Vallourec Sa · EURONEXT:VK
Vallourec Sa — Q4 2023 Earnings Presentation
33 slides from Vallourec Sa's earnings presentation, November 2023
Slide 1: Investor Presentation Fourth Quarter 2023
Investor Presentation Fourth Quarter 2023
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: Who We Are
Who We Are Technology Integrated Leader Manufacturer A trustworthy partner for cutting edge steel solutions that make energy transformation possible Partner Environmental of Choice Steward 4
Slide 5: 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 6: The New Vallourec Plan
The New Vallourec Plan Key Objectives Tools Utilized Primary Financial Operational Governance Strategic Goals Targets Initiatives Improvements €230m EBITDA / €250m FCF Improvement1 Realigning Our Deliver Industrial Footprint Reshaping Our Best-in-Class Profitability Management Team Close Profitabili
Slide 7: Reshaping Vallourec’s Production Footprint
Reshaping Vallourec’s Production Footprint Old Vallourec assets and production flows (2021) New Vallourec assets and production flows (2024) Europe North America Domestic Industrial Player Domestic Capacity for Premium Export Hub North America France Domestic Demand Domestic Capacity for Finishing a
Slide 8: New Vallourec: Near-Term Targets
New Vallourec: Near-Term Targets Year-End Target Current Status Tube production to be finalized imminently, ahead of Closure of German tube operations schedule Final phases of project underway, full benefits to be Execution of €110m capex program in Brazil realized in 2024 Cost reductions expected t
Slide 9: Profitability at Healthy Levels Despite US Market Headwinds
Profitability at Healthy Levels Despite US Market Headwinds EBITDA down sequentially in Q3 but up YoY Fourth quarter and full-year 2023 outlook Group EBITDA (€m) • Full-year 2023 EBITDA to range between €1,075m and 374 €1,175m 312 320 222 • Total cash generation to be positive in the fourth quarter
Slide 10: A Significant Balance Sheet Transformation
A Significant Balance Sheet Transformation Significantly reduced net debt Meaningfully improved liquidity € Million € Million 1,493 1,590 1,498 1,391 190 1,130 181 1,203 185 1,000 462 868 189 462 312 741 703 462 412 938 894 855 552 291 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q3 2022 Q4 2022 Q1 2023
Slide 11: Capital Allocation Priorities: Driving Towards Shareholder Returns
Capital Allocation Priorities: Driving Towards Shareholder Returns Executing the New Vallourec Plan ⚫ Investment in Brazil capabilities ⚫ Shutdown of German rolling operations Deleveraging Our Balance Sheet ⚫ Net debt zero by end of 2025 at the latest ⚫ Corridor of +/- 0.5x Net Debt / EBITDA Reinves
Slide 12: Supplemental Information
Supplemental Information YY vallourec
Slide 13: 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 14: 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 $2k1 2023E Total Market Size (mt) 9.6 4.4 Not Analyzed High-Growth Emerging Market 2023E Served Market Size (mt) 5.4 1.1 0.4 % o
Slide 15: Emphasizing Value over Volume
Emphasizing Value over Volume Focusing on high-value, premium products Addressing premium, high-margin markets % of Rolling Capacity (Capacity in Million Tonnes) % of Tubes Sales Volumes (Volumes in Million Tonnes) 3.0 2.2 2.4 1.7 12% 10% 6% 22% 8% 16% 88% 86% 78% 74% Old Vallourec New Vallourec Old
Slide 16: Major Seamless OCTG Markets
Major Seamless OCTG Markets 2023 Market Size (Million Tonnes) CIS North America 1.3 Europe 0.2 2.9 China 2.9 1.0 Africa 0.3 Middle East Asia Pacific 0.5 Ex-China 0.5 South America Dominant Connection Technology Proprietary API Sources: Internal market intelligence based on public peer commentary, Ry
Slide 17: US OCTG Market: Expecting Stabilization in Near-Term
US OCTG Market: Expecting Stabilization in Near-Term Rig count appears to be stabilizing Imports at multi-year lows OCTG prices near global averages US Horizontal Rig Count Monthly US OCTG Imports (Th. Tonnes) Seamless OCTG Price ($ / Tonne) 800 350 5,000 700 4,500 4,277 4,354 600 300 4,062 500 4,00
Slide 18: International OCTG Market: Broad-Based Demand Strength
International OCTG Market: Broad-Based Demand Strength International rig count holding at healthy levels Market pricing solid, new order prices increasing Onshore Rig Count Offshore Rig Count Seamless OCTG Price ($ / Tonne) Onshore (L Axis) Offshore (R Axis) Middle East North Sea 3,500 800 250 2,920
Slide 19: A Significant New Business Opportunity in New Energies
A Significant New Business Opportunity in New Energies Geothermal CCUS Hydrogen Similarity to Very Similar Largely Similar New Business Model Legacy Business Target Market Highest Intermediate Lowest Share Addressable Intermediate Intermediate Very Large Market Our New Energies Target New Energies t
Slide 20: Capitalizing on Strong Market Prices and Our Premium Products
Capitalizing on Strong Market Prices and Our Premium Products Tubes market in the midst of a strong upturn Premium products command premium prices Historical OCTG Market Pricing ($ / tonne) Tier 1 OCTG Supplier Average Selling Price ($ / tonne) International United States Weighted Market Price Weigh
Slide 21: Elevated Industry Costs Point to Higher Landing Point for Prices
Elevated Industry Costs Point to Higher Landing Point for Prices Tubes manufacturing costs remain elevated Reframing historical prices with constant costs Tier 1 OCTG Supplier Average Cash Cost of Sales ($ / tonne) Tier 1 OCTG Supplier Average Selling Price ($ / tonne) Tier 1 Actual ASP Average Actu
Slide 22: 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 23: 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 23
Slide 24: Low-Cost Operations with Fast-Payback Extension Options
Low-Cost Operations with Fast-Payback Extension Options 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 produ
Slide 25: 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 26: Financial Data
Financial Data b valiourec
Slide 27: Income Statement
Income Statement € million, unless noted 2018 2019 2020 2021 2022 1Q23 2Q23 3Q23 Revenues 3,921 4,173 3,242 3,442 4,883 1,338 1,358 1,142 Cost of sales (3,342) (3,435) (2,634) (2,605) (3,807) (926) (890) (818) Industrial margin 579 738 608 837 1,076 412 468 324 Selling, general and administrative ex
Slide 28: Balance Sheet
Balance Sheet € million, unless noted 2018 2019 2020 2021 2022 1Q23 2Q23 3Q23 Goodwill & intangible assets 429 427 74 83 76 89 89 87 PP&E and biological assets 2,751 2,704 1,748 1,790 1,891 1,871 1,923 1,960 Other non-current assets 540 510 357 443 442 443 451 468 Total non-current assets 3,720 3,64
Slide 29: Cash Flow Summary
Cash Flow Summary € million, unless noted 1Q22 2Q22 3Q22 4Q22 2022 1Q23 2Q23 3Q23 EBITDA 45 160 198 312 715 320 374 222 Non-cash items in EBITDA 20 (36) (39) (13) (68) 13 (21) 11 Financial cash out (4) (34) (9) (63) (110) (18) (61) (8) Tax payments (21) (17) (18) (23) (79) (16) (60) (54) Adjusted op
Slide 30: Segment Data
Segment Data Segment Key Performance Indicators € million, unless noted 2021 1Q22 2Q22 3Q22 4Q22 2022 1Q23 2Q23 3Q23 Volume sold* 1,640 395 433 462 514 1,804 431 396 343 Revenue (€m) 3,030 902 1,096 1,197 1,467 4,663 1,258 1,279 1,068 Tubes Average Selling Price (€) 1,848 2,284 2,531 2,591 2,853 2,5
Slide 31: 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 32: 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 33: 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