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Looking at the markets: Benteler, Vallourec, Webco Industries

Published: - 07/06/2017 Author: Di Maggio, EIC
Looking at the markets: Benteler, Vallourec, Webco Industries

The time has come for a new issue of the column "Looking at the markets", that analyses the performances of three stock companies which are particularly prominent in their field with current information on their business activities.

This time we're concentrating on steel tubes, taking into consideration three well-know tube manufacturers - a good way to feel the pulse of this industry!
The three companies are:

Benteler, Austria
Vallourec, France
Webco Industries Inc., USA

We invite you to read the final part of the article called "Latest trends" which considers newly published market surveys and other studies concerning directly or indirectly the steel tube industry, constituting an additional source of information.



Benteler Group, Salzburg/Austria (28/03/2017): The group with nearly 28,000 employees and busy in the Automotive, Steel/Tube, Distribution and Glass Processing Equipment sectors achieved earnings from operating activities after non-recurring effects (EBIT) of €191.2 million (2015: €136.2 million). Contributing to this rise were in particular the positive development in the Automotive Division and the sale of Engineering Services with effect from January 1, 2017. Revenue were at €7,423 million (2015: €7,598 million). One principal reason for the fall is the continuing difficult business environment in the Steel/Tube Division due to the ongoing crisis in the oil and steel tube market. The Automotive Division which accounts for 78% of group revenue gained ground and is expected to profit from the growth in Asia.
In order to open up growth opportunities for the future, the group made investments of €440 million in 2016, a large part of this in the expansion of international business. In particular this investment went into new thermoforming lines in the Automotive Division. Around €60 million was invested in the new hot rolling mill in Shreveport, USA.
In the 2016 financial year, the group made available €94 million for spending on research and development. A total of 87 patent applications were filed. The Group was also able to further expand the global orientation of its research and development organization on the international markets and intensify cross-divisional collaboration between the development departments.
Steel/Tube revenue fell by 6.8% to €825 million. The Division accounts for around 11% of group revenue. A principal cause of the decline was reduced demand in a market environment characterized by overcapacities which put strong pressure on the price level in the USA and in Europe. The new steel tube mill in Shreveport, USA, is a decisive component in the company’s long-term global growth strategy.
Benteler Automotive achieved a revenue of €5,880 million in 2016. This represents a rise of 1.7%. Key contributors to the revenue increase were the growth regions of Eastern Europe, with the new module plant at Września in Poland, and the Asia-Pacific region with the new module plant at Shenyang in China. The recovery of the Brazilian market also contributed to the positive revenue trend.

By 2021 investments of €200 million are being planned to increase the competitiveness of the company’s five German locations of the Steel/Tube Division.

For the 2017 financial year the group expects to increase the revenue to around €11 billion by 2021.
The steel tube market is expected to continue to be volatile in the future. The European market in particular is still characterized by overcapacities and high price pressure. As a result the focus remains on the processing of additional sales markets outside the established core markets in Europe. With the new steel tube mill in the USA, the Steel/Tube Division is well set up for the recovery in the oil and gas market that is expected in the medium term.
Growth opportunities are opening up for the Automotive Division in particular in the Asian market and – once the crisis has been resolved – in Latin America. The market situation in Europe is expected to remain stable at a high level with strong growth in Eastern Europe.

Company presentation/annual report




Vallourec SA, Boulogne-Billancourt/France (26/04/2017): The manufacturer of seamless steel tubes with nearly 19,000 employees in more than 20 countries recorded revenue of €783 million over the first quarter of 2017, up 16.7% compared with the first quarter of 2016. Operating result was a loss of €111 million, compared to a loss of €290 million in Q1 2016, resulting from higher EBITDA and from the absence of restructuring and impairment charges in Q1 2017. Financial result was at -€43 million versus -€34 million in Q1 2016, resulting mainly from the recognition of a loss of €8 million related to the change in fair value of NSSMC shares held by Vallourec since 2009. As at 31 March 2017, group net debt increased by €246 million compared to 31 December 2016 to reach €1,533 million.
Oil & Gas revenue reached €485 million in Q1 2017, up 10.5% year-on-year. In the USA, Oil & Gas revenue increased as the number of active rig count rose, supporting final demand for OCTG tubes.
Petrochemicals revenue was €48 million in Q1 2017, up 60.0% year-on-year, as a result of the integration of the Chinese company Anhui Tianda Oil Pipe Company Limited in November 2016.
Power Generation revenue amounted to €84 million in Q1 2017, down 1.2% year-on-year (including the impact related to the integration of Tianda).
Industry & Other revenue amounted to €166 million in Q1 2017, up 41.9% year-on-year. In Europe, Industry & Other revenue was up essentially thanks to the Mechanical Engineering while the Automotive and Construction market segments remained relatively stable. The pricing environment, in a context of increasing raw material costs, remained however very challenging year on year.
In Brazil, Industry & Other revenue was significantly up mainly thanks to the important increase in the mine's revenue as a result of higher iron ore sales prices. The Automotive market recorded an increase in activity thanks to the heavy vehicles segment while Mechanical Engineering remained relatively stable.

On 26 January 2017, Vallourec finalized the divestment of a 60% stake in the Saint Saulve steel mill to Asco Industries. Vallourec retains a 40% share in the steel mill. Vallourec's new organization structured around the four regions North America, South America, Europe/Africa (EA), and the Middle East/Asia (MEA) and two central departments (Development & Innovation and Technology & Industry) is in place. The company continues to deploy its transformation plan through its new rationalized industrial footprint combined with the rigorous implementation of the structural cost reductions program.


For 2017, Vallourec expects oil & gas revenue in the US to rebound more significantly than previously expected. In Brazil, drilling activity is expected to remain broadly stable compared to 2016, while revenue in EAMEA should still be impacted by the low activity and prices reflected in the backlog to be delivered in this region.
Vallourec does not expect any major change in its other businesses, with the exception of higher revenue from its iron ore sales in Brazil.
The Group confirms it targets an EBITDA improvement ranging between €50 million and €100 million when compared to 2016.

Company presentation/annual report (2016 annual financial report)




Webco Industries Inc., Sand Springs, Oklahoma/USA (09.03.2017): The manufacturer and distributor of high-quality carbon steel, stainless steel and other metal tubular products with more than 1,000 employess reported results for its second quarter of fiscal year 2017 (ended January 31, 2017). For the second quarter of fiscal year 2017, the company generated net income of USD2.2 million, compared to a net loss of USD1.2 million for the Q2 in fiscal 2016. Net sales for the Q2 2017 were USD91.6 million, a 21.3% increase from the USD75.5 million of sales in Q2 2016.
In the Q2 2017 Webco achieved income from operations of USD1.8 million, after depreciation of USD2.8 million. The second fiscal quarter of the prior year generated a loss from operations of $1.0 million, after depreciation amounting to USD2.9 million. Gross profit for the second quarter of fiscal 2017 was USD7.6 million, or 8.2% of net sales, compared to USD4.5 million, or 5.9 percent of net sales, for the Q2 2016.
Webco’s income from operations for the first six months of fiscal year 2017 was USD3.3 million, after depreciation expense of USD5.6 million, while the company generated a loss from operations for the same period in fiscal 2016 of USD1.9 million, after depreciation expense of USD5.9 million. Gross profit for the first six months of fiscal 2017 was USD15.5 million, or 8.6% of net sales, compared to USD9.4 million, or 5.6% of net sales for the same period in fiscal year 2016.
Selling, general and administrative expenses were USD5.8 million in Q2 2017 and USD5.5 million in Q2 2016. Selling, general and administrative charges were USD12.2 million in the first six months of the current fiscal year, an increase over the USD11.3 million in such expenses in the same period of fiscal 2016. The increase in SG&A reflects increased costs associated with increased activity levels.

A company spokeswoman commented that the company’s performance continues to primarily improve as a result of not having to deal with high cost steel in this lower demand environment. Volumes have been low and the industrial and energy-related economies are relatively sluggish. The tubing industry continued to deal with low oil prices, commodity volatility, a strong U.S. dollar, and foreign competition. Expense and working capital management continue to be priorities in this lower demand environment. Webco has been investing in its core strengths, including quality, efficiency, yield improvement and capabilities.

Company presentation/annual report



Latest trends – Market Research Reports


Iron & Steel Pipe & Tubes World Report
June 2017

Steel Pipe & Tube Manufacturers (GLOBAL) - Industry Report
June 2017

Welded Linepipe & OCTG Market Tracker
May 2017

Copper Pipes & Tubes Market 2017. Global Production Technology and Development Trend Research Report to 2021
May 2017

Market Survey and Report of Europe Welded Steel Tube Industry 2017

Feb 2017
(and more reports:)

Europe Duplex Stainless Steel Pipe Market Report 2017

Feb 2017

Global Steel Tube Market 2017 Share, Trend, Segmentation and Forecast to 2021

Jan 2017

The World Market for Stainless Steel Welded Tube & Pipe


Previous issues of the column:
Looking at the markets: Bossard, Norma Group, SFS >>
Looking at the markets: Bekaert, Salzgitter, Voestalpine >>
Looking at the markets: Aurubis, Huber+Suhner, Leoni >>

The information has been compiled by Dipl.-Ing. Konrad Dengler, a technical journalist specialised in industrial activities.

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