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Steel pipemaker Vallourec expects full-year core profit jump
Global Banking & Finance Review®
Company
By Elena Vardon
(Reuters) – Vallourec expects a big jump in 2022 core profit to between 650 million and 750 million euros ($659-$760 million), the French steel pipemaker said on Wednesday, even though its iron ore mine in Brazil is not operating at full capacity.
Its previous guidance was for a result “significantly above” 2021 levels, when earnings before interest, tax, depreciation and amortisation (EBITDA) came in at 492 million euros.
Vallourec said operations at its Pau Branco mine, which have been gradually restarting after heavy rainfall in January, would be back to normal no sooner than the second quarter of 2023.
If the mine had operated at full capacity, annual core profit could have reached one billion euros this year, excluding any effect from its restructuring plan, the firm in a statement.
Vallourec’s restructuring plan, launched by newly appointed chief executive Philippe Guillemot in May, is set to free up 230 million euros of recurring EBITDA from the closure of sites in Germany, France and Scotland, and cut around 2,950 jobs.
Provisions linked to the restructuring costs came in at 456 million euros, impacting the company’s quarterly net result which was a loss of 415 million euros.
Guillemot said free cash flow remained in the negative territory in the second quarter due to “temporary investments in inventories to satisfy strong business demand”, but expects it to turn positive in the second half.
The firm said second-quarter EBITDA came in at 160 million euros, up from 148 million euros a year earlier, driven by a strong performance in its tube business in North America.
“We are seeing a parallel increase in activity and price inflation, reflecting both rising costs and the tension between supply and demand”, said Guillemot in a call with journalists.
($1 = 0.9854 euros)
(Reporting by Elena Vardon; Editing by Muralikumar Anantharaman and Elaine Hardcastle)
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a financial metric used to evaluate a company's operating performance.
A restructuring plan is a strategy implemented by a company to improve its financial stability, often involving changes in operations, management, or financial structure.
Core profit refers to a company's earnings derived from its primary business operations, excluding any income from non-operational activities.
Free cash flow is the cash generated by a company after accounting for capital expenditures. It indicates the cash available for distribution among all security holders.
Market dynamics refer to the forces that impact the supply and demand of goods and services in a market, influencing pricing and competition.
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