Vallourec plans to grow its topline in 2020 and beyond by improving its competitiveness in the tubulars market for the oil & gas sector, and reducing its costs.
The company has forecasted an EBITDA of €500mn ($542mn) in 2020 with incremental improvements on cost savings and sales. Furthermore, it expects the second half of 2020 to be significantly stronger than H1, which will be largely affected by low seasonality in its Q1 EBITDA.
The tubulars maker achieved gross savings of €141mn in 2019 and expects to save another $59mn in 2020 on the closure of the Reisholz Powergen plant in Germany in H2. Additionally, an agreement with Nippon Steel to participate in the company’s share capital increase is likely to further strengthen the company’s balance sheet. Nippon Steel presently has a 14.6pc voting stake in Vallourec.
In 2019, Vallourec’s sales volumes declined by 3.1pc to 2.291mn mt from 2.364mn mt in 2018. The French company reported a revenue of €4.173bn in 2019, up by 6.4pc compared to €3.921bn in 2018 driven by sales to the oil and gas industry in the Middle East and East Africa (MEA).
Lower activity in the US onshore oil and gas market, was offset by MEA oil and gas activity, while the first step in the recovery of deep offshore in Brazil began in Q4 2019. The company’s revenue growth was also driven by by higher iron ore volume and prices from its Brazil operations.
The company’s EBITDA more than doubled at €347 million versus €150 million in 2018. Its revenue from the oil and gas revenue increased by 8.1pc to €3.042bn in 2019 from €2.813bn in 2018. Revenue from its other businesses which includes iron ore operations in Brazil, increased by 14.7pc to €939mn in 2019 from €819mn the prior year.
Philippe Crouzet, chairman of the board, said Vallourec’s financial results evidenced the benefits of a reshaped industrial footprint and the successful implementation of new routes in Brazil and China along with a continued downsizing of the firm’s footprint in Europe to enhance its cost competitiveness and sourcing flexibility.