Vallourec SA · EURONEXT:VK
Vallourec SA — Shareholder Meeting (June 2011)
51 slides from Vallourec SA's shareholder meeting presentation, Jun 7, 2011
Slide 1: Ordinary and Extraordinary Shareholders' Meeting
Ordinary and Extraordinary Shareholders’ Meeting Palais des Congrès 7 June 2011
Slide 2: Presentation by the Management Board
Ordinary and Extraordinary Shareholders’ Meeting Presentation by the Management Board
Slide 3: Agenda
1. Financial results 2010 2. First quarter 2011 and outlook 3. Review by activity 4. Our major investments 5. Strategy and conclusion 3 Shareholders’ Meeting – 7 June 2011
Slide 4: 1. Financial results 2010
1. Financial results 2010 Olivier MALLET Member of the Management Board, Chief Financial Officer 4 Shareholders’ Meeting – 7 June 2011
Slide 5: 2010: A year of recovery
2010: A year of recovery 2008 2009 2010 World GDP (1) +1.9% -1.9% +4.1% (annual change) World industrial production (1) -0.2% -8.8% +7.9% (annual change) Oil demand (2) (Bb/d) 86.2 84.9 87.9 Worldwide E&P expenditure (3) $ 457bn $ 400bn $ 442bn Rig Count (4) (annual average) United States 1,878 1,08
Slide 6: Strong increase in volume and slight improvement in sales
Strong increase in volume and slight improvement in sales 740 +26% in 2010 696 658 672 Volume 488 507 553 484 370 330 344 315 K tonnes Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 1 820 +1% in 2010 1 620 1 613 1 384 1 313 1 303 Sales 1 082 1 122 1 189 979 1 090 877 € milli
Slide 7: Strong growth in the Americas (North and South)
Strong growth in the Americas (North and South) 2009 2010 Sales = € 4,465 m Sales = € 4,491 m France 5% North France 4% North America Germany America Germany 18% 23% 14% Other 25% Other E.U. 27 E.U. 27 South South 9% America 8% America Rest of 17% Rest of 25% the world the world Asia and the Asia an
Slide 8: Vallourec continues to demonstrate its capacity to adapt
Q 0 200 400 600 800 1 000 1 200 1 400 1 600 1 800 2 000 1' 0 Q 4 € million 2' 0 Q 4 3' 0 Q 4 4' 0 Q 4 1' 0 Q 5 2' 0 Q 5 3' 0 Q 5 4' 0 Q 5 1' 0 Q 6 2' 0 Q 6 3' 0 its capacity to adapt Q 6 4' 0 Q 6 1' 0 Q 7 2' 0 Q 7 3' 0 Q 7 4' 0 Q 7 1' 0 Q 8 2' 0 Q 8 3' 0 Q 8 4' 0 Q 8 1' 0 Q 9 2' 0 Vallourec continue
Slide 9: Success of CAPTEN programme
Success of CAPTEN programme Savings Year 3 Year 2 cost base* Reference Year 1 Cost savings of € 280 m at end of 2010 2007 2008 2009 2010 • Gross savings of € 280 million at end of 2010 ahead of target • New programme CAPTEN+ launched in 2011 with broadened scope: Customer focus: lead time, quality,
Slide 10: Success of programme
Succes of programme • Total management commitment • Methodology & training • 280 Continuous Improvement Teams • 28,000 safety visits in 2010 Frequency rate (LTIR) 12 10 10,0 8 9,3 6 4 5,3 2 3,1 0 2007 2008 2009 2010 Shareholders’ Meeting – 7 June 2011
Slide 11: Financial results: EBITDA margin maintained above 20%
Financial results: EBITDA margin maintained above 20% € million 2009 2010 % change Sales volume (k tonnes) 1,503 1,888 +26% Sales 4,465 4,491 +1% Cost of sales (1) -3,000 -3,039 +1% Selling, general and administrative costs (1) -448 -487(2) +9% Other income (expense), net -36 -40 EBITDA 981 925 -6%
Slide 12: Cash flow
Cash flow € million (268) 708 (873) Gearing ratio of 7.9% 407 Net cash (161) from operations Gross cash flow Change in gross WCR Gross capital expenditure position at (105) (381) 31/12/09 (89) Financial investments Other Dividends Net debt at 31/12/10 12 Shareholders’ Meeting – 7 June 2011
Slide 13: Capital expenditure
Capital expenditure Planned € million Capex 873 677 529 438 282 2006 2007 2008 2009 2010 2011p Capex Capex relating to VSB Other strategic Capex Shareholders’ Meeting – 7 June 2011
Slide 14: Dividend
Dividend Maintain a pay-out ratio(1) above the average targeted ratio of 33% over the long term 38.6% 37.3% 40% 37.4%(2) 34.7% 33.2% • Dividend payable in cash 33% or in shares 30% • Subscription price for dividend payment in 20% shares: € 75.92 • Ex-dividend date: 10% 15 June 2011 • Option period:
Slide 15: 2. First quarter 2011 and outlook
2. First quarter 2011 and outlook 15 Shareholders’ Meeting – 7 June 2011
Slide 16: Key market indicators continue to be well oriented
Key market indicators continue to be well oriented 2009 2010 2011e World GDP (1) -1.9% +4.1% +3.4% (annual change) World industrial production (1) -8.8% +7.9% +4.6% (annual change) Oil demand (2) (Bb/d) 84.9 87.9 89.2 Worldwide E&P expenditure (3) $ 400bn $ 442bn $ 490bn Rig Count (4) at 31 May 2011
Slide 17: Key figures: Q1 2011
Key figures : Q1 2011 Sales Volume Sales K tonnes € million +46% +31% 501 1 148 877 344 Q1 2010 Q1 2011 Q1 2010 Q1 2011 EBITDA Net income, Group share € million € million +35% +37% 82 203 61 148 16.9%* 17.7%* Q1 2010 Q1 2011 Q1 2010 Q1 2011 * EBITDA / Sales 17 Shareholders’ Meeting – 7 June 2011
Slide 18: Outlook
Outlook H1 2011 Positive trends in most markets of the Group Higher volume, sales, and EBITDA margin in Q2 vs Q1 ▬ Impact of higher raw material costs EBITDA margin in H1 2011 slightly below H2 2010 H2 2011 All mills operating at high utilisation rates Price increases will impact H2 deliveries ▬ Raw
Slide 19: Share price performance from January 2008 to May 2011
Share price performance from 1 January 2008 to 31 May 2011 140 € 90.6 Vallourec € 87.0 120 -4% 100 80 60 40 20 5 550 CAC 40 4 007 points points -28% 0 Ja Ja Ja Ja M M Ju S N M M Ju Se N M M Ju S N M M ep ov ep ov ay ov ar ar ay ar ay ar ay n- n- n- n- l l- 0 l p -0 -1 - - -0 -0 -0 -0 - -1 -1 -1 10 -
Slide 20: 3. Review by activity
3. Review by activity Jean-Pierre MICHEL Member of the Management Board, Chief Operating Officer 20 Shareholders’ Meeting – 7 June 2011
Slide 21: A reference player worldwide
A reference player worldwide 4 Steel mills 10 Tube mills 37 Finishing units Sales & Services Forest & mine 20 600 employees over 50 production facilities 5 research centres 21 Shareholders’ Meeting – 7 June 2011
Slide 22: Sales by application
Sales by application 2009 2010 Sales = € 4,465m Sales = € 4,491m Automotive 5% Oil & Gas Automotive 7% Oil & Gas Mecanical 50% Mecanical 53% engineering 7% engineering 9% Other 4% Other 6% Petrochem. 8% Petrochem. 8% Power Power generation generation 26% 17% Total Energy* : 84% of sales Total Energy
Slide 23: Oil & Gas
% of total sales 2010 Oil & Gas Sales € million 53% +5% 2,969 2,239 2,355 2008 2009 2010 Consolidated sales include VAM Drilling Middle East from 1 October 2009, Protools from February 2010 and Serimax from 8 June 2010 23 Shareholders’ Meeting – 7 June 2011
Slide 24: Oil & Gas
Oil & Gas • United States Strong growth in the number of active rigs: +42% in 2010 reaching 1,700 active rigs at the end of December Horizontal drilling for gas or oil increased by 66% Strong demand for premium OCTG • Rest of the world Number of active rigs: +9% at 1,118 units Good level of activity
Slide 25: Non-conventional drilling requires more tubes and more technicity
Non-conventional drilling requires more tubes and more technicity Vertical versus horizontal drilling Image : Devon Non-conventional drilling: • More wells • Deeper wells • More complex drilling: hydraulic fracturing and horizontal drilling • High success rate and high productivity 25 Shareholders’
Slide 26: Pipes and premium connections: resistant and gas tight
Pipes and premium connections: resistant and gas tight Horizontal driling • Hydraulic fracturing and horizontal drilling are established technologies • Requirements are stringent in terms of resistance and tightness • The VAM SG® connection was specifically designed for Depth (feet) non-conventional
Slide 27: Power generation
% of total sales 2010 Power generation Sales € million 17% -32% 1,308 1,155 780 2008 2009 2010 27 Shareholders’ Meeting – 7 June 2011
Slide 28: Power generation
Power generation • Significant drop in orders for new conventional coal fired power plants in Europe and the USA • Recovery of projects for conventional power plants in China, India and other Asia-Pacific countries • Unfavourable price / mix effect • Growth in sales for nuclear power plants, which i
Slide 29: Petrochemicals
% of total sales 2010 Petrochemicals Sales € million 8% 691 -2% 365 357 2008 2009 2010 • Progressive recovery of sales throughout the year • Very dynamic market in the Middle East with several major petrochemical and desalination projects underway • The market continues to grow 29 Shareholders’ Meet
Slide 30: Non-energy
% of total sales 2010 Non-energy 9% 7% Sales 6% € million 1,469 1 500 1 400 1 300 +42% 1 200 • Strong sales recovery Mechanical 1 100 713 across all industrial engineering 999 markets, notably in Brazil 1 000 (automotive) and in 900 Germany (mechanical 800 416 705 engineering) 700 600 365 Automotive
Slide 31: 4. Our major investments
4. Our major investments Philippe CROUZET Chairman of the Management Board 31 Shareholders’ Meeting – 7 June 2011
Slide 32: Two major projects underway
Two major projects underway • Brazil: a new industrial complex in Jeceaba • USA: a new tube mill in Youngstown 32 Shareholders’ Meeting – 7 June 2011
Slide 33: New integrated tube mill
New integrated tube mill Steel Tube Heat Threading production production treatment V & M Mineração iron ore V & M Florestal Continuous Rolling mill with VAM® charcoal casting PQF technology connections 33 Shareholders’ Meeting – 7 June 2011
Slide 34: An ambitious project
An ambitious project 2007 2009 2008 2010 34 Shareholders’ Meeting – 7 June 2011
Slide 35: A project in harmony with the local development
A project in harmony with the local development • 10,000 jobs created during the construction phase • 1,500 full time jobs during the operational phase • A plan to support five municipalities: health, safety, education and culture • Using latest technology to deliver energy savings, reduce water con
Slide 36: Shareholders’ Meeting – 7 June 2011
36 Shareholders’ Meeting – 7 June 2011
Slide 37: New tube mill in Youngstown (USA)
New tube mill in Youngstown (USA) The construction is progressing … June 2010 November 2010 January 2011 May 2011 37 Shareholders’ Meeting – 7 June 2011
Slide 38: 5. Strategy and conclusion
5. Strategy and conclusion 38 Shareholders’ Meeting – 7 June 2011
Slide 39: Growing demand for Energy
Growing demand for Energy World Energy Demand (1990-2035) (trillions of Btu) Source: U.S. Energy Information Administration estimates – International Energy Outlook 2010 39 Shareholders’ Meeting – 7 June 2011
Slide 40: The Energy world has witnessed some major upheavals
The Energy world has witnessed some major upheavals… • The revolution in unconventional gas • New frontiers for oil & gas • Clean energy – lower CO2 emissions • After Macondo and Fukushima: towards a new energy mix Two shared imperatives: Security and energy independence 40 Shareholders’ Meeting – 7
Slide 41: Opportunities for Vallourec
… which represent opportunities for Vallourec • Deep offshore in Brazil • Technical performance • Local content • Efficient logistics 41 Shareholders’ Meeting – 7 June 2011
Slide 42: Opportunities for Vallourec
Opportunities for Vallourec • American shale hydrocarbons • Safety • Service • Local production 42 Shareholders’ Meeting – 7 June 2011
Slide 43: Opportunities for Vallourec
Opportunities for Vallourec • 3rd generation nuclear energy • Security • Technological Developement 43 Shareholders’ Meeting – 7 June 2011
Slide 44: Opportunities for Vallourec
Opportunities for Vallourec • Thermal power plants in China • Clean technologies • Local content • Competitive costs 44 Shareholders’ Meeting – 7 June 2011
Slide 45: Vallourec strategy is focused on all these new growth opportunities
Vallourec strategy is focused on all these new growth opportunities Oil & Gas Power Power USA generation Oil & Gas generation 2012 France 2011 & nuclear 2011 China 2012-13 Oil & Gas Saudi Arabia 2011 Oil & Gas Oil & Gas Integrated Nigeria Indonesia plant VSB 2010 2009 Brazil 2011 4 Steel mills 10 Tu
Slide 46: A strategy focused on three pillars: (1) Product innovation
A strategy focused on three pillars: (1) Product innovation Oil & Gas Power generation Other applications VAM family of The largest range of Innovative solutions for connections adapted to seamless tubes to equip construction and meet the most complex power plants mechanical engineering environments
Slide 47: (2) Technological innovation
(2) Technological innovation • “Premium Forged Pipes” An exclusive process for the production of large diameters and thicknesses • Pilot rolling mill (Riesa, Germany) A unique capacity to simulate every step in the production process for seamless pipes 47 Shareholders’ Meeting – 7 June 2011
Slide 48: (3) Service excellence through local presence and offer of solutions
(3) Service excellence through local presence and offer of solutions • VAM Global Solutions 48 Shareholders’ Meeting – 7 June 2011
Slide 49: Men and women engaged in the success of the Vallourec project
Men and women engaged and associated with the success of the Vallourec project Vallourec University • In 2010 : More than 2,500 recruitments Over 650,000 hours of training Launch of “Vallourec University” Creation of “Expert Managers”: > 250 experts in the world More than 70% of personnel participat
Slide 50: The Group has seen a profound transformation over 10 years
The Group has seen a profound transformation over 10 years € million 2000 2010 Sales 2,204 4,491 EBITDA margin 9.3% 20.6% Net income 55 410 Market Capitalisation (at 31 Dec) € 527m € 9,270m 78% 74% Outside 44% Europe 60% Energy Non 18% 56% Europe 40% Energy 22% 26% 18% 2000 2010 2000 2010 Sales by m
Slide 51: Leader in Premium Tubular Solutions
A clear vision for the future Vallourec, a Group : Premium Local Competitive Leader in Premium Tubular Solutions 51 Shareholders’ Meeting – 7 June 2011