Vallourec Sa · EURONEXT:VK
Vallourec Sa — Q2 2024 Earnings Presentation
40 slides from Vallourec Sa's earnings presentation, Jul 26, 2024
Slide 1: Q2 2024 Results
Q2 2024 Results July 26, 2024 vv valiourec
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: Agenda
Agenda Topic Speaker Slide 1 Q2 2024 Highlights Philippe Guillemot, Chairman of the Board & Chief Executive Officer 4 2 Market & Commercial Environment Philippe Guillemot, Chairman of the Board & Chief Executive Officer 12 3 Q2 2024 Results Review Sascha Bibert, Chief Financial Officer 17 4 Outlook
Slide 4: Q2 2024 Highlights
1 Q2 2024 Highlights Philippe Guillemot Chairman of the Board & Chief Executive Officer
Slide 5: Q2 2024 Highlights
Q2 2024 Highlights Results & Outlook Further Deleveraging and Resilient Margin • Second quarter 2024 results reflect strong international OCTG market and New Vallourec benefits • Group EBITDA was €215m (down €20m QoQ) with EBITDA margin of 20% • Tubes EBITDA per tonne of €599, above €550 for the sev
Slide 6: Structurally Improved Profitability and Sustainable Cash Generation
Structurally Improved Profitability and Sustainable Cash Generation Meaningfully improved profitability Consistent cash generation and net debt reduction Tubes EBITDA / Tonne (€) and Group EBITDA Margin € Million Tubes EBITDA / Tonne Group EBITDA margin Adj. FCF Net Debt 900 30% 1,493 28% 1,389 800
Slide 7: 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 8: 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 9: 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 10: 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 11: 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 12: Market & Commercial Environment
2 Market & Commercial Environment Philippe Guillemot Chairman of the Board & Chief Executive Officer
Slide 13: US OCTG Market: Still Feeling The Effects of Muted Demand
US OCTG Market: Still Feeling The Effects of Muted Demand Rig count fell ~7% in Q2 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 3
Slide 14: 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 15: Tubes Overview: Strong Profitability Despite US Market Dynamics
Tubes Overview: Strong Profitability Despite US Market Dynamics Tubes profitability remains on a solid level International market remains strong Tubes EBITDA / Tonne (€) • Another quarter of solid margin and EBITDA per 832 tonne reflecting New Vallourec plan benefits 751 • Multiple new major interna
Slide 16: Mine & Forest Overview: Phase 1 Extension Moving Ahead
Mine & Forest Overview: Phase 1 Extension Moving Ahead Mine production sold up slightly in Q2 Advancing Pau Branco mine extension projects Iron Ore Production Sold (Million Tonnes) • Expect a second half increase in production sold 1.9 • Q2 2024 production sold 1.4m tonnes 1.8 1.7 • Continue to expe
Slide 17: Q2 2024 Results Review
3 Q2 2024 Results Review Sascha Bibert Chief Financial Officer
Slide 18: Key Group Figures
Key Group Figures Revenues EBITDA € Million € Million 1,358 374 1,085 (20%) (43%) 215 Q2 2023 Q2 2024 Q2 2023 Q2 2024 Adjusted Free Cash Flow Net Debt € Million € Million 174 485 (€121m) 364 (53%) 81 Q2 2023 Q2 2024 Q1 2024 Q2 2024 Please see “Definitions of Non-GAAP Financial Data” in the Appendix
Slide 19: Tubes Production and Revenue Details
Tubes Production and Revenue Details Volume Sold Average Selling Price Revenues Thousand Tonnes € / Tonne € Million 396 3,226 3,189 1,279 1,196 382 3,115 3,130 2,937 343 351 1,068 1,030 292 932 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q2 2023 Q3 2023 Q4 2023 Q1
Slide 20: Tubes Profitability
Tubes Profitability EBITDA and EBITDA Margin EBITDA per Tonne € Million and % of Revenues € / Tonne 330 832 (28%) (36%) 599 26% 210 20% Q2 2023 Q2 2024 Q2 2023 Q2 2024 Please see “Definitions of Non-GAAP Financial Data” in the Appendix 20
Slide 21: Mine & Forest Performance
Mine & Forest Performance Production Sold Average Iron Ore Market Price1 Million Tonnes $ / Tonne (Quarterly Average) 1.9 111 112 0.3% (25%) 1.4 Q2 2023 Q2 2024 Q2 2023 Q2 2024 Revenues EBITDA € Million € Million and % of Revenues 93 50 (25%) 69 (€35)m 15 54% 22% Q2 2023 Q2 2024 Q2 2023 Q2 2024 Plea
Slide 22: Group Net Income Analysis
Group Net Income Analysis Net Income, Group Share (Q2 2024) Net Income Evolution € Million Net Income, Group Share (€ Million) 157 159 57 111 105 105 78 76 6 52 68 (35) 215 40 111 EBITDA D&A Financial Other Income tax Net (415) income income, (loss) Group Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 share 2022 202
Slide 23: Second Quarter 2024 Group Cash Flow Bridge
Second Quarter 2024 Group Cash Flow Bridge € Million 0 65 215 54 80 15 30 121 96 81 31 71 41 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 & non- disposals & cash adj. to net decrease EBI
Slide 24: Debt and Liquidity
Debt and Liquidity Debt Liquidity Net Debt (€ Million) € Million 1,493 1,714 1,590 1,130 1,498 1,539 1,498 1,000 186 868 741 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 703 462 Gross Debt (€ Million) 412 1,06
Slide 25: 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 26: 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 27: Outlook & Key Takeaways
4 Outlook & Key Takeaways Philippe Guillemot Chairman of the Board & Chief Executive Officer
Slide 28: 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 29: Key Takeaways
Key Takeaways We have now built a sustainable balance sheet; further cash generation 1 will be directed largely to shareholder returns in 2025 at the latest* A combination of cost reduction, efficiency improvement and capacity 2 rationalization will drive returns in Brazil towards best-in-class leve
Slide 30: Appendices
Appendices Y vallourec
Slide 31: Key Performance Indicators
Key Performance Indicators Quarterly Figures Year-to-Date Figures Q2 2024 Q1 2024 Q2 2023 QoQ chg. YoY chg. H1 2024 H1 2023 YoY chg. Volume sold* 351 292 396 20% (11%) 643 827 (22%) Revenue (€m) 1,030 932 1,279 11% (19%) 1,963 2,537 (23%) Tubes Average Selling Price (€) 2,937 3,189 3,226 (8%) (9%) 3
Slide 32: Tubes Revenue Breakdown
Tubes Revenue Breakdown Revenue by Region Quarterly Figures Year-to-Date Figures QoQ YoY YoY in € million Q2 2024 Q1 2024 Q2 2023 % chg. % chg. H1 2024 H1 2023 % chg. North America 383 450 663 (15%) (42%) 833 1,321 (37%) South America 169 153 229 10% (26%) 322 418 (23%) Middle East 247 162 157 53% 5
Slide 33: Income Statement
Income Statement Quarterly Figures Year-to-Date Figures € million, unless noted Q2 2024 Q1 2024 Q2 2023 QoQ chg. YoY chg. H1 2024 H1 2023 YoY chg. Revenues 1,085 990 1,358 95 (273) 2,075 2,696 (621) Cost of sales (774) (669) (890) (105) 116 (1,443) (1,816) 373 Industrial margin 311 321 468 (10) (157
Slide 34: Balance Sheet
Balance Sheet In € million Assets 30-Jun-24 31-Dec-23 Liabilities 30-Jun-24 31-Dec-23 Equity - Group share 2,311 2,157 Net intangible assets 37 42 Non-controlling interests 77 67 Goodwill 37 40 Total equity 2,388 2,224 Net property, plant and equipment 1,885 1,980 Bank loans and other borrowings 772
Slide 35: Cash Flow Summary
Cash Flow Summary Quarterly Figures Year-to-Date Figures In € million Q2 2024 Q1 2024 Q2 2023 QoQ chg. YoY chg. H1 2024 H1 2023 YoY chg. EBITDA 215 235 374 (20) (159) 450 694 (244) Non-cash items in EBITDA (0) 10 (21) (10) 21 9 (8) 17 Financial cash out (65) 5 (61) (70) (4) (60) (79) 19 Tax payments
Slide 36: Financial Indebtedness and Liquidity
Financial Indebtedness and Liquidity Financial Indebtedness In € million 30-Jun-24 31-Dec-23 8.500% 5-year EUR Senior Notes due 2026 – 1,105 7.500% 8-year USD Senior Notes due 2032 748 – 1.837% PGE due 2027 (a) 193 229 ACC ACE (b) 109 94 Other 32 42 Total gross financial indebtedness 1,082 1,470 Cas
Slide 37: 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 38: 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 39: 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 40: 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