Third Quarter and First Nine Months 2014 Results Investor Presentation November 6, 2014
Q3 / 9M 2014 in review
Q3 / 9M 2014 financial performance Sales EBITDA & EBITDA Margin(1) In millions of In millions of and in % +1.7% -6.4% 3,969 4,036 661 619 +5.3% at cc. -2.6% 240 -27.1% 1,379 1,343 -3.7% 17.4% 175 16.7% 15.3% at cc.…
Oil & Gas (66.1% of 9M 2014 Groups sales) Petrochemicals (5.0% of 9M 2014 Groups sales) Oil & Gas Sales ( m) O&G sales: +2.5% EAMEA: Sales increase y-o-y in 9M 2014. In Q3 2014, higher 2,604 2,668 volumes, but with a less…
Power Generation (10.1% of 9M 2014 Groups sales) Power Generation Sales ( m) +6.5% 409 384 +7.3% at cc. Conventional power generation market: continues to suffer from pricing pressure in an intensely competitive market…
Industry & Other (18.8% of 9M 2014 Groups sales) Industry & Other Sales ( m) Mechanicals -0.8% Automotive 764 758 Construction & Other +4.2% In the EU: higher at cc. volumes offset by 309 320 negative price and product mix…
Q3 / 9M 2014 Financial Results
Q3 2014: from Sales to EBITDA % In millions of Q3 2014 Q3 2013 Change EBITDA down 27.1%, margin down: Sales volumes (k tons) 564 545 +3.5% Mostly as a result of lower sales in Sales 1,343 1,379 -2.6% Brazil Cost of sales1 (1,028)…
9M 2014: from Sales to EBITDA % In millions of 9M 2014 9M 2013 Change EBITDA down 6.4%, margin down: Sales volumes (k tons) 1,698 1,575 +7.8% Weaker industrial margin at Sales 4,036 3,969 +1.7% 1,048m: Less favourable volumes and…
9M 2014: from EBITDA to Net Income % In millions of 9M 2014 9M 2013 Change EBITDA 619 661 -6.4% Operating Profit down 11.1% As % of sales 15.3% 16.7% -1.4pt y-o-y to 345m: Depreciation of industrial assets (226) (202) +11.9%…
Free Cash Flow In millions of 9M 2014 9M 2013 Change Cash flow from operating activities +516 +504 +12 (FFO) (A) Change in operating WCR (B) (176) (313) +137 +decrease, (increase) Gross capital expenditure (C) (205) (317)…
Capital Expenditure In millions of 909 873 803 677 567 529 450 on average 400 2008 2009 2010 2011 2012 2013 2014e 2015e & beyond / 15
Net debt In millions of Net Debt as of Net Debt as of Dec. 31, 2013 Sept. 30, 2014 Free Cash Flow Dividends paid Asset disposals & other elements (1,631) +135 (142) (19) (1,657) Net debt = Net debt = 32.7% 31.3% of…
Financial resources as of September 30, 2014 Strong and diversified financial structure Optimized cost of financing 18% Approx. 69% of 82% of gross debt gross debt raised is at fixed rate* on capital markets Bank & Other Debt…
Outlook
2014 Targets Assuming no significant changes in markets and currencies, Vallourec continues to target: 2014 sales close to those of 2013 EBITDA down by approximately 10% vs. 2013 Positive Free Cash Flow in 2014 / 19
Appendix
A worldwide leader Worldwide presence and regional leadership with Key figures over 24,000 employees in more than 20 countries 2013 Over 50 production facilities worldwide delivering a large spectrum of products for diversified…
Our strategy to create value Continue to support our customers challenges More Continue to differentiate from low-cost players premium Improve Vallourec profitability Provide local content & supply key markets domestically…
Regional leaderships Europe China North America Brazil ME/Africa/Asia Reshaped production capacity to support growth over years to come / 23
Bringing our premium solutions closer to our customers 9,900 3,200 2,600 8,400 Over 24,000 5 steel mills Sales & services employees* 14 pipe mills Forest & mine 50 production 38 finishing units 6 R&D centers facilities *…
Safety and health, our top priorities Safety performance The Group is committed 9.3 9.4 and mobilized 7.1 5.5 for the safety 5.3 5.0 and health of its 3.2 2.8 2.6 employees 2.3 2.0 2008 2009 2010 2011 2012 2013 2014…
Sales breakdown for the First Nine Months of 2014 Sales by region Sales by market 3,969m 4,036m 3,969m 4,036m 26.6% 31.0% North America 65.6% 66.1% Oil & Gas 23.6% 17.4% South America Asia & Middle East 24.3% 23.9%…
Sales breakdown for the FY 2013 Sales by region Sales by market 5,326m 5,578m 5,578m 5,326m 28.8% 26.2% North America Oil & Gas 60.7% 65.8% 21.2% South America 22.0% Asia & Middle East 18.4% 26.2% Petrochemicals 6.7%…
2013: Another year of growth for Oil & Gas operations Oil & Gas sales - In million 66% of total sales +13% 50% of +14% 3,669 total sales +21% 3,233 2,841 +5% 2,239 2,355 2009 2010 2011 2012 2013 Capturing market growth…
Our position in Brazil Long term partnership with Petrobras (since 1954) Fully integrated local production A complete product offering MINAS GERAIS Premium OCTG VAM connections Drill pipes Risers and flowlines VMB Belo…
Our position in the USA Oil & Gas Shale Plays Vallourec operations Casper, WY Youngstown, OH Muskogee, OK Houma, LA Houston,TX Image: Hart Energy Long-term relationships with distributors, large independents and…
Ramp up of new operations on track USA: New Youngstown mill Enlarged local offer to better meet China: New Valinox mill customer needs (product range, lead Inauguration: June 6, 2013 time and services) Rapid ramp up throughout…
Update on ongoing industrial new set up: Investments < 50m USA: New VAM Finishing unit France: doubling testing capacity Youngstown, Ohio 2015-2017 program Expected 1st delivery early 2015 France: steel mill revamping Operating…
R&D resources Vallourec Research Vallourec Research Center France Center Technology Significant R&D Vallourec Research expenses (87m in Vallourec Competence Center Germany 2013) Center USA Extension of testing development…
Partnering with our customers to answer their most complex challenges Creation of Key Account Managers Development of customer Oil & Gas Power Generation Industry events Development of specific project to answer specif customer…
Energy trends confirming predominance of Oil & Gas Energy demand trends by fuel Oil & Gas trends Growth in Oil consumption in 15.1 emerging economies 13.1 2.2 Transport sector delivers a 1.7 0.9 large share of Oil demand 0.7…
Oil & Gas Premium products for all applications Deep wells Corrosive environments Shale Gas Arctic Deviated and horizontal wells Development High-temperature of corrosion- High-pressure resistant Offshore drilling steel tubes and…
SURF applications / 38
Well profiles adapted to all reservoirs All paths are possible: Vertical well Directional well High deviated well 3D and complex well Extended Reach Drilling (ERD) well Ultra-ERD well Horizontal well / 39
What are the components of a well Conductor Less technical Casing Surface 955 ft Casing 3500 ft Intermediate Casing 10385 ft Production Casing 12950 ft More technical Production Tubing 14000 ft 15015 ft / 40
Specificities of shale applications Challenging environment Low permeability / Low porosity Thin & wide formations Hydraulic fracturing Horizontal wells High bending High internal pressures during water High rotational torque…
Solutions: evolution of grades and connections requirements for Shale Shale Oil Shale Gas Shallow Up to 10 000 ft 10 000 ft TVD < 2 000 ft 2 000 - 5 000 ft 5 000 10 000ft Lateral length Premium Semi premium API Gas tight…
Solutions: evolution of grades and connections requirements for HPHT 392F 200C 356F 180C Ultra 302F 150C HPHT 10 000 psi 15 000 psi 17 500 psi Extreme HPHT HPHT Testing VAM TOP capacities VAM 21 VM 125 HC SS / 43
Unconventional drilling technologies require more premium OCTG Breakthrough technologies enable access to non-conventional shale reserves, requiring more tons of OCTG and more premium connections Difference between conventional…
Market environment in 2013 and into 2014e 1/2 USA Eurozone Real GDP Industrial production Real GDP China 0.8% 3.8% 4.1% Real GDP 2.3% 2.9% -0.6% -0.4% 2.2% 2.2% 7.7% 7.7% 2012 2013 2014 7.5% Industrial production 2012 2013 2014…
Market environment in 2013 and into 2014e 2/2 2012 2013 2014e Oil demand growth +1% expected in Oil Demand(1) (Bbl/d) 90.5 91.7 92.6 2014 Oil price:(2) Brent (/bbl) 111.7 108.6 104.2 Global economy: global growth International…
Oil & Gas market 1,800 Oil vs. Gas in the US(1) 1,600 Oil & Gas International rig count(1) Oil: 82% 1,600 1,400 1,400 1,200 1,200 1,000 active rigs 1,000 active rigs 800 800 Land: 75% 600 600 400 Gas: 18%…
The trends and market environments North America Europe Markets overcapacity A dynamic but competitive Oil & Gas market Our export base for high-tech products We are one step ahead Consolidate our and must keep that advantage…
Q3 2014: from EBITDA to Net Income % In millions of Q3 2014 Q3 2013 Change EBITDA 175 240 -27.1% As % of sales 13.0% 17.4% -4.4pt Depreciation of industrial (78) (66) +18.2% assets Other (amortization, exceptional items, (17)…
9M 2014 Balance Sheet In millions of 30 Sept. 2014 31 Dec. 2013 In millions of 30 Sept. 2014 31 Dec. 2013 Non current assets 6,121 5,827 Equity, Group share 4,872 4,601 Non-controlling interests 416 385 Inventories and 1,694 1,423…
Dividend for the year 2013 2.1 1.8 Option period: 0.81 0.69 4-17 June 2014 Payment date: 25 June 2014 2012 2013 Earning per share Dividend per share Dividend up 17.4% y-o-y Dividend payable in cash or in shares at…
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