VALLOUREC: Vallourec's First Quarter 2014 Results

              VALLOUREC: Vallourec's First Quarter 2014 Results   Press Release  May 2014  www.vallourec.com  Vallourec's First Quarter 2014 Results  Boulogne-Billancourt (France), 7 May 2014 - Vallourec, world leader in premium tubular solutions, today announces its results for the first quarter of  2014.  The consolidated financial statements were presented by Vallourec's Management Board to its Supervisory Board.  FIRST QUARTER 2014 RESULTS:    oSales of € 1,271 million, up 4.8% year-on-year (up 11.7% at constant     exchange rates)   oEBITDA of € 196 million, up 2.6% year-on-year, with a 15.4% EBITDA margin   oNet income, Group share of € 56 million, up 60.0% year-on-year   oNet debt stable at € 1,628 million as of March 31, 2014  KEY FIGURES                                Q1              Q1             Change In € million                 2014            2013             YoY Sales                       1,271     1,213            +4.8% EBITDA                     196    191            +2.6% As % of sales                     15.4%           15.7%           -0.3pt Operating profit           109  90           +21.1% Net income, Group share  56  35           +60.0% Free Cash Flow^1         36           -99  +€135m  1.Free Cash Flow (FCF) is a non-GAAP measure and is defined as cash flow     from operating activities minus capital expenditures and plus/minus change     in operating working capital requirement  Commenting on  these results,  Philippe Crouzet,  Chairman of  the  Management  Board, said:  "We are pleased to report that our first quarter 2014 results are in line with our expectations, with an improved overall financial performance. Indeed,  the  first quarter sales are up 4.8% (up 11.7% at constant exchange rates),  EBITDA  is up 2.6% and the  net income Group share  increased by 60.0%. These  figures  reflect the growth in our Oil & Gas sales, while Vallourec's other markets did not benefit from noticeable changes.  In light of  the continuing strength  of the  Euro and a  less favourable  mix  expected in the EAMEA  region, we have reinforced  our cost savings  measures.  Assuming no significant changes in markets and currencies, Vallourec continues to target stable to moderate increase in sales and EBITDA,and a positive Free Cash Flow generation in 2014."  I - CONSOLIDATED SALES BY MARKET  For the first quarter of 2014, Vallourec recorded sales of € 1,271 million, up 4.8% compared with the  first quarter of 2013  (up 11.7% at constant  exchange  rates). Higher  volumes (+13.3%)  were partly  offset by  an overall  negative  price and  product mix  effect  (-1.6%) and  a negative  currency  translation  effect (-6.9%) due to  the weakened Brazilian real  and US dollar against  the  Euro.                                  Q1              Q1        Change In € million                   2014            2013        YoY Oil & Gas                    822    768  +7.0% Petrochemicals             66  75 -12.0% Oil & Gas, Petrochemicals    888    843  +5.3% % of total sales                    69.9%           69.5%                                                            Power Generation             135    136  -0.7% % of total sales                    10.6%           11.2%                                                            Industry & Other             248    234  +6.0% % of total sales                    19.5%           19.3%                                                            Total                         1,271     1,213  +4.8%  Oil & Gas, Petrochemicals  For the first  quarter of  2014, Oil &  Gas sales  were up 7.0%  (up 14.6%  at  constant exchange rates)  compared with the  first quarter of  2013, to €  822  million. This increase was primarily driven by a favourable mix in the  Middle  East, alongside higher volumes in the USA, and despite a lower mix in  Brazil.  Overall,  prices  remained  broadly  stable  year-on-year.  Oil  &  Gas  sales  represented 64.7% of the Group's total consolidated sales.    oIn the USA, higher volumes are reflecting the commercial success of     Vallourec's enlarged offer. As forecasted, the product mix showed an     increase of sales of semi-premium and API products. During the first     quarter of 2014, the market was supported by a 1.2% year-on-year increase     in the average active rig count associated with an increased efficiency.        oIn the EAMEA^[1] region, sales in the first quarter of 2014 significantly     increased, benefiting from a particularly strong customer mix, essentially     in the Middle East. While the tendering activity in that area remains     substantial, the level of bookings in Saudia Arabia has decreased.  As an illustration of Vallourec's ability to provide with the most advanced premium tubular solutions, Total has awarded the Group a  significant  $ 100 million contract for ML-South Offshore Project in Brunei with deliveries expected to start in the second half of 2015.     oIn Brazil, as expected, sales decreased in the first quarter of 2014 as     they were impacted by the temporary decline in tonnages of OCTG casing     tubes delivered to the pre-salt basins and by the negative Brazilian real     translation effect. Deliveries of casing tubes to Petrobras will increase     as from the second quarter of 2014, earlier than initially anticipated.  For the first quarter  of 2014, Petrochemicals sales  were € 66 million,  down  12.0% year-on-year (down 8.0% at constant exchange rates) mainly affected by a very competitive  environment.  They represented  5.2%  of the  Group's  total  consolidated sales.  Power Generation  For the first  quarter of  2014, Power Generation  sales were  € 135  million,  stable year-on-year (flat at constant  exchange rates), representing 10.6%  of  the Group's total consolidated sales. Conventional power generation market remained  competitive with a lack of  new  projects.  Industry & Other  For the first quarter of 2014, Industry  & Other sales were € 248 million,  up  6.0% year-on-year (up 15.4% at constant exchange rates), and represented 19.5% of the Group's total consolidated sales.    oIn Europe, sales were broadly stable, slightly higher volumes being offset     by lower prices. The market environment remains very competitive.   oIn Brazil, the first quarter of 2014 sales improved year-on-year mainly     driven by higher iron ore sales. Over the full year, iron ore prices are     expected to be lower than in 2013.  II - FINANCIAL RESULTS  Summary consolidated income statement                                Q1              Q1        Change In € million                 2014            2013        YoY Sales Volume (k tonnes)         551    487 +13.3% Sales                       1,271     1,213  +4.8% Industrial margin          330    327  +0.9% (as % of sales)                   26.0%           27.0%   -1pt SG&A costs^1                     -130          -132  -1.5% (as % of sales)                   10.2%           10.9% -0.7pt EBITDA                     196    191  +2.6% As % of sales                     15.4%           15.7% -0.3pt Operating profit           109  90 +21.1% Net income, Group share  56  35 +60.0%  1.Before depreciation and amortization  For the first quarter of 2014, EBITDA was € 196 million, up 2.6% year-on-year. EBITDA margin decreased by 30  bp compared with the  first quarter of 2013  to  15.4% of sales.  The robust performance in Oil & Gas operations especially in EAMEA was  partly  offset by a lower  contribution from Brazilian Oil  & Gas operations while  in  the USA, volumes increase  was offset by the  less favourable product mix  and  higher costs of  raw materials. As  a consequence, the  industrial margin  was  flat in  absolute  value  and down  by  1  point as  a  percentage  of  sales,  representing 26.0% of sales. Sales, general and  administrative costs  (SG&A) decreased  by 1.5%  to €  130  million or 10.2% of sales compared with 10.9% in the first quarter of 2013.  Operating profit increased by 21.1% year-on-year to reach € 109 million.  This  performance  was  achieved  despite  a  slight  increase  of  depreciation  of  industrial assets.  As  a reminder,  the  first  quarter of  2013  included  a  provision of € 20.6 million accrued for a fraud on international transfers.  For the first quarter of 2014, financial result was negative at -€ 20  million  and improved compared with the previous year.  Net income,  Group sharewas  € 56  million,  up 60.0%  versus last  year.  The  effective tax rate was 31.5% in the  first quarter of 2014, compared to  35.5%  in the first quarter of 2013.  III - CASH FLOW & FINANCIAL POSITION                                                   Q1         Q1      Change In € million                                    2014       2013       YoY Cash flow from operating activities (FFO)   +160   +130           +30 (A) Change in operating WCR (B)                           -57   -131           +74 [+ decrease, - increase]                                         Gross capital expenditures (C)                        -67    -98           +31 Free Cash Flow^1 (A)+(B)+(C)                +36 -99  +135  1.Free Cash Flow (FCF) is a non-GAAP measure and is defined as cash flow     from operating activities minus capital expenditures and plus/minus change     in operating working capital requirement  For the first quarter of 2014,  Vallourec generated a positive free cash  flow  of €  36 million  versus -€  99 million  in the  first quarter  of 2013.  This  evolution resulted from the following items:    oCash flow from operating activities was up € 30 million in the first     quarter of 2014 at € 160 million, largely due to the decrease of income     taxes paid.   oOperating working capital requirement increased by € 57 million in the     first quarter of 2014. Its level as of March 31, 2014 was reduced by 4     points of the annualized first quarter sales compared to the end of March     2013.   oGross capital expenditures stood at € 67 million in the first quarter     2014, down 31.6% year-on-year, reflecting the strict control of capital     expenditures. Looking forward, Vallourec continues to target a maximum     capital expenditures level of € 500 million in 2014 and € 450 million on     average from 2015 onwards.  As of March 31, 2014, net debt reached € 1,628million, stable versus  year-end  2013, with a gearing ratio of 32.0%.  As of March  31, 2014, Vallourec  had approximately €  3 billion of  committed  financings, which included undrawn confirmed credit lines of € 1.7 billion.  As previously announced,  Vallourec signed in  February 2014 a  multi-currency  revolving credit facility for € 1.1 billion, maturing in February 2019, plus two one-year extension options, enabling the Group  to increase its  financial flexibility and  to extend  the  maturity of its financial resources.  IV - MARKET TRENDS & OUTLOOK 2014  In Oil & Gas, Vallourec targets a further increase in sales. In EAMEA,  the sales  shall continue  to benefit  from a  dynamic Middle  East  market, which will be supplied by the Group'snew industrial set-up, combining European mills,  VSB  anditslocal  finishing units.  Nonetheless,  based  on  recent bookings, mix and deliveries  in the later part  of the year should  be  less favourable than in 2013. The Middle East market remains the most  dynamic  area in the EAMEA  region and continues  to support the  medium and long  term  growth expectations. In the  USA, the  Group continues  to target  higher sales,  supported by  the  recent market developments, associated with an increased share of semi-premium and API products in its portfolio. In Brazil, deliveries  of casing tubes  to Petrobras for  the pre-salt  basins  will increase as from  the second quarter  of 2014 when compared  to a low  Q1  2014, earlier than initially anticipated.  Nevertheless, this does not  change  full year 2014  expectations for  Brazilian Oil &  Gas operations  of a  lower  contribution than in 2013.  No change in trends is foreseen in the conventional power generation activity, while sales for nuclear power  plantsshouldbenefit from the rescheduling  of  some projects from 2013 to 2014.In  Industry & Other, the visibility  remains  limited due to the still fragile economic recovery.  Thepersisting strength of  the Euro  will continue to  impact negatively  the  profitability of the deliveries fromEurope.  Vallourec is committed to financial discipline and return to shareholders.  It  will continue  to adapt  its  European cost  base,  offset inflation  on  cost  through its Capten+ savings program,  reduce capital expenditures and  tightly  manage working capital requirement. In light of  the continuing strength  of the  Euro and a  less favourable  mix  expected in  the  EAMEA region,  Vallourec  has reinforced  its  cost  savings  measures.  Assuming  no  significant  changes  in  markets  and   currencies,  Vallourec continues  to  target  stable  to moderate  increase  in  sales  and  EBITDA,and a positive Free Cash Flow generation in 2014.     About Vallourec Vallourec is a world leader in premium tubular solutions primarily serving the energy markets, as well as other industrial applications.  With over 24,000 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 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, SBF 120 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 Follow us on Twitter @VallourecGroup  Presentation of Q1 2014 results  Wednesday 7   oAnalyst conference call / audio webcast at 6:00 pm (CET) to be May 2014        held in English.              To participate in the call, please dial:             0800 279 4992 (UK), 0805 631 580 (France),             1 877 280 2296 (USA), +44 (0)20 3427 0503 (Other countries)             Conferencecode: 9937130                oAudio webcast and slides will be available on the website at:              http://www.vallourec.com/EN/GROUP/FINANCE                oA replay of the conference call will be available until 14 May                 2014.              To listen to the replay, please dial:             0800 358 7735 (UK),0800 989 597(France),             1 866932 5017 (USA), +44 (0)20 3427 0598 (Other countries)             Access code: 9937130  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.com   caroline.philips@vallourec.com  Calendar             05/28/2014 Shareholders' General Assembly 07/30/2014 Release of second quarter and first half 2014 results 11/06/2014 Release of third quarter and first nine months 2014 results                                    Appendices  Documents accompanying this release:    oSales volume (k tonnes)   oSales by geographic region   oSales by market   oForex   oCash flow statement   oSummary consolidated income statement   oSummary consolidated balance sheet  Sales volume                             2014          2013      Change In thousands of tonnes                              YoY Q1                      551  487 +13.3% Q2                               na  543    na Q3                               na  545    na Q4                               na  584    na Total                   551   2,159    na  na: not applicable  Sales by geographic region                           Q1        As % of       Q1        As % of Change In € million            2014        sales       2013        sales   YoY Europe                264   20.8%    258   21.3%  +2.3% North America         370   29.1%    310   25.6% +19.4% South America         256   20.1%    308   25.4% -16.9% Asia & Middle East    305   24.0%    247   20.4% +23.5% Rest of World       76    6.0%  90    7.3% -15.6%                                                            Total                  1,271  100.0%     1,213  100.0%  +4.8%  Sales by market                             Q1        As % of       Q1        As % of Change In € million              2014        sales       2013        sales   YoY Oil & Gas               822   64.7%    768   63.3%  +7.0% Petrochemicals        66    5.2%  75    6.2% -12.0% Power Generation        135   10.6%    136   11.2%  -0.7% Mechanicals             105    8.3%    104    8.6%  +1.0% Automotive            53    4.2%  54    4.5%  -1.9% Construction & Other  90    7.0%  76    6.2% +18.4%                                                              Total                    1,271  100.0%     1,213  100.0%  +4.8%  Forex  Average exchange rate Q1 2014 Q1 2013 EUR / USD                1.37    1.32 EUR / BRL                3.24    2.64 USD / BRL                2.37    2.00  Cash flow statement                                 Q1                  Q1                Q4 In € million                  2014                2013              2013                                                                Cash flow from              +160                +130            +205 operating activities Change in operating                    -57                -131            +130 WCR [+ decrease, - increase] Net cash flows from         +103                  -1            +335 operating activities Gross capital                          -67                 -98            -250 expenditures                         -  -  Financial Investments                                                      - Dividends paid                         -23    -            -4 Asset disposals &                    -10                 -22             +57 other elements                                                                Change in net debt                      +3                -121            +138 [+decrease, -increase] Net debt (end of                     1,628               1,735           1,631 period)  Summary consolidated income statement  VALLOUREC                                         Q1            Q1      Change In € million                                     2014          2013      YoY SALES                                            1,271    1,213  +4.8% Cost of sales^1                                     -941       -886  +6.2% Industrial margin                                330    327  +0.9% (as % of sales)                                      26.0%        27.0%   -1pt SG&A costs^1                                        -130       -132  -1.5% Other income (expense), net                           -4         -4    na EBITDA                                           196    191  +2.6% EBITDA as % of sales                                 15.4%        15.7% -0.3pt Depreciation of industrial assets                    -71        -64 +10.9% Other (amortization, exceptional items,              -16        -37    na impairment & restructuring) OPERATING PROFIT                                 109   90 +21.1% Financial income (loss)                              -20        -28 -28.6% PROFIT BEFORE TAX                               89   62 +43.5% Income tax                                           -28        -22 +27.3% Net profit of equity affiliates               -  4   na NET INCOME FOR THE CONSOLIDATED ENTITY          61   44 +38.6% Non-controlling interests                             -5         -9   na NET INCOME, GROUP SHARE                         56   35 +60.0% EARNINGS PER SHARE                                    0.4         0.3   na (in €)  1.Before depreciation and amortization  na: not applicable  Summary consolidated balance sheet  VALLOUREC In € million       Assets         31-Mar   31-Dec       Liabilities        31-Mar   31-Dec                       2014     2013                            2014     2013                                       Equity, Group share                                                                         4,698 4,601 Intangible assets,        Non-controlling            net                    197 206    interests                 390 385 Goodwill                  Total equity                                         495 495                            5,088 4,986 Net property, plant        and equipment        4,167 4,151 Biological assets         Bank loans and other                                 192 178    borrowings              1,386 1,379 Investments in            Employee benefits          equity affiliates      172 173                              199 182 Other non-current         Deferred tax               assets                 429 437    liabilities               217 209 Deferred tax assets       Other long-term                                   192 187    liabilities               238 225 Total non-current               Total non-current             assets               5,844 5,827  liabilities             2,040 1,995 Inventories and                 Provisions                 work-in-progress     1,530 1,423                            151 138 Trade and other              Overdrafts and other          receivables            989 1,099  short-term borrowings   1,161 815 Derivatives -         Trade payables             assets                  77 92                               774 833 Other current             Derivatives -            assets                 322 297    liabilities                13 24 Cash and cash             Other current              equivalents            919 563    liabilities               454 510 Total current                   Total current                 assets               3,837 3,474  liabilities             2,553 2,320 TOTAL ASSETS                    TOTAL LIABILITIES                                  9,681 9,301                          9,681 9,301 Net debt                        Net income, Group                             1,628 1,631  share                      56 262  -------------------------  [1] EAMEA: Europe, Africa, Middle East, Asia  140507 Vallourec Q1 2014 in PDF  ------------------------------------------------------------------------------  This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients. The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein. Source: VALLOUREC via Globenewswire HUG#1783499  
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