Q RESULTS INVESTOR PRESENTATION

Transcription

1 Q 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 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

3 Q HIGHLIGHTS

4 Q AT A GLANCE IMPROVED FINANCIAL PERFORMANCE Revenue of 862m, up 10.1% year-on-year (+22.1% at constant exchange rates) Q EBITDA improved YoY at - 5m Strong revenue growth YoY in North America CONFIRMATION OF MARKET TRENDS IN O&G U.S. rig count expected to remain robust Higher tendering activity on international Oil & Gas markets, which should benefit Vallourec deliveries from the end of 2018 on Stable drilling activity in Brazil and long-standing partnership with Petrobras reinforced LIQUIDITY STRENGTHENED 400m refinancing through bond issuance in April 2018

5 Q KEY FIGURES REVENUE (in millions of ) EBITDA (1) (in millions of ) FREE CASH-FLOW (2) (in millions of ) Q Q Q Q Q Q YoY revenue increase: mainly driven by Oil & Gas operations in the U.S. despite negative forex YoY EBITDA improved 16m FCF impacted essentially by working capital following usual seasonality (1) Earnings Before Interest, Taxes, Depreciation and Amortization (2) Non-GAAP measure defined as cash flow from operating activities minus capital expenditure and plus/minus change in operating working capital requirement 5

6 Q FINANCIAL RESULTS 6

7 Q REVENUE BY MARKET Revenue up 10.1% vs. Q % at constant exchange rates Oil & Gas +1.2% 1 (+15.3% 2 ) Q revenue in millions of and as a % of revenue Industry & Other +8.4% 1 (+16.9% 2 ) USA: Strong recovery Rebound in volumes along with higher prices Weakening of the US dollar EAMEA: Stable Broadly stable volumes and revenue Brazil: Down Higher than average OCTG deliveries in Q Weakening of the Brazilian Real % % Europe: Higher prices for Mechanical Engineering and Automotive Brazil: Broadly stable revenue with slightly higher volumes in Mechanical Engineering and Automotive, and lower revenue at the mine as a result of iron ore market prices Petrochemicals +93.8% 1 (+114.6% 2 ) % % Power Generation 16.7% 1 (20.2% 2 ) Strong increase Recovery in the US Conventional Slightly higher conventional volumes with better price/mix due to orders booked in H Q versus Q At constant exchange rates 7

8 Q REVENUE AND EBITDA +10.1% 783m -12.0% 8.4% +22.1% 13.7% 862m Revenue Positive volume and price/mix effect, essentially thanks to Oil & Gas operations in the U.S. Negative forex impact EBITDA improved + 16m YoY Industrial margin up 2m Q VALLOUREC Currency Translation Volume Price/Mix Q Q Q Change In millions of euros YoY REVENUE % Cost of sales (759) (682) 11.3% Industrial margin % (as % of revenue) 11.9% 12.9% -1.0 pt SG&A costs (101) (113) -10.6% (as % of revenue) 11.7% 14.4% -2.7 pts Other income (expense), net (7) (9) na EBITDA (5) (21) + 16m Higher activity Savings from the Transformation Plan Partially offset by the increase in raw material prices and unfavorable currencies evolution Improved Industrial margin in North America, lower in Brazil Lower SG&A costs Q SG&A representing 11.7% of revenue vs. 14.4% in Q

9 Q VS Q1 2017: EBITDA TO NET INCOME VALLOUREC Q1 Q1 Change In millions of euros YoY EBITDA (5) (21) + 16m EBITDA as % of revenue -0.6% -2.7% +2.1pts Depreciation of industrial assets (70) (79) -11.4% Amortization and other depreciation (9) (11) na Impairment of assets (13) - na Asset disposals, restructuring and other (33) - na OPERATING INCOME (LOSS) (130) (111) - 19m Net financial income (loss) (43) (43) na PRE-TAX INCOME (LOSS) (173) (154) - 19m Income tax - 19 na Share in net income (loss) of associates - (2) na CONSOLIDATED NET INCOME (LOSS) (173) (137) - 36m Non-controlling interests (3) (11) na NET INCOME (LOSS), GROUP SHARE (170) (126) - 44m EARNINGS PER SHARE (in ) (0.4) (0.3) Higher EBITDA Non-recurring impairment and asset disposals, restructuring and other : mainly resulting from further restructuring measures undertaken in Europe in Q Financial result stable: Higher interest charges Q financial result included a loss related to the change in fair value of NSSMC shares Income tax: Tax gains reduced compared to Q as a consequence of the results recovery in North America 9

10 Q1 2018: FREE CASH-FLOW Vallourec In millions of euros Q Q Change ( m) Q Cash-flow from operating activities (FFO) (A) (83) (82) -1 (124) Change in operating WCR (B) [+ decrease, (increase)] (152) (104) Gross capital expenditure (C) (19) (34) +15 (66) Free cash-flow 1 (A)+(B)+(C) (254) (220) (34) (26) Cash-flow from operating activities broadly stable compared to Q1 2017, with the improvement of EBITDA being offset by higher financial interests and taxes paid, and improving 41m compared to Q Working capital requirement increased 152m following usual seasonality, and targeted to decrease from this level by the end of the year. Working capital in days of sales significantly reduced YoY 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 10

11 Q NET DEBT (in millions of ) Net Debt as at 31 Dec Net Debt as at 31 Mar (1,542) Cash-flow from operating activities (83) Change in WCR 1 Gross capital expenditure Asset disposals & other items (152) (19) 13 (1,783) Free cash-flow = - 254m Mainly forex impacts 1 Change in Working Capital Requirement, + decrease/(increase) 11

12 DEBT AND LIQUIDITY Bank & Other Financing (ST) 318m Commercial Papers (ST) 491m Bank & Other Financing (LT) 96m OCEANE (LT) 223m AVAILABLE LIQUIDITY AS AT 31 MARCH 2018 (in m) 839 GROSS DEBT BREAKDOWN (in m) 31 Mar ,040 Bonds (LT) 1,494m 2,879 Cash Undrawn Long Term Facilities Total Liquidity Net debt as at 31 March 2018 Gross Debt: 2,622m Cash & Cash equivalents: 839m Net Debt: 1,783m Liquidity as at 31 March bn of cash 2.0bn undrawn LT committed bank facilities LT committed bank facilities Total 2.1bn, of which: 0.1bn maturing in bn maturing in bn maturing in 2021 Gearing covenant: 100% for , tested every 31/12 New Bonds 2023 OCEANE Bonds MATURITIES OF BONDS 1 (in m) & After S&P rating: B Outlook negative Liquidity reinforced and maturity extended in April m bonds, due 2023 at 6.375% Coupon 1 LT Market Financing represents 95% of Long Term Debt 12

13 OUTLOOK

14 OUTLOOK FOR 2018 NORTH AMERICA Average rig count expected to remain robust This should allow Vallourec to pass further OCTG price increases in H Vallourec will also benefit from the full year impact of volume and price increases achieved in H Ready to benefit and, if necessary, to adapt to the final outcome of Section 232 which aims at favoring domestic steel manufacturers BRAZIL O&G: Petrobras drilling activity expected to remain stable. New long-term contracts signed with Petrobras will enter into force in H Industry: better momentum should be confirmed EAMEA O&G: Vallourec anticipates higher bookings with positive impacts on deliveries to materialize starting late H Industry: better momentum should be confirmed Power Generation: declining conventional power plant projects Transformation Plan will again generate significant savings this year Unfavorable forex and raw material prices vs VALLOUREC TARGETS 2018 EBITDA TO IMPROVE VERSUS 2017, WITH H SIGNIFICANTLY HIGHER THAN H

15 APPENDIX

16 Q FINANCIALS 16

17 REVENUE BREAKDOWN REVENUE BY GEOGRAPHIC REGION In millions of euros Q As % of revenues Q As % of revenues Change YoY Europe % % 19.1% North America % % 49.2% South America % % -14.1% Asia & Middle East % % -4.3% Rest of World % % - Total % % 10.1% REVENUE BY MARKET In millions of euros Q As % of revenues Q As % of revenues Change YoY Q Oil & Gas % % 1.2% 614 Petrochemicals % % 93.8% 94 Oil & Gas, Petrochemicals % % 9.6% 708 Power Generation % % 16.7% 125 Mechanicals % % 29.2% 123 Automotive % % 15.2% 39 Construction & Other % % -19.7% 75 Industry & Other % % 8.4% 237 Total % % 10.1% 1,070 17

18 BALANCE SHEET (in millions of ) Assets 31-Mar Dec 2017 Liabilities 31-Mar Dec 2017 Equity, Group share 2,193 2,426 Net intangible assets Non-controlling interests Goodwill Total equity 2,636 2,885 Net property, plant and equipment 2,840 2,977 Shareholder loan Biological assets Bank loans and other borrowings (A) 1,813 1,817 Associates Employee benefits Other non-current assets Deferred tax liabilities Deferred tax assets Provisions and other long-term liabilities Total non-current assets 3,807 3,966 Total non-current liabilities 2,105 2,105 Inventories and work-in-progress 1,121 1,004 Provisions Trade and other receivables Overdrafts and other short-term borrowings (B) Derivatives - assets Trade payables Other current assets Derivatives - liabilities Cash and cash equivalents (C) 839 1,021 Tax and other current liabilities Total current assets 2,801 2,856 Total current liabilities 1,852 1,811 Assets held for sale Liabilities disposal for sale TOTAL ASSETS 6,685 6,886 TOTAL EQUITY AND LIABILITIES 6,685 6,886 Net debt (A+B-C) 1,783 1,542 Net income (loss), Group share (170) (537) 18

19 CAPITAL EXPENDITURE (in millions of ) Q

20 2017 FINANCIALS 20

21 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% 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 BUSINESS APPENDIX 25

26 OIL & GAS MARKET FUNDAMENTALS DEMAND/SUPPLY BALANCE NEW OIL PRODUCTION CAPACITY REQUIRED mb/d mb/d 4, , , , ,5 0.5 Production decline rate of post-peak conventional oil fields (per year) +0.4% Demand growth New Policies Scenario (per year ) +0.9% Demand growth Current Policy Scenario (per year ) 94-0, , Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Stock Change (R) World Oil Supply World Oil Demand -2, % Source: International Energy Agency. Oil Market Report - April 2018 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 U.S. 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 26

27 OIL & GAS MARKET TRENDS E&P CAPITAL SPENDING ( bn) RIG COUNT AND WTI PRICES ($) Source: IHS Markit November 2017 Latin America Russia & Caspian North America Middle East Europe Asia-Pacific Africa Global Capex 2, , , , J-14 J-14 N-14 A-15 S-15 F-16 J-16 D-16 M-17 O-17 M-18 Total International US WTI (right) Source: Baker Hughes and Thomson Reuters 2, 500 2, 000 1, 500 1, OCTG PRICES ($/t) 0 J-14 A-14 J-14 O-14 J-15 A-15 J-15 O-15 J-16 A-16 J-16 O-16 J-17 A-17 J-17 O-17 J-18 A-18 Middle East 1(1) Western European 1(1) US 2(2) Source: 1 MBR (OCTG casing L80 premium connection) April PipeLogix (average Seamless pipes) April 2018 After 2 years of significant reduction, E&P CAPEX slightly increased in 2017 mainly thanks to North America WTI price averaged at 67$/b in Q Rig count US: recovering to 1,000+ active rigs in May 2018 International offshore: showing first signs of recovery OCTG prices recovering in the U.S. 27

28 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 in 2017 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 28

29 VALLOUREC AT A GLANCE FY 2017 Sales volume: 2,256Kt Sales: 3,750m Worldwide presence with c.19,500 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 29

30 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 30

31 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 c.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 31

32 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