Vallourec S.A.

Hello and welcome to the Valoric Q2 and half year 2024 results call. My name is Saskia and I will be your coordinator for today's event. Today's call is being recorded and for the duration, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to Conor Lainer, Vice President of Investor Relations, to begin today's conference. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and thank you for joining us for Valorac's second quarter and first half 2024 results presentation. I'm Conor Lainer, Vice President of Investor Relations at Valorac. I'm joined today by ValorX Chairman and Chief Executive Officer, Philip Guillemot, and ValorX 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 Guillemot.

Thank you, Kudo. Welcome, ladies and gentlemen, and thank you for joining us to discuss Valorect's second 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 second quarter of 2024, followed by an update on the market and commercial environment. Sacha will then take you through our second quarter numbers. I will finish with our outlook for the third quarter and full year 2024. Let's look at the highlights of the second quarter 2024 on slide five. Our second quarter results continue to reflect the strong international OCTG market and the benefits of the new VALREC plan. As expected, Group EBITDA was down moderately versus Q1. EBITDA was €250 million, while EBITDA margin remained strong at around 20%. EBITDA pattern was also very strong at €599, above €550 for the 7th straight quarter, despite significant lower pricing in the US versus this time last year. We remain ahead of plan in deleveraging. Net debt reached 364 million euros at the end of the second quarter. For the full year, we expect Group EBITDA to range between 800 and 850 million euros. The decline in second half EBITDA is largely related to lower realized pricing in the US which we do not assume to be fully offset by continued strong international results. That said, we do expect to generate further cash flow in the second half. Our balance sheet is now at a level we see as resilient for any market condition. As such, cash flows generated from here will be allocated predominantly towards shorter returns which I remind you will begin in 2025 at the latest. Moving to slide six, it is worth taking a moment to reflect on the success we have enjoyed as we implemented the new value-added plan. In addition to experiencing a strong market for our premium products, the new value-added plan and our focus on value over volume have delivered structurally improved profitability versus our performance over the past several years. This profitability has allowed the rapid deleveraging you see on the right. We have removed over a billion euros of net debt from our balance sheet in less than two years. Let's look at how we have executed this and what is still to come within our overarching strategy. I am on slide 7. Our strategic journey since the financial restructuring has been truly transformative. In 2022 and 2023, we executed the new Valorec plan, which fundamentally changed Valorec into a more profitable, more resilient, and more cap-generative business. As a result, we have been able to significantly reduce our net and gross debt which was punctuated by our successful balance sheet refinancing in April. We have several operational levels remaining to create value, regardless of the market environment. Here, we highlight three of the most meaningful. Our performance enhancement program for our Brazilian tubes operation, the phase one and phase two extension project at the Pau Branco iron ore mine, and the development of our New Energies franchise. We gave you a look at our opportunity set in New Energies at our event in Hono Emery last month. Today, we will give you an update on our performance announcements program in Brazil Tubes. Before we get there, though, I would note that our work to optimize capital employed is by no means finished. We continue to progress on non-core asset cells, the largest of which is a former production facility in Rath. Ultimately, this will enable us to return 80 to 100% of our total cash generation to our shareholders, as we indicated at our Capital Market Day last September. I reiterate that these returns will begin in 2025 at the latest, subject to board and shareholder approval.