Posted on Nov 18, 2020 at 6:22 PMUpdated Nov 18, 2020 6:23 PM
Vallourec has not finished with restructuring and layoffs. The manufacturer of steel tubes for the energy industry announced Wednesday more than a thousand job cuts to face the health crisis longer than expected. A crisis that particularly hits the oil and gas companies. They are Vallourec’s first customers and drastically reduce their investments in the face of falling black gold prices.
“The second wave of the pandemic worsens the outlook for most of our customers, in the exploitation of hydrocarbons as in industry, explains Edouard Guinotte, the chairman of the management board, in an interview with ‘Echos’. We do not expect any significant improvement in our markets before 2022 and this unfortunately forces us to adapt throughout the group and reduce our industrial footprint, particularly in Europe. “
Avoid forced departures
The job cuts announced in the United States in the spring were not enough. The Déville-lès-Rouen plant in Seine-Maritime, which employs 190 people, will be closed. Specializing in the finishing of tubes produced in Germany, the Normandy site suffers from a too low level of activity, enough to ensure barely a week of work by the end of the year. And it is far from other Vallourec sites, in Germany and in the Nord department. “The cost structure of the Déville plant unfortunately makes it uncompetitive, mainly due to its under-activity and excessively high transport and logistics costs”, resumes Edouard Guinotte.
Vallourec intends to cut 160 jobs elsewhere in France, without site closure. “We cannot guarantee at this stage that there will be no forced departures at all, but we will do our utmost to limit them through measures of age, reclassification and training”, promises the leader who took the reins of the company last March. In Germany, 200 jobs will be cut and working hours will be reduced by 20%. The group had already cut 800 jobs and closed a factory in this country at the start of the year. Finally, in Brazil, where Vallourec has a solid presence, 500 job cuts are planned.
Fall in turnover
The group published its results for the third quarter on Wednesday. Turnover fell by a third, to 716 million euros, gross operating profit of 15%. The net loss is close to 70 million over the period. “Our results are solid given the context”, Judge Edouard Guinotte, who welcomes a “Good resistance” activity, particularly in Brazil, where the Vallourec iron mine benefits from a well-oriented market for this ore. Cost reductions in the United States have also helped. The Chairman of the Management Board continues to aim for a positive net cash flow for the second half of the year.
“The second wave of the pandemic worsens the prospects for most of our customers, in the exploitation of hydrocarbons as in industry,” explains Edouard Guinotte, Chairman of the Executive Board of Vallourec.Vallourec
This last point is watched closely because the company is bending under a net debt of 2.3 billion euros, an unsustainable level. This is why the company has embarked on a major financial restructuring. More than half of the debt will be converted into shares. “With a debt reduced by more than half, we will be able to envisage the future under good conditions for the coming years”, considers the chairman of the management board.
Shareholders have lost almost everything
In other words, the creditors of the group, of the banks but also of the Anglo-Saxon funds, will hold the majority of the capital. “We are reasonably confident because this financial restructuring is in everyone’s interest, but nothing has been decided yet, negotiations are just starting, warns Edouard Guinotte. To be effective, the plan will need to be approved by two-thirds of bank debt holders, two-thirds of bondholders and two-thirds of shareholders. “ The leader aims for a deal “By February 2021”.
Current shareholders will see their stake massively diluted, starting with the two benchmark carriers, the public bank bpifrance and the Japanese Nippon Steel. They each hold 15% of the capital since Vallourec’s previous rescue in 2016. A reserved capital increase could be launched in order to limit the dilution, which will be very significant anyway. Whatever happens, shareholders will have lost most of their stake: Vallourec’s market capitalization has dropped by 90% in five years , falling to less than 260 million euros.
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