Vallourec core profit falls short of forecasts, shares drop

By Dagmarah Mackos

(Reuters) -French steelmaker Vallourec’s shares slipped on Monday after it reported a 55% rise in quarterly core profit, driven by its tubes business, which fell short of expectations.

Vallourec also reported negative free cash flow of 81 million euros for the third quarter, but said it still expects this to turn positive for the second half of 2022.

Shares in Vallourec, which are up more than 22% year-to-date, were down 6% at 1113 GMT after the results, which showed third-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) rose to 198 million euros ($204 million).

European mining and metal shares fell on Monday on worries over the potential impact of rising number of COVID-19 infections in China.

“Our tube business continues to improve quarter after quarter driven by a favourable environment due to a worldwide focus on energy security,” Chief Executive Philippe Guillemot said, adding that supply in North America remains tight.

Profit was hit by losses in Germany and by its margin on exports from Brazil, he added in a call.

As a slowing economy in Europe drives up costs, higher energy expenses are likely to be felt into next year at its German sites, Vallourec said.

It had said it would close its German manufacturing sites as well as its heat treatment line in Saint-Saulve in France and a site in Scotland, under a restructuring plan.

Production at its Pau Branco iron ore mine in Brazil, where operations have been gradually restarting after heavy rainfall shut it in January, would be higher than anticipated in the fourth quarter, at lower prices.

Vallourec confirmed its full-year core profit (EBITDA) guidance of 650 to 750 million euros and a strong fourth quarter, but could not say at what end of the range it would be.

($1 = 0.9728 euros)

(Reporting by Dagmarah Mackos, additional reporting by Dina Kartit; editing by Kim Coghill, Jason Neely and Alexander Smith)