French pipe manufacturer Vallourec has announced some updates in its 2014 guidance, following its Brazilian customer Petrobras' decision to eliminate most of its tube inventories by the end of the year, while maintaining its drilling plans.
Vallourec stated that it is making some significant temporary adjustments due to reduction in demand for its oil and gas pipe operations in Brazil and in the Europe, Middle East and Africa (EAMEA) region. This will be a one-time adjustment. It will heavily weigh on Vallourec's sales in the second half of 2014, with an estimated net EBITDA impact of approximately €60 million.
Vallourec's adjustments included adapting its mills in Brazil to a lower load, while in the EAMEA region, adapting its industrial operations servicing those markets, in addition to the recently announced measures aiming at structurally improving its European cost base.
As a result, Vallourec now targets EBITDA to be down by approximately 10 percent compared to 2013. The company has also decided to reduce its capital expenditures by €100 million, down from an initial target of €500 million for 2014.