Vallourec reports
first quarter 2018 results
-
Revenue of €862 million, up 10.1% year-on-year
(+22.1% at constant exchange rates)
-
Q1 2018 EBITDA improved year-on-year at -€5
million
-
H2 2018 EBITDA targeted to be significantly
higher than H1, supported by higher prices in the US and deliveries
on international Oil & Gas markets
|
Boulogne-Billancourt (France), 17 May 2018 - Vallourec,
a world leader in premium tubular solutions, today announces its
results for the first quarter of 2018. The consolidated financial
information was presented by Vallourec's Management Board to its
Supervisory Board on 16 May 2018.
Key figures
Q1 |
Q1 |
Change |
In millions of euros |
Q4 |
2018 |
2017 |
YoY |
|
2017 |
515 |
475 |
8.4% |
Sales Volume (k
tons) |
655 |
862 |
783 |
10.1% |
Revenue |
1,070 |
(5) |
(21) |
+€16m |
EBITDA |
11 |
-0.6% |
-2.7% |
+2.1 pts |
As % of revenues |
1.0% |
(170) |
(126) |
-€44m |
Net income (loss), Group
share |
(164) |
(254) |
(220) |
-€34m |
Free cash-flow |
(26) |
31 Mar.2018 |
Change over the
period |
In millions
of euros |
31 Dec. 2017 |
1,783 |
+€241m |
Net debt |
1,542 |
Commenting on
these results, Philippe Crouzet, Chairman of the Management Board,
said:
"Vallourec's financial performance continues to
improve: our revenue and EBITDA increased in the first quarter of
2018 compared to the previous year notably thanks to the strong
momentum on the Oil & Gas market in the US. Compared to the
last quarter of 2017, in spite of negative seasonality impact, cash
flow from operating activities improved
significantly.
Supported by robust oil prices, tendering activity
is improving in International Oil & Gas markets. Since the
beginning of the year, we have achieved significant commercial
successes including the reinforcement of our long-standing
partnership with Petrobras in Brazil, and we participated in large
tenders which should benefit Vallourec deliveries from the end of
2018 on.
The final outcome of Section 232 measures in the
US is uncertain, but we are ready to adapt as necessary, and to
benefit from our local US production.
We are moving forward with our Transformation
Plan, which is generating significant cost reductions, and we have initiated further
adjustments in Europe.
Taking into account the gradual recovery in our main markets and the
progress in our Transformation Plan, we confirm our positive
outlook for the year with EBITDA in the second half of 2018
targeted to be significantly higher than in the first
half."
I - CONSOLIDATED
REVENUE BY MARKET
In millions of
euros |
Q1
2018 |
Q1
2017 |
Change |
Change YoY at constant exchange
rates |
Q4
2017 |
YoY |
Oil & Gas, Petrochemicals |
584 |
533 |
9.6% |
24.2% |
708 |
Power Generation |
98 |
84 |
16.7% |
20.2% |
125 |
Industry & Other |
180 |
166 |
8.4% |
16.9% |
237 |
Total |
862 |
783 |
10.1% |
22.1% |
1,070 |
Over the first
quarter of 2018, Vallourec recorded revenue of €862 million, up 10.1% compared with the first quarter of
2017. Revenue was up 22.1% at constant exchange rates with a
positive volume impact of 8.4% mainly driven by Oil & Gas
operations in the US, and a positive price/mix effect of 13.7%
resulting from higher prices in the US for Oil & Gas and
Petrochemicals, and in Europe for Industry.
Sequentially, Q1 2018 Group
revenue was down 19.4% compared with Q4 2017 (-17.3% at constant
exchange rates). Lower volumes were mostly due to a seasonality
effect. Price/mix was broadly stable with (i) improved prices in
the Oil & Gas and Industry & Other activities, and (ii)
lower prices in Power Generation.
Oil & Gas, Petrochemicals
(67.7% of consolidated revenue)
Oil & Gas
revenue reached €491 million in Q1 2018, up 1.2% year-on-year
(+15.3% at constant exchange rates).
-
In the USA, Oil & Gas
revenue increased year-on-year, despite a negative forex effect:
the number of active rig count rose soundly (+31%), supporting
higher demand for OCTG tubes, and prices were raised in the second
half of 2017. Vallourec initiated further price increases during Q1
2018, to be effective essentially as from H2 2018. Compared to Q4
2017 revenue was down essentially as a result of
seasonality.
-
In the EA-MEA regions, Oil
& Gas volumes and revenue were broadly stable year-on-year.
Negative forex translation impact was mainly offset by positive
price/mix. Overall, tendering activity increased in these regions
as anticipated.
-
In Brazil, Oil & Gas
revenue was down compared to Q1 2017, which benefited from higher
than average OCTG deliveries to Petrobras for exploratory wells in
the Libra field. Revenue was also significantly affected by the
weakening of the Brazilian Real. In April 2018, Vallourec
reinforced its unique long-standing relationship with Petrobras by
signing new long-term contracts for the supply of the most
comprehensive range of premium products and services.
Petrochemicals revenue was €93 million in Q1 2018, up
93.8% year-on-year (+114.6% at constant exchange rates),
essentially as a result of the recovery in the US.
Power Generation (11.4% of
consolidated revenue)
Power
Generation revenue amounted to €98 million in Q1 2018, up 16.7%
year-on-year (+20.2% at constant exchange rates). This increase was
due to slightly higher volumes and better price/mix for
Conventional power generation due to orders taken in H1 2017.
Industry & Other (20.9% of
consolidated revenue)
Industry &
Other revenue amounted to €180 million in Q1 2018, up 8.4%
year-on-year (+16.9% at constant exchange rates):
-
In Europe, Industry & Other revenue was up
thanks to higher prices in Mechanical Engineering and Automotive
applications.
-
In Brazil, Industry & Other revenue was
broadly stable with higher volumes in Mechanical Engineering and
Automotive driven by Brazilian economy recovery. Revenue from the
mine was down as a result of lower iron ore market prices.
II - Q1 2018
CONSOLIDATED RESULTS ANALYSIS
In Q1 2018,
EBITDA stood at -€5 million, up €16 million
year-on-year, with:
-
Consolidated revenue up 10.1%;
-
An industrial margin of €103 million, up €2
million compared with Q1 2017, reflecting (i) higher activity (ii)
savings resulting from the Transformation plan, (iii) partially
offset by the increase in raw material prices and unfavorable
currencies evolution. An increase of industrial margin was recorded
in the North American Oil & Gas market, while it decreased in
Brazil in comparison with Q1 2017, which had benefited from a more
favorable forex impact along with higher than average offshore
deliveries;
-
Sales, general and administrative costs
(SG&A) down 10.6% at €101 million, representing 11.7% of
revenue compared with 14.4% in Q1 2017.
Compared with Q4 2017, Q1 2018
EBITDA decreased €16 million. As a reminder, net reversals in
provisions were booked in Q4 2017 for €45 million, compared to €8
million in Q1 2018. Excluding these changes in provisions, Q1 2018
shows a significant improvement despite a negative seasonality
impact.
Operating result
was a loss of €130 million, compared to a loss of €111 million
in Q1 2017. Q1 2018 operating result includes €13 million
impairment charges as well as €33 million charges relating to asset
disposal, restructuring and other. These non-recurring elements
essentially result from restructuring provisions and impairments
related to further restructuring measures undertaken in Europe in
Q1 2018.
Financial result was negative at -€43 million,
stable compared to Q1 2017. In Q1 2018, Vallourec recorded higher
interest charges as a result of last year's OCEANE and bond
issuances. As a reminder, Q1 2017 financial result included a loss
of €8 million related to the change in fair value of Vallourec's
NSSMC shares.
Income tax
was nil compared to a gain of €19 million in
Q1 2017. Tax gains were reduced compared to Q1 2017 as a
consequence of the results recovery in North America.
The share
attributable to non-controlling interests amounted to -€3
million, compared to -€11 million in Q1 2017.
This resulted in
a net loss, Group share of -€170 million, compared to -€126
million in Q1 2017.
III - CASH FLOW
& FINANCIAL POSITION
Over Q1 2018,
free cash flow was -€254 million, with:
-
Cash flow from operating activities of -€83
million, broadly stable compared to Q1 2017, with the improvement
of EBITDA being offset by higher financial interests and taxes
paid. Compared to Q4 2017, cash flow from operating activities
improved by €41 million;
-
The working capital requirement increased by
€152 million, according to usual seasonality, and is targeted to
decrease from this level by the end of the year. Working capital in
days of sales was significantly reduced year-on-year;
-
Capital expenditure of -€19 million, compared to
-€34 million in Q1 2017.
As at 31 March
2018, Group net debt increased by €241 million compared to 31
December 2017 to reach €1,783 million.
Vallourec's cash position as at 31
March 2018 amounted to €0.8 billion. Medium and long-term undrawn
committed facilities amounted to €2.0 billion. At the same date,
short-term debt amounted to €0.8 billion, including €0.5 billion of
commercial paper.
Vallourec reinforced its liquidity
beginning of April 2018 by raising €400 million senior notes due
2023. The proceeds from the offering will be used, together with
cash on hand, to refinance Vallourec's outstanding bonds due August
2019 by redeeming them when they mature.
IV -
TRANSFORMATION PLAN
Vallourec continues to deploy its
Transformation Plan which is generating significant savings.
Further milestones have been
achieved since the beginning of 2018 with divestments as part of
the continuous rationalization of the Group's asset portfolio. In
April, Vallourec closed the sale of its Drilling Products business
to NOV. The Group also closed the divestiture of Vallourec
Fittings, a subsidiary producing seamless fittings in France.
The small tube finishing line in
Saint-Saulve dedicated to conventional power plants is expected to
be closed by the end of 2018[1].
V - MARKET TRENDS
& OUTLOOK
Oil & Gas market fundamentals
are improving. According to the latest IEA report, worldwide oil
stocks have decreased significantly while countries which had
committed to curb their production are maintaining a high
discipline. These trends are supporting the increase of global
tendering activity of oil companies.
In the US, Vallourec anticipates
the average rig count to remain robust. This should allow Vallourec
to pass further OCTG price increase in H2 2018, in addition to the
full year impact of volume and price increases achieved in H2 2017.
The effects of Section 232 measures under finalization, aiming at
favoring domestic steel manufacturers, are still to be assessed.
Vallourec is ready to both benefit and adapt, if necessary, to
their final outcome.
In Brazil, drilling activity is
expected to remain stable. The new long-term contracts signed with
Petrobras will enter into force in H2 2018.
In the rest of the world, in the
context of an increasing number of tenders for Oil & Gas
projects, Vallourec anticipates higher bookings, with positive
impacts on deliveries to materialize starting late H2 2018.
Improved macroeconomics in Europe
and Brazil should benefit our Industry & Other operations.
Power Generation revenue is expected to be impacted by a
diminishing number of conventional power plant projects,
particularly in Asia.
Despite unfavorable currencies and
raw material prices, Vallourec confirms its positive outlook for
the year based upon the progressive recovery of its main markets
and the significant savings generated by its Transformation Plan.
The Group targets 2018 EBITDA to improve versus 2017, with H2 2018
significantly higher than H1.
About
Vallourec
Vallourec is a world leader in
premium tubular solutions for the energy markets and for demanding
industrial applications such as oil & gas wells in harsh
environments, new generation power plants, challenging
architectural projects, and high-performance mechanical equipment.
Vallourec's pioneering spirit and cutting edge R&D open new
technological frontiers. With close to 19,500 dedicated and
passionate employees in more than 20 countries, Vallourec works
hand-in-hand with its customers to offer more than just tubes:
Vallourec delivers innovative, safe, competitive and smart tubular
solutions, to make every project possible.
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: SBF 120 and Next 150.
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
Follow us on Twitter @Vallourec
Presentation of Q1 2018
results
To participate in the call, please dial:
+44 (0)330 336 9411 (UK),
+33 (0)1 76 77 22 57 (France),
+1 323-794-2551 (USA),
+44 (0)330 336 9411 (Other countries)
Conference code: 2064405
http://www.vallourec.com/EN/GROUP/FINANCE |
Information and Forward-Looking
Statements
This press release 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 the actual results and developments may differ
significantly from those expressed, induced or forecasted in the
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 2018.
Calendar
|
|
25 May 2018
25 July 2018 |
Annual Shareholders' Meeting
Release of second quarter and first half 2018 results |
For further
information, please contact:
Investor relations
Alexandra Fichelson
Guilherme Camara
Tel: +33 (0)1 49 09 39 76
Investor.relations@vallourec.com |
Press relations
Héloïse Rothenbühler
Tel: +33 (0)1 41 03 77 50 / +33 (0)6 45 45 19 67
heloise.rothenbuhler@vallourec.com |
Individual shareholders
Toll Free Number (from France): 0 800 505 110
actionnaires@vallourec.com
|
|
Appendices
Documents accompanying this
release:
-
Sales volume
-
Forex
-
Revenue by geographic region
-
Revenue by market
-
Summary consolidated income statement
-
Summary consolidated balance sheet
-
Free cash flow
-
Cash flow statement
-
Definitions of non-GAAP financial data
Sales volume
In thousands of tons |
2018 |
2017 |
Change |
|
YoY |
|
|
|
|
Q1 |
515 |
475 |
8.4% |
Q2 |
|
538 |
|
Q3 |
|
588 |
|
Q4 |
|
655 |
|
|
|
|
|
Total |
515 |
2,256 |
|
Forex
Average exchange rate |
Q1
2018 |
Q1
2017 |
EUR /
USD |
1.23 |
1.06 |
EUR /
BRL |
3.99 |
3.35 |
USD /
BRL |
3.25 |
3.15 |
Revenue by geographic
region
In millions of
euros |
Q1 |
As % of |
Q1 |
As % of |
Change |
|
2018 |
revenues |
2017 |
revenues |
YoY |
|
|
|
|
|
|
Europe |
137 |
15.9% |
115 |
14.7% |
19.1% |
North America |
279 |
32.4% |
187 |
23.9% |
49.2% |
South America |
140 |
16.2% |
163 |
20.8% |
-14.1% |
Asia & Middle East |
264 |
30.6% |
276 |
35.2% |
-4.3% |
Rest of World |
42 |
4.9% |
42 |
5.4% |
- |
|
|
|
|
|
|
Total |
862 |
100.0% |
783 |
100.0% |
10.1% |
Revenue by market
In millions of
euros |
Q1 |
As % of |
Q1 |
As % of |
Change |
Q4 |
|
2018 |
revenues |
2017 |
revenues |
YoY |
2017 |
|
|
|
|
|
|
|
Oil & Gas |
491 |
57.0% |
485 |
62.0% |
1.2% |
614 |
Petrochemicals |
93 |
10.7% |
48 |
6.1% |
93.8% |
94 |
Oil & Gas, Petrochemicals |
584 |
67.7% |
533 |
68.1% |
9.6% |
708 |
|
|
|
|
|
|
|
Power Generation |
98 |
11.4% |
84 |
10.7% |
16.7% |
125 |
|
|
|
|
|
|
|
Mechanicals |
93 |
10.8% |
72 |
9.2% |
29.2% |
123 |
Automotive |
38 |
4.4% |
33 |
4.2% |
15.2% |
39 |
Construction & Other |
49 |
5.7% |
61 |
7.8% |
-19.7% |
75 |
Industry & Other |
180 |
20.9% |
166 |
21.2% |
8.4% |
237 |
|
|
|
|
|
|
|
Total |
862 |
100.0% |
783 |
100.0% |
10.1% |
1,070 |
Summary consolidated income
statement
Q1 |
Q1 |
Change |
In millions of euros |
Q4 |
2018 |
2017 |
YoY |
|
2017 |
862 |
783 |
10.1% |
REVENUE |
1,070 |
(759) |
(682) |
11.3% |
Cost of
sales(1) |
(944) |
103 |
101 |
2.0% |
Industrial
margin |
126 |
11.9% |
12.9% |
-1.0 pt |
(as % of revenue) |
11.8% |
(101) |
(113) |
-10.6% |
SG&A costs(1) |
(117) |
(7) |
(9) |
na |
Other
income (expense), net |
2 |
(5) |
(21) |
+€16m |
EBITDA |
11 |
-0.6% |
-2.7% |
+2.1 pts |
EBITDA as % of revenue |
1.0% |
(70) |
(79) |
-11.4% |
Depreciation of industrial assets |
(76) |
(9) |
(11) |
na |
Amortization and other depreciation |
(11) |
(13) |
- |
na |
Impairment of assets |
(64) |
(33) |
- |
na |
Asset
disposals, restructuring and other |
(66) |
(130) |
(111) |
-€19m |
OPERATING INCOME (LOSS) |
(206) |
(43) |
(43) |
na |
Financial income (loss) |
(34) |
(173) |
(154) |
-€19m |
PRE-TAX INCOME (LOSS) |
(240) |
- |
19 |
na |
Income
tax |
76 |
- |
(2) |
na |
Share
in net income (loss) of associates |
- |
(173) |
(137) |
-€36m |
NET INCOME (LOSS) FOR THE CONSOLIDATED ENTITY |
(164) |
(3) |
(11) |
na |
Non-controlling interests |
- |
(170) |
(126) |
-€44m |
NET INCOME (LOSS), GROUP SHARE |
(164) |
(0.4) |
(0.3) |
-€0.1 |
EARNINGS PER SHARE (in €) |
(0.4) |
-
Before depreciation and
amortization
na: not applicable
Summary consolidated balance
sheet
In millions of
euros |
Assets |
31-Mar |
31-Dec |
Liabilities |
31-Mar |
31-Dec |
2018 |
2017 |
2018 |
2017 |
|
|
|
|
|
|
|
|
|
Equity, Group share |
2,193 |
2,426 |
Net intangible assets |
82 |
89 |
Non-controlling interests |
443 |
459 |
Goodwill |
339 |
348 |
Total equity |
2,636 |
2,885 |
Net property, plant and equipment |
2,840 |
2,977 |
Shareholder loan |
71 |
72 |
Biological assets |
71 |
71 |
Bank loans and other borrowings (A) |
1,813 |
1,817 |
Associates |
100 |
102 |
Employee benefits |
198 |
209 |
Other non-current assets |
134 |
137 |
Deferred tax liabilities |
23 |
18 |
Deferred tax assets |
241 |
242 |
Provisions and other long-term liabilities |
71 |
61 |
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 |
165 |
149 |
Trade and
other receivables |
575 |
568 |
Overdrafts and other short-term borrowings (B) |
809 |
746 |
Derivatives - assets |
27 |
32 |
Trade payables |
549 |
582 |
Other current assets |
239 |
231 |
Derivatives - liabilities |
10 |
13 |
Cash and cash equivalents (C) |
839 |
1,021 |
Tax and other current liabilities |
319 |
321 |
Total current assets |
2,801 |
2,856 |
Total current liabilities |
1,852 |
1,811 |
Assets held for sale |
77 |
64 |
Liabilities disposal for sale |
21 |
13 |
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) |
Free cash flow
In millions of euros |
Q1
2018 |
Q1
2017 |
Change |
Q4
2017 |
|
Cash flow
from operating activities (FFO) (A) |
(83) |
(82) |
-€1m |
(124) |
Change in
operating WCR (B)
[+ decrease, (increase)] |
(152) |
(104) |
-€48m |
164 |
Gross
capital expenditure (C) |
(19) |
(34) |
€15m |
(66) |
Free cash flow
(A)+(B)+(C) |
(254) |
(220) |
-€34m |
(26) |
Cash flow statement
Q1
2018 |
Q1
2017 |
In millions of euros |
Q4
2017 |
|
(83) |
(82) |
Cash flow from operating activities |
(124) |
(152) |
(104) |
Change in
operating WCR
+ decrease, (increase) |
164 |
(235) |
(186) |
Net cash flow from operating activities |
40 |
(19) |
(34) |
Gross capital expenditure |
(66) |
- |
- |
Financial investments |
- |
- |
- |
Increase and decrease in equity |
27 |
- |
- |
Impact of acquisition |
- |
- |
- |
Dividends paid |
- |
13 |
(26) |
Asset
disposals & other items |
102 |
(241) |
(246) |
Change in net debt
+ decrease,
(increase) |
103 |
1,783 |
1,533 |
Net debt
(end of period) |
1,542 |
Definitions of non-GAAP financial
data
Gross capital
expenditure: Gross capital expenditure is defined as the sum of
cash outflows for acquisitions of property, plant and equipment and
intangible assets and cash outflows for acquisitions of biological
assets.
Free
cash-flow: Free cash-flow (FCF) is defined as cash-flow from
operating activities minus gross capital expenditure and plus/minus
change in operating working capital requirement.
Industrial
margin: The industrial margin is defined as the difference
between revenue and cost of sales (i.e. after allocation of
industrial variable costs and industrial fixed costs), before
depreciation.
Consolidated net
debt: Consolidated net debt is defined as Bank loans and other
borrowings plus Overdrafts and other short-term borrowings minus
Cash and cash equivalents.
Banking
Covenant: As defined in the bank loan agreements, the "banking
covenant" ratio is the ratio of the Group's consolidated net debt
to the Group's equity, restated for gains and losses on derivatives
and for remeasurements (foreign currency gains and losses of
consolidated subsidiaries).
Data at constant
exchange rate: The data presented « at constant exchange
rate » is calculated by eliminating the translation effect
into euros for the revenue of the Group's entities whose functional
currency is not the euro. The translation effect is eliminated by
applying Year N-1 exchange rates to Year N revenue of the
contemplated entities.
[1] The implementation of the
project is subject to prior consultation with relevant workers
council.
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information contained therein.
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