Vallourec S.A.

Hello and welcome to the Valorack Q1 2024 results release call. Please note this call is being recorded and for the durations of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand you over to Valorac to begin today's conference. Thank you.

Thank you. Good morning, ladies and gentlemen, and thank you for joining us for Valorac's first quarter 2024 results presentation. I'm Connor Lina, Vice President of Investor Relations at Valorac. I'm joined today by Valorac's Chairman and Chief Executive Officer, Philip Guillemot, and Valorac's Chief Financial Officer, Sasha Bieber. Before we begin our presentation, I would like to note that this conference call will be recorded and a replay will be available following the call. You can find the audio webcast on our investor relations website. The presentation slides referred to during this call are available for download here as well. Today's call will contain forward-looking statements. Future results may differ materially from statements or projections made on today's call. The forward-looking statements and risk factors that could affect those statements are referenced at the beginning of our slide presentation. These are also included in our universal registration document filed with the French financial markets regulator, the AMF. This presentation will be followed by a Q&A session. I will now turn the call over to Philip Kimmel. Thank you, Conor.

Welcome, ladies and gentlemen, and thank you for joining us to discuss ValuX first quarter 2024 results. Before proceeding, let me draw your attention to slide two, where you can consult our safe harbor statement. Today's agenda is on slide three. I will start with the highlights of the first quarter of 2024, followed by an update on the market and commercial environment. Sacha will then take you through our first quarter numbers, and I will finish with our outlook for the second quarter and full year 2024. First, let's look at the highlights of the first quarter of 2024 on slide five. Our results demonstrated the clear benefits of the new value-added plan and our value-over-volume strategy. Despite lower U.S. pricing, our group EBITDA margin expanded 177 basis points sequentially, and our cubes EBITDA margin was up 277 basis points sequentially. Our tubes EBDA pattern at 751 euros expanded by 100 euros sequentially and year over year to the second highest level we have seen in the past 15 years. This was only surpassed by our results in the second quarter 2023. Overall, our group EBDA in the first quarter was 235 million euros. As further evidence of the progress we have made in reshaping Valorec, we generated 172 million euros of adjusted free cash flow and reduced our net debt for the sixth quarter in a row. Our net debt now stands at 485 million euros, which is 515 million euros lower year over year. Looking ahead, We expect our second quarter EBITDA to moderately decline versus the first quarter due to sequentially weaker market dynamics in the United States. However, despite this lower EBITDA, we expect to further reduce our net debt in the second quarter. Moving to our commercial and operational updates, the international OCTG market remains strong. Pricing remains very healthy and we have a robust pipeline of potential demand across multiple geographies. In the US, demand has been stable for the past several months. However, market pricing has decreased in March and April. As compared to the start of the year, market expectations have reset. lower due to pressure on gas-directed breathing activity, though we continue to see OCTG supply and demand as balanced. We continue to see strong momentum in our new energies business and particularly in our Delphi vertical storage solution. In early April, we signed a partnership agreement with Nexkem. through which we will integrate our vertical hydrogen storage solution, DELPHI, into global hydrogen and green ammonia production projects, where NETSCAN is a technology provider. We continue to target the first commercial DELPHI system deployment in 2025. We will update you on this and more at our All-Noir One Research and Development and New Energy site visit on June 4. In April, we completed a significant step in our new VALOREC journey by executing a comprehensive balance sheet refinancing. We have decreased our cost of debt, extended the maturities of our senior notes and liquidity facilities, and preserved significant flexibility for our future capital allocation. This finalizes a major step in crisis-proofing our business. We are well ahead of our plans to reach net debt zero by year-end 2025 and expect to meaningfully reduce our debt from the Q1 2024 level by year-end 2024. Accordingly, we now target the initiation of returns to shareholders in 2025 at the latest. Now let's discuss the commercial environment on slide 7. We focus on the US OCTG market. The horizontal rig count, a proxy for our demand, remains stable. It has been effectively flat since last October. We continue to expect it to remain at a similar level for the next several months. While not shown here, imports took a step higher in January and February but have decreased again in both March and April. Accordingly, industry inventories are now slightly above five months of demand, below the long-term historical average. However, many market participants started the year expecting demand to increase. As gas-directed activity has weakened, we have seen decreases in spot market pricing in March and April. That said, we continue to see OCTG supply and demand as balanced and remain disciplined in our pricing strategy. On slide 8, we turn to the international OCTG market. Drilling activity has remained stable at strong levels for the past several quarters. Our leading technology offering positions us extremely well in the current market environment. In the Middle East, some of our largest customers are focusing on developing their gas resources. Our suite of premium gas-type connections are the preferred solution for developing this field. Global investments in offshore fields are also at the highest level. They have been in years and are likely to continue to grow. There have been several high profile exploration successes and project development activity remains high. This is stimulating strong demand for our high-end premium tubes that assure the safe development of complex offshore fields. At the market level, Pricing has remained relatively flat at every level. We continue to see a favorable booking price relative to our invoice price in international OCTG markets, indicating a tailwind to future results. Let me wrap up to comment on our tubes business on slide nine. Our first quarter results demonstrated the power of the new value-add class. In spite of lower U.S. pricing and volumes, we saw EBITDA patterns improve again in the first quarter of 2024 to the second highest level we have seen in more than 15 years. This reflects the cost reduction we have executed as well as a mixed shift we have implemented with the value over volume strategy. As I discussed in the previous slide, the international OCTG market remains strong. We continue to see a robust demand pipeline across several geographies, including the Middle East, Africa and the North. I would also reiterate that our gas-oriented product portfolio in the Middle East is well positioned for our top customers investment strategy. In other words, we have seen no change in demand resulting from the well-publicized all-week suspension in Saudi Arabia. In North America, we continue to align ourselves with some of the largest independent EMPs and distribution partners who remain committed to our value-over-volume surgery and are staying disciplined on pricing despite the recent spot market evolution. Let's turn to our mine and forest segment on slide 10. Iron ore production was 1.4 million tons in the first quarter, in line with our expectations. Unanticipated, the favorable iron ore price environment has been supportive to our EBITDA, which was slightly above the €100 million annualized run rate we guided at our capital market statement. With iron ore prices down marginally versus the first quarter level, we expect EBITDA will return closer to that €100 million annualized level in the second quarter. We continue to advance our phase one and phase two extension and will update you on these as we progress through the year. I will now end the call over two sessions to comment on our financial results.