Vallourec Sales Plummet During First Quarter
YOUNGSTOWN, Ohio – Vallourec, the Paris-based parent of Vallourec Star reports sales declined 17.2% during the first quarter of 2015 compared to the same period last year, blaming lower oil prices and reduced capital expenditures from its customers.
“Vallourec is currently facing very difficult market conditions, characterized by major exploration and production capital expenditure cuts by our customers,” said Phillipe Crouzet, chairman of Vallorec’s management board. “Q1 2015 was severely affected by a drop in high margin oil and gas sales in the EAMEA [Europe, Africa, Middle East, Asia] region, along with a challenging macroeconomic environment in Brazil and depressed iron ore prices. Following the decline in demand, price pressure in the market has intensified for new orders, particularly in North America and for less differentiated products in the EAMEA region.”
Vallourec said sales stood at $1.175 billion (U.S.) versus $1.419 billion in sales a year ago.
Business was especially impacted in the United States, the company said. Vallourec Star manufactures oil country tubular goods, or OCTG, pipe from its mill here that mostly supplies the U.S. market.
The company’s pipe is used for drill pipe and well casings. The rig count, that is, the number of rigs actively operating in the United States at any given time, declined by 43% during the quarter.
Vallourec reported that sales were down year-over-year in the United States in terms of U.S. dollars but were up in terms of Euros. However, sales were “significantly impacted” compared to the fourth quarter of 2014.
In late 2013, the company opened its new $1 billion pipe mill i just of Martin Luther King Boulvard, and an affiliated company VAM USA, is developing a pipe threading operation near the site.
The company says the decline in demand for OCTG pipe is likely to impact sales throughout the year.
“In the USA, OCTG sales are expected to strongly decline due to the very low levels of orders and the increasing price pressure resulting from reduced end-users consumption together with destocking from distributors,” the company said.
The company announced that it would reduce its worldwide workforce of 23,000 by 2,000 employees. Three quarters of these employees are based in Europe, the company reported.
Pictured: Vallourec’s Youngstown pipe mill.
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