Vallourec S.A.

Hello, and welcome to the VALOREC Q3 and I month 2024 results conference call. Please note this conference is being recorded, and during the conference, your line is being listed in only mode. However, you will have the opportunity to ask questions towards the end of the presentation, and this can be done by typing star 1 on your telephone keypad. Today's call will be chaired by Mr. Philippe Guillemot, Chairman of the Board and Chief Executive Officer, as well as Mr. Sacha Biber, Chief Financial Officer. And I've had to call over to Mr. Conor Lina, Vice President of Investor Relations. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and thank you for joining us for Valorac's third quarter and first nine months 2024 results presentation. I'm Conor 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 Philippe Guillemot.

Philippe Guillemot Thank you, Conor. Welcome, ladies and gentlemen, and thank you for joining us to discuss ValueX Third Quarter 2024 Results. Before proceeding, let me draw your attention to slide 2, where you can consult our safe harbor statement. Today's agenda is on slide 3. I will start with the highlights of the surfwater of 2024, followed by an update on the market and commercial environment. Sacha will then take you through our third quarter numbers and I will finish with our outlook for the fourth quarter and full year 2024. Let's look at the highlights of the third quarter 2024 on slide 5. In the third quarter, we maintained a healthy EBITDA margin similar to what we delivered over the past several quarters. This was driven by ongoing trends in the international OCTG market and the benefits of the new value-add plan, and in spite of softness in the US OCTG market. Based on our results in the third quarter and our expectations for the fourth quarter, we reiterate our full-year EBITDA outlook of 800 to 850 million euros. Fourth quarter group volumes and EBITDA will increase versus Q3 due to contributions from both US and international tubes. We continue to generate significant cash flow. Our total cash generation was 130 million euros in the quarter, allowing us to reduce net debt for the eighth quarter in a row. Since 2022, The new Valorec plan has enabled the group to reduce its net debt by more than 1.2 billion euros. We were pleased to announce last week the exit from the Save World plan implemented in 2021, a major step in demonstrating the significant progress we have made since our financial restructuring. We have achieved our target balance sheet and are well ahead of our plan to reach net debt zero by year-end 2025. Therefore, we confirm that the total cash generation in the third quarter and in future quarters will be subject to the 80% to 100% payout ratio we announced at last year's Capital Markets Day. We plan to announce a dividend proposal for our 2025 AGM with our full year 2024 results communication. Beyond these solid results, in the third quarter, we announced our first strategic acquisition in nearly a decade with the acquisition of Thermal Tidal Brazil, which will strengthen our position in the offshore line pipe market. Operationally, we continue to progress our optimization program in Brazil and are very encouraged with the results so far. We also recently announced a change in our organizational structure with the creation of a new operations department and the promotion of Bertrand Frischmann to Chief Operations Officer. This move enhances the progress we have already made in making Bellwag an efficient globally integrated operation. In tubes, we continue to experience robust demand in international markets. In the third quarter, this was particularly clear in some of our key offshore markets. We announced two major awards in Brazil and Angola, and our opportunities both on and offshore remain robust. In the US, we have observed a recent improvement in the OTG market, with both a significant recovery in our order intake and an increase in spot market pricing. I will provide more color on these points later. Let's move to slide 6 to discuss our acquisition of ThermoTite do Brasil. This $7.5 million acquisition will give Alourec access to an increasingly essential technology for deep water line pipe markets where we tend to focus our line pipe activities. Thermotide is a strong fit with our portfolio and is well aligned with the value over volume strategy. Pricing for thermal insulation tends to be roughly equal to that of the bare pipe, and comes with accretive EBITDA margins versus our group average. The deal is also compelling economically, as we have executed it with an accretive transaction multiple, has clear geographic synergy, and this solution has the potential to be offered on a significant amount of our existing live pipe volumes. Moving to slide seven. I want to step back for a minute and discuss how we are progressing on the key objectives of the New Value Act plan. Recall that we had two primary objectives as part of this plan, crisis-proofing the business and delivering best-in-class profitability. With our significant deleveraging, balance sheet refinancing, and our move to low-cost production hubs, we have achieved our objective of significantly crisis-proofing our business. Here, we look at the second of this objective, delivering best-in-class profitability. On the left, we show the EBITDA pattern gap that we have historically experienced versus our peer. Compared to the second quarter of 2022, when we announced the new value-added plan, I am pleased to say that we have made significant strides in eliminating this gap. Reflecting on the drivers of this trend, we have done very good work in raising our average selling price, a clear endorsement of the value-over-value strategy, and our enhanced pricing policy. We continue to see opportunities on this front by further penetrating high-value markets, for example, via our premiumization program in China. On the other side of the equation, we have executed major cost savings already, but we still have opportunities on this front. Last quarter, we rolled out our optimization plan in Brazil. This program will significantly contribute to closing the residual gap. Beyond this, we have significant potential to further integrate and optimize our business. We continue to push towards working as one global organization, and we can continue to better connect sales, production, and supply chain with better data and process integration. Putting it all together, we are not finished with our drive to improve our . On the right-hand side, you will see a new metric that we increasingly use in our internal steering. return on invested capital. We are not only working to optimize profit and cash flows, but to optimize the way that we manage the capital employed in our business. Since day one of our transformation, we focused on working capital and improving the cash cycle of our business. Optimizing the invested capital, however, also means making decisions to scale back in some areas like our choice to close the plug mill in Brazil that we announced last quarter. It also drives our investment decisions, for example, our successful capacity expansion in Saudi Arabia, our capital project that will extend all deep bottleneck critical high-value equipment like our heat treatment and premium threading operations. As we move further and further in the new value journey, we continue to find new opportunities to mobilize idle capital for the benefit of all stakeholders. Now, let's move to our usual discussion of the commercial environment. On slide 9, we start on the US OCTG market. The horizontal rig count stabilized in the third quarter as both oil and gas-directed activity leveled out. Imports have continued to moderate versus the first quarter level, especially when we look at the seamless market. There has been continued action by U.S. trade officials to preserve fair competition in the U.S. OCTG market, and this has driven an ongoing tightening in industry inventory levels. With demand stabilizing and supply tightening, we have seen clear signs of improvement in the U.S. business. Over the past several months, we have seen orders from our customers well in excess of the levels we saw at mid-year. In particular, we have experienced strong demand for our high-torque connections, which are specially designed for longer lateral wells. This increased demand will support our volume in the first quarter. As a result of this positive market trend, we have seen spot pricing rise in both September and October. Turning to slide 10, let's discuss the international OCTG market. The offshore and onshore rig count has been effectively flat since mid-2023, and market pricing has followed roughly the same trend. You will recall that we have been significantly outperforming both the trend and level of international market prices with our value over volume strategy. We have continued to see pricing on our new orders remain at a robust level for the past several quarters. Our portfolio is very well positioned for the current market environment, as our premium tubes are essential for gas-draining activity in the Middle East and for all key offshore markets, but particularly those in South America, Africa, and the Gulf of Mexico, which will largely serve from our international export hubs. Based on what we see today, we think these robust market conditions will persist for the foreseeable future. Let me wrap up the comments on our tubes business on slide 11. We announced two meaningful contracts in the quarter, one for Total Energy for its Camino development in Angola, and one for Petrobras for its CEPIATU and ATAPETU projects. Both contracts recognize the significant value that ValuWag delivers to our customers and capitalize on our ability to offer both premium products and differentiated services globally. In addition, the U.S. market is showing clear signs of improvement. Our order intake has been strong recently, And according to PipeLogix, distributor sentiment has increased to levels not seen since mid-2022. We are upbeat on the outlook for the US market, but remain focused on executing the value-over-volume strategy. Because we are reaching orders in excess of our capacity, we have chosen to focus on improving pricing and mix rather than react too quickly with capacity increases. We are also progressing on our optimization program in Brazil. We have implemented a deep focus throughout the organization. Our labor cost savings targets are confirmed. In short, Brazil still has significant potential to grow its contribution to group results over the coming years, which will support our plan to improve our margins and return on capital. Let's move to our mine and forest segment on slide 12. As you are likely aware, the global iron ore market softened in the third quarter. This translated in both lower price and lower sales volume. Our production sold in the third quarter was below our expectation at 1.3 million tons, which was down slightly versus the second quarter. on the ongoing softness in the export market, as well as the effects of the rainy season in Brazil, we are lowering our expectations for our full-year mine production to approximately 5 million tonnes, down from 6 million tonnes previously. Despite this, I am pleased with the progress we have made in our Phase 1 mine extension. we have now gained access to the higher quality reserves targeted by this project. Therefore, at current high on our prices, we expect to deliver a full year EBITDA slightly below 100 million euros of EBITDA in our mine and forest segment. Thank you for your attention. I will now hand the call over to Sacha to comment on our financial results.