Vallourec Sa · EURONEXT:VK

Vallourec Sa — 9M 2015 Earnings Presentation

37 slides from Vallourec Sa's earnings presentation, Nov 9, 2015

  1. Slide 1: Q3 / 9M 2015 results

    Q3 / 9M 2015 results Investor Presentation 9 November 2015

  2. Slide 2: Information and Forward-Looking Reflections

    Information  Full year consolidated financial statements at 31 December are audited  Half year financial statements are subject to limited review by statutory auditors  Quarterly financial statements are unaudited and are not subject to any review  Unless otherwise specified, indicated variation

  3. Slide 3: Q3 / 9M 2015 at a glance

    Y vallourec Q3 / 9M 2015 at a glance

  4. Slide 4: 9M 2015 financial results strongly impacted by adverse market conditions

    9M 2015 financial results strongly impacted by adverse market conditions Volumes sold Revenues In k tons In millions of € 4,036 -27.1% 1,698 -35.7% -32.3% 2,942 1,091 at cc. 1,343 564 -35.1% -43.8% 317 872 -34.3% at cc. Q3 2014 Q3 2015 9M 2014 9M 2015 Q3 2014 Q3 2015 9M 2014 9M 2015 EBITDA (1) Free

  5. Slide 5: Adverse market conditions affecting Vallourec's Oil & Gas business

    Adverse market conditions affecting Vallourec’s Oil & Gas business International Rig Count – Oil & Gas split United States Rig Count – Oil & Gas split 2 000 1600 1 800 1400 1 600 1200 1 400 Gas: 20% 1 200 1000 1 000 # active rigs 800 Oil 800 Gas 600 Total 600 400 Oil: 80% 400 200 200 0 0 Jun-14 Jun-

  6. Slide 6: Delivering on ongoing measures to adapt to the downturn

    Delivering on ongoing measures to adapt to the downturn Further capex discipline SG&A costs reduction In millions of € In millions of € 567 €30m 411 410 -6.6% 383 388 <300 €350m 159 2013 2014 9M 2015 FY 2015e 9M 2013 9M 2014 9M 2015 Global staff reduction  Strict capex discipline: Capex to stand Gl

  7. Slide 7: Q3 / 9M 2015 financial results

    Q3 / 9M 2015 financial results

  8. Slide 8: Sharp fall in volumes sold

    Sharp fall in volumes sold Volumes sold 2013-2015 In k tons 625 584 583 551 564 545 543  Approx. 35% drop in volumes 487 compared to 2014 412 362 317  In particular in the Oil & Gas market in NA and EAMEA Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 2013 2014 9M 2015 2,159 k t

  9. Slide 9: Revenues evolution severely affected by drop in volumes

    Revenues evolution severely affected by drop in volumes Q3 2015 versus Q3 2014 9M 2014 versus 9M 2015 -35.1% -27.1% €1,343m -43.8% €4,036m -35.7% +9.5% €872m +5.3% €2,942m +3.3% -0.8% Q3 2014 Volume Currency Price/Mix Q3 2015 9M 2014 Volume Currency Price/Mix 9M 2015 Translation Translation /9

  10. Slide 10: Oil & Gas (63.4% of 9M 2015 Group's revenues)

    Oil & Gas (63.4% of 9M 2015 Group’s revenues) Oil & Gas revenues In millions of €  O&G revenues: 2,668 -30.1%  EAMEA: Volumes and mix -34.8% significantly down in 9M 2015 at cc. compared with a strong 9M 2014 1,864  USA: Volumes down reflecting the 54% fall in the active rig count and destocking

  11. Slide 11: Revenues breakdown for 9M 2015

    Revenues breakdown for 9M 2015 As % of total Group revenues Revenues by market Revenues by region 31.0% 29.9% 66.1% 63.4% 17.4% 17.8% 21.0% 23.9% 5.3% 5.0% 8.2% 10.1% 13,7% 8.5% 19.2% 23.1% 18.8% 17.6% 9M 2014 9M 2015 9M 2014 9M 2015 North America Rest of the world Oil & Gas Power Generation South A

  12. Slide 12: 9M 2015: from Revenues to EBITDA

    9M 2015: from Revenues to EBITDA 9M 9M Change In millions of € 2015(1) 2014 YoY Revenues 2,942 4,036 -27.1%  Revenues down 27% mostly Industrial margin 396 1,048 -62.2% resulting from a negative volume effect, partly offset by a positive As % of revenues 13.5% 26.0% -12.5pt currency translation eff

  13. Slide 13: 9M 2015: from EBITDA to Net Income

    9M 2015: from EBITDA to Net Income 9M 9M Change In millions of € 2015(1) 2014 YoY EBITDA 0 619 -100.0% Depreciation of industrial  Other charges of €165 million (228) (226) +0.9% assets mainly composed by Other (amortization, restructuring charges and exceptional, restructuring, (165) (48) na impai

  14. Slide 14: Free Cash Flow

    Free Cash Flow In millions of € Q3 2015 9M 2015 9M 2014 Change Cash flow from operating (66) (85) 516 (601) activities (FFO) (A) Change in WCR (B) 168 279 (176) 455 + decrease, (increase) Gross capital expenditure (70) (159) (205) 46 (C) Free Cash Flow (A)+(B)+(C) 32 35 135 (100)  Positive FCF at €

  15. Slide 15: 9M Free cash flow & net debt

    9M Free cash flow & net debt In millions of € Net Debt as at Net Debt as at 31 Dec. 2014 30 Sept. 2015 Change in Gross capital WCR(1) expenditure Net debt = 37.1% of Dividends paid Cash flow from Net equity operating activities (159) Asset disposals debt = (1,547) & other items 48.3% (68) of equity

  16. Slide 16: Financial resources as at 30 September 2015

    Financial resources as at 30 September 2015 Long-term committed financing profile In millions of € Undrawn committed financing Drawn committed financing 4 000  Strong liquidity position: 3 500  €604 million of cash on balance sheet which covers 3 000 more than 125% of the short 1 790 1 790 1 790 t

  17. Slide 17: Outlook

    Y vallourec Outlook

  18. Slide 18: Facing severe market conditions

    Facing severe market conditions Key market assumptions USA EAMEA - Ongoing reduction in active rig count + Favorable impact of stronger US dollar - Further structural reductions in stock held by distributors +/- Power Generation: activity should remain broadly stable in an increasingly competitive e

  19. Slide 19: Appendix

    Y vallourec Appendix

  20. Slide 20: Valens, Vallourec's 2-year competitiveness plan

    Valens, Vallourec’s 2-year competitiveness plan

  21. Slide 21: Valens: a 2-year global plan to improve competitiveness and drive efficiency

    Valens: a 2-year global plan to improve competitiveness and drive efficiency Competitiveness plan Valens: 2015-2016 (full year effect in 2017) Costs Cash use Organization reduction optimization efficiency Target vs. 2014(1) Target from 2015(2) Effective as at 1 April 2015 Leaner organization Normali

  22. Slide 22: Valens - Structurally reduce cost base (1/2)

    Valens - Structurally reduce cost base (1/2) 2014 cost base 2-year cost reduction targets(1) 5,701  700 initiatives o/w 2/3rd started  Targeted savings of 10% of added costs confirmed (1,753) 2% 10% €30m (2,495) €350m €240m €240m (598) 855 Raw materials SG&A & Other (568) €80m Manufacturing Total

  23. Slide 23: Valens - Reduce added cost base (2/2)

    Valens - Reduce added cost base (2/2) Costs reduction Manufacturing Targets & Direct costs SG&A Total 2015-2016 on sales Base 2014, excl. Raw In % 10% 14% 10% material In €m 240m 320m 80m base 2014 (60% variable costs) (50% variable costs) Before inflation, Including avoided costs Full year effect i

  24. Slide 24: Capital allocation framework in line with shareholders' interests

    Capital allocation framework in line with shareholders’ interests Decision framework Cash generated by operations Capital expenditure to ROCE target 1 maintain and grow the company ROCE above WACC in 2018 under normalized oil market conditions 2 1 Dividend Conservative balance sheet 3 1 management w

  25. Slide 25: Optimization of the industrial set-up

    Optimization of the industrial set-up 2017 targeted 2011 tube 2014 tube tube production production production capacity capacity capacity 400kt 750kt 750kt 500kt 800kt 800kt 1,500kt 1,350kt 900kt Total 2,400kt ≈2,900kt ≈2,450kt / 25

  26. Slide 26: Q3 2015 financial data

    Y vallourec Q3 2015 financial data

  27. Slide 27: Revenues breakdown for Q3 2015

    Revenues breakdown for Q3 2015 As % of total Group revenues Revenues by market Revenues by region 25.8% 35.4% 61.1% 66.2% 16.2% 14.5% 24.5% 5.6% 23.0% 5.5% 17.1% 8.5% 9.8% 8.9% 18.5% 16.2% 25.0% 18.2% Q3 2014 Q3 2015 Q3 2014 Q3 2015 North America Rest of the world Oil & Gas Power Generation South Am

  28. Slide 28: Q3 2015: from Revenues to EBITDA

    Q3 2015: from Revenues to EBITDA Q3 Q3 Change In millions of € 2015 2014 YoY  Revenues down 35% mostly as a Revenues 872 1,343 -35.1% result of the significant drop in volumes from Oil & Gas in NA and Industrial margin 60 315 -81.0% EAMEA As % of revenues 6.9% 23.5% -16.6pt  SG&A reduction of €18

  29. Slide 29: Q3 2015: from EBITDA to Net Income

    Q3 2015: from EBITDA to Net Income Q3 Q3 Change In millions of € 2015 2014 YoY EBITDA (66) 175 -137.7% Depreciation of industrial (79) (78) +1.3% assets Other (20) (17) na Operating income (loss) (165) 80 -306.3% Financial income (loss) (15) (10) +50.0% Income tax 3 (33) -109.1% Non-controlling inte

  30. Slide 30: Q3 2015 cash flow statement

    Q3 2015 cash flow statement In millions of € Q3 2015 Q3 2014 Q2 2015 Cash flow from operating activities (66) 156 (38) (FFO) Change in WCR 9 112 168 +decrease, (increase) Net cash flow from operating 165 74 activities 102 Gross capital expenditure (70) (67) (41) Financial investments - - - Dividends

  31. Slide 31: 9M 2015 financial data

    Y vallourec 9M 2015 financial data

  32. Slide 32: Capital Expenditure

    Capital Expenditure In millions of € 909 873 803 677 567 529 388 350 <300 159 2008 2009 2010 2011 2012 2013 2014 9M 2015 FY 2015e Beyond 2015 / 32

  33. Slide 33: Revenues by geographic region

    Revenues by geographic region In millions of € 9M As % of 9M As % of Change 2015 revenues 2014 revenues YoY Europe 679 23.1% 775 19.2% -12.4% North America 881 29.9% 1,250 31.0% -29.5% South America 524 17.8% 701 17.4% -25.2% Asia & Middle East 618 21.0% 965 23.9% -36.0% Rest of World 240 8.2% 345 8

  34. Slide 34: 9M 2015 balance sheet

    9M 2015 balance sheet In millions of € 30 Sept. 2015(1) 31 Dec. 2014 In millions of € 30 Sept. 2015(1) 31 Dec. 2014 Non current assets 4,490 5,077 Equity, Group share 2,989 3,743 Non-controlling interests 391 426 Inventories and 1,227 1,490 Equity 3,380 4,169 work-in-progress Trade and other receiva

  35. Slide 35: 9M 2015 cash flow statement

    9M 2015 cash flow statement In millions of € 9M 2015 9M 2014 Cash flow from operating activities (85) 516 (FFO) Change in WCR 279 (176) +decrease, (increase) Net cash flow from operating 194 340 activities Gross capital expenditure (159) (205) Financial investments - - Dividends paid (68) (142) Asse

  36. Slide 36: ROCE definition

    ROCE definition  ROCE = Net Operating Profit Less Adjusted Tax (NOPLAT) / Capital Employed  “Capital Employed” as shown in the denominator is defined as the sum of Net Fixed Asset and Operating Working Capital, minus Goodwill  “NOPAT” as shown in the numerator is calculated as EBITDA minus Deprec

  37. Slide 37: Leader in Premium Tubular Solutions

    Leader in Premium Tubular Solutions Euronext Paris: ISIN code: FR0000120354, Ticker: VK USA: American Depositary Receipt (ADR) - ISIN code: US92023R2094, Ticker: VLOWY Investor Relations Contact - Vallourec Group Tel: +33 1 49 09 39 76 / email: [email protected] www.vallourec.com

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