(News Bulletin 247) – The specialist in seamless tubes for the oil and gas industry has delivered its objectives for the current year, counting on a “strong” gross operating profit. These imprecise prospects are somewhat punished on the stock market this Friday.

Mass was already somewhat said for Vallourec. The specialist in seamless tubes for the oil and gas industry had pre-announced its results and announced, at the beginning of February, that it was counting on gross operating income and cash flow higher than its forecasts. The action then gained more than 3%.

The complete results delivered by the group this Friday therefore come as no great surprise. In the fourth quarter, Vallourec posted turnover down 15% excluding currency effects year-on-year, to 1.28 billion euros, due to a 26% drop in volumes. Gross operating income stood at 280 million euros for a corresponding margin of 21.9%, compared to 20.3% in 2022. The group also generated a cash flow of 149 million euros. . This allowed it to reduce its net debt to 570 million euros at the end of December 2023, reducing it by half compared to the end of 2023 (1,130 million euros).

The market’s focus is logically on the prospects announced for 2024, since the results were therefore already well known.

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The action falls back

For the current year, Vallourec is counting on a year of “strong gross operating income”, positive free cash generation over the entire financial year as well as the continued reduction of its net debt.

For the first half of 2024 alone, the company anticipates gross operating income similar to that of the second half, i.e. 502 million euros, notes Oddo BHF, once again positive cash generation and continued reduction of its debt. sharp.

Targets therefore not very precise. The market is in any case taking advantage of the opportunity to sell the stock a little, the action falling by 2.4% around 2:20 p.m. to 13.7 euros, after having even lost up to 6.6% in the morning.

“The market may be quite dissatisfied with the lack of precision on the objectives while the value which has often disappointed it in the past, under the previous management. But Vallourec is used to being cautious at the start of the year to avoid missing your objectives,” explains a financial intermediary.

“A lot could play out in the second half, depending on the trend in tube prices on the American market,” he continues.

“Accelerated debt reduction”

Remember that Vallourec is currently implementing a strategy which consists of favoring value over volumes so as to be less dependent on economic cycles. This strategy has enabled it to no longer burn cash for five quarters and should lead to the company’s complete deleveraging in 2025. A sine qua non condition for the group to resume paying a dividend to its shareholders. Among its shareholders are the American investment company Apollo (28% of the capital).

This strategy, however, led the group to gradually stop its activities on its production sites in Germany to transfer them to Brazil and thus gain competitiveness.

Following the company’s announcements this Friday, Oddo BHF reiterated its advice to “outperform” with a price target of 21 euros. The bank underlines that, based on the multiples of enterprise value in relation to the gross operating profit expected in 2024, Vallourec shows a discount of 35% compared to its main comparable, the Italian Tenaris. This while the group is in an “accelerated debt reduction phase”.

“The group could, in our opinion, return to a cash balance in 2024, (…) i.e. one year ahead of its objective (we must go back to 2008 in order to find Vallourec debt-free)”, also writes Oddo BHF .