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Vallourec leaders expect further future loss
By Kalea Hall
YOUNGSTOWN
So far, 2015 has been less than stellar for French steelpipe manufacturer Vallourec, parent company of Youngstown’s Vallourec Star.
Vallourec reported second-quarter and first-half 2015 earnings Thursday that showed the hit the company has taken because of the downturn in the oil and gas market.
The company reported a net loss of $217 million in the second quarter of this year.
That loss is far worse than the company’s first-quarter 2014 net loss of $84.4 million.
And, the company said it expects third- and fourth-quarter deliveries and margins to be significantly below that of the second quarter.
“The severe downturn in the oil and gas markets persists,” Philippe Crouzet, chairman of Vallourec’s management board, said in a statement. “The resulting decline in drilling activity since the beginning of the year, particularly in North America and the EMEA [Europe, Middle East and Africa] region, led to a sharp fall in our sales and increased pressure on prices in the first semester. As a result, our mills have been operating well below capacity, leading to inefficiencies typically associated with low load. Vallourec’s management remains fully committed to confront this depressed environment, which will further affect the remainder of 2015.”
Revenues from the first half of 2014 to the first half of 2015 dropped 23.1 percent – from slightly more than $2.9 million in the first half of 2014 to slightly more than $2.2 million.
The complete net loss reported by the company for the first half of this year totals more than $300 million. That is compared to the more than $157 million net income reported during the first half of 2014.
Earnings before interest, taxes, depreciation, amortization and restructuring costs, or EBITDA, went down 85.1 percent in the first half of 2015 from the first half of 2014.
Free cash flow, or cash flow from operating activities after capital expenditures, was down about $37 million in the first half of 2015 compared with the last.
Vallourec reported revenues in the oil and gas industry were down 25.1 percent during the first half of this year. In North America, the revenues have taken a 15.2 percent hit.
The North American rig count has dropped by more than 1,000 year over year in the U.S., according to Baker Hughes, an oil-field service company that keeps a record of rigs.
The drop began once the price of oil started to drop last year. Crude-oil prices Thursday were down $52.18 from a year earlier. Oil prices were coming in at nearly $100 a barrel in 2014, according to the U.S. Energy Information Administration.
To answer the severe downtown in the oil and gas market, Vallourec worked to cut costs including a global staff reduction of 1,600 jobs during the first half of 2015, which includes about 1,000 permanent jobs.
“We have adapted our operations to the shock of the falling volumes,” Crouzet said during a conference call with investors and members of the media Thursday.
Earlier this month, leaders at the Vallourec Star plant on Martin Luther King Jr. Boulevard, where steel pipe for hydraulic fracturing is produced, announced a workforce reduction of about 60 to 80 effective in August because of the a significant drop in sales from last year. The plant will employ 650 after the workforce reduction.
In 2014, Vallourec had a total of 23,000 employees. The company has a presence in more than 20 countries providing tubular solutions for energy markets and other industrial applications.
“I am convinced that the vigorous actions we have taken, combined with our unique technologies, talented people and key local positions, will enable us to respond to the challenging environment and keep meeting our customers’ expectations,” Crouzet said.