Investing.com -- S&P Global Ratings has affirmed its credit ratings for Vallourec (EPA:VLLP), a leading provider of seamless tubes and specialized high-value products, while upgrading the company’s outlook to positive. The ’BB+’ long-term issuer credit rating and ’B’ short-term issuer credit rating were maintained, along with the ’BB+’ issue rating on Vallourec’s senior unsecured notes.
The revised outlook reflects the resilience of Vallourec’s business model as its multi-year transformation plan concludes. S&P Global Ratings noted the company’s business prospects remain robust, with margins steadily improving above 20%. These improvements are largely due to an increasing share of higher-valued specialized products and a more flexible cost structure.
Despite macroeconomic uncertainties, Vallourec is expected to post an S&P Global Ratings-adjusted EBITDA above €800 million in 2025 and 2026. The company’s balance sheet has also strengthened, with a reported zero net debt position.
The outlook change is largely driven by Vallourec’s business becoming more robust and immune to downturns due to improved margins and a flexible cost structure. The company’s EBITDA margin reached 21% in 2024, demonstrating its ability to maintain margins even in less favorable environments.
Vallourec’s solid position in the premium oil country tubular goods (OCTG) global market supports the 2025-2026 EBITDA predictions. The company’s activities are well diversified across the globe, with tubes EBITDA being roughly equally split across North America, South America, and the rest of the World in 2024.
The company achieved its net debt zero target ahead of schedule earlier in 2025, thanks to favorable working capital dynamics and sizable divestments, including the sale of the Dusseldorf-Rath site in Germany for €155 million. This achievement allows the company to start distributing dividends in 2025, in line with its financial policies.
S&P Global Ratings expects Vallourec’s reported EBITDA to be €800 million-€900 million in 2025, with free operating cash flow of more than €400 million. The S&P Global Ratings-adjusted debt to EBITDA (gross, excluding all cash) is expected to be below 1.5x, which aligns with the ’BB+’ rating.
The positive outlook reflects the development of a cash generative, cycle-proof business model, with a one in three chance of an upgrade in the coming 12 months if the company continues to strengthen its business profile. However, the outlook could be changed to stable if demand or price for the company’s product fell substantially, or if the company deviated from its financial policy following a material merger, acquisition, or change in ownership.
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