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 |
Q42017 |
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.comFollow us on Twitter
@Vallourec
Presentation of Q1 2018 results
Analyst conference call / audio webcast at 6:00 pm (Paris time) to
be held in English. To listen to the audio webcast:
https://edge.media-server.com/m6/go/Vallourec18Q1 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 Audio webcast and slides will be available on the
website at: 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 201825 July 2018 |
Annual Shareholders' MeetingRelease of second quarter and first
half 2018 results |
For further information, please
contact:
Investor relations
Alexandra FichelsonGuilherme CamaraTel: +33 (0)1 49 09 39
76Investor.relations@vallourec.com |
Press relations
Héloïse Rothenbühler Tel: +33 (0)1 41 03 77 50 / +33 (0)6 45 45 19
67heloise.rothenbuhler@vallourec.com |
Individual shareholdersToll 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 |
Q12018 |
Q12017 |
Change |
Q42017 |
|
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
Q12018 |
Q12017 |
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.
Vallourec (EU:VK)
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De Mar 2024 à Avr 2024
Vallourec (EU:VK)
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