Financial Resilience Amid Sector Volatility

In a period marked by uncertainty for the oil and gas industry, Vallourec has showcased remarkable financial fortitude during the first quarter of 2025. The company achieved an EBITDA of €207 million representing a robust 21% margin, while generating total cash flow of €104 million. This marks the tenth consecutive quarter of positive cash generation, a testament to the effectiveness of the company's strategic overhaul. Chairman and CEO Philippe Guillemot emphasized that these results landed "at the high end of our expected range," highlighting the company's ability to maintain profitability despite fluctuating market conditions driven by concerns over OPEC+ production increases and potential demand slowdowns.

Premium Strategy Delivers Strong Returns

Vallourec's deliberate pivot toward high-value premium products continues to yield significant dividends across its business segments. The Tubes division reported an EBITDA per metric ton of €528, representing a 3% sequential increase, with particularly strong performance in Eastern Hemisphere operations. Meanwhile, the Mine & Forest segment demonstrated exceptional growth with EBITDA reaching €53 million, a 33% sequential improvement fueled by higher volumes and reduced production costs. This performance underscores the success of strategic initiatives including the Phase 1 mine extension project in Brazil, which has enhanced both ore quality and operational efficiency.

Global Market Navigation Shows Strategic Agility

Despite challenging market sentiment in the energy sector, Vallourec has maintained strong booking momentum throughout Q1 2025, continuing positive trends observed in late 2024. The company reported a 7% increase in tube volumes year-over-year, primarily driven by increased shipments to Middle Eastern and North American customers. US market prices have shown an upward trajectory, though they have yet to fully incorporate the impact of recently announced tariffs due to ongoing market uncertainties. This mixed pricing environment was reflected in an 8% price/mix effect that partially offset volume gains, demonstrating the complex market dynamics Vallourec must navigate.

Financial Transformation Earns Market Recognition

The company's financial restructuring has garnered significant external validation, with all three major rating agencies acknowledging Vallourec's strengthened position. Most notably, Fitch upgraded the company to Investment Grade status, a significant milestone that reflects confidence in its balance sheet resilience and cash generation capabilities. The net cash position improved by €91 million sequentially to reach €112 million, providing substantial financial flexibility. This transformation represents the culmination of three years of strategic initiatives designed to optimize operations and enhance financial stability regardless of market conditions.

"New Vallourec" Plan Drives Operational Excellence

The impressive Q1 2025 performance reflects the substantial operational changes implemented under the "New Vallourec" plan over the past three years. Key initiatives have included centralizing production in cost-efficient hubs strategically located near major customers and establishing integrated operations in the US to effectively serve North American clients. This restructuring has positioned Vallourec advantageously within the current trade environment while enabling significant operational efficiencies. Guillemot noted that these changes have created a company "well positioned for any market environment" with the ability to "manage the business optimally in any market condition."

Segment Performance Reveals Strategic Priorities

A closer examination of segment performance reveals both challenges and opportunities. The Tubes segment reported revenues down 2% year-over-year due to a 9% reduction in average selling price, though volumes increased by 7%. Tubes EBITDA decreased from €220 million in Q1 2024 to €166 million in Q1 2025, primarily reflecting lower North American profitability. However, this decline was partially offset by improvements in other regions resulting from higher market pricing and benefits from the New Vallourec plan. The Mine & Forest segment demonstrated remarkable growth with iron ore production sold increasing by 15% year-over-year to 1.6 million metric tons, contributing to the segment's EBITDA of €53 million compared to €30 million in Q1 2024.

Forward Outlook Balances Caution With Confidence

Looking ahead, Vallourec has provided measured guidance that reflects both market uncertainties and strategic confidence. The company expects Q2 2025 Group EBITDA to range between €170 million and €200 million, with Tubes EBITDA per metric ton projected to be flat to slightly higher sequentially. For the full year, Vallourec anticipates improved second-half performance compared to the first half, with international shipments expected to increase due to strong bookings in recent quarters. The Mine & Forest segment is projected to reach approximately 6 million metric tons of production sold for the year, with profitability dependent on prevailing iron ore market prices. Despite ongoing market uncertainties, the company's diversified customer base, spanning global national oil companies, international oil companies, and resilient independent US producers, provides a foundation for sustainable performance.

Key Takeaways:

• Vallourec generated €207 million in EBITDA with a 21% margin in Q1 2025, achieving its tenth consecutive quarter of positive cash flow despite energy market uncertainties

• The company's strategic transformation earned an Investment Grade rating from Fitch, with net cash position improving by €91 million to reach €112 million

• Despite mixed segment performance, Vallourec projects stronger results in H2 2025, with international shipments expected to increase based on robust order bookings