VALLOUREC : VALLOUREC : Vallourec reports second quarter and first half 2013 results

 VALLOUREC : VALLOUREC : Vallourec reports second quarter and first half 2013
                                   results

Vallourec reports second quarter and first half 2013 results

Boulogne-Billancourt, 30  July  2013  - Vallourec,  world  leader  in  premium 
tubular solutions,  today 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



Key figures for the second quarter and first half 2013

             Q2         Q2     Change     Q1     Change     H1         H1     Change
In €         2013       2012     YoY      2013     QoQ      2013       2012     YoY
million
Sales                                            
Volume (k      543      528  +2.8%      487 +11.5%    1,030    1,032  -0.2%
tonnes)
Sales                    +3.7%        +13.5%                +2.5%
             1,377    1,328           1,213           2,590    2,527
EBITDA            +20.4%     +20.4%         +22.7%
               230      191             191             421      343
As % of        16.7%      14.4% +2.3pt      15.7%   +1pt      16.3%      13.6% +2.7pt
sales
Operating         +16.8%  +54.4%         +15.1%
income         139      119              90             229      199
Net
income,      +8.8%  +77.1%   +14.1%
Group           62       57              35              97       85
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  thousand 
tonnes, 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 thousand  tonnes, flat  (-0.2%) 
compared to prior year.



CONSOLIDATED SALES BY MARKET

                  Q2         Q2     Change     Q1     Change   H1      H1    Change
In € million      2013       2012     YoY      2013     QoQ    2013    2012    YoY
                                                
Oil & Gas           911      816 +11.6%      768 +18.6% 1,679 1,516 +10.8%
Power                                     
Generation          121      140 -13.6%      136 -11.0%   257   278 -7.6%
                                 
Petrochemicals       77       90 -14.4%       75 +2.7%    152   175 -13.1%
                                                      
Total Energy      1,109    1,046 +6.0%       979 +13.3% 2,088 1,969 +6.0%
% of total
sales               80.5%      78.8%            80.7%         80.6%   77.9%   
                                                                        
                                       
Mechanical          101      128 -21.1%      104 -2.9%    205   253 -19.0%
                                 
Automotive           66       60 +10.0%       54 +22.2%   120   125 -4.0%
Construction &                      
Other               101       94 +7.4%        76 +32.9%   177   180 -1.7%
Total                                     
non-Energy          268      282 -5.0%       234 +14.5%   502   558 -10.0%
% of total
sales               19.5%      21.2%            19.3%         19.4%   22.1%   
                                                                        
                                                         
Total             1,377    1,328 +3.7%     1,213 +13.5% 2,590 2,527 +2.5%



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 rigs^[1] 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 count^[2] 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.





RESULTS



Summary consolidated income statement

             Q2         Q2     Change     Q1     Change     H1         H1     Change
In €         2013       2012     YoY      2013     QoQ      2013       2012     YoY
million
Sales                                            
Volume (k      543      528  +2.8%      487 +11.5%    1,030    1,032  -0.2%
tonnes)
Sales                    +3.7%        +13.5%                +2.5%
             1,377    1,328           1,213           2,590    2,527
Cost of       -991     -979                   +11.9%   -1,877   -1,884  -0.4%
sales^1                          +1.2%     -886
(as % of       72.0%      73.7% -1.7pt      73.0%   -1pt      72.5%      74.5%   -2pt
sales)
SG&A          -140     -151                    +6.1%     -272     -295  -7.8%
costs^1                          -7.3%       -132
(as % of      -10.2%     -11.4% -1.2pt     -10.9% -0.7pt     -10.5%     -11.7% -1.2pt
sales)
EBITDA            +20.4%     +20.4%         +22.7%
               230      191             191             421      343
As % of        16.7%      14.4% +2.3pt      15.7%   +1pt      16.3%      13.6% +2.7pt
sales
Operating         +16.8%  +54.4%         +15.1%
income         139      119              90             229      199
Net
income,      +8.8%  +77.1%   +14.1%
Group           62       57              35              97       85
share

1.Before depreciation and amortization



Analysis of Q2 2013 Results

Sales increased by 3.7% versus Q2 2012 to € 1,377 million, mainly reflecting a
positive mix effect driven by  a higher proportion of  Oil & Gas sales,  while 
the  positive  volume  effect  (+2.8%)  was  offset  by  a  negative  currency 
translation effect (-3%).

The cost of  sales, at  72.0% of  sales in Q2,  improved compared  to Q2  2012 
(73.7% of sales) particularly as a result of a better mix.

Sales, general and administrative costs (SG&A) amounted to € 140 million,  and 
decreased in value and as a percentage of sales at 10.2%.

The EBITDA for Q2 was up € 39 million, or 20.4% year-on-year to € 230 million.
EBITDA margin improved by 230 bp to 16.7%  of sales (vs. 14.4% of sales in  Q2 
2012) despite lower OCTG prices  in the USA, as a  result of higher Oil &  Gas 
sales and efficient cost control.



Analysis of First Half of 2013 Results

Consolidated sales  in H1  2013 amounted  to  € 2,590  million, up  2.5%  when 
compared to H1  2012, reflecting  stable volumes  and a  positive mix  effect, 
which were  partly offset  by lower  OCTG prices  in the  USA and  a  negative 
currency translation effect (-3.3%).

The cost of sales amounted  to € 1,877 million or  72.5% of sales in H1  2013, 
representing an  improvement  compared  to  H1 2012  (74.5%  of  sales).  This 
improvement was mainly due to a better  mix with a higher proportion of Oil  & 
Gas sales and continued cost reductions.

The sales, general and administrative costs (SG&A) were down in value and as a
percentage of sales at
10.5% to reach €  272 million, thanks to  lower commercial and  administrative 
costs as well as a reduction of R&D expenses due to the completion of  certain 
projects.

The EBITDA in H1 2013 totalled € 421 million, up 22.7% year on year.  Compared 
to H1 2012, the EBITDA margin improved by 270 bp to 16.3% of sales. The  Group 
profitability improved largely due  to a better sales  mix, an efficient  cost 
control, the continuing ramp-up of the new mills and better exchange rates  on 
hedged transactions.

Operating income amounted to € 229 million  in H1 2013, 15.1% above the  prior 
year level. Better EBITDA  was partly offset by  the increase of  depreciation 
and amortization,  due  to  recent  capital  expenditures.  Exceptional  items 
include the provision of € 20.6 million  which was accrued in Q1 2013 for  the 
fraud on international transfers suffered by a subsidiary of Vallourec.

Net income, Group share amounted to € 97 million, 14.1% above prior year.  The 
impact on interest charges from a higher net debt has been almost fully offset
by a lower average cost of debt. The effective tax rate reached 35.7% over the
period.

Earnings per share amounted to € 0.8 in H1 2013 compared to € 0.7 in H1 2012.



Cash flow

                 Q2            Q2 2012           Q1           H1        H1 2012
In €             2013         restated^1         2013         2013     restated^1
million
                                                                              
Cash flow    +170            +151            +130             +204
from                                                          +300
operating
activities
Change in             -71             -27            -131   -202            -158
gross WCR
[+                                                                             
decrease, -
increase]
Operating                    +124              -1      +98             +46
cash flows            +99
                                                                              
Gross                -100            -200             -98     -198            -341
capital
expenditure
Financial              
Investments             -             -             -                      -
Dividends             -52          -175     -52            -175
paid                                                    -
Asset                                        -22      +12              -3
disposals &           +34
other
elements
                                                                              
Change in
net debt              -19            -251            -121     -140            -473
[+decrease,
-increase]
Net debt
(end of               1,754           1,667           1,735    1,754           1,667
period)

1.Figures for the year 2012 have been restated with the impact of the change
    in method of accounting for actuarial gains and losses on employee
    benefits (revised standard IAS 19)



Cash flow  from operating  activities amounted  to €  300 million  in H1  2013 
compared to € 204 million in H1 2012. This improvement was largely due to  the 
improved EBITDA.

Over the period, gross working capital requirements increased by € 202 million
reflecting notably the ramping up of new mills.

Gross capital expenditure for H1  2013 was € 198  million, down € 143  million 
year on year. Capex for  the full year 2013 is  still expected to be around  € 
650 million  including less  than €  200  million for  the completion  of  the 
finishing lines of the new mill in Youngstown (USA).

In June 2013, the payment of the  dividend in shares resulted in the  creation 
of 1,338,791 new shares issued at a price  of € 36.69 per share (i.e. a  share 
capital increase of 1.07%). Furthermore, the  cash outflow for the payment  of 
the dividend by the  Holding company to its  shareholders' amounted to €  36.5 
million.

As a result, during H1  2013, net debt increased by  € 140 million to reach  € 
1,754 million as of June 30 2013, representing 34.6% of consolidated equity (€
5,075 million). Net debt is expected to be slightly up at the end of 2013.  As 
of June 30 2013, Vallourec had close  to € 3 billion of committed  financings, 
which included undrawn confirmed credit lines of € 1.6 billion.



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.



About Vallourec

Vallourec is a world leader in premium tubular solutions primarily serving the
energy markets, as well as other industrial applications.

With over 23,000 employees, integrated manufacturing facilities, advanced  R&D 
and a  presence in  more than  20 countries,  Vallourec offers  its  customers 
innovative global solutions to meet the energy challenges of the 21st century.

Listed on the NYSE Euronext in Paris (ISIN code: FR0000120354, Ticker VK)  and 
eligible for the Deferred  Settlement System (SRD),  Vallourec is included  in 
the following indices: MSCI World Index, Euronext 100 and CAC 40.

In the United States, Vallourec has  established a sponsored Level 1  American 
Depositary Receipt  (ADR) program  (ISIN code:  US92023R2094, Ticker:  VLOWY). 
Parity between ADR and a Vallourec ordinary share has been set at 5:1.



www.vallourec.com



Presentation of Q2 and H1 2013 results

Tuesday   oAnalyst conference call at 6:30 pm (CET) to be held in English.
30 July
        To participate in the call, please dial:

        0800 6940257 (UK), 0805 632056 (France),

        1 866 966 9439 (USA), +44 1452 555566 (other countries)

        Conferencecode: 16089115

          oSlides will be available on the website at:

        http://www.vallourec.com/en/finance/investor-relations/

          oA replay of the conference call will be available until 13 August
            2013.

        To listen to the replay, please dial:

        0800 9531533 (UK), 0805 111337 (France),

        1 866 247 4222 (USA), +44 1452 550000 (other countries)

        Access code: 16089115



For further information, please contact
Investor relations               Press relations

Etienne Bertrand                  Caroline Philips

Tel: +33 (0)1 49 09 35 58         Tel: +33 (0)1 41 03 77 50

etienne.bertrand@vallourec.fr    caroline.philips@vallourec.fr






Calendar

09/26 & 09/27/2013 Investor day

                   Pittsburgh - USA

                   (register now)
11/07/2013         Release of third quarter 2013 results



Appendices

Documents accompanying this release:

§ Sales volume (k tonnes)

§ Sales by geographic region

§ Summary consolidated income statement

§ Summary consolidated balance sheet



Sales volume

                          2013          2012      Change
In thousands of tonnes                              YoY
                                                     
Q1                      487  504  -3.4%
Q2                      543  528  +2.8%
Q3                                   525 
Q4                                   535 
                                                     
Total                                 2,092 



Sales by geographic region

                       H1       As % of      H1       As % of Change
In € million           2013       sales      2012       sales   YoY
                                                               
Europe              511   19.7%  594   23.5% -14.0%
North America       686   26.5%  704   27.9%  -2.6%
South America       608   23.5%  626   24.8%  -2.9%
Asia & Middle East  614   23.7%  400   15.8% +53.5%
Rest of World       171    6.6%  203    8.0% -15.8%
                                                            
Total                2,590  100.0%   2,527  100.0%   2.5%



Summary consolidated income statement

VALLOUREC        Q2     Q2 2012   Change    Q1    Change    H1     H1 2012   Change
In € million    2013   restated^1  YoY     2013    QoQ     2013   restated^1  YoY
                                                                       
Sales                 1,328  +3.7%        +13.5%         2,527  +2.5%
               1,377                    1,213         2,590
                                                                          
Cost of         -991     -979  +1.2%   -886 +11.9% -1,877   -1,884  -0.4%
sales^2
SG&A costs^2    -140     -151  -7.3%   -132  +6.1%   -272     -295  -7.8%
Other income     -16       -7           -4          -20       -5      
(expense), net
                                                                       
EBITDA              191 +20.4%      +20.4%       343 +22.7%
                 230                      191           421
EBITDA as % of   16.7%      14.4%          15.7%          16.3%      13.6%      
sales
                                                                          
Depreciation
of industrial    -72      -55 +30.9%    -64 +12.5%   -136     -110 +23.6%
assets
Other
(amortization,
exceptional      -19      -17          -37          -56      -34      
items,
impairment &
restructuring)
OPERATING           119 +16.8%    +54.4%       199 +15.1%
INCOME           139                       90           229
Financial        -22      -24  -8.3%    -28 -21.4%    -50      -48  +4.2%
income
INCOME BEFORE           +23.2%      +88.7%       151 +18.5%
TAX              117       95            62           179
Income tax       -42      -28          -22          -64      -45      
Net income of                               
equity            -3        4            4            1        6      
affiliates
CONSOLIDATED           +1.4%    +63.6%       111  +4.5%
NET INCOME        72       71            44           116
Minority         -10      -14           -9          -19      -26      
interests
NET INCOME,            +8.8%    +77.1%         +14.1%
GROUP SHARE       62       57            35            97       85
EARNING PER                                                  
SHARE            0.5     0.5            0.3          0.8      0.7   
(in €)

1.Figures for the year 2012 have been restated with the impact of the change
    in method of accounting for actuarial gains and losses on employee
    benefits (revised standard IAS 19)
2.Before depreciation and amortization



Summary consolidated balance sheet

VALLOUREC                                                      
In € million                                                   
                    30-Jun    31-Dec                       30-Jun    31-Dec
      Assets         2013      2012        Liabilities      2013      2012
                            restated^1                             restated^1
                                                                        
                                     Shareholders'            4,729
                                        equity             4,660
Intangible assets,          Minority             
net                   235 224       interests            415 415
Goodwill                    Total equity           
                      515 511                          5,075  5,144
Net tangible fixed        4,320                          
assets              4,229
Biological assets           Bank loans and           1,410
                      187 196       other borrowings   1,403
Investments in              Employee benefits    
equity affiliates     163 162                            211 215
Other non-current           Deferred tax         
assets                446 408       liabilities          144 190
Deferred tax                Other long-term      
assets                182 213       liabilities          224 210
Total non-current         6,034 Total non-current        2,025
assets              5,957             liabilities        1,982
                                                              
Inventories and           1,430 Provisions           
work-in-progress    1,579                                  159 153
Trade and other                Overdrafts and          
receivables         1,028 969       other short-term   1,195 750
                                        bank borrowings
Derivatives -           Trade payables       
assets                 21 59                             761 678
Other current               Derivatives -      
assets                296 203       liabilities           30 15
Cash and cash               Other current        
equivalents           844 546       liabilities          523 476
Total current             3,207 Total current            2,072
assets              3,768             liabilities        2,668
                                                              
TOTAL ASSETS              9,241 TOTAL LIABILITIES        9,241
                    9,725                                9,725
                                                              
Net debt                  1,614 Net income, Group  
                    1,754             share                 97 217

1.Figures for the year 2012 have been restated with the impact of the change
    in method of accounting for actuarial gains and losses on employee
    benefits (revised standard IAS 19)



Information

Half-year financial statements at 30 June 2012 and 30 June 2013 are subject to
limited audit review.

Quarterly statements are unaudited and not subject to any review.

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

[1] Baker Hughes (USA rig count) - end of June 2013



[2] Baker Hughes (International rig count = outside North America) - end of
June 2013

130730_Vallourec press release_Q2 and H1 2013 (PDF)

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