Vallourec Confirms 2013 Targets, Warns on Weak Brazilian Real

By Inti Landauro

PARIS--French steel pipe maker Vallourec (VK.FR) reiterated its targets for this year but warned the weak Brazilian real and the slowdown of drilling in the South American country may jeopardize its goals.

In a statement released late Thursday, Vallourec's Chief Executive Philippe Crouzet said the company still targets higher sales this year and an improvement of its earnings before interest, depreciation and amortization margin. "The recent weakness of the Brazilian real against other currencies and the temporary reduction of demand for new wells in Brazil will slightly dampen this improvement," he said.

The company still expects its pipes for the oil and gas industry to keep driving its growth for the foreseeable future, boosted by demand from shale gas extraction, as well as other non-conventional sources of hydrocarbons in areas such as Brazil where the Vallourec pipes have a competitive advantage.

In the short term, though, Brazil's weak currency has pushed the state-controlled company Petroleo Brasileiro SA (PBR) over the past months to slow its exploration activity, which means fewer exploration wells. This market trend in Brazil is expected to last between the fourth quarter of this year and the first half of next year.

Vallourec doesn't see its other businesses improving in the coming months, with the exception of the Brazilian automotive market.

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