Vallourec SA

PAR:VK

Earnings Call Transcript

[Operator]

Hello, and welcome to the Vallourec Q2 2020 Results Call. My name is Dan, and I will be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions]I will now hand you over to your host, Jerome Friboulet, to begin today's conference.

[Jerome Friboulet, Director of Investor Relations]

Thank you for joining us for Vallourec's Q2 and H1 2020 Results presentation. I am Jerome Friboulet, Head of Investor Relations. With me today to comment the result, we have Edouard Guinotte, Chairman of the Management Board; Olivier Mallet, member of the Management Board and Chief Financial Officer. It is also audio webcasted on our Investor Relations website, and the presentation slides are available for download. Before I hand over to Edouard Guinotte, I must warn you that today's conference call will contain forward-looking statements and that future results may differ materially from statements and projections made on today's call. For your convenience, the forward-looking statements and risk factors that could affect those statements are referenced at the beginning of our slide presentation and are included in our universal registration document filed with the French financial market regulator, the AMF, and in our interim financial report. This presentation will be followed by a Q&A session. Now I would like to leave the floor to Edouard Guinotte.

[Edouard Frederic Guinotte, Chairman of the Management Board]

Thank you, Jerome, and good evening, everyone. Thank you for joining us for this presentation of our Q2 and H1 2020 results. Beforehand, I'd like to express my gratitude to all Vallourec teams worldwide for their continued focus, professionalism and collective engagement to adapt and work through this unprecedented crisis. Let's now turn on to the highlights of the quarter. So that's Page 4. First of all, our Q2 activity and results were clearly affected by the unprecedented oil and gas market situation in North America, while on the other hand, other regions did show resilience. Revenue was down 22% year-on-year, mostly due to the activity on the oil and gas sector. EBITDA stood at EUR 43 million, which is down from EUR 102 million in Q2 2019, a decline which is essentially located in North America, while other regions, as I said, showed solid resilience. Worth highlighting as well, the free cash flow, which stood at negative EUR 77 million, down from the positive EUR 16 million in Q2 2019, including higher restructuring charges and financial expenses. Finally, net income came out at minus EUR 493 million, including significant -- due to the significant impact of impairment charges for minus EUR 441 million, of which, EUR 323 million relate to the impairment of our North American goodwill. Of course, all of these impairment charges are entirely noncash. As a result, the net debt stood at EUR 2.3 billion, and the liquidity is still solid at EUR 1.5 billion against EUR 1.78 billion at the end of Q1. In terms of operations, it's worth highlighting, we continue to enjoy, let's say, positive commercial momentum. Our commercial heat ratio was maintained at a high level, and in particular, we are happy to report that our frame-agreement with Petrobras was extended by 2 years until mid-2023, which reaffirms our historical partnership with this very important actor of offshore Brazil, which is one of the most productive offshore area in the world. Also worth highlighting in Q2, large awards we won in Africa and the Middle East, which will pave the way for deliveries in 2021. Still on the operating side, I'm happy to report that our carbon emission targets were deemed to be in compliance with the Paris Agreement Provision, so COP 21, and reviewed and approved by the SBTI, scientific-based target initiative, back in June 2020, and we are the only company in the oil and gas sector to receive this positive evaluation. In terms of outlook for 2020, we can confirm what we told last quarter, and the outlook is twofold: The sharp drop in North American Onshore activity is confirmed, of course; but so are our levels of resilience outside North America, of which, Brazil offshore activity, which will continue to accelerate in H2 as expected. The sustained activity from our very profitable iron ore mine, so it's twofold. The volumes are expected to be slightly higher than last year, while the prices are showing elements of support, which will help our results in H2. And finally, in EA-MEA regions, we will be supported by the strong deliveries of high alloy tubes, which we commented before. On top of these market elements, we will also benefit from extensive cost-cutting programs across the group, which consist in the full adaptation of our variable costs, which, I remind everyone, include the direct labor. And on top of the full adaptation to variable costs, we target, and we confirm the target, of EUR 130 million of savings in 2020, of which we already achieved EUR 51 million in H1. The free cash flow as a result of all of these is targeted to be positive in H2, including as well the significant release in working capital, which seasonally happens in H2. In terms of our refinancing plan, the group announced on February 19 our intention to launch a capital increase of EUR 800 million, combined with a new credit line of EUR 800 million as well. This refinancing operation could not be carried out, considering the market and activity context. So Vallourec continues discussions, in particular with our reference shareholders and banks in order to define a new refinancing plan, taking into account the consequences of the COVID crisis as well as the expectations from our main markets. Moving on to the next slide, where you can see most of our key figures. I would only highlight that, as you can see, the sharp decrease in volume produced, minus 30%, was to a certain extent, offset in the revenue by a positive price/mix effect, which happened mostly in Brazil and in EA-MEA markets. And I will now hand over to Olivier, who is going to review more in detail our financial results.

[Olivier Bruno Benedict Mallet]

Thank you, Edouard. Good evening or good morning, everyone. So on Slide 7, let me give you some more details on our revenue growth by activity and by region. Our revenue for the second quarter reached EUR 843 million, down 17% at same exchange rate. Starting with our largest segment, oil and gas, which -- this represents 61% of our total revenue. This revenue in this segment was down 26% at same exchange rates, reflecting mainly lower revenue in North America and EA-MEA. In North America, the revenue decrease was, of course, driven by lower deliveries first, due to the sharp decrease in rig count as well as to lower prices. In EA-MEA, revenue decrease reflected lower shipments, partially offset by better pricing, related notably to high alloy deliveries. In South America, revenue increased strongly, reflecting a pickup in offshore deliveries as well as a better price/mix despite the unfavorable currency conversion effect. Petrochemicals revenue was up 10% year-on-year, mainly driven by higher sales of line pipes in Middle East, Asia and North America. Industry and other were down 4% at same exchange rates. In Europe, this reflected lower volumes and prices linked to the COVID crisis. In South America, industry revenue was down as well, reflecting lower automotive volumes and unfavorable currency effect, partially offset by higher volumes in mechanical engineering. Still in South America, in Brazil, our iron ore mine revenue increased despite the unfavorable conversion currency effect, reflecting both in the higher outputs plus 18% compared to Q2 '19, and very resilient prices. Finally, power generation revenue was up 10% year-on-year, mainly due to timing of project deliveries. The closure of our German plant in Reisholz dedicated to tubes for conventional power plants will be effective in the second semester of this year. Moving now to Slide 8 with more details on revenue first and then your EBITDA. First is the revenue decrease of 22% year-on-year can be broken into 2 ways. First, broken down to first, a volume impact of minus 30%, mainly driven by oil and gas, a positive price/mix effect of plus 14% and a negative conversion effect of 6% due to the devaluation of the real. The positive price/mix effect came from oil and gas in EA-MEA and Brazil, which did more than offset the lower prices in North America. Moving now to EBITDA. EBITDA, it stood at EUR 43 million, down EUR 59 million year-on-year, reflecting, first, the industrial margin level that it was at EUR 233 million. The decline, reflecting the lower activity in oil and gas in North America, and to a much smaller extent, in industry. So that North America is really where the largest part of the decline of the group results came in from -- in Q2. This was partially offset by savings, the positive contribution of the high alloy deliveries in EA-MEA and in higher mine contribution. Then at the SG&A level, we did continue to cut costs aggressively. They were down 21% compared to a year ago. On the next slide, some comments on the P&L below EBITDA. The operating result was negative at minus EUR 485 million compared to EUR 1 million in Q2 '19 due to impairment charges of EUR 441 million related mainly to the full write-off of the North American goodwill for EUR 223 million. The other big part of these impairment charges, being related to some European fixed assets. It's important to notice that these impairment charges were mainly driven by changes in the discount rates applied to calculate the terminal value, and as well, again, to calculate the terminal value by a revision of the long-term market growth assumptions for oil and gas, North America, given the difficulty to predict them on the very long term. The restructuring provisions were also recorded for EUR 22 million, and were mainly related to the closure of Reisholz in Germany and to restructuring in Brazil. As a consequence, the group net result amounted to a negative EUR 493 million, mostly impacted by the impairment charges and to be compared with minus EUR 77 million in Q2 '19. Let's move, Slide 10 to cash, starting with working capital management. Operating working capital requirements decreased by EUR 20 million in Q2 versus an increase of EUR 4 million in Q2 '19, essentially as a result of the activity decline. Net working capital requirement in days slightly increased to 115 days of sales in Q2, at the end of Q2 compared to 108 days in Q2 '19, reflecting customer mix evolution with the lower part of North America, a smaller part of North America as well as the fact that some inventories are fixed in nature. Let me as well remind you that we typically record a seasonality effect towards the end of the year, with a significant working capital release to be expected in Q4. Moving to Slide 11, on free cash flow. We generated a negative free cash flow of EUR 77 million compared to a positive of EUR 16 million in Q2 of last year. This was mainly driven by the decrease of the cash flow from operating activities, which itself reflects a lower EBITDA as well as higher financial expenses and restructuring cash out. The decrease of operating working capital requirement did partly offset it. And CapEx were slightly higher at EUR 32 million than in Q2 '19, still according to planned projects and of course, in line with our full year envelope of around EUR 160 million. I will conclude this part with the net debt on Slide 12. The group's net financial debt as of June 30 stood at EUR 2.426 billion to be compared with EUR 2.267 billion at the end of March 2020. This increase was mainly driven by the negative free cash flow. The EUR 38 million that you see on the line other asset disposal and other items for H1 reflect currency effects on net debt and the repayment of lease debts under the IFRS 16 new accounting rule. Our liquidity position as of June 30, 2020, was still strong, with cash and cash equivalents of EUR 1. 420 billion and EUR 123 million of undrawn facilities. At the same date, long-term debt amounted to EUR 1.746 billion, short-term to EUR 2 billion, including EUR 80 million of commercial paper and EUR 1.811 billion drawn from the EUR 1.934 billion credited bank facilities, for which, I remind you that EUR 200 million are maturing in July 2020, and EUR 1.324 million in February 2021. The banking covenant ratio was estimated at 124% at the end of June. I remind you, of course, that this covenant is only tested once a year at the end of December, so that this June estimate does not affect our ability to draw down on our committed facilities over H2 2020. And I will not comment again on what Edouard indicated on our refinancing operations, and I will just give him the floor back.

[Edouard Frederic Guinotte, Chairman of the Management Board]

So thank you, Olivier. Let's move on to the outlook for 2020, where in essence, we will rely on our enhanced competitiveness and some areas of resilience towards the end of the year. So let's start with the market context, the oil and gas market context. In essence, our analysis didn't change compared with our preceding call. If anything, the international energy agency has been revising upwards, both the demand contraction, which has been less than anticipated in Q2 and its recovery in upcoming quarters. So as you can see on this, on the graph on the right-hand side, after a massive collapse of demand in Q2, demand is expected to restore at or slightly above 95 million of barrels per day, while at the same time, OPEC and non-OPEC countries adjusted production sharply as well, and the production of the supply is expected to reach 90 million barrels per day, bringing the market undersupplied in Q3 and through H2 2020. So in these severely adverse market conditions, we had to adapt rapidly, which is what I'm going to describe now. On the next slide, I remind everyone that Vallourec went through a very significant transformation plan since 2016. As a result of this plan, our cost base, expressed in euro per tonne, decreased by close to 40% over the past 3 years through savings, capacity rationalization and the deployment of our new routes, which, in turn, allow us to enjoy or to reach much higher commercial successes, and this continued in Q2 and will continue along the year. We are going to complete this by additional cost savings efforts, which I remind you -- so in the short term, we rely on the, let's say, the temporary working hours reduction, so short time work, furlough in the U.S. We, of course, put a strong hold on expenditure and froze any new hiring, specifically in North America where the bunch of the activity decrease materialized. We very promptly reduce the number of positions there by more than 1/3, it's over 900 positions, which were cut across plants and support functions in North America. And this was decided and communicated in April and was effective by the end of May, which is a sign of how reactive our workforce and our operations in North America can be. On top of that, CapEx envelope was reduced by 20% to EUR 160 million. Although it's worth highlighting, we kept the very profitable mine expansion project in this budget. And finally, we continued tightening the working capital requirements, which should reflect in H2 in particular. So at this stage, I confirm the target of EUR 130 million of savings on top of the full adaptation of our variable costs, which I remind everyone, include the direct labor. Next is we will benefit from areas of resilience, first and foremost, Brazil offshore activity, which will grow in 2020 compared with 2019. Petrobras and all of the IOCs present in Brazil have confirmed their focus on this highly productive, highly efficient pre-salt area, and this will translate in an increased number of offshore wells to be drilled in 2020. On top of that, Brazil is one of our most cost competitive base, also spurred on by the devaluation of the real against the dollar and the euro. Still in Brazil, we will benefit from the activity of our mine, which, as I said, will post higher production output in 2020 compared with 2021 and also benefit from a sustained level of iron ore prices this year. And the expansion project, which I announced earlier this year, is well underway, and it will support -- it will extend production by close to 30% starting 2022. Outside Brazil, EA-MEA will benefit from our diversified customer base and our restored competitiveness. It's an important part of our oil and gas revenue, over 50%, and large market shares in premium segments. There, the strong part of the national oil companies bring stability in a low oil price environment. And this is where our renewed competitiveness and increased commercial heat ratio will matter the most. In 2020 specifically, we will benefit from the deliveries of our backlog of high alloy products. And finally, we recall on this slide, the commercial momentum confirmed in 2020. And again, of note is the strong heat ratio on a limited amount of open tenders. So thanks to this, we essentially confirm our outlook for 2020. In Europe, Africa and Middle East Asia, we will benefit from the sustained activity of Middle East and North Africa NOC, even though some IOCs have delayed projects. This will be offset by the strong deliveries of high alloys that we have in the backlog. The industry markets are expected to remain subdued. In North America, we expect no material improvement in the U.S., and in Brazil, as I indicated, we will -- we expect the increased deliveries of our premium products for offshore wells, and this will accelerate in H2. The industry markets will continue to be impacted by the crisis and the iron ore mine will continue to support our activity. In terms of adaptation measures, I think I commented that already, the amount of short-time work and furlough, in particular in Europe, will increase as our expected activity decreases. We confirm the target for savings, EUR 130 million on top of the full adaptation of variable costs, the reduction of the CapEx envelope and the working capital release, which will lead us to target a positive free cash flow in H2 2020. And with this, I will conclude the presentation of the slides and open the floor for the Q&A session.

[Operator]

[Operator Instructions] And we do have the first question. The first caller we'll hear from is Vlad Sergievskii, calling from Bank of America.

[Vladimir Maximovich Sergievskii, Research Analyst]

A few questions from my side. First of all, profit margin seems to decline sequentially in Q2, despite obviously, revenue staying very resilient, and positive mix driving realized prices up as well. What were the headwinds that drove this margin down? That's the first one. And secondly, could you provide some color on the scale of large awards in Africa and Middle East you referred to? Is it in tonnes or dollars? Also, are you able to comment on pricing on those awards?

[Edouard Frederic Guinotte, Chairman of the Management Board]

Thank you, Vlad, for this first question. So the main headwind to our results in Q2 was definitely the collapse of the activity in North America. The rig count there decreased very, very significantly. The pace was minus 60 to minus 70 rigs per week, and as a consequence, the deliveries from our North American operations decreased also very significantly. So this is the -- by far, the main impact. Now in the rest of the world, IOCs and NOCs review their CapEx plan, and this led to some delayed deliveries or some delayed projects. But the impact of this is, by far, not at the same level or the same magnitude as what happened in North America. In terms of the large orders we secured in Africa and the Middle East, I won't disclose any competition-sensitive details of course, but these are large orders, so several dozens of thousand tons. The deliveries of which will spread over the end of 2020 and predominantly in 2021.

[Operator]

The next question will come from the line of Kevin Roger calling from Kepler.

[Kevin Roger, Research Analyst]

Yes. I would have 2 on my side, please. The first one is related to the U.S. market. One question to understand maybe what is happening in the country, because when we look at the imports coming from South Korea, Taiwan over the past 2 months in, it has been very important to preventing something like 75% of the market in total when you include [ all the imports ]. So I was wondering, is there, let's say, any particular reason for that? Is there a change in terms of needs of tubes in the country? Or is it just a reason of pricing, et cetera? So I was wondering if you can provide some information on the typology of the U.S. markets right now. And the second one will be related to the debt. So basically, you have finally impaired the U.S. asset. You have a gearing ratio above 100%. I understand that it's tested just once a year, but what's the risk at the end that your books that initially -- or supporting the capital increase will finally just ask the repayment of the RCF piece?

[Edouard Frederic Guinotte, Chairman of the Management Board]

Okay. Thank you, Kevin, for your question. So with regards to North America and the imports in the U.S., the answer is fairly simple. The time between an order is placed, it's produced and shipped and delivered to the U.S. is typically much longer than what the local operations can offer. And so most of what was delivered in Q2 correspond to orders, which were placed before the collapse, so let's say, early Q1. And of course, it was too late to call back the orders. And so this is what you see onshoring in Q2. We do expect this to reduce considerably. They do not dry out, but a very, very significant reduction, which is typically what we see in the U.S. market when the market contracts, is the market share of the domestic producers increases very significantly. First, because there is some sort of national preference to local mills, but also and foremost, because their lead time is so much quicker that they are better positioned to react to any short-term needs that operators may have. So we expect a repeat of this phenomenon. As far as the impairments and impact on the gearing, I will let Olivier answer the question.

[Olivier Bruno Benedict Mallet]

So first, on the impairment. First, a small correction, it's not the assets that we have impaired, it's the goodwill. And it's essentially due to the change in the technical parameters, which are the discount rate applied as well as the market growth rate applied to calculate the terminal value. For both of them, we have taken or discount rate is not upon us, it's market premium and so on. And for long term or perpetual growth rate, we have taken much more conservative assumptions. But it does apply only to your, say, post-2025 or something like that for the calculation of these impairment tests. So what is the impact on our capability to draw down our lines? There is no impact whatsoever, because as I guess you -- I hope you already know, we test this covenant every year on December 31. So this will appear when the 2020 accounts would be released, somewhere in February 21 and communicated to our banks. And as you know, our banking lines expire in February 21 anyway. So it's actually a sort of a year 1 event point at this stage, given the maturity of our lines.

[Operator]

The next caller is Sahar Islam, calling from Goldman Sachs.

[Sahar Islam, Analyst]

So the first one was on working capital. You talked about the release in the second half. Could you give us some color as to how big that could be, please? And then secondly, around the stabilization, in the U.S., are you seeing signs of that already? Or do you think the market will continue to deteriorate in Q3?

[Edouard Frederic Guinotte, Chairman of the Management Board]

Yes, I will start with the question on the U.S. market. So you may have seen that the pace of the rig count decrease since a few weeks has reduced very, very significantly compared with Q2. So at the -- let's say, at the heart of the collapse, the decrease was minus 60, minus 70 rigs per week. Over the last 4 weeks, we were between minus 1, minus 5, minus 2. So if you look at the curve, it's quite clear that we are reaching the bottom of the curve, we don't expect in the short term, any increase or any significant increase of these rig counts, because first and foremost, operators will probably rely on DUCs, drilled but not completed, wells before they put back rigs to work. So we expect -- we do expect that the market will stabilize at the current level. When it comes to working capital requirements, Olivier?

[Olivier Bruno Benedict Mallet]

Yes, you know we have to be always quite cautious because predicting working capital change at the very end of the year is always difficult. It will depend, in particular, the new orders we'll get implying to start manufacturing for [indiscernible] in '21. So once again, I don't want to give a figure or to be too precise. This being said, as every year, we will have a significant working capital review. As every year, it will be for, most of it, or essentially in Q4. If you want to compare the working cap release in H2 this year compared to H2 last year, maybe it could be slightly above last year, because we are not at the same level of activity evolution. This being said, it should not be from a very different order of magnitude than what you have seen last year in H2.

[Operator]

And the next question will come from Amy Wong calling from UBS.

[Amy Wong]

A couple of questions from me. The first question relates to your discussion about the refinancing plan -- you needing a new plan. So could you help us just contextualize what that actually means? You said you're talking to reference shareholders, are you talking to new shareholders? Any approximate timing of when you will be ready to announce a new refinancing [indiscernible]? That's my first question.

[Edouard Frederic Guinotte, Chairman of the Management Board]

So Amy, I'm afraid I will have to disappoint you on this one, because I'm not going to disclose much about the ongoing discussions. They do involve most of our stakeholders, our reference shareholders, banks. And at this stage, I don't have anything concrete to disclose. We will do as soon as it's ready.

[Amy Wong]

Okay. I just missed the question. I'm going to ask you just maybe a couple of housekeeping questions. In terms of your 2Q EBITDA, can you help us understand on how much cost savings were actually realized in the quarter? You say EUR 51 million was achieved, was that in the quarter? Or is that the exit run rate? And then related to that, understanding your EBITDA evolution as well, your provision balances seem to have gone down by about EUR 30 million, EUR 40 million between 1Q and 2Q. Now is that also -- is that a provision relief that taken into a positive in 2Q?

[Edouard Frederic Guinotte, Chairman of the Management Board]

I'm sorry, Amy, I think we missed your last question.

[Olivier Bruno Benedict Mallet]

The second one.

[Amy Wong]

Well, the second one was just related -- to your provisions seemed to have gone down by about EUR 30 million -- or 30-odd million between the end of 1Q and 2Q. So just wondering if there were some positive like provision releases in the second quarter EBITDA?

[Edouard Frederic Guinotte, Chairman of the Management Board]

So with regards to the savings, EUR 51 million is the H1 results, and this typically accelerates throughout the year. So I do not consider that it's a fair split between Q1 and Q2. The savings in Q1 were lower than the savings in Q2, which in turn, will be lower than the savings in Q3 and Q4. As far as the provisions, I will let Olivier…

[Olivier Bruno Benedict Mallet]

Yes, I'm double checking, actually, it's not what I have in mind, so I don't have the -- that provisions were materially going down in Q2, but we'll confirm you later during the call.

[Operator]

And the next caller will be Alan Spence calling from Jefferies.

[Alan Henri Spence, Equity Analyst]

Just one fairly direct question from my side. Would you consider looking into state aid or a large asset sales as a way to improve the balance sheet?

[Edouard Frederic Guinotte, Chairman of the Management Board]

So like I said, we are discussing with all our stakeholders, including reference shareholders, among which Bpifrance. When it comes to selling assets, so this is something we review very regularly, and well, there are 2 groups of assets, which we could consider. First, the forest, as you know, we have -- and we own a much larger area of forest than we actually need for our steel making. The fact of the matter is we did auction or try to sell a part of the forest, and so far, the value we are receiving for this forest is below what we believe the intrinsic value of this forests are. And with a growing concern about carbon emission, carbon sink, et cetera, we believe that the value of these assets is set to increase, so we don't want to rush if we don't get the expected value from this. As far as the mine is concerned, this is something we looked into and came to the conclusion, and we are quite happy to have reached this conclusion in the past, that we are far better off keeping the mine. It plays, particularly in the current context, it plays its role of shock absorbers, of stabilization of our results by being very steady, both in terms of volume produced and enjoying price, which do not follow at all what the oil or gas price are doing. So we are quite happy to have these in our assets. And to the extent that, as explained, we are doubling down on these assets by spending EUR 65 million to expand the production of the mine and continue benefiting from its stabilizing role in the years to come.

[Olivier Bruno Benedict Mallet]

Maybe coming back to the question on provisions, to answer Amy. First, at the EBITDA level, there actually, in Q2, no significant noncash change in provision, impacting the EBITDA. I think we are speaking of EUR 2 million, so it's close to nothing. But you are correct, Amy, the amount of provisions went down but below the EBITDA since we have been using parties of provisions built for restructuring and building some other provisions. So this is the impact we are trying to actually increase in Q2.

[Alan Henri Spence, Equity Analyst]

Just on the mine, clearly, the expansion plans you've laid out signal that's a pretty core to your strategy. But you guys have always been pretty hesitant to give us a cost profile so we could figure out the earnings trajectory. If it is core, why not give us that level of the disclosure so that we can appropriately evaluate something that you claim? And we have no right to disbelieve you, but something that's generating quite healthy profitability?

[Edouard Frederic Guinotte, Chairman of the Management Board]

Well, it's been our decision and policy so far not to disclose this amount of details. We don't even disclose results and margin by regions, also for very clear and sensitive competition reasons. All I can say is that from many different KPIs, be it health and safety, be it quality, be it productivity and finally, costs. This mine is considered in Brazil as a benchmark and posts cost structure which is quite significantly below that of a comparable mine in Valens, for instance.

[Alan Henri Spence, Equity Analyst]

Okay. I appreciate you haven't historically done it, but if this is really such a great asset, aren't you afraid you'll never get the valuation of it in your share price?

[Edouard Frederic Guinotte, Chairman of the Management Board]

Well, quite frankly, our focus is really to maximize our EBITDA trajectory, which in turn should reflect in our share price. We are not taking a share -- some of the part valuation approach.

[Operator]

[Operator Instructions] But next up, we have a follow-up question from Amy Wong.

[Amy Wong]

And Olivier, thanks for the answer on the provision, that's very clear. My next question is just kind of on your outlook comments. I mean you've given a lot of the moving parts, Brazil, up; North America, continued subdued. And then you've got the accelerating -- acceleration of the cost savings, so how do you feel about your 2Q EBITDA? Is that looking like the bottom for this year? Or would you just give us a steer on directionally what the next couple of quarters will look like?

[Olivier Bruno Benedict Mallet]

So what we can say, just to give some color about that, it says that we did confirm -- we do confirm the outlook we gave when commenting our Q1 results. It's a pretty clear confirmation, meaning as well that on a French regulation, if we were materially apart from the consensus for the EBITDA, we would have to quit it, which we don't do. Then about the quarterly evolution, as Edouard said, we have taken large orders, some of them will be delivered starting in Q4 this year, plus the acceleration, which is very significant of our high-alloy tubes for pre-salt in Brazil, will accelerate in the course of H2 as well, so that we expect more deliveries in this country in Q4 than in Q3, so that, knowing that, as far as the U.S. are concerned, we don't expect so far any material change over H2. It tends to mean that Q4 could be higher than Q3.

[Operator]

And that is all the time we have for questions today. Thank you all for joining today's call. You may now disconnect your lines. There will be a replay made available of this call shortly. Thanks again for joining. Once again, you may now disconnect your lines.

[Edouard Frederic Guinotte, Chairman of the Management Board]

Bye, everyone.

[Olivier Bruno Benedict Mallet]

Bye bye. Thank you. Bye bye.