Q1 2017 RESULTS - Vallourec · ... GAAP measure defined as cash flow from operating activities...

Q1 2017 RESULTS

Investor Presentation

26 April 2017

INFORMATION

Quarterly financial statements are unaudited and are not subject to any review

Half year financial statements are subject to limited review by statutory auditors

Full year consolidated financial statements at 31 December are audited

Unless otherwise specified, indicated variations are expressed in comparison with the same period of the previous year

Q1 2017 RESULTS – INVESTOR PRESENTATION – 26 APRIL 2017 2

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements. These statements include financial forecasts and estimates

as well as assumptions on which they are based, statements related to projects, objectives and expectations

concerning future operations, products and services or future performance. Although Vallourec’s management believes

that these forward-looking statements are reasonable, Vallourec cannot guarantee their accuracy or completeness

and these forward-looking statements are subject to numerous risks and uncertainties that are difficult to foresee

and generally beyond Vallourec’s control, which may mean that actual results and developments may differ significantly

from those expressed, induced or forecasted in the forward-looking statements. These risks include those developed

or identified in the public documents filed by Vallourec with the AMF, including those listed in the “Risk Factors” section

of the Registration Document filed with the AMF on 21 March 2017 (N° D.16-0141).

26/04/2017 CHARTE POWERPOINT VALLOUREC 3

Q1 2017 HIGHLIGHTS

VOLUMES SHIPPED ACROSS THE CYCLE

4

VOLUMES SHIPPED 2013-Q1 2017 (in Kt)

2013

2,159 Kt2014

2,323 Kt2015

1,411 Kt2016

1,281 Kt

Q1 2017 RESULTS – INVESTOR PRESENTATION – 26 APRIL 2017

* Tianda included

5Q1 2017 RESULTS – INVESTOR PRESENTATION – 26 APRIL 2017

Q1 2017 KEY FIGURES

(1) Earnings Before Interest, Taxes, Depreciation and Amortization(2) Non-GAAP measure defined as cash flow from operating activities minus capital expenditure and plus/minus change in operating working

capital requirement

EBITDA(1) (in millions of €) FREE CASH FLOW(2) (in millions of €)

VOLUMES SHIPPED (In Ktons) REVENUE (in millions of €)


Q1 2017 REVENUES

€671m

36.3%8.5% -37.8%

9.7% €783m

+16.7%

* Scope effect calculated with regard to restated Q1 2016 revenue

CHARTE POWERPOINT VALLOUREC 7

Q1 2017 FINANCIAL RESULTS

Q1 2017 REVENUE BREAKDOWN

8

AS % OF TOTAL GROUP REVENUE

Oil & Gas

Petrochemicals

Power Generation

Industry & Other

North America

South America

Asia & Middle East

Rest of the world

Europe

REVENUE BY MARKET REVENUE BY REGION


Q1 2017: FROM REVENUE TO EBITDA

9

in millions of € Q1 2017 Q1 2016Change

YoY Q4 2016

Change

QoQ

Revenue 783 671 16.7% 838 -6.6%

Cost of sales(1) (682) (621) +9.8% (778) -12.3%

Industrial margin 101 50 102.0% 60 68.3%

As % of revenue 12.9% 7.5% 5.4 pts 7.2% 5.7 pts

SG&A(1) (113) (116) -2.6% (117) -3.0%

As % of revenue -14.4% -17.3% 2.9 pts -13.9% -0.5 pt

Others (9) (6) Na (6) na

EBITDA (21) (72) +51m (63) +42m

As % of revenue -2.7% -10.7% 8.0 pts -7.5% 4.8 pts

EBITDA up €51m YoY

Consolidated revenue up:

Due to a positive

scope and forex

effect

Higher volumes in

North America and

Brazil offset by lower

prices and mix in

EAMEA and NA

compared to Q1 2016

deliveries

Positive results of the

Transformation plan

reflected in a better

industrial margin and lower

SG&A cost

(1) Before depreciation and amortization


Q1 2017: FROM EBITDA TO NET INCOME

10

in millions of € Q1 2017 Q1 2016Change

YoY Q4 2016

Change

QoQ

EBITDA (21) (72) +51m (63) +42m

Depreciation

of industrial assets(79) (70) 12.9% (73) 8.2%

Amortization

and other depreciation(11) (11) na (16) na

Impairment of assets - (63) na (1) na

Asset disposals,

restructuring and other- (74) na (35) na

Operating income

(loss)(111) (290) +179m (188) +77m

Financial income

(loss)(43) (34) 26.5% (31) 38.7%

Income tax 19 28 na 28 na

Net income (loss)

of associates(2) (2) na (4) na

Non-controlling

interests11 14 na 13 na

Net income (loss),

Group share(126) (284) +158m (183) +57m

Net loss reduced

by €158m,

thanks to

increased

EBITDA and

absence of

restructuring

and impairment

charges in Q1

2017


Q1 2017 FREE CASH FLOW

11

(* Free cash flow (FCF) is a non-GAAP measure and is defined as cash flow from operating activities minus gross capital expenditure

and plus/minus change in operating working capital requirement

FREE CASH FLOW: €(220) m

in millions of € Q1 2017 Q1 2016 Q4 2016

Cash flow from operating activities

(FFO) (A) (82) (135) (124)

Change in WCR (B)

+ decrease, (increase)(104) (61) +196

Gross capital expenditure (C) (34) (43) (75)

Free Cash Flow* (A)+(B)+(C) (220) (239) (3)


Free cash flow = €-220 m

(in millions of €)

Q1 2017 NET DEBT

12

Net

debt =

34.0%

of

equity

Dividends

paid

Asset

disposals

& other items

Net Debt as at

31 Dec. 2016 Net Debt as at

31 Mar. 2017

Cash flow

from

operating

activities Change

in WCR(1)Gross

capital

expenditure

Net

debt =

42%

of

equity

(1) Change in Working Capital Requirement, + decrease / (increase)

GEARING RATIO AT 31/03/2017: 41.9%


(1,287)(82)

(104)(34) (26) (1,533)

-

LIQUIDITY AND FINANCING

13

Net debt at 31 March 2017

Gross debt €2.5 billion (incl. €1.1 billion LT debt: bonds, leasing...)

Cash: €1 billion

Net debt: €1,533 million

Liquidity at 31 March 2017

€1 billion of cash

€2.3 billion LT committed bank facilities of which €0.7 billion drawn

€1.5 billion short term debt

LT financing maturity profile

Bonds: no significant repayment until 2019

Maturity of most bank facilities beyond 2019

Gearing covenant for 2018-2020 raised from 75% to 100%

(1) Subject to gearing covenant tested annually

LONG-TERM DRAWN DEBT MATURITY PROFILE (in € m)

LONG-TERM COMMITTED BANK FACILITIES PROFILE(1)

(in € m)


2 3102 110 2 110 2 018

1 079

Mar-17 Dec-17 Dec-18 Dec-19 Dec-20

1 084 1 084 1 066

650 635 621 607

Mar-17 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 After Dec.22


OUTLOOK

Considering better than initially expected market trends in the US, the targeted

EBITDA improvement of €50 to €100 million for FY 2017 when compared to 2016

to be in the upper part of the range

2017 OUTLOOK

15

Oil & Gas revenue in the US expected to rebound more significantly than previously foreseen, while timing of recovery in EAMEA still uncertain

In Brazil, drilling activity expected to remain broadly stable compared to 2016

No major changes in other Group businesses

Vallourec Transformation Plan to continue to bring its benefits



APPENDIX

17

VALLOUREC AT A GLANCE

Key clients

Key segments

Revenue share

(FY 2016)

Worldwide presence with 18,300 employees(1) in more than 20 countries

Over 50 production facilities worldwide delivering a large spectrum of products for diversified

applications, geographies and sectors

Highly innovative with 6 advanced R&D and 4 connection test centers located in France, Germany,

Brazil and the U.S. employing over 500 researchers and technicians

A clear and constant strategy: more premium, more local, more competitive

FY 2016:

Sales volume: 1,281 Kt

Sales: €2,965 m

65% 16%

19%

€559 m€486 m€1,920 m

OIL & GAS POWER GENERATION INDUSTRY

(1) At December 31, 2016 (permanent and temporary contracts). Before Tianda acquisition

GLOBAL LEADER IN PREMIUM TUBULAR SOLUTIONS OPERATING ACROSS DIVERSIFIED END MARKETS AND GEOGRAPHIES


http://www.salzgitter-ag.de/en/

http://www.salzgitter-ag.de/en/

(6.0)%

0.5% Above and beyond demand, field

depletion is the key factor: 5m Bpd need

to be put in production every year to

maintain current oil supply

Rebound in E&P necessary to avoid a

new reverse oil shock

Oil demand growing, OPEC agreement

implemented: supply / demand to

rebalance in 2017

Rebound in E&P activity will then be

shaped by the large dispersion of projects

economics and risk profiles

Source: International Energy Agency, “Oil Medium Term Market Report” – February 2015

Demand growth

(per year)

Production decline

(per year)

Source: IEA OMR report – Feb 2017

RECOVERY FUNDAMENTALS

18

Global oil production needs (2012-2035)

TRANSFORMING THE COMPANY TO BENEFIT FROM THE RECOVERY

Demand/supply Balance


19

TRANSFORMATION PLAN: STRATEGIC INITIATIVES FULLY EXECUTED

Reshape European operations

Closure of four facilities

2 rolling mills: Saint-Saulve and Déville-Lès-Rouen (France)

1 threading line: Mülheim (Germany)

1 heat treatment line: Bellshill (Scotland)

Sale of a majority holding in Saint-Saulve steel mill

Disposal of Vallourec Heat Exchanger Tubes

Develop highly competitive production hubs

VSB & VBR merger

Shut down of Belo Horizonte’s #2 blast furnace

Shut down of Belo Horizonte’s #1 blast furnace and steel mill 2018

Tianda acquisition

Implementation of new routes In line

Strengthen balance sheet by raising c.€1 bn equity

Reinforce partnership with NSSMC

New organization


A RESHAPED INDUSTRIAL SET-UP

20

Global capacities rebalanced: Europe down from 65% (2010) to 23% of global capacities**

Unique position with state-of-the-art rolling and finishing capacities in every key region

New highly competitive routes to supply international O&G markets

NORTH AMERICA

Rolling capacity:

2014: 750 Kt, i.e. 25%

2017: 750 Kt, i.e. 24%

BRAZIL

Rolling capacity:

2014: 800 Kt, i.e. 27%

2017: 1,100 Kt, i.e. 35%(incl. 300 Kt dedicated to NSSMC)

EUROPE

Rolling capacity:

2014: 1,350 Kt, i.e. 46%

2017: 700 Kt, i.e. 23%

CHINA

Rolling capacity*:

2014: 0 Kt

2017: 550 Kt, i.e. 18%(incl. 200 Kt for export)

A COMPETITIVE INDUSTRIAL SET-UP WITH LOW-COST ROUTES• PQF only

• **rolling capacities


TRANSFORMATION PLAN: TARGETS CONFIRMED

(1) Savings are before inflation

(2) 30% of this amount depending on market recovery

(3) At 2014 volumes

(4) At current volumes

€130m

IN LINE TO ACHIEVE THE FULL BENEFIT OF OUR TRANSFORMATION PLAN

21

Transformation Plan

€150m

€250m

€350m €750m1,2 Valens savings to be overachieved:

Target 2015-2017: €350m3

Achieved 2015-2016: €280m4

Transformation Plan execution fully in line:

Savings: Target of €400m over 2016-2020

€150M already achieved in 2016

€250m to generate over 4 years (2017-2020)

New production routes and change of scope:

Target 2016-2020: €350m confirmed

Valens


Q1 2017 FINANCIAL DATA


23

REVENUE BY GEOGRAPHY

in millions of € Q1 2017As %

of revenueQ1 2016

As %

of revenue

Change

YoY Q4 2016

Europe 115 14.7% 135 20.1% -14.8% 186

North

America187 23.9% 128 19.1% +46.1% 193

South

America163 20.8% 98 14.6% +66.3% 89

Asia

& Middle

East

276 35.2% 171 25.5% +61.4% 289

Rest of

World

42 5.4% 139 20.7% -69.8% 81

Total 783 100.0% 671 100.0% +16.7% 838


24

CAPITAL EXPENDITURE

(in millions of €)

529

677

873 909

803

567

388

268

175

34

2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 2017


25

Q1 2017 BALANCE SHEET

In millions of € 31 Mar. 2017 31 Dec. 2016

Non current assets 4,801 4,877

Inventories

and work-in-progress1,199 1,035

Trade and other

receivables587 546

Financial instruments 7 58

Other current assets 293 283

Cash & cash equivalents 1,013 1,287

Assets disposal for sale - 46

TOTAL ASSETS 7,900 8,132

Net Debt 1,533 1,287

Net Debt / Equity 41,9% 34,1%

In millions of € 31 Mar. 2017 31 Dec. 2016

Equity, Group share 3,183 3,284

Non-controlling interests 479 494

Equity 3,662 3,778

Shareholder loan 87 84

Provisions and deferred tax 684 708

Bank debt 2,546 2,574

Financial instruments 34 105

Trade payables 580 530

Tax and other current

liabilities307 310

Liabilities disposal

for sale- 43

TOTAL EQUITY

AND LIABILITIES7,900 8,132


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

Q1 2017 RESULTS - Vallourec · ... GAAP measure defined as cash flow from operating activities...

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