Release Date: May 15, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vallourec SA (VLOUF, Financial) reported a strong Q1 2025 with a 25% increase in operating results and cash conversion.
- Group EBITDA reached EUR207 million, at the high end of expectations, with an improved EBITDA margin from 20% to 21%.
- The company secured major contracts with Sonatrach, Buzios Oil Company, and Allseas, reflecting strong international bookings.
- Vallourec SA (VLOUF) received an investment grade rating from Fitch, marking its first in about a decade.
- The company generated strong cash flow, improving its net cash position to EUR112 million.
Negative Points
- The US market faces uncertainty due to trade policy and customer demand, impacting price increases.
- The planned divestment of Serimax indicates a strategic shift, which may affect specialized welding technology capabilities.
- Volatility in oil prices creates uncertainty around US activity levels in the second half of the year.
- The tax rate for Q1 was higher than expected, impacting net income.
- Imports in the US have increased, driven by East European and Korean welded pipes, affecting market dynamics.
Q & A Highlights
Q: Can you provide more details on the guidance for Q2, particularly regarding the US contribution to group tube EBITDA and the potential decline in EBITDA?
A: Philippe Guillemot, CEO, explained that Vallourec's profitability is now less dependent on the US market, with strong EBITDA generated across all geographies. Sascha Bibert, CFO, added that the potential decline in Q2 EBITDA is mainly due to expected lower mining and forest EBITDA and FX translation effects. The US onshore business contributes around 20% to 30% of tube EBITDA.
Q: What are the drivers behind the increase in imports in April compared to previous months?
A: Philippe Guillemot, CEO, noted that the increase in imports was primarily from Eastern Europe, Korea, and Austria. Korean imports consist of welded pipes, which do not impact Vallourec's seamless pipe business in the US. The US administration is expected to monitor these imports closely.
Q: What assumptions have been made for the US market in the second half of the year, and how does it impact the overall outlook?
A: Philippe Guillemot, CEO, stated that the outlook for the second half is based on current market conditions, with a conservative view on the US market. The recent increase in oil prices provides more confidence in maintaining stable activity levels. Sascha Bibert, CFO, added that the second half is expected to be stronger than the first, with a focus on international markets.
Q: Can you provide more color on pricing trends outside of the US, particularly in the Middle East and North Sea regions?
A: Philippe Guillemot, CEO, explained that the Middle Eastern index has been dropping, but Vallourec's focus on high-value products and customers means their performance is not directly tied to these indices. The North Sea pricing remains flat, and Vallourec's strategy focuses on value over volume.
Q: What is the outlook for working capital development, considering FX and price changes?
A: Sascha Bibert, CFO, mentioned that while working capital management is a priority, there might be an increase between Q2 and Q3 due to expected activity pick-up. However, this should normalize, and the overall impact on the full year is expected to be minimal.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
