PARIS--French steel-pipe maker Vallourec SA (VK.FR) Tuesday said
it will cut jobs and reduce investment in 2015 because its oil and
gas companies are likely to cut back on orders following the recent
collapse in oil prices.
Vallourec expects to be hit heavily by falling demand from oil
companies in the U.S., the Middle East and Brazil, which are likely
to cut back on oil drilling in reaction to lower oil prices.
Additionally, they are likely to use pipes they have stockpiled
instead of buying new ones.
The environment for its other businesses--such as steel pipes
for power plants--will remain challenging this year, the company
said.
To keep free cash flow positive in 2015, Vallourec plans to cut
7% of its payroll at its factories around the world, equivalent to
about 1,400 jobs, as part of cost-cutting plan valued at some 350
million euros ($396 million). The company will also reduce capital
investment to EUR350 million down from a previous target of EUR450
million.
Vallourec announced the cost-cutting plan after swinging to a
EUR1.09 billion net loss in the fourth quarter from a EUR85 million
net profit the year earlier. The company attributed the loss to a
EUR1.1 billion write-down on the value of its assets in Brazil and
in Europe as the company expects returns on those assets to be much
lower on account of lower oil prices.
The company posted a EUR924 million net loss for the full year
compared with a net profit of EUR262 million.
In the fourth quarter, Vallourec's sales rose 3.5% to EUR1.67
billion from EUR1.61 billion. Sales for the full year gained 2.2%
to EUR5.7 billion, beating market expectations. Analysts polled by
FactSet expected sales of EUR1.49 billion in the fourth quarter and
EUR5.50 billion for the full year.
Separately, Vallourec said Pierre Pringuet, beverage maker
Pernod Ricard's (RI.FR) deputy chairman, was appointed member of
the supervisory board.
Write to Inti Landauro at inti.landauro@wsj.com
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