By Scott Kanowsky
Investing.com -- French steel tubemaker Vallourec (EPA:VLLP) reported weaker-than-expected third quarter core income, as strong pricing and volumes at its oil and gas business in North America were partly offset by lower iron ore mining activity.
Earnings before interest, tax, depreciation, and amortization for the three-month period ended on September 30 increased by 55% year-on-year to €198 million (€1 = $1.0239). Analysts polled by Bloomberg had predicted the figure would rise to €232.2M.
"Our tube business continues to improve quarter after quarter driven by a favorable environment due to a worldwide focus on energy security," said chief executive officer Philippe Guillemot in a statement.
"Q3 results are positively impacted by the new Company-wide pricing strategies implemented since Q2 and strong volume dynamics related to new or existing contracts."
He added that progress was being made in its effort to restore normal operations at its Pau Branco iron ore mine in Brazil, which has been slowly restarting following a temporary shutdown in January due to damage caused by flooding.
But this decreased level of iron ore mining in South America hit its industrial unit, with third quarter revenues at the division slipping by 0.5% to €346M.
Higher energy costs also weighed on its sites in Germany, which Vallourec is aiming to close as part of a broader overhaul of the structure of the company.
Meanwhile, free cash flow was negative at -€81M, although it did improve compared to the mark registered in the third quarter of 2021.
Paris-listed shares in Vallourec slumped in morning trading on Monday.
However, the company confirmed its full-year target for core profit of between €650M and €750M. Free cash flow is expected to be positive in the second half as well, thanks to projections for solid fourth quarter returns.