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VALLOUREC: Vallourec reports second quarter and first half 2014 results

   VALLOUREC: Vallourec reports second quarter and first half 2014 results   Press Release  July 2014  www.vallourec.com  Vallourec reports second quarter and first half 2014 results  Boulogne-Billancourt (France),  30  July 2014  -  Vallourec, world  leader  in  premium tubular solutions, today announces its results for the second  quarter  and first half of 2014.  The consolidated financial statements were  presented  by Vallourec's Management Board to its Supervisory Board.  SECOND QUARTER 2014 (Q2) RESULTS:    oSales of €1,422 million, up 3.3% year-on-year (up 8.7% at constant     exchange rates)   oEBITDA of €248 million, up 7.8% year-on-year, with a 17.4% EBITDA margin   oNet income, Group share of €88 million, up 41.9% year-on-year  FIRST HALF 2014 (H1) RESULTS:    oSales of €2,693 million, up 4.0% year-on-year (up 10.1% at constant     exchange rates)   oEBITDA of €444 million, up 5.5% year-on-year, with a 16.5% EBITDA margin   oNet income, Group share of €144 million, up 48.5% year-on-year   oPositive H1 2014 Free Cash Flow at €37 million vs. -€100 million in H1     2013   oNet debt of €1,739 million as of June 30, 2014  KEY FIGURES In millions of euros.   Q2    Q2     %                             H1    H1     % 2014  2013  Change                         2014  2013  Change 1,422 1,377  +3.3%          Sales          2,693 2,590  +4.0%   248   230  +7.8%         EBITDA            444   421  +5.5% 17.4% 16.7% +0.7pt      As % of sales      16.5% 16.3% +0.2pt   156   139 +12.2%    Operating profit       265   229 +15.7%    88    62 +41.9% Net income, Group share   144    97 +48.5%    +1   (1)   +€2m    Free Cash Flow^1       +37 (100) +€137m  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 achieved a solid performance in the  first half 2014, with sales up  10.1%  at constant exchange  rates and EBITDA  up 5.5%. We  continue to  structurally  improve our European cost base, and tightly manage working capital requirement and capital expenditures. This resulted in  the generation of a positive  free  cash flow of €37 million over the period.  Obviously, we are facing short-term  challenges, notably in Brazil, that  will  affect our results in the second half  of 2014, while we target 2014 sales  to  be close to 2013 level.  As a result, we have  taken immediate actions on  the  operational front to mitigate these temporary negative impacts, and adapt  our  industrial  operations  to   the  lower  load.   Vallourec's  management   and  operational teams remain  focused on  generating positive Free  Cash Flow  for  2014.  We continue  to build  on the  long-term attractiveness  of global  Oil &  Gas  markets, driven by the need for E&P capital expenditures, and remain confident that our  strategy  positions  us  well to  capture  future  growth  in  these  markets."  I - CONSOLIDATED SALES BY MARKET  For the second quarter of 2014, Vallourec recorded sales of €1,422 million, up 3.3% compared with the  second quarter of 2013  (up 8.7% at constant  exchange  rates). Higher volumes  (+7.4%) and a  positive price and  product mix  effect  (+1.3%) were partly offset by a negative currency translation effect (-5.4%).  For the first  half of 2014,  Vallourec recorded sales  of €2,693 million,  up  4.0% compared  with the  first half  of 2013  (up 10.1%  at constant  exchange  rates). While prices and the product mix were stable, higher volumes  (+10.1%)  were partly offset by  a negative currency translation  effect (-6.1%) due  to  the persisting weakness of the Brazilian real and the U.S. dollar against  the  Euro.  In millions of euros.   Q2    Q2     %                                     H1    H1     % 2014  2013  Change                                 2014  2013  Change   956   911  +4.9%            Oil & Gas            1,778 1,679  +5.9%    61    77 -20.8%         Petrochemicals            127   152 -16.4% 1,017   988  +2.9% Total Oil & Gas, Petrochemicals 1,905 1,831  +4.0% 71.5% 71.8%              % of total sales         70.7% 70.7%                                                          143   121 +18.2%        Power Generation           278   257  +8.2% 10.1%  8.7%              % of total sales         10.3%  9.9%                                                          262   268  -2.2%        Industry & Other           510   502  +1.6% 18.4% 19.5%              % of total sales         19.0% 19.4%                                                        1,422 1,377  +3.3%              Total              2,693 2,590  +4.0%  Oil & Gas, Petrochemicals  For the second quarter of 2014, Oil & Gas sales were up 4.9% year-on-year  (up  10.5% at constant exchange rates) to €956 million.  For the first  half of 2014,  Oil & Gas  sales were up  5.9% year-on-year  (up  12.4% at constant exchange rates) to €1,778 million.    oDuring the first half of 2014, the demand in the USA was supported by a     3.2% year-on-year increase in the average active rig count and gains in     drilling efficiency. Higher volumes sold reflected this increased demand,     and the commercial success of Vallourec's enlarged offer with existing and     new customers, served by the successful ramp-up of the new rolling mill.     The proportion of API and     semi-premium products in Vallourec's portfolio in H1 2014 was more     important than in H1 2013. Selling prices of OCTG sold by Vallourec will     increase in the second half of 2014, offsetting the increase in scrap     costs experienced at the beginning of the year.        oSales increased in the EAMEA^[1] region in the first half of 2014 compared     to the first half of 2013, resulting from an exceptionally strong backlog     generated in 2013, especially in the Middle East, with high advanced     premium products. As announced in early June, the level of orders recorded     by Vallourec has reduced in the region in Q2 2014. This will impact the     Group's deliveries until mid-2015. This resulted from E&P^[2] operators     adjusting their inventories and delaying some tenders for premium     products, in an environment where IOCs^[3] are constantly looking at     optimizing their E&P spending. This does not however change the positive     structural trends relying on major E&P capex programs in the region,     required to offset depletion and to support growing domestic oil and gas     demand for instance in Saudi Arabia and Abu Dhabi.        oSales decreased in Brazil in the first half of 2014 due to the temporary     decline in tonnages of OCTG casing tubes for offshore delivered during the     first quarter of 2014, despite the restart of deliveries to Petrobras in     Q2 2014, and to the negative effect of the translation of the Brazilian     real. Vallourec sales were also impacted in H1 2014 by the low level of     IOCs' activities in Brazil due partly to disappointing exploration     results.  As announced by the  Group in early  June, Petrobras' decision  to  eliminate most of its  tube inventories by  the end of  the year will  heavily  weigh on Vallourec's sales in the second  half of 2014, with an estimated  net  EBITDA impact of  circa €60  million. Nonetheless, Petrobras  did confirm  its  drilling schedule.  For the second quarter of 2014, Petrochemicals sales reached €61 million, down 20.8% year-on-year (down 15.6% at constant exchange rates) mainly affected  by  a continuous intense competition. For the first half  of 2014, Petrochemicals sales  reached €127 million,  down  16.4% year-on-year (down 11.8% at constant exchange rates).  Power Generation  For the second quarter of 2014, Power Generation sales stood at €143  million,  up 18.2% year-on-year (up 19.8% at constant exchange rates).  For the first half of 2014, Power  Generation sales stood at €278 million,  up  8.2% year-on-year (up 9.3% at constant exchange rates). Vallourec continues to  successfully serve the  conventional power  generation  market, especially in Asia  and in the Middle  East. In the nuclear  activity,  sales were up year-on-year benefiting from a favourable comparison base. As  a  reminder, H1 2013 sales were affected by a low Q2 2013 due to the rescheduling of some projects from 2013 to 2014.  Industry & Other  For the second quarter of 2014, Industry & Other sales stood at €262  million,  down 2.2% year-on-year (up 4.1% at constant exchange rates).  For the first half of 2014, Industry  & Other sales stood at €510 million,  up  1.6% year-on-year (up 9.6% at constant exchange rates).    oIn Europe, sales benefited from higher volumes mainly driven by positive     trends in agricultural goods partly offset by lower prices and product     mix. The market environment remains highly competitive despite slightly     better macroeconomic indicators.   oIn Brazil, sales were slightly down year-on-year notably due to the     decrease of heavy vehicles sales (domestic and export). Moreover, the     deterioration of macroeconomic environment is affecting Vallourec's sales     to distributors and to EPC^[4] companies. Iron ore sales were slightly up     in euros in H1 2014.  II - FINANCIAL RESULTS  Summary consolidated income statement In millions of euros.    Q2     Q2     %                              H1      H1      %  2014   2013  Change                          2014    2013   Change     583   543  +7.4% Sales Volume (k tonnes)   1,134   1,030 +10.1%   1,422 1,377  +3.3%          Sales            2,693   2,590  +4.0% (1,019) (991)  +2.8%     Cost of sales^1     (1,960) (1,877)  +4.4%   71.7% 72.0% -0.3pt     (as % of sales)       72.8%   72.5% +0.3pt     403   386  +4.4%    Industrial margin        733     713  +2.8%   28.3% 28.0% +0.3pt     (as % of sales)       27.2%   27.5% -0.3pt   (143) (140)  +2.1%      SG&A costs^1         (273)   (272)  +0.4%   10.1% 10.2% -0.1pt     (as % of sales)       10.1%   10.5% -0.4pt     248   230  +7.8%         EBITDA              444     421  +5.5%   17.4% 16.7% +0.7pt      As % of sales        16.5%   16.3% +0.2pt     156   139 +12.2%    Operating profit         265     229 +15.7%      88    62 +41.9% Net income, Group share     144      97 +48.5%  1.Before depreciation and amortization  Q2 2014 consolidated income statement analysis  For the  second  quarter  of 2014,  EBITDA  stood  at €248  million,  up  7.8%  year-on-year. EBITDA  margin  increased by  70  bp compared  with  the  second  quarter of 2013 to 17.4% of sales. This resulted from:    oAn improved industrial margin at €403 million, representing 28.3% of     sales, compared with 28.0% in Q2 2013. Following a strong first quarter,     the industrial margin progressed due to a robust performance of the Oil &     Gas operations in the second quarter of 2014, notably in EAMEA, despite     the negative impact of the stronger euro against the U.S. dollar.     Notwithstanding the restart of casing tubes deliveries to Petrobras in Q2     2014, Brazilian contribution remained lower compared to Q2 2013.   oBroadly stable Sales, general and administrative costs (SG&A) in value at     €143 million and at 10.1% as a percentage of sales. Cost inflation was     mainly offset by a favourable currency effect.  H1 2014 consolidated income statement analysis  For  the  first  half  of  2014,  EBITDA  stood  at  €444  million,  up   5.5%  year-on-year. EBITDA margin reached 16.5% of sales in H1 2014 and was  broadly  stable compared with the first half of 2013. This resulted from:    oAn improved industrial margin in value at €733 million, mainly thanks to     the robust performance of     Oil & Gas operations in EAMEA, but slightly down as a percentage of sales     at 27.2% primarily explained by the lower contribution from Brazil and by     the negative impact of the stronger euro against the U.S. dollar.   oStable Sales, general and administrative costs (SG&A) of €273 million,     benefiting from the effects of cost reduction measures and from a     favourable currency effect. SG&A decreased from 10.5% of sales in H1 2013     to 10.1%.  Operating profit increased by 15.7% year-on-year to reach €265 million through improved EBITDA, despite  higher depreciation  of industrial  assets, in  line  with the major  investments of the  last years. During  the second quarter  of  2014, the Group accrued a €11.6  million provision for restructuring plans  in  France, partly offset by one-off items  for €10.8 million. As a reminder,  the  first half of 2013 included an  exceptional provision of €20.6 million  before  tax.  For the first  half of  2014, financial result  was negative  at -€31  million  versus -€50  million in  H1  2013. This  improvement  mainly resulted  from  a  positive foreign exchange  result in  H1 2014  while slightly  negative in  H1  2013.  The effective tax rate was 31.6% in the first half of 2014, compared to  35.7%  in the first half of 2013.  Net income, Group sharestood at €144 million, up 48.5% versus last year. III - CASH FLOW & FINANCIAL POSITION In millions of euros.   Q2    Q2     Change                                       H1    H1    Change 2014  2013                                                2014  2013  +200  +170         +30     Cash flow from operating       +360  +300      +60                               activities (FFO) (A) (128)  (71)         -57    Change in operating WCR (B)    (185) (202)      +17                           [+ decrease, - increase]              (71) (100)         +29  Gross capital expenditures (C)   (138) (198)      +60    +1   (1)  +2    Free Cash Flow (A)+(B)+(C)       +37 (100)  +137  For the first half of 2014, Vallourec  generated a positive free cash flow  of  €37 million compared with -€100 million in the  first half of 2013.  This performance resulted from  the  following items:    oCash flow from operating activities was up €60 million in the first half     of 2014 at €360 million, largely due to EBITDA improvement, and to the     decrease in income taxes paid.   oOperating working capital requirement increased by €185 million in the     first half of 2014. As a reminder, the working capital at the end of     December 2013 benefited from positive non-recurring items.   oGross capital expenditures stood at €138 million in the first half of     2014, down 30.3% year-on-year, reflecting the strict and efficient control     of capital expenditures. Vallourec formerly announced its decision to     reduce its capital expenditures by €100 million (down from an initial     target of €500 million to €400 million for 2014). The Group continues to     target capital expenditures to €450 million on average from 2015 onwards.  In June  2014,  the  Holding  company  paid  €84.7  million  dividend  to  its  shareholders in cash. The  payment of the dividend  in shares resulted in  the  creation of 518,416 new shares (i.e. 0.4% of the share capital).  As of June 30, 2014, net debt  was €1,739million, an increase of €108  million  compared to the end of 2013. The gearing ratio was 33.5%.  As of  June 30,  2014, Vallourec  had approximately  €3 billion  of  committed  financings, which included undrawn confirmed credit lines of €1.7 billion.  IV - MARKET TRENDS & OUTLOOK 2014  In Oil & Gas, lower bookings recorded  in EAMEA during the second quarter  due  to inventory adjustments by  E&P operators and  postponed tenders will  impact  deliveries until mid-2015. In spite of this temporary impact, the EAMEA region remains a  dynamic  area  and  continues  to  support  the  long  term  growth  expectations. In the USA,  the Group  continues to  experience a  good level  of OCTG  sales  supported by higher  drilling activity  and improving prices,  despite a  less  favourable mix. In Brazil, the contribution of Oil & Gas operations in 2014 will be lower than in 2013 as  a result  of Petrobras'  decision to  eliminate most  of its  tube  inventories by  year-end,  while  maintaining its  drilling  plans  unchanged.  However, this one-time impact on Vallourec's  sales in H2 2014 and  especially  in the  fourth quarter,  does not  change  the long  term potential  for  deep  offshore pre-salt in Brazil. The Brazilian non-Oil  & Gas operations  will continue to  be impacted by  the  deterioration in the local macroeconomic  environment, and declining iron  ore  prices. The Group does not foresee  any change in trends  in the Power Generation  and  Industry & Other European operations.  The strength of the Euro will continue to impact negatively the  profitability  of the deliveries fromEurope.  Assuming no significant changes in markets and currencies, Vallourec  confirms  its target of  2014 EBITDA  down by approximately  10% compared  to 2013.  The  Group remains focused on generating positive Free Cash Flow for 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 and SBF 120.  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 Q2 / H1 2014 results  Wednesday 30   oAnalyst conference call / audio webcast at 6:00 pm (Paris July 2014        time)                  to be held in English.               To participate in the call, please dial:              0800 279 4992 (UK),0805 631579 (France),              1 877 280 2296 (USA), +44 (0)20 3427 1919 (Other countries)              Conferencecode: 3979566                 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 6                  August 2014.               To listen to the replay, please dial:              0800 358 7735 (UK),0800 949597 (France),              1 866 932 5017 (USA), +44 (0)20 3427 0598 (Other countries)              Access code: 3979566  Information and Forward-Looking Reflections  This press release  contains forward-looking reflections  and information.  By  their nature, these  reflections and information  include financial  forecasts  and estimates as well as the  assumptions on which they are based,  statements  related to projects, objectives and expectations concerning future operations, products and services or  future performance. Although Vallourec's  management  believes  that   these  forward-looking   reflections  and   information   are  reasonable, Vallourec  cannot guarantee  their  accuracy or  completeness  and  investors  in  Vallourec  are   hereby  advised  that  these   forward-looking  reflections and information  are subject to  numerous risks and  uncertainties  that are difficult to foresee and generally beyond Vallourec's control,  which  may mean that the  actual results and  developments differ significantly  from  those expressed, induced or forecasted in the forward-looking reflections  and  information. These risks include those  developed or identified in the  public  documents filed by Vallourec with the AMF, including those listed in the "Risk Factors" section of the  Registered Document filed with  the AMF on April  14,  2014 (N° D.14-0358).  Calendar             11/06/2014 Release of third quarter and first nine months 2014 results  For further information, please contact Investor relations                Press relations Etienne Bertrand                  Laurence Pernot Tel: +33 (0)1 49 09 35 58         Tel: +33 (0)1 41 03 78 48 etienne.bertrand@vallourec.com   laurence.pernot@vallourec.com                                    Appendices  Documents accompanying this release:    oSales volume (k tonnes)   oForex   oSales by geographic region   oSales by market   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                               583  543  +7.4% Q3                               na  545    na Q4                               na  584    na Total                   1,134   2,159    na  na: not applicable  Forex  Average exchange rate     H1 2014          H1 2013 EUR / USD              1.37  1.31 EUR / BRL               3.15  2.67 USD / BRL              2.30  2.03  Sales by geographic region In millions of euros.                      H1   As % of  H1   As % of Change                   2014   sales  2013   sales   YoY Europe               530   19.7%   511   19.7%  +3.7% North America        774   28.7%   686   26.5% +12.8% South America        507   18.8%   608   23.5% -16.6% Asia & Middle East   656   24.4%   614   23.7%  +6.8% Rest of World        226    8.4%   171    6.6% +32.2%                                        Total              2,693  100.0% 2,590  100.0%  +4.0%  Sales by market In millions of euros.                           H1       As % of      H1       As % of Change                         2014       sales      2013       sales   YoY Oil & Gas              1,778   66.0%   1,679   64.8%  +5.9% Petrochemicals        127    4.7%  152    5.9% -16.4% Power Generation      278   10.3%  257    9.9%  +8.2% Mechanicals           211    7.8%  205    7.9%  +2.9% Automotive            105    3.9%  120    4.6% -12.5% Construction & Other  194    7.3%  177    6.9%  +9.6%                                     Total                  2,693  100.0%   2,590  100.0%  +4.0%  Cash flow statement In millions of euros.      Q2          Q2          Q1                             H1          H1    2014        2013        2014                           2014        2013                                       Cash flow from        +200        +170        +160     operating             +360        +300                                         activities                                         Change in       (128)        (71)        (57)   operating WCR          (185)       (202)                                        + decrease,                                         (increase)                                       Net cash flows         +72         +99        +103   from operating          +175         +98                                         activities        (71)       (100)        (67)   Gross capital          (138)       (198)                                        expenditures        Financial              -       -       -    Investments           -       -       (113)        (52)        (23)   Dividends paid         (136)        (52)          +1         +34        (10) Asset disposals &          (9)         +12                                       other elements                                     Change in net debt       (111)        (19)          +3    + decrease,           (108)       (140)                                         (increase)       1,739       1,754       1,628  Net debt (end of        1,739       1,754                                          period)  Summary consolidated income statement In millions of euros.    Q2     Q2      %                                       H1      H1       %  2014   2013  Change                                    2014    2013   Change   1,422 1,377   +3.3%              SALES                 2,693   2,590   +4.0%                        (1,019) (991)   +2.8%         Cost of sales^1          (1,960) (1,877)   +4.4%     403   386   +4.4%        Industrial margin             733     713   +2.8%   28.3% 28.0%  +0.3pt         (as % of sales)            27.2%   27.5%  -0.3pt   (143) (140)   +2.1%           SG&A costs^1             (273)   (272)   +0.4%    (12)  (16)     na   Other income (expense), net       (16)    (20)     na     248   230   +7.8%              EBITDA                  444     421    5.5%   17.4% 16.7% +0.7pt       EBITDA as % of sales         16.5%   16.3% +0.2pt                           (77)  (72)   +6.9%    Depreciation of industrial      (148)   (136)   +8.8%                                    assets                             Other (amortization,    (15)  (19)     na        exceptional items,           (31)    (56)     na                         impairment & restructuring)     156   139  +12.2%         OPERATING PROFIT             265     229  +15.7%    (11)  (22)  -50.0%     Financial income (loss)         (31)    (50)  -38.0%     145   117  +23.9%        PROFIT BEFORE TAX             234     179  +30.7%    (46)  (42)   +9.5%            Income tax               (74)    (64)  +15.6%       0   (3)     na Net profit of equity affiliates        0       1     na      99    72  +37.5% NET INCOME FOR THE CONSOLIDATED      160     116  +37.9%                                    ENTITY    (11)  (10)     na    Non-controlling interests        (16)    (19)     na      88    62  +41.9%     NET INCOME, GROUP SHARE          144      97  +48.5%    0.7  0.5     na    EARNINGS PER SHARE (in €)        1.1    0.8     na  1.Before depreciation and amortization  na: not applicable  Summary consolidated balance sheet In millions of euros.           Assets          30-Jun 31-Dec        Liabilities        30-Jun 31-Dec                           2014   2013                             2014   2013                                        Equity, Group share        4,814  4,601 Intangible assets, net      190    206 Non-controlling interests    373    385 Goodwill                    499    495 Total equity               5,187  4,986 Net property, plant and   4,234  4,151 equipment Biological assets           204    178 Bank loans and other       1,399  1,379                                        borrowings Investments in equity       167    173 Employee benefits            216    182 affiliates Other non-current assets    454    437 Deferred tax liabilities     224    209 Deferred tax assets         211    187 Other long-term              237    225                                        liabilities Total non-current assets  5,959  5,827 Total non-current          2,076  1,995                                        liabilities Inventories and           1,612  1,423 Provisions                   162    138 work-in-progress Trade and other           1,080  1,099 Overdrafts and other       1,222    815 receivables                            short-term borrowings Derivatives - assets         52     92 Trade payables               786    833 Other current assets        359    297 Derivatives - liabilities      7     24 Cash and cash               882    563 Other current liabilities    504    510 equivalents Total current assets      3,985  3,474 Total current liabilities  2,681  2,320 TOTAL ASSETS              9,944  9,301 TOTAL LIABILITIES          9,944  9,301 Net debt                  1,739  1,631 Net income, Group share      144    262  -------------------------  [1] EAMEA: Europe, Africa, Middle East, Asia  [2] E&P: Exploration and Production  [3] IOC: International Oil Company  [4] EPC: Engineering, Procurement and Construction  Information Half-year financial statements at 30 June 2013 and 30 June 2014 are subject to limited review by statutory auditors. Quarterly financial statements are unaudited and not subject to any review.  20140730_Vallourec-press-release_Q2_H1_2014_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#1843857  
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