| Press Release | |
| May 2014 www.vallourec.com | |
Vallourec's First Quarter 2014 Results
Boulogne-Billancourt (France), 7 May 2014 - Vallourec, world leader in premium tubular solutions, today announces its results for the first quarter of 2014. The consolidated financial statements were presented by Vallourec's Management Board to its Supervisory Board.
FIRST QUARTER 2014 RESULTS:
- Sales of € 1,271 million, up 4.8% year-on-year (up 11.7% at constant exchange rates)
- EBITDA of € 196 million, up 2.6% year-on-year, with a 15.4% EBITDA margin
- Net income, Group share of € 56 million, up 60.0% year-on-year
- Net debt stable at € 1,628 million as of March 31, 2014
KEY FIGURES
| Q1 | Q1 | Change | |
| In € million | 2014 | 2013 | YoY |
| Sales | 1,271 | 1,213 | +4.8% |
| EBITDA | 196 | 191 | +2.6% |
| As % of sales | 15.4% | 15.7% | -0.3pt |
| Operating profit | 109 | 90 | +21.1% |
| Net income, Group share | 56 | 35 | +60.0% |
| Free Cash Flow1 | 36 | -99 | +€135m |
- Free Cash Flow (FCF) is a non-GAAP measure and is defined as cash flow from operating activities minus capital expenditures and plus/minus change in operating working capital requirement
Commenting on these results, Philippe Crouzet, Chairman of the Management Board, said:
"We are pleased to report that our first quarter 2014 results are in line with our expectations, with an improved overall financial performance. Indeed, the first quarter sales are up 4.8% (up 11.7% at constant exchange rates), EBITDA is up 2.6% and the net income Group share increased by 60.0%. These figures reflect the growth in our Oil & Gas sales, while Vallourec's other markets did not benefit from noticeable changes.
In light of the continuing strength of the Euro and a less favourable mix expected in the EAMEA region, we have reinforced our cost savings measures. Assuming no significant changes in markets and currencies, Vallourec continues to target stable to moderate increase in sales and EBITDA, and a positive Free Cash Flow generation in 2014."
I - CONSOLIDATED SALES BY MARKET
For the first quarter of 2014, Vallourec recorded sales of € 1,271 million, up 4.8% compared with the first quarter of 2013 (up 11.7% at constant exchange rates). Higher volumes (+13.3%) were partly offset by an overall negative price and product mix effect (-1.6%) and a negative currency translation effect (-6.9%) due to the weakened Brazilian real and US dollar against the Euro.
| Q1 | Q1 | Change | |
| In € million | 2014 | 2013 | YoY |
| Oil & Gas | 822 | 768 | +7.0% |
| Petrochemicals | 66 | 75 | -12.0% |
| Oil & Gas, Petrochemicals | 888 | 843 | +5.3% |
| % of total sales | 69.9% | 69.5% | |
| Power Generation | 135 | 136 | -0.7% |
| % of total sales | 10.6% | 11.2% | |
| Industry & Other | 248 | 234 | +6.0% |
| % of total sales | 19.5% | 19.3% | |
| Total | 1,271 | 1,213 | +4.8% |
Oil & Gas, Petrochemicals
For the first quarter of 2014, Oil & Gas sales were up 7.0% (up 14.6% at constant exchange rates) compared with the first quarter of 2013, to € 822 million. This increase was primarily driven by a favourable mix in the Middle East, alongside higher volumes in the USA, and despite a lower mix in Brazil. Overall, prices remained broadly stable year-on-year. Oil & Gas sales represented 64.7% of the Group's total consolidated sales.
- In the USA, higher volumes are reflecting the commercial success of Vallourec's enlarged offer. As forecasted, the product mix showed an increase of sales of semi-premium and API products. During the first quarter of 2014, the market was supported by a 1.2% year-on-year increase in the average active rig count associated with an increased efficiency.
- In the EAMEA[1] region, sales in the first quarter of 2014 significantly increased, benefiting from a particularly strong customer mix, essentially in the Middle East. While the tendering activity in that area remains substantial, the level of bookings in Saudia Arabia has decreased.
As an illustration of Vallourec's ability to provide with the most advanced premium tubular solutions, Total has awarded the Group a significant $ 100 million contract for ML-South Offshore Project in Brunei with deliveries expected to start in the second half of 2015.
- In Brazil, as expected, sales decreased in the first quarter of 2014 as they were impacted by the temporary decline in tonnages of OCTG casing tubes delivered to the pre-salt basins and by the negative Brazilian real translation effect. Deliveries of casing tubes to Petrobras will increase as from the second quarter of 2014, earlier than initially anticipated.
For the first quarter of 2014, Petrochemicals sales were € 66 million, down 12.0% year-on-year (down 8.0% at constant exchange rates) mainly affected by a very competitive environment. They represented 5.2% of the Group's total consolidated sales.
Power Generation
For the first quarter of 2014, Power Generation sales were € 135 million, stable year-on-year (flat at constant exchange rates), representing 10.6% of the Group's total consolidated sales.
Conventional power generation market remained competitive with a lack of new projects.
Industry & Other
For the first quarter of 2014, Industry & Other sales were € 248 million, up 6.0% year-on-year (up 15.4% at constant exchange rates), and represented 19.5% of the Group's total consolidated sales.
- In Europe, sales were broadly stable, slightly higher volumes being offset by lower prices. The market environment remains very competitive.
- In Brazil, the first quarter of 2014 sales improved year-on-year mainly driven by higher iron ore sales. Over the full year, iron ore prices are expected to be lower than in 2013.
II - FINANCIAL RESULTS
Summary consolidated income statement
| Q1 | Q1 | Change | |
| In € million | 2014 | 2013 | YoY |
| Sales Volume (k tonnes) | 551 | 487 | +13.3% |
| Sales | 1,271 | 1,213 | +4.8% |
| Industrial margin | 330 | 327 | +0.9% |
| (as % of sales) | 26.0% | 27.0% | -1pt |
| SG&A costs1 | -130 | -132 | -1.5% |
| (as % of sales) | 10.2% | 10.9% | -0.7pt |
| EBITDA | 196 | 191 | +2.6% |
| As % of sales | 15.4% | 15.7% | -0.3pt |
| Operating profit | 109 | 90 | +21.1% |
| Net income, Group share | 56 | 35 | +60.0% |
- Before depreciation and amortization
For the first quarter of 2014, EBITDA was € 196 million, up 2.6% year-on-year. EBITDA margin decreased by 30 bp compared with the first quarter of 2013 to 15.4% of sales.
The robust performance in Oil & Gas operations especially in EAMEA was partly offset by a lower contribution from Brazilian Oil & Gas operations while in the USA, volumes increase was offset by the less favourable product mix and higher costs of raw materials. As a consequence, the industrial margin was flat in absolute value and down by 1 point as a percentage of sales, representing 26.0% of sales.
Sales, general and administrative costs (SG&A) decreased by 1.5% to € 130 million or 10.2% of sales compared with 10.9% in the first quarter of 2013.
Operating profit increased by 21.1% year-on-year to reach € 109 million. This performance was achieved despite a slight increase of depreciation of industrial assets. As a reminder, the first quarter of 2013 included a provision of € 20.6 million accrued for a fraud on international transfers.
For the first quarter of 2014, financial result was negative at -€ 20 million and improved compared with the previous year.
Net income, Group share was € 56 million, up 60.0% versus last year. The effective tax rate was 31.5% in the first quarter of 2014, compared to 35.5% in the first quarter of 2013.
III - CASH FLOW & FINANCIAL POSITION
| Q1 | Q1 | Change | |
| In € million | 2014 | 2013 | YoY |
| Cash flow from operating activities (FFO) (A) | +160 | +130 | +30 |
| Change in operating WCR (B) | -57 | -131 | +74 |
| [+ decrease, - increase] | |||
| Gross capital expenditures (C) | -67 | -98 | +31 |
| Free Cash Flow1 (A)+(B)+(C) | +36 | -99 | +135 |
- Free Cash Flow (FCF) is a non-GAAP measure and is defined as cash flow from operating activities minus capital expenditures and plus/minus change in operating working capital requirement
For the first quarter of 2014, Vallourec generated a positive free cash flow of € 36 million versus -€ 99 million in the first quarter of 2013. This evolution resulted from the following items:
- Cash flow from operating activities was up € 30 million in the first quarter of 2014 at € 160 million, largely due to the decrease of income taxes paid.
- Operating working capital requirement increased by € 57 million in the first quarter of 2014. Its level as of March 31, 2014 was reduced by 4 points of the annualized first quarter sales compared to the end of March 2013.
- Gross capital expenditures stood at € 67 million in the first quarter 2014, down 31.6% year-on-year, reflecting the strict control of capital expenditures. Looking forward, Vallourec continues to target a maximum capital expenditures level of € 500 million in 2014 and € 450 million on average from 2015 onwards.
As of March 31, 2014, net debt reached € 1,628 million, stable versus year-end 2013, with a gearing ratio of 32.0%.
As of March 31, 2014, Vallourec had approximately € 3 billion of committed financings, which included undrawn confirmed credit lines of € 1.7 billion.
As previously announced, Vallourec signed in February 2014 a multi-currency revolving credit facility for
€ 1.1 billion, maturing in February 2019, plus two one-year extension options, enabling the Group to increase its financial flexibility and to extend the maturity of its financial resources.
IV - MARKET TRENDS & OUTLOOK 2014
In Oil & Gas, Vallourec targets a further increase in sales.
In EAMEA, the sales shall continue to benefit from a dynamic Middle East market, which will be supplied by the Group's new industrial set-up, combining European mills, VSB and its local finishing units. Nonetheless, based on recent bookings, mix and deliveries in the later part of the year should be less favourable than in 2013. The Middle East market remains the most dynamic area in the EAMEA region and continues to support the medium and long term growth expectations.
In the USA, the Group continues to target higher sales, supported by the recent market developments, associated with an increased share of semi-premium and API products in its portfolio.
In Brazil, deliveries of casing tubes to Petrobras for the pre-salt basins will increase as from the second quarter of 2014 when compared to a low Q1 2014, earlier than initially anticipated. Nevertheless, this does not change full year 2014 expectations for Brazilian Oil & Gas operations of a lower contribution than in 2013.
No change in trends is foreseen in the conventional power generation activity, while sales for nuclear power plants should benefit from the rescheduling of some projects from 2013 to 2014. In Industry & Other, the visibility remains limited due to the still fragile economic recovery.
The persisting strength of the Euro will continue to impact negatively the profitability of the deliveries from Europe.
Vallourec is committed to financial discipline and return to shareholders. It will continue to adapt its European cost base, offset inflation on cost through its Capten+ savings program, reduce capital expenditures and tightly manage working capital requirement.
In light of the continuing strength of the Euro and a less favourable mix expected in the EAMEA region, Vallourec has reinforced its cost savings measures. Assuming no significant changes in markets and currencies, Vallourec continues to target stable to moderate increase in sales and EBITDA, and a positive Free Cash Flow generation in 2014.
About Vallourec
Vallourec is a world leader in premium tubular solutions primarily serving the energy markets, as well as other industrial applications.
With over 24,000 employees, integrated manufacturing facilities, advanced R&D and a presence in more than 20 countries, Vallourec offers its customers innovative global solutions to meet the energy challenges of the 21st century.
Listed on Euronext in Paris (ISIN code: FR0000120354, Ticker VK) and eligible for the Deferred Settlement System (SRD), Vallourec is included in the following indices: MSCI World Index, Euronext 100, SBF 120 and CAC 40.
In the United States, Vallourec has established a sponsored Level 1 American Depositary Receipt (ADR) program (ISIN code: US92023R2094, Ticker: VLOWY). Parity between ADR and a Vallourec ordinary share has been set at 5:1.
www.vallourec.com
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Presentation of Q1 2014 results
| Wednesday 7 May 2014 |
0800 279 4992 (UK), 0805 631 580 (France), 1 877 280 2296 (USA), +44 (0)20 3427 0503 (Other countries) Conference code: 9937130
0800 358 7735 (UK), 0800 989 597 (France), 1 866 932 5017 (USA), +44 (0)20 3427 0598 (Other countries) Access code: 9937130 |
| For further information, please contact | ||
| Investor relations Etienne Bertrand Tel: +33 (0)1 49 09 35 58 etienne.bertrand@vallourec.com | Press relations Caroline Philips Tel: +33 (0)1 41 03 77 50 caroline.philips@vallourec.com | |
Calendar
| 05/28/2014 | Shareholders' General Assembly |
| 07/30/2014 | Release of second quarter and first half 2014 results |
| 11/06/2014 | Release of third quarter and first nine months 2014 results |
Appendices
Documents accompanying this release:
- Sales volume (k tonnes)
- Sales by geographic region
- Sales by market
- Forex
- Cash flow statement
- Summary consolidated income statement
- Summary consolidated balance sheet
Sales volume
| 2014 | 2013 | Change | |
| In thousands of tonnes | YoY | ||
| Q1 | 551 | 487 | +13.3% |
| Q2 | na | 543 | na |
| Q3 | na | 545 | na |
| Q4 | na | 584 | na |
| Total | 551 | 2,159 | na |
na: not applicable
Sales by geographic region
| Q1 | As % of | Q1 | As % of | Change | |
| In € million | 2014 | sales | 2013 | sales | YoY |
| Europe | 264 | 20.8% | 258 | 21.3% | +2.3% |
| North America | 370 | 29.1% | 310 | 25.6% | +19.4% |
| South America | 256 | 20.1% | 308 | 25.4% | -16.9% |
| Asia & Middle East | 305 | 24.0% | 247 | 20.4% | +23.5% |
| Rest of World | 76 | 6.0% | 90 | 7.3% | -15.6% |
| Total | 1,271 | 100.0% | 1,213 | 100.0% | +4.8% |
Sales by market
| Q1 | As % of | Q1 | As % of | Change | |
| In € million | 2014 | sales | 2013 | sales | YoY |
| Oil & Gas | 822 | 64.7% | 768 | 63.3% | +7.0% |
| Petrochemicals | 66 | 5.2% | 75 | 6.2% | -12.0% |
| Power Generation | 135 | 10.6% | 136 | 11.2% | -0.7% |
| Mechanicals | 105 | 8.3% | 104 | 8.6% | +1.0% |
| Automotive | 53 | 4.2% | 54 | 4.5% | -1.9% |
| Construction & Other | 90 | 7.0% | 76 | 6.2% | +18.4% |
| Total | 1,271 | 100.0% | 1,213 | 100.0% | +4.8% |
Forex
| Average exchange rate | Q1 2014 | Q1 2013 |
| EUR / USD | 1.37 | 1.32 |
| EUR / BRL | 3.24 | 2.64 |
| USD / BRL | 2.37 | 2.00 |
Cash flow statement
| Q1 | Q1 | Q4 | |
| In € million | 2014 | 2013 | 2013 |
| Cash flow from operating activities | +160 | +130 | +205 |
| Change in operating WCR | -57 | -131 | +130 |
| [+ decrease, - increase] | |||
| Net cash flows from operating activities | +103 | -1 | +335 |
| Gross capital expenditures | -67 | -98 | -250 |
| Financial Investments | - | - | - |
| Dividends paid | -23 | - | -4 |
| Asset disposals & other elements | -10 | -22 | +57 |
| Change in net debt | +3 | -121 | +138 |
| [+decrease, -increase] | |||
| Net debt (end of period) | 1,628 | 1,735 | 1,631 |
Summary consolidated income statement
| VALLOUREC | Q1 | Q1 | Change |
| In € million | 2014 | 2013 | YoY |
| SALES | 1,271 | 1,213 | +4.8% |
| Cost of sales1 | -941 | -886 | +6.2% |
| Industrial margin | 330 | 327 | +0.9% |
| (as % of sales) | 26.0% | 27.0% | -1pt |
| SG&A costs1 | -130 | -132 | -1.5% |
| Other income (expense), net | -4 | -4 | na |
| EBITDA | 196 | 191 | +2.6% |
| EBITDA as % of sales | 15.4% | 15.7% | -0.3pt |
| Depreciation of industrial assets | -71 | -64 | +10.9% |
| Other (amortization, exceptional items, impairment & restructuring) | -16 | -37 | na |
| OPERATING PROFIT | 109 | 90 | +21.1% |
| Financial income (loss) | -20 | -28 | -28.6% |
| PROFIT BEFORE TAX | 89 | 62 | +43.5% |
| Income tax | -28 | -22 | +27.3% |
| Net profit of equity affiliates | - | 4 | na |
| NET INCOME FOR THE CONSOLIDATED ENTITY | 61 | 44 | +38.6% |
| Non-controlling interests | -5 | -9 | na |
| NET INCOME, GROUP SHARE | 56 | 35 | +60.0% |
| EARNINGS PER SHARE (in €) | 0.4 | 0.3 | na |
- Before depreciation and amortization
na: not applicable
Summary consolidated balance sheet
| VALLOUREC | |||||
| In € million | |||||
| Assets | 31-Mar | 31-Dec | Liabilities | 31-Mar | 31-Dec |
| 2014 | 2013 | 2014 | 2013 | ||
| Equity, Group share | 4,698 | 4,601 | |||
| Intangible assets, net | 197 | 206 | Non-controlling interests | 390 | 385 |
| Goodwill | 495 | 495 | Total equity | 5,088 | 4,986 |
| Net property, plant and equipment | 4,167 | 4,151 | |||
| Biological assets | 192 | 178 | Bank loans and other borrowings | 1,386 | 1,379 |
| Investments in equity affiliates | 172 | 173 | Employee benefits | 199 | 182 |
| Other non-current assets | 429 | 437 | Deferred tax liabilities | 217 | 209 |
| Deferred tax assets | 192 | 187 | Other long-term liabilities | 238 | 225 |
| Total non-current assets | 5,844 | 5,827 | Total non-current liabilities | 2,040 | 1,995 |
| Inventories and work-in-progress | 1,530 | 1,423 | Provisions | 151 | 138 |
| Trade and other receivables | 989 | 1,099 | Overdrafts and other short-term borrowings | 1,161 | 815 |
| Derivatives - assets | 77 | 92 | Trade payables | 774 | 833 |
| Other current assets | 322 | 297 | Derivatives - liabilities | 13 | 24 |
| Cash and cash equivalents | 919 | 563 | Other current liabilities | 454 | 510 |
| Total current assets | 3,837 | 3,474 | Total current liabilities | 2,553 | 2,320 |
| TOTAL ASSETS | 9,681 | 9,301 | TOTAL LIABILITIES | 9,681 | 9,301 |
| Net debt | 1,628 | 1,631 | Net income, Group share | 56 | 262 |
