Loss-making French oil industry tubing maker Vallourec plans to raise 1 billion euros ($1.1 billion) in new capital and cut its production capacity in Europe by half, it announced on Feb. 1, in an overhaul backed by key shareholders.
The restructuring announced on Feb. 1 includes the closure of two rolling mills in France, one threading line in Germany and a heat treatment line in Scotland, leading to the loss of about 1,000 jobs on top of previously announced cuts.
Vallourec, whose steel pipes are used chiefly in the oil and gas industry, has been hit hard by plunging oil prices that have led customers to rein in investments.
"Our plan significantly adjusts our industrial footprint in Europe to address overcapacity and focus on highly specialised activities in France and Germany," Vallourec head Philippe Crouzet said, adding that it would not pay a dividend on 2015 results.
Crouzet told a conference call that about 500 jobs would be affected in France, but that no sites would be closed entirely.
In Brazil and China, Vallourec said it planned to create improved production hubs by merging Vallourec & Sumitomo Tubos do Brasil and Vallourec Tubos do Brasil and acquiring Tianda Oil Pipe in China.
The changes in Brazil would lead to the closure of two blast furnaces and one steel mill over 2016-2018, concentrating all steel production at the Jeceaba facility.
The restructuring is intended to generate around 750 million euros in additional earnings before interest, tax, depreciation and amortisation (EBITDA) by 2020, thanks to measures implemented by end-2017, Vallourec said.
The company reported EBITDA of 855 million euros and a net loss of 924 million euros in 2014, while for 2015 analysts on average expect it to report next month a loss at the EBITDA level of 100 million euros and a net loss of 592 million euros, according to Thomson Reuters data.
The capital increase is supported by French state bank BPI France and Japan's Nippon Steel & Sumitomo Metal Corp, big shareholders which would subscribe to a reserved equity instrument, in the form of a convertible bond, priced at 11 euros per share through which they would increase their stakes to 15 percent each.
Vallourec said the capital increase would be split between the reserved equity instrument and a rights issue, giving a midpoint of 490 million euros for the former, and 510 million for the latter.
Shareholders will vote on the capital hike on April 6 with a view to completing the process in the second quarter, subject to market conditions, Vallourec said.
Vallourec's supervisory board also said that it had decided to renew the mandates of the three members of the management board, including Crouzet, for a further four years from March. ($1 = 0.9237 euros)
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