First Quarter 2024 Results
• Cash generation capability of New Vallourec on display with sixth straight quarter of deleveraging
• International OCTG pricing remains strong due to robust demand pipeline across multiple geographic regions
• Market demand remains stable in the US; industry inventories have normalized
• Expect to reduce net debt further in the second quarter
• Target initiation of capital returns to shareholders in 2025 at the latesta
HIGHLIGHTS
First Quarter 2024 Results
• Effects of New Vallourec plan and Value over Volume strategy on display:
o Tubes EBITDA margin of 23.6% up 277bps sequentially and 135bps year-over-year
o Tubes EBITDA per tonne of €751 increased sequentially and year over year despite lower US pricing
• Group EBITDA of €235 million down 16% sequentially and 27% year over year
o Tubes EBITDA of €220 million down 12% sequentially and 21% year over year due to reductions in US pricing and lower volumes, largely driven by the closure of Germany
o Mine & Forest EBITDA of €30 million down 29% sequentially and 37% year over year due to lower sales volumes and lower non-cash forest revaluation effects
• Adjusted free cash flow €172 million; total cash generation €102 million
• Deleveraging ahead of plan: net debt declined sequentially and more than halved year over year from €1,000 million in Q1 2023 to €485 million in Q1 2024
Second Quarter 2024 Outlookb
• Group EBITDA is expected to moderately decline versus Q1 due to US Tubes market dynamics:
o For the Tubes segment, increased volumes and EBITDA in our international portfolio are expected to be more than offset by lower prices and volumes in the US
o Mine & Forest EBITDA is expected to move closer to the €100 million annualized run-rate
• Net debt is expected to decline further versus the Q1 2024 level
Full Year 2024 Outlookb
• Group EBITDA margin expected to remain strong through 2024 due to robust international Tubes pricing in backlog and further operational improvement
• Net debt is expected to decline meaningfully versus the Q1 2024 level
a – Vallourec’s dividend policy would in any event be conditional upon the Board’s decision taking into account Vallourec’s results, its financial position including the deleveraging target and the potential restrictions applicable to the payment of dividends. Dividends and share repurchases would also be subject to shareholders’ approval.
b – In all cases, total cash generation and net debt guidance excludes the potential positive impact of major asset sales. See further details regarding the second quarter and full year 2024 outlook at the end of this press release.
Philippe Guillemot, Chairman of the Board of Directors and Chief Executive Officer, declared:
“Our first quarter results confirm the merits of the New Vallourec plan and our Value over Volume strategy. Following the closure of our German rolling mills at the end of 2023, our Tubes profitability per tonne and EBITDA margin took meaningful steps higher despite lower volumes in the first quarter. We also continue to deliver on our goal to decrease our net debt, which we reduced again by €85 million sequentially and €515 million year over year. The international OCTG market remains strong. We see a robust pipeline of new order opportunities across the Middle East, Africa and North Sea, and accordingly, market prices remain favorable. In the US, a reset in market expectations has caused some further incremental pricing pressure. That said, market demand remains stable and inventories have normalized. We remain disciplined in executing our Value over Volume strategy both in the US and globally. We are seeing clear opportunities to deliver differentiated value to our customers via our premium product offering. In the Middle East, our customers are increasingly focusing on developing their gas resources, for which they demand premium connections. Continued momentum in deepwater exploration and development campaigns is leading to strong demand for our high-end products in mission-critical offshore applications. Finally, in North America, operators’ desire to drill ever-longer laterals in their horizontal wells is driving strong demand for our high-torque connections. On March 12th, we announced that ArcelorMittal had reached an agreement to purchase Apollo’s stake in Vallourec. The deal is expected to close in the second half of 2024, following the completion of various regulatory approvals. We are delighted to welcome ArcelorMittal as a reference shareholder and look forward to finding ways to enhance value with this industrial partner. In April, we successfully executed our holistic balance sheet refinancing. This marked a major step towards our objective of making Vallourec crisis-proof. Through these transactions, we have extended our debt and liquidity facility maturities, increased our available liquidity, and reduced our debt service costs. We now benefit from greater visibility and financial flexibility for the years to come. Alongside this transaction, our significant progress in reshaping Vallourec has been recognized by all three of the major ratings agencies. S&P has upgraded our rating for the fourth time since we announced the New Vallourec plan, which now stands at BB+, Outlook stable. We are also delighted to welcome the addition of Moody’s and Fitch, which rate Vallourec Ba2, Outlook positive and BB+, Outlook positive, respectively. We are now notably ahead of schedule on our plan to reach zero net debt by year-end 2025 at the latest. As such, we anticipate that we will initiate our return of capital to shareholders in 2025 at the latest.”
