New Vallourec marks the start of a new industrial journey
When I joined Vallourec as CEO in Spring 2022, its future was uncertain. A company once counted among France’s industrial giants was fighting for its survival. One year in, the transformation is far-reaching. Thanks to our New Vallourec plan, we have a clear roadmap: to build a group that is profitable in all market conditions, and which has a promising long-term future.
This outcome was far from given. Getting a company back on its feet calls for radical decisions and intense focus. The New Vallourec plan we set out in March last year transforms the business on three fronts: sales, organization and industrial footprint. All are focused on restoring profitability and long-term growth.
New Vallourec profoundly changes the way we do business. It means giving priority to value over volume and our operating performance to sustainably strengthen our profitability. We have restructured our organization and industrial footprint to create a high-performance organization, with production sites in the right places. This will enable us to restore the margins needed for future investments, particularly in innovation, research and development. It enables to focus on the road ahead, opening up new markets outside fossil fuels to become a key player in the low-carbon economy by 2050.
Tangible results one year in
Already, we are seeing what this means in action. Our profitability is steadily strengthening. Our first quarter earnings were positive for the first time in nine years: €156 million compared to a loss of €35 million last year. This supports our cashflow and our objective of reducing debt.
Equally, our debt is trending down. We still have some way to go, but I firmly believe that we’re on track to reach our goal of net zero debt by 2025. This is important because it guarantees our longevity, our ability to absorb future industry cycles, and even future crises.
We’ve been able to do this thanks to our people. To turn around a business, you need to move fast. At Vallourec, we moved exceptionally fast. What would normally be done in months, we did in weeks; what would normally be done in weeks, we did in days. I would personally like to thank everyone in the company whose commitment has made it possible to achieve these results. As a CEO, you stake your reputation on a turnaround plan—but it’s the people on the ground who make it possible.
A platform for long-term growth
When I set the wheels of the New Vallourec plan into motion, I was very clear: this is more than a financial restructuring plan. It’s a platform for long-term growth. I knew when I accepted the job of CEO that Vallourec had huge opportunities within reach, if only it could get into a position where it was able to grasp them.
Vallourec operates in a strategic sector, energy, which is undergoing profound transformation. The world needs energy that is available, affordable and—increasingly—decarbonized. The transition to a fully decarbonized economy will take a couple of decades. It will be marked by rapid acceleration in the development of decarbonized technologies and fuels. In the future, we will be less reliant on oil. But it is also clear that for the foreseeable future, the world economy will continue to rely on the 100 million barrels of oil that are pumped out daily.
This is why, through our New Energies business, we are actively investing in innovative new products for low-carbon applications. This is about building on our existing deep energy expertise. As an illustration, we are developing an innovative compressed hydrogen storage solution. In Autumn, we will install a demonstrator at our Aulnoye-Aymeries site in northern France. Its lower footprint will facilitate integration into industrial projects in the hydrogen sector, thereby advancing the development of hydrogen infrastructure in Europe.
Other use cases are in carbon capture and storage, where Vallourec brings valuable knowledge in terms of manufacturing tubes and other structures to store and transport carbon and prevent leaks; and solar, where we are providing structural tubes for the construction of solar installations on large farms.
We are also investing in innovation. A good example is wire arc additive manufacturing (WAAM), where we are building on our expertise in metallurgy and non-destructive testing to improve the efficiency and sustainability of manufacturing.
Leading by example
Of course, there is a new dimension, which all companies today must integrate: sustainability. I have made it a tenet of my transformation plan that what we do, we do for the long-term. To be a leading actor in the decarbonized economy, we need to be exemplary ourselves.
We are starting from a strong base. Vallourec has set science-based targets and a trajectory, validated by SBTi, to reduce carbon emissions in line with Paris Agreement targets to contain global warming within 1.5°C. This covers both our direct (scope 1) and indirect (scopes 2 and 3) emissions. We have already met our target for 2025, and have now set a demanding target to reduce the carbon intensity of our manufactured tubes by 35%.
But being a responsible leader means acting sustainably across the board. This means thinking beyond carbon, to consider topics such as diversity, equity and inclusion, or broader environmental issues. A good example is biodiversity. For years, Vallourec has managed 165,000 hectares of forest in Brazil. One half is covered with a mix of trees native to the region, while the second half produces charcoal used in our blast furnaces.
Of course, one of the main areas in which we have an impact is in how we manufacture our products. Green energy is one part of the equation: re-use of materials is another. Our products now contain 51% recycled steel, a proportion we are continuing to improve. This leadership in sustainability is important because it is expected by our customers. It is one of the reasons Vallourec will be a partner of choice for energy companies in the future.
