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

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[1] EAMEA: Europe, Africa, Middle East, Asia

140507 Vallourec Q1 2014 in PDF

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Source: VALLOUREC via Globenewswire
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