9 (52) +61m EBITDA as % of revenue 0.9% -7.5% 8.4 pts Depreciation of industrial assets (70) (69) 1.4% Amortization and other depreciation (10) (11) na Impairment of assets (1) (2) na Asset disposals, restructuring and other (16) (9) na OPERATING INCOME (LOSS) (88) (143) +55m Net financial income (loss) (39) (31) 25.8% PRE-TAX INCOME (LOSS) (127) (174) -27.0% Income tax 6 6 na Share in net income (loss) of associates - (2) na CONSOLIDATED NET INCOME (LOSS) (121) (170) -28.8% Non-controlling interests 2 10 na NET INCOME (LOSS), GROUP SHARE (119) (160) +41m EARNINGS PER SHARE (in ) (0.3) (0.9) na Improved EBITDA: + 61m to 9m Industrial margin up 58m: Revenue increase Savings and scope change from the Transformation Plan Favorable change in provisions Lower SG&A costs: Efficient cost savings more than offsetting negative scope, forex and inflation impacts Financial income : Higher interest charges => Net loss reduced by 41m VALLOUREC INVESTOR PRESENTATION - NOVEMBER

9 9M 2017 P&L CLOSE TO EBITDA BREAKEVEN VALLOUREC 9M 9M Change In millions of euros YoY REVENUE 2,680 2, % Cost of sales (2,353) (1,949) 20.7% Industrial margin % (as % of revenue) 12.2% 8.4% +3.8 pts SG&A costs (323) (331) -2.3% Other income (expense), net (13) (4) na EBITDA (9) (156) +147m EBITDA as % of revenue -0.3% -7.3% +7.0 pts Depreciation of industrial assets (221) (210) 5.2% Amortization and other depreciation (33) (33) na Impairment of assets (1) (70) na Asset disposals, restructuring and other (13) (92) na OPERATING INCOME (LOSS) (277) (561) +284m Net financial income (loss) (140) (99) 41.4% PRE-TAX INCOME (LOSS) (417) (660) -36.8% Income tax na Share in net income (loss) of associates (3) (4) na CONSOLIDATED NET INCOME (LOSS) (396) (612) -35.3% Non-controlling interests na NET INCOME (LOSS), GROUP SHARE (373) (575) +202m EARNINGS PER SHARE (in ) (0.8) (3.4) na Improved EBITDA Industrial margin up 149m, Revenue increase Savings and scope change from the Transformation Plan Favorable change in provisions Lower SG&A costs, Efficient cost savings more than offsetting negative scope, forex and inflation impacts Lower restructuring and impairment charges Increased financial charges: Higher interest expenses Change in NSSMC shares fair value Forex impact => Net loss reduced by 202m VALLOUREC INVESTOR PRESENTATION - NOVEMBER

10 9M 2017 FREE CASH FLOW 9M 9M Change Vallourec Q3 Q3 Change ( m) In millions of euros ( m) (208) (275) +67 Cash flow from operating activities (FFO) (A) (48) (72) +24 (103) (17) -86 Change in operating WCR (B) [+ decrease, (increase)] (86) (100) +14 Gross capital expenditure (C) (25) (27) +2 (397) (392) -5 Free cash flow (A)+(B)+(C) (72) (75) +3 Cash flow from operating activities improved by 67m: better EBITDA, partly offset by unfavorable change in non-cash provisions higher financial charges Working capital needs for US recovery partly offset by better efficiencies Strict capex discipline ( * 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 - NOVEMBER

11 A SOLID LIQUIDITY POSITION AND LONG TERM MATURITY in m MATURITIES OF BONDS (1,2) 800 Net debt at 30 September 2017: 1,645m Gross debt 2.6bn (incl. 1.1bn LT debt: bonds, leasing...) Cash: 1.0bn LONG-TERM COMMITTED BANK FACILITIES PROFILE in m 2022 Bond OCEANE Existing Bonds Liquidity at 30 September bn of cash 1.4bn undrawn LT committed bank facilities ( 0.7bn drawn) ST debt of 0.9bn, incl. 0.6bn commercial paper (excl. 0.7bn of drawing on LT revolving bank facilities) Liquidity reinforced and maturity extended in October m convertible bond (OCEANE), maturity m bond, due 2022 Use of proceeds: reimbursement of RCF drawings (which remain available) and part of ST debt, notably commercial paper Gearing covenant on LT committed bank facilities 75% at 31 December % for (1) As of September 2017, adjusted for the OCEANE and new bond issues; (2) Bonds represent 94% of Long Term Debt VALLOUREC INVESTOR PRESENTATION - NOVEMBER

12 OUTLOOK FOR THE MONTHS TO COME NORTH AMERICA Rig count expected to plateau, assuming no significant change in WTI price High load of Vallourec domestic facilities BRAZIL O&G: Petrobras drilling activity expected to remain stable Industry: better momentum in a competitive environment Q4 2017: impacted by a less favorable mix O&G EAMEA IOCs: Progressively starting to sanction new projects NOCs: Expected to remain sustained Q4 2017: impacted by a less favorable mix Industry: better momentum in a competitive environment Power Generation: to be progressively impacted by a reduced number of conventional power plant projects Group results dependant notably on the evolution of raw material costs and forex Focused on sustained implementation of its Transformation Plan which will continue to generate significant savings Q EBITDA to be slightly negative or nearing breakeven FY 2017 EBITDA target revised upwards: to range between - 30m and - 10m VALLOUREC INVESTOR PRESENTATION - NOVEMBER

13 APPENDIX

14 9M 2017 FINANCIALS VALLOUREC INVESTOR PRESENTATION - NOVEMBER

15 9M 2017: EBITDA UP 147M YoY VOLUMES SHIPPED (1) (In Ktons) REVENUE (in millions of ) EBITDA (2) (in millions of ) FREE CASH FLOW (3) (in millions of ) 9M M (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 - NOVEMBER

16 9M 2017 REVENUE BREAKDOWN AS % OF TOTAL GROUP REVENUE REVENUE BY MARKET REVENUE BY REGION * Tianda and 100% of VSB consolidation VALLOUREC INVESTOR PRESENTATION - NOVEMBER

17 REVENUE BY GEOGRAPHY 9M As % of 9M As % of Change In millions of euros 2017 revenue 2016 revenue YoY Europe % % -8.9% North America % % 84.7% South America % % 19.6% Asia & Middle East % % 55.5% Rest of World % % -27.5% Total 2, % 2, % 26.0% VALLOUREC INVESTOR PRESENTATION - NOVEMBER

18 9M 2017 BALANCE SHEET In millions of euros Assets 30-Sept 31-Dec 30-Sept 31-Dec Liabilities Equity, Group share 2,619 3,284 Net intangible assets Non-controlling interests Goodwill Total equity 3,090 3,778 Shareholder loan Net property, plant and equipment 3,177 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 4,300 4,877 Total non-current liabilities 1,448 1,549 Inventories and work-in-progress 1,136 1,035 Provisions Trade and other receivables Overdrafts and other short-term borrowings 1,576 1,453 Derivatives - assets Trade payables Other current assets Derivatives - liabilities Cash and cash equivalents 992 1,287 Tax and other current liabilities Total current assets 2,994 3,209 Total current liabilities 2,682 2,678 Assets held for sale 46 Liabilities disposal for sale 43 TOTAL ASSETS 7,294 8,132 TOTAL EQUITY AND LIABILITIES 7,294 8,132 Net debt 1,645 1,287 Net income (loss), Group share (373) (758) Gearing ratio 53.2% 34.1% VALLOUREC INVESTOR PRESENTATION - NOVEMBER

19 9M 2017 NET DEBT (in millions of ) Net Debt as at 31 Dec Net Debt as at 30 Sept Net debt = 34.1% of equity Net debt = 53.2% of equity (1,287) Cash flow from operating activities (208) Change in WCR (1) (103) Gross capital expenditure (86) Dividends paid - Asset disposals & other items 39 (1,645) Free cash flow = - 397m (1) Change in Working Capital Requirement, + decrease / (increase) VALLOUREC INVESTOR PRESENTATION - NOVEMBER

20 CAPITAL EXPENDITURE (in millions of ) VALLOUREC INVESTOR PRESENTATION - NOVEMBER

21 Q FINANCIALS VALLOUREC INVESTOR PRESENTATION - NOVEMBER

22 IMPROVED Q REVENUE +39.1% 38.7% 13.7% 964m -4.0% -9.3% 693m * 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. VALLOUREC INVESTOR PRESENTATION - NOVEMBER

23 Q3 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 - NOVEMBER

24 Q REVENUE BREAKDOWN AS % OF TOTAL GROUP REVENUE REVENUE BY MARKET REVENUE BY REGION * Tianda and 100% of VSB consolidation VALLOUREC INVESTOR PRESENTATION - NOVEMBER

25 Q REVENUE BY MARKET In millions of euros Q3 As % of Q3 As % of Change 2017 revenue 2016 revenue YoY Oil & Gas % % 49.9% Petrochemicals % % 132.1% Oil & Gas, Petrochemicals % ,3% 55.1% Power Generation % % -13.0% Mechanicals % % 23.3% Automotive % % 29.6% Construction & Other % % 39.1% Industry & Other % % 29.5% Total % % 39.1% VALLOUREC INVESTOR PRESENTATION - NOVEMBER

26 BUSINESS APPENDIX VALLOUREC INVESTOR PRESENTATION - NOVEMBER

27 VALLOUREC AT A GLANCE FY 2016: Sales volume: 1,281 Kt Sales: 2,965 m 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 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 VALLOUREC INVESTOR PRESENTATION - NOVEMBER

28 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 Global capabilities redeployed with a shift from Europe to Asia and the Americas Oil and gas local market supply North America Rolling capacity: 2014 : 750 kt, i.e. 25% 2017 : 750 kt, i.e. 24% New highly competitive production hub Brazil Centre of technological excellence Europe Rolling capacity: 2014 : 1,350 kt, i.e. 46% 2017 : 700 kt, i.e. 23% China Rolling capacity: 2014 : 0 kt 2017 : 550 kt, i.e. 18% (incl. 200 kt for export) New highly competitive production hub Rolling capacity: 2014 : 800 kt, i.e. 27% 2017 : 1,100 kt, i.e. 35% (incl. 300 kt earmarked for NSSMC) 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 VALLOUREC INVESTOR PRESENTATION - NOVEMBER

29 VALLOUREC IS WELL POSITIONED TO BENEFIT FROM MARKET S RECOVERY TO COME, AND NEW OIL PRODUCTION CAPACITY REQUIRED PER YEAR DEMAND/SUPPLY BALANCE Production decline rate of post-peak fields (per year) +0.5% Demand growth (per year ) -6% Source: World Energy Outlook 2016 November 2016 Source: IEA OMR report September 2017 GLOBAL CAPEX FORECAST US$bn Continued growth in demand Above and beyond demand, field depletion is the key factor: large new projects need to be put in production every year to just maintain current oil supply Supply / demand imbalance created by the shale revolution is progressively resolved Africa Asia Pacific Europe Middle East North America Russia & Caspian Latin America Global Capex After under-investment over the past 3 years, a global rebound in E&P capex is needed to avoid oil counter-shock: shale potential in the US is insufficient to offset worldwide depletion Source: Upstream E&P Capex - IHS September 2017 VALLOUREC INVESTOR PRESENTATION - NOVEMBER

30 THE TRANSFORMATION PLAN SUCCESSFUL IMPLEMENTATION Transformation Plan objectives confirmed SG&A decrease YoY: cost savings more than offsetting the negative scope and forex impact Efficient CAPEX management Over 9M: Divestiture of a 60% stake in the Saint-Saulve steel mill New organization implemented Development of the new competitive routes in m 750m EBITDA CONTRIBUTION TARGETED FROM TP (1) EFFECTIVE COST CUTTING SG&A ADAPTATION STRICT CAPEX DISCIPLINE Savings in m SG&A, in m CAPEX, in m H PROVEN ABILITY TO IMPLEMENT EFFECTIVE COST CUTTING MEASURES (1) Savings are before inflation; 30% of this amount depending on market recovery VALLOUREC INVESTOR PRESENTATION - NOVEMBER

31 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