VALLOUREC: Vallourec reports first quarter 2013 results

Vallourec reports first quarter

2013 results

 

Boulogne-Billancourt, 2 May 2013 - Vallourec, world leader in premium tubular solutions, today announced its results for the first quarter 2013. The consolidated financial statements were presented today by Vallourec's Management Board to its Supervisory Board. 

 

Vallourec first quarter results in line with expectations:

• Sales stable versus Q1 2012 at € 1,213 million
• EBITDA up 26% versus Q1 2012 at € 191 million
• EBITDA margin up at 15.7% versus 12.7% in Q1 2012
• Net income, Group share of € 35 million, up 21% from Q1 2012

 

Key figures for the 1^st quarter of 2013

	Q1	Q1	Change	Q4
In € million	2013	2012	YoY	2012
Sales Volume (k tonnes)	487	504	-3%	535
Sales	1,213	1,199	+1%	1,465
EBITDA	191	152	+26%	235
As % of sales	15.7%	12.7%	+3.0pt	16.1%
Operating income	90	80	+13%	142
Net income, Group share	35	29	+21%	70

 

Commenting these results, Philippe Crouzet, Chairman of the Management Board, stated:

 

"Vallourec first quarter results are in line with our expectations. The EBITDA margin improvement versus Q1 2012 is essentially a reflection of the higher proportion of Oil & Gas sales in our total sales mix and the maintained efforts to reduce costs. Indeed, we continued to benefit from our strong market position and enhanced premium offering to achieve higher sales especially in the most complex oil and gas basins, such as Brazilian deep offshore or sour environment in the Middle East. In the meantime, Vallourec's other markets continued to face a difficult environment marked by economic uncertainty and low demand in Europe.

The ramping up of our new mill in Youngstown is advancing according to plan, and the new finishing lines are on schedule for commissioning in the second quarter. At VSB, our Brazilian joint venture with NSSMC^[1], the ongoing qualification process is advancing as scheduled. In Saudi Arabia, the recent qualification of our finishing mill has allowed us to deliver our first locally threaded premium connections.

The Group remains focused on improving its operating efficiency. Based on the current market conditions and the progressive ramp up of the new mills, the Group confirms its objective of sales to increase and the EBITDA margin to improve in 2013."

 

SALES VOLUME

In Q1 2013, sales volume of rolled tubes amounted to 487 thousand tonnes, slightly below Q1 2012 (-3%). Higher volumes in the Oil & Gas segment, reflecting especially higher sales in Brazil and in the Middle East, were offset by lower volumes in industrial markets, particularly in Europe. 

 

CONSOLIDATED SALES BY MARKET

	Q1	Q1	Change	Q4
In € million	2013	2012	YoY	2012
Oil & Gas	768	700	+10%	901
Power Generation	136	138	-1%	228
Petrochemicals	76	85	-11%	88
Total Energy	980	923	+6%	1,217
% of total sales	81%	77%		83%
Mechanical	105	125	-16%	118
Automotive	54	65	-17%	49
Construction & Other	74	86	-14%	81
Total non-Energy	233	276	-16%	248
% of total sales	19%	23%		17%
Total	1,213	1,199	+1%	1,465

 

Energy

Oil & Gas sales were up 10% in Q1 2013 versus the same period in the prior year to reach € 768 million, i.e. 64% of total sales (vs. 58% in Q1 2012).

In the USA, the lower rig count^[2] compared to prior year at 1,758 in average in Q1 2013 vs. 1,990 in Q1 2012, although partly offset by greater efficiency, resulted in a decline in the OCTG consumption. In this environment, Vallourec has been able to maintain flat volumes versus Q1 2012 thanks to its strong market positioning to serve the fast growing shale oil plays. However, Vallourec OCTG sales in the USA were affected by the price adjustments made during the first quarter.

The deliveries from the new plant in Youngstown, Ohio, started in December 2012 and will progressively increase throughout the year.

In the rest of the world, the international rig count^[3] at 1,274 rigs on average in Q1 2013 was up 7% versus Q1 2012. Vallourec sales increased in virtually all regions, particularly in the Middle East, the North Sea and Asia, in a stable price environment.

In the Middle East, where Vallourec enjoyed strong bookings throughout H2 2012, sales also benefited from a richer mix, with more premium tubes for sour services.

In Brazil the Oil & Gas market continued to benefit from a strong momentum. Vallourec sales were up when compared to Q1 2012, reflecting Petrobras' increased demand for offshore premium grade pipes and connections.

 

Power Generation sales amounted to € 136 million in Q1 2013, down 1% when compared to Q1 2012 and represented 11% of the total consolidated sales.

Sales for conventional power plants were virtually flat when compared to Q1 2012. They are mainly concentrated in Asia and in Europe and are still affected by a competitive environment and a low level of projects in Europe.

Sales for nuclear power plants were at the same level as in Q1 2012 and were mostly concentrated in France, China and South Korea.

 

Petrochemicals sales amounted to € 76 million in Q1 2013, down 11 % versus Q1 2012 and suffered from low project activity and reduced inventories from distributors.

The Group is positioned to supply a number of projects in the USA, the Middle East, Asia and China. Nevertheless, the market is very competitive and short lead times provide limited visibility.

             

Non-energy

Non-Energy sales amounted to € 233 million in Q1 2013, down 16 % when compared to Q1 2012 and represented 19% of the total consolidated sales in Q1 2013 (compared to 23% in Q1 2012).

Q1 2013 sales were impacted by the continued global economic weakness and specifically the decline in industrial production in Europe and in Brazil. In addition, prices were still under pressure.

In Brazil, Non-Energy sales were also impacted by the decline in the iron ore contract price during 2012 and in Q1 2013, before a rebound to take place in the second quarter of 2013.

 

 

RESULTS

Summary consolidated income statement

	Q1	Q1	Change	Q4
In € million	2013	2012	YoY	2012
Sales Volume (k tonnes)	487	504	-3.4%	535
Sales	1,213	1,199	+1.2%	1,465
Cost of sales[4]	- 886	-905	-2.1%	- 1,072
(as % of sales)	73.0%	75.4%	-2.4pt	73.2%
SG&A costs[4]	-132	-144	-8.3%	-146
(as % of sales)	-10.9%	-12.0%	-1.1pt	10.0%
EBITDA	191	152	+25.7%	235
As % of sales	15.7%	12.7%	+3.0pt	16.1%
Operating income	90	80	+12.5%	142
Net income, Group share	35	29	+20.7%	70

 

Consolidated sales in Q1 2013 amounted to € 1,213 million, virtually flat when compared to Q1 2013, reflecting lower volumes (-4%) and negative currency impact (-4%), offset mostly by a positive mix effect.

The cost of sales of € 886 million represented 73% of sales in Q1 2013, and improved compared to Q1 2012 (75.4% of sales). This improvement mainly resulted from a better mix with a higher proportion of Oil & Gas sales, a more favourable currency hedging for European exports, and continued cost reductions. 

The sales, general and administrative costs (SG&A) were reduced by 8.3% to reach € 132 million, representing 10.9% of sales versus 12.0% in Q1 2012.

The EBITDA for Q1 2013 was up 26% to € 191 million, representing 15.7% of sales vs. 12.7% in Q1 2012. The Group profitability was improved mainly thanks to a better sales mix and efficient cost control.

Operating income amounted to € 90 million in Q1 2013, up 13% over the same period last year. Better EBITDA was partly offset by a higher level of depreciation and amortization reflecting higher industrial assets. Exceptional items include a provision of € 20.6 million accrued for a fraud on international transfers suffered by a subsidiary of Vallourec. This has an impact of € 13.5 million on the net income. The Group has initiated litigation action seeking compensation for the damage suffered.

Net income, Group share amounted to € 35 million, 21% above prior year, the operating income improvement being partly offset by increased interest expenses with higher debt partly compensated by the lower average cost of debt. Average tax rate reached 35.5% due to non recognition of differed tax assets.

Earnings per share amounted to €0.28 compared to €0.24 in Q1 2012.

 

Summary of cash and balance sheet items

(in € million)	Q1'13	Q1'12	Q4'12
Gross cash flow from operations	+130	+53	+174
Change in gross WCR	-131	-132	+98
[+ decrease, - increase]
Operating cash flows	-1	-79	+272
Gross capital expenditure	-98	-140	-309
Other	-22	-4	+66
Change in net debt
[+decrease, -increase]	-121	-223	+29
Net debt (end of period)	1,735	1,416	1,614

 

Operations generated gross cash flow of € 130 million in Q1 2013 compared to € 53 million in Q1 2012. This improvement mainly resulted from a better mix in sales and EBITDA. Over the quarter, gross working capital requirements increased by € 131 million reflecting particularly the ramping up of the new mills.

Gross capital expenditure for the quarter amounted to € 98 million, down € 42 million year on year. Capex for 2013 is still expected to be around € 650 million.

During the quarter, net debt increased by € 121 million to reach € 1,735 million as of 31 March 2013, representing 32% of consolidated equity (€ 5,351 million). As of 31 March 2013, Vallourec had around € 3.2 billion of committed financings, which include undrawn confirmed credit lines of € 1.6 billion.  

 

 

OUTLOOK 

Looking forward, indicators for the global Oil & Gas markets remain well oriented, while the economic environment continues to be challenging for other markets, with limited visibility.

Based on these conditions and thanks to the progressive ramp up of the new mills, the Group continues to expect volumes and sales to grow and the EBITDA margin to improve in 2013.

 

ABOUT VALLOUREC

Vallourec is a world leader in premium tubular solutions primarily serving the energy markets, as well as other industrial applications.

With over 23,000 employees, integrated manufacturing facilities, advanced R&D, and presence in more than 20 countries, Vallourec offers its customers innovative global solutions to meet the growing energy challenges of the 21^st century.

Listed on NYSE Euronext in Paris (ISIN code: FR0000120354, Ticker VK) and eligible for the Deferred Settlement System, Vallourec is included in the following indices: MSCI World Index,
Euronext 100 and CAC 40.

In the United States, Vallourec has a sponsored Level 1 American Depository Receipt (ADR) program (ISIN code: US92023R2094, Ticker: VLOWY). The ratio of Vallourec ADR to ordinary shares is 5:1. 

 

www.vallourec.com

 

PRESENTATION OF Q1 2013 RESULTS

Thursday 2 May 2013

• Analyst conference call at 6:30 pm (CET) to be held in English.

To participate in the call, please dial:

0800 694 0257 (UK),

0805 632 056 (FR),

1 866 966 9439 (USA),

+44 1452 555 566 (other countries)

Conference code: 35244216

Slides in English will be available on the website at:  http://www.vallourec.fr/en/finance/investor-relations/

• A replay of the conference call is available until 8 May 2013

To listen to the replay, please dial:

0800 953 1533 (UK), 0805 111 337 (FR), 1 866 247 4222 (USA)

+44 1452 550 000 (other countries)

Access code: 35244216

 

CALENDAR 2013

• 30 May: Shareholders' General Assembly
• 30 July: Release of Q2 and Half-Year 2013 Results
• 26-27 September: Investor Day in Pittsburgh, USA
• 7 November: Release of Q3 2013 Results

 

FOR FURTHER INFORMATION, PLEASE CONTACT

 

Investor Relations                      Etienne BERTRAND                    Tel: +33 (0)1 49 09 35 58             E-mail: etienne.bertrand@vallourec.fr

Press Relations Caroline PHILIPS Tel: +33 (0)1 41 03 77 50 E-mail: caroline.philips@vallourec.fr

 

 

 

Documents accompanying this release:

• Sales volume (metric tonnes)
• Sales by geographic region
• Summary consolidated income statement
• Summary consolidated balance sheet
• Summary consolidated cash flow statement

 

 

Sales volume

 

Sales volume corresponds to the volume in metric tonnes of hot-rolled tubes produced and delivered by Vallourec's rolling mills.

 

In thousands of tonnes	2013	2012	Change
Q1	487	504	-3.4%
Q2		528
Q3		525
Q4		535
Total		2,092

 

Sales by geographic region

 

	Q1	As % of	Q1	As % of	Change
In € million	2013	sales	2012	sales	YoY
Europe	258	21%	301	25%	-14%
North America	310	26%	365	31%	-15%
South America	308	25%	278	23%	+11%
Asia & Middle East	247	20%	167	14%	+48%
Rest of World	90	8%	88	7%	+3%
Total	1,213	100%	1,199	100%	+1%

 

Summary consolidated income statement

VALLOUREC	Q1 2013	Q1 2012	Change	Q4 2012	Change
(in € million)			Q1'13 /		Q1'13 /
			Q1'12		Q4'12
Sales	1,213	1,199	+1.2%	1,465	-17.2%
Cost of sales[4]	- 886	-905	-2.1%	-1,072	-17.4%
Selling, general and administrative costs[4]	-132	-144	-8.3%	-146	-9.6%
Other income (expense), net	-4	2	na	-12	na
EBITDA	191	152	+25.7%	235	-18.7%
EBITDA as % of sales	15.7%	12.7%		16.1%
Depreciation of industrial assets	-64	-55	+16.4%	-71	-9.9%
Other (amortization, exceptional items, impairment & restructuring)	-37	-17	na	- 22	na
OPERATING INCOME	90	80	+12.5%	142	-36.6%
Financial income	-28	-24	+16.7%	-27	+3.7%
INCOME BEFORE TAX	62	56	+10.7%	115	-46.1%
Income tax	-22	-17		-34
Net income of equity affiliates	4	1		2
CONSOLIDATED NET INCOME	44	40	+10.0%	83	-47.0%
Minority interests	- 9	-11		-13
NET INCOME, GROUP SHARE	35	29	+20.7%	70	-50.0%
EARNING PER SHARE (in €)	0.28	0.24		0.57

Summary consolidated balance sheet

 

 

 

 

Summary consolidated cash flow statement

 

(in € million)	Q1'13	Q1'12	Q4'12
Gross cash flow from operations	+130	+53	+174
Change in gross WCR	-131	-132	+98
[+ decrease, - increase]
Operating cash flows	- 1	-79	+272
Gross capital expenditure	- 98	-140	-309
Financial Investments	-	-	-
Dividends paid	-	-	-2
Asset disposals & other elements	- 22	-4	+68
Change in net debt	-121	-223	+29
[+decrease, -increase]