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Vallourec reports 17.2 percent drop in 1Q 2015 sales
YOUNGSTOWN
French steel-pipe maker Vallourec said Wednesday its first-quarter sales saw a drop of 17.2 percent from the first quarter of 2014, as the sharp decline in oil prices continues to impact companies that serve the oil and gas industry.
The company said it’s on track with implementing its cost-savings plan, which would cut 2,000 jobs worldwide with three-quarters of them in Europe.
The parent company of Vallourec Star, 2669 Martin Luther King Jr. Blvd., reported first-quarter sales at $1.17 million, compared with $1.4 million in the first quarter of 2014.
“Vallourec is currently facing very difficult market conditions,” said Philippe Crouzet, chairman of the company’s management board, in a statement. “Q1 2015 was severely affected by a drop in high-margin oil and gas sales in the EAMEA region [Europe, the Middle East and Africa]. ... Following the decline in demand, price pressure in the market has intensified for new orders, particularly in North America and for less-differentiated products in the EAMEA region.”
The company reported a loss of $84.4 million for the 2015 first quarter compared with a gain of $62.2 million in the 2014 first quarter.
The oil and gas market made up 62.1 percent of Vallourec’s sales in the first quarter of 2015. A majority of the company’s sales were from North America at 38.1 percent.
Crouzet said the company will reduce its European steel and tube capacity and worldwide overhead costs.
Looking ahead, production capacity in the U.S. is projected to remain at the same level in 2017 compared to last year.
Vallourec Star, where steel pipe for hydraulic fracturing is produced, declined to comment on the financial results. But the company has previously told The Vindicator the oil-price decline has impacted pipe orders as customers scale back on drilling plans.
Since June 2014, oil prices have declined by more than 50 percent, but economists said the prices are finally recovering. Prices were above $100 per barrel of oil in late April 2014 compared with oil prices at $57 per barrel Tuesday, according to the U.S. Energy Information Administration.
“The free fall is over,” PNC economist Mekael Teshome said, adding that prices are forecast to hit $60 for a barrel of oil in the fourth quarter of 2015.
But companies such as Vallourec may take longer to recover from the drop, he added.
That’s because prices fell so quickly that it hurt investment in the industry, said Phil Flynn, an energy-market analyst of the Price Futures Group in Chicago.
The drop in oil prices “really sent shock waves throughout the globe,” he said.
Although oil prices are expected to increase, investment dollars will come back slowly as companies determine whether the market is sustainable, Flynn said.
“It may take years.”