Vallourec Reports Second Quarter and First Half 2013 Results
08/02/2013 - Despite the challenging environment in European industrial markets, Vallourec continued to benefit from its high premium offering and its strong market position to serve the shale hydrocarbons plays in the USA, the deep offshore market in Brazil and the dynamic market in the Middle East.
Vallourec, a world leader in premium tubular solutions, announced its results for the second quarter and first half of 2013. The consolidated financial statements were presented by Vallourec’s Management Board to its Supervisory Board.
Q2 2013:
· Sales up 3.7% versus Q2 2012 at € 1,377 million
· EBITDA of € 230 million, up 20.4% versus Q2 2012
· EBITDA margin improved by 230 bp to 16.7% of sales
· Net income, Group share of € 62 million, or € 0.5 per share
H1 2013:
• Sales of € 2,590 million, up 2.5% versus H1 2012
• EBITDA of € 421 million, up 22.7%
• EBITDA margin improved by 270 bp to 16.3% of sales
• Net income, Group share of € 97 million, or € 0.8 per share
Summary of results
Commenting these results, Philippe Crouzet, Chairman of the Management Board, stated: “Vallourec second quarter and first half results are in line with our expectations. The Group sales, EBITDA and EBITDA margin improved in Q2 2013, both year-on-year and sequentially. These performances were largely driven by the higher proportion of Oil & Gas sales in our total sales mix, representing 65% of H1 sales, and by the cost reductions implemented across the Group.
Despite the challenging environment in European industrial markets, Vallourec continued to benefit from its high premium offering and its strong market position to serve the shale hydrocarbons plays in the USA, the deep offshore market in Brazil and the dynamic market in the Middle East. Furthermore, the Group started to benefit from the progressive ramp-up of the new mills in accordance with plan.
The Group remains focused on enhancing its operating efficiency and, based on current market conditions, continues to target for 2013 an increase of volume and sales and an improvement of the EBITDA margin.”
Sales Volume
In Q2 2013, sales volume of rolled tubes shipped amounted to 543,000 metric tons, up 2.8% when compared to Q2 2012. This improvement was mainly driven by higher Oil & Gas volumes.
For H1 2013, sales volume amounted to 1,030,000 metric tons, flat (-0.2%) compared to prior year.
Energy
Oil & Gas sales were up 11.6% in Q2 2013 versus the same period of the prior year, to reach € 911 million, i.e. 66% of total sales (vs. 61% in Q2 2012).
For H1 2013, Oil & Gas sales were up 10.8% year on year to € 1,679 million, representing 65% of total sales compared to 60% in H1 2012.
In the USA, the number of active rigs1 during Q2 2013 averaged 1,761, flat since the beginning of the year, but still lower than the average of 1,970 active rigs in Q2 2012. However, the lower number of active rigs was partly offset by greater drilling efficiency. Prices were stable in Q2 2013 when compared to Q1 2013 but below 2012 level. Driven by the commercial success of its dedicated VAM® connections for shale applications, the Group continued to benefit from its strong market position on the shale oil market offsetting the still subdued shale gas market, which does not show signs of recovery yet as initially anticipated. The deliveries of the new plant in Youngstown (USA) have been gradually increasing since the beginning of the year. This resulted in higher Q2 Oil & Gas revenues vs. Q2 2012.
In H1 2013, Oil & Gas sales in the USA slightly decreased versus H1 2012, higher volumes being offset by lower prices.
In the rest of the world, the average rig count2 increased by approximately 6% during Q2 2013 compared to Q2 2012, to reach 1,306 active rigs, with high levels of activity in most regions.
In the Middle East, Vallourec revenues improved especially as the Group benefited from a good product mix
such as in Saudi Arabia. The ongoing qualification of VSB for premium products is running on schedule, which will allow the plant to gradually increase its premium products output to fulfill orders notably from Africa and the Middle East.
In Brazil, Vallourec continued to benefit from a good mix driven by the domestic Oil & Gas offshore market. In order to further deepen its long-term collaboration with Petrobras, and supply the Brazilian market with the most advanced products, Vallourec inaugurated, in July 2013, a new Research Center in the State of Rio de Janeiro, located next to Petrobras’ CENPES research center.
In H1 2013, Oil & Gas sales in the rest of the world were up when compared to the same period of the prior year, notably in Brazil, driven by a product mix more biased toward offshore applications.
Power generation sales amounted to € 121 million in Q2 2013, down 13.6% versus Q2 2012 and represented 9% of total consolidated sales in Q2 2013.
For H1 2013, power generation sales amounted to € 257 million, down 7.6% year on year, representing 10% of total consolidated sales.
The conventional power generation market remained weak. Local competition continued to be intense in Asia where most new-build activity is concentrated. Sales for nuclear power plants are affected by the rescheduling of some projects over 2014. For full year 2013, the Group is not expecting any improvement for the power generation market.
Petrochemicals sales were € 77 million in Q2 2013, down 14.4% year on year.
For H1 2013, petrochemicals sales amounted to € 152 million, down 13.1% year on year and represented 6% of total consolidated sales, in a very competitive environment.
Non-energy
Non-energy sales amounted to € 268 million in Q2 2013, down 5.0% when compared to Q2 2012. Non-energy sales represented 19% of total consolidated sales in Q2 2013 (vs. 21% in Q2 2012). For H1 2013, non-energy sales amounted to € 502 million, down 10.0% year on year, representing 19% of total sales compared to 22% in H1 2012.
In Europe, the non-energy sales decreased versus 2012 due to lower average selling prices and a high reference base in 2012. End-user demand for pipes dedicated to the mechanical use was affected in particular by a weaker mining sector. The construction and automotive markets also remained weak with the exception of the agricultural business which is performing well. In addition, prices remained under pressure.
In Brazil, the Group’s non-energy sales benefited from a rebound in the automotive market showing an improvement in Q2 2013 when compared to Q2 2012. In Q2 2013, iron ore sales were up compared to Q1, due to higher contract prices, and up year on year. Iron ore contract prices are expected to be down in H2 2013.
Outlook
The indicators for Vallourec’s Oil & Gas markets remain globally positive due to Brazil and dynamism of the rest of the world, despite no recovery of the US gas drilling activity. The economic environment continues to be challenging for other markets, with limited visibility.
Based on these conditions and thanks to the progressive ramp up of the new mills, the Group continues to target growth in volumes, sales and improvement in EBITDA margin in 2013.
