Vallourec (VK) Q2 2024 earnings summary

Executive summary

• Q2 2024 results reflect strong international OCTG demand and resilient margins, with group EBITDA at €215m–€250m and a margin near 20%, despite lower US pricing.

• Net debt reduced to €364m, ahead of deleveraging targets, with over €1bn of net debt removed in less than two years and positive cash generation for the seventh consecutive quarter.

• Strategic transformation continues, focusing on operational efficiency, cost reduction, and value over volume, especially in Brazil, including closure of the Barreiro Plug mill.

• Shareholder returns are set to begin in 2025 at the latest, with payout ratio of 80–100% of total cash generation once leverage targets are met.

• International contract wins with ADNOC, Equinor, and ExxonMobil support growth.

Financial highlights

• Q2 2024 EBITDA was €215m–€250m, with a margin of 19.8%–20% and EBITDA per tonne at €599 for the seventh consecutive quarter.

• Q2 revenues were €1,085m, down 20% YoY; net income, group share, was €111m, down from €159m YoY.

• Net debt at Q2 end was €364m, with liquidity close to €1.5bn.

• Adjusted free cash flow in Q2 was €81m; total cash generation was €41m.

• Full-year group EBITDA expected between €800m and €850m.

Outlook and guidance

• Q3 revenues and EBITDA expected to decrease sequentially due to lower US shipments and pricing; Q3 should mark the highest mining production quarter.

• Full-year tubes business to benefit from strong international demand, offset by weaker US market.

• Full-year mining production sold expected at 6m tonnes, with EBITDA around €100m.

• Net debt reduction to continue in H2 2024, with further cash generation directed to shareholder returns in 2025.

• Q4 EBITDA expected to be slightly higher than Q3, assuming stable US prices and higher volumes.