Vallourec secures profitable growth through rationalization project
BOULOGNE-BILLANCOURT, France -- Vallourec has announced major strategic initiatives aimed at transforming its operational set-up, improving its competitiveness and reinforcing its financial strength, in an effort to secure long-term profitable growth and sustained shareholder value creation.
By downsizing European capacity by 50%, focusing on high value and specialized activities, and creating two highly competitive production hubs in Brazil and China, the company aims to enhance global competitiveness. Additionally, with support from Bpifrance and NSSMC, the company plans to strengthen its balance sheet through €1.0 billion of new equity.
The company's planned rationalization project will lead to the closure of two rolling mills in Saint-Saulve and Deville, France; one threading line in Mülheim, Germany; as well as one heat treatment line in Bellshill, Scotland. This will result in a 50% reduction in tube production capacity by 2017.
The company is rationalizing its Brazilian operations through the merger of Vallourec & Sumitomo Tubos do Brasil (VSB, Jeceaba site, operated by Vallourec and NSSMC in a 56/40.4% JV, with Sumitomo Corp. holding the remaining 3.65%) and Vallourec Tubos do Brasil (VBR, fully owned by Vallourec). A new entity will result from the merger, Vallourec Soluções Tubulares do Brasil. Vallourec will hold a majority stake of 84.6% stake, NSSMC will hold 15% and Sumitomo Corp. will hold 0.4%.
The rationalization of Brazilian operations will lead to the closure of two blast furnaces and one steel mill over 2016-2018, to concentrate all steel production in the Jeceaba facility.
Vallourec is also to acquire a further 50.61% stake in the Chinese seamless pipe manufacturer Tianda Oil Pipe (TOP), in addition to the 19.46% already owned. Following completion of the transaction, Vallourec will hold a 70.07% controlling interest in TOP, and will subsequently launch a Mandatory General Offer to acquire all remaining shares.
The initiative is expected to generate an additional EBIDA contribution of approximately €750 million. NSSMC will subscribe to Vallourec's equity issuance, acting as anchor investor.
Philippe Crouzet, chairman of the management board, said, "Our plan significantly adjusts our industrial footprint in Europe, to address overcapacity and focus on highly specialized activities in France and Germany. It rationalizes and optimizes our Brazilian operations. It gives us access to a second, highly competitive production hub in Tianda Oil Pipe."
