French pipemaker Vallourec says it sees US pricing stabilising in the second half of the year at “healthy levels” and market headwinds slowing.
A decline in tube prices and profitability due to lower sales volumes should be slightly offset by higher international pricing in the third quarter, the company says in its first-half earnings report monitored by Kallanish.
While US prices are forecast to decrease moderately in Q3, sales volumes should bottom as distributor inventories normalise. “Our results in Q2 2023 continued the excellent performance we have produced over the last several quarters. Favourable pricing and solid execution across the Group and especially in the Eastern Hemisphere drove robust profitability,” says chief executive Philippe Guillemot.
“US tube pricing has been on a downward trend, though it remains at healthy levels … Outside of the US, demand for our tubular products remains strong, and pricing has continued to show an upward trend. We are capitalising on this via our premium production hubs in Brazil and Asia, while continuing to wind down our tube production activities in Germany,” he adds.
The company’s Brazilian capacity increase is underway and is expected to be completed in 2024. The closure of sites in Europe is slightly ahead of schedule. Vallourec expects German tube production operations to cease in Q4.
Consolidated H1 revenue was €2.6 billion ($2.8 billion), up 31% year-on-year thanks to stable sales volumes, positive price/mix effect, improved Mine and Forest division performance and the euro-dollar currency effect. Ebitda increased notably, reaching €694m compared to €205m in H1 2022. This reflects increasing margins.
Overall, the company registered a positive performance in the global Oil & Gas market in terms of prices and volumes and a recovery in iron ore volumes. For the first half, tube revenue was up 27% y-o-y due to higher pricing.
H1 gross capital expenditure stood at €119 million, up from €59m in H1 2022. Full-year 2023 gross capex is expected to be around €220m, including approximately €70m related to the transfer of Oil & Gas volumes from Germany to Brazil.
Natalia Capra France