Vallourec Sa · EURONEXT:VK
Vallourec Sa — Q3 2022 Earnings Presentation
29 slides from Vallourec Sa's earnings presentation, Nov 21, 2022
Slide 1: Third Quarter 2022 Results
Third Quarter 2022 Results November 21, 2022 27 July, 2022 1
Slide 2: Legal Disclaimer
LEGAL DISCLAIMER Forward-Looking Statements This presentation may include 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”, “sh
Slide 3: Today's Agenda
TODAY’S AGENDA 1. Highlights of the Third Quarter 2. Strategy Execution: New Vallourec Plan 3. Market Environment and Business Development 4. Q3 2022 Results 5. FY 2022 Outlook and Key Takeways 3
Slide 4: 1. Highlights of the Third Quarter
1. HIGHLIGHTS OF THE THIRD QUARTER ► Q3 EBITDA of €198 million, +55% year-over-year, and +24% quarter-over-quarter Solid Q3 ► Positive trajectory of worldwide Tube business, especially in the U.S. performance ► Iron Ore mine production of 1.5mt; civil works for restoration of core Cachoeirinha pile
Slide 5: 2. Strategy Execution: New Vallourec Plan
2. STRATEGY EXECUTION: NEW VALLOUREC PLAN 5
Slide 6: New Vallourec Plan Objectives
NEW VALLOUREC PLAN OBJECTIVES Cycle-proof: Value over Volume: Positive FCF* even at Rationalize portfolio to drive bottom of cycle profitable growth Best-in-class profitability: Close margin gap with peers over the cycle *FCF before change in working capital 6
Slide 7: New Vallourec Journey
NEW VALLOUREC JOURNEY Completed / In Execution Financial restructuring (completed) New Vallourec transformation Vallourec New Energies ► €1.7bn debt reduction (in execution) (initiated) ► Refinanced legacy debt with 5-year ► Closure of German assets, ► Identify and exploit opportunities maturity not
Slide 8: German Plant Closures and Global Overhead Reduction Update
GERMAN PLANT CLOSURES AND GLOBAL OVERHEAD REDUCTION UPDATE Cumulative Global Headcount Reduction* ~3,000 ► Social plan agreements finalized in Germany, France and UK ► Major milestone achieved, substantially de-risking New Vallourec plan ► Financial impact in line with assumptions embedded in Q2 for
Slide 9: 3. Market Environment and Business Development
3. MARKET ENVIRONMENT AND BUSINESS DEVELOPMENT 9
Slide 10: Supportive Tube Business Environment
SUPPORTIVE TUBE BUSINESS ENVIRONMENT US Well Count and OCTG Consumption per Rig OCTG Price Evolution 1 800 500 +16% +18% $3,880 1 600 450 +12% 1 400 400 $3,356 1 200 350 $2,840 300 $2,536 1 000 $2,207 250 $2,008 800 $1,843 $1,717 200 600 150 400 100 200 50 - 0 Q4 21 Q1 22 Q2 22 Q3 22 Wells Drilled (
Slide 11: Tubes Business Development
TUBES BUSINESS DEVELOPMENT 2022 Tubes EBITDA per ton (€/t) New pricing actions drive profitability ► 2022 EBITDA reflects pricing policies implemented since Q2 2022 with a shorter lead time in the US • Comprehensive review of Company-wide pricing strategies implemented since Q2 2022 • New focus on v
Slide 12: Mine Business Development
MINE BUSINESS DEVELOPMENT Q1 2021 – Q1 2023 Mine Production (million tons) Restoration Progress “Cachoeirinha” Pile January 22 May 22 2.3 2.2 1.9 1.9 1.5 c.1.2 c.1.2 1.1 August 22 November 22 0.15 Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Production to continue in Q4 22/Q1 23 at c.55% Ci
Slide 13: 4. Q3 2022 Results
4. Q3 2022 RESULTS Y vallourec 13
Slide 14: Q3 2022 Key Figures
Q3 2022 KEY FIGURES TUBES VOLUMES (k tons) REVENUE (€ million) 1,281 462 834 +53.6% +18.2% Mine and Forest revenue 391 Tubes revenue Q3 2021 Q3 2022 Q3 2021 Q3 2022 EBITDA (€ million) FREE CASH FLOW (€ million) Q3 2021 Q3 2022 c.250 198 82 Mine normalized 18 128 EBITDA FCF before Working Mine and Fo
Slide 15: Q3 2022 Financial Highlights
Q3 2022 FINANCIAL HIGHLIGHTS ► EBITDA of €198 million, margin 15.4% Q3 2021 – Q3 2022 Revenue bridge (€ million) • €278 million Industrial margin, or 22% of revenue 214 (43) 1,281 o Highly favorable Oil & Gas market in North America and Middle East 134 o Negative impact from iron ore mine year-on-ye
Slide 16: Cash Flow Q3 2022
CASH FLOW Q3 2022 Q3 2022 EBITDA to FCF bridge (€ million) Q3 and Q4 2022 Free Cash Flow (€ million) 198 (36) > €80m 162 (8) (18) (28) 135 82 28 (135) (54) (81) Q3 2022 Provisions Cash EBITDA Interest Tax Restructuring Change in Capex Free Cash Restructuring Change in FCF before (81) EBITDA payments
Slide 17: Focus on Cash Flow and Working Capital
FOCUS ON CASH FLOW AND WORKING CAPITAL FCF before Working Capital and Restructuring/Other (€ million) Progression of Working Capital* (€ million) 1,660 82 1,471 1,190 1,010 940 48 5 Q1 2022 Q2 2022 Q3 2022 Q3 2021 FY2021 Q1 2022 Q2 2022 Q3 2022 Net Receivables/Payables Inventory Improving ongoing ca
Slide 18: Net Debt and Liquidity
NET DEBT AND LIQUIDITY € million ► Liquidity position as of September 30 2022 Net Debt Net Debt as of as of of €703 million: June 30 2022 Sept 30 2022 ► Cash of €291 million ► Revolving Credit Facility of €462 million o/w €412 million unutilized ► Liquidity position as of November 21 2022: ► Fully r
Slide 19: New Reporting Segmentation FY 2022 Onwards
NEW REPORTING SEGMENTATION FY 2022 ONWARDS Results, Assets and Liabilities by Operating Segment FY 2021* Holding Inter-segment in € million Tubes Mine and Forest companies and Total transactions others INCOME STATEMENT Revenue 3,030 469 186 (243) 3,442 EBITDA 148 358 (16) 2 492 Depreciation of indus
Slide 20: 5. FY 2022 Outlook and Key Takeaways
5. FY 2022 OUTLOOK AND KEY TAKEWAYS 20
Slide 21: Tube Business Environment
TUBE BUSINESS ENVIRONMENT NORTH AMERICA Q4 2022 2023 ► Highly favorable market conditions to continue through year-end and into 2023 ► OCTG market very tight in terms of available supply EUROPE-AFRICA & MIDDLE EAST- ASIA ► Oil & Gas in Middle East and Asia: ongoing volume recovery in the coming quar
Slide 22: 2022 EBITDA Outlook
2022 EBITDA OUTLOOK Quarterly 2022 EBITDA improvement driven by Tube FY 2022 EBITDA €650 to €750 million business (€ million) (€ million) 650-750 198 160 492 258 45 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2020 FY 2021 FY 2022 Tubes Mine and Forest Tubes Mine and Forest Group Guidance range Strong pick up
Slide 23: Key Takeaways
KEY TAKE AWAYS ► Another quarter-on-quarter increase in EBITDA in Q3 driven by tube business ► Mine continues to operate in Q4 and Q1 2023, albeit below full capacity; works related to restoration of Cachoeirinha pile completed* and request to release pile registered ► FY 2022 EBITDA guidance confir
Slide 24: Appendices
APPENDICES Y vallourec 24
Slide 25: Q3 2022 P&L
Q3 2022 P&L In € million Q3 2022 Q3 2021 Change Revenues 1,282 834 53.7% Cost of sales (1,004) (627) 60.1% Industrial Margin 278 207 34.3% (as a % of revenue) 21.7% 24.8% (3.1)p.p. Sales, general and administrative costs (77) (75) 2.7% (as a % of revenue) (6.0)% (9.0)% (3)p.p. Other (3) (4) na EBITD
Slide 26: Revenue Breakdown – Q3 2022
REVENUE BREAKDOWN – Q3 2022 REVENUE BY REGION As % of As % of In € million Q3 2022 Q3 2021 Change revenue revenue Europe 141 11.0% 139 16.6% 1.7% North America (Nafta) 546 42.6% 215 25.8% 153.4% South America 277 21.7% 302 36.2% (8.1)% Asia and Middle East 224 17.5% 142 17.0% 58.2% Rest of the world
Slide 27: Balance Sheet as at September 30th, 2022
BALANCE SHEET AS AT SEPTEMBER 30TH, 2022 In € million Assets 09/30/2022 12/31/2021 Liabilities 09/30/2022 12/31/2021 Equity - Group share * 1,767 1,763 Non-controlling interests 44 45 Net intangible assets 41 45 Total equity 1,811 1,808 Goodwill 42 38 Shareholder loan - - Net property, plant and equ
Slide 28: Indebtedness
INDEBTEDNESS In € million 09/30/2022 Bond issue – maturing in June 2026 1,143 PGE 218 RCF 50 ACC ACE 306 Other 67 TOTAL GROSS FINANCIAL INDEBTEDNESS 1,784 Cash 291 TOTAL NET FINANCIAL INDEBTEDNESS 1,493 28
Slide 29: Investor Relations Contact and Financial Calendar
► Euronext Paris: ISIN code: FR0013506730, ► Financial calendar: Ticker: VK • March 2, 2023 – Publication of Q4 and full-year 2022 USA: American Depositary Receipt (ADR) - ISIN results code: US92023R4074, Ticker: VLOWY ► Investor Relations Contact - Vallourec Group ► Conference and roadshow • Januar