(News Bulletin 247) – The manufacturer of seamless tubes for the oil and gas industry is once again raising its outlook for the past year. Vallourec says it remains focused on cash generation and its objective of net debt reduced to zero by the end of 2025 at the latest.

Vallourec once again surprises the market. The specialist in seamless tubes for the oil and gas industry announced Thursday evening that it anticipates annual results above expectations, after noting dynamic activity at the end of 2023.

The French company now expects a gross operating profit (Ebitda) greater than 1.19 billion euros, compared to a previous estimate of between 1.08 billion to 1.18 billion euros, announced alongside the results of the third trimester. Which reflects an increase of 66% compared to the 715 million euros published in 2022.

For the fourth quarter alone, Vallourec expects to publish a gross operating profit of more than 275 million euros. The company’s confidence is supported by a better orientation of its activity both in North America and in the Eastern Hemisphere region.

Cash generation and debt reduction on the program

Above all, Vallourec announces yet another very good news in terms of its cash generation. For its fourth quarter, the company expects to achieve free cash flow of more than 140 million euros. This objective includes approximately 37 million euros linked to the sale of the Muelheim site in Germany carried out in the last days of December. To gain competitiveness, the company decided last year to gradually stop the activity of its production sites in Germany and transfer it to Brazil.

It previously expected positive cash generation in the fourth quarter, an objective which was then understood to exclude possible impacts of asset sales. For the year 2023, the company plans to achieve a free cash flow of more than 560 million euros, while in 2022, the group still burned through 200 million euros of cash.

“Cash flows were supported by high gross operating income and the continued reduction in working capital requirements,” explains Vallourec.

Above all, since the implementation of the New Vallourec plan in May 2022, the group says it has “achieved its best gross operating profit and its best cash generation in almost 15 years”. Remember that this strategy aims to recover the group by favoring value over volume and by rationalizing the group’s portfolio, and to generate positive free cash flow even at the bottom of the cycle, that is to say when the economy is weak. carrier.

Cash generation is also something closely monitored by the market, as is the trajectory of debt. Moreover, the specialist in seamless tubes for the oil and gas industry has worked hard to continue its slimming treatment.

A debt halved in one year

Net debt actually decreased significantly in the fourth quarter to reach 580 million euros. And for the entire 2023 financial year, the trend is identical, with net debt expected to be less than 580 million euros as of December 31, 2023, compared to 1.13 billion euros in 2022.

The company has confirmed that it intends to completely deleverage, by the end of December 2025 at the latest. “We are on track to achieve zero net debt by 2025 at the latest. Following our deleveraging, we aim to achieve a significant return to shareholders, 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.

“As part of this strategy, the new Vallourec should generate 1 billion euros of “total liquidity” over the two financial years 2024-2025 and maintain net debt levels well below its target range of plus or minus 0 .5x Ebitda, Bank of America explained in a previous note.

On the Paris Stock Exchange, this upward revision of the outlook is also welcomed. Strongest increase in the SBF 120, the title of the specialist in seamless tubes increased by another 4.6%, around 11:50 a.m. after a peak of 9.5% in the first exchanges.