Vallourec Sa · EURONEXT:VK
Vallourec Sa — Q1 2023 Earnings Presentation
40 slides from Vallourec Sa's earnings presentation, May 17, 2023
Slide 1: First Quarter 2023 Results
First Quarter 2023 Results May 17th, 2023 1
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 1. Q1 2023 Highlights 2. New Vallourec Plan Update 3. Market & Commercial Environment 4. Q1 2023 Results Review 5. Q2 and FY 2023 Outlook and Key Takeaways 3
Slide 4: Q1 2023 Highlights
y vallourec | Q1 2023 HIGHLIGHTS
Slide 5: First Quarter 2023 Highlights
FIRST QUARTER 2023 HIGHLIGHTS ➢ EBITDA of €320m (up €275m YoY (a)) driven by robust Tubes profitability and Mine volume recovery • Tubes EBITDA of €279m (up €223m YoY) supported by 28% YoY average selling price increase • Mine & Forest EBITDA of €48m (up €46m YoY) aided by ~1.4m tonne YoY volume rec
Slide 6: Furthering Our ESG Advantage
FURTHERING OUR ESG ADVANTAGE UPGRADES IN OUR EXTERNAL RATINGS PROGRESS IN OUR EMISSIONS REDUCTION PLANS* 2021 2022 Million tonnes CO2e emissions (Scope 1+2) 1.6 1.8 1.5 1.3 Climate A- A- 1.2 1.2 1.2 Water B A- 2017 2018 2019 2020 2021 2022 2025 Further reduction (base) (target) Forest C B- ahead due
Slide 7: New Vallourec Plan Update
y vallourec M4 NEW VALLOUREC PLAN UPDATE
Slide 8: Reminder: New Vallourec Plan Objectives
REMINDER: NEW VALLOUREC PLAN OBJECTIVES TARGET INDUSTRIAL FOOTPRINT IN 2024 SUMMARY OF THE NEW VALLOUREC PLAN NORTH AMERICA Key Objectives: Steel-making capacity: 750k tonnes Rolling capacity: 750k tonnes EASTERN HEMISPHERE ➢ Cycle-Proof our Business: Generate through-cycle FCF(a) Rolling capacity:
Slide 9: New Vallourec Plan: Key Year One Actions
NEW VALLOUREC PLAN: KEY YEAR ONE ACTIONS Key Plan Levers First Year Actions ➢ Strengthened pricing policies Emphasizing ➢ Reinforced focus on contract terms Value over Volume ➢ Realized 28% YoY increase in Tubes average selling price ➢ Finalized social plans for European Targeting Reshaping asset cl
Slide 10: New Vallourec Plan: Near-Term Updates
NEW VALLOUREC PLAN: NEAR-TERM UPDATES German Brazil Capex Asset Program Closures ➢ Primary phase of capex program ➢ Order backlog largely in hand for now underway 2023 production plan; ramp-down remains on schedule ➢ Plan in place to mitigate shipment disruptions during transformational ➢ Sale proce
Slide 11: Market & Commercial Environment
3 MARKET & COMMERCIAL ENVIRONMENT 11
Slide 12: U.S. OCTG Market: Range-Bound and Profitable
U.S. OCTG MARKET: RANGE-BOUND AND PROFITABLE U.S. HORIZONTAL LAND RIG COUNT U.S. SEAMLESS OCTG PRICE EVOLUTION Rig count $/tonne 750 4,277 4,354 4,062 3,708 650 3,130 550 450 350 250 Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Source: Baker Hughes Source: Pipe Logix. Average of all U.S. seamless price indicators
Slide 13: International OCTG Market: Continued Growth
INTERNATIONAL OCTG MARKET: CONTINUED GROWTH INTERNATIONAL RIG COUNT MIDDLE EAST SEAMLESS OCTG PRICE EVOLUTION Onshore rig count Offshore rig count $/tonne 2,367 800 250 2,283 Onshore (L Axis) Offshore (R Axis) 2,207 2,008 1,843 700 225 600 200 500 175 400 150 Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Source: Ba
Slide 14: Continued Tubes Profitability Growth
CONTINUED TUBES PROFITABILITY GROWTH TUBES PROFITABILITY PROGRESSION KEY HIGHLIGHTS EBITDA / tonne (€) ➢ Solid Q1 result driven by robust pricing in the U.S. and strong execution in Eastern Hemisphere 648 • Volumes down slightly in the U.S. as we prioritized price 554 over tonnage, consistent with o
Slide 15: Mine and Forest: Returning to Full Production
MINE AND FOREST: RETURNING TO FULL PRODUCTION MINE PRODUCTION EVOLUTION KEY HIGHLIGHTS Million tonnes ➢ Meaningful QoQ and YoY improvement in Q1 2023 driven by volume growth and higher pricing 2.3 • Global iron ore pricing was resilient due to China demand 2.2 • Substantial YoY volume increase refle
Slide 16: First Quarter Results Review
4 FIRST QUARTER RESULTS REVIEW 16
Slide 17: Revised Free Cash Flow Reporting Rationale
REVISED FREE CASH FLOW REPORTING RATIONALE PRIOR DISCLOSURE REVISED DISCLOSURE KEY HIGHLIGHTS € million Q1 2022 € million Q1 2022 ✓ Reporting transparency enhanced: EBITDA 45 EBITDA 45 Provisions in EBITDA 19 Non-cash items in EBITDA 20 ✓ Restructuring cash costs and Cash EBITDA 64 Financial cash ou
Slide 18: Q1 2023 Group Key Figures
Q1 2023 GROUP KEY FIGURES REVENUES EBITDA € million € million 1,338 320 916 +46% +275 45 Q1 2022 Q1 2023 Q1 2022 Q1 2023 ADJUSTED FREE CASH FLOW NET DEBT € million € million 1,130 194 1,000 (130) +404 (210) Q1 2022 Q1 2023 Q4 2022 Q1 2023 Revenue and EBITDA growth driven by improved profitability in
Slide 19: Q1 2023 Tubes Production and Revenues
Q1 2023 TUBES PRODUCTION AND REVENUES VOLUME SOLD REVENUES AVERAGE SELLING PRICE k tonnes € million 1,258 € million 431 2,919 395 +9% 902 +40% 2,284 +28% Q1 2022 Q1 2023 Q1 2022 Q1 2023 Q1 2022 Q1 2023 Q1 2023 REVENUES BY GEOGRAPHY Q1 2023 REVENUES BY SEGMENT 2% North America Oil & Gas and 24% 17% P
Slide 20: Q1 2023 Tubes Profitability
Q1 2023 TUBES PROFITABILITY EBITDA AND EBITDA MARGIN EBITDA PER TONNE € million and % of revenues € / tonne 279 648 +223 +506 22% 56 142 6% Q1 2022 Q1 2023 Q1 2022 Q1 2023 Substantial increase in Tubes profitability driven largely by higher pricing Please see “Definitions of Non-GAAP Financial Data”
Slide 21: Q1 2023 Mine and Forest Performance
Q1 2023 MINE AND FOREST PERFORMANCE PRODUCTION SOLD AVERAGE QUARTERLY IRON ORE PRICES Million tonnes $ / tonne 141 125 1.5 (16) +1.4 0.1 Q1 2022 Q1 2023 Q1 2022 Q1 2023 Source: Platts, CFR China 62% Fe ($/tonne) REVENUES EBITDA € million € million and % of revenues 93 48 +69 24 8% +46 52% 2 Q1 2022
Slide 22: Q1 2023 Group Financial Highlights
Q1 2023 GROUP FINANCIAL HIGHLIGHTS YoY REVENUE BRIDGE YoY EBITDA BRIDGE € million € million 46 275 241 55 1,338 320 (25) (50) 44 81 916 17 13 45 Q1 2022 Forex Volume Price / Mix Mine & Q1 2023 Q1 2022 Forex Volume Price / Cost Mine & Other Q1 2023 Forest Mix Inflation Forest Q1 2023 EBITDA TO NET IN
Slide 23: Group Cash Flow Bridge
GROUP CASH FLOW BRIDGE Q1 2023 CASH FLOW BRIDGE: EBITDA TO CHANGE IN NET DEBT € million 13 320 (18) 299 (16) (52) 194 (53) 4 151 (47) 130 (21) EBITDA Non-cash Financial Tax Adj. Chg. in Gross Adj. Restruct. Asset Total Non-cash (Increase) items in cash out payments operating working capital free cas
Slide 24: 2023 Outlook & Key Takeaways
5 2023 OUTLOOK & KEY TAKEAWAYS 24
Slide 25: Earnings and Cash Flow Outlook
EARNINGS AND CASH FLOW OUTLOOK ➢ Tubes: expect robust revenues as Int’l price improvement offsets moderate sequential U.S. decline ➢ Mine and Forest: mine to return to full production in Q2 2023; sequential volume increase to be offset by lower market prices ➢ EBITDA to be similar to Q1 2023 and up
Slide 26: Key Takeaways
KEY TAKEAWAYS ➢ Strong Q1 2023 earnings and total cash generation driven by favorable market conditions, Value over Volume strategy and strong execution ➢ New Vallourec plan remains on track to deliver €230m of recurring EBITDA savings starting Q2 2024 ➢ Execution of major Brazil capital program und
Slide 27: Appendices
APPENDICES y vallourec 27
Slide 28: Analyst Toolkit
ANALYST TOOLKIT EBITDA To improve vs. 2022 Cash Flow Items: Tax payments Higher than 2022 Gross capital expenditures ~€220m of which: Recurring investment ~€150m of which: New Vallourec implementation ~€70m Restructuring charges & non-recurring items <€350m Please see “Definitions of Non-GAAP Financ
Slide 29: Key Performance Indicators
KEY PERFORMANCE INDICATORS Holding co. and Inter-segment Tubes Mine and Forest Total other transactions Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 % chg. % chg. % chg. % chg. % chg. 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Volume sold* 431 395 9% 1.5 0.1 nm Revenue (€m) 1,258 902 40% 93 24 nm 46 47 (2%)
Slide 30: Tubes Revenues Breakdown
TUBES REVENUES BREAKDOWN REVENUE BY REGION QoQ YoY in € million Q1 2023 Q4 2022 Q1 2022 % chg. % chg. Europe 152 137 162 11% (6%) North America 658 744 346 (12%) 90% Middle East 112 111 94 1% 19% Asia 54 111 75 (51%) (28%) South America 189 241 190 (22%) (0%) Rest of World 92 123 35 (25%) 163% Total
Slide 31: Income Statement
INCOME STATEMENT € million, unless noted Q1 2023 Q4 2022 Q1 2022 QoQ chg. YoY chg. Revenues 1,338 1,541 916 (203) 422 Cost of sales (926) (1,126) (787) 200 (139) Industrial margin 412 415 129 (3) 283 (as a % of revenue) 30.8% 26.9% 14.1% 3.9 pp 16.7 pp Selling, general and administrative expenses (7
Slide 32: Balance Sheet
BALANCE SHEET In € million Assets 31-Mar-23 31-Dec-22 Liabilities 31-Mar-23 31-Dec-22 Equity - Group share 1,812 1,643 Net intangible assets 49 37 Non-controlling interests 43 42 Goodwill 40 40 Total equity 1,855 1,685 Net property, plant and equipment 1,805 1,829 Bank loans and other borrowings (A)
Slide 33: Cash Flow Summary
CASH FLOW SUMMARY In € million Q1 2023 Q4 2022 Q1 2022 QoQ chg. YoY chg. EBITDA 320 312 45 8 275 Non-cash items in EBITDA 13 (13) 20 26 (7) Financial cash out (18) (63) (4) 45 (14) Tax payments (16) (23) (21) 7 5 Adjusted operating cash flow 299 213 40 86 259 Change in working capital (52) 183 (216)
Slide 34: Financial Indebtedness and Liquidity
FINANCIAL INDEBTEDNESS AND LIQUIDITY FINANCIAL INDEBTEDNESS In € million 31-Mar-23 31-Dec-22 8.500% Bonds due 2026 1,128 1,135 1.837% PGE due 2027 222 220 Revolving credit facility (RCF) (a) 150 – (b) ACC ACE 326 282 Other 68 43 Total gross financial indebtedness 1,894 1,681 Cash and cash equivalent
Slide 35: Old vs. New Cash Flow Metric Reconciliation (Q1 2022)
OLD VS. NEW CASH FLOW METRIC RECONCILIATION (Q1 2022) Q1 2022 Free Cash Flow Reconciliation Restructuring Other Non-cash Other Prior & non- Capital investing and New Prior Naming Convention items in financial cash Current Naming Convention Format recurring expenditures financing Format EBITDA (a) im
Slide 36: Old vs. New Cash Flow Metric Reconciliation (FY 2022)
OLD VS. NEW CASH FLOW METRIC RECONCILIATION (FY 2022) FY 2022 Free Cash Flow Reconciliation Restructuring Other Non-cash Other Prior & non- Capital investing and New Prior Naming Convention items in financial cash Current Naming Convention Format recurring expenditures financing Format EBITDA (a) im
Slide 37: Definitions of Non-GAAP Financial Data
DEFINITIONS OF NON-GAAP FINANCIAL DATA 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 capital expen
Slide 38: Definitions of Non-GAAP Financial Data
DEFINITIONS OF NON-GAAP FINANCIAL DATA 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 working capit
Slide 39: Definitions of Non-GAAP Financial Data
DEFINITIONS OF NON-GAAP FINANCIAL DATA Operating working capital requirement includes working capital requirement as well as other receivables and payables. Restructuring charges and non-recurring items consists primarily of the cash costs of executing the New Vallourec plan, including severance cos
Slide 40: Save the date: Capital Markets Day, September 12th, 2023
➢ Euronext Paris: ISIN code: FR0013506730, Ticker: VK ➢ USA: American Depositary Receipt (ADR) - ISIN code: US92023R4074, Ticker: VLOWY ➢ Investor Relations Contact - Vallourec Group • Email: Connor.Lynagh@vallourec.com • Alternate: investor.relations@vallourec.com • www.vallourec.com ➢ Financial Ca