Vallourec Sa · EURONEXT:VK
Vallourec Sa — Q3 2016 Earnings Presentation
41 slides from Vallourec Sa's earnings presentation, Nov 8, 2016
Slide 1: Q3 / 9M 2016 results
Q3 / 9M 2016 results Investor Presentation 8 November 2016
Slide 2: Information and Forward-Looking Statements
INFORMATION Full year consolidated financial statements at 31 December are audited Half year financial statements are subject to limited review by Statutory Auditors To date, third quarter 2016 financial information has not been audited nor subject to limited review by Statutory Auditors Unl
Slide 3: Q3 / 9M 2016 at a glance
Q3 / 9M 2016 AT A GLANCE 08/11/2016 CHARTE POWERPOINT VALLOUREC 3
Slide 4: Q3 2016 highlights
Q3 2016 highlights VOLUMES SOLD REVENUES In k tons In millions of € 321 333 317 872 763 693 Q3 2015 Q2 2016 Q3 2016 Q3 2015 Q2 2016 Q3 2016 EBITDA(1) FREE CASH FLOW(2) In millions of € In millions of € 32 (66) (32) (52) -78 -75 Q3 2015 Q2 2016 Q3 2016 Q3 2015 Q2 2016 Q3 2016 (1) Earnings Before Inte
Slide 5: 9M 2016 financial results impacted by very challenging market conditions
9M 2016 financial results impacted by very challenging market conditions VOLUMES SOLD REVENUES In k tons In millions of € 1,091 -17.0% YoY 2,942 905 -27.7% YoY 2,127 9M 2015 9M 2016 9M 2015 9M 2016 EBITDA(1) FREE CASH FLOW(2) In millions of € In millions of € 35 0 (156) - 392 -156m -427m 9M 2015 9M
Slide 6: Strategic initiatives progressing well
Strategic initiatives progressing well Transformation plan on track : Q3 2016 update Merger(1) of Vallourec Tubos do Brasil and Vallourec & Sumitomo Tubos do Brasil into Vallourec Soluções Tubulares do Brasil on 1 October 2016 All necessary clearances obtained to acquire the control of Tianda Oi
Slide 7: Pursuing adaptation measures
Pursuing adaptation measures STRICT CAPEX DISCIPLINE SG&A In millions of € In millions of € 803 158 137 127 130 119 116 567 109 106 388 268 200 2012 2013 2014 2015 2016 est Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2015 2015 2015 2016 2016 2016 GLOBAL HEADCOUNT REDUCTION Global Headcount -1,600 -1,900 -1,80
Slide 8: Focus on Q3 2016 financial results
FOCUS ON Q3 2016 FINANCIAL RESULTS 08/11/2016 CHARTE POWERPOINT VALLOUREC 8
Slide 9: Q3 revenues affected by price/mix effect despite slight pickup in volumes
Q3 revenues affected by a significant price/mix effect despite slight pickup in volumes Q3 2016 VERSUS Q3 2015 +5.0% +0.1% -25.6% €872m €693m -20.5% Q3 2015 Volume Currency Price/Mix Q3 2016 Translation Investor Presentation – 8 November 2016 9
Slide 10: Revenues breakdown for Q3 2016
Revenues breakdown for Q3 2016 As % of total Group revenues Revenues by market Revenues by region 18.5% 25.8% 61.1% 59.3% 23.2% 16.2% 24.5% 22.4% 4.0% 5.6% 15.6% 8.5% 13.7% 17.1% 25.0% 22.2% 21.1% 16.2% Q3 2015 Q3 2016 Q3 2015 Q3 2016 North America Rest of the world Oil & Gas Power Generation South
Slide 11: Q3 2016: from Revenues to EBITDA
Q3 2016: from Revenues to EBITDA Q3 Q3 Change Q2 In millions of € 2016 2015 YoY 2016 EBITDA: up by €14 Revenues 693 872 -20.5% 763 million year-on-year Slightly lower industrial Cost of sales(1) (637) (812) -21.6% (691) margin : • Impact of revenues decline Industrial margin 56 60 -6.7% 72 (-20.
Slide 12: Q3 2016: from EBITDA to Net Income
Q3 2016: from EBITDA to Net Income Q3 Q3 Change Q2 In millions of € 2016 2015 YoY 2016 EBITDA (52) (66) -21.2% (32) Depreciation of (69) (79) -12.7% (71) Improved operating result industrial assets mostly thanks to an improved EBITDA Other (22) (20) na (25) Operating income (143) (165) -13.3% (128
Slide 13: Free Cash Flow
Free Cash Flow In millions of € Q3 2016 9M 2016 9M 2015 Change Cash flow from operating activities (72) (275) (85) -190 (FFO) (A) Change in WCR (B) 24 (17) 279 -296 + decrease, (increase) Gross capital expenditure (C) (27) (100) (159) +59 Free Cash Flow (A)+(B)+(C) (75) (392) 35 -427 Negative FCF at
Slide 14: 9M Free Cash Flow and Net Debt
9M Free Cash Flow and Net Debt In millions of € Net Debt as at Net Debt as at 31 Dec. 2015 30 Sept. 2016 Net debt = Net 29.1% proceeds Dividends Asset disposals of of capital paid & other items equity Net increase debt = (2) (66) 50.0% (1,020) of equity Net Cash flow from debt = operating activities
Slide 15: Liquidity and Financing
Liquidity and Financing Net debt as at 30 September 2016: Long-term drawn debt maturity profile (€m) - Gross debt €2.3 billion (incl. €1.1 billion LT 1 200 debt: bonds, leasing...) 1 000 - Cash : €1.3 billion 800 - Net debt : €1,020 million 600 1,095 1,095 1,073 1,030 Liquidity as at 30 Septembe
Slide 16: Outlook
OUTLOOK 08/11/2016 CHARTE POWERPOINT VALLOUREC 16
Slide 17: Mixed market conditions
Mixed market conditions USA EAMEA Rebound in deliveries in Q3 2016 should be + confirmed in Q4 +/- OCTG deliveries should be similar over next quarters - Power Generation: revenues expected to be down in 2016 compared to 2015 at current perimeter(1) with nuclear power generation activity experiencin
Slide 18: 2016 Guidance confirmed; H1 2017 trends
2016 Guidance* confirmed EBITDA Negative EBITDA, below 2015 Cash Flow Negative Free Cash Flow of c. €(600)m** Net Debt not to exceed €1.5bn by year-end, after Tianda acquisition Net Debt and full consolidation of VSB H1 2017 trends The conditions in which Vallourec is operating in this semester sh
Slide 19: Appendix
APPENDIX 08/11/2016 CHARTE POWERPOINT VALLOUREC 19
Slide 20: 9M 2016 Financial Data
9M 2016 FINANCIAL DATA 08/11/2016 CHARTE POWERPOINT VALLOUREC 20
Slide 21: Cyclical downturn strongly impacted volumes sold
Cyclical downturn strongly impacted volumes sold VOLUMES SOLD 2013-2016 In k tons 625 584 583 551 564 543 545 487 412 362 320 321 333 317 251 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 2013 2014 2015 9M 2016 2,159 k tons 2,323 k tons 1,411 k tons 905 k
Slide 22: 9M revenues affected by drop in volumes and negative price/mix
9M revenues affected by strong drop in volumes and negative price/mix effect 9M 2016 VERSUS 9M 2015 €2,942m -17.0% -27.7% -2.4% -8.3% €2,127m 9M 2015 Volume Currency Price/Mix 9M 2016 Translation Investor Presentation – 8 November 2016 22
Slide 23: Revenues breakdown for 9M 2016
Revenues breakdown for 9M 2016 As % of total Group revenues Revenues by market Revenues by region 17.2% 29.9% 59.9% 17.7% 63.4% 17.8% 26.3% 21.0% 4.5% 5.3% 15.8% 17.1% 13.7% 8.2% 19.8% 23.1% 21.7% 17.6% 9M 2015 9M 2016 9M 2015 9M 2016 North America Rest of the world Oil & Gas Power Generation South
Slide 24: Revenues by geography
Revenues by geography In millions of € 9M As % of 9M As % of Change 2016 revenues 2015 revenues YoY Europe 461 21.7% 679 23.1% -32.1% North America 366 17.2% 881 29.9% -58.5% South America 378 17.7% 524 17.8% -27.9% Asia & Middle East 559 26.3% 618 21.0% -9.5% Rest of World 363 17.1% 240 8.2% +51.3%
Slide 25: 9M 2016 cash flow statement
9M 2016 cash flow statement In millions of € 9M 9M 2016 2015 Cash flow from operating (275) (85) activities (FFO) Change in WCR (17) +279 +decrease, (increase) Net cash flow from operating (292) +194 activities Gross capital expenditure (100) (159) Capital increase +959 - Dividends paid (2) (68) Ass
Slide 26: 9M 2016: from Revenues to EBITDA
9M 2016: from Revenues to EBITDA In millions of € Change 9M 2016 9M 2015 YoY Revenues 2,127 2,942 -27.7% Industrial margin and Cost of sales (1) (1,949) (2,546) -23.4% EBITDA down: • Lower revenues: drop in Industrial margin 178 396 -55.1% volumes (-17.0%) and negative price/mix effect (-8.3%) As
Slide 27: 9M 2016: from EBITDA to Net Income
9M 2016: from EBITDA to Net Income Change In millions of € 9M 2016 9M 2015 YoY Operating result down : EBITDA (156) 0 Na Restructuring charges of €92 million and impairment charges Depreciation of industrial assets (210) (228) -7.9% of €70 million mainly related to the strategic initiatives Other
Slide 28: Capital Expenditure
Capital Expenditure In millions of € 909 873 803 677 567 529 388 268 200 100 2008 2009 2010 2011 2012 2013 2014 2015 9M 2016 2016 est. Investor Presentation – 8 November 2016 28
Slide 29: 9M 2016 Balance Sheet
9M 2016 Balance Sheet In millions of € 30 Sept. 2016 31 Dec. 2015 In millions of € 30 Sept. 2016 31 Dec. 2015 Non current assets 4,278 4,353 Equity, Group share 3,171 2,646 Non-controlling interests 337 392 Inventories and 951 1,066 Equity 3,508 3,038 work-in-progress Trade and other receivables 498
Slide 30: Transformation Plan
TRANSFORMATION PLAN 08/11/2016 CHARTE POWERPOINT VALLOUREC 30
Slide 31: Project to reshape European operations: fixing capacity issues
1. Project to reshape European operations: Fixing capacity issues* Project to streamline our European operations… Closure of 2 out of the 4 large rolling mills 50% tube production capacity reduction vs. 2014 (1/3 in Valens plan) Asset disposals: confirmation of the planned sale of a majority
Slide 32: Develop highly competitive production hubs: Brazil
2. Develop highly competitive production hubs Optimizing operations in Brazil* Rationalization of production set-up with NSSMC Merger of VSB & VBR Supply agreement maintained with NSSMC Allowing for Shut down of Belo Horizonte’s 2 blast furnaces and steel mill Capex avoidance and rationa
Slide 33: China – developing a new route from Tianda
3. Develop highly competitive production hubs China – developing a new route from Tianda* A state-of-the-art PQF mill (2010): 500kt production capacity coupled with finishing capacities Qualified by Tier one OCTG customers A successful partnership with Vallourec : 19.5% stake acquired by Vallo
Slide 34: Reinforced partnership with NSSMC
4. Reinforced partnership with NSSMC A new step Enhance R&D cooperation Improving the efficiency of the 40+ year technical cooperation on VAM® connections development Adding resources to the joint R&D operation for VAM® connections to accelerate development and release of new products and redu
Slide 35: Key Financial Benefits from Transformation Plan
Reminder of Key Financial Benefits from Transformation Plan EBITDA Contribution Achievable Independent from Market Recovery c. €750m By 2018 By 2020 Change in scope c. €100m Positive EBITDA impact of full consolidation of c.70% c. 70% Tianda and VSB Optimization of global production footprint c. €
Slide 36: A streamlined and rebalanced industrial set-up
A streamlined and rebalanced industrial set-up NORTH AMERICA EUROPE Rolling capacity: Rolling capacity: 2014: 1,350kt, i.e. 46% CHINA 2014: 750kt, i.e. 25% 2018: 750kt, i.e. 24% 2018: 700kt, i.e. 23% Rolling capacity: 2018: 550kt, i.e. 18% incl. 200kt for export BRAZIL Rolling capacity: 2014: 800kt,
Slide 37: A successful c. €1bn capital increase
A successful c. €1bn capital increase Shareholder composition – June 2016 €480m Rights Issue 16,70% 2,60% 0,50% 15,00% €514m Mandatory 65,20% Convertible Bonds - Tranche A: €389 million converted at €11 per share - Tranche B: €125 million converted at €2.21 per share Bpifrance Participations & Caiss
Slide 38: Beyond the trough
BEYOND THE TROUGH 08/11/2016 CHARTE POWERPOINT VALLOUREC 38
Slide 39: Depletion to drive volume recovery
Depletion to drive volume recovery Global oil production needs (2012-2035) Above and beyond demand, field depletion is the key factor: 5m Bpd need Demand growth 0.5% (per year) to be put in production every year to maintain current oil supply Oil supply / demand rebalancing is expected in the sh
Slide 40: ROCE definition
ROCE definition ROCE = Net Operating Profit Less Adjusted Tax(1) (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 Dep
Slide 41: Investor Relations Contact - Vallourec Group
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