Weekend in style for Vallourec. The title of the manufacturer of seamless tubes climbed 9%, to 13.88 euros, appearing at the top, by far, of the SRD. Behind this flight hides a note from the Oddo BHF firm. Demining the sensitive subject of the working capital requirement (WCR), the analyst in charge of the value estimates that the tensions observed during the first months of the year on Vallourec’s WCR are ” traditional at this stage of the cycle and do not worry us. »
In the first quarter, the cash flow generated by the activity was 21 million, but the free cash flow remained negative by 230 million euros, under the effect of a tension on the WCR, which climbed, net, to 125 days of turnover, against 104 days a year ago. This deterioration is the consequence of the acceleration in demand in a context of rising raw material costs (need to restock) and will result in an acceleration of the gross operating surplus (Ebitda) over the coming quarters. In the end, the net debt increases, over the three months, to 1.2 billion euros, against 958 million at December 31.
” We believe that the group will be able to reduce it over the next few quarters says Oddo BHF, adding that the group, under pressure from the Apollo and SVP funds, should achieve its cost reduction and gross operating surplus targets. Consequently, the analyst renews his opinion of “outperformance” and raises his target price from 14.50 euros to 16.50 euros.
Restructuring
Engaged in a vast restructuring in Europe, Vallourec has announced the elimination of some 3,000 jobs, or nearly a fifth of its workforce. Germany is paying the heaviest price, with the closure of its three factories. The Saint-Saulve pipe mill in France and the Bellshill threading line in Scotland will also draw the curtain in favor of a refocusing of European threading activities on the Aulnoye site in France. Vallourec thus hopes generate €130 million of additional EBITDA as well as €20 million capital expenditure reductions, with full effect in the first quarter of 2024. In parallel, it will strengthen its OCTG production in Brazil.