NEWS 2014 Vallourec Page 2 WHERE HISTORY IS BEING WRITTEN Page 16 in 2014 THE PURSUIT OF EXCELLENCE AND DIFFERENCE Page 24
THE ENERGY OF YOUR ACTIVITY REPORT CHALLENGES Page 34 WorldReginfo - acd21f38-96c9-4d60-9799-3e388e20877c WorldReginfo - acd21f38-96c9-4d60-9799-3e388e20877c 2 NEWS 2014
8 VAM® CELEBRATES 50 YEARS OF SUCCESS!
10 OUTLOOK
12 VISION Interview with Philippe Crouzet, Chairman of the Management Board Message from Vivienne Cox, Chairman of the Supervisory Board
THE WORLD OF VALLOUREC 16 WHERE HISTORY IS BEING WRITTEN Our three major markets Closer to our customers Focus Africa tomorrow
THE VALLOUREC LABEL 24 THE PURSUIT OF EXCELLENCE AND DIFFERENCE Industrial excellence: premium across-the-board Commercial excellence: creating more value for our customers Corporate Social Responsibility: Vallourec’s commitments Focus Innovation every day
THE VALLOUREC TEAM 34 THE ENERGY OF YOUR CHALLENGES Expert and proud to be part of Vallourec Safety: priority for one and all Focus Vallourec women
42 FINANCIALS Our governance Closer to our shareholders Financial results and responsible performance targets WorldReginfo - acd21f38-96c9-4d60-9799-3e388e20877c NEWS 2014 NEWS 2014
Inauguration Inventory Vallourec Star recycles of Vallourec adjustments 99% of its water
Saudi Arabia by major partners The Youngstown Manufacturers (Ohio) plant has set Association, earning In mid-2014, products. These up a state-of-the-art the 2014 Petrobras, a major events significantly water treatment Environmental customer of the impacted Vallourec’s facility that meets Management and Group in Brazil, order book and all recommendations Recycling Award. decided to performance in 2014, of the Steel significantly reduce but without its tube inventories. diminishing Large EAMEA zone confidence operators also in the long-term adjusted inventories attractiveness of Vallourec’s first the Group at the and deferred tenders these two markets. premium finishing heart of the world’s on premium plant for oil and gas leading oil-producing tubes in the Middle country. The unit is East, the Dammam dedicated to heat plant brings treatment of tubes Vallourec closer and threading to its customer, of the VAM® line of Up to the Kingdom’s premium connections national oil company, and has an annual Saudi Aramco, capacity of 100,000 and positions metric tons. 5,000 40 years of expertise Zero lost-time accidents meters serving the nuclear in 4 years: Vallourec Mexico the depth at which the industry wins the 2014 Vallourec reservoirs of the Kaombo Safety Award. project are operated offshore Vallourec has been Valinox Nucléaire from Angola using Vallourec’s a partner of the has produced over French nuclear 40,000 kilometers tubular solutions. industry since its of tubes, Vallourec Drilling beginning and is the the equivalent only company able of the Earth’s Products develops its to supply all of the circumference. activities in Argentina tubes needed by Today, 80% of a nuclear plant, nuclear power plants Six unconventional seeking to make in all sizes and all worldwide are drilling assemblies the country energy steel grades. Since equipped with were allocated to independent by 1974, subsidiary Vallourec tubes. Vallourec Drilling 2030. This should Products, drive the establishing the development of company’s position shale gas resources New Award for CSR in the developing in Argentina, which market. The ranks third in the commitments Argentine world behind the Vallourec was again Responsibility government is U.S. and China. Iconic chrome recognized for its by Agefi at good practices the 2014 Corporate of motorcycle in Corporate Social Governance Awards. 4 suppliers were recognized manufacturer Harley with 2014 Vallourec Supplier's Davidson supplied Awards for their performance by Vallourec Vallourec qualified in the categories: to equip the new Chinese “Competitiveness,” “Quality Vallourec Tubos do 338,000 meters Brasil will supply of tubes will be used ACP1000 standard reactor, and deadlines,” “Innovation” 552 metric tons to mass produce confirming its reputation for and “CSR.” Vallourec places of seamless cold engine and rear technical excellence in the a high priority on working drawn tubes protection bars, Chinese market, which exclusively for as well as spare with a network Harley Davidson. parts for fans of the represents half of the global of responsible suppliers. No less than legendary brand. nuclear market.
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Mobile and adaptable in height, jack-up rigs enable exploration and drilling of deposits in shallow waters (up to 200 meters). Between 1,300 and 2,500 metric tons of tubes are required to equip this type of platform. With demand growing worldwide, Vallourec quality is making the difference in an intensely competitive market. In 18 months, the Group booked 50,000 metric tons of orders. Its Oceanfit® steel grade is designed for extreme temperatures of -50 °C / -60 °C and Arctic waters, opening new possibilities.
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Vallourec strengthens its VAM® connections testing capacities worldwide
Test and certify excellence: that’s Vallourec’s A new ultramodern testing station at the Aulnoye- commitment and the key to its reputation. Aymeries center doubles testing capacities. The Group has the resources to offer increasingly Here too, the tests performed involve make-up sophisticated connections to meet the most and break-out operations, simulation of combined stringent regulations and new customer loads (tension or compression, interior and exterior requirements. A tour of the world of Vallourec. pressure), deformation, resistance to high temperatures and fatigue. The Group has three full-scale VAM® connections test The new center being built in Brazil will also conduct centers in France (Aulnoye-Aymeries), the U.S. full-scale testing of proprietary connections, enabling (Houston) and Indonesia (Batam), with a fourth center qualification to the highest industry standards being built in Brazil (Belo Horizonte). and the specific requirements of the Brazilian market. Capacity was doubled to 8,400 m2 at the Houston All of these investments illustrate Vallourec’s commitment center in 2012, which is specifically designed to test to excellence and its ability to push the frontiers of tubes for shale hydrocarbons and offshore projects technological innovation for the benefit of its customers. in the Gulf of Mexico. The VAM® connections are subject to the most extreme full-scale testing to demonstrate sealing qualities.
THE MAIN CONSTRAINTS TO WHICH CONNECTIONS ARE SUBJECTED IN A PRE-SALT FIELD
Weight of the column Tension
Riser Marine currents Fatigue Water Casing tubes Production tubes (tubing) Layers of salt Rocks Exterior pressure Salt Rising of the fluid Oil Interior 2,000 bar 200 pressure technicians and Rocks 250° Celsius engineers dedicated ® Increase in temperature The pressure and temperature levels to to testing VAM of the cemented tubes which connections are regularly tested. connections. Compression
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All Vallourec! The deployment of the One Vallourec project is complete. Today, all sites worldwide, all safety equipment and all media proudly carry the Vallourec brand, colors and values.
Vallourec demonstrated its ability to support highly complex offshore projects in winning the contract for the Kaombo project, operated by Total E&P Angola: 27,000 metric tons of tubes and premium connections, designed for particularly difficult drilling conditions. WorldReginfo - acd21f38-96c9-4d60-9799-3e388e20877c NEWS 2014 NEWS 2014
In taking the pedestrian bridge that runs to Mont Saint-Michel, one can appreciate the insularity and unspoiled beauty of the World Heritage Site. The 760-meter bridge is supported by 124 columns that are both thin and strong… and are tubes produced by Vallourec.
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400 metric tons of high-performance steel tubes form the 124 columns that support the bridge. The seamless tubes, with a maximum length of 9.5 meters, are ideally proportioned: 24.45 centimeters in diameter, 4 centimeters thick at the ends of the structure and 6 centimeters in the central section for supporting the passage of 2.5 million visitors a year. They are resistant to wind, the constant motion of the sea and salt water through a special anti-corrosion coating.
Deck
Tube thickness Central section: 6 centimeters Ends of the bridge: 4 centimeters
Tube 24.45 centimeters in diameter
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VAM® CELEBRATES 50 YEARS OF SUCCESS!
In 1965, the Vallourec team led by Alexandre Madrelle launched a revolutionary connection. Since then, VAM® premium connections have linked more than tubes: they connect people, projects and countries. They have become the benchmark reference and a symbol of Vallourec’s values.
INNOVATION PROXIMITY Our R&D teams continuously design and develop premium On all projects and onshore solutions that are both innovative and offshore platforms throughout ® and competitive, to meet the the world, 24/7, a VAM expert requirements of our customers. is always at your side.
VAM® Field Service Vallourec offers on-site solutions for oil and gas projects - VAM® solutions are born.
Partnership with Sumitomo Metal 1985 Vallourec signs a 10-year research ® First VAM® patent and development CLEANWELL Vallourec responds to agreement on VAM® Vallourec sells its first 1965 the metal-metal sealing connections with 2000 dope-free coating challenge. Japan’s Sumitomo solution. Metal, renewed in 1995 and again in 2005.
New VAM® VAM TOP® 18 years later, Vallourec Vallourec launches launches the second VAM TOP®, the world’s generation of VAM® best-selling premium 1983 1990 connections. connection to date.
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CONFIDENCE For more than 50 years, we have been working to build NETWORK cooperative and long-term Throughout the world, relations with our stakeholders, we work hand in hand with based on trust and mutual our partners to ensure the highest respect. level of quality and compliance with the most stringent safety standards.
PERFORMANCE We implement reliable VAM® solutions for all types of applications, including the most complex, and offer fully integrated services.
Innovation, proximity, Accessories offer launched network, performance Vallourec acquires and confidence: Tube Alloy, expanding its these are the values line of OCTG accessories. through which Vallourec has built the history VAM® 21™ of VAM® connections The world’s only for 50 years. It is these assets that it engages connection offering the New test center in continuing to develop 2008 same sealing performance in Brazil ® breakthrough premium as the tube, VAM 21™ Vallourec is building connections and is the culmination of years 2015 its fourth VAM® fully-integrated solutions of research and innovation connections test that will create value and confirms Vallourec’s center in Belo for the next 50 years. leadership. Horizonte.
And tomorrow
VAM® Drilling Houston: capacity doubled Vallourec acquires SMFI, The VAM® connections test GIAT’s workshops in Tarbes, 2012 center in Houston expands, 2005 OMSCO and creates VAM® opening the way to the - 2006 Drilling, which becomes Aulnoye-Aymeries center, Vallourec Drilling Products, which also extends its capacities a leader in its market. in 2014.
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VALENS, VALLOUREC’S COMPETITIVENESS PLAN
Vallourec operates in an environment impacted by the significant drop in oil prices and the sharp reduction in oil exploration and production investment. The Group has leveraged all sources of flexibility to cope with falling volumes. In addition to these economic measures, it is implementing a two-year competitiveness plan called "Valens."
3 A more agile organization structured around 2015-2016 : four regions (Europe, North America, South America, focus on competitiveness Eastern Hemisphere), with centralized control of industrial The “Valens” competitiveness plan involves a substantial resources. reduction of costs and the optimized use of cash over Objectives: bring Vallourec even closer to its customers two years. Vallourec has also introduced a new capital and markets, accelerate decision-making and improve allocation policy to ensure value creation for all industrial operational efficiency. stakeholders. 2-YEAR COST REDUCTION TARGETS(1) Three key measures: 1 €350 million reduction of the cost base 350 30 over the period 2015-2016 (vs. 2014), or 10% of costs, 240 excluding raw materials. All types of costs, all divisions and all countries are included in the plan which comprises over 500 cost reduction initiatives identified by internal working groups and is based on a global project management organization with dedicated resources. 80 (1) Full year effect in 2017, assuming same volumes & cost 2 Optimization of capital expenditures at base as in 2014. (compared to €450 million (2) SG&A: sales, general €350 million per year and administrative costs. previously announced), a level that enables the Group Total Raw Manu- SG&A(2) materials facturing to maintain and grow the business. and direct costs on sales
Vallourec in 2014 10 WorldReginfo - acd21f38-96c9-4d60-9799-3e388e20877c Vallourec's competitiveness plan is part of an overall five-year performance plan that goes beyond the objectives of competitiveness and will strengthen the Group's fundamentals to earn the total confidence of its customers.
Striving for excellence Making a difference at all sites and in all that it does, starting At equal competitiveness, what creates the Vallourec with safety and quality: this is the commitment preference? Its innovative strength, unique customer of Vallourec for its customers and employees. experience and exemplary responsibility.
3 key fields of action 3 key fields of action
1 Safety 1 Innovation Deployment of the plan to prevent fatal accidents Promoting creativity, reducing time-to-market and strengthen the safety culture. and streamlining the R&D portfolio.
2 Quality 2 Commercial excellence Systematic elimination of causes of non-compliance, A commercial approach focused on customer in-depth treatment of all claims and deployment satisfaction, value proposition and reinforcement of Six Sigma methods. of the Vallourec brand’s position as a genuine premium label. 3 Operational efficiency Lean management implementation, reduction 3 Corporate social responsibility of maintenance costs and inventory. Improving energy efficiency and reducing the environmental footprint, developing employee skills and expertise.
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- “The world is changing and Vallourec is adapting Interview to these with Philippe Crouzet, Chairman of the Management Board changes.”
Following the power How is Vallourec adapting? What are the levers you have generation and industrial Will you be updating the strategy? activated? markets, it is the turn of the oil P. C. — This adaptation had already P. C. — There are two approaches and gas market to encounter begun some time ago. Originally, to improve competitiveness: reduce costs difficulties. Why and to what our business model was very European. or differentiate through higher-end extent? We exported from Europe, which products and services offered. I have P. C. — Oil and gas companies are exposed us to foreign currency risk and chosen to activate both of these levers. experiencing a profound change in their strained our competitiveness. Our We are also strongly accelerating our business. The high price of oil for four strategy has been to move toward more safety, quality and operational excellence or five years prompted them to increase premium products to support our programs as well as committing to an exploration investment, which failed customers in the most challenging ambitious cost reduction plan, covering to generate sufficient returns due exploration areas; toward more local production as well as fixed costs. to a disappointing discovery rate. supply to optimize the supply chain, to be Specifically, the harmonization of The resulting low financial return, closer to our customers and to generate equipment and production standards exacerbated by the sharp fall in oil prices, more local value, which is required by a in all of our plants allows us to optimize requires a rethinking of the sector's growing number of countries; and toward industrial resource allocation by order economic model. These are structural greater competitiveness, through at a global level. Vallourec’s reorganization changes. The world is changing and continuous investment in R&D, sustained into regional hubs and centralized Vallourec is adapting to these changes. efforts toward operational excellence and direction of the Group's industrial policy development of our presence in Brazil, enable us to fully implement this the Middle East and the U.S. We must approach. We will also standardize our now build on what we have in place offer, in close collaboration with our and focus our efforts on our customers, to capitalize on the best competitiveness. Valens, the ambitious existing products and focus research on two-year competitiveness plan breakthrough innovations. Customers that we announced in February reflects need to perceive that Vallourec solutions this determination. improve their return on investment.
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- “We are committed to changes that go well beyond responding to the crisis.”
How are Vallourec's employees What is the outlook for 2015? Beyond that, how do you see reacting to these changes? P. C. — This is a year of great challenge the market evolving? P. C. — The sales force and plant teams for Vallourec. We must simultaneously P. C. — Energy consumption is know that our markets are cyclical and manage a major adaptation to the continuing to increase worldwide. that each cycle requires measures of economic situation and implement the Population growth is accelerating and adaptation. They see the drop in orders, necessary measures to reinforce our four-fifths of the planet has significant are aware of the new customer business model, making it more flexible, needs for energy to support development. requirements and can feel the particularly responsive and competitive. We are Energy resources are not overabundant strong intensity of this cycle. Social committed to changes that go well and new ones must be found, partners know that we are committed beyond responding to the crisis. These extracted and exploited each year to transparency regarding our business changes are irreversible and sustaining. under competitive conditions without and we provide them with all the Yes, 2015 will be difficult for our company, compromising safety. The slow growth of information to understand the situation. as it will be for our customers and alternative energy sources in the energy This results in a high level of maturity at suppliers. But, we were prepared for it mix of major companies and countries Vallourec. Our competitiveness plan was and I am convinced that Vallourec will underlines that oil and gas will be part of built together with the teams. All emerge stronger from this crisis. the future. Vallourec too. In our industry, programs have been developed in the long-term strategies are winning field, with potential savings and strategies. This is our choice for Vallourec. optimization identified by working groups that have involved nearly 250 managers. The ideas generated have led to 500 key initiatives already being implemented by those who proposed them. Each Vallourec employee can contribute to strengthening the company. The new Vallourec we are building reflects a shared global ambition.
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Message from Vivienne Cox, Chairman of the Supervisory Board
- Confidence
Vallourec is operating in a difficult environment which I have always been confident in the relevance of is undergoing profound changes and is compounded Vallourec’s positioning and the future of its products. by a cycle of unprecedented turbulence. Absorbing these The world will always need high-end tubes, rich in shocks requires a radical transformation. This is what advanced technology, expertise and quality because the Group is in the process of doing, with rigor and people will always need energy and the exploration determination. And, this is what gives me confidence. and production of energy will become more complex. It is critical that we continue to innovate and deliver I have confidence in the men and women of the high-quality tubular solutions for which we are Vallourec. This is not the first time they have experienced known and recognized. This is Vallourec’s strength such a cycle and they know they need to respond. and signature. When I talk with employees in plants, in Houston or in Belo Horizonte, in France or in the Middle East, I have said and I remain convinced that Vallourec I find people willing to do whatever it takes for Vallourec has a bright, long-term future. Through its actions, to respond and to come out of this cycle stronger. the Group will emerge stronger from this difficult They have done it before. period.
I have confidence in the management team. All are committed to the implementation of a proactive action plan. They know that providing a sustainable future for Vallourec requires strategic, sometimes difficult choices. Their vision is strong and their commitment will be essential in enhancing Vallourec’s value long-term. I have confidence in the new organization of regional hubs, which brings Vallourec closer to its customers while ensuring its competitiveness globally.
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Where history is being written
Wherever tubular solutions of high technology, quality and expertise are needed.
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72% 17% INDUSTRY OIL AND GAS (INCLUDING PETROCHEMICALS) 11%
POWER GENERATION
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OUR THREE MAJOR MARKETS
Based on the strengths of its premium solutions and the expertise of its teams, Vallourec confirms its leadership position in its three major markets, in an environment affected in particular by increased competition and lower oil prices.
The historical leader in the oil and gas market, Vallourec offers oil and gas industry customers a range of premium tubular solutions to meet the highest demands and covers the entire chain, from exploration to production to transportation of hydrocarbons.
Vallourec’s seamless threaded OCTG (Oil Country Tubular Goods) tubes are used to equip a large number of oil and gas wells throughout the world, in casing and tubing. Vallourec offers all equipment required for drilling: drill pipe, bottom-hole tools and accessories for drill OIL AND GAS strings. The connection of seamless tubes is made using VAM® premium threaded connections, a Vallourec trademark celebrating its 50th anniversary in 2015. From the wells to processing units, hydrocarbons are routed offshore and onshore via Vallourec tubes and accessories. Its super duplex welded stainless steel tubes for umbilicals connect seabed-installed equipment million €4,084 to the surface control station.
of sales, including 71.7% of Group World leader in €288 million from the sales, of which premium “Vallourec Global Solutions” services provide Petrochemicals activity. 66.6% is from connections with customized support to customers, sharing Vallourec’s Oil & Gas and the VAM® line of expertise throughout the well’s life cycle. 5.1% is from the connections. Petrochemicals Vallourec.com activity.
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Vallourec offers the world’s broadest tubes portfolio for the power generation market. Whether for conventional thermal power plants, new “ultra supercritical” coal-generation plants or nuclear plants, Vallourec responds to all of the needs of power generators. Its specialized subsidiaries, Valinox Nucléaire and Vallourec Heat Exchanger Tubes, are special partners POWER GENERATION in the renovation of France’s nuclear plants.
Seamless tubes for boilers and steam generators, welded tubes for heat exchangers in all sizes and all grades, carbon steel to high-alloy steels, including titanium, stainless steel and nickel alloys… Vallourec products meet the challenges of power generators million and its services support their performance, from logistics €610 to risk analysis and customized training. of sales. 10.7% of World leader in Group sales. tubes for the power Vallourec.com generation market, offering the world’s broadest portfolio of tube sizes and steel grades.
Vallourec’s premium tubular solutions are used in the construction of numerous public infrastructure facilities: bridges, stadiums, vast airports and others that are among the boldest architectural projects. The PREON® Box innovation enables architects to optimize metallic structures used in the construction sector. The engineering industry uses Vallourec tubes and rings to manufacture cranes, agricultural machinery and all types of work site machinery. Car manufacturers equip light and heavy vehicles with the Group’s tubular solutions. The energy INDUSTRY sector also relies on Vallourec to build its offshore jack-up rigs. Finally, the patented PREON® marine innovation will reduce the environmental impact of installing offshore wind turbines.
With tubes, hollow bars and hollow sections of all sizes and steel grades, Vallourec’s offer responds to the most €1,007million varied and demanding industrial applications with proprietary steel grades recognized for their weight of sales. 17.6% of European leader and corrosion resistance, elasticity and outstanding Group sales. in seamless tubes hardening qualities. for mechanical applications. Vallourec.com
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CLOSER TO OUR CUSTOMERS
Vallourec‘s plants and research centers are located close to customers to better share their goals, meet their needs and create value with them locally. Today, the Group has more than 50 locations in 20 countries, with a global workforce of over 23,000 employees.
NORTH SOUTH AMERICA AMERICA
31 % of 16% of Group Sales 70% Group Sales 37% Projected share of shale oil growth in oil production expected 3,200 in the net growth of U.S. oil 8,400 in Brazil by 2020(3). employees(1) production between 2014 employees(1) and 2020(4). 60 years of partnership with Petrobras, Brazil’s national oil company.
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ASIA AND 1,400 GW THE MIDDLE EAST of new capacity from coal-fired power plants to be installed 25% of worldwide by 2020(3). Group Sales 60% of these new capacities are expected to be installed 2,300 employees(1) in India and China(3).
Middle East China Vallourec supports Saudi Aramco, the Saudi national oil company. 95% of China's nuclear power plants 814 billion are equipped with Vallourec tubes. barrels, the amount of the Middle East’s proven oil reserves, nearly 48% of the world’s total(3).
EUROPE AFRICA
19% of 117 Group Sales 1974 employees(2) 40% Vallourec has been the special of oil production in sub-Saharan Africa 9,800 partner of the French nuclear comes from deep and ultra-deep employees(1) industry since the beginning. offshore fields(3). (1) Employees as of December 31, 2014 (permanent and temporary contracts). (2) Employees as of December 31, 2014, including Steel mills Finishing units Plantation and mine all types of contracts (permanent, temporary, interim). (3) AIE – World Energy Outlook 2014. Tube mills Research & development Sales and services offices (4) AIE – Medium-Term Oil Market Report 2015. Vallourec.com
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AFRICA TOMORROW Proven reserves of oil in sub-Saharan Africa account for 5% of the world reserves(1) and everything in the region is just beginning. Vallourec tubular solutions used to equip the exploration and production projects of major oil and gas producers on the continent are meeting with significant success. Discoveries in West African pre-salt, geological formations similar to those encountered offshore of Brazil and operated by Petrobras using Vallourec equipment reinforce the development prospects. Africa is the future and Vallourec is there. 65 million(1) barrels of proven reserves
With 3/4 in Nigeria and Angola VALLOUREC IN AFRICA
Egypt Vallourec entered Africa in 2007 through a service company in Angola. Today, the Luanda-based team has 13 employees. In Nigeria, the Group has established a sales office in Lagos Ghana and a premium threading facility in Onne, employing Nigeria
100 people of which 98% are Nigerians. At the beginning Gabon of 2015, Vallourec opened an office in Johannesburg, South Africa, that is responsible for deploying OCTG offers, Angola as well as drilling products and line pipe with major oil and gas operators located in the region. The Group also has teams in Gabon and Egypt.
South Africa
More premium, local and competitive 117 In Africa, the Group applies its premium positioning, employees its proximity that ensures effective relationships and the competitiveness of its solutions to meet its customers’ economic challenges. Vallourec also seeks to create value for the host country, investing in industrial assets, giving priority to local sourcing and subcontracting throughout the production chain, while recruiting and training its teams on site.
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CLOV project Providing a wide range Kaombo project of premium offshore 27,000 metric tons solutions for this field of the most advanced of 34 subsea wells tubular solutions, operated by Total, including including VAM® 21™, Abuja 200 kilometers of seamless VAM® SLIJ-II™ and VAM® line pipe, application BOLT™ connections Nigeria of 150 kilometers of for this offshore project anticorrosive coating operated by Total, with and 5,500 welds 59 wells drilled in very on sensitive lines. complex geological conditions.
Egina project Supply of 24,000 metric tons of premium threaded tubes manufactured in the Onne factory in Nigeria for this complex project at 1,600 meters depth, operated by Total with training for young Nigerian engineers. Luanda
Angola
Vallourec did not wait until local content CONTRACT REVIEW had become a contractual requirement. Sharing is part of its philosophy. In Nigeria, Vallourec supported the renovation of two TEN project buildings that allow the communities 15,000 metric tons of Onne and Ikpokiri to come together of premium offshore to celebrate weddings and traditional line pipe and welding holidays. “Vallourec put smiles on our services provided to faces,” said representatives from the Subsea 7 for oil and communities. gas fields located in deep waters off the Ghanaian coast and Ghana operated by Tullow SHARING ITS SUCCESS Oil Plc. Accra
(1) International Energy Agency, World Energy Outlook 2014.
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The pursuit of excellence and difference
To make Vallourec the preferred partner of its customers and stakeholders.
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Our ambition is to be a world leader. By providing total confidence to our customers in delivering the benchmark solutions for the energy industry and other selected demanding applications. By committing to the success of our customers, our employees and our shareholders.
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INDUSTRIAL EXCELLENCE: PREMIUM ACROSS-THE- BOARD
Offer the best product at the best price, delivered on time, conforming to all customer expectations: industrial excellence is more than ever at the forefront at Vallourec. The determination to be competitive
Valens, North America, the 2015-2016 South America competitiveness and Eastern plan launched Hemisphere – puts The objective for all production teams This commitment to excellence by Vallourec, Vallourec closer at all sites is to improve quality to improve mobilizes production teams, managers enhances to its customers customer satisfaction. It is also about and commercial teams in careful the excellence and improves reducing the cost of obtaining quality. monitoring and extends to the Chairman initiative. the Group’s overall To achieve excellence, Vallourec relies of the Management Board, who is To significantly industrial on customer feedback and survey results informed of each claim by e-mail. reduce costs, performance. to detect defects, as well as on its An impact at the highest level that beginning with An entity competitiveness plan and, especially, energizes the organization and drives industrial costs, responsible its lean management dimension. it forward. The initial results are the Group relies for orchestrating encouraging with the number of claims on hundreds industrial policy No such thing as a minor showing a significant decrease in early of initiatives will optimize claim 2015. On-time delivery, another driver from field teams, the allocation The first means for customer feedback of excellence, is also subject to including of resources are claims, which are treated heightened monitoring. The Group is optimizing in localizing systematically and comprehensively. intensifying the connections between its maintenance and production where Whatever their nature, all are treated production, sales and decision-making reducing the time it will be the most the same way. Vallourec is organized centers to accelerate the process from required for a series economically to ensure that the defect, real or order to delivery. Finally, make-to-order change. appropriate. perceived, will never happen again. stimulates excellence in planning The new The objective: halve the number in Vallourec plants. organization, of customer claims by the end of 2015 with four regional and target zero defect. centers – Europe,
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What the surveys say Lean power to streamline its product portfolio, The second channel for customer To reduce defects and costs, Vallourec diversify product lines to meet small, feedback, surveys are part of the is working on four performance specific orders and simplify the process process for continuously improving quality categories: equipment efficiency, for achieving this flexibility. Adjusting and customer satisfaction. Among the productivity, inventory reduction its model to meet the needs of each areas for progress they have helped and reduced turnaround time from major customer worldwide, this is the new identify: the quality of information provided order to delivery. challenge for Vallourec and the future to customers. This includes administrative One of the most notable projects of its industrial excellence. and customs documents as well as is rethinking the involvement of production premium packaging: from the information workers by giving them the means on the tube, such as coding colors to measure their performance and take or the mode of pallet loading, direct action to respond to problems. to the aesthetics of polish and the quality The Group empowers them and gives ÷ 2 the number of customer of protective coatings. Working groups them the means to review the way they claims by the end of 2015 are also improving the quality of test do their job and to improve it or to identify is the objective certificates to better respond to customer the problem and communicate on it. expectations. Some issues are brought back to the level of Vallourec's research Produce differently centers and can lead to product changes. Tomorrow, Vallourec's solutions will accelerate return on investment for its customers, who will be able to perceive and measure it. The Group is working
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COMMERCIAL EXCELLENCE: CREATING MORE VALUE FOR OUR CUSTOMERS
Vallourec puts its organization at the service of its customers to better understand their strategic challenges and work with them to create unique value propositions.
The world is changing. Economic Start with the customer Building value propositions constraints are causing Vallourec In all of Vallourec’s three major markets, Vallourec’s thorough understanding customers to reconsider the economic customers faced with new challenges are of the new challenges of its customers viability of their projects. Meanwhile, increasing their requirements. Oil and gas enables it to identify and quantify value competition is intensifying, with new, operators expect safety, a significant creation drivers, allowing the creation particularly aggressive entrants. reduction in the total cost of their projects of customized and high-impact value The recognized excellence of Vallourec and innovation in technologies and propositions. For example, Vallourec products is a key differentiator but the business models. Major power generators is integrating OCTG tube logistics and Group needs to go further in identifying are seeking to reduce costs of production maintenance from its plants to offshore ways to create additional value for its per kWh and minimize their environmental platforms for oil operators in the North customers and making value propositions footprint, without compromising safety. Sea and South America, optimizing that respond to their needs. Industrial customers are working to operational costs for its customers. Competitiveness is also being increase the competitiveness of their By generating tangible added value strengthened through a reinforced product lines and operations through for its customers, these value propositions commercial approach based on innovation, engineering and optimization distinguish Vallourec offerings from a program of global excellence of the production chain and procurement. traditional and low-cost competitors and governance that, step by step, Better understanding customer value on many criteria beyond price. involves each level of the company. creation issues that go beyond a lower Central to the Group's business strategy, commodity purchase price, through direct value creation directs all its actions, and strategic dialogue, is a fundamental in particular its pricing strategy and its step in Vallourec’s commercial excellence portfolio of innovative projects, products program. and services.
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Major high The broad deployment of this approach value-added projects has required changing the sales organization and increasing synergies Major projects logistics, double with plants and, therefore, reviewing are subject to a joint welding methods of innovating, selling, producing specific approach operations for and delivering projects. to enable Vallourec "pipe-in-pipe" to participate production and Strengthening the sales force upstream in the gas export pipe. Vallourec is undertaking the certification engineering Through this of its key account teams. The cross- Thinking differently tubular solutions. additional value organizational teams include sales, Customer satisfaction is the responsibility This approach has created for the technical sales, marketing and innovation of all Vallourec employees. At each been implemented customer, specialists as well as plant managers meeting of Vallourec senior executives, successfully in the Vallourec was able and project and services managers. a customer is invited to speak. TEN project to make a They work to develop relationships with Creating value and differentiation are located in the deep difference and was relevant levels of customer organizations central to Quality Day and Innovation Day, waters off the chosen for this to understand their issues and contribute two major Group meetings. A customer Ghanaian coast. project in to creating differentiating and profitable culture is driving the new Vallourec. The Group partnership with value propositions. identified and the engineering, A program to strengthen the management quantified value procurement and of the sales force is also being deployed creation drivers construction (EPC) in all divisions and regions. before offering company. This is an ambitious program that a comprehensive Vallourec is implementing with all solution integrating necessary means: effective professionals, its unique innovative methods from best marketing expertise: the and value creation practices, appropriate supply of subsea, certified training, advanced information non-standard size systems and relevant measurement line pipe, an anti- indicators. The Group is also revitalizing corrosion coating, its sales and distribution channels.
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CORPORATE SOCIAL RESPONSIBILITY: VALLOUREC’S COMMITMENTS
Vallourec has always been committed to conducting Water: resource #1 its business responsibly. It has built a five-year plan An essential and valuable resource, water is used as a coolant throughout to accelerate its approach, a means for shared and Vallourec’s production processes, sustainable competitiveness, focusing on the representing 60% of total raw materials involvement of its teams and linking to its business consumed. model. To preserve the resource, Vallourec works to reduce intakes through recirculation systems and to improve the water quality of its discharges. In 2014, following works conducted on the Deville site, Group water consumption decreased by over Vallourec signed the United Nations Global deployed since 2009, Vallourec is taking 15%, despite the ramp-up of new sites. Compact five years ago and promotes action to reduce its gas and electricity Vallourec’s four integrated steel mill and its principles at all sites. Its Sustainable consumption 20% by 2020 (compared pipe mill sites have an average internal Development Charter sets out its social, with 2008). At the end of 2014, energy recycling rate of 98.1%, demonstrating societal and environmental commitments performance improvement had reached the performance of workflow systems. and sets performance goals tracked 15%, taking into account the volume This recycling reduces the volume each year. As a market leader positioned of activity and the "product mix". of water discharged into public networks to deliver premium products and services, Although Vallourec emissions from or the environment from the plant’s water Vallourec seeks to go further in extending its activity are low compared to similarly treatment sites. Illustrating the attention its commitment in all areas and to set sized companies in its industry, paid to water quality, the new a high standard. It is a commitment the GreenHouse project also seeks Youngstown plant earned the 2014 of excellence that also contributes to reduce carbon emissions, of which Vallourec Star Award for Environmental to creating a Vallourec preference. almost 60% is produced by gas furnace Management and Recycling awarded consumption. The electric steel mills by the Steel Manufacturers Association. For the world's climate at Saint-Saulve, Youngstown and Its ultra-modern treatment plant has 36% of total energy consumed by Jeceaba contribute significantly to this a recirculation rate of over 99% the Group is renewable. This results performance, helping Vallourec to earn and produces potable quality water. mainly from the use of eucalyptus wood a B ranking from the Carbon Disclosure In parallel, Vallourec works to make its charcoal produced by Vallourec Florestal Project in 2014 and a score of 91 out of management of water more economical. on its 237,000-hectare plantation, 100 for information transparency. to supply the Brazilian blast furnaces. Through its GreenHouse project,
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3.4 m3 of water to produce one metric ton of tubes 45% portion of Vallourec purchases made locally
Green model Pushing the limits more than a quarter of Vallourec’s in Brazil of recycling purchasing. Supplier's Day 2014, In 2014, the Group generated the second edition of this event, was Vallourec Florestal the eucalyptus 670,000 tons of waste, but the impact an opportunity to remind the Group's operates its own plantations. is much more limited than it appears 100 largest suppliers of Vallourec’s eucalyptus Over the years, because Vallourec considers these requirements and to recognize the best plantations to Vallourec has wastes to be a resource: 83% are performers. produce charcoal improved its recycled into secondary raw materials, to feed its steel charcoal 10% are burned to produce energy and Supporting local mill. Each year, manufacturing only 7% is landfilled. At the same time, communities about one- process and net processing costs decreased as did Vallourec places a high priority seventh of the consumes less the proportion of hazardous waste, which on the impact of its activities on local forest is harvested eucalyptus to is 6%. It is a means of reducing both the populations. Local purchases, which and immediately produce a tube. impact on the environment and the cost accounted for 45% of mass purchases reforested. Sludge The goal is now of materials. In 2015, Vallourec increased in 2014, reinforce local industrial recovered from to produce surplus its target for using “by-products” development. In addition to this direct cleaning gas blast biomass for use to 94.5% across the entire company. economic impact, the Group undertakes furnaces is used elsewhere. In addition, 55% of the steel used actions to promote education, health to fertilize in plants, whether produced or and development. In Brazil, more than purchased, comes from recycled scrap. 5,000 young people benefited between 2011 and 2014 from programs promoting Lead suppliers long-term learning and job placement Purchases by the Group reached and the cultural center funded by the 4.2 billion euros in 2014. It is therefore Group, Cine Theatro Brasil, welcomed essential for Vallourec to ensure that more than 160,000 visitors in 2014. the criteria for social and environmental Vallourec’s Indonesian subsidiary responsibility - including respect for ethical is engaged in providing assistance principles and the priority on safety - for education and health programs, are taken into account by its suppliers. financing facilities and acting to restore Vallourec uses biomass from its 237,000 hectares of eucalyptus plantations as a source of energy In one year, Vallourec conducted over the environment. All of these efforts for its Brazilian blast furnaces. 650 audits of supplier risks on its sites. mobilized nearly €6.6 million in 2014. A service provider specializing in social and environmental responsibility also assessed 576 suppliers, representing
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INNOVATION EVERY DAY
Essential to differentiation and growth, innovation is at the heart of Vallourec's strategy. Responding to the needs of its customers and anticipating their technological challenges of tomorrow: that is the challenge for the Group.
Unmatched connection for wells with long horizontal sections
Designed for highly deviated wells with long horizontal sections, the VAM® HTTC™ (High Torque Threaded and Coupled) premium New steel grade connection for casing and tubing New generation service for drill pipe resists extreme torque and contracts in Brazil compression during column As operators seek hydrocarbons installation and ensures perfect The 60-year partnership with in ever more extreme conditions, sealing during production phases. Petrobras has set a new standard. Vallourec is there to support them. A high-value product that enables Two five-year contracts cover a value Its new “VM-105 DP SS+” steel grade and secures the most complex added services portfolio on an allows drilling of wells containing horizontal drilling. unprecedented scale. The objective: hydrogen sulfide. Hydrogen sulfide The VAM® HTTC™ connection to help the Brazilian oil company was jointly developed in the (H2S) is highly corrosive and can meet the challenges of ultra-deep cause cracking of drill pipe, a major R&D centers in Houston (US) offshore applications, particularly risk in such operations. However, and Aulnoye-Aymeries (France), in logistics. Brazilian transportation many wells in Russia, the Middle East, and involved experts and commercial and logistics subsidiary Vallourec China and North America are exposed teams in the Middle East, the US Transporte e Serviços coordinates to the gas. This new steel grade and Europe. Successfully qualified equipment supply with the drilling guarantees an unmatched level at the end of 2014 by a major operator program, organizes the supply chain of resistance to corrosion for welds, in the Middle East, it is now available in all ports through which the tubes which are the most sensitive points. in different sizes. pass on their way to the offshore Vallourec thus enters a technological platforms, manages traceability, “new frontier.” prepares drilling operations, inspects and repairs tubes, rents special accessories and provides engineering. An innovative service offering that makes Vallourec the benchmark reference in providing solutions for its customers.
Self-locking threading
Internal seal
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VALLOUREC’S INNOVATION ECOSYSTEM
6 research centers Located close to the markets, they are dedicated to developing new products and improving existing products as well as manufacturing technologies and processes. AULNOYE-AYMERIES – FRANCE The Vallourec Research Center Connections is the expert in VAM® AULNOYE-AYMERIES – FRANCE premium threaded connections, The Group’s historical research from design to testing. center, the Vallourec Research HOUSTON – UNITED STATES Center France focuses particularly The Vallourec Competence Center USA on metallurgy, especially for OCTG develops customized VAM® connections applications and mechanics. for the US market and conducts testing.
DÜSSELDORF – GERMANY The Vallourec Research Center Germany develops steel tubes for power plants and oil and gas line pipe. It houses a welding laboratory.
BELO HORIZONTE – BRAZIL The Vallourec Research Center Brazil adapts Group solutions to the needs of Brazilian customers, particularly for operating pre-salt fields, as well as producing new designs. It is reinforced by the Vallourec Competence Center located in Rio de Janeiro, on the grounds of the University of Rio de Janeiro, near the research center of Petrobras.
DÜSSELDORF – GERMANY The Vallourec Research Center Technology innovates in Vallourec’s core processes. The Group laboratory, located in Riesa, functions as a mini-plant with advanced equipment and pushes the boundaries for hot forming steels and alloys.
3 test stations A collaborative approach around the world are testing full-scale VAM® Group R&D teams work closely with customers, connections under the most extreme conditions. academic laboratories and historical partners such as Nippon Steel & Sumitomo Metal Corporation and Tubacex.
researchers and technicians million dedicated patents filed 500 in the Group €95.7 to R&D in 2014 22 in 2014
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The energy of your challenges
Customer culture is the driver for Vallourec teams.
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Vallourec University is open to all, offering degree programs for non- executives and trainees.
Women represent 11% of the Group’s overall workforce and 21% of the management. Vallourec is taking steps to fully leverage this half of the available talent pool.
Visitors to a Vallourec plant are struck by the simplicity of relationships.
The Experts program distin- guishes and builds loyalty with the 317 Vallourec Vallourec continues specialists to progress in core toward Group the ultimate professions. goal of zero accidents.
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EXPERT AND
PROUD TO BE Wherever they come from and whatever their profession, Vallourec employees share PART OF a common culture. VALLOUREC
They are operators, supervisors, engineers, researchers, sales people, buyers, in-house lawyers... their know-how is the Group’s best asset, their commitment is the guarantee of excellence and sustainable satisfaction of its customers. It is Vallourec employees who make the difference.
The Vallourec Group has grown through A culture shared Opinion: one year after mergers and acquisitions of companies throughout the world the major survey around the world. Yet, all Vallourec Vallourec has always fostered an Launched in 2013 with almost all Vallourec employees, whether in Houston, Belo entrepreneurial culture, with employees employees worldwide, the Opinion survey Horizonte, Düsseldorf or Aulnoye- feeling involved and proud of their indicated the levels of engagement: Aymeries, share a common culture, expertise. In recent decades, the Group 80% of employees responded, a rare marked by a spirit of engineering, has evolved, becoming more international score for this type of survey, with 76% nourished by a passion for tubes, and professional. Processes have been of respondents expressing a positive driven by a desire to invent, living implemented for operations, managers opinion. Two strong expectations the imperative for safety. in the field are focused on operational emerged: strengthening synergies excellence and the Vallourec spirit between teams and better recognition continues. of performance. In 2014, the Group Visitors to Vallourec plants who meet worked to respond, with the development with the team are struck by the simplicity of action plans by each site. The Group of relationships. They are both direct defines the framework for building 514,000 – close management erases barriers – commitment and motivation, which hours of training and careful – respect for the individual is built on eight HR standards applicable is a core value. Decisions are guided by throughout the world, and provides a the general interest. All of this contributes support methodology. The HR standards, 95% to employees’ attachment to the integrated as part of the industrial of executives have received company, their pride in belonging and an excellence program, help drive the a performance review ability to adapt, acquired over the years. progress of employees and the company.
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At Vallourec, we build careers Talented women at Vallourec The Human Resources department works Women make up 11% of Vallourec’s closely with the divisions to adjust needs overall workforce and 21% of its and develop potential. The people managers. Although close to the 25% review, a snapshot of the population average for engineering schools and of 3,800 Vallourec managers, enables scientific universities, this ratio is not talent to be identified and leveraged sufficient for Vallourec. The Group is by providing new challenges. Any vacant taking steps to reverse this trend in order position is offered first to this pool to fully leverage this important pool of employees via the Talent 360 platform, of talent. allowing them to seize opportunities The Gender Diversity committee is guiding for development. this approach toward greater balance. The Group recruits most of its employees A network of Vallourec women managers from engineering schools and universities, has been set up to foster this trend with employees acting as “ambassadors” throughout the Group. The latest initiative on behalf of Vallourec with future is the mentoring of high-potential women graduates. Training at Vallourec University, managers by Vallourec senior executives internal mobility and expatriation are all in order to further develop female talent. means for leveraging the pool of skills. Vallourec University is open to all and offers degree programs for non- executives and apprentices. Specific to Vallourec is its Experts program, which identifies and builds loyalty among employees with specialized knowledge in Vallourec’s key professions such as metallurgy and rolling. The body, strategic for Vallourec, is growing, bringing together 317 experts as of the end of 2014.
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SAFETY: PRIORITY FOR ONE AND ALL
Safety is part of a responsible industrial approach and at Vallourec, it involves everyone. Rooted in the Group’s culture and human experience, safety is also a driver of excellence. For the Group, but also for its customers.
<1 LTIR goal for 2018
All visitors entering a Vallourec site are immediately invited to consider the 96% potential risks to which they may be of accidents have a component related to behavior exposed and receive a series of simple instructions before proceeding on their guided visit, outfitted with personal protective equipment (PPE). Dots trace 1/5 the path, protective barriers prevent All managers have safety as one of their five annual objectives access to machines and posters provide reminders on the value of a life: “A parent cannot be replaced.”
A key to manufacturing excellence Safety is the top priority and the first point of Vallourec’s industrial excellence program. Management believes those who pay attention to danger pay attention to everything and that safety is a driver of excellence. This determination has paid dividends. In the field, safety is the priority of each and every person, in every gesture and every day. Through actions and campaigns, Vallourec teams have made the journey from simple compliance to awareness of the safety of others. Having achieved this level of safety maturity, Vallourec continues to make progress toward the ultimate goal of zero accident.
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Considerable progress, Mobilization continues 2014 safety success but safety can never be 96% of accidents are due to behavior. The Group has greatly improved taken for granted The Group is redeploying the “12 golden communication about “near misses,” In 2008, Vallourec launched its rules,” which are a non-negotiable which are now reported and shared comprehensive program of continuous common base. throughout the management line and improvement in safety, in response to These safety instructions cover all areas between plants to allows risks to be deteriorating safety indicators in 2007. of personal protection, including anticipated and prevented. Six years later, all Vallourec employees the use of PPE, the proper use of hand Vallourec teams focus on the number worldwide share a common vision of tools and use of protected passages of days without an accident, a collective safety reflected in the results. The LTIR(1), when moving about. Lessons learned success which involves everyone the frequency rate of accidents with from accidents have caused the Group and which is celebrated. In 2014, lost time and the industry benchmark, to refocus on basic safety rules. It starts Aulnoye-Aymeries celebrated 250 days dropped from 9.2 in 2008 to 1.3 in 2014, with locking and logging equipment without an accident by holding surpassing the objective of 2. TRIR(2), before any human intervention a luncheon for everyone at the site. which counts all accidents with and rules of handling loads at height, Vallourec Mexico passed the four-year and without lost time, also fell over for which the risk of serious accident mark without an accident, a new record the same period, from 31 to 4.2, is among the highest. Other areas celebrated by the entire team. compared to an objective of 5. include procedures in confined spaces Despite this progress and despite and falls from heights, for which (1) LTIR: lost-time injury rate (number of accidents with lost the need for enhanced diligence time per million hours worked) all efforts, the Group unfortunately (2) TRIR: total recordable injury rate, with and without lost experienced two fatal accidents among has been reinforced. time (total number of accidents per million hours worked) its employees in 2014 in Brazil and Beyond behaviors, the Group is working Abu Dhabi. In response, it has focused on physical protection on manufacturing its actions on unlikely, but potentially lines and while working with or around very serious events and is deploying machinery, to keep operators at a safe specific rules and techniques, as well distance from danger, on the continuous Safety Day as dedicated training. Anticipating upgrading of equipment and on improved across Vallourec the worst is the best way of avoiding ergonomics. accidents: it is a cultural shift that illustrates Vallourec’s resolve to eradicate Exemplary management the risk of fatal accidents. The sharing of the responsibilities by each level of management and the involvement of local managers underline the importance of the topic and help crystallize attention. The quarter-hour weekly safety sessions with the team keep attention focused on the subject. Analysis and quantification June 19, 2014 was prestigious 2014 of risks by position has enabled indicators a day dedicated to Vallourec Safety to be identified for monitoring them safety. Teams at Award to the over time. Safety visits also contribute all Vallourec sites Mexican plant to improve results with each operator worldwide with the best visited and observed at their post twice exchanged performance in the a year by a manager who looks for ways experiences and Group: four years to reduce risks. In 2014, more than best practices, without a lost-time 32,000 such safety visits were carried participated in accident. out across the Group. workshops on risk Employees participated in 350 safety awareness, both at continuous improvement teams in 2014, work and at home, including on three subjects common and witnessed the to all plants: working “hands free” awarding of the (50% of accidents involve hands), reporting all health and safety information and continuous updating of risk assessments.
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VALLOUREC WOMEN They are operators, researchers or top managers around the world. They share the same passion NEETA RAJESH and demonstrate each day the future of women Inside Sales Manager at Vallourec. at Vallourec Drilling Products Middle East, Jebel Ali, United Arab Emirates
hen Vallourec arrived in the region in 2008, Neeta applied for a sales W assistant position. Two years later, the company acquired two plants in Jebel Ali and Abu Dhabi and Neeta was promoted to Inside Sales Manager. Today, she leads - a four-member team responsible for designing the commercial offers and supervises the entire “Women think about order processing, through final delivery. “Customers in the Middle East are extremely sustainability, their vision demanding. Our maxim is customer satisfaction so we have to be very proactive.” Since 2012, is guided by overall she has also been in charge of ensuring empathy.” excellence in the management of a major contract with National Drilling Company, F1, Orange, Club Med, by overall empathy.” Stéphanie the biggest customer of Vallourec Drilling Vallourec. After an supports the advancement Products in the Middle East. “The tube industry T accomplished career as an of women at Vallourec with is still very male-dominated, but Vallourec offers attorney and women’s advocate, an action plan to attract young women attractive career paths and opportunities Stéphanie joined the masculine female engineers and a project to take on more responsibility. I trust world of steel in February 2014, for the mentoring of women the company to allow me to go further.” determined to contribute to the by top managers to help evolution of women in the industry. Vallourec’s home-grown female Throughout her career, she has talent emerge. She believes seen legal departments feminized “we have a good example and has taken women's issues of a success story at the head to heart and head on, defending of our Supervisory Board,” the right to balance ambition with Vivienne Cox. Convincing and personal life. But what in fact those around her and progressing makes them different? “They are based on facts is her method. engaged, factual and freer in their “I never wanted to make remarks, which is useful in these it an issue,” she concludes, difficult times. Women think about “but it remains a real battle.” sustainability, their vision is guided
STÉPHANIE FOUGOU Group General Counsel, Manager of the “Gender Diversity” Steering Committee, Boulogne-Billancourt, France
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- “The transformation of steel is a fascinating area of research.“
n impeccable French, Thiara explains that she does what she always dreamed of: to search. To learn, invent and see one’s findings applied. I She was hired by Vallourec in 2011 in the Quality and Research Department, to work on cold drawing as an intern. Vallourec saw her potential and supported her throughout her university studies: from the five-month metallurgy induction training program at Aulnoye-Aymeries to the Belo Horizonte Research Center and today at the Rio Competence Center. At 24, Thiara completed her masters with a research project on the application of nanoparticles for steel tube coatings. With 15 women dedicated to research in Brazil, gender is not an issue, says Thiara. Man or woman, the passion is the same. “The transformation of steel is a fascinating area of research. It's impressive how temperature variations are used to change the properties of a material.” A remarkable phenomenon found in all Vallourec pipe mills around the world.
THIARA RODRIGUES Engineer, Vallourec Competence Center, Rio de Janeiro, Brazil
like the hands-on aspect of working the lathe and all the other machines “Iassociated with the threading process,” says Misty enthusiastically. She oversees the thread and alone ensures the entire stage, from setting the threading machine controls on her line to the handling of the impressively sized tubes. Misty already has had a lengthy career in operations. Entering TCA in 2000, she joined Vallourec Star in 2009 when it purchased TCA. Today, she is one of the few women working in this production area. “It’s never been an issue for me,” she says of working in a traditionally male-dominated position. "You just have to pull your own weight and show that you can do the job." The team spirit transcends differences and builds the cohesion on which Vallourec runs. “We have a good team, with good communication,” MISTY FIELDS says Misty. “That’s important in making sure Computer Numeric Control Machinist at Vallourec Star, we produce quality pipe. Everyone is more Muskogee, U.S.A. than willing to help one another out.”
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OUR GOVERNANCE
Vallourec’s governance is composed of a Supervisory Board and a Management Board. The Management Board provides management direction, while the Supervisory Board oversees this direction as the representative body of the shareholders. The GMC (Group Management Committee) implements the strategy defined by the Management Board.
MANAGEMENT BOARD
PHILIPPE CROUZET JEAN-PIERRE MICHEL OLIVIER MALLET Chairman of the Management Board Chief Operating Officer Chief Financial Officer and General Counsel
Chairman Members SUPERVISORY VIVIENNE COX CÉDRIC DE BAILLIENCOURT Director of BG Group Plc CFO of the Bolloré Group BOARD and Pearson Plc Composition on March 31, 2015 OLIVIER BAZIL Vice Chairman Director of Legrand, Michelin, Firmenich PATRICK BOISSIER International and Château Palmer Chairman of the Construction and Naval Activities Industry Group (GICAN) PASCALE CHARGRASSE Business Development Manager at Valinox Nucléaire, representing employee shareholders
JEAN-FRANÇOIS CIRELLI Member of the Supervisory Board of Vallourec
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GROUP MANAGEMENT COMMITTEE
STÉPHANIE FOUGOU FRANÇOIS CURIE NICOLAS DE COIGNAC Group General Counsel Group Vice President Human Resources Senior Vice President North America
PHILIPPE CARLIER DIDIER HORNET ALEXANDRE LYRA Senior Vice President Europe Senior Vice President Eastern Hemisphere Senior Vice President South America
MICHEL DE FABIANI HENRI POUPART-LAFARGE Non-voting Board member Director of BP France and Valéo, Executive Vice President of Alstom FRANÇOIS HENROT Member of the Supervisory Board of Valco and President of Alstom's Transport sector Chairman of Investment Banking Activities, Rothschild Group JOSÉ CARLOS GRUBISICH PIERRE PRINGUET(1) Chairman of Eldorado Brasil Celulose SA, Vice Chairman of the Board of Directors Director of Halliburton of Pernod Ricard, Director of Iliad, Avril (1) At its February 23, 2015 meeting, Vallourec’s Supervisory Board coopted Mr. Pierre Pringuet ANNE-MARIE IDRAC and Cap Gemini and Chairman of AFEP as a member of the Supervisory Board, replacing Director of Saint-Gobain, Bouygues Mr. Edward G. Krubasik, who resigned. The ratification ALEXANDRA SCHAAPVELD of his appointment will be proposed at the Shareholders' and Total Member of the Supervisory Board Meeting on May 28, 2015. of Holland Casino, Bumi Armada Berhad and Société Générale Vallourec.com
Activity report 43 WorldReginfo - acd21f38-96c9-4d60-9799-3e388e20877c SHAREHOLDERS SHAREHOLDERS
CLOSER TO OUR SHAREHOLDERS
The Group’s priority is to maintain relationships based on trust with all shareholders, whether individual or institutional, French or foreign.
This relationship is the result of sustained Sharing information communication, constructive dialogue and direct Vallourec meetings with individual shareholders in 2014 contacts managed by the Investor Relations and included participating in panel discussions in Lyon Financial Communication team. in June and in Paris in December along with members of the oil services sector. Several hundred shareholders For the latest news participated to discuss the future of the sector, deepen The Group publishes a number of financial their knowledge of the Group and engage in dialogue communications such as press releases on the Group’s with the Vallourec team. results and businesses, Shareholder Letters and the Shareholder’s guide. Available on the Group’s website Relations with institutional investors and financial (www.vallourec.com), they are sent electronically to Club analysts in 2014 included nearly 350 meetings and members and by a simple registration process. To enable conference calls by the Group’s Management and its shareholders and financial analysts to follow the Group Investor Relations team. Almost 50 days were dedicated news in real time, Vallourec is present on Twitter, to roadshows and conferences in global financial centers, Facebook and LinkedIn. particularly in Europe and the United States, addressing challenges in the oil sector.
SHAREHOLDING STRUCTURE VALLOUREC AT DECEMBER 31, 2014 SHARE DATA 82.05% Public Listed on Euronext Paris Eurolist (compartment A) 7.61% Group employees Admitted to the Deferred Settlement Service 7.47% ISIN share code: FR0000120354 (ticker: VK) 7.61% CDC Group of Vallourec‘s share 1.51% ISIN ADR share code: US 92023R2094 (ticker: VLOWY) capital is held by Group Nippon Steel & employees Sumitomo Metal Corporation Indices: Euronext 100, SBF 120, Euronext Vigeo France 20, 1.36% Euronext Vigeo Europe 120 and Euronext Vigeo Eurozone 120. Treasury shares Market capitalization at March 31, 2015: €3 billion.
Vallourec in 2014 44 WorldReginfo - acd21f38-96c9-4d60-9799-3e388e20877c SHAREHOLDERS
Members of the Vallourec Shareholders Club are invited to discussion sessions with a team dedicated to Club members.
A new hotline New: Vallourec A toll-free number (0 800 505 110, from landlines in Shareholders Club France) provides shareholders with simplified access to information such as the financial calendar and the ability The loyalty of to any adult understand to listen to commentary on the latest results and be put individual individual holding Vallourec while in touch with the Investor Relations and Financial shareholders is at least one enabling the Group Communication team or the registered shares securities essential for registered share or to better management service. Vallourec. To 100 bearer shares. understand reinforce the bonds A program of shareholder Employee share ownership: of trust and regular meetings expectations. 7th operation, same participation proximity, the and discussions In 2014, nearly 15,000 employees in 13 countries were Group decided to helps shareholders invited to subscribe to the seventh employee share offer create a Club, open to better launched by the Group. Their massive participation resulted in 7.61% of company shares held by employees at December 31, 2014, confirming employees’ commitment to the company and their confidence in its Meetings with nearly 350 future. funds and institutional investors were held at 14 financial centers Vallourec.com
DIVIDEND MAINTAINED EARNINGS PER SHARE DIVIDEND DISTRIBUTION AND DIVIDEND IN € KEY DATES Vallourec’s dividend policy, approved by the Supervisory Board, targets the distribution 2012 2013 2014 June 3, 2015: Record date of an average of 33% of consolidated net income, (1) June 4, 2015: Share quoted ex-dividend Group share over the long term. With the cash Earnings per share €1.8 €2.1 €1.9 flow generated in 2014, despite lower results, June 4-17, 2015: Option period: shareholders €0.69 €0.81 €0.81 Vallourec will propose at the May 28, 2015 Dividend per share elect to receive the dividend in cash or shares General Shareholders’ Meeting that the dividend and return the instructions to their financial (2) 39.7% 39.6% 44.3% paid for 2014 be maintained at the same level Payout ratio institution. of the previous year, €0.81 per share. This dividend corresponds to a payout ratio of 44.3% (1) Adjusted earnings per share (excluding impairment impacts). From June 25, 2015: Dividend payment Earnings per share including impairment impacts were – €7.3 in 2014. of consolidated net income, Group share. (2) The payout ratio is calculated based on the total number of shares outstanding at December 31.
Activity report 45 WorldReginfo - acd21f38-96c9-4d60-9799-3e388e20877c INDICATORS
SALES VOLUMES IN KT
FINANCIAL 2,323 2,092 2,159
The 7.6% increase in volumes RESULTS was partly offset by a negative price and product mix effect (–3.7%) and a negative translation effect (–1.7%).
Despite an oil and gas environment that 20 20 20 12 13 14 deteriorated sharply in the second half, Vallourec demonstrated financial resilience in 2014. The Group benefited primarily from the growth EBITDA AND EBITDA MARGIN of the Oil & Gas activity in the USA, supported by IN € MILLION AND AS A % OF SALES the successful ramp up of its new American mill. 920 855 788* 16.5% 15.0%
14.8%* EBITDA stood at €855 million, down 7.1% compared with 2013.
20 20 20 12 13 14
ENSURE THE SAFETY AND PROTECT THE HEALTH RESPONSIBLE OF OUR EMPLOYEES PERFORMANCE TARGETS 86%
The decrease in the accident frequency rate with and without lost time (TRIR) and with lost time (LTIR) between 2008 and 2014.
As a leader of its industry, Vallourec must set In 2014, the Group again exceeded its targets. The TRIR was 4.2 compared to a target of 5. the standard for corporate social responsibility. The LTIR dropped to 1.3 and the severity rate The Group has made a commitment of accidents to 0.06. Despite these efforts, 2014 was marked unfortunately by two fatal to all of its stakeholders to make a difference. accidents. More than ever, the Group is mobilized to improve safety. 2015 Objective: reduce TRIR to 4.
Vallourec in 2014 46 WorldReginfo - acd21f38-96c9-4d60-9799-3e388e20877c INDICATORS
SALES SALES BY MARKET IN 2014 IN € MILLION IN %
5,578 5,701 5,326 66.6% Oil & Gas In 2014, Oil & Gas sales rose by 3.5% 5.1% Petrochemicals compared with 2013, reaching a record of €3,796 million, to represent today 66.6% Group sales increased by 2.2% 10.7% of total Group sales, compared with 65.8% (+3.9% at constant exchange Power generation in 2013. The Power Generation activity rates), driven mainly by Oil & Gas 7.8% Mechanical engineering recorded an increase of 6.6% in 2014. and Power Generation. 3.3% The Petrochemicals and Industry & Other Automotive activities declined respectively by 6.5% 6.5% 20 20 20 and 2.1% compared with 2013. 12 13 14 Construction & Other
NET INCOME, GROUP SHARE SALES BY REGION IN 2014 IN € MILLION IN %
221* 262 239** Net income, Group share (924) 16.1% The share of sales generated in North America was a loss of €924 million. South America rose from 26.2% in 2013 to 30.6% in 2014. Adjusted net income, Group 30.6% This increase was made possible by higher 20 20 20 North America 12 13 14 share (excluding impairment volumes in the United States. The share of Adjusted impacts) amounted to €239 25.2% Asia and the Middle East sales generated in South America was down million, a decrease of 8.8% 19.1% 5 points, mainly due to Petrobras’ decision to compared with 2013. Europe eliminate most of its tube inventories. Sales in 20 9.0% the Middle East benefited from an exceptional 14 Rest of the world backlog generated in 2013.
* Figures have been restated with the impact of the change in method of accounting for actuarial gains and losses on post-employment benefits (revised standard IAS 19). ** Excluding impairment impacts (as part of its annual impairment review, Vallourec reassessed the carrying value of its global asset base and recorded an impairment of assets amounting to €1,104 million. See Registration Document filed with the AMF on April 10, 2015, No. D.15-035, Chapter 6, Notes 2.3 and 28 to the consolidated financial statements).
ESTABLISH A NETWORK TRAIN AND MOTIVATE OF RELIABLE AND RESPONSIBLE SATISFY OUR SHAREHOLDERS OUR EMPLOYEES SUPPLIERS OVER THE LONG TERM
76% 576 B+
The portion of employees worldwide The number of suppliers involved The average rating of Vallourec satisfied to be part of Vallourec, according in Vallourec’s social and environmental by four major non-financial rating agencies, to the 2013 “Opinion” survey. responsibility evaluation, meeting the Group’s objective for 2014. an increase of 261 over 2013. In 2014, action plans were developed and As at December 1, 2014, Vallourec was included deployed locally to respond to expectations 2015 Objective: involve 750 suppliers in the Euronext Vigeo France 20, Euronext Vigeo expressed in the survey. in the process, an increase of 174. Europe 120 and Euronext Vigeo Eurozone 120. The next satisfaction survey should take 2015 Objective: obtain an A– in the surveys place in 2016. expected during 2015.
Activity report 47 WorldReginfo - acd21f38-96c9-4d60-9799-3e388e20877c CAPITAL EXPENDITURE To learn more, IN € MILLION the 2014 Registration 803 Document, including Capital expenditure was 567 the annual financial €388 million in 2014, down 388 31.6% compared with 2013, report, is available. 2013 being the year when the new tube mill in Youngstown, USA started production.
20 20 20 12 13 14
NET DEBT IN € MILLION
1,614 1,631 1,547 As at December 31, 2014, the Group’s net debt amounted Vallourec.com to €1,547 million, a decrease of €84 million compared with the end of 2013, representing a gearing ratio of 37.1%.
20 20 20 12 13 14
IMPROVE THE ENERGY EFFICIENCY OF OUR EQUIPMENT, RESPECT OUR ENVIRONMENT REDUCE CARBON EMISSIONS AND PROTECT BIODIVERSITY OTHER 2014 INDICATORS
21% 514,000 of women managers hours of professional 15% 94% training
Improvement in Vallourec’s energy performance The portion of the Group’s waste recycled €6.6 million between 2008 and 2014. in 2014, meeting the objective set spent on actions to benefit local (excluding Vallourec & Sumitomo Tubos do communities At Group level, except Vallourec & Sumitomo Brasil and the new pipe mill in Youngstown). Tubos do Brasil and the new pipe mill ramping up in Youngstown, energy consumption reached 2015 Objective: 94.5% of waste recycled 968 kWh/metric ton processed compared on a scope extended to all Group plants. to an objective of 954 kWh/metric ton processed. 55% 94% A ratio weighed on by lower production levels of steel produced of production and investments in energy performance. from recycled scrap from ISO 14001 2015 Objective: 1,070 kWh/metric ton certified sites processed on a scope extended to all Group plants.
Vallourec in 2014 48 WorldReginfo - acd21f38-96c9-4d60-9799-3e388e20877c FOR MORE INFORMATION ON VALLOUREC
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Published by the Vallourec Corporate Communications Department. Design and production: . English version: ALTO International. Photo credits: Boris Bertram – Franck Dunouau – Philippe Dureuil – Eric Flogny/Picture Tank – Thiago Fernandes – Gyro Photography/amanaimages/Corbis – Howest/Ivan Varyukhin/Landbysea/Getty Images – Bruno Lavorato – Stéphane Remael/La Company – Ewen Weatherspoon – Vallourec photo library. All rights reserved. This document was printed on Condat coated, PEFC certified paper. WorldReginfo - acd21f38-96c9-4d60-9799-3e388e20877c REGISTERED OFFICE 27, avenue du Général Leclerc 92100 Boulogne-Billancourt, France 552 142 200 RCS Nanterre
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A French limited liability company (société anonyme) with Management and Supervisory Boards and issued capital of €261,195, 950 WorldReginfo - acd21f38-96c9-4d60-9799-3e388e20877c