Vallourec Sa · EURONEXT:VK
Vallourec Sa — Q2 2023 Earnings Presentation
35 slides from Vallourec Sa's earnings presentation, Jul 28, 2023
Slide 1: Second Quarter 2023 Results
Second Quarter 2023 Results July 28th, 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. Q2 2023 Highlights 2. New Vallourec Plan Update 3. Market & Commercial Environment 4. Q2 2023 Results Review 5. 2023 Outlook and Key Takeaways 3
Slide 4: Q2 2023 Highlights
y vallourec | Q2 2023 HIGHLIGHTS
Slide 5: Second Quarter 2023 Highlights
SECOND QUARTER 2023 HIGHLIGHTS ➢ EBITDA of €374m (up €214m YoY (a)) driven by robust Tubes profitability and Mine volume recovery • Tubes EBITDA of €330m (up €201m YoY) supported by 27% YoY average selling price increase • Mine & Forest EBITDA of €50m (stable YoY): ~0.9m tonne YoY increase in produc
Slide 6: New Vallourec Plan Update
y vallourec M4 NEW VALLOUREC PLAN UPDATE
Slide 7: 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 8: New Vallourec Plan: Near-Term Updates
NEW VALLOUREC PLAN: NEAR-TERM UPDATES German Brazil Capex Asset Program Closures ➢ Primary phase of capex program ➢ Ramp-down of production largely completed, with incremental activities progressing ahead of projects continuing through the end of schedule; tube production to stop in the year Q4 2023
Slide 9: Market & Commercial Environment
3 MARKET & COMMERCIAL ENVIRONMENT 9
Slide 10: US OCTG Market: Headwinds Slowing
US OCTG MARKET: HEADWINDS SLOWING US HORIZONTAL US SEAMLESS US OCTG RIG COUNT OCTG PRICE EVOLUTION IMPORT TRENDS Rig count $/tonne Monthly OCTG Imports (k tonnes) 300 800 4,277 4,354 4,062 3,708 250 3,538 700 200 600 150 500 100 400 50 300 – Jun-21 Jun-22 Jun-23 Mar-22 Mar-23 Sep-21 Dec-21 Sep-22 De
Slide 11: International OCTG Market: Strong Demand
INTERNATIONAL OCTG MARKET: STRONG DEMAND INTERNATIONAL RIG COUNT SEAMLESS OCTG PRICE EVOLUTION Onshore rig count Offshore rig count $/tonne Middle East North Sea 800 Onshore (L Axis) Offshore (R Axis) 250 2,920 3,000 700 225 2,750 2,583 2,583 2,270 2,283 2,367 2,207 2,008 600 200 500 175 400 150 Q2
Slide 12: Continued Tubes Profitability Growth
CONTINUED TUBES PROFITABILITY GROWTH TUBES PROFITABILITY PROGRESSION KEY HIGHLIGHTS ➢ Solid Q2 result driven by robust pricing in the US and strong EBITDA / tonne (€) execution in Eastern Hemisphere 832 • Middle East a key bright spot in the quarter, with sequential improvement in Brazil also contri
Slide 13: Mine & Forest: Stable Results in Q2
MINE & FOREST: STABLE RESULTS IN Q2 MINE PRODUCTION SOLD EVOLUTION KEY HIGHLIGHTS Million tonnes ➢ Flattish QoQ and YoY results in Q2 2023 due to volume growth offset by lower market pricing • Global iron ore pricing remained resilient but down modestly 2.2 versus first quarter 2.1 1.9 1.9 • Mine re
Slide 14: Second Quarter Results Review
4 SECOND QUARTER RESULTS REVIEW 14
Slide 15: Q2 2023 Group Key Figures
Q2 2023 GROUP KEY FIGURES REVENUES EBITDA € million € million 1,358 374 1,144 +19% +214 160 Q2 2022 Q2 2023 Q2 2022 Q2 2023 ADJUSTED FREE CASH FLOW NET DEBT € million 174 € million 1,000 868 (132) +313 (139) Q2 2022 Q2 2023 Q1 2023 Q2 2023 Revenue and EBITDA growth driven by improved profitability i
Slide 16: Q2 2023 Tubes Production and Revenues
Q2 2023 TUBES PRODUCTION AND REVENUES VOLUME SOLD AVERAGE SELLING PRICE REVENUES k tonnes €/tonne € million 433 3,226 1,279 396 1,096 (8%) 2,531 +27% +17% Q2 2022 Q2 2023 Q2 2022 Q2 2023 Q2 2022 Q2 2023 Q2 2023 REVENUES BY GEOGRAPHY Q2 2023 REVENUES BY SEGMENT 3% North America Oil & Gas and 18% 16%
Slide 17: Q2 2023 Tubes Profitability
Q2 2023 TUBES PROFITABILITY EBITDA AND EBITDA MARGIN EBITDA PER TONNE € million and % of revenues € / tonne 330 832 +201 +534 26% 129 298 12% Q2 2022 Q2 2023 Q2 2022 Q2 2023 Substantial increase in Tubes profitability driven largely by higher pricing Please see “Definitions of Non-GAAP Financial Dat
Slide 18: Q2 2023 Mine & Forest Performance
Q2 2023 MINE & FOREST PERFORMANCE PRODUCTION SOLD AVERAGE QUARTERLY IRON ORE PRICES Million tonnes $ / tonne 1.9 138 (27) 111 +0.9 1.0 Q2 2022 Q2 2023 Q2 2022 Q2 2023 Source: Platts, CFR China 62% Fe ($/tonne) REVENUES EBITDA € million € million and % of revenues 93 51 50 68 +25 (1) 74% 54% Q2 2022
Slide 19: Q2 2023 Group Financial Highlights
Q2 2023 GROUP FINANCIAL HIGHLIGHTS YoY REVENUE BRIDGE YoY EBITDA BRIDGE € million € million 23 1,358 44 374 306 187 1,144 (41) (1) (25) (90) 160 29 (4) Q2 2022 Forex Volume Price / Mix Mine & Q2 2023 Q2 2022 Forex Volume Price / Cost Mine & Other Q2 2023 Forest Mix Inflation Forest SG&A EXPENSE TREN
Slide 20: Group Cash Flow Bridge
GROUP CASH FLOW BRIDGE Q2 2023 CASH FLOW BRIDGE: EBITDA TO CHANGE IN NET DEBT € million 374 (21) (61) 232 8 (60) 174 (66) 118 14 132 3 (59) 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 cash &
Slide 21: 2023 Outlook & Key Takeaways
5 2023 OUTLOOK & KEY TAKEAWAYS 21
Slide 22: Earnings and Cash Flow Outlook
EARNINGS AND CASH FLOW OUTLOOK ➢ Tubes: Expect to see lower sales volumes and prices in the US market, slightly offset by higher international pricing ➢ Mine & Forest: Production sold likely to remain slightly less than normal cadence with production costs Q3 2023 at the high end of the recent range
Slide 23: Key Takeaways
KEY TAKEAWAYS ➢ Strong Q2 2023 earnings and total cash generation driven by favorable market conditions, Value over Volume strategy and strong execution ➢ Iron ore mine returning to higher production levels though expected to operate below its full potential in the second half of 2023 ➢ Cross-curren
Slide 24: Appendices
APPENDICES y vallourec 24
Slide 25: Analyst Toolkit
ANALYST TOOLKIT EBITDA €950m - €1,100m Cash Flow Items Financial cash out ~€150m Tax payments Higher YoY 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
Slide 26: Key Performance Indicators
KEY PERFORMANCE INDICATORS Holding co. and Inter-segment Tubes Mine & Forest Total other transactions Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 % chg. % chg. % chg. % chg. % chg. 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Volume sold* 396 433 (8%) 1.9 1.0 93% Revenue (€m) 1,279 1,096 17% 93 68 36% 51 60
Slide 27: Tubes Revenues Breakdown
TUBES REVENUES BREAKDOWN REVENUE BY REGION QoQ YoY in € million Q2 2023 Q1 2023 Q2 2022 % chg. % chg. North America 663 658 460 1% 44% South America 229 189 213 21% 8% Middle East 157 112 110 40% 43% Europe 102 152 172 (33%) (41%) Asia 73 54 102 35% (29%) Rest of World 56 92 39 (40%) 42% Total Tubes
Slide 28: Income Statement
INCOME STATEMENT € million, unless noted Q2 2023 Q1 2023 Q2 2022 QoQ chg. YoY chg. Revenues 1,358 1,338 1,144 20 214 Cost of sales (890) (926) (890) 36 – Industrial margin 468 412 254 56 214 (as a % of revenue) 34.5% 30.8% 22.2% 3.7 pp 12.3 pp Selling, general and administrative expenses (84) (79) (
Slide 29: Balance Sheet
BALANCE SHEET In € million Assets 30-Jun-23 31-Dec-22 Liabilities 30-Jun-23 31-Dec-22 Equity - Group share 2,026 1,643 Net intangible assets 47 37 Non-controlling interests 48 42 Goodwill 42 40 Total equity 2,074 1,685 Net property, plant and equipment 1,848 1,829 Bank loans and other borrowings (A)
Slide 30: Cash Flow Summary
CASH FLOW SUMMARY In € million Q2 2023 Q1 2023 Q2 2022 QoQ chg. YoY chg. EBITDA 374 320 160 54 214 Non-cash items in EBITDA (21) 13 (36) (34) 15 Financial cash out (61) (18) (34) (43) (27) Tax payments (60) (16) (17) (44) (43) Adjusted operating cash flow 232 299 73 (67) 159 Change in working capita
Slide 31: Financial Indebtedness and Liquidity
FINANCIAL INDEBTEDNESS AND LIQUIDITY FINANCIAL INDEBTEDNESS In € million 30-Jun-23 31-Dec-22 8.500% Bonds due 2026 1,121 1,135 1.837% PGE due 2027 224 220 (a) ACC ACE 332 282 Other 47 43 Total gross financial indebtedness 1,724 1,681 Cash and cash equivalents 855 552 Total net financial indebtedness
Slide 32: 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 33: 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 34: 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 35: Capital Markets Day, September 12th, 2023 in London
➢ 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