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Press Release |
July
2015
www.vallourec.com |
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Vallourec reports
second quarter
and first half 2015 results
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Global staff reduction of 1,600 over the first
half of 2015, including close to 1,000 permanent jobs
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Boulogne-Billancourt (France), 30 July 2015 -
Vallourec, world leader in premium tubular solutions, today
announces its results for the second quarter and first half of
2015. The consolidated financial statements were presented by
Vallourec's Management Board to its Supervisory Board on 30 July
2015.
Commenting on
these results, Philippe Crouzet, Chairman of the Management Board,
said:
"The severe downturn in the Oil
& Gas markets persists. The resulting decline in drilling
activity since the beginning of the year, particularly in North
America and the EAMEA region, led to a sharp fall in our sales and
increased pressure on prices in the first semester. As a result,
our mills have been operating well below capacity, leading to
inefficiencies typically associated with low load.
Vallourec's management remain
fully committed to confront this depressed environment, which will
further affect the remainder of 2015.
We have implemented drastic
flexibility measures to adapt our mills to the low load, and have
removed approximately 80% of the variable costs associated with the
lost volume.
In parallel, we are deploying
Valens in strict accordance with the plan, and are on track to
gradually deliver the targeted savings.
Finally, and more than ever under
such circumstances, we maintain a strong focus on cash, through
tight working capital management and strict discipline on capex:
we therefore reiterate our positive free cash flow generation
target for 2015.
I am convinced that the vigorous
actions we have taken, combined with our unique technologies,
talented people and key local positions, will enable us to respond
to the challenging environment and keep meeting our customers'
expectations."
Key figures
H1 |
H1 |
Change |
In millions of euros |
Q2 |
Q2 |
Change |
2015 |
2014 |
YoY |
|
2015 |
2014 |
YoY |
774 |
1,134 |
-31.7% |
Sales Volume (k
tonnes) |
362 |
583 |
-37.9% |
2,070 |
2,693 |
-23.1% |
Revenues |
1,018 |
1,422 |
-28.4% |
66 |
444 |
-85.1% |
EBITDA |
13 |
248 |
-94.8% |
3.2% |
16.5% |
-13.3pt |
As % of revenues |
1.3% |
17.4% |
-16.1pt |
(228) |
265 |
na |
Operating income
(loss)(1) |
(193) |
156 |
na |
(275) |
144 |
na |
Net income (loss), Group
share |
(199) |
88 |
na |
+3 |
+37 |
-€34m |
Free cash flow(2) |
+33 |
+1 |
+€32m |
-
Comprises €145 million of other
charges, including €111 million of restructuring charges and
impairment related to the implementation of Valens
-
Free cash flow (FCF) is a
non-GAAP measure and is defined as cash flow from operating
activities minus gross capital expenditure and plus/minus change in
operating working capital requirement
na: not
applicable
I - CONSOLIDATED REVENUES BY
MARKET
H1 |
H1 |
Change |
In millions of euros |
Q2 |
Q2 |
Change |
2015 |
2014 |
YoY |
|
2015 |
2014 |
YoY |
1,439 |
1,905 |
-24.5% |
Oil
& Gas, Petrochemicals |
720 |
1,017 |
-29.2% |
253 |
278 |
-9.0% |
Power
Generation |
110 |
143 |
-23.1% |
378 |
510 |
-25.9% |
Industry & Other |
188 |
262 |
-28.2% |
2,070 |
2,693 |
-23.1% |
Total |
1,018 |
1,422 |
-28.4% |
Oil & Gas, Petrochemicals (69.5% of revenues)
Oil & Gas
revenues reached €1,331 million in H1 2015, down 25.1% year-on-year
(down 32.1% at constant exchange rates):
-
In the USA, volumes sold
were down, reflecting the fall in active rig count by 53% over the
first semester along with destocking from distributors. Moreover,
prices decreased in Q2.
-
In the EAMEA[1]
region, in a context of postponement of projects by IOCs and of
ongoing destocking in Saudi Arabia, volumes and mix were
significantly down in H1 2015 compared with a strong
H1 2014.
-
In Brazil, revenues were
slightly down year-on-year in H1 2015 due to lower drilling
activity.
Petrochemicals revenues were €108 million in H1 2015,
down 15.0% year-on-year (down 21.3% at constant exchange rates) due
to lower demand in a highly competitive environment.
Power Generation (12.2% of revenues)
Power
Generation revenues amounted to €253 million in H1 2015, down
9.0% year-on-year (down 12.6% at constant exchange rates):
-
Conventional power
generation revenues were impacted by lower volumes along with
pricing pressure.
-
In nuclear, revenues were
slightly up year-on-year, explained by a favourable comparable in
2014.
Industry & Other
(18.3% of revenues)
Industry & Other revenues amounted to €378
million in H1 2015, down 25.9% year-on-year (down 26.7% at constant
exchange rates):
-
In Europe, revenues were
down year-on-year in a very competitive environment.
-
In Brazil, revenues were
down year-on-year, strongly impacted by the continued deterioration
of the macroeconomic environment in the region, notably by the
severe downturn in the automotive industry. Indeed, according to
ANFIR, the Brazilian Road Implements Association, sales for the
domestic heavy vehicles market decreased by approximately 50% in H1
2015 compared with previous year.
H1
2015 iron ore revenues were significantly down year-on-year, due to
the 46% drop in iron ore spot prices compared with H1 2014.
II - H1 2015 CONSOLIDATED RESULTS
ANALYSIS
EBITDA stood at
€66 million in H1 2015, down 85.1% year-on-year. EBITDA margin
was 3.2% of revenues in H1 2015 compared with 16.5% in H1 2014.
This was due to:
-
Lower consolidated revenues at €2,070 million,
down 23.1% (down 28.7% at constant exchange rates), mainly
resulting from a negative volume effect (-31.7%), notably for Oil
& Gas in EAMEA and in the USA, and despite positive translation
(+5.6%) and price/mix (+3.0%) effects.
-
Lower industrial margin at €336 million, down
54.2%. Despite a significant reduction in variable costs, and lower
industrial fixed costs, industrial margin was impacted by the fall
in sales, and by inefficiencies associated with mills load well
below production capacity.
-
Sales, general and administrative costs
(SG&A) declined by 3.3% to €264 million, with an 11.2%
year-on-year decrease in Q2 2015. This improvement results from an
overall focus on cost reduction, first results of Valens G&A
actions, and was achieved despite unfavourable exchange rates and
inflation. R&D efforts were kept stable.
Operating loss
was €228 million in H1 2015, compared with a profit of €265
million in H1 2014. This deterioration results from lower EBITDA,
and from €145 million of other charges, including €111 million of
restructuring charges and impairment related to the implementation
of Valens. The depreciation of industrial assets remained broadly
stable at €149 million.
For the first
half of 2015, financial result was negative at -€37 million versus -€31 million in H1 2014.
The income tax
charge amounted to €15 million in H1 2015 compared with €74
million in H1 2014.
Non-controlling interests were a
charge of -€5 million in H1 2015, compared with a product of €16
million in H1 2014, explained by the decline in US operations
results.
Net loss, Group
share was €275 million in H1 2015,
compared with a profit of €144 million in H1 2014.
III - CASH FLOW & FINANCIAL
POSITION
Vallourec
generated a slightly better than anticipated free cash flow at €3
million in H1 2015, compared with a positive free cash flow of
€37 million in H1 2014. This was primarily explained by:
-
Negative cash flow from
operating activities resulting from the drop in EBITDA;
-
Lower capital expenditure
at €89 million, representing a decrease of 35.5% compared with H1
2014;
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A reduction in operating
working capital requirement (+€111 million), compared with an
increase of €185 million in H1 2014, notably due to
inventories.
In June 2015, the Holding company
paid €41.9 million in dividend to its shareholders in cash. The
payment of the dividend in shares resulted in the creation of
3,090,460 new shares (i.e. 2.37% of the share capital).
As at 30 June
2015, Group net debt increased by €123
million to €1,670 million compared with the end of 2014. The
gearing ratio was 42.5% compared with 37.1% at the end of 2014.
Vallourec's liquidity position is
strong. The Group increased its committed financings to
approximately €3.6 billion, including €1.8 billion
undrawn confirmed credit lines, and no significant repayment until
2017. In June 2015, the Group signed an additional multi-currency
revolving credit facility for €90 million, maturing in February
2019, plus two one-year extension options.
IV - SHORT-TERM ADAPTATION AND
VALENS PLAN
The Group is adapting to the low
load of the mills. Global staff reduction was 1,600 over the first
half of 2015 (close to 7% of total headcount), including close to
1,000 permanent jobs.
Action plans have been implemented to adapt the
mills' to the reduced activity, and allowed to remove approximately
80% of the variable costs (excluding raw materials) associated with
the lost volume.
The Valens plan is well on track
with approximately 2/3rd of the 450+
initiatives already started notably on manufacturing costs and
SG&A. These initiatives, along with an overall focus on cost
reduction, contributed to the reduction of industrial fixed costs
and to the improvement of S&GA in H1 2015. The targeted savings
of 10% of added costs, with a full year effect in 2017, is
confirmed.
The process to structurally reduce
our European steel and tube capacity, and our worldwide overhead
costs is being deployed according to plan.
V - MARKET TRENDS &
OUTLOOK
Vallourec expects its Oil &
Gas deliveries and results to be further impacted in H2 2015 by the
challenging market trends:
-
In the EAMEA region, the
order inflow is staying at a very low level and destocking in Saudi
Arabia is continuing. Therefore, low deliveries and unfavourable
mix, associated with price pressure, will continue to significantly
weigh on H2 2015 performance, which is expected to decline compared
to H1, despite the favourable effect of a stronger US dollar.
-
In the USA, the results in
each of the two coming quarters are expected to be significantly
below Q2 2015. After the Q2 2015 sequential drop in volumes sold,
the likely stabilization of the active rig count at a very low
level, and the continuation of the destocking from distributors
throughout the year, should not allow any volume recovery in H2
2015, while price pressure that started in H1 intensifies.
-
In Brazil, due to the
current cash constraints of Petrobras, Vallourec expects its Oil
& Gas H2 2015 revenues to be down compared with H1 2015.
On 29 June 2015, Petrobras released its E&P 2015-2019 capex
plan which was revised downwards compared to the 2014-2018 plan.
Thanks to a focus maintained on development in pre-salt basins,
Vallourec expects an increase in deliveries, starting in
2017.
Industry & Other operations in
Brazil will continue to suffer in H2 2015 from the deteriorating
local macroeconomic environment, while persisting oversupply in the
iron ore market will result in significantly lower prices than in
2014.
In Europe, the environment for Power Generation and Industry &
Other operations remains very competitive.
Overall, despite the ongoing cost
reduction measures, this very challenging environment, notably in
the Oil & Gas markets, is expected to lead to Q3 and Q4 2015
deliveries and margins being significantly below the level achieved
in Q2, which will likely result in a negative EBITDA for the full
year.
The Group maintains a strong focus
on cash: the operating working capital requirement will continue to
be strongly reduced in H2 2015, and the capital expenditure revised
down to around €300 million from €350 million initially
planned.
Based on current market conditions and currency
trends, Vallourec continues to target a
positive free cash flow generation in 2015.
About Vallourec
Vallourec is a
world leader in premium tubular solutions primarily serving the
energy markets, as well as other industrial applications.
With over 23,000 employees in
2014, integrated manufacturing facilities, advanced R&D and a
presence in more than 20 countries, Vallourec offers its customers
innovative global solutions to meet the energy challenges of the
21st century.
Listed on Euronext in Paris (ISIN
code: FR0000120354, Ticker VK) and eligible for the Deferred
Settlement System (SRD), Vallourec is included in the following
indices: MSCI World Index, Euronext 100 and SBF 120.
In the United States, Vallourec
has established a sponsored Level 1 American Depositary Receipt
(ADR) program (ISIN code: US92023R2094, Ticker: VLOWY). Parity
between ADR and a Vallourec ordinary share has been set at 5:1.
www.vallourec.com
Follow us on Twitter @Vallourec
Presentation of Q2 / H1 2015
results
Thursday 30 July 2015 |
To participate in the call, please dial:
0800 279 5736 (UK), 0805 631 580 (France),
1877 280 1254 (USA), +44(0)20 3427 1916 (Other countries)
Conference code: 3861281
http://www.vallourec.com/EN/GROUP/FINANCE
To listen to the replay, please dial:
0800 358 7735 (UK), 0800 949 597 (France),
1866 932 5017 (USA), +44(0)20 3427 0598 (Other countries)
Access code: 3861281 |
Information and Forward-Looking
Reflections
This press release contains
forward-looking reflections and information. By their nature, these
reflections and information include financial forecasts and
estimates as well as the assumptions on which they are based,
statements related to projects, objectives and expectations
concerning future operations, products and services or future
performance. Although Vallourec's management believes that these
forward-looking reflections and information are reasonable,
Vallourec cannot guarantee their accuracy or completeness and
investors in Vallourec are hereby advised that these
forward-looking reflections and information are subject to numerous
risks and uncertainties that are difficult to foresee and generally
beyond Vallourec's control, which may mean that the actual results
and developments differ significantly from those expressed, induced
or forecasted in the forward-looking reflections and information.
These risks include those developed or identified in the public
documents filed by Vallourec with the AMF, including those listed
in the "Risk Factors" section of the Registration Document filed
with the AMF on 10 April 2015 (N° D.15-0315).
Calendar
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9 November 2015 |
Release of third quarter and first nine months 2015
results |
For further information, please
contact |
Investor relations
Etienne Bertrand
Tel: +33 (0)1 49 09 35 58
etienne.bertrand@vallourec.com |
|
Press relations
Héloïse Rothenbühler
Tel: +33 (0)1 41 03 77 50
heloise.rothenbuhler@vallourec.com |
Investor relations
Alexandra Fichelson
Tel: +33 (0)1 49 09 39 76
alexandra.fichelson@vallourec.com |
|
Individual shareholders
Florent Chaix
Tel: +33 (0)1 41 03 76 53
florent.chaix@vallourec.com |
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Appendices
Documents accompanying this
release:
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Sales volume
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Forex
-
Revenues by geographic region
-
Revenues by market
-
Cash flow statement
-
Free cash flow
-
Summary consolidated income statement
-
Summary consolidated balance sheet
-
Tube production capacity
Sales volume
In thousands of tonnes |
2015 |
2014 |
Change |
|
YoY |
|
|
|
|
Q1 |
412 |
551 |
-25.2% |
Q2 |
362 |
583 |
-37.9% |
Q3 |
|
564 |
|
Q4 |
|
625 |
|
|
|
|
|
Total |
774 |
2,323 |
|
Forex
Average
exchange rate |
H1 2015 |
H1
2014 |
EUR /
USD |
1.12 |
1.37 |
EUR /
BRL |
3.31 |
3.15 |
USD /
BRL |
2.97 |
2.30 |
Revenues by geographic
region
In millions of euros |
H1 |
As % of |
H1 |
As % of |
Change |
|
2015 |
revenues |
2014 |
revenues |
YoY |
|
|
|
|
|
|
Europe |
461 |
22.3% |
530 |
19.7% |
-13.0% |
North
America |
656 |
31.7% |
774 |
28.7% |
-15.2% |
South
America |
383 |
18.5% |
507 |
18.8% |
-24.5% |
Asia &
Middle East |
404 |
19.5% |
656 |
24.4% |
-38.4% |
Rest of
World |
166 |
8.0% |
226 |
8.4% |
-26.5% |
|
|
|
|
|
|
Total |
2,070 |
100.0% |
2,693 |
100.0% |
-23.1% |
Revenues by market
In millions of euros |
H1 |
As % of |
H1 |
As % of |
Change |
Q2 |
Change |
|
2015 |
revenues |
2014 |
revenues |
YoY |
2015 |
YoY |
|
|
|
|
|
|
|
|
Oil &
Gas |
1,331 |
64.3% |
1,778 |
66.0% |
-25.1% |
678 |
-29.1% |
Petrochemicals |
108 |
5.2% |
127 |
4.7% |
-15.0% |
42 |
-31.1% |
Oil & Gas, Petrochemicals |
1,439 |
69.5% |
1,905 |
70.7% |
-24.5% |
720 |
-29.2% |
|
|
|
|
|
|
|
|
Power Generation |
253 |
12.2% |
278 |
10.3% |
-9.0% |
110 |
-23.1% |
|
|
|
|
|
|
|
|
Mechanicals |
204 |
9.9% |
211 |
7.8% |
-3.3% |
105 |
-0.9% |
Automotive |
65 |
3.1% |
105 |
3.9% |
-38.1% |
30 |
-42.3% |
Construction & Other |
109 |
5.3% |
194 |
7.3% |
-43.8% |
53 |
-49.0% |
Industry & Other |
378 |
18.3% |
510 |
19.0% |
-25.9% |
188 |
-28.2% |
|
|
|
|
|
|
|
|
Total |
2,070 |
100.0% |
2,693 |
100.0% |
-23.1% |
1,018 |
-28.4% |
Cash flow statement
H1 |
H1 |
In millions of euros |
Q2 |
Q2 |
Q1 |
2015 |
2014 |
|
2015 |
2014 |
2015 |
(19) |
+360 |
Cash
flow from operating activities |
(38) |
+200 |
+19 |
+111 |
(185) |
Change
in operating WCR |
+112 |
(128) |
(1) |
+ decrease, (increase) |
+92 |
+175 |
Net cash flow from operating activities |
+74 |
+72 |
+18 |
(89) |
(138) |
Gross
capital expenditure |
(41) |
(71) |
(48) |
- |
- |
Financial investments |
- |
- |
- |
(66) |
(136) |
Dividends paid |
(66) |
(113) |
- |
(60) |
(9) |
Asset
disposals & other items |
(34) |
+1 |
(26) |
(123) |
(108) |
Change in net debt |
(67) |
(111) |
(56) |
+ decrease, (increase) |
1,670 |
1,739 |
Net debt
(end of period) |
1,670 |
1,739 |
1,603 |
Free cash flow
H1 |
H1 |
Change |
In millions of euros |
Q2 |
Q2 |
Change |
2015 |
2014 |
|
2015 |
2014 |
(19) |
+360 |
-379 |
Cash
flow from operating activities (FFO) (A) |
(38) |
+200 |
-238 |
+111 |
(185) |
+296 |
Change
in operating WCR (B) |
+112 |
(128) |
+240 |
[+ decrease, (increase)] |
(89) |
(138) |
+49 |
Gross
capital expenditure (C) |
(41) |
(71) |
+30 |
+3 |
+37 |
-34 |
Free cash flow (A)+(B)+(C) |
+33 |
+1 |
+32 |
Summary consolidated income
statement
H1 |
H1 |
Change |
In millions of euros |
Q2 |
Q2 |
Change |
2015(1) |
2014 |
YoY |
|
2015 |
2014 |
YoY |
2,070 |
2,693 |
-23.1% |
REVENUES |
1,018 |
1,422 |
-28.4% |
(1,734) |
(1,960) |
-11.5% |
Cost of
sales(2) |
(876) |
(1,019) |
-14.0% |
336 |
733 |
-54.2% |
Industrial
margin |
142 |
403 |
-64.8% |
16.2% |
27.2% |
-11.0pt |
(as % of revenues) |
13.9% |
28.3% |
-14.4pt |
(264) |
(273) |
-3.3% |
SG&A costs(2) |
(127) |
(143) |
-11.2% |
(6) |
(16) |
na |
Other
income (expense), net |
(2) |
(12) |
na |
66 |
444 |
-85.1% |
EBITDA |
13 |
248 |
-94.8% |
3.2% |
16.5% |
-13.3pt |
EBITDA as % of revenues |
1.3% |
17.4% |
-16.1pt |
|
|
|
|
|
|
|
(149) |
(148) |
+0.7% |
Depreciation of industrial assets |
(73) |
(77) |
-5.2% |
(145) |
(31) |
na |
Other
(amortization,
exceptional items,
impairment & restructuring) |
(133) |
(15) |
na |
(228) |
265 |
na |
OPERATING INCOME (LOSS) |
(193) |
156 |
na |
(37) |
(31) |
+19.4% |
Financial income (loss) |
(16) |
(11) |
+45.5% |
(265) |
234 |
na |
PRE-TAX INCOME (LOSS) |
(209) |
145 |
na |
(15) |
(74) |
-79.7% |
Income
tax |
2 |
(46) |
-104.3% |
0 |
0 |
na |
Share
in net income (loss) of associates |
(1) |
0 |
na |
(280) |
160 |
na |
NET INCOME (LOSS) FOR THE CONSOLIDATED ENTITY |
(208) |
99 |
na |
(5) |
16 |
na |
Non-controlling interests |
(9) |
11 |
na |
(275) |
144 |
na |
NET INCOME (LOSS), GROUP SHARE |
(199) |
88 |
na |
(2.1) |
1.1 |
na |
EARNINGS PER SHARE (in €) |
(1.5) |
0.7 |
na |
-
As concerns the Amendment to
IFRS 11, the impact of its application on the consolidated
financial statements as at 30 June 2015 primarily translates to a
€60 million drop in sales in consideration for purchases; a €165
million drop in non-current assets, in consideration for other
provisions and long-term liabilities, and a drop in trade
receivables of €33 million, in consideration for trade
payables.
-
Before depreciation and
amortization
na: not applicable
Summary consolidated balance
sheet
In millions of euros |
|
|
|
|
|
Assets |
30-June |
31-Dec |
Liabilities |
30-June |
31-Dec |
2015(1) |
2014 |
2015(1) |
2014 |
|
|
|
|
|
|
|
|
|
Equity,
Group share |
3,519 |
3,743 |
Net
intangible assets |
165 |
166 |
Non-controlling interests |
406 |
426 |
Goodwill |
357 |
332 |
Total equity |
3,925 |
4,169 |
Net
property, plant and equipment |
3,487 |
3,523 |
|
|
|
Biological
assets |
190 |
214 |
Bank loans
and other borrowings |
1,778 |
1,782 |
Associates |
194 |
184 |
Employee
benefits |
205 |
244 |
Other
non-current assets |
282 |
435 |
Deferred
tax liabilities |
254 |
256 |
Deferred
tax assets |
207 |
223 |
Provisions
and other long-term liabilities |
60 |
229 |
Total non-current assets |
4,882 |
5,077 |
Total non-current liabilities |
2,297 |
2,511 |
|
|
|
|
|
|
Inventories
and work-in-progress |
1,443 |
1,490 |
Provisions |
265 |
163 |
Trade and
other receivables |
895 |
1,146 |
Overdrafts
and other short-term borrowings |
867 |
912 |
Derivatives
- assets |
26 |
28 |
Trade
payables |
555 |
807 |
Other
current assets |
325 |
343 |
Derivatives
- liabilities |
206 |
173 |
Cash and
cash equivalents |
975 |
1,147 |
Tax and
other current liabilities |
431 |
496 |
Total current assets |
3,664 |
4,154 |
Total current liabilities |
2,324 |
2,551 |
TOTAL ASSETS |
8,546 |
9,231 |
TOTAL EQUITY AND LIABILITIES |
8,546 |
9,231 |
|
|
|
|
|
|
Net debt |
1,670 |
1,547 |
Net income (loss), Group share |
(275) |
(924) |
|
|
|
|
|
|
Gearing ratio |
42.5% |
37.1% |
|
-
As concerns the Amendment to
IFRS 11, the impact of its application on the consolidated
financial statements as at 30 June 2015 primarily translates to a
€60 million drop in sales in consideration for purchases; a €165
million drop in non-current assets, in consideration for other
provisions and long-term liabilities, and a drop in trade
receivables of €33 million, in consideration for trade
payables.
Tube production capacity
In thousands of tonnes |
2017
targeted tube production capacity |
2014 tube production capacity |
2011 tube production capacity |
|
USA |
750 |
750 |
400 |
Brazil |
800 |
800 |
500 |
Europe |
900 |
1,350 |
1,500 |
Total |
~2,450 |
~2,900 |
2,400 |
[1] EAMEA:
Europe, Africa, Middle East, Asia
20150730_Vallourec-press-release-Q2-H1-2015-PDF
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: VALLOUREC via Globenewswire
HUG#1942559
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