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Vallourec has published better than expected quarterly results, confirming the recovery. Profit guidance for the 2nd half is cautious. The valuation is low, especially in view of growth expected in the next two years. The balance sheet is robust and allows appropriate strategic choices to be made. PLUS code confirmed.
Volumes hit rock bottom in Q3 2009 and are now recovering. Results are expected to grow steadily from Q2 2010 after hitting a low point in the 1st half. Within 2 years, the new production facilities (Brazil, US) will contribute to strong growth, completed by acquisitions. In our opinion, the valuation remains attractive considering the potential of Vallourec.
We met the CFO of Vallourec in Paris. Activity has recovered strongly in the United States, where the group is about to step up the scale of its business. In Brazil, Vallourec remains the best placed company to benefit from future Petrobas investments. With the exception of Power, the other markets are starting to move again, if only because of restocking. After the low point for sales and margins in the 1st half of 2010, Vallourec’s figures are set to rise again strongly.
Annual figures published by Vallourec were better than expected in every respect. Business in the 4th quarter proved far stronger than forecast. Cash generation is very high. The group has a net positive cash flow totalling €400 million and intends to pay a dividend of €3.5. Volumes hit rock bottom in Q3 2009 and demand is recovering, except for the Power segment. However, guidance for 2010 remains cautious. PLUS code confirmed.
Vallourec announced Q3-2009 results sharply higher than expected. Cash generation is high and the group now has a positive net cash flow; the targeted acquisitions policy will continue. Costs have been quickly adjusted. Oil & Gas volumes should recover toward the end of the year. Lagging effects on prices will weigh on margins until first half 2010. PLUS rating confirmed.
Following the sharp fall in industrial production and oil investments, volumes are likely to hit rock bottom in Q3 2009. In the 1st half of 2009, Vallourec proved the flexibility of its cost base. It has strong potential for volumes to recover at end 2009/2010 followed by prices at end 2010/2011. Almost free from debts, the balance sheet will enable the company to seize growth opportunities. Valuation ratios are low considering the profit potential on the 2011 time horizon.
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