Vallourec - comment

Main takeaway from Vallourec’s Q1 release last night is the emphatic statement that FY22 EBITDA now expected to be significantly above FY21, despite the mine shut down in Q1. The mine has restarted operations on May 4th, with restrictions for a period of 3 months, under which, Vallourec aims to ramp up from 70% to full capacity over this period. Free cash flow headline is negative, impacted by mine closure but more importantly the build-up of inventory reflecting forward volume expectations. Outlook remains very bullish, especially in the Oil & Gas segment. This sentiment is across the three regions, led by North America, buy volumes and pricing expected to significantly recover in Europe/Middle East and South America as well.