(News Bulletin 247) – The French manufacturer of seamless steel tubes raised its gross operating profit target after a third quarter above expectations. Vallourec says it is continuing its efforts to reduce debt.

Weighed down by years of underinvestment by energy giants in oil and gas exploration as well as by its cost base, Vallourec now presents a better face since the arrival at its helm, at the start of 2022, of Philippe Guillemot.

The group returned to positive cash generation in the fourth quarter of 2022, and more recently raised its targets for the 2023 financial year in July thanks to better-than-expected results in the second quarter.

And the group’s latest publication further testifies to this spectacular recovery linked to the New Vallourec plan announced in May 2022. Vallourec published accounts above expectations in the third quarter, a trajectory which allows the group to once again raise its annual profit outlook operating gross.

Between July and the end of September, the group achieved gross operating income up 12.1% year-on-year to 222 million euros, “driven by the solid profitability of the tubes segment”. The corresponding margin now stands at 19.4% of turnover, which reflects a clear improvement compared to the 15.4% published last year at the same time. Vallourec also outperformed analysts’ expectations. The Factset consensus expected a gross operating profit of only 163 million euros and a margin of 15.3%.

In the third quarter of 2023, the group generated revenues of 1.11 billion euros, down 11% and 5% at constant exchange rates. Vallourec explains this drop in revenues by a negative volume effect of 26% mainly linked to the drop in deliveries of the industrial segment in Europe and of tubes for the “oil & gas” segment in North America.

But over nine months, the trend is positive for Vallourec which saw its turnover increase by 15% to 3.83 billion euros.

A little further down in the accounts, Vallourec generated a net profit group share of 76 million euros, which represents a level 12 times higher than that published for the third quarter of 2022 (6 million euros).

Net debt cut in half

Furthermore, Vallourec also announces good news relating to its cash generation. For the third quarter, the company achieved free cash flow of €154 million and adjusted cash flow of €217 million. This last indicator, which excludes the impact of restructuring charges and other non-recurring items, was added by the group to try to give more clarity to investors.

Cash generation, closely linked to the group’s deleveraging trajectory, is something closely monitored by the market. On the debt front, the specialist in seamless tubes for the oil and gas industry continues its slimming treatment. Net debt was halved over one year, reaching 741 million euros while it peaked at 1.493 billion euros in the third quarter of 2022.

The company confirmed that it plans to fully deleverage by the end of December 2025 at the latest. “We are making effective progress towards our goal of reducing our net debt to zero by the end of 2025 at the latest. achieved, our ambition is to distribute to our shareholders a significant part of our overall cash generation, potentially from 2025″, declared its CEO, Philippe Guillemot. Moreover, on this subject, the specialist in the manufacture of seamless tubes indicated in September, ahead of a day dedicated to investors, that it could resume paying a coupon as soon as it was out of debt. , in 2025 normally.

Profitability prospects raised

Other good news for investors, Vallourec is taking advantage of this communication to refine its 2023 outlook. And this adjustment of objectives is also going in the right direction.

Management now expects gross operating income of between 1.075 billion euros and 1.175 billion euros for the 2023 financial year, compared to a previous estimate of “between 950 million euros and 1.1 billion euros” . The company says it is confident in the trajectory of its profitability due to the maintenance of a favorable market environment in the “eastern hemisphere” region and its operational performance which it considers “solid”.

Concerning free cash flow, this should be positive in the fourth quarter, an objective which, specifies Vallourec, does not include the impact of potential asset sales. Consequently, the French group expects a continued reduction in its net debt during the last quarter of 2023 compared to the level of the third quarter, still excluding possible impacts of asset sales.

On the Paris Stock Exchange, the market appreciates Vallourec’s results and confidence. The stock rose 5.4% around 10:40 a.m., after reaching a peak of 7.2% at the start of the session.