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By Benjamin Mallet
PARIS May 7 French pipes and tubes maker
Vallourec is to step up cost saving measures as its
profits are hurt by the strong euro currency and a slowdown in
orders from the Middle East energy sector, still the main driver
of demand growth.
Vallourec, whose products are supplied mainly to the oil and
gas industry, said net profit in the three months to March grew
60 percent from a year earlier to 56 million euros ($78
million), higher than a 44 million euro company-supplied
consensus of analysts expectations, but down from 85 million in
the fourth quarter.
Sales volume growth in the quarter of 13.3 percent
outweighed a 1.6 percent negative price and product mix effect
and a 6.9 percent negative currency impact as the euro - the
base currency for its costs - strengthened against the Brazilian
real and the U.S. dollar - in which much of its revenue is
The company said it was nevertheless still targeting stable
to moderate increase in sales and core earnings and positive
free cash flow generation this year.
Where Middle East orders were concerned, "it seems that some
clients in the region have a level of stocks that is getting
high, and that this is leading to a slowdown in orders and a
less favourable mix of orders since the end of the first
quarter," said Finance Director Olivier Mallet on a telephone
"The Middle East nevertheless remains the most dynamic in
the EAMEA (Europe, Asia, Middle East & Africa) zone and still
supports our long term growth perspectives," he said.
Mallet noted strong demand in particular from Saudi Arabia,
which he said planned to raise the number of exploration rigs in
action to 200 by the end of 2014 from 170 at the moment.
(Additional reporting and writing by Andrew Callus; editing by