Vallourec SA · EURONEXT:VK
Vallourec SA — Q1 2011 Earnings Presentation
47 slides from Vallourec SA's earnings presentation, May 2011
Slide 1: Q1 2011 results
Q1 2011 results Investor Presentation May 2011
Slide 2: Information
Information Quarterly statements are unaudited and are not subject to any review. Unless otherwise specified, indicated variations are expressed in comparison with the same period of the previous year. Information and Forward-Looking Reflections This document contains forward-looking reflections and
Slide 3: Agenda
1. Market environment and Q1 highlights 2. Financial results 3. Review by activity 4. Outlook 3 Q1 2011 Results
Slide 4: 1. Market environment and Q1 highlights
1.Market environment and Q1 highlights 4 Q1 2011 Results
Slide 5: Key market indicators
Key market indicators Oil prices rising Natural gas prices still low Q1’10 Q4’10 Q1’11 Change Avg YoY Avg Avg 12 120 Oil 10 100 Oil prices 78.6 85.1 93.5 +19% $ / MMbtu 8 80 $ / Bbl US$/bbl (WTI) 6 60 Gas prices 5.2 3.8 4.3 -17% 4 40 US$/MMbtu 2 20 (Henry Hub) US Gas 0 0 Scrap prices 232 284 343 +48
Slide 6: Key market indicators in the USA
Key market indicators in the USA USA Rig Count(1): 1,776 at 1 April 2011 • Actuals beat forecast so far 2000 this year 1500 1000 • +5% YTD Horizontal: +7% at 1,017 500 Directional: +8% at 228 0 Vertical: -1% at 531 Fe 8 A Ju A O 9 Fe 9 A Ju A O 0 Fe 0 D D D pr ug pr ug ct ct ec ec ec n- n- b- b- b-
Slide 7: Market environment
Market environment • Oil & Gas: USA Rig count continued to rise ahead of expectations, exceeding 1,800 rigs in April # oil rigs > # gas rigs Much of the growth in oil drilling has been horizontal wells drilled in tight zones Distributor OCTG inventories below 5 months • Oil & Gas: Rest of World OCTG
Slide 8: Q1 2011: Highlights
Q1 2011: Highlights • Strong year on year growth, but sequential dip as anticipated, due to deliveries concentrated in coming quarters • Bookings increased and order book lengthened during the quarter • Prices increases have been announced to gradually offset higher raw material costs • VSB successf
Slide 9: Q1 2011 Key figures
Q1 2011 Key figures Sales Volume +46% y-o-y Sales +31% y-o-y k tonnes -9% q-o-q € million -12% q-o-q 553 1 303 501 1 148 877 344 Q1 2010 Q4 2010 Q1 2011 Q1 2010 Q4 2010 Q1 2011 EBITDA 17.7% of sales Net income, Group share € million € million +35% y-o-y 261 -24% q-o-q 108 203 82 148 61 16.9% 20.0% 1
Slide 10: 2. Financial Results
2. Financial Results 10 Q1 2011 Results
Slide 11: Key figures
Key figures Q1 2011 Q4 2010 Q1 2010 Volume (k tonnes) 501 553 344 Change -9% +46% Sales € 1,148 m € 1,303m € 877 m Change -12% +31% EBITDA € 203 m € 261 m € 148 m (as % of sales) 17.7% 20.0 % 16.9 % Net income, Group share € 82 m € 108 m € 61 m Gross cash flow from € 74 m € 171 m € 84 m operations G
Slide 12: Volume and sales
Volume and sales +46% YoY Volume 740 696 - 9% QoQ 658 672 K tonnes 488 507 553 484 501 370 330 344 315 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 +31% YoY 1 820 -12% QoQ 1 620 1 613 Sales 1 384 1 313 1 303 1 122 1 189 1 148 1 082 € million 979 1 090 877 Q1 08 Q2 08
Slide 13: Sales evolution
Sales evolution Sales in € million +31% -12% +46% 1,148 1,303 +2% 1,148 877 +4% -21% -9% -3% Year on year Sequential Scope Volume Price / Mix Currency Q1 effect* effect effect translation Q1 Q4 Scope Volume Price / Mix Currency Q1 effect* effect effect translation 2010 effect 2011 2010 effect 2011 *
Slide 14: EBITDA
EBITDA € million Q1 2011 Q4 2010 % change QoQ Q1 2010 % change YoY Sales volume (k tonnes) 501 553 -9.5% 344 +45.6% Sales 1,147.8 1,302.9 -11.9 % 877.4 +30.8% Cost of sales (1) -794.5 -899.9 -11.7% -613.6 +29.5% As % of sales 69.2 % 69.1% 69.9 % Selling, general and -145.9 (2) -124.1 (2) +17.6% -108
Slide 15: Net income
Net income € million Q4 2010 % change Q1 2010 % change Q1 2011 QoQ YoY EBITDA 203.4 261.0 -22.1% 148.4 +37.1% Depreciation industrial assets -53.6 -52.6 -40.5 Other (amortization, impairment & restructuring) -7.9 -16.7 -9.2 Operating Income 141.9 191.7 -26.0% 98.7 +43.8% Financial Income -6.7 -12.7
Slide 16: Cash flow
Cash flow € million Q1 2011 Q4 2010 Q1 2010 Gross cash flow from operations 73.7 170.7 84.3 Change in gross WCR * -240.2 +25.7 -1.5 Operating cash flow -166.5 196.4 82.8 Gross capital expenditure -194.7 -342.4 -136.7 Financial investments 0.0 0.0 -16.2 Dividends paid -7.1 -12.6 -3.6 Asset disposals
Slide 17: Capital expenditure
Capital expenditure Planned € million Capex 873 677 529 438 Q1 Capex € 195 million 2007 2008 2009 2010 2011 Capex Capex relating to VSB Other strategic Capex 17 Q1 2011 Results
Slide 18: Other financial elements
Other financial elements At 31 March 2011: • Net debt of € 724 million Gearing ratio 15.2% • Liquidity profile 37% of the € 1,327 million bank loans and other borrowings have a maturity in excess of 2 years Undrawn confirmed credit lines of € 1.3 billion includes the February revolving credit facili
Slide 19: 3. Review by activity
3. Review by activity 19 Q1 2011 Results
Slide 20: Sales by application
Sales by application Q1 2011 Q1 2010 Sales = € 1,148 m Sales = € 877 m Automotive 7% Oil & Gas Automotive 7% Oil & Gas Mechanical 55% Mechanical 51% engineering 12% engineering 9% Other 7% Other 3% Petrochem. Petrochem. 7% 8% Power Power generation generation 12% 22% Total Energy*: 74% of sales Tota
Slide 21: Oil & Gas
Oil & Gas 55% of total sales Q1 2011 Sales € million 2,239 2,355 +41% YoY -13% QoQ 721 630 447 2009 2010 Q1'10 Q4'10 Q1'11 Consolidated sales include Serimax from 8 June 2010 21 Q1 2011 Results
Slide 22: Oil & Gas
Oil & Gas • United States Sales volume slightly below Q4 2010 Price increases applicable for Q2 and Q3 deliveries Strong end-user demand for finished goods (pipe + VAM connection) • Rest of the world Good level of activity, seasonal slowdown in Brazil Sales below Q4 2010, which included high deliver
Slide 23: Power Generation
Power Generation 12 % of total sales Q1 2011 Sales € million 1,155 780 - 29% YoY -34% QoQ 191 204 135 2009 2010 Q1'10 Q4'10 Q1'11 • Sales for coal fired power plants during the quarter affected by product mix • Overall bookings increasing for projects in China, India, Korea, Slovenia and Poland with
Slide 24: Petrochemicals
Petrochemicals 7% of total sales Q1 2011 Sales € million 365 357 +14% YoY - 24% QoQ 106 80 70 2009 2010 Q1'10 Q4'10 Q1'11 • Positive market in the Middle East, India and South-East Asia with major projects underway for delivery in the coming quarters 24 Q1 2011 Results
Slide 25: Non-Energy
Non-Energy 26% of total sales Q1 2011 Sales € million 12% 7% 7% 999 1000 900 Mechanical 800 416 • Sales driven by strong 705 engineering 700 +79% YoY demand from distributors 600 • Positive growth prospects 325 in industrial markets 500 +11 QoQ notably in Germany, 318 northern Europe, China, 400 Aut
Slide 26: 4. Outlook
4. Outlook 26 Q1 2011 Results | YE vatiourec
Slide 27: Outlook
Outlook H1 2011 Market indicators continue to be well oriented across all business activities and high deliveries are expected for Q2 Volume, sales, and EBITDA margin will increase in Q2 vs Q1 ▬ Impact of higher raw material costs = EBITDA margin in H1 2011 slightly below H2 2010 H2 2011 All mills o
Slide 28: Appendices
Appendices 28 Q1 2011 Results
Slide 29: 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 > 75% of sales • Over 20,000 employees, integrated manufacturing facilities, advanced R&D, and presence in more than 20
Slide 30: 2010 sales by activity and geographic region
2010 sales by activity and geographic region Sales = € 4,491 m Automotive 7% Oil & Gas France 4% North Mechanical 53% America engineering 9% Germany 14% 25% Other Other 6% E.U. 27 South 8% America Petrochem. Rest of 24% 8% the world Asia and the Power 8% Middle-East generation 17% 17% Non-E.U. : 74%
Slide 31: Growing demand for Energy
Growing demand for Energy World primary energy demand by fuel Historical Projected Total Energy Demand 2008 – 2035: +1.2% CAGR Source: International Energy Agency estimates – World Energy Outlook 2010 (New Policies Scenario) 31 Q1 2011 Results
Slide 32: Growing demand for Energy
Growing demand for Energy • End of “easy” oil & gas Field depletion request additional 3Mbpd capacity per year Deep offshore development in Brazil and West Africa Growing safety & environmental concerns More premium content, more innovation • Quest for energy independence China & USA: shale gas Chin
Slide 33: Vallourec Global Strategy: Invest where the growth is
Vallourec Global Strategy: Invest where the growth is New tube Nuclear China tubes mill in USA Nansha France Changzhou Tianda 2012 2011 Saudi Powergen Nuclear OCTG tubes Arabia OCTG 2012 2011 2013 threading 2011 PTCT Nigeria Indonesia OCTG VSB pipe 2009 threading and steel 2009 mill in Brazil 2011 D
Slide 34: Market trends: New reservoir challenges
Market trends: New reservoir challenges • Depletion of existing fields • New developments in challenging areas: Deeper wells More corrosive fields Directional / Horizontal wells More HP/HT wells More deep water offshore wells • Emergence of new applications: CO2 capture & storage Source: Douglas Wes
Slide 35: Our products for Oil & Gas
Our products for Oil & Gas • Oil Country Tubular Goods (OCTG) Casing – to consolidate the well Tubing – to convey oil & gas • VAM® Premium Premium connections Connections Premium Casing Gas-tight metal to metal connections Premium Tubing • Drill Pipes Premium Casing • Linepipes Accessories • Risers
Slide 36: Fit for purpose solutions for every environmental challenge
Fit for purpose solutions for every environmental challenge Shale Gas Deep Water Deep Well HPHT VAM® SG VAM® Riser VAM® 21 VAM® 21 Expandable 125SS Arctic Extended Reach Sour Gas Heavy Oil Salt Dome LT Grades Hydroclean SS CRA VAM® SW HC Grades CleanWell VAM® Express Grades VAM® Must VAM® HTF 36 Q1
Slide 37: 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 to Belo Horizonte VMB n Sa Drill pipe Espirito ito VSB pír Risers and flowlines Santo Es B
Slide 38: Ramping-up in 2011
Ramping-up in 2011 • First billet pierced in December 2010 • Successful completion of full tube production circuit in April 2011 • Next steps involve the start-up 2008 of the finishing mill and the commissioning of the steel mill 2009 (May) • First deliveries Q4 2011 • Progressive ramp-up to mid-201
Slide 39: 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 40: Ideally positioned to serve the Oil & Gas market in the USA
Ideally positioned to serve the Oil & Gas market in the USA Image: Statoilhydro Oil & Gas Shale Plays Casper, WY Youngstown, OH Muskogee, OK Houma, LA Houston, TX Image: Hart Energy Vallourec operations • Long-term relationships with distributors, large independents and international majors • Strong
Slide 41: Strengthening our presence and our offer in the Middle East
Strengthening our presence and our offer in the Middle East Regional Offer VAM Drilling Middle East, Dubai. Oct 2009. Cairo Local supply of drilling products and services certified for sour service Protools, Abu Dhabi. Feb 2010. Dammam Dubai Leading provider of drilling accessories Abu Dhabi in the
Slide 42: Strengthening our presence in China: New investments in 2010
Strengthening our presence in China: New investments in 2010 • 8 manufacturing and service facilities Power Power generation •• New generation New forge forge to to produce produce 60,000 60,000 • 500 employees tonnes tonnes of of large large diameter diameter seamless seamless pipes pipes in in • 6
Slide 43: Enhanced offer for Oil & Gas
Enhanced offer for Oil & Gas • Serimax: Leader in offshore welding solutions • Vallourec Umbilicals to meet the challenges of deep offshore New plant in France to produce welded stainless steel pipes for umbilicals (lines combining pipes, cables and optical fibres connecting equipment on the seabed
Slide 44: VAM Global Solutions
VAM Global Solutions Training programme Tubular Essentials Integrated Services Training & Supply Technical Chain Support From Mill Accessories & to Well Coordination Well Coordination Tube Alloy Repair Field services Services Licencee network VAM Field Services 164 Licencees Connection Expertise 44
Slide 45: Process innovation
Process innovation • Pilot rolling mill (Riesa, Germany) Inauguration – December 2010 Unique ability to simulate and investigate all critical steps in tube production Accelerator for the development of premium steel grades • Expansion of Research Centre in Brazil (Belo Horizonte) New laboratory test
Slide 46: Product innovation
Product innovation VAM® 21 VAM® SG Cleanwell Dry® For the most Specifically developed Family of dope-free critical applications for shale drilling lubricants for offshore, New market: Brazil (Gas & Oil) arctic and desert environments 46 Q1 2011 Results
Slide 47: Leader in Premium Tubular Solutions
Leader in Premium Tubular Solutions Investor Relations Department +33 1 49 09 39 76 www.vallourec.com Q1 2011 Results