Vallourec Sa · EURONEXT:VK
Vallourec Sa — FY2014 Earnings Presentation
39 slides from Vallourec Sa's earnings presentation, Feb 24, 2015
Slide 1: Full Year 2014 results
Full Year 2014 results Investor Presentation 24 February 2015
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
Slide 3: 2014: resilient financial performance and strong operational achievements
2014: resilient financial performance and strong operational achievements Sales €5,701m +2.2% Record year in Oil & Gas sales (+3.9% at constant exchange rates) Solid performance in North America EBITDA(1) & €855m EBITDA in line with guidance EBITDA margin(2) -7.1% Net loss, Group share of -€
Slide 4: Going forward
Going forward Short term adaptation to the severe fall in oil prices Valens, a 2-year cash generation and cost reduction plan Strict discipline on capital allocation ROCE target: >WACC in 2018, under normalized oil market conditions Maintain our strategy Adapt to the new environment Reinforce
Slide 5: 2014 dividend proposed to be maintained at €0.81 per share
2014 dividend proposed to be maintained at €0.81 per share Dividend €2.1 Proposed dividend to: €1.9(1) — be maintained at €1.8 €0.81 per share — be paid in cash or in shares at €0.81 €0.81 shareholders option €0.69 Payment date: — 25 June 2015 2012 2013 2014 Earning per share Dividend per share
Slide 6: 2014 Financial Results
Y vallourec 2014 Financial Results
Slide 7: Resilient operational performance, strong cash generation
Resilient operational performance, strong cash generation In millions of € EBITDA(1) & Sales Free cash flow(3) EBITDA margin(2) 5,578 5,701 920 855 274 -150bp 16.5% 15.0% 2013 2014 2013 2014 (41) 2013 2014 +2.2% -7.1% +€315m (+3.9% at constant exchange rates) (1) Earnings Before Interest, Taxes, Dep
Slide 8: Sales breakdown for 2014
Sales breakdown for 2014 As % of total Group sales, and change in % (comparison year-on-year) Sales by market Sales by region 26.2% +19.5% 30.6% 65.8% +3.5% 66.6% 21.2% -22.4% 16.1% 26.2% -1.9% 25.2% 5.5% -6.5% 5.1% 10.3% +6.6% 10.7% 7.3% +26.5% 9.0% 18.4% -2.1% 17.6% 19.1% +2.3% 19.1% 2013 2014 201
Slide 9: Sales evolution
Sales evolution In millions of €, comparison year-on-year +2.2% +7.6% -1.7% -3.7% 5,701 5,578 2013 Volume Currency Price/Mix 2014 Translation /9
Slide 10: EBITDA in line with guidance
EBITDA in line with guidance In millions of €, comparison year-on-year Higher sales in line with guidance, offset by: Stable at 10.0% of sales, Negative volume & mix effect in Brazil notwithstanding Negative EUR/USD impact increased R&D effort 920 -5.8% na 855 +1.4% 2013 Industrial margin SG&A O
Slide 11: Rebasing our assets to their fair economic value
Rebasing our assets to their fair economic value Revised prospects for the end-markets served by a number of our assets Severe fall in oil prices Increased discipline in E&P Capex policy for IOCs, mainly impacting O&G sales in EAMEA New competitors emerging in the less differentiated products
Slide 12: Net income evolution
Net income evolution In millions of €, comparison year-on-year 262 -65 +26 -9 239 -1,104 -4 +29 (924) Higher D&A, in line with Improvement mainly recent major investments, resulting from positive offset by Other positive foreign exchange items result in 2014 -59 (3) 2013 EBITDA D&A & Financial Incom
Slide 13: Strong free cash flow & net debt reduction
Strong free cash flow & net debt reduction In millions of € Net Debt as of Net Debt as of Dec. 31, 2013 Dec. 31, 2014 Cash flow from Change in Gross capital Net operating activities WCR(1) Net debt = expenditure debt = 32.7% 37.1% of (20) of equity equity Dividends paid Asset disposals & (388) other
Slide 14: Outlook for 2015
Y vallourec Outlook for 2015
Slide 15: Oil market evolution expected to severely impact Oil & Gas sales
Oil market evolution expected to severely impact Oil & Gas sales Brent / WTI price evolution(1) Brent / WTI 2015 average prices significantly 120 Brent below $100 below 2014 average 110 100 OPEP E&P expenses to decrease in 2015 vs. 2014 meeting 90 $/bbl US rig count fast reducing; Internationa
Slide 16: Key market assumptions for 2015
Key market assumptions for 2015 USA Europe - Lower OCTG consumption due to shale oil + Weakening of the Euro - drilling severely impacted by WTI price fall Destocking from distributors - Competitive environment in Power Generation and Industry & Other - Pressure on prices - North Sea O&G drilling ac
Slide 17: Fast adaptation to the changing market environment
Fast adaptation to the changing market environment 2015 flexibility levers: most Vallourec sites have the ability to adapt their variable costs to the activity drop Reduction of working hours by approx.15% in the mills, incl. a reduction by approx. 7% of the workforce in 2015 vs. 2014(1) Immed
Slide 18: Strategic Update and 2-year competitiveness plan
Strategic Update and 2-year competitiveness plan
Slide 19: Oil & Gas market remains an attractive market over MT & LT
Oil & Gas market remains an attractive market over MT & LT 2014-20 World Oil Production Evolution breakdown (mb/d)(1) Expected MT & LT growth in World Oil Add. call World Oil Oil & Gas production in the Supply RoW (2) on OPEC Supply 2014 USA Canada Brazil non-OPEC crude (3) 2020 regions where Vall
Slide 20: More Premium: reaffirming our long term strategy
Reaffirming our long term strategy, while focusing on competitiveness Customer Reaffirming Our achievement so far… 2019 target requests our strategy Heat treated deliveries (% of total tons) Leadership on the high MORE PREMIUM Innovative end / high ~70% and margin products premium 58% 66% products
Slide 21: More Local: reaffirming our long term strategy
Reaffirming our long term strategy, while focusing on competitiveness Customer Reaffirming Our achievement so far… 2019 target requests our strategy Breakdown of revenues by region (% of sales) Continue to Local rebalance our MORE LOCAL content and 15% assets portfolio Local 27% 2008 34% 2014 31%
Slide 22: More Competitive: reaffirming our long term strategy
Reaffirming our long term strategy, while focusing on competitiveness Customer 2015-2016 Reaffirming Our achievement so far… requests target(1) our strategy Valens Capten savings to MORE COMPETITIVE offset the inflation Our continued area of focus Competitive €350m Need to offer €70m €100m accel
Slide 23: 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
Slide 24: Valens - Structurally reduce cost base
Valens - Structurally reduce cost base In millions of €, comparison year-on-year 2-year cost reduction targets1 5,701 (1,753) 2% 10% 350 30 (2,495) 240 1,540 (568) (30) 855 80 2014 Raw Manufacturing SG&A Other 2014 Total Raw materials Manufacturing SG&A Sales materials & Direct cost EBITDA & Direct
Slide 25: Valens - Enforce strict capex discipline
Valens - Enforce strict capex discipline Cash use optimization Target Normalized capex at €350m p.a. vs. €450m p.a. previously announced 450 Capex envelope sized for 388 business development, mix improvement, and maintenance 350 Premiumization / Business dev.: Rigorous capex qualification and €1
Slide 26: 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
Slide 27: Vallourec committed to cash generation and return on capital
Vallourec committed to cash generation and return on capital 2015 FCF: Positive Maintain our strategy 2014 dividend: Proposed to be Adapt to the new maintained at €0.81 per share environment Reinforce our focus on competitiveness Long-term Increased discipline on ROCE: > WACC in 2018,
Slide 28: Appendix
Y vallourec Appendix
Slide 29: Valens - Reduce added cost base
Valens - Reduce added cost base 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 in 2017
Slide 30: Oil & Gas (66.6% of FY 2014 Group’s sales)
Oil & Gas (66.6% of FY 2014 Group’s sales) Oil & Gas sales in € million 2014 3,796 +3.5%, +4.9% at cc. 2013 3,669 EAMEA: Sales increase, benefiting from the exceptional backlog generated in 2013 Low level of orders since Q2 impacted Q4 2014 sales, and will severely impact 2015 deliveries USA
Slide 31: Power Generation (10.7% of 2014 Group’s sales)
Power Generation (10.7% of 2014 Group’s sales) Power Generation sales in € million 2014 610 +6.6%, +6.8% at cc. 2013 572 Conventional: Continued to benefit from numerous projects but was impacted by sustained pricing pressure Nuclear: Benefiting from the rescheduling of some projects from 2013 t
Slide 32: Industry & Other (17.6% of 2014 Group’s sales)
Industry & Other (17.6% of 2014 Group’s sales) Industry & Other sales in € million Mechanicals 2014 372 188 447 1,007 Automotive -2.1%, +1.3% at cc. Construction & Other 2013 383 231 415 1,029 In the EU: Higher volumes offset by negative price and product mix effect In Brazil: Weak macroeconom
Slide 33: FY / Q4 2014 simplified income statement
FY / Q4 2014 simplified income statement Change Change In millions of € 2014 2013 Q4 2014 Q4 2013 YoY YoY Sales 5,701 5,578 +2.2% 1,665 1,609 +3.5% Industrial margin 1,453 1,543 -5.8% 405 436 -7.1% As % of Sales 25.5% 27.7% -2.2pt 24.3% 27.1% -2.8pt SG&A(1) (568) (560) +1.4% (158) (149) +6.0% As % o
Slide 34: Adjusted net income, Group share
Adjusted net income, Group share In millions of euros Impairment impacts 2014 2014 2013 Change Actual Impairment Depreciation Deferred Adjusted Actual YoY of current tax assets (incl. Goodwill) assets EBITDA 855 855 920 -7.1% Depreciation of industrial assets (311) (311) (270) +15.2% Other (amortiza
Slide 35: Capital Expenditure
Capital Expenditure In millions of € 909 873 803 677 567 529 388 350 2008 2009 2010 2011 2012 2013 2014 2015e & beyond / 35
Slide 36: FY 2014 Balance Sheet
FY 2014 Balance Sheet In millions of € 31 Dec. 2014 31 Dec. 2013 In millions of € 31 Dec. 2014 31 Dec. 2013 Non current assets 5,077 5,827 Equity, Group share 3,743 4,601 Non-controlling interests 426 385 Inventories and 1,490 1,423 work-in-progress Equity 4,169 4,986 Trade and other 1,146 1,099 rec
Slide 37: Financial resources as at December 2014
Financial resources as at 31 December 2014 Strong and diversified financial structure Optimized cost of financing Bank & Other Debt 19% Approx. 71% 81% of gross debt of gross debt is at fixed rate* raised on capital markets Bond Debt Comm. Paper 81% Variable rate Fixed rate Approximately €3.5 bi
Slide 38: 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
Slide 39: 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