Vallourec Sa · EURONEXT:VK
Vallourec Sa — Investor Presentation (September 2024)
42 slides from Vallourec Sa's investor presentation, September 2024
Slide 1: Investor Presentation
Investor Presentation September 2024
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: Investment Overview
Investment Overview YY vallourec
Slide 4: The Vallourec Investment Case
The Vallourec Investment Case 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 an
Slide 5: Vallourec's Strategic Journey
Vallourec’s Strategic Journey More Profitable, More Resilient, More Cash Generative Operational and Strategic Improvements Execution of the New Vallourec Plan Brazil Tubes performance enhancement Downsized activities in Europe & China Improved pricing policies and product mix Mine Phase 1 and Phase
Slide 6: Significantly Reshaped Production Footprint
Significantly Reshaped Production Footprint Changes resulting from the New Vallourec plan and subsequent Brazil optimization Closed ~700kt of rolling capacity and various finishing sites Premium finishing capacity North America Europe increased by 40kt Domestic Capacity for Finishing and Reduced rol
Slide 7: Strong Liquidity and Reduced Debt Following Refinancing
Strong Liquidity and Reduced Debt Following Refinancing Debt Liquidity Net Debt (€ Million) € Million 1,493 1,714 1,130 1,590 1,000 1,498 1,539 186 1,498 868 741 1,391 190 570 485 177 364 181 228 1,203 185 462 462 462 189 462 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 312 550 2022 2022 2023 2023 2023 2023 2024 2024 70
Slide 8: Our Capital Allocation Framework
Our Capital Allocation Framework Overarching Philosophy and Milestones Metric Objective Application Zero net debt • Net debt below €400m is now well within long-term sustainable range Target Leverage +/- 0.5x net debt / EBITDA • Must stay within leverage range after shareholder return 80 – 100% • In
Slide 9: Brazil Performance Program
2 Brazil Performance Program
Slide 10: Progressing Brazil Tubes Operations to Best-in-Class
Progressing Brazil Tubes Operations to Best-in-Class Key accomplishments and further initiatives Substantial improvement so far, but more to come Brazil Tubes EBITDA per Tonne Accomplishments in 2022 – 2023 >4.5x ✓ Redesigned organizational structure ✓ Executed major capex program as planned ✓ Deliv
Slide 11: Rationalization of Our Brazilian Production Footprint
Rationalization of Our Brazilian Production Footprint Streamlining assets and retaining upside potential Tubes Production Capacity (Thousand Tonnes) • Optimizing our asset base To be reduced by 150kt • Jeceaba (500kt): state of the art, world-class rolling mill by year-end 2024 • Barreiro (450kt): t
Slide 12: Reducing Complexity and Operating Costs
Reducing Complexity and Operating Costs Driving efficiency in our operations Focusing product portfolio to enhance efficiency Active Industry & Process Stock-Keeping Units (SKUs) • Complexity reduction • Exiting low-margin Industry businesses where pricing 4,000 does not reflect high value-add (21%)
Slide 13: Creating the Platform for Profitable Future Growth
Creating the Platform for Profitable Future Growth Capitalizing on Future Demand Improving Production Efficiency • Strong demand pipeline in global premium OCTG • Manufacturing process improvements underway and PLP export markets with further upside to benchmark utilization • Significant progress in
Slide 14: Operations & Financials
Operations & Financials b valiourec
Slide 15: Supplier of Mission-Critical Premium Seamless Tubular Solutions
Supplier of Mission-Critical Premium Seamless Tubular Solutions Focused on high-end seamless tubular solution Highly demanding applications for our products Vallourec Focus Vertical Well Commercial Airline Section Cruising Altitude Up to 10,000 meters ~10,000 meters Welded Tubes Seamless Tubes Mount
Slide 16: 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 17: The Value of R&D: New Solutions and New Markets
The Value of R&D: New Solutions and New Markets VM130 MS X80 HW Extreme X65 HW for LP Collapse for LP Steel Grades VAM® VAM® SLIJ-3 VAM® SPRINT CLEANWELL® CLEANWELL® Composite New SPRINT T&C Premium T&C SF-FJ Integrals Tubing Connections Connections Oil & Gas Solutions Intelligent In-Pipe Pre-Instal
Slide 18: Technology Unlocks High-Value Markets
Technology Unlocks High-Value Markets Gaining Access to Value-Added Markets Advanced Technology Drives Higher Added Value Market Price ($ / tonne) • Value over Volume strategy emphasizes participation in markets where we are well-positioned due to: 8,000 • Technology 7,000 • Geography or trade 6,000
Slide 19: 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 20: 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 20
Slide 21: Mine Earnings Power and Growth Potential
Mine Earnings Power and Growth Potential 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 production business
Slide 22: Midcycle Cash Flow Simulation: Significant Potential Returns
Midcycle Cash Flow Simulation: Significant Potential Returns Metric Assumption Comments EBITDA (€) Tubes €750m Mine & Forest €125m Holding & Other, Intersegment (€25m) Group EBITDA €850m Cash Flows (€) Capital expenditures €175m Including mine extensions, can reduce to ~€125m in downturn Financial c
Slide 23: 2024 Earnings, Cash Flow and Net Debt Outlook
2024 Earnings, Cash Flow and Net Debt Outlook Third Quarter 2024 Full Year 2024 Revenues to decrease sequentially due to lower Strong international market environment to Tubes US shipments and pricing as well as persist, more than offset by lower US demand Q4-weighted international shipment schedule
Slide 24: Cash Flow Modeling Items for 2024
Cash Flow Modeling Items for 2024 Mid-Year 2024 Update Prior View Updated View Financial Approximately €100m Approximately €100m cash out Mid-to-high 20% cash tax rate Low-to-mid 20% cash tax rate Tax payments relative to reported pre-tax income relative to reported pre-tax income Capital Approximat
Slide 25: Market Dynamics
Market Dynamics YY vallourec
Slide 26: 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 $2k1 2023E Total Market Size (mt) 9.6 4.4 Not Analyzed High-Growth Emerging Market 2023E Served Market Size (mt) 5.4 1.1 0.4 % o
Slide 27: Limited Set of Premium Seamless Tube Suppliers
Limited Set of Premium Seamless Tube Suppliers Tier 1 Global Suppliers ~6 million tonnes annual production Suppliers Unable to Access Global Premium Market Regional Western Suppliers Asia and CIS Suppliers ~2.5 million tonnes annual production >10 million tonnes annual production Note: reflects prod
Slide 28: Major Seamless OCTG Markets
Major Seamless OCTG Markets 2023 Market Size (Million Tonnes) CIS North America 1.3 Europe 0.2 2.9 China 2.9 1.0 Africa 0.3 Middle East Asia Pacific 0.5 Ex-China 0.5 South America Dominant Connection Technology Proprietary API Sources: Internal market intelligence based on public peer commentary, Ry
Slide 29: US OCTG Market: Still Feeling The Effects of Muted Demand
US OCTG Market: Still Feeling The Effects of Muted Demand Gas rig count remains weak Diverging trends in US imports Spot pricing down in Q2 US Horizontal Rig Count Monthly OCTG Imports Seamless OCTG Price ($ / Tonne) Oil (L Axis) Gas (R Axis) All Others Major Welded Importers 3,538 600 160 350 2,992
Slide 30: International OCTG Market: Stable at Healthy Levels
International OCTG Market: Stable at Healthy Levels Robust onshore and offshore drilling activity International market pricing remains strong Onshore Rig Count Offshore Rig Count* Seamless OCTG Price ($ / Tonne) Onshore (L Axis) Offshore (R Axis) Middle East North Sea 3,500 800 600 3,000 3,000 2,800
Slide 31: Tubes Revenue Mix by Quarter
Tubes Revenue Mix by Quarter Revenues balanced across core regions Increased focus on oil & gas markets % of Tubes Revenues and Absolute Revenues (€ millions) % of Tubes Revenues and Absolute Revenues (€ millions) North America South America Middle East Rest of World Oil & Gas and Petrochemicals Ind
Slide 32: Significant Growth Potential in Our New Energies Business
Significant Growth Potential in Our New Energies Business Carbon Capture, Utilization and Geothermal Hydrogen Storage (“CCUS”) Primary Tubes Casing for Casing and tubing for CO2 injection wells; H2 storage systems; transportation Application geothermal wells transportation line pipes line pipes Heat
Slide 33: Delphy Vertical H2 Storage: Superior Intermediate Scale Solution
Delphy Vertical H2 Storage: Superior Intermediate Scale Solution Competition has higher costs or other drawbacks Delphy is a superior-cost solution in its target range € / kgH2 Delivered Solution Capex Opex Other Factors 3.0 Low-pressure Not scalable 2.5 gaseous High-pressure Higher safety risk 2.0
Slide 34: Financial Data
Financial Data b valiourec
Slide 35: Summary Income Statement
Summary Income Statement € million, unless noted 2019 2020 2021 2022 1Q23 2Q23 3Q23 4Q23 2023 1Q24 2Q24 Revenues 4,173 3,242 3,442 4,883 1,338 1,358 1,142 1,276 5,114 990 1,085 Cost of sales (3,435) (2,634) (2,605) (3,807) (926) (890) (818) (886) (3,520) (669) (774) Industrial margin 738 608 837 1,0
Slide 36: Summary Balance Sheet
Summary Balance Sheet € million, unless noted 2019 2020 2021 2022 1Q23 2Q23 3Q23 4Q23 2023 1Q24 2Q24 Goodw ill & intangible assets 427 74 83 76 89 89 87 82 82 80 73 PP&E and biological assets 2,705 1,748 1,790 1,891 1,871 1,923 1,960 2,050 2,050 2,040 1,944 Other non-current assets 509 357 443 442 4
Slide 37: Cash Flow Summary
Cash Flow Summary € million, unless noted 2019 2020 2021 2022 1Q23 2Q23 3Q23 4Q23 2023 1Q24 2Q24 EBITDA 347 258 492 715 320 374 222 280 1,196 235 215 Non-cash items in EBITDA (22) 1 (37) (68) 13 (21) 11 (1) 2 10 (0) Financial cash out (234) (232) (228) (110) (18) (61) (8) (1) (88) 5 (65) Tax payment
Slide 38: Segment Key Performance Indicators
Segment Key Performance Indicators € million, unless noted 2021 1Q22 2Q22 3Q22 4Q22 2022 1Q23 2Q23 3Q23 4Q23 2023 1Q24 2Q24 Volume sold* 1,640 395 433 462 514 1,804 431 396 343 382 1,552 292 351 Revenue (€m) 3,030 902 1,096 1,197 1,467 4,663 1,258 1,279 1,068 1,196 4,802 932 1,030 Tubes Average Sell
Slide 39: 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 40: 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 41: 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
Slide 42: Share Information and Financial Calendar
Share Information and Financial Calendar Share Information Financial Calendar Euronext Paris • November 15th, 2024: Publication of Third ISIN code: FR0013506730 Quarter and Nine-Month 2024 Results Ticker: VK Upcoming Investor Events USA: American Depositary Receipt (ADR) • September 5th, 2024: Jeffe