VALLOUREC. January 2018

Transcription

1 VALLOUREC January 2018

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 ). 2

3 VALLOUREC RE-POSITIONED TO FULLY BENEFIT FROM THE RECOVERY THANKS TO ITS TRANSFORMATION PLAN 1 Favourable long-term trends Extensive technological expertise and brand trust-recognition A reshaped industrial set up with highly competitive low-cost export routes Strong focus on cost reduction 5 A solid liquidity position and long term maturity 6 Start of recovery in activity and financial performance 3

4 FAVOURABLE LONG-TERM TRENDS NEW OIL PRODUCTION CAPACITY REQUIRED PER YEAR DEMAND/SUPPLY BALANCE mb/d mb/d 102 4,5 Production decline rate of post-peak fields (per year) +0.5% Demand growth (per year ) ,5 2,5 1,5 0,5-0,5-1,5-6% 90 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 Q ,5 Stock Change (R) World Oil Supply World Oil Demand Source: World Energy Outlook 2016 November 2016 Source: IEA OMR report November 2017 GLOBAL CAPEX FORECAST Continued growth in demand US$bn 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 November

5 2 EXTENSIVE TECHNOLOGICAL EXPERTISE AND BRAND TRUST-RECOGNITION Proven know-how & technology R&D expense ( mm) % of revenues 1.6% 1.7% 2.2% 2.2% 2.0% dedicated R&D centres in France, Germany, Brazil and the US Over 500 researchers and technicians dedicated to R&D Industry benchmark for quality Number of new patents filed VAM connections setting the standard of quality and innovation for over 50 years Developed over 30 product lines to meet harshest conditions Close collaboration with customers Case study Developed innovative tubular solutions for E&P in hard-toaccess deposits 1 ~80% of the products sold today did not exist in 2009 Case study In Nov. 2015, Vallourec signed a 5-year contract with Total for OCTG Vallourec has provided an extensive range of premium offshore solutions 1 For example ultra deep water and pre-salt fields 5

6 3 OPTIMIZED INDUSTRIAL FOOTPRINT Rationalization of Brazilian activities through the merger of VSB & VBR Optimizing Brazilian operations A single integrated and optimized production set up Brazil - BRL/USD benefits - Lower cost export route Shut down of 2 blast furnaces and steel mill in Belo Horizonte Supply agreement with NSSMC Capex optimization and rationalization of assets G&A and tax synergies Leveraging the Jeceaba plants superior competitive position for export Optimized and highly competitive Brazilian operations Developing new routes from Tianda Highly competitive route for Chinese and International O&G markets China In 2016 Vallourec has taken full control of Tianda Oil Pipe A state of the art PQF mill Qualified by Tier1 customers In partnership since 2011 Developed and enlarged offering of highly competitive solutions VAM connections on Tianda s highly competitive tubes Streamlining European operations Fixing European over-capacity Hot rolling hub Closure of 2 out of the 4 large rolling mills (France) Sale of majority stake in steel mill and disposal of Vallourec Heat Exchanger Tubes to create an optimized European footprint Finishing hub Rolling activities concentrated in Germany, finishing activities in France Sustained emphasis on R&D Optimized industrial footprint with new highly competitive hubs 6

7 3 A RESHAPED INDUSTRIAL SET-UP WITH HIGHLY COMPETITIVE LOW-COST EXPORT ROUTES A unique position with high-end rolling and finishing capabilities in all regions Two highly competitive routes developed in Brazil and China for international O&G markets Global capabilities redeployed with a shift from Europe to Asia and the Americas Centre of technological excellence Rolling capacity: 2014 : 1,350 kt, i.e. 46% 2017 : 700 kt, i.e. 23% Oil and gas local market supply Steel mills Tube mills North America Rolling capacity: 2014 : 750 kt, i.e. 25% 2017 : 750 kt, i.e. 24% New highly competitive production hub Brazil Europe China New highly competitive production hub Rolling capacity: 2014 : 0 kt 2017 : 550 kt, i.e. 18% (incl. 200 kt for export) R&D Finishing unit Rolling capacity: 2014 : 800 kt, i.e. 27% Sales & Services office Plantation and mine 2017 : 1,100 kt, i.e. 35% (incl. 300 kt earmarked for NSSMC) 1 Excluding 300kt in Jeceaba as NSSMC s purchase agreement 2 Including 200kt for exports 7

8 4 STRONG FOCUS ON COST REDUCTION 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 % % 15% % 14% % CAPEX, in m % 11% H Q Q Q Q Q Q Q SG&A m % Sales 8% M 2017 PROVEN ABILITY TO IMPLEMENT EFFECTIVE COST CUTTING MEASURES (1) Savings are before inflation; 30% of this amount depending on market recovery 8

9 5 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 Existing Bonds 2022 Bond OCEANE LONG-TERM COMMITTED BANK FACILITIES PROFILE in m 2,110 2,110 2,018 1,124 Dec-17 Dec-18 Dec-19 Dec-20 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 9

10 6 START OF RECOVERY: STRONG US OCTG MARKET REBOUND IOCs PROJECTS STARTING TO BE SANCTIONED 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) J-14 M-14 S-14 J-15 M-15 S-15 J-16 M-16 S-16 J-17 M-17 S-17 Source: Baker Hughes and Thomson Reuters Nov Total Intl. U.S. WTI (right) J-14 M-14 S-14 J-15 M-15 S-15 J-16 M-16 S-16 J-17 M-17 S-17 Middle East (1) Western European (1) US (2) Source: (1) OCTG casing J/K 55 (btc connection) - MBR Oct (2) PipeLogix (average Seamless pipes) Oct

11 6 9M 2017: CONTINUOUS VOLUME IMPROVEMENT VOLUMES SHIPPED 2013 Q (Kt) ,159 Kt ,323 Kt ,411 Kt ,281 Kt ,601 Kt * Incl. Tianda and VSB full consolidation 9M 2017 vs. 9M 2016: +77%, incl. Tianda acquisition and VSB full consolidation +31% at constant scope, driven mostly by North America 11

12 6 9M 2017: IMPROVING FINANCIAL PERFORMANCE REVENUE (in millions of ) Improved financial performance in 9M 2017: 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 2,127 2,680 9M M 2017 Range for FY 2017 EBITDA target revised upwards to - 30m and - 10m 30 September 2017 net debt at 1.6bn. Cash consumption efficiently managed over Q3 2017, notably thanks to operational working capital management: Net debt up 358m over 9M 2017 Net debt up 32m over Q EBITDA (1) (in millions of ) 9M M Net debt (in millions of ) 1,613 1,645 1,287 (1) Earnings Before Interest, Taxes, Depreciation and Amortization 31 Dec June Sept

13 6 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 13

14 Q&A

15 APPENDIX EXANE CEO CONFERENCE - JUNE 2017

16 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 6 MARKET TRENDS US O&G MARKET US OCTG Consumption per Rig per Month US Rig Count Oct 0 Source: US Rig Count (1) Consumption (t) / Rig/Month (rhs) (2) (1) Baker Hughes (Nov. 2017) (2) Preston US OCTG consumption (Nov. 2017) Source: Baker Hughes (Nov. 2017) Onshore Offshore US Crude Oil Production (mbpd) Source: US Energy Information Administration (Oct. 2017) US OCTG market recovery confirmed: Active rig count more than doubled since May 2016 (930 as of December, 15 th ) Efficiency gains : OCTG consumption per rig increased by more than 50% since 2014 Level of OCTG inventory remains below 3 months of consumption 16

17 6 MARKET TRENDS EAMEA O&G MARKET International Active Rig Count Onshore/offshore Breakdown # Source: Baker Hughes (Oct. 2017) Worldwide FIDs, Excluding Unconventional Major project sanctions (50+ mmboe reserves), by year (1) Source: Wood Mackenzie s Pre-FID Upstream Project Tracker June 2017 (1) Average of >50 mmboe projects sanctioned per year onshore offshore YTD 15 significant conventional projects to reach FID YTD 2017, i.e. more than double compared to 2016 Rebound of conventional developments is mandatory to meet the emerging supply gap between worldwide demand and declining production: US tight oil is representing a minor part of the worldwide oil production, and does not have the potential to offset depletion in the rest of the world 17

18 6 MARKET TRENDS BRAZILIAN MARKET Petrobras Upstream Capex ($bn) Market Expectations Total E&P US$60.3bn 12% 11% Production Development + Exploration GDP / PIB (% a.a.) 3,0 42% 58% 2,0 77% Concession Transfer of Rights Production Sharing (Libra) 1,0 Exploration Production Development Operational Support Pre-Salt Post-Salt Source: Petrobras Strategic Plan ,0 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep for for 2018 Source: Banco Central do Brasil Oct Petrobras Start-up of New Production Units O&G Brazilian operations driven by Petrobras Capex, focusing on Presalt Negotiation of frame-agreement renewal ongoing Industrial demand driven by start of GDP recovery Mine revenue follows iron price evolution Source: Petrobras Strategic Plan

19 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 6 MARKET TRENDS OTHER NON O&G MARKETS Germany IFO Business Climate Index Index Tubes for Industry (Europe) and Powergen (Asia & Europe) are mainly manufactured in Europe Industry: European business indicators improving : Positive trends for volumes, Price environment remains competitive Source: IFO Institute Oct Powergen Global Installed Generation Capacity Powergen market outlook dependent on the number of powerplants projects Coal-fired power plants: While coal-fired powergen total capacity is forecasted to expand, its share will decline in the energy mix In the short term, number of expected projects in China and Korea revised downwards Nuclear: Will be mostly limited to China and to a lesser extent to India Source: IEA World Energy Outlook 2017 (New Policies Scenario) Nov

20 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 20

21 VALLOUREC PRODUCT OFFERING AND APPLICATIONS OIL & GAS Conventional power plant POWER GENERATION Nuclear power plant Welding Production riser Drill pipe Casing Tubing Flowline Umbilicals Copyright: Total Tool joint Connection 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 Key components for conventional and nuclear power plants Higher efficiency achieved for ultra super critical conventional coal fired power plants INDUSTRY Construction Tubular solutions in infrastructure and complex architectural projects Mechanical Engineering tubes and rings for cranes, axles, hydraulic cylinders, mining and farming machinery 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 Automotive suspension and transmission parts, structural and passive safety components, shock absorbers, bearings for all types of vehicles 4 21

22 WORLDWIDE LEADER IN PREMIUM TUBES Leading positions in various, niche markets across the globe First seamless pipe actor to put new capacity dedicated to shale in the US 1 Premium OCTG in the USA Recognised technology leader globally for complex well designs 1 Premium OCTG in Brazil Unmatched technical leadership and strong R&D 1 Premium tubes for power generation applications Differentiation through global premium services (network of over 200 VAM licensees, accessories shop ) 2 Drill pipes globally Key partner in construction of modern supercritical or ultra-supercritical thermal power plants 2 Ball-bearings 1 tubes in Europe European leader in seamless tubes for mechanicals premium applications 1 Ball-bearings manufactured from seamless tubes 22

23 Major production hubs STATE-OF-THE-ART INTEGRATED AND FULLY RENEWED INDUSTRIAL SET-UP Brazil NA China Expansion of production The exceptional spend on strategic projects initiated in 2008 is now behind Investment into a premium pipe mill (PQF) in Jeceaba ( ) Commissioned in 2011 Investment into a new pipe mill (FQM) in Youngstown (Ohio, US) ( ) Commissioned in 2013 capacity in Vallourec Changzhou for PowerGen applications ( ) Valinox Nucleaire Tubes Previous cycle of major investments occurred in late 1970 s OCTG / Line pipe for export Belo Horizonte tube mills dedicated for domestic markets OCTG for US shale market Centralized management combining MPM & FQM rolling mills Guangzhou ( ) Strategic minority share in Tianda Oil Pipe (2011); full control end 2016 OCTG focus on exports Historical CAPEX spend by region ( m) Asia South America North America Europe Modern, fully invested facilities with limited future CAPEX requirements Normative CAPEX assumed to be c. 350m 23

24 STRATEGIC INITIATIVES FULLY EXECUTED 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 24

25 STRONG AND EXPERIENCED MANAGEMENT TEAM Chairman of the Management Board Philippe Crouzet 30 years of experience form the manufacturing industry Chairman of the Management Board since 2009 As of April 3rd, 2017 Chief Financial Officer Olivier Mallet More than 23 years financial experience in various industries CFO since 2008 Advisor to the Management Board Jean-Pierre Michel 38 years in the Group Development & Innovation Didier Hormet 22 years in the Group Europe Africa Hubert Paris 18 years in the Group Middle East Asia Edouard Guinotte 18 years in the Group Technology & Industry Philippe Carlier 20 years in the Group North America Nicolas de Coignac 23 years in the Group South America Alexandre Lyra 24 years in the Group 25

26 Q3 / 9M 2017 RESULTS

27 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. 27

28 9M 2017 REVENUE BREAKDOWN AS % OF TOTAL GROUP REVENUE REVENUE BY MARKET REVENUE BY REGION * Tianda and 100% of VSB consolidation 28

29 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 29

30 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 30

31 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% 31

32 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 32

33 VALLOUREC SUMMARY FINANCIALS Revenue Is Recovering After Sharp Drop Due To Oil Price Crisis EBITDA Heading Back To Positive Territory Revenue (in m) EBITDA (in m) EBITDA margin 17.7% 14.8% 16.5% 15.0% (2.0%) (7.4%) (4.1%) Q EBITDA of 3m LTM Jun- 17 (77) (219) (133) LTM Jun-17 Working Capital Has Adapted To Reduced Level Of Activity Completion Of Investment Cycle Resulted In Optimized Capex Gross Working Capital (in m) Capex (in m) % of revenues 17.2% 15.1% 10.2% 6.8% 7.0% 5.9% 5.0% LTM Jun LTM Jun-17 Note: Consolidation of VSB at 100% as from October 1st, 2016 and of Tianda at 100% as from Dec. 31,

34 CAPITAL EXPENDITURE (in millions of ) 34

35 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