Vallourec warns on profit as Petrobras cuts pipe stocks

PARIS, June 10 Tue Jun 10, 2014 11:49am EDT

PARIS, June 10 (Reuters) - Steel pipes maker Vallourec warned core profit would be 10 percent lower in 2014 compared with 2013's 920 million euros ($1.25 billion) as customers - mainly Brazilian state oil company Petrobras - run down inventories to save money.

Petrobras alone will account for some 60 million euros of the slide in earnings before interest, tax, depreciation and amortisation (EBITDA), which Chairman Philippe Crouzet on Tuesday told reporters would amount to between 80 and 90 million in total.

Crouzet said it would take Petrobras until about the end of the year to run its pipe inventories down to nothing. He said Petrobras was still committed to all high-value deepwater oil projects, and so the impact of the inventory run-down would be a "one-off" for Vallourec.

The French company said that throughout Europe, Asia the Middle East and Africa, the level of orders had also fallen as other exploration and production companies adjusted their inventories and delayed some tenders for premium products.

"This will impact deliveries through the end of the year and in the first half of 2015," Vallourec said.

To mitigate the impact of both factors, Vallourec said in a statement it would cut capital spending for this year by some 100 million euros from an initially planned 500 million.

"The group is facing a more challenging environment mainly due to temporary adjustments by selected large customers, and has taken immediate measures to adjust to this new situation," Crouzet said in a statement.

"Management remains convinced of the long-term attractiveness of the global oil and gas end markets the group serves." ($1 = 0.7345 Euros) (Reporting by Andrew Callus; Editing by James Regan)