Vallourec S.A.

Good day and welcome to Valorex 2026 first quarter 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 web conference, all participants will be in listen-only mode. During the question and answer session, you may ask questions by dialing hashtag 5 on your telephone keypad to answer 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, Laura. Good morning, ladies and gentlemen, and thank you for joining us for Valeric's first quarter 2026 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, Natalie Delbrook. Before we begin our presentation, I would like to note that this conference call will be recorded. A replay will be available following the call. You can find the audio webcast on our Investor Revations website. 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. Forward-looking statements and risk factors that could affect those statements are referenced in slide two of today's presentation. These are also included in our universal registration documents 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 ValuX first quarter 2026 results. You can see today's agenda on slide 3. Before we discuss today's results, I want to briefly address the situation in the Middle East and what it means for our employees. From the very beginning, ensuring the safety of our people has guided every decision we have made. Given our strong footprint in affected areas, I would like to express my deep appreciation to our teams for their dedication and professionalism over the past several months. Now, let's turn to slide five to discuss our results and outlook. As described in our press release this morning, we have changed the presentation currency from the Euro to the US dollar which better reflect the performance of our activities, which are mainly carried out in US dollars. In the first quarter, we delivered robust results, with group EBITDA of $220 million, or 187 million euros, above the midpoint of our guidance. EBITDA margin improved by 200 basis points, sequentially to 22.6%, thanks to our intense focus on execution and cost management. In the tube segment, EBITDA per turn of $724 returned to the high point we achieved in Q3 last year, above our guidance provided in February. This was achieved despite the challenging environment in the Middle East. We generated strong cash flow once again, converting over 60% of EBITDA to cash, which was 10 percentage points higher than in Q1 2025. This clearly demonstrates the continued improvement in our earnings quality, driven by our strong focus on operational efficiency and working capital management. After $107 million of share repurchases, we increase our net cash position to $67 million at the end of the quarter. Turning to the outlook, we expect cubes, volumes, and EBITDA per ton to decrease sequentially in the second quarter, temporarily impacted by the Middle East conflict, which I will provide further details on later in the presentation. In Mayan forests, production sold is expected to be around 1.4 million tons. As a result, we expect Q2 EBITDA to round between $175 and $205 million. We expect Q2 to represent the low point with improvements in EBITDA in H2. In the U.S., booking activity remains very strong and we are seeing certain customers preparing to increase drilling activity. This, combined with lower imports and recently announced trade investigations, is leading to improved market pricing to be reflected in our results from the third quarter. In international markets, our primary customers in the Middle East have remained resilient. Meanwhile, in select Middle East countries where we do not maintain local presence, order postponements and shipping delays have impacted our invoicing calendar. Outside the Middle East, tendering activity is high and we see customers moving to accelerate their development activity, notably in offshore markets. We expect to communicate on several important high-value contracts awards in this domain over the coming weeks. In New Energies, we see clear commercial momentum, demonstrated by the recent signing of our long-term agreement with Ferbo Energy, worth up to $800 million in potential revenue over the next five years. This follows the announcement in January of our partnership with FTS, proving the need for reliable, clean, baseload energy to facilitate data centers built out in the U.S. I am pleased to announce that ValuWake will host a deep dive on the geothermal market and our favorable positioning on June 15th to further illuminate this long-term opportunity for our investors and stakeholders. Turning to capital allocation, we repurchased 91 million euros of shares in Q1. Whilst the pace of the buyback has slowed, we reiterate that any unused funds from the program will be added to the interim external dividend in August. Let's move to slide 6. With the excellent QUBES performance in Q1, we delivered a higher quarterly EBITDA pattern than our primary peer for the first time since the launch of the new value plan. We also continued to outperform on return on invested capital. These results demonstrate the effectiveness of our value-over-volume strategy excellent cost adaptation enabled by our fit-for-purpose industry and our ongoing efforts to improve the efficiency of our operations. Turning to slide 8 for an overview of the Middle East market in the context of the ongoing conflict. The region accounted for 22% of our tubes revenue in 2025. within the typical contribution of 20 to 25%. Importantly, Saudi Arabia and the UAE, where we have local presence, account for around two-thirds of our Middle East sales. It is also worth highlighting that most of our sales are focused on onshore drilling applications, where reactivity has been more stable compared to offshore applications since the onset of the conflict. In Middle East, countries which we serve directly from our exporters in Brazil and China, OCPD demand has remained resilient. We have not seen any other cancellations to date. However, we have been experiencing select order postponement and shipping delays in certain countries. We continue to work closely with these customers to leverage alternative logistic routes to support their current programs and recovery plans. Notably, thanks to the commitment of our teams, revenue in the region increased year-over-year in Q1. Let's turn to slide 9 for a closer look at Valuate's operating model in the key Middle East markets. In Saudi Arabia, which accounts for more than 50% of the regional recount, Valourette has a strong local presence. In this market, domestic steelmakers typically source iron ore from India, deliver through Oman. We source the majority of our thin finished tubes locally from suppliers such as MPTG. We then heat treat and thread these tubes in our in-country facility in Oman. We also provide tubular management services including warehousing at our yard and therefore maintain several months of finished tubular inventories. This local presence ensures that we are well equipped to continue supporting our key customers in the current environment. In DOE, we also provide tubular management services and therefore maintain several months of inventory on behalf of our major local customers. However, This market is served from our international export hubs. We have tested and approved alternative routes bypassing the Strait of Hormuz to serve our customers, including ports in Oman and the Red Sea. Outside of Saudi Arabia and the UAE, we serve customers directly from our export hubs and do not maintain significant inventories on the ground. So far, we have seen a limited number of shipments being diverted or offloaded for future delivery. We continue to work with our customers to use alternative logistic routes, including tracking. Overall, for our largest customers in Saudi Arabia and the U.S., business has largely continued uninterrupted. while we are expediently select order postponement and temporary delays in shipping in the remaining countries. For this reason, and assuming no further deterioration, we maintain our outlook for higher volumes internationally in the second half. Let's turn to slide 10 to examine how Valorex is poised to respond to increased draining activity. With the increase in oil and gas prices and rapidly strengthening supply fundamentals, our customers around the world are beginning to respond by accelerating their development plans. We expect this increase in activity to translate first to higher short cycle activity in regions like the U.S. and in certain offshore tieback projects. while longer cycle projects should support higher activity from 2027 onwards. We expect higher levels of tubular demand as a result, and we are well positioned to deliver incremental volumes as we support our customers with their taxes. As we highlighted last quarter, we are making several investments into value-added downstream capacity that will de-button-neck our operations. This now also includes the upgrade of our recently acquired coating facilities. Turning to our new energies offering on slide 11. As energy security concerns play an increased role in national level decision making, we have developed proven technologies that support countries to develop and store more of their own energy sources. This includes traditional and next-generation geothermal tubular solutions, our DSC vertical underground storage solution for green hydrogen, and tubular solutions for the underground storage of natural gas and CO2. We have also entered into collaborations with key stakeholders to explore and support the development of wide or naturally occurring hydrogen and helium production. Now, let's turn to the international OCTG market on slide 12. You can see on the left chart, demand remains stable in international markets outside the Middle East in Q1. Within the Middle East, you can clearly see the divergence between onshore activity, which was relatively stable, and much weaker offshore activity. I remind again that Balouet is mostly exposed to onshore drilling activity in the region. Impacts by country vary widely, and in fact, Saudi Arabia's recount has increased in every month in 2026 so far, confirming the activity acceleration expected this year despite the conflict. Looking ahead, we are encouraged by the size and breadth of the tendering opportunities we see in both OCTG and our Line 5 business, many of which relate to offshore and deep water development in both established and emerging destinations with favorable economics. We also continue to see robust and growing demand in markets with higher levels of unconventional activities. On the right-hand chart, the latest outlook from HiSTAT shows an inflation in market pricing in Q1. As mentioned on previous calls, our premium portfolio allows us to outperform this indicator. Let's turn to slide 13, where we focus on the US market. On the demand front, the oil rebound remains stable over Q1 and has not yet responded to higher prices. That said, recent market commentary and the booking standards of our customers suggest higher levels of activity are planned from H2 2026. Gas-directed activity fell slightly over the quarter but remains up around 20% year-on-year. We expect gas-related drilling to be well supported by increasing demand for U.S. energy as projects come online and the U.S. substitute for gas blocks behind the Strait of Hormuz. Looking at the supply side, imports remain below the 12-month average in the year to date, especially for seamless products. We expect the recently launched investigation into unfair trade practices in Austria, the largest single source of seamless imports, to allow the Strait of Hormuz and the UAE to result in greater market share for local producers such as Railway. On the right, seamless spot pricing has increased every month since January, and distributor sentiment has rapidly improved. We will see the benefit of higher prices in our P&L from the third quarter. Overall, we see a positive oil and gas market ahead, complemented by the growing activity levels of our existing and prospective pure thermal customers. I will now hand the call over to Nathalie to comment our financial results.

Thank you, Philippe. Let me now walk you through our Q1 2026 results. For the first time this quarter, they are displayed in US dollar as the group changed the reporting currency of its consolidated financial statement as of January 1, 2026. The reason for this change in reporting currency from euro to US dollar is to better reflect the performance of our activities, most of our revenues being denominated in US dollars, and to make our financial information more visible as our main customers and main peers already report in US dollars. To ensure a smooth transition, you can still find all our usual figures, denominated in euro, in the appendix of our results press release published this morning. Starting on slide 15, we see on this slide our execution track record with key metrics. In Q1, as I will now show you, we have delivered another strong quarter, despite the ongoing disruption in the Middle East adding further challenges. Resilient margins and strong cash generation leading to further balance sheet strengthening. Group EBITDA on the top left, the margin was strong at 22.6% in Q1, improving versus Q4 2025. It reflected a more favorable product mix and strong cost adaptation. Total cash generation in the quarter remained robust at approximately $135 million, reflecting stable free cash flow and lower restructuring and non-declaring items year over year. Net working capital days were kept below 90 days in Q1 at 86 days, with a slight increase, mainly as a function of the decline in volumes and revenues. In Q1, we still released cash from working capital. Net cash at the end of the quarter is positive and slightly stronger than at the end of December 2025, after $107 million share buyback. So, in Q1, we continued to build on our solid track report. On page 16, group revenues amounted to $975 million, down sequentially, mainly due to lower shipments to the Middle East and to the Gulf of America. However, a big year reached $220 million, slightly higher than Q1 2025. The year-over-year slight improvement was driven by higher pricing and improved mix over all regions in tubes, partially offset by lower volumes in tubes and a lower contribution from mine and forest. Adjusted free cash flow was $177 million, demonstrating strong cash conversion again this quarter. We ended the quarter with a net cash position of $67 million, an improvement of $21 million versus year-end 2025, after $107 million of shares repurchased. On page 17. In June, volume sold declined to 272,000 zones, reflecting temporary shipment delays and select order postponements to the Middle East, as well as lower shipments, mainly to the Gulf of America. Average selling price, as you can see, remained high at $3,304 per ton, supported by an improvement. Geographically, on the bottom of the slide, we can see a higher share of the revenues from the Middle East compared to Q1 2025. This is supported by resilient customer activity, especially in Saudi Arabia and in the United Arab Emirates. Moving to Qube's profitability on slide 18. Despite lower volumes versus Q4 2025, Q's EBITDA remained at a high level at $196 million and the EBITDA margin significantly increased quarter over quarter to 22%. EBITDA per ton reached $724 of 14% sequentially and 31% year over year. This strong performance reflects A favorable mix as we maintain our focus on value over volume and the very good adaptation of our cost base during the quarter. Turning to mine and forest on page 19. Production sold amounted to approximately 1.3 million tons, down 15% year on year. This was mainly impacted by record rainfalls in the main ice region during the quarter. Segment revenues were stable at $95 million. ABDA for the quarter is $38 million, with margin of approximately 40%, with lower iron ore volumes and some negative FX effects. On slide 20, We continue to deliver, as you can see, a solid bottom line on this chart. In Q1 2026, net income group share was $87 million, that is 9% of total revenue. From EBITDA to net income, we can see depreciation and amortization very much in line with previous water rates in Q4 2025. Financial results as well at minus $20 million. And the other pillar of the bridge is quite limited. It includes, as usual, restructuring and someone of impact. Turning to slide 21, cash generation remains very strong, with adjusted operating cash flow less capex at around 56% of the year. we achieved a further working capital release in Q1 following the Q4 performance, mainly reflecting disciplined inventory management and solid collections. CapEx increased slightly quarter on quarter, but went in line with our expectations, that is to be toward the upper end of our previously stated 150 to 200 million euro range, that is 175 to 250 On slide 22, you can see that our financial position remains very strong. As of March 31, 2026, our net cash position amounted to $67 million, with gross debt reducing to $994 million. Liquidity remains strong at approximately $1.9 billion. This robust balance sheet gives us significant flexibility to navigate market volatility and continue investing in select growth opportunities. I will now hand the call back to you, Philippe.

Thank you, Nathalie. Let's turn to slide 23 to discuss our outlook. Starting with our tubes business. In the same quarter, we expect volumes and EBITDA patterns to decrease sequentially, given a longer period of disruption in the Middle East compared to the first quarter. We expect to be compensated for certain conflict-related costs later in the year. For the full year, we expect sustained strength in sales volume thanks to Valorex market share gains during 2025, and higher activity levels among certain customers. We expect US market prices to increase further on improving industry supply-demand conditions, more than upsetting increases in energy and raw material costs. In our international tubes business, we continue to expect lower sales volume in H1 2026 due to slower bookings in H2 2025, as the previously mentioned logistical delays in some Middle East markets. We see activity recovery in key international markets, setting the stage for higher second-half volumes, assuming no further deterioration in the pattern gulf. We expect market pricing to remain broadly stable versus the second half of 2025, with discrete customer contracts driving selective price upsides. For mine and forest, we expect production flow to be around 1.4 million tons in the second quarter, and we confirm our prior full year guidance for 5.5 million tons of sales volume. At the group level, we expect our second quarter ability to range between $175 and $205 million, with Q2 expected to be the low point of the year. Let's conclude on slide 24. We are delivering further improvements in profitability driven by our intense focus on operational excellence and cost management. Our local presence and product mix is supporting performance in key Middle East markets with resilient customer activity. We see high tendering activity in international markets, setting the stage for volume growth from H2 2026. Meanwhile, certain U.S. customers are increasing their booking plans with upside for U.S. pricing. Thank you again for your attention. Natalie and I are now ready to take your questions.

If you wish to ask a question, please dial the hashtag 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial hashtag SIS on your telephone keypad. We have a question from Matt Smith from Bank of America. Please go ahead.

Hi there. Good morning. Thanks for taking my questions. I wanted to start on cost, if I could. You know, exceptional cost control in the first quarter. you know, a very strong EBITDA return number in pubes despite the lower top line that you've referred to. Can I just come back to picking into the details a bit, you know, how much of that is product mix shipped in the quarter? I suppose just trying to get to how sustainable the current cost level that you've booked in the first quarter is. And I suppose could I tack on to that, you know, could additional costs related to logistics in the Middle East change that picture at all on the cost line as we go through the year, please. And then the second question would be turning to the US. As you noted, seeing some early signs of increased activity, certainly seeing signs of increased pricing. I guess my question was just do you, from a Valorac perspective, do you see upside in terms of sales volumes as well to your US unconventional customers? Where are you versus your Maximum capacity, I suppose, is my question. Thank you.

Going back to your first question, in fact, we have to go back to the new value-added plan. You see what is our industrial footprint today and the geographies where we are operating. And what you see in human numbers is the consequence of this new value-added plan. We are in geographies where we know how to flex capacity when volume are decreasing. And as a consequence, we are able to pose positive margin even with fairly low volume in some of the plants we have in this region. So this is structural today. This is a given. This is an asset. And this means, by the way, that we have a significant operating leverage. When volume will pick up, obviously, this will translate in even better margin. So the mix has obviously a role to play, but here in the case of T1, definitely it's our ability to manage costs, to flex capacity when needed, that has led to this very strong EBITDA per ton, which is, as we mentioned, higher than our main peer. Going to the U.S., volume has been strong for the last few months. As we said, we anticipate it will be the case in the next few months, too. You saw last year that we announced a major investment in our Youngstown plant with a new line to produce plants. our latest generation of high-store connections. So this will come live at the beginning of next year. So this is just an example of what we do and where we invest in order to be able to obviously capture additional volume.

Perfect. Well, thank you very much. Have a good day.

We have a question from Guilherme Levine from Morgan Stanley. Please go ahead.

Hi, good morning. I have two questions, please. The first one on your second Q guidance, could you perhaps walk us through the building blocks between the low end and high end of the guidance and how that relates to the sort of timing assumption that you are working with in terms of the reopening of the Strait? And then, secondly, you mentioned a compensation for cost of rents post second Q2 this year. Could you also say a few words about insurance discussions, how that compensation might take place, and if the recovery of those costs is expected at the moment more for 3Q, or is there any chance that that could potentially flip into next year. Thank you.

Yeah, as usual, we give a round for our guidance. In fact, Q2, as I said earlier, we see some impact volume in the list and extra costs that, as you mentioned, will be negotiated with customers and recovered later after Q2. Typically, logistic costs. We have alternative routes to deliver. These incur additional costs to be discussed and negotiated with customers, which, by the way, understand that, obviously, they need to look at it and enter in a fair negotiation on this cost because they need us today. They need us to continue to operate as they are, especially the ones who are still at So I think, yeah, that's normal life. That's part of the business. Will we conclude all this negotiation in H2 and some of it in early 27? Could be. We'll see. But today we see a goodwill on our customer side to enter into this discussion for the reason I explained earlier. Let's take a bit backward. One assumption behind Q2 about the Strait of Hormuz. Let's put things in perspective. Again, I keep telling you, two-thirds of our revenue in Lévis is with customers that can bypass the Strait of Hormuz. Arambo, where we have three different local contracts, as you have understood from my description, and a node that we can deliver using all the ports and trucks to deliver the pipe. So, even if the trade-off remains closed for a while, and as long as these two customers continue to operate, I think we will continue to perform in the regions. And we will continue to have volume, maybe even higher this year than they were last year in the region, as we had in Q1. So, and if the trade-off remains closed even longer, it's likely that all the regions in the world where we are will compensate for the few countries that are depending on the Strait of Hormuz. It could be the U.S., it could be Brazil, where we are, as an example. So, again, this is just to illustrate the fact that we are very, as Valouret, very resilient in the current circumstances.

Thank you.

We have a question from Jean-Luc Romain from CIC CIB. Please go ahead.

Good morning. I have two questions if I may. First question is about your new framework agreement with Petrobras which starts in Q4. Do you expect more volumes or more prices or both, and what kind of increments should we expect in terms of mixed price? It's one figure, two figures. I'm not sure you want to tell this. The question is about an investment in geothermal produce management in Greenfire Energy in 2022. Could you update us on this investment?

As you mentioned, we expect the first volume of this new long-term agreement to come end of the year, in Q4 this year. But what's going on right now just makes this contract even more valid. As I said in my comments, we see a lot of offshore activity and tendering activity. And we will announce in the next few weeks a few major contracts in this area, both in OCTG and LightPipe. So more to come. And even more in LightPipe, as you know, we have now added the thermal insulation business to our portfolio with the acquisition of Thermaltight Global Diff, which is running at full speed right now. And that's obviously what we invest into. You mentioned the investment in Greenfire, which happened just at the time I joined. So it was not my decision. Nevertheless, it was a bet. You know, when you invest in new development, new startup, sometimes you win, sometimes you lose. Well, I won't say that Greenfire was a great bet. Nevertheless, we have, starting in 2022, started to work with XDS, with Fairmoop, And we help them to develop their new geothermal concept, advanced and enhanced geothermal concept. And these ones are very successful. And when you see at Fermo the contract we have signed and the volume, obviously, we have already now this year with them, it's definitely a clear success. More to come on June 15th. We'll have the opportunity to, obviously, tell you more about... this new geothermal concept, our contribution to their development, and also what potential market it represents for value-added.

Thank you very much.

As a reminder, if you wish to ask a question, please dial the hashtag 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial the hashtag 6 on your telephone keypad. We have a question from Guillaume Delabaye from Bernstein. Please go ahead.

Yes. Good morning, Philippe. Congrats on the results, and I think it's a great start to organize a geothermal day because it's going to be significant. I would like maybe to come back to the first question, the question of future operating leverage. So a naive analysis for your kind of industrial business is you increase EBITDA and EBITDA margin by a combination of growing volumes and higher pricing. Up to now, we had higher EBITDA mainly thanks to value over volume, but in fact, you increase EBITDA despite a decline in volume. So my question is very, very simplistic. If we have an increase in volume in Q4 2026 and in 2027, this should logically, correct me or not, translate into significant operating leverage, correct?

Yes, so... Thank you, Guillaume, for your comment. You remember that after the new Valorite plan, I announced that we have launched a new plan whose name is From Good to Great. So we have many activities to improve our way of managing our operations, and all these start to translate into the numbers you see in Q1. the higher flexibility we have on our cost. Obviously, we are improving on every point. You know, making things good first time makes a difference at the end of the day on our cost structure. So this is what you see. And obviously, there is more to come because it's a multi-year program which we are deploying throughout the group. So going back to your question, can we expect one volume will increase to see, yeah, the impact of this ability to better manage costs, to reduce costs, combined with the already value over volume and pricing strategy, yes, definitely, I can answer positively. You remember that when I launched the New World Plan, I had two main objectives. One, to make the balance sheet of the group net debt zero. This was achieved end of 24. And to close the margin gap with our main tier. And you can see quarter after quarter how we progress toward this objective. So I remain totally focused with my team to deliver, obviously, this second objective.

Mr. Cliff, merci Philippe.

As a reminder, if you wish to ask a question, please dial hashtag 5 on your telephone keypad to answer the queue. If you wish to withdraw your question, please dial hashtag 6 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you. While there is much uncertainty around the situation in the Middle East, I am confident that our business can adapt more rapidly than before and take advantage of the improving medium-term outlook we see ahead. With our local industrial footprint and premium technical offer, alongside ongoing efforts to improve Valurex operations, and capture rapidly expanding addressable markets in new energies, we are well positioned to drive further value creation. Operator, you may end the call.