Vallourec to Cut Jobs, Investment on Low Oil-Price Squeeze

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 [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires