Vallourec Sa · EURONEXT:VK
Vallourec Sa — Investor Day (September 2023)
116 slides from Vallourec Sa's investor day presentation, Sep 12, 2023
Slide 1: Capital Markets Day
Capital Markets Day September 12, 2023
Slide 2: Legal Disclaimer
Legal Disclaimer Forward-Looking Statements This presentation includes forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms as “believe”, “expect”, “anticipate”, “may”, “assume”, “plan”, “intend”, “will”, “shoul
Slide 3: Today’s Agenda
Today’s Agenda Topic Speaker Slide 1 Introducing Vallourec Philippe Guillemot, Chairman and Chief Executive Officer 5 2 Creating a New Vallourec Philippe Guillemot, Chairman and Chief Executive Officer 13 3 Tubes Markets - The Vallourec Advantage Jacky Massaglia, Senior VP, North America 25 - Oil Co
Slide 4: Today’s Speakers
Today’s Speakers In order of appearance PHILIPPE GUILLEMOT JACKY MASSAGLIA Chairman & Chief Executive Officer Senior Vice President North America LAURENT DUBEDOUT ULRIKA WISING Senior Vice President Senior Vice President OCTG, Services & Accessories Energy Transition Eastern Hemisphere Sales BERTRAN
Slide 5: Introducing Vallourec
1 Introducing Vallourec Philippe Guillemot Chairman & Chief Executive Officer
Slide 6: Key Takeaways and Targets
Key Takeaways and Targets Vallourec is a mission-critical supplier of complex steel Financial Figures tubular solutions supported by industry-leading R&D and world-class production facilities. Zero Net Debt by year-end 2025 at the latest We are making Vallourec more profitable, more resilient and mo
Slide 7: Who We Are
Who We Are Technology Integrated Leader Manufacturer A trustworthy partner for cutting edge steel solutions that make energy transformation possible Partner Environmental of Choice Steward 7
Slide 8: Our Global Asset Base
Our Global Asset Base Expected footprint in 2024 Major production assets Steel Rolling Heat Threading R&D Mine Treatment * * Excludes sites to be closed as part of the New Vallourec plan *Rolling & heat treatment within Aulnoye forge only 8
Slide 9: What We Do
What We Do A global leader serving 2022 KEY FACTS markets OPERATIONS OIL & GAS Tubes, connections and services for development of oil and gas fields ~40 major Present in more than 16,000 production assets 20 countries employees INDUSTRY FINANCIAL Lightweight and resistant tubes for automotive, agrib
Slide 10: Our Global Blue-Chip Customer Base
Our Global Blue-Chip Customer Base 10
Slide 11: Oil & Gas Demand Expected to Grow in Near- and Long-Term
Oil & Gas Demand Expected to Grow in Near- and Long-Term Oil demand growth expected in the near-term Solid demand outlook for oil & gas in long-term Million Barrels per Day Indexed Oil & Gas Demand 108 OPEC IEA 2023 2030 2050 105 108 108 106 103 100 100 104 102 100 98 96 94 92 2021 2022 2023 2024 20
Slide 12: Investment in Oil Supply is Required: Strong Tubes Demand Ahead
Investment in Oil Supply is Required: Strong Tubes Demand Ahead Crude oil inventory overhang has been removed Long-cycle oil production is at historical lows Observable Crude Oil Inventories (billion barrels) Percentage of Non-Shale Oil Production from New Fields 2.8 18% 2.7 16% 14% 2.6 12% 2.5 10%
Slide 13: Creating a New Vallourec
2 Creating a New Vallourec Philippe Guillemot Chairman & Chief Executive Officer
Slide 14: The Evolution of Vallourec
The Evolution of Vallourec 1886 1930 1957 1965 2002 2011 2016 2021 2022 Invention of Vallourec listed Acquisition of Acquisition of New board and seamless tube on Paris Stock North Star Tubes, complete control management rolling process by Exchange increasing of Tianda Oil initiate the New Mannesman
Slide 15: Harnessing the Full Potential of Our Premier Assets
Harnessing the Full Potential of Our Premier Assets Purchased Sumitomo Corporation’s 19.5% non-controlling interest in our US steel & rolling subsidiary (Vallourec Star) Purchased Nippon Steel Corporation and Sumitomo Corporation’s combined 49% interest in US premium threading subsidiary (VAM USA) P
Slide 16: The New Vallourec Plan
The New Vallourec Plan Key Objectives Tools Utilized Primary Financial Operational Governance Strategic Goals Targets Initiatives Improvements €230m EBITDA / €250m FCF 1 1 Improvement1 Realigning Our Deliver Industrial Footprint Reshaping Our Best-in-Class Profitability Management Team Close Profita
Slide 17: Realigning Our Industrial Footprint
1 Realigning Our Industrial Footprint Addressing loss-making operations in Europe Revealing higher profits in remaining operations EBITDA of European Operations (€ millions) EBITDA of All Other Operations (€ millions) 833 630 448 (101) 361 (103) (118) 280 (130) (138) 180 (178) 2017 2018 2019 2020 20
Slide 18: Vallourec Production Footprint
1 Vallourec Production Footprint Old Vallourec assets and production flows (2021) New Vallourec assets and production flows (2024) Europe North America Domestic Industrial Player Domestic Capacity for Premium Export Hub North America France Domestic Demand Domestic Capacity for Finishing and Domesti
Slide 19: Emphasizing Value over Volume
2 Emphasizing Value over Volume Focusing on high-value, premium products Addressing premium, high-margin markets % of Rolling Capacity (Capacity in Million Tonnes) % of Tubes Sales Volumes (Volumes in Million Tonnes) 3.0 2.2 2.4 1.7 12% 10% 6% 22% 8% 16% 88% 86% 78% 74% Old Vallourec New Vallourec O
Slide 20: Improving Our Pricing Strategy
3 Improving Our Pricing Strategy Structurally improving our pricing Key changes in commercial management $ / Tonne Reported Revenue per Tonne Weighted Avg. Market Price • Change in focus from maximizing throughput volume 3,600 to maximizing margin and cash 3,400 • Clearer delineation of profit and l
Slide 21: Refreshing Our Management Team
1 Refreshing Our Management Team PHILIPPE GUILLEMOT Chairman & Chief Executive Officer Significant equity alignment Up-front, meaningful personal investment in Vallourec equity Over €12 million invested by AMERICAS OPERATIONS & BUSINESS LINES CENTRAL FUNCTIONS executive committee members BERTRAN
Slide 22: Setting Ambitious ESG Targets
2 Setting Ambitious ESG Targets Furthering our CO2e emissions leadership Targeting industry-leading safety Total Recordable Incident Rate 2025 -25% Achieved Early Vallourec Historical Vallourec Target Industry Benchmarks Scope 1, 2 & 3 vs. 2017 3.66 2.95 2030 -30% Added in ‘23 Scope 1, 2 & 3 Upstr
Slide 23: The New Vallourec Plan in Action
The New Vallourec Plan in Action Early Accomplishments Targets by Year-End 2023 Next Steps Finalize sale of land and equipment in Refreshed management team and board Closure of German tube operations Germany, France and UK Improved internal processes and Execution of €110 million capex program Impro
Slide 24: New Vallourec by the Numbers
New Vallourec by the Numbers Old Vallourec New Vallourec (2018) Midcycle Simulation Net Debt €2.1b Zero Net Debt / EBITDA 13.7x +/- 0.5x Tubes EBITDA per Tonne €45 €450 Total Cash Generation1 (€516m) €450m 1 2018 figures reflect change in net debt, while midcycle simulation presents total cash gener
Slide 25: Tubes Markets: The Vallourec Advantage
3.1 Tubes Markets The Vallourec Advantage Jacky Massaglia Senior Vice President North America
Slide 26: Our Offering: Premium Seamless Tubular Solutions
Our Offering: Premium Seamless Tubular Solutions Welded Tubes Seamless Tubes Lower-end products made by rolling flat Higher-end products made by piercing Product Summary steel into a tube and welding the seam and extending a round steel billet Lower-cost product with simpler Higher-cost product with
Slide 27: Why Do Our Customers Need Premium Tubes?
Why Do Our Customers Need Premium Tubes? Collapsed pipe (external pressure) Vertical Well Commercial Airline Section Cruising Altitude Up to 10,000 meters ~10,000 meters Mount Everest 8,849 meters Corroded tubing Vallourec Tubes Burj Khalifa 828 meters Eiffel Tower The Shard 330 meters 310 meters Ho
Slide 28: What Makes a Premium Tube?
What Makes a Premium Tube? Premium product characteristics Price is a small part of the equation for customers Percentage of Responses in Customer Survey Strength & Withstands extreme pressures from geological Hardness formations, ocean depths, or internal flow Other Inventory Management Price Corro
Slide 29: The Seamless Tube Production Process
The Seamless Tube Production Process Heat Raw Material Sourcing Steelmaking Rolling Treatment Threading Externally sourced scrap OCTG Only and recycled process scrap Scrap Metal Iron Ore Pelletizing Plant Pellets Cast Iron Lumber Kiln Charcoal Blast Furnace Conversion of scrap Piercing and Heating a
Slide 30: Vallourec’s Competitive Advantages
Vallourec’s Competitive Advantages Steelmaking Rolling Vertical integration in US and Recently-built and Brazil recently-upgraded rolling Extensive array of custom capacity across 3 main alloys and metal grades production hubs State-of-the art steel shop for Broad network of mills high-end
Slide 31: Key Seamless Tubes Markets
Key Seamless Tubes Markets Oil Country Tubular Project Line Pipe Industry New Goods (OCTG) (PLP) & Process & Other Energies 2023E ASP (price/tonne) Mid $3k Low-mid $2k Low $2k1 2023E Total Market Size (mt) 9.6 4.4 Not Analyzed High-Growth Emerging Market 2023E Served Market Size (mt) 5.4 1.1 0.4 % o
Slide 32: Limited Set of Premium Seamless Tube Suppliers
Limited Set of Premium Seamless Tube Suppliers Tier 1 Global Suppliers ~6 million tonnes annual production Suppliers Unable to Access Global Premium Market Regional Western Suppliers Asia and CIS Suppliers ~2.5 million tonnes annual production >10 million tonnes annual production Note: reflects prod
Slide 33: The VAM Connection: Setting the Standard
The VAM® Connection: Setting the Standard VAM® by the numbers Continuous innovation drives VAM® forward VAM® TOP 58 Years in service • Introduced in 1993 • Standard-setting performance for premium connection • Extensive range of field-proven solutions 30% Market share in served markets VAM® 21 • Int
Slide 34: A Leading Research and Development Franchise
A Leading Research and Development Franchise • Helping Customers Push Technological Limits ~400 research professionals • Customers trust Vallourec to create new products for extreme conditions Centers in France, United • Fit-for-purpose solutions and high-end standard products States and Brazil • Ex
Slide 35: Key Takeaways: The Vallourec Advantage
Key Takeaways: The Vallourec Advantage We operate in a demanding premium market with a small 1 group of direct competitors We add value through our industry-leading research and 2 development and production processes Our ownership of the VAM® premium connection family is 3 a meaningful competitive d
Slide 36: Tubes Markets: OCTG
3.2 Tubes Markets OCTG Laurent Dubedout Senior Vice President OCTG, Services & Accessories Eastern Hemisphere Sales
Slide 37: What Are Oil Country Tubular Goods?
What Are Oil Country Tubular Goods? Oil Country Tubular Goods (OCTG) are a class of high-performing steel tubes that are placed in an oil & gas well during drilling to provide structural support and produce hydrocarbons throughout the life of the well. A drilling rig placing OCTG downhole Concentric
Slide 38: Rising Upstream Investment Driving Higher Tubular Demand
Rising Upstream Investment Driving Higher Tubular Demand Major project approvals expected to increase Global upstream investment expected to increase Global Greenfield Upstream Capex Approvals ($B) Total Global Upstream Capex ($B) Americas Europe & Africa Middle East RoW Onshore Offshore 683 700 121
Slide 39: Segmenting the Seamless OCTG Market
Segmenting the Seamless OCTG Market Proprietary1 Seamless API Seamless High-end products for severe and Medium-range tubes with standardized Defining Features challenging environments connections 2023E Total 4.2m 5.4m Market Size tonnes tonnes Typical Price per Tonne $3,000 – $4,500 $1,000 – $2,000
Slide 40: Pricing Power in OCTG Premium Products
Pricing Power in OCTG Premium Products Selling Price ($ / Tonne) 4,500 3,000 1,500 Commodity Tube Tier 1 Tube High-End Tube w/ API Connection w/ Premium Connection w/ Premium Connection Typical Market Low-depth onshore wells; Deep wells, higher-pressure Extreme pressures; highly Applications surface
Slide 41: Major Seamless OCTG Markets
Major Seamless OCTG Markets 2023 Market Size (Million Tonnes) CIS North America 1.3 Europe 0.2 2.9 China 2.9 1.0 Africa 0.3 Middle East Asia Pacific 0.5 Ex-China 0.5 South America Dominant Connection Technology Proprietary API Sources: Internal market intelligence based on public peer commentary, Ry
Slide 42: Major OCTG Market Characteristics
Major OCTG Market Characteristics Region Primary Customers Commercial Demands • High volumes Large Independent • Just-in-time delivery North America Exploration & Production • Reliable domestic supply chain Companies (E&Ps) • Fit-for-purpose technology • Multi-year program support • Inventory manage
Slide 43: Where We Succeed: Gulf of Mexico Case Study
Where We Succeed: Gulf of Mexico Case Study Identifying a critical customer need Clear impact: tripling market share in a core market • Pushing the technical boundaries of well design US Gulf of Mexico Market Share • Operators are increasingly pursuing projects with higher 75% VAM® SLIJ-3 pressure r
Slide 44: Key Takeaways: OCTG
Key Takeaways: OCTG Strong upstream oil & gas fundamentals point to a multi-year 1 upturn for the OCTG industry Our focus on the high-end OCTG market allows us to charge a 2 meaningful premium versus much of the market We are well-positioned in global OCTG markets that value and 3 pay for premium pr
Slide 45: Tubes Markets: PLP & Process
3.3 Tubes Markets PLP & Process Jacky Massaglia Senior Vice President North America
Slide 46: Understanding Project Line Pipe & Process Pipe
Understanding Project Line Pipe & Process Pipe Project Line Pipe (PLP) refers to tubes used to transport fluid above the surface of the earth. Process Pipe refers to tubes used in fluid processing facilities (refineries, biofuel plants, LNG plants, etc.) Offshore field development Onshore process fa
Slide 47: Segmenting the Seamless Line Pipe Market
Segmenting the Seamless Line Pipe Market Offshore Onshore Consolidated market with significant Fragmented market with limited Defining Features treatment and customization required technology and standardized products 2023E Total 0.3m 1.2m1 Market Size tonnes tonnes Typical Price per Tonne $2,000 -
Slide 48: Process Market: Playing to Our Regional Strengths
Process Market: Playing to Our Regional Strengths Focusing on the Americas process businesses Process market dynamics Estimated Market Size (Million Tonnes) North America Orders of small lots, often sold through RoW 0.5 distributors 0.6 Core Vallourec Markets South Driven by facility capex cycles bo
Slide 49: Substantial Uptick in PLP & Process Opportunities
Substantial Uptick in PLP & Process Opportunities Robust offshore project developments ahead Strong Process spending environment ahead Offshore Greenfield Capex Approvals ($b) Total Americas Spending ($b) Americas Europe & Africa Middle East RoW Upstream (Facilities) Midstream Downstream 261 259 111
Slide 50: Where We Succeed: Stabroek Block Development Support
Where We Succeed: Stabroek Block Development Support Contributing to the success of a major development Bringing Vallourec’s assets and technology to bear Vallourec is supplying heavy-wall, tight- Production tolerance subsea flowlines and risers from its Capabilities advanced Brazil tube production
Slide 51: Key Takeaways: PLP & Process
Key Takeaways: PLP & Process We have a strong geographic and technical position in the 1 demanding offshore PLP business Our geographic location gives us a defensible 2 competitive moat in the Americas Process business High expected levels of project capex creates a solid 3 demand outlook for PLP &
Slide 52: Tubes Markets: New Energies
3.4 Tubes Markets New Energies Ulrika Wising Senior Vice President Energy Transition
Slide 53: New Energies Require Premium Tubes
New Energies Require Premium Tubes Geothermal CCUS Hydrogen Casing and tubing for CO2 Primary Tubes Casing for H2 storage systems; injection wells; transportation Application geothermal wells transportation pipelines pipelines Corrosion resistance; Extremely tight Heat resistance; connection Key Pro
Slide 54: The Geothermal Opportunity Set
The Geothermal Opportunity Set Mature Technology, Emerging Technologies, Growing Applications High Potential Growth Geothermal Conventional Enhanced Geothermal Advanced Geothermal Heat Pump Geothermal Systems System Flash / Binary Power Plant Binary Power Plant Binary Direct use District Electricity
Slide 55: Sizing Our Geothermal Opportunity
Sizing Our Geothermal Opportunity Substantial growth in geothermal drilling activity Considerations in market sizing Global Geothermal Wells Drilled per Year • Conventional market set for meaningful growth • Annual conventional geothermal well count expected to grow 765 771 2.6x by 2030 711 • 500 –
Slide 56: The CCUS Opportunity Set
The CCUS Opportunity Set Capture Transport Storage & Usage Ethanol Plant Onshore & offshore transportation pipelines Steel mill Dehydration and Soft drink factory compression facility Cement plant Chemicals plant Onshore gathering pipelines CO2 injection wells for EOR or sequestration 56
Slide 57: Sizing Our CCUS Opportunity
Sizing Our CCUS Opportunity Major surge in CCUS investment ahead Considerations in market sizing Total CO2 Storage Capacity (Million Tonnes per Annum) • Installed capacity of CO2 storage to grow 8x by 2030 Operational Under construction Planned • Substantial growth expected in North America and Euro
Slide 58: The Hydrogen Opportunity Set
The Hydrogen Opportunity Set Production Transport End Usage Grey H2 Natural gas exploration Steam Methane Reformer H2 liquification / Trucking Hydrogen refueling station and transport H2 storage compression (gaseous or liquid H2) H2 storage Green H2 Hydrogen pipeline network Renewable power H2 stora
Slide 59: Advantages of Vertical Storage
Advantages of Vertical Storage Product merits Superior cost profile for mid-scale applications • Safety & Footprint: Storage vessels € / kgH2 Delivered are deployed underground in proven 3.0 hydrogen-tight tubes • Cost: Can offer substantial cost 2.5 advantages vs. competing solutions in 2.0 mid-sca
Slide 60: Sizing Our Hydrogen Opportunity
Sizing Our Hydrogen Opportunity Substantial growth in hydrogen development Considerations in market sizing Installed Hydrogen Facility Capacity (Million Tonnes per Annum) • Focused on the expansion of green hydrogen due to Operational Under Construction Planned significantly higher storage requireme
Slide 61: Building Momentum in New Energies
Building Momentum in New Energies Supportive policy and industry momentum Key milestones in our New Energies development • Geothermal Fit for 55 and CBAM1 • Invested in GreenFire Energy, an AGS startup, which is on EU Explicit targets for carbon capture, legislative track for demonstration and testi
Slide 62: A Significant New Business Opportunity
A Significant New Business Opportunity Geothermal CCUS Hydrogen Similarity to Very Similar Largely Similar New Business Model Legacy Business Target Market Highest Intermediate Lowest Share Addressable Intermediate Intermediate Very Large Market Our New Energies Target New Energies to comprise 10-15
Slide 63: Key Takeaways: New Energies
Key Takeaways: New Energies The competitive advantages we have in OCTG & PLP 1 directly translate to our potential in New Energies We are making significant progress early in the 2 evolution of the New Energies space We have potential to grow our New Energies business into 3 a meaningful financial c
Slide 64: Deep Dive: North America
4.1 Deep Dive North America Bertrand Frischmann Chief Operating Officer Americas
Slide 65: Our North America System
Our North America System A vertically-integrated, high-volume, domestic production system Electric Arc Furnace in Youngstown, Ohio Tube Production Capacity (Thousand Tonnes) Steelmaking • 100% recycled scrap Youngstown • Zero-carbon nuclear power source • Single integrated site with rolling operatio
Slide 66: Defining the North American Market
Defining the North American Market Core Market US Onshore US Offshore Canada Mexico High-volume, “factory- Long-cycle, complex Mix of oil sands, shale Effectively single- Demand style” development, fields demanding high- and offshore resources customer market with Trends largely shale resources end
Slide 67: US OCTG Market: Key Facts & Figures
US OCTG Market: Key Facts & Figures 5m tonnes 60% 55% 2022E US OCTG Market Size Seamless OCTG Share Semi-Premium & Premium1 3 18% Major Domestic Players Estimated Vallourec Seamless Share Sources: Preston Pipe, OCTG Situation Report, PipeLogix, Vallourec Estimates 1As a percentage of seamless demand
Slide 68: Focused on the Highest-Value Markets
Focused on the Highest-Value Markets Deepwater Application Characteristics Market Summary All Complex Reservoir Conditions Virtually 100% Seamless Applications High Safety Requirements Premium Connections Only Increasing Complexity & Vallourec Focus High-End Domestic & Imports Primarily Heat-Treated
Slide 69: Our US Business Model: Leveraging Distribution
Our US Business Model: Leveraging Distribution A collaborative, three-party model Targeting resilient customers that pay for quality Percentage of US OCTG Demand and Vallourec Sales Volume % of Market % of Vallourec Volume Customers 60% 56% Technical Full Product Services Suite 26% 24% Vallourec Dis
Slide 70: A More Sustainable Domestic Industry Has Emerged
A More Sustainable Domestic Industry Has Emerged 2018 2019 2020 2021 2022 Tenaris announces US Steel indefinitely acquisition of 1m tpy idles Lone Star and producer, IPSCO, the Domestic Mills US steel and pipe- Loraine mills resulting in a ~1.1m making assets of tpy capacity reduction Russian group
Slide 71: Long-Term Demand Trends: Rising Intensity and Seamless Share
Long-Term Demand Trends: Rising Intensity and Seamless Share OCTG intensity continues to rise Increased preference for domestic seamless OCTG Shipments per Horizontal Rig (Tonnes, 3 Month MAvg) Percentage of OCTG Shipments 900 100% 800 90% 700 80% Imported Welded 70% 600 60% Domestic 500 Welded 50%
Slide 72: Short-Term Demand Trends: Green Shoots for 2024 Demand
Short-Term Demand Trends: Green Shoots for 2024 Demand Leading indicators suggest rig count growth in 2024 US activity insufficient to grow production Monthly US Horizontal Well Count (Spuds) • Oil & gas prices rising as cost pressures moderating • WTI oil price up ~30% to mid $80/bbl level after to
Slide 73: OCTG Market Stabilizing, Pricing Supported at Higher Levels
OCTG Market Stabilizing, Pricing Supported at Higher Levels Supply side correction driving improving outlook Imports and domestic shipments have fallen Monthly OCTG Shipments (k Tonnes, 3 Month Moving Average) • Imports have fallen substantially Domestic Import • Imports down ~50% vs. the Q4 2022 /
Slide 74: Key Takeaways: North America
Key Takeaways: North America Our premier domestic manufacturing footprint is one of the 1 industry’s best-placed assets to serve the United States A substantially improved US industry should allow more 2 sustainable through-cycle industry returns Near-term supply-demand fundamentals are improving 3
Slide 75: Deep Dive: Eastern Hemisphere
4.2 Deep Dive Eastern Hemisphere Laurent Dubedout Senior Vice President OCTG, Services & Accessories
Slide 76: Our Eastern Hemisphere System
Our Eastern Hemisphere System A flexible, geographically diversified premium production system Tube Production Capacity (Thousand Tonnes) Low-Cost External Sourcing Steelmaking • Able to source low-cost billets on China market • Cost-competitive with Youngstown and Jeceaba internal production Three
Slide 77: Major Eastern Hemisphere Markets
Major Eastern Hemisphere Markets Middle East Europe & Africa Asia & CIS OCTG 1.0m tonnes 0.6m tonnes 4.7m tonnes Market Size Premium products More commoditized, Market Mix of premium & API, demanded, largely in dominated by local Dynamics global competition offshore applications competition Valloure
Slide 78: Well-Positioned in Eastern Hemisphere
Well-Positioned in Eastern Hemisphere Aligned with the largest market players Major project approvals to drive future growth Percentage of Eastern Hemisphere Upstream Capex (2020-25) Greenfield Capex Approved ($B) Africa Asia Europe Middle East Middle East 85 NOC 81 44% Other 67 34% 63 56 54 51 50 4
Slide 79: Supporting Capacity Growth in the Middle East
Supporting Capacity Growth in the Middle East Strong customer relationships in a key region Significant offshore capacity investment ahead Middle East Drilling & Well Services Capex ($b) • Major presence in premium markets in Saudi Arabia, the UAE, Qatar, Kuwait and Iraq Onshore Offshore • Region ex
Slide 80: Value over Volume in China
Value over Volume in China Creating a new premium production hub in China Maximizing our premium export volumes China Sales Volumes (Thousand Tonnes) and Percentage Exported • Historically underutilized production base Premium Production Other Production Exports (% of Total) • EBITDA at or below bre
Slide 81: Key Takeaways: Eastern Hemisphere
Key Takeaways: Eastern Hemisphere We focus on select, higher-value markets in the Eastern 1 Hemisphere where we have a defensible position Our position in the Middle East is very strong due to 2 solid customer relationships and domestic capacity The outlook for investment in the Middle East is robus
Slide 82: Deep Dive: South America
4.3 Deep Dive South America Bertrand Frischmann Chief Operating Officer Americas
Slide 83: Our South America System
Our South America System A low-cost, vertically-integrated production system focused on premium products Raw Material Ownership in Mine & Forest Tube Production Capacity (Thousand Tonnes) Mine & Forest • Iron ore mine provides raw material & diversification • Forest is low-carbon charcoal source and
Slide 84: The Mining Process
The Mining Process Beneficiation Plant Dispatch & Sales Run of Mine Iron Ore (ROM) Open Pit Wet Tailings Dewatering Filter Waste Pile Dry Tailings Waste Waste and Dry Tailings External Waste 84
Slide 85: Mine Update: Improving How We Work
Mine Update: Improving How We Work Increasing focus on safety and sustainability New leadership in our Mine & Forest business • Ongoing operational and safety review following waste pile slippage and subsequent reconstruction Announcing the hiring of Jun Mutó • Evolution of our mine management appro
Slide 86: Low-Cost Operations with Fast-Payback Extension Options
Low-Cost Operations with Fast-Payback Extension Options Near-term operational targets Two-phase extension plan in progress New near-term1 annual iron ore production 6.0m Phase 1 Phase 2 target (m tonnes) Incremental Annual Production used to support Tubes – +1mt – 2mt 1.0m Iron Ore Production4 produ
Slide 87: Creating Value in Our Forest
Creating Value in Our Forest An hidden asset in our South America system • Vallourec Florestal • 164k hectare eucalyptus forest in Minas Gerais, Brazil • Decarbonization benefits across our business • Low-carbon biomass charcoal supply allows blast furnace to avoid use of high-cost coke with added c
Slide 88: Carboval: Our Methane-Free Decarbonization Tool
Carboval: Our Methane-Free Decarbonization Tool Conventional kiln production Carboval continuous carbonization Dry Wood Charcoal Charcoal Methane-emitting, low-technology, Patent-protected, zero methane, automatic, continuous process manual batch process with opportunity for technology licensing and
Slide 89: Markets Served by Our South America Tubes Business
Markets Served by Our South America Tubes Business Oil & Gas Exports Domestic Oil & Gas Domestic Industry Demand Supplying premium products Largely focused on Mix of domestic to Africa, Europe, Middle major offshore basins industries (automotive, Trends East and US GoM with Petrobras & IOCs agribusi
Slide 90: Multi-Year Tube Demand Tailwinds in Brazil
Multi-Year Tube Demand Tailwinds in Brazil Offshore-focused market demands premium tubes Healthy offshore market expected for years to come Percentage of 2023E Brazil OCTG Demand Brazil Offshore Well Count 116 119 Onshore Operators 104 29% 94 92 93 Petrobras 89 (Offshore) 53% 68 58 55 57 51 39 IOCs
Slide 91: Repositioning One of Our Top Industrial Assets
Repositioning One of Our Top Industrial Assets 2007 – 2011 2021 2022 – 2023 Greenfield Investment Established Control Expanding Capabilities • Major capacity investment • Purchased Nippon Steel • Investing €110 million to in Jeceaba facility, Corporation’s 15% interest expand large diameter and comm
Slide 92: Unleashing the Full Potential of Our Brazilian Tubes Operations
Unleashing the Full Potential of Our Brazilian Tubes Operations Maximizing Output Maximizing Margins Simplifying manufacturing routes and Industrializing production process for volumes debottlenecking critical equipment transferred from Germany Reengineering supply chain processes as an Opti
Slide 93: Key Takeaways: South America
Key Takeaways: South America Our Mine & Forest will continue to contribute to our financial performance 1 and will be a key lever to further decarbonize our operations Global export opportunities and a strong domestic market drive a 2 favorable outlook for our South America assets We have taken majo
Slide 94: New Vallourec Financial Impact
5.1 New Vallourec Financial Impact Sascha Bibert Chief Financial Officer
Slide 95: Historical Shortfalls in Performance
Historical Shortfalls in Performance Weak profitability and failure to adapt to downturn Over €200 million of average cash burn per year Tubes EBITDA / Tonne (€) Group EBITDA Margin Group Free Cash Flow (€ million) 400 25% Free Cash Flow 2011-20 Average 300 20% 274 15% 135 200 10% 100 5% – (41) (41)
Slide 96: The New Vallourec Plan: Guiding Framework for Financial Decisions
The New Vallourec Plan: Guiding Framework for Financial Decisions Primary Financial Strategic Goals Targets €230m EBITDA / €250m FCF Improvement1 Deliver Best-in-Class Profitability Close Profitability Gap with Primary Peer Positive FCF through the Cycle2 Make Vallourec Cycle-Proof Achieve Zero Net
Slide 97: A New Rigorous Approach to Underperformance: Examples
A New Rigorous Approach to Underperformance: Examples Umbilicals Europe Tubes China Tubes Capital Employed ~€35m ~€400m ~€130m Loss-making and cash-negative Years of extensive losses despite Near-breakeven operations Operational company focused on highly- multiple cost cutting and despite low-cost n
Slide 98: New Vallourec Plan Bearing Fruit
New Vallourec Plan Bearing Fruit Substantial improvement in profitability More reliable FCF generation and net debt reduction Tubes EBITDA / Tonne (€) Group EBITDA Margin Group Net Debt and Adjusted Free Cash Flow (€ million) Pre-Restructuring Net Debt: 2,364 900 30% 800 1,493 1,389 25% 700 1,213 1,
Slide 99: Closing the Margin and Return Gap Versus Our Peers
Closing the Margin and Return Gap Versus Our Peers Persistent margin gap historically Difference reduced, with more to come Tubes EBITDA per Tonne ($) Tubes EBITDA per Tonne ($) Vallourec Peer 1,259 1,275 1,253 Vallourec Peer 1,071 740 734 735 906 866 735 695 598 567 534 317 366 481 490 401 159 406
Slide 100: Midcycle Simulation
5.2 Midcycle Simulation Sascha Bibert Chief Financial Officer
Slide 101: Capitalizing on Strong Market Prices and Our Premium Products
Capitalizing on Strong Market Prices and Our Premium Products Tubes market in the midst of a strong upturn Premium products command premium prices Historical OCTG Market Pricing ($ / tonne) Tier 1 OCTG Supplier Average Selling Price ($ / tonne) International United States Weighted Market Price Weigh
Slide 102: Elevated Industry Costs Point to Higher Landing Point for Prices
Elevated Industry Costs Point to Higher Landing Point for Prices Tubes manufacturing costs remain elevated Reframing historical prices with constant costs Tier 1 OCTG Supplier Average Cash Cost of Sales ($ / tonne) Tier 1 OCTG Supplier Average Selling Price ($ / tonne) Tier 1 Actual ASP Average Actu
Slide 103: Midcycle Tubes Earnings Power Simulation
Midcycle Tubes Earnings Power Simulation Metric Assumption Comments Operating Assumptions Total sales volumes (k tonnes) 1,700 Maximizing premium mix as opposed to maximizing volumes Vallourec average selling price ($) $2,800- $3,000 Assumes market prices in the low-mid $2k per tonne range + Tier 1
Slide 104: Midcycle Mine & Forest Earnings Power Simulation
Midcycle Mine & Forest Earnings Power Simulation Metric Assumption Comments Operating Assumptions Production sold (m tonnes) 6.0 Target production level pre-Extension Phase 2 Platts iron ore price index ($ / tonne) $110 Modestly below current level and trailing 5-year average Vallourec price as % of
Slide 105: Capital Allocation
5.3 Capital Allocation Sascha Bibert Chief Financial Officer
Slide 106: Capital Allocation Priorities: Driving Towards Shareholder Returns
Capital Allocation Priorities: Driving Towards Shareholder Returns Executing the New Vallourec Plan Investment in Brazil capabilities Shutdown of German rolling operations Deleveraging Our Balance Sheet Net debt zero by end of 2025 at the latest Corridor of +/- 0.5x Net Debt / EBITDA Reinves
Slide 107: Midcycle Cash Flow Simulation
Midcycle Cash Flow Simulation Metric Assumption Comments EBITDA (€) Tubes €750m As derived on slide 104 Mine & Forest €125m As derived on slide 105 Holding & Other, Intersegment (€25m) Group EBITDA €850m Cash Flows (€) Capital expenditures €175m Including mine extensions, can reduce to ~€125m in dow
Slide 108: Key Takeaways: Financial Framework
Key Takeaways: Financial Framework We are making financially impactful improvements with our 1 New Vallourec plan We see meaningful through-cycle free cash flow 2 potential for our business We aspire to return a significant amount of our total cash 3 generation to shareholders Note: Vallourec’s divi
Slide 109: Closing Remarks
6 Closing Remarks Philippe Guillemot Chairman & Chief Executive Officer
Slide 110: Reiterating Our Full Year 2023 Outlook
Reiterating Our Full Year 2023 Outlook Tubes Mine & Forest US volumes to trough in the third quarter with Production sold to be around 3.6 million lower market prices continuing to affect tonnes in the second half Vallourec’s fourth quarter pricing Production costs to remain at the high end of
Slide 111: Key Takeaways and Targets
Key Takeaways and Targets Vallourec is a mission-critical supplier of complex steel Financial Figures tubular solutions supported by industry-leading R&D and world-class production facilities. Zero Net Debt by year-end 2025 at the latest We are making Vallourec more profitable, more resilient and mo
Slide 112: Question & Answer Session
Question & Answer Session ¥ vallourec
Slide 113: Supplemental Disclosures
8 Supplemental Disclosures
Slide 114: Definitions of Non-GAAP Financial Data and Concepts
Definitions of Non-GAAP Financial Data and Concepts Adjusted free cash flow is defined as adjusted operating cash flow +/- change in operating working capital and gross capital expenditures. It corresponds to net cash used in operating activities less restructuring and non-recurring items +/- gross
Slide 115: Definitions of Non-GAAP Financial Data and Concepts
Definitions of Non-GAAP Financial Data and Concepts Free cash flow, as previously defined, may continue to be derived as follows: total cash generation - asset disposals & other cash items. This is also defined as EBITDA adjusted for changes in provisions, less interest and tax payments, changes in
Slide 116: Definitions of Non-GAAP Financial Data and Concepts
Definitions of Non-GAAP Financial Data and Concepts Net working capital requirement is defined as working capital requirement net of provisions for inventories and trade receivables; net working capital requirement days are computed on an annualized quarterly sales basis. Non-cash adjustments to net