(News Bulletin 247) – The manufacturer of seamless tubes for the oil and gas industry can resume full operation of its Pau Branco iron mine after obtaining the agreement of the Brazilian authorities.

The news is sparse on the Paris Stock Exchange on this holiday commemorating the armistice of May 8, 1945. Vallourec brings some material to a sluggish Parisian market, the French group announced Friday evening that it had obtained the green light from the Brazilian authorities for a return to full operation of its iron mine in Brazil.

On the Paris Stock Exchange, this announcement is appreciated. The title of the specialist in seamless tubes rose by 3.6%, around 10:50 a.m. and occupied the head of the SBF 120 index.

Vallourec is therefore starting well this week. The French group is authorized to resume its activity in its iron mine in Brazil under normal conditions after having obtained the necessary authorizations from the Brazilian mining and environmental authorities. According to Vallourec, the Pau Branco iron mine located in the state of Minas Gerais “should return to full production capacity no later than the end of the second quarter of 2023”.

Operations suspended at the start of 2022

The French group had been forced to suspend its operations in this mine between January and May 2022 following an overflow of a sediment containment dike. It had been caused by heavy rains that fell on the Minas Gerais region in January 2022.

In May 2022, Vallourec obtained a first authorization for a partial restart of the operation of its iron mine in Brazil. In return, the French group was not to use the tailings site. Under these operating conditions, the group explains that it was only able to extract 4 million tonnes in 2022, a volume which came out “well below the available capacity of 8.7 million tonnes per year”.

Vallourec specifies in its press release that the production sold in the first quarter of 2023 was in line with forecasts of around 1.5 million tonnes, and that the production sold last April was around 0.6 million tonnes.

Brazil is a strategic area for Vallourec. The company has indeed transferred its German production to the Latin American giant as part of its “New Vallourec” transformation plan. This roadmap was put in place in May 2022, after the arrival of CEO Philippe Guillemot, previously managing director of the collective catering group Elior.

Zero net debt in 2025

The first effects of this plan are materializing, according to management. Last March, Vallourec had indeed enchanted the markets, the group having kept its promise to generate positive cash flow in the fourth quarter of 2022. The company’s cash generation was driven by the reduction in the working capital requirement of activity (-183 million euros) as well as the improvement in the group’s financial results in the fourth quarter.

Over the last three months of 2022, Vallourec saw its revenues jump 45% over one year to 1.54 billion euros and more than doubled its gross operating income to 312 million. euros.

The company intends to keep the same trajectory for the future. In 2023, Vallourec hopes to increase its gross operating income, generate positive cash generation and continue to reduce its net debt. Regarding this last point, its CEO Philippe Guillemot said that Vallourec’s net debt should be reduced to zero by 2025.