Vallourec, Strongest rise in SBF 120 Mid-session Wednesday, January 25, 2023 – 01/25/2023 at 12:16

(AOF) –

Vallourec

(+ 2.85% – 13.34 euros)

Vallourec benefits from the signing of a long-term contract with Petrobras for the supply of OCTG pipes. The three-year contract covers the supply of premium seamless OCTG tubing, associated accessories, as well as specialized physical and digital services, representing a volume of more than 110 kt of products and accessories.

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Key points

– Together with Tenaris, the world leader in the market of seamless steel pipes (12% market share) and the world leader in premium pipe solutions;

– EUR 3.4 billion turnover, with a strong position in the oil and gas sector (54%), ahead of the strongly developing industry (36%), petrochemicals (6%) and electricity;

– New economic model in 3 pillars: reduction of production capacities in Europe, 2 strengthening presence in America, Middle East and Southeast Asia, transformation plan towards better competitiveness;

– Non-working capital due to BPI (2%), Apollo funds 1

ers

CEO Edouard Guinotte, who chairs the board of 9 directors and shareholders with 20% of the shares;

– Balance sheet cleaned up in 2021 with €752 million in cash against €1.8 billion in equity and €1.4 billion in net debt with capital growth.

Challenges

– “New Vallourec” strategy to increase productivity: relocation of German pipe production sites to Brazil effective 2023 / consolidation of European threading activities at the Aulnoye site to be headed by a new “One R&D” organization / reduction of overhead costs, head office functions with strategy and expertise by limiting, extension of structures in all regions / automation of operational processes, economies of scale / financial objectives: 230 million euro additional recurring operating profit, 250 million euro positive cash impact;

– Innovation strategy supported by 5 R&D centers and partnerships: take advantage of the technological advantage (VAM connections) and digital solutions distributed to customers through the Smartengo Vallourec.smart platform / respond to challenges such as lightness in industry, efficiency of power plants. energy and complexity of transportation and storage in oil and gas

/ Support employee suggestions through Open Innovation issues and Booster;

– Environmental strategy approved by SBTi in 2 parts: “Significant increase in turnover in 2020-30” / proposal for energy transition solutions for geothermal energy, offshore wind energy, carbon capture and storage and hydrogen for mitigation: 40 renewable energy, 96% recycled waste, 43% from steel recycling;

– the productive quality of 3 main industries: Youngstone in the USA, therefore a competitive advantage for the group favored by the increase in customs duties on steel, VSB in Brazil and Tianda in China;

– Positioning of competitive routes Brazil and China with expected 500 kt pipe production in 2024 vs. 300 kt in 2019.

Challenges

– Sensitivity to crude and iron ore prices and the Brazilian real and dollar parity against the euro;

– After a 36% increase in sales and a widening of net loss in 1

er

semester, 2022 forecast update: positive cash flow and reduction in debt / oil and gas: towards improved margins / industrial and others: in a stable market, full restart of Brazilian iron plant with a target of 2.6 Mt, so an estimate of 670-750 million euro gross operating surplus.

Environmental transition driving metal prices

The ecological transition increases demand and raises prices. Thus, lithium prices rose 100% last year, supported by sales of electric vehicles. The demand for metals such as aluminum, copper, graphite or nickel should increase until 2050. The war in Ukraine fueled price growth, as Russia is a major producer of mineral raw materials, particularly aluminum, palladium, nickel and titanium. The International Energy Agency (IEA) recently warned of the risk of shortages of several metals essential to the energy transition. Europe mobilized on strategic metals to strengthen its sovereignty.

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