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Vallourec Factory Will Cease Production in Europe, Shifting Activity to Industrial Units in Brazil
The French manufacturer of steel tubes, primarily used by oil and gas drillers, Vallourec, will cut approximately 2,950 jobs and also close several production plants in Germany, France, and the United Kingdom, transferring part of its production to Brazil to accelerate profit growth as production demand stabilizes.
The plan, which is expected to be achieved in the first quarter of 2024, will increase recurring profit before taxes, interest, depreciation, and amortization by 230 million euros (US$ 241 million), said Vallourec, which restructured its debt last year, in a statement on Wednesday, 18.
The profit production progress will be 250 million euros due to a reduction in capital expenditures.
Such decisions will allow Vallourec to maintain strong profitability in its production, regardless of market conditions, said Philippe Guillemot, who was appointed CEO in March with the aim of enhancing Vallourec’s results.
In Germany, where about 2,400 jobs will be cut, Vallourec’s processes have lost, on average, approximately 100 million euros per year in past years, states Vallourec’s new CEO.
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The oil industry is benefiting from a post-pandemic recovery in energy demand. However, hydrocarbon manufacturers remain cautious about increasing spending on exploration and new wells to avoid unnecessary investments that occurred during previous demand booms.
Vallourec’s EBITDA dropped to 45 million euros in the first three months of 2022, compared to 80 million euros the previous year, as Vallourec had to temporarily cease operations at an iron ore mine in Brazil.
Thanks to the recovery in demand and the gradual resumption of its mining activity, Vallourec currently expects its EBITDA to increase significantly this year in 2022 with the shift of production to Brazil.
Meet Vallourec
Vallourec, Tubular Solutions of Brazil, was established in October 2016 and is the result of the merger of Vallourec Tubos do Brasil and Vallourec & Sumitomo Tubos do Brasil.
The company has two industrial parks for the production of seamless steel tubes, one located in Belo Horizonte (MG), in the Barreiro region, and the other in Jeceaba, also in Minas Gerais.
The steel tube plant located in the Barreiro region is one of the most well-equipped steel mills in the national and international market, producing seamless steel tubes for the oil, industrial, automotive energy, and construction sectors.
The Jeceaba plant is one of the most modern in the world and focuses on the production of seamless steel tubes for the oil and gas sector.
The company is a global leader in tubular solutions, with major consumers in the oil and gas, energy generation, and industrial markets. Altogether, Vallourec has eight units spread across Brazil.
Focus of the Company’s Plants
In Brazil, in Minas Gerais, the plants Barreiro and Jeceaba focus on the production of seamless steel tubes. The Florestal Unit manages the production of charcoal that fuels the ovens of the tube-producing plants. The Mining Unit supplies the needs for iron ore. The company also has a business unit in Minas Gerais that provides administrative services. The company has production lines in the states of Minas Gerais and São Paulo and provides seamless and welded steel tubes and tubular solutions for industries in general, especially for automotive, energy, machinery, and industrial equipment markets.
There is also a part of Vallourec in Rio de Janeiro, where it provides specialized services for the oil and gas sector, and in Espírito Santo, which offers anti-corrosive coating services.
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