14/04/2021 - Economy - Industry - Investment - ImpactOlivier Mallet discusses the impact of the coronavirus crisis on Vallourec and the severe economic shock it has caused, as well as the measures put in place by the Group to overcome them and continue to look to the future.
What impact has the coronavirus crisis had on Vallourec? How did you respond?Olivier Mallet: This crisis has had very serious consequences for most of our business sectors. Primarily for the Oil & Gas market, where it resulted in a fall in demand and oil prices in the second quarter, followed by a sharp decline in activity among our Oil and Gas customers. This naturally had an impact on our annual results. Faced with this situation, we acted very quickly, initially in the United States, which is the most volatile region and where the fall in activity was most severe. From May, we reduced the workforce there by more than 30%. Similar measures were also taken over the course of the year, notably in France, Germany and Brazil. These decisions are not easy and we are fully aware of the efforts asked of all employees. But we also know that everyone in the Group is fully aware of the challenges and is collectively committed to tackling the crisis. Our cost reduction operations achieved savings of €165m in 2020, far exceeding our initial target of €130m. We are aiming for at least €400m in additional gross savings by 2025.
But we also know that everyone in the Group is fully aware of the challenges and is collectively committed to tackling the crisis.Olivier Mallet
What are your forecasts for Vallourec’s activity in the coming months?O.M.: This crisis is unusual in that it was triggered by the Covid-19 crisis and therefore circumstantial. Which makes it very different from the 2014 crisis, for example, which resulted from a technological disruption with the emergence of shale gas and oil in the United States. Analysts therefore agree that by 2022 or 2023, global oil demand will return to near pre-crisis levels at around 100 million barrels per day. The Group’s competitiveness is a crucial advantage to enable it to pass this milestone and we are aiming for further savings. We can also count on areas of resilience. In Brazil, for example, we will benefit from high iron ore prices and accelerated deliveries of our premium tubes for the offshore market.
How does your refinancing plan give you a solid foundation for approaching 2021 and the coming years?O.M.: This financial restructuring meets the two major objectives we set ourselves. Namely, a reduction in our debt by just over half (or €1.8bn) and maintaining sufficient liquidity to deal with any unexpected developments (€1.4bn at the end of 2020). Residual debt, meanwhile, will be extended over the next five years under good conditions. This refinancing will therefore allow us to roll out our strategy, which is based on improving our gross operating income thanks to our competitiveness, the gradual recovery of our main markets from 2022 and, eventually, the effects of innovations developed in the services and energy transition sectors.