Vallourec S.A.

Good day and welcome to Valorex 2025 Full Year Results presentation hosted by Philippe Guillemot, Chairman of the Board and Chief Executive Officer, and Nathalie Delbreuve, Chief Financial Officer. For the first part of the conference call, all participants will be in listen-only mode. During the question and answer session, you may ask questions by dialing pound key five on your telephone keypad to enter the queue. And now I would like to hand the call over to Daniel Thompson, Director of Investor Relations. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and thank you for joining us for Valeric's fourth quarter 2025 results presentation. I'm Daniel Thompson, Director of Investor Relations at Valeric. I'm joined today by Valeric's Chairman and Chief Executive Officer, Philippe Guillemot, and Valeric's Chief Financial Officer, Nathalie Dalbroek. Before we begin our presentation, I would like to note that this conference call will be recorded. The 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 also available for download here. 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 on slide two of today's presentation. They 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'll now turn the call over to Philippe Guillemot.

Thank you, Dan. Welcome, ladies and gentlemen, and thank you for joining us to discuss Valouec's fourth quarter and full year 2025 results. You can see today's agenda on slide three. I will move directly to slide five, where I will start by discussing the highlights of 2025. 2025 was another transformative year for Valouec. We progressed several major strategic initiatives and achieved key financial milestones. We continued to drive operational excellence for the organization, including the execution of our cost reduction program in Brazil, completed in Q2 ahead of schedule. We significantly narrowed the profitability gap with our primary peers, demonstrating the effectiveness of our strategy and execution. We stay true to our value-over-volume operating model, securing a new and enhanced long-term agreement with Petrobras, winning major high-value tenders across the Middle East, and driving market share and margin growth in the U.S. through our domestic footprint. We continue to streamline our sources and uses of capital, executing the sale of our non-core CERIMAX welding operations and redeeming 10% of our long-term nodes. Importantly, we also position the company for profitable roles. We successfully acquired and integrated ThermoType do Brasil, adding to our line pipe coating capabilities. These are increasingly serving as a key differentiator in a deep-water project. In the U.S., we broke ground on a $48 million premium threading line investment in Yongsan to increase capacity to thread VAM high-torque connections, which are increasingly used in onshore wells with long laterals. We made further progress on the Phase 2 extension of the mine ahead of expected completion in 2027. As Nathalie will discuss, we built on our growing track record of consistent cash generation with over 400 million euros of total cash generated in 2025 for the third straight year. These improvements in our profitability and financial resilience were recognized with investment-grade credit ratings across all three rating agencies, setting the stage for further optimization of our balance sheet on more favorable terms. Finally, in May, we paid a substantial dividend to shareholders for the first time in a decade, executed a minor buyback and worked to enable our much more significant 2026 share buyback. Let's turn to slide 6 to discuss our results and outlook. In the fourth quarter, we delivered solid results once again with group EBITDA of €214 million above the midpoint of our guidance. This came with a robust 21% margin. We delivered excellent total cash generation of 177 million euros thanks to robust collection and inventory management. In the first quarter, we expect tubes and BDA per ton to remain stable sequentially, while volumes will be below the Q4 2025 level due to slower international bookings in H2 2025. In mine and forest, production soil is expected to be around 1.4 million tons. As a result, we expect Q1 EBITDA to range between 165 and 195 million euros. In the US, our assets remain highly utilized and recent booking activity remains strong. Industry pricing has softened slightly, but we are encouraged by the downward trend in imports and the resilience of our customers' activity. In international markets, commercial activity remains somehow subdued in H2 2025, but in the Middle East we are now seeing clear signs of acceleration, especially in markets with higher levels of unconventional activity. We see potential for activity to increase in the second semester and beyond as the oil market rebalances gas-related activity increases, and our customers face accelerating decline rates. Turning to capital allocation, we are making good progress with our €200 million buyback announced in January, with €150 million remaining under the current program. We have purchased 3 million shares year-to-date. Now, let me provide you with an update on 2026 shareholder return on slide 7. Today, I am pleased to announce ValuWax's expectation to propose, in addition to the €200 million share buyback, an interim dividend of approximately €450 million to be distributed in the third quarter this year. This would take the total return to shareholders to approximately 650 million euros between January and August 2026, representing a year-on-year increase of around 280 million euros. This distribution represents approximately 90% of our 2025 total cash generation, and 100% of the proceeds of the warrants, which are expected to be exercised before the end of June. We have adopted a balanced distribution framework, limiting warrants dilution through buybacks, growing our dividend, and maintaining a defensive balance sheet. Based on our current share price, this distribution represents a potential interim dividend of €1.75 per share, including the anticipated deduction from the exercise of warrants. This is a healthy increase of 25 cents compared to last year's €1.50 per share. Turning to slide 8. We show the usual comparison versus our primary public peer. The trend is clearly positive over the past year, and we remain focused on eliminating the gap entirely. We continue to outperform in terms of return on capital, which is a key focus of our medium-term roadmap. And on that note, let's turn to slide 10 for an update on our strategic priorities. We have made substantial efforts to streamline our core asset base over the past several years, but there is still work to be done. Our key strategic priorities in 2026 are directed at unlocking this potential. First, we will continue to drive operational excellence throughout the Group. This is not a passive process. We are actively implementing a new management system which is firmly results-driven and embedded in daily operations across all business functions. Bertrand Frischmann, our Chief Operations Officer, is responsible for its implementation. We look forward to sharing more about this program with you in the coming months. Secondly, we will continue to optimize our asset base to drive improved return on capital. And third, we are actively investing to position ourselves for profitable growth. Let me talk about a few examples on these later two initiatives now. Let's turn to slide 11. Here you can see the targeted set of high return projects we have executed since the launch of the new value-add plan in 2022. You will recall we began with a major downsizing of our rolling capacity in Germany and right sizing in China and ultimately Brazil. We made the strategic decision to close loss-making capacities and exit low margin business. More recently, our focus has turned to the upstream and downstream elements of our value chain and is more about enabling profitable growth than shrinking our assets. In our upstream process, we have invested to expand capacity for high-quality iron ore production at our mine in Basile. Production from the Phase 1 extension started at the end of 2024. We are now working on Phase 2. with completion still scheduled for some time in 2027. We are now undertaking projects to reconfigure our steelmaking assets in Brazil to reuse complexity and maximize operational flexibility, including the ability to run our steelmaking operations without the use of our blast furnace. In our downstream operations, we are investing heavily in our trailing and coating capabilities, where technology barriers and returns on capital are higher. We are adding to our trailing line capabilities in the US, adding both large diameter and high torque capabilities. Meanwhile, we see significant opportunities in advanced coating solutions, and we'll be investing in both Line 5 and OCG coating line this year. All of these projects will be executed within our expected capex envelope of 150 to 200 million euros on top of significantly increased spending on safety initiatives as laid out in our capital allocation framework. Let's turn to slide 12. to discuss one way in which we are positioning for profitable growth. At our Capital Market Day in 2023, we highlighted our favorable positioning in the conventional geothermal market and the upside that could materialize in more advanced technologies. We are now seeing clear signs that these next generation technologies are moving towards widespread adoption. The momentum is driven by rising demand for low-carbon, baseload, and dispatchable power, with AI hyperscalers investing heavily to secure supply. The IEA has recently highlighted a five-fold surge in next-generation geothermal financing over the past three years to $2.2 billion in 2025. The increase in financing has been underpinned by rapid technological progress, much of which relates to learnings from the Shell industry. With drillings and well costs representing up to 80% of total costs, significant improvements in drilling speeds are dramatically improving geothermal project economics. You can see the high potential of this market in the chart on the right, which comes on top of expected growth in conventional geothermal. We are already experiencing a significant increase in our geothermal bookings as our customers begin to execute on development pipelines that are orders of magnitude above today's installed capacity. We are uniquely positioned to benefit from this growth thanks to our domestic footprint in the two largest markets for geothermal today, the US and Indonesia. Our cutting-edge research and development expertise has allowed us to continuously improve our product offering to meet the high demands of geothermal wells placed on tubular products. And we can pair these products with our world-class service offerings. Let's look more closely at the next generation geothermal opportunity. I am on slide 13. You can see the elements that differentiate traditional geothermal from next generation applications. On the left, you have conventional geothermal, which has seen steady growth over time, but is restricted by the requirements for hot water reservoirs and sufficient subsurface permeability. In the middle, Enhanced geothermal mitigates the permeability constraint by using shell-like technology to add subsurface structures into deeper conventional geothermal systems. In closed loops or advanced geothermal, the only requirement is hot rock, with no need for an external water source or permeable rock. Naturally, this opens up the resource potential exponentially. Turning to slide 14, you can see the typical characteristics for each geothermal development type. Much like the oil and gas industry used rapidly advancing technology to tap into unconventional and ultra deep water fields in the early 2000s, the geothermal industry is pushing technological boundaries that open new markets. Valourec is ideally positioned from its expertise in shell developments to serve energy and thermal markets. Similarly, our unique vacuum insulated tubing solution is ideal for closed loop systems. This is not a fantasy. We are already serving customers across all of these product categories. Clearly, Though, the growth potential in next-generation solutions coupled with VALUX's higher revenue opportunity per MW makes the growth in advanced and enhanced applications quite compelling. As you may have seen, in January, we announced an exclusive partnership with XGS Energy to support their delivery of a 3GW pipeline of commercial advanced zero-thermal projects across the Western US. We hope this will be the first of many such fruitful relationships in this industry. Now, let's turn to our usual discussion on the OCTG market. I am on slide 16, where we focus on the U.S. market. On the demand front, the horizontal oil recount has been stable since mid-2025. Gas-directed draining activity has increased for 2025 and into 2026. A wave of LNG product startups and growing domestic gas demand is supporting market expectations. Trigs draining for gas now account for a quarter of the total count, up from 17% a year ago. Looking at the supply side, imports continue to decline for the fourth quarter following the administration's increase in Section 232 steel tariffs in June. Notably, we can see from the chart that the tariffs have been more effective in curbing seamless imports compared to welded imports. On the right, SIMLET spot pricing has moderated slightly since the third quarter, though prices increased in both January and February alongside improving sentiment. Overall, we are encouraged by the improving supply-side dynamics and the resilience of our customers' activities. Let's move to the international OCTG market on slide 17. Demand remains stable in international markets but was somewhat subdued in 2025 compared to the beginning of 2024. We saw slower tender activity in the second half of 2025 that will cause us to start 2026 at a slower shipment cadence. In most of our core regions in the Middle East, Africa and Latin America, we have continued to perform well, in part due to our strong positions in high-value markets like unconventional gas and deep water. Looking ahead in the Middle East, we are seeing some signs of an activity acceleration, especially in markets with higher levels of unconventional activity for which we are supporting customers today with our high top premium connections. Our premium portfolio often allows us to outperform the price indicators we show on the right side of this slide. That said, the latest outlook from ISTAC does show an improvement in market pricing in January. I confirm that our average booking prices for international markets have remained at healthy levels due to our ongoing focus on value over volume. I will now hand the call over to Nathalie to comment on our financial results.