Vallourec SA · EURONEXT:VK
Vallourec SA — FY2011 Earnings Presentation
52 slides from Vallourec SA's earnings presentation, Feb 23, 2012
Slide 1: Q4 and Full Year 2011 Results
Q4 and Full Year 2011 Results Investor Presentation 23 February 2012 Q4 and Full Year 2011 Results
Slide 2: Information and Forward-Looking Reflections
Information Audit procedures have been carried out for the full year consolidated financial statements. Final certification will take place before the Registered Document is filed with the AMF, mid-April 2012 Quarterly statements are unaudited and are not subject to any review Unless otherwise
Slide 3: Key Figures & Highlights, Strategy, Review by Activity, Financial Results
1 Key Figures & Highlights 1. 2. Strategy 3. Review by Activity 4. Financial Results & Outlook 3 Q4 and Full Year 2011 Results
Slide 4: Key Figures & Highlights
1 Key Figures & Highlights 1. 4 Q4 and Full Year 2011 Results
Slide 5: The market environment in 2011 and into 2012
The market environment in 2011 and into 2012 2010 2011 2012e Oil demand growth of Oil Demand (1) ((Bbl/d)) 88.3 89.0 90.1 0 8% in 2011 and 1 0.8% 1.2% 2% Oil price: Brent ($/bbl) 79.5 111.3 111.3 forecast for 2012 Gas price: Henry Hub ($/bcf) 4.4 4.0 3.5 High levels of E&P Worldwide E&P spending
Slide 6: 2011 Key figures
2011 Key figures K tonnes Volume up 19% € million Sales up 18% 2,251 5,296 , 1,888 4,491 -2% in Q4 +19% in Q4 601 589 1 306 1,306 1,553 2010 2011 Q3 11 Q4 11 2010 2011 Q3 11 Q4 11 € million EBITDA 17.7% of sales € million Net income, Group share 925 940 410 402 16.4% of +29% in Q4 sales in Q4 228 25
Slide 7: Volume and sales
Volume and sales Volume (k tonnes) 601 589 553 561 488 484 507 501 370 344 315 330 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Sales (€ million) 1,553 1,313 1,303 1,290 1,306 1,189 , 1 148 1,148 1,082 1,090 1 122 1,122 979 877 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4
Slide 8: Sales by geographic region
Sales by geographic region: Strong gggrowth in the USA,, Europe p and the Middle East 2011 sales = € 5,296m € million 2010 2011 Change Rest of World France Europe u ope 1,183 , 83 1,426 , 6 +21% % 7% 4% Germany Asia & As % of sales 26% 27% 14% Middle East 19% North America 1,135 1,372 +21% 9% Oth EU
Slide 9: 2011: Highlights
Valinox Nucléaire 2011: Highlights Start up of new capacity at Valinox Nucléaire, France for nuclear power Nucléaire projects Inauguration of new Brazilian plant VSB Inauguration VSB Partnership with Tianda Oil Pipe to serve the Chinese Oil & Gas market Tianda Oil Pipe Acquisition of Zamil P
Slide 10: Committed to safety
Committed to safety Frequency rate (LTIR) 12 10.0 10 9.3 8 6 5.3 4 3.1 2.8 2 0 2007 2008 2009 2010 2011 10 Q4 and Full Year 2011 Results
Slide 11: Strategy
2 Strategy 2. 11 Q4 and Full Year 2011 Results
Slide 12: Growing demand for Energy
Growing demand for Energy +22% Growth 2009 - 2020 2.2 CAGR* 2009-2020 0.9 16 1.6 Coal 2 0% 2.0% 0.7 3.2 Renewables Nuclear Oil 0.9% 2.5 Gas Gas 2.2% 4.4 Oil 4.0 Coal Nuclear 2.6% Renewables 2.7% 4.1 3.3 Total 1 8% 1.8% World 2009 World 2020 Source: International S I t ti l Energy E A Agency: N New P
Slide 13: Favourable trends in the Oil & Gas market drive demand for OCTG
Favourable trends in the Oil & Gas market drive demand for OCTG More volume OCTG demand increasing +4% CAGR (2005 – 2015) More premium Demand for premium growing faster than for API Premium becoming more complex: Advanced Premium 11.7MT Advanced Premium Premium demand 9.7MT 30% x2 7 6MT 7.
Slide 14: Regional Leadership Strategies
Regional Leadership Strategies Vallourec local industrial sites Premium Research Centre technology centre Leading premium domestic supplier Chinese VM2 in China Tianda Oil Pipe Leverage g Leverage a unique local position presence VSB Zamil Pipes 14 Q4 and Full Year 2011 Results
Slide 15: A global organization for a global offer
A global organization for a global offer Technology, Research, Development & Innovation International Research Centres: France France, Germany, Germany Brazil, Brazil USA 500 Engineers and Technicians Global Gl b l Solutions S l ti Product Design Training g and Technical Support pp Sup
Slide 16: Capturing growth – worldwide
Capturing growth – worldwide • Local leadership More Local Presence • Local content • Customer intimacy • Added value More Premium • Technological T h l i l leadership l d hi • Premium Service • VSB More Competitiveness • VM2 • European streamlining 16 Q4 and Full Year 2011 Results
Slide 17: Review by activity
3 Review by activity 3. 17 Q4 and Full Year 2011 Results
Slide 18: Sales by activity: A good year for Oil & Gas
Sales by activity: A good year for Oil & Gas 2011 sales = € 5,296m € million 2010 2011 Change Automotive Oil & Gas O 2,355 ,355 2,841 ,8 +21% % Construction & Other 7% Power generation 780 707 -9% Oil & Gas 7% Petrochemicals 357 373 +4% Mechanicals 12% Energy as % of sales 78% 74% 54% Mechanical 416
Slide 19: Oil & Gas: USA rig count up 19% in 2011
Oil & Gas: USA rig count up 19% in 2011 2 500 Oil vs. Gas 2 000 2,007 rigs at 31 Dec 2011 40% 1 500 Oil drilling: +56% at 1,193 rigs 1 000 Gas drilling: -12% at 809 rigs 500 60% 0 Marked shift from gas to oil drilling in Q4 2011 Oil: +12% up 133 rigs Oil Gas Misc Gas -12% down 114 rigsg
Slide 20: Oil & Gas: Growing development offshore
Oil & Gas: Growing development offshore International rig count (1) 1400 International rig count +5.5% in 2011 1200 1,180 rigs at 31 Dec 2011 1000 75% 1 171 rigs 1,171 i att 31 JJan 2012 800 600 Rig count growth rates 2011: 400 Brazil +24% 200 25% 0 Middle East +14% Europe +13% O/S Land Global O
Slide 21: Oil & Gas
Oil & Gas € million 54% of total sales in 2011 2 841 2,841 2,355 Sales growth: + 21% iin 2011 + 22% Q4’11 vs Q4’10 + 29% in Q4 vs Q3 880 721 681 630 650 2010 2011 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 21 Q4 and Full Year 2011 Results
Slide 22: Oil & Gas
Oil & Gas United States International Q4 sales benefited from Q4 sales increased strongly sustained drilling activity Good level of activity in the and price increases North Sea, Sea Middle East East, West announced in previous Africa, Asia and Brazil quarters Commercial success of Strong
Slide 23: Petrochemicals
Petrochemicals € million Sales were largely driven by 7% of total sales in 2011 sustained activity in the USA, Asia and in the Middle East Sales growth: + 4% iin 2011 Projects include oil sands 373 357 - 12% Q4’11 vs Q4’10 facilities in Canada and LNG - 7% in Q4 vs Q3 projects in the USA and Mid
Slide 24: Power generation
Power generation € million Q4 boosted by nuclear sales 13% of total sales in 2011 Nuclear N l represented t d around d 20% of total power Sales growth: generation sales in 2011 780 - 9% iin 2011 707 + 8% Q4’11 vs Q4’10 Sales for conventional coal + 27% in Q4 vs Q3 fired power plants progressed
Slide 25: Non-Energy / Industry
Non-Energy / Industry € million Mechanicals 26% of total sales in 2011 Very strong growth driven 1,375 by demand for the German Sales growth in 2011: machine building industry 359 M h i l + 58% Mechanicals: notably in H1 H1. 999 Automotive: + 13% Lower orders since H2. Construction & Other: + 35%
Slide 26: Financial Results and Outlook
4 Financial Results 4. and Outlook 26 Q4 and Full Year 2011 Results
Slide 27: Sales evolution
Sales evolution Full Year 2011 € million +18% +19% -2% -2% Q4 2011 +2% +19% +19% 5361 5296 5,296 -2% 4,491 4491 4572 1,553 Year on Year 1,306 1306 Sequential 1279 1279 1279 Q3 2011 Scope Volume Currency Price/Mix Q4 2011 2010 Scope Volume Currency Price/Mix 2011 translation translation 27 Q4 and Ful
Slide 28: Q4 2011 EBITDA
Q4 2011 EBITDA QoQ € million Q4 2011 Q3 2011 Change % Sales volume (k tonnes) 589 601 -2% Sales 1,553 1,306 +19% Cost of sales (1) -1,135 -933 +22% As % of sales -73.1% -71.5% SG&A(1) -149 -139 +7% As % of sales -9 9.6% 6% -10 10.7% 7% Other income/expense, net -15 -6 EBITDA 254 228 +12% As % of sal
Slide 29: Q4 2011 Net Income, Group Share
Q4 2011 Net Income, Group Share QoQ € million Q4 2011 Q3 2011 Change % EBITDA 254 228 +11.7% Depreciation industrial assets -51 -48 Amortization, impairment & restructuring Amortization -7 -14 (non-industrial assets) Operating Income 196 165 +18.7% Financial income -12 12 -12 12 Income before tax 18
Slide 30: Full Year 2011 Results
Full Year 2011 Results € million 2011 % of sales 2010 % of sales Change % Sales 5 296 5,296 4 491 4,491 +18% Cost of sales (1) -3,745 -70.7% -3,039 -67.7% +23% SG&A(1) -576 -10.9% -488 -10.9% +18% Oth income/expense, Other i / nett -35 35 -39 39 EBITDA 940 17.7% 925 20.6% +2% Depreciation industrial
Slide 31: Cash flow
Cash flow € million Q4 2011 2011 2010 Gross cash flow from operations 166 638 708 Change in gross WCR * +135 -337 -268 Operating cash flow 302 301 440 Gross capital expenditure -293 -909 -873 Financial investments -148 -223 -162 Dividends paid -4 -106 -105 Asset disposals and other elements +88 +124
Slide 32: Capital expenditure
Capital expenditure 909 873 677 529 438 282 2006 2007 2008 2009 2010 2011 2012 2013 Capex relating to VSB Other strategic capex incl. USA Capex Planned capex 32 Q4 and Full Year 2011 Results
Slide 33: VSB update
VSB update Plant conforms to ISO 9000 and API standards First tubes have been manufactured and delivered to customers t In 2012: Targeted production around 50% of capacity, subject to customer qualification Product mix heavily weighed towards standard products 33 Q4 and Full Year 2011 Result
Slide 34: VM2 update
VM2 update Construction has advanced well and is nearing completion In 2012: Merger with V&M Star on 1 January y 2012 On schedule to produce its first tube Commercial production to start in the summer Rapid ramp up to target capacity 34 Q4 and Full Year 2011 Results
Slide 35: Other financial elements
Other financial elements At 31 December 2011: Net debt of € 1,194 million Gearing ratio of 23% Undrawn confirmed credit lines of around € 1.5 billion Successful inaugural bond issue of € 650 million, maturing in February 2017 Vallourec assigned BBB+ / A-2 long and short term ratings b Stan
Slide 36: Proposed dividend
Proposed dividend € 1.75 € 1.3 € 1.3 2009 2010 2011 Pay-out ratio 38.6% 37.3% 39.3% Note: Historical dividend per share has been recalculated to take into account the 2 for 1 share split on 9 July 2010 36 Q4 and Full Year 2011 Results
Slide 37: 2012 Outlook
2012 Outlook Ongoing positive trends in Oil & Gas activities Price increases achieved in 2011 continue to apply Vallourec expects sales to grow by around 10% Weak performance in Q1 2012 mainly due to low bookings for industrial segments in Europe in H2 2011 and seasonal effects Less favour
Slide 38: Leader in Premium Tubular Solutions
Leader in Premium Tubular Solutions Q4 and Full Year 2011 Results
Slide 39: Appendices
Appendices 39 Q4 and Full Year 2011 Results
Slide 40: Group profile
Group profile World leader in premium tubular solutions primarily serving the Energy markets, as well as other industrial applications Oil & Gas, Power Generation, Petrochemicals > 70% of sales Over O 22,000 22 000 employees, l i t integrated t d manufacturing f t i f iliti facilities, advance
Slide 41: Vallourec applications for Energy and Non-Energy markets
Vallourec applications for Energy and Non-Energy Non Energy markets 2011 Sales 6 € 5,296 m 2 7% 2 7% 12% 1 7% 5 13% 1 3 4 54% 4 1. Oil & Gas 2. Power generation 3. Petrochemicals 4 Mechanical engineering 4. 5 Automotive 5. 6 Construction & other 6. 41 Q4 and Full Year 2011 Results
Slide 42: A worldwide leader
A worldwide leader 9,900 2,800 1,500 8,000 4 steel mills 10 Pipe mills 37 Finishing units Sales & Services Forest & mine 5 R&D centres 22,200 employees + 50 p production facilities Employees at 31 December 2011 42 Q4 and Full Year 2011 Results
Slide 43: Strong relationship with blue chip clients
Strong g relationship p with blue chip p clients Oil & Gas PowerGen Other … in all markets 43 Q4 and Full Year 2011 Results
Slide 44: Our products for Oil & Gas
Our products for Oil & Gas Oil Country C t Tubular T b l Goods (OCTG) Casing g – to consolidate the well Tubing – to convey oil & gas Premium connections VAM® Premium P i Connections Premium Casing Gas-tight metal to metal Premium Tubing connections Premium Casing Drill Pipes Linepipes
Slide 45: Global offer: Premium products for all applications
Global offer: Premium products for all applications Shale Gas Extended Reach Heavy Oil Arctic VAM® SG Hydroclean, VAM® SW LT Grades VAM® Express CleanWell VAM® HTF EXTREME APPLICATIONS: ADVANCED PREMIUM Deep Water Sour Gas Deep Well HPHT Salt Dome VAM® Riser SS, CRA VAM® 21 VAM® HP, VAM® 21 HC Grade
Slide 46: Ideally positioned to serve the Brazilian market
Ideally positioned to serve the Brazilian market Long term partnership with Petrobras ((since 1954)) Fully integrated local production A complete product offering MINAS GERAIS Premium OCTG VAM® connections Drill pipe Belo Horizonte VMB Risers and flowlines Espirito VSB Santo Dedicate
Slide 47: Ideally positioned to serve the Oil & Gas market in the USA
Ideally positioned to serve the Oil & Gas market in the USA Oil & Gas Shale Plays Vallourec operations Casper, WY Youngstown, OH Muskogee, OK Houma, LA Houston, TX Image: Hart Energy Long-term relationships with distributors, large independentsand international majors Strong reputation of VAM® p
Slide 48: Importance of unconventional drilling technologies
Importance of unconventional drilling technologies Break-through technologies enable the industrial exploitation of non-conventional shale reserves Difference between conventional drilling (vertical) and unconventional drilling (horizontal) Image: Devon % Premium OCTG Tons per % Small OD Type of w
Slide 49: Balance sheet
Balance sheet € million 31/12/2011 31/12/2010 € million 31/12/2011 31/12/2010 Non current assets 5 623 9 5,623.9 4 616 9 4,616.9 Shareholders’ equity Shareholders 4 830 3 4,830.3 4 556 4 4,556.4 Minority interests 380.0 267.2 Inventories and work in 1,388.9 1,190.3 progress Equity capital 5,210.3 4,
Slide 50: Historic Results
Historic Results 2005 2006 2007 2008 2009 2010 2011 Production output (K tonnes) 2,692 2,880 2,838 2,766 1,503 1,888 2,251 € million Sales 4 307 4,307 5 542 5,542 6 141 6,141 6 437 6,437 4 465 4,465 4 491 4,491 5 296 5,296 EBITDA 1,061 1,665 1,751 1,694 981 925 940 g EBITDA margin 24.6% 30.0% 28.5%
Slide 51: Notes
Notes Q4 and Full Year 2011 Results
Slide 52: Leader in Premium Tubular Solutions
Leader in Premium Tubular Solutions Investor Relations Contact - Vallourec Group Tel: +33 1 49 09 39 76 / email: investor.relations@vallourec.fr www.vallourec.com Q4 and Full Year 2011 Results