• EBITDA Margin: Maintained a healthy margin similar to previous quarters.
• Full Year EBITDA Outlook: Reiterated at EUR800 million to EUR850 million.
• Cash Generation: EUR130 million in Q3, reducing net debt for the eighth consecutive quarter.
• Net Debt Reduction: Over EUR1.2 billion reduction since 2022.
• Q3 Group EBITDA Margin: Close to 19%.
• Tubes Volumes: Reduced to 292 kilotons in Q3.
• Mine & Forest Segment EBITDA: Expected slightly below EUR100 million for the full year.
• Net Debt Reduction in Q3: EUR124 million.
• Full Year Mine Production Expectation: Approximately 5 million tonnes, down from 6 million tonnes.
• Q3 Cash Flow: Total cash generation of EUR130 million.

• Warning! GuruFocus has detected 3 Warning Sign with VLOUF.

Release Date: November 15, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Vallourec SA (VLOUF) maintained a healthy EBITDA margin in Q3 2024, driven by strong international OCTG market performance.
• The company generated significant cash flow, reducing net debt for the eighth consecutive quarter, totaling a reduction of over EUR1.2 billion since 2022.
• Vallourec SA (VLOUF) announced its first strategic acquisition in nearly a decade with Thermotite do Brasil, enhancing its position in the offshore line pipe market.
• The company is progressing well with its optimization program in Brazil, which is expected to significantly contribute to closing the profitability gap.
• Vallourec SA (VLOUF) plans to announce a dividend proposal for its 2025 AGM, marking the first dividend in 10 years, reflecting strong financial health.

Negative Points

• The US OCTG market experienced softness, impacting Vallourec SA (VLOUF)'s overall performance.
• The global iron ore market softened in Q3, leading to lower prices and sales volumes in the Mine & Forest segment.
• Vallourec SA (VLOUF) lowered its full-year mine production expectations to approximately 5 million tonnes, down from 6 million tonnes.
• Q3 2024 saw a reduction in tonnage sold and a slight decrease in average realized prices, leading to a year-over-year decline in revenues and EBITDA.
• The company faces potential challenges from the new tax environment in France, which could impact shareholder remuneration strategies like share buybacks.

Q & A Highlights

Q: Is a share buyback still an option for shareholder remuneration given the new tax environment in France? A: Philippe Guillemot, CEO: While we never exclude any ways to return excess cash to shareholders, the potential tax implications in France make share buybacks less attractive. We plan to return cash to shareholders with a payout ratio of 80% to 100%, starting from Q3. The dividend proposal will be announced in February, based on Q3 cash generation.

Q: With US volumes picking up and international activities remaining robust, can we expect Q1 2025 EBITDA to improve compared to Q4? A: Philippe Guillemot, CEO: While I won't provide specific guidance for Q1 2025 EBITDA, US volumes are increasing, and pricing booked today will impact Q1 invoicing. We anticipate a U-shaped profile between the end of this year and the beginning of next year.

Q: How might increased trade restrictions in the US affect exports from Asia, and could this impact pricing in international markets? A: Philippe Guillemot, CEO: We are already seeing positive momentum in the US market, with increased order intake and pricing. Our US production is domestic, so we are well-positioned to benefit from trade barriers. Imports from Asia have decreased, which is favorable for us.

Q: What impact do longer lateral wells have on demand compared to the number of wells drilled? A: Philippe Guillemot, CEO: Longer laterals are beneficial as they require more tonnes of tubes and improve the mix with high torque connections. The rig count is becoming less of a proxy for our activity; it's the value and volume of tubes that matter.

Q: Can you provide an update on the disposals and the progress of the mine extension? A: Philippe Guillemot, CEO: Discussions on disposals are ongoing, particularly for the large property in Dusseldorf. The mine extension is progressing well, with confirmed quality of iron ore. However, the overall market environment may lead to a reset of expectations for next year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.