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Hello, and welcome to the Vallourec Q3 and 9M 2020 Results Conference. My name is Lydia, 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, Director of Investor Relations and Financial Communication, to begin today's conference. Thank you.
Thank you for joining us for Vallourec's Q3 and 9 Months 2020 Results Presentation. With me today to comment this result, we have Edouard Guinotte, Chairman of the Management Board; Olivier Mallet, member of the Management Board and Chief Financial Officer. This conference will be recorded, and a replay will be available. 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 contains forward-looking statements and that future results may differ materially from statements or 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 with the French financial market regulator, the AMF. This presentation will be followed by a Q&A session. Now I would like to leave the floor to Edouard Guinotte.
Thank you, Jerome. Good evening, everyone. I hope you and your close ones are keeping well, safe and that you manage to fend off the pandemic. Let me start with a few key highlights on our today's call. Starting with Q3 results. Our revenue stood at EUR 760 million, down 32% year-on-year and reflects the impact of the coronavirus crisis on the global economy and its impact on the activity of our customers, particularly in the global oil and gas market. In spite of this, our EBITDA stood at EUR 71 million, with the margin up at 9.9% of sales, which compares somewhat favorably to Q3 2019 and is an indication of our identified areas of resilience, be it the domestic market in Brazil, the mine activity in Brazil as well, as well as the support from the deliveries of special alloys products produced in Europe and delivered in EA-MEA region as well finally as the positive impact of the adaptation measures and the savings generated since the beginning of the year. As a consequence, the free cash flow was slightly positive at EUR 35 million. And also, as a consequence, the net debt is unchanged at EUR 2.3 billion while the liquidity remains around EUR 1.4 billion. We continued to record some commercial momentum, with, in particular, the renewal of our frame agreement with Total by another 5 years, which completes nicely the extension of our frame agreement with Petrobras in Brazil by 2 years, which was announced last quarter. This gives me an opportunity to thank our customers and partners throughout the world for their renewed support in a particularly complex situation. And as well, thank our teams and our staff around the world who continue to show commendable dedication and extraordinary engagement to work through the crisis. Moving on to the outlook for the full year 2020. I will mostly confirm what I said last quarter where the full year outlook is supported by our resilience levels despite depressed activity, particularly in North America. So we will continue being supported by the deliveries of special alloy tubes in EA-MEA, which somehow offsets the impact of delayed projects by IOCs and NOCs in the region. In Brazil, we continue to witness the trends, which we are working in Q3, in particularly the profitability of our iron ore mine. We confirm our full year target of EUR 130 million of gross savings on top of the full adaptation of our variable costs, including direct labor. And finally, we confirm as well to target positive free cash flow in H2, including the significant release of working capital. This being said, looking maybe further ahead, we don't expect material changes in our activity for the coming quarters. And all in all, we decidedly need to get ready for market environment, which will remain subdued and where competition, due to global overcapacity, will remain very active. It's in this context that we launched additional structural measures to adapt to the outlook of our activity and continue to improve competitiveness. These measures will impact our whole group after what was already implemented in North America. In Europe, we will adapt our production capacity to a lower level and streamline SG&A, which we'll lead in France to the reduction of around 350 positions, including the closure of our heat treatment facility in Deville-Les-Rouen. In Germany, we will continue reducing the headcount with around 200 position being reduced over '21 and '22 after -- or on top of what we already achieved since we announced them, 600 position since 2019 and the closure of the Reisholz plant, which was completed in the summer. On top of this, we will also implement a working time reduction by up to 20%. In Brazil, we launched a comprehensive savings plan, which includes a structural reduction of around 500 positions in support functions by the end of 2020. Finally, our financial restructuring, which, as you know, is targeted to [ embrace ] all the borrowings at Vallourec S.A. level and targets or seeks to reduce the debt level significantly as well as the interest cash burden. The objective of the company is to negotiate an agreement with our creditors on the terms of the financial restructuring. And as we communicated yesterday, Vallourec S.A. seeks to reduce its debt amounting to EUR 3.5 billion by slightly over 50% by way of a debt-to-equity conversion. I'll now hand over to Olivier for more details on the results of the quarter.
Thank you, Edouard. Good evening, everyone. So on Slide 7, let me give you first more details on our revenue evolution by activity and by region. Our revenue for Q3 reached EUR 716 million, down 32% year-on-year or down 22% at constant exchange rates. Starting with our largest segment, oil and gas, which represented 57% of our total revenue. Its revenue was down 39% year-on-year or 31% at constant exchange rate, reflecting mainly lower revenue from North America and EA-MEA. In North America, the revenue decrease was driven by lower deliveries due to the unprecedented decrease in rig count as well as to lower prices. In Europe, Africa, Middle East, Asia, the revenue decrease reflected lower volumes, while the high alloy deliveries positively impacted the price mix. And in South America, revenue strong increase reflected the forecast increase in deliveries of premium OCTG tubes for presold offshore despite an unfavorable currency conversion effect. Petrochemicals revenue then was down 61% year-on-year, mainly driven by lower sales of line pipes in North America as well as by some pressure on prices. And industry and other activities were down 18% year-on-year or plus 4% at constant exchange rates. In Europe, first, industry revenue was down year-on-year, reflecting lower volumes and lower prices. In South America, industry and other revenue was up as a result of higher revenue from the iron ore mine, reflecting both higher volumes and prices and of the overall stability of our sales to the industry markets before unfavorable currency conversion effect. And finally, revenue in our power gen segment was up 25% year-on-year, mainly due to timing of project deliveries. I remind you that we had announced that we would shut down our German plant in Reisholz that was dedicated to tubes for conventional -- for power plants. This closure is effective since this summer.Moving now to Slide 8 with more details on revenue and EBITDA. First, the revenue decrease of minus 32% year-on-year can be broken down into a volume impact of minus 46%, mainly driven by oil and gas in North America and EA-MEA and the positive price/mix of plus 25%. This positive price/mix reflects a better price/mix in oil and gas in Europe, Africa, Middle East, Asia, due notably to the deliveries in 2020 of a large backlog of special alloy tubes. And in South America, these 2 positive price/mix effects more than offsetting the lower prices in North America. Our revenue was impacted by a negative currency conversion effect of minus 11% related to the euro versus Brazilian real [ part ]. Moving then to EBITDA. It stood in Q3 at EUR 71 million, down, I would say, only EUR 13 million year-on-year with an EBITDA margin up to 9.9% of revenue, 2 percentage points higher than in Q3 2019. This evolution reflected first an industrial margin moving to EUR 154 million to be compared with EUR 177 million in 2019 Q3, reflecting the impact of a lower activity in oil and gas, notably in North America and also the impact, but to a much smaller extent, of lower activity industry in Europe. These negatives were partially offset, first, by our savings measures, then by higher mine contribution and as well from a positive evolution of the contribution of oil and gas in South America. The impact of lower oil and gas volumes in Europe, Africa, Middle East, Asia was offset by the better price/mix in these regions. In terms of the SG&A, we have continued to cut them, and they are down 17% year-on-year. On the next slide, Slide 9. Some quick comments on the most relevant lines of the P&L below the EBITDA. First, the operating results was almost stable at EUR 7 million compared to EUR 10 million in Q3 '19. The lower depreciation and amortization charges almost offsetting the lower EBITDA. Second, the financial result was negative at minus EUR 64 million, an EUR 8 million increase in the expenses compared to Q3 '19, reflecting higher financial expenses. As a result mostly of these moves, the group net result amounted to a negative EUR 69 million, relatively close to the minus EUR 60 million in Q3 '19 despite the extremely difficult overall market environment. Let me now comment on cash items, starting on Slide 10 with working capital. Our net working capital requirement was reduced by EUR 277 million year-on-year and by EUR 117 million sequentially, as a result, essentially, of the activity decline. In terms of days of sales, you can notice that the net working capital requirement increased to 120 days in Q3 '20 compared to 105 days in Q3 '19. It has been impacted in terms of days of sales by customer mix and by the fact that a large part of inventories are fixed by nature, such as spare parts, for instance. Now moving to Slide 11 to comment on our free cash flow. The free cash flow in Q3 was positive at EUR 35 million to be compared with a positive EUR 26 million in Q3 '19. First, the cash flow from operating activities was negative at minus EUR 32 million to be compared to a negative EUR 2 million in Q3 '19, reflecting the lower EBITDA as well as higher restructuring cashout linked to all the adaptation measures we have taken. The operating working capital requirement decreased in Q3 this year by EUR 94 million versus EUR 71 million in Q3 last year. And finally, our CapEx stayed under tight monitoring with EUR 27 million in Q3 this year to be compared to EUR 43 million in Q3 last year, all this leading to this free cash flow comparable slightly higher than the one of Q3 last year. And I will conclude this part with the net debt evolution on Slide 12. The group net financial debt as of the end of September 2020 stood at EUR 2.329 billion, almost stable compared with EUR 2.326 billion at the end of the last quarter. This increase over 9 months was mainly driven by the free cash flow consumption of EUR 223 million and by EUR 75 million of negative impact of asset disposals and other items. Our liquidity position at the end of September remained strong with cash and cash equivalents of EUR 1.349 billion and EUR 12 million of undrawn facilities. At the same date, our long-term debt amounted to EUR 1.748 billion and the short-term one to EUR 1.929 billion. EUR 1.712 billion were drawn from our EUR 1.724 billion committed banking facilities, which mature in February next year. EUR 99 million of drawn banking facilities were repaid at their maturity in July 2020. And on this, I will give back the floor to Edouard.
Thank you, Olivier. So moving on to recapping on the outlook for the full year 2020 who I -- which I mentioned most of it already, but let's dive a little bit by region. So in North America, particularly onshore, we consider that the rig count has bottomed out mid-August, as you saw, around 240 rigs. It's now slightly above 300. So it's -- at least the fall has stopped and some slight sight of rebound are welcome. The average 2020 OCTG prices are significantly below 2019, and we can expect to see a beginning of recovery early in 2021. In Europe, Africa and Middle East, Asia, as I said, the delayed projects from IOCs and NOCs are offset in 2020 by the positive effect of delivering the backlog of high alloy products this year. As far as industry segments are concerned, demand is still significantly impacted by the COVID-19 crisis. In South America, as I said, the 2020 drilling activity in pre-salt field is increasing year-on-year as anticipated. The industry segments overall resisted quite well and are expected stable year-on-year. And as far as the mine, the volume produced in Brazil is expected to be higher than last year, thanks notably to the use of mobile processing units. And as far as the iron ore prices, which have so far stayed at favorable levels, we expect a limited decline in Q4. So all in all, I need to repeat that we don't expect material evolution of demand in our activity in the coming quarters. As far as cost savings are concerned, we do confirm the full year target of EUR 130 million on top of the adaptation of variable costs which, I remind everyone, includes direct labor. Cash is controlled strictly with, in particular, the cap of our CapEx envelope at around EUR 160 million. So all in all, we confirm that we target our free cash flow to be positive in H2, including the positive impact of a significant release of working capital. And coming back on the structural measures, we are announcing to adapt to our outlook and to foster competitiveness. As I said, in Europe, we essentially reduce the available capacity, both in Germany and France. And we streamlined SG&A, both reflecting a reduced footprint in Europe and also reflecting a generally lower activity worldwide. So this will lead us to start what we called in France a PSC, which includes the reduction of around 350 positions, including the closure of our heat treatment facility in Deville. The rest of the reposition impacting some production sites in the north of France as well as our support functions, SG&A, both at the headquarters and at our shared service center in [ Valencia ] in the north of France. In Germany, 200 positions less over '21, '22 on top of the implementation of working time reduction up to 20%. And I confirm this comes on top of the total of 800 positions, which have been reduced since 2019. Europe is not the only one contributing to the effort. Brazil is also launching a comprehensive action plan, resulting in the structural reduction of 500 positions in support functions to be implemented in 2020. The in-sourcing of previously subcontracting activities and renewed or continued focus on optimizing steel costs and redesigning some of our industrial processes like maintenance and sales and operations planning. I will conclude this brief presentation of our Q3 results and announcements, and we are ready to take your questions.
[Operator Instructions] Our first question comes from Alan Spence of Jefferies.
I've got 3 hopefully pretty quick questions, and I'll take them one at a time. So the first one regarding the quarter-on-quarter improvement in EBITDA. I mean, to be fair, iron ore averaged up $27 per ton quarter-on-quarter. I know you did mention some better profitability from the mine being a component. But is there any way you can give us a bit more quantitative? What percentage of the increase was because of better performance in your core market versus the iron ore mine?
Olivier, this one is for you.
Yes. So as you know, we don't typically give this kind of details. What I can tell you though is that, yes, the mine was a significant part of the improvement. Another big part of the improvement was the savings being achieved by the group. And finally, the positive news, I would say, is that if you look globally at our oil and gas activities, the pluses and minuses were almost pretty much offsetting each other, with a significant drop in the U.S. but as well a significant upside in South America due to the expected and actual pickup in drilling activity in pre-salt Brazil. While in all the Europe, Africa, Middle East, Asia region, the drop in volumes was pretty much offset by the very positive mix we enjoy in Q3 as globally in 2020 with the devise of tubes of very high alloy content and therefore, good margins.
Is it fair to say the iron ore was more than 50% of the gain?
We won't answer this level of detail, as you know.
I thought I would try. Okay. Second one, the net working capital increased to 120 days of sales. I know, obviously, there's 2 sides to that equation. But thinking about the absolute level of net working capital, have you done all the optimization you can? Or do you still think there's more room for improvement in 2021?
So as you know, we have launched in early last year a so-called TRI for payable receivable inventories task force, which first spend like 6 months doing an in-depth review, diagnosis, plant by plant category of working capital by category, then came up with action plans that started to be implemented in H2 last year and continued to be implemented this year. As I was mentioning, the increase in number of days that we see in Q3 happens each time you have a very sharp decrease in activity. Maybe 25% or more inventories are fixed by nature. It's about spare parts, consumables, so they don't follow the level of activity. And generally speaking, the adjustment of work of inventories does follow with a few months of delay, the evolution of the activity itself. And we are mentioning as well some customer mix impact in Q3. So to your point, is there still margin of optimization? Yes. We believe that we are not completely at the end of the journey and that we have still some levers of spreading even more around the [ world ], all the action plans and routines that have already started to be nicely implemented in many, many of our operations. The big lever being probably in staying the inventories where it's quite technical, but can be lots of hoops to implement what makes inventories to stay at the lowest possible level.
Okay. And my last one, regarding these delayed projects in EA-MEA. If I understand the guidance correctly, it doesn't sound like you expect these to fully come back in 2021. Is that assumption correct? And perhaps if you can share over what time period you might think those orders can come back into your order book?
Yes, you've read correctly our comments. Deliveries of special tubes in 2020 are to a relatively large extent based on bookings made a year before in 2019. Since then, the overall activity in the market has slowed down. It's not saying that there will be nothing anymore in 2021. But the plus we had this year would certainly be lower in 2021 since now.
I think maybe the question was addressing what we included our delayed project expected in 2020, not necessarily only the special alloy products. So for this specifically, it depends. It's very much a case-by-case basis, but some are expected to be postponed to 2021. Others can be postponed even further. So the corresponding activity will be spread over the next years.
Moving on to our next question, we have Vlad Sergievskii of Bank of America.
Good to see healthy profitability levels in these current conditions. I have 3 questions, if I can go one by one, please. So would you be able to provide your volume and mix outlook for the next maybe few quarters, at least directionally? I mean, is it safe to assume that volumes bottomed in Q3? Or it's too early to say? That's the first question. And then what are the kind of regional trends you are seeing? Are your U.S. volumes coming back? Are you seeing further growth in Brazil from current levels? And what will happen to Middle Eastern volumes given, obviously, an airport is in tendering there? That's the first one.
So on this first question, Vlad, the short answer is, as I indicated, overall, we don't expect a material change in our business outlook for the next quarters. So now if we look a little bit region by region, what we can say is, definitely in the U.S., we consider that Q3 was the bottom. And so therefore, we should see some kind of activity rebound in the next quarters and possibly the start of recovery on prices. Now we don't -- again, we don't expect a [ firework ] for the recovery. We expect something very, very progressive. As far as the other regions are concerned, the outlook for Brazil is positive on all domestic markets. While in EA-MEA, it's a market which is typically with a longer reaction time than the U.S. And this is where we don't see much difference arising in the next quarters compared with what we are living in 2020.
Understood. That's very helpful. And if I can switch the gears and ask you about the restructuring commentary. I understand you can't share all details, but any color would be really helpful here. In particular, if you can comment, how did you come up to a proposal to consort slightly more than half of gross debt into equity? Why not significantly more or significantly less than this number? And is there already any earlier feedback from your stakeholders, including creditors and the equity to this proposal?
Yes. Vlad, thank you for the question. I'm afraid I'm going to disappoint you, and probably the other participants to this call, because there is only so much we can share at this stage. It's important to keep in mind that the negotiation process is hardly starting. And so therefore, our plan is to come back to you in due course when we have something clear to announce. This being said, the important point in what we can share is in accordance with the general objectives, which we set out with this process, our main target is to reduce our debt and the corresponding leverage to a significant level. Significant level, meaning allowing the company, based on our activity and business outlook, to operate in a sound and robust manner; reduce the cash burden of the financial expenses; and finally, allow the company to refinance itself in the coming years, let's say, at normal conditions on the market. It's about as much as I can share. And we consider that slightly above 50% of debt-to-equity conversion is the right level for the company to reach these objectives, not too much and not too little.
Understood. And lastly, a very quick clarification, perhaps for Olivier. I mean, there was sizable power gen deliveries this quarter. And historically, those deliveries actually were sometimes coinciding with provision releases. Was there any meaningful net provision releases in this quarter?
No, in this quarter, there was almost no change in provision. I think there was a EUR 1 million change in provision in the group. And by the way, last year, the EBITDA in Q3 benefited from, I think, EUR 11 million of provision reversal. So if you look at the EBITDA, net of provision changes, it's very comparable, quite the same figure this year compared to Q3 last year.
Moving on to our next caller, we have Jean-Luc Romain of Market Solutions.
I actually have 2 questions. One relates to the very big contract you had in the -- I think it was the Emirates last year for delivery this year. Does delivery continues into 2021? And my second question is about products you are developing for the renewables -- for renewable energies and for geothermal in -- well, in like 5, 10 years, how big could this business be in your eyes?
Okay. Thank you. So commenting on the UA contract. If you recall, the award was for a 5-year contract. And so we started delivering on this particular contract this year, actually quite recently. And yes, the deliveries will continue in 2021 and beyond. As far as your question on renewables, we do have quite a significant ambition in generating additional revenues from 4 specific segments linked with the energy transition. So to remind everyone, geothermal, fixed wind offshore, carbon capture utilization and storage and finally, hydrogen. We are already active in the geothermal segment, which does already contribute to our sales in, relatively speaking, a limited manner. And we consider that there is -- it's a segment which offers growth opportunities going forward. As for the others, it's an ambition. We do believe that these segments will develop into sizable market segments for us. But we are also very realistic in the timing for these developments. And in particular, for carbon capture and hydrogen, we don't expect that the anticipated revenue stream will start to impact our sales before, let's say, 2024, 2025. So it's more of a midterm goal than short-term support.
Moving on to our next caller, we have Kevin Roger of Kepler Cheuvreux.
I have 3 questions, please, and I will go with them. So the first one is related to your comments that you did. You're saying that basically you expect the activity to remain broadly unchanged in the coming quarters. So you generated EUR 70 million EBITDA this quarter. Based on your comments, I guess, we can assume that maybe the EBITDA will remain on those levels. What will be, let's say, the incremental support on your EBITDA in the coming quarters? Because you are targeting on a gross number, so what will be, let's say, the net impact that you expect maybe in Q4 and Q1 of 2021? And the 2 next questions are probably more for Olivier. Olivier, sorry for the stupid first one. But in the press release, you say that you want to cover half of your -- roughly speaking, half of your EUR 3.5 billion gross debt. In the balance sheet, you have EUR 3.7 billion. Can you remind me what are the EUR 0.2 billion that are not concerned by the operation, please? And the last one is relating to the working capital. Sorry for this one, but can you help us to, let's say, have a view on your working cap movement in Q4? Would you expect, let's say, an even bigger number than Q3 or we should base on the Q3 numbers, please?
Okay. Thank you, Kevin. So as far as the EBITDA, I trust you don't expect me to give you a very accurate EBITDA guidance for the next quarters. But generally speaking, it's what I answered to one of the previous participants. Generally speaking, no major changes in the activity outlook. Maybe a little bit better in the U.S., a little bit better in Brazil, very much the same in EA-MEA. And as far as elements of support, basically, we want to trust what we can control, which is essentially the cost reduction measures, which we launched already this year, which we expect to continue support our results in the next quarter and in the next quarters. So that's for the EBITDA. As far as your question on the gross debt, so even I, I think, can answer this one. So the restructuring process encompasses the gross debt at Vallourec S.A. level. And this is the EUR 3.5 billion we are talking about. When we look at the total gross debt of the group, it includes also some, what we call, some local debt essentially in Brazil and in China, which are not targeted or involved in the restructuring process. And the last question is for you, Olivier, on the working capital requirements in Q4.
So definitely, Kevin, we expect a decrease in working capital in Q4. As always, I will be cautious, not giving you a precise guidance on the exact figure. As you know, it's always quite difficult to forecast that very precisely. But yes, again, a working cap decrease in Q4.
Moving to our next caller, we have Guillaume Delaby of Societe Generale.
A difficult question. Basically, you are starting a financial restructuring. And generally speaking, a financial restructuring always happens in tough time, in terms of crisis. However, it also often reflects some internal weaknesses in the governance process. So basically, I have 3 very simple questions. What are the lessons which you have drawn in terms of governance from what is currently happening? What should or could be changed? And going forward, when this financial restructuring will be done, what kind of assurance could we have that it may not happen again in the future? So I guess you cannot understand -- you cannot answer everything, but if I can have some color on those, I would say, cultural factors.
Yes. Thank you for the questions. I'm not sure I will agree to your linking the restructuring process we are entering with failures in governance. I would remind everyone that as early as last February, we were announcing a capital increase and renewal of credit lines, which was precisely going to address what was the remaining weakness of the company, which is too high level of debt. This announcement at the time were pretty much and pretty well received by the market, be it on the capital markets, the bonds. And it was ultimately approved at our general assembly. And it's only the pretty much unpredictable coronavirus crisis and its impact on the global economy and in turn, on the activity of our oil and gas customers, which ultimately prevented us from implementing this plan, which was again capping or completing the transformation plan, which was initiated by my predecessor and Olivier back in 2016. So we were on the right track. And unfortunately, it was not made to be possible. And quite frankly, in a time as the ones we are facing where I have to worry about ensuring the health and safety of our teams, I have to worry to make sure that everywhere in the world, we adapt as quickly as we can and as decidedly as we can to the evolution of the market. I have a tendency to focus on what's ahead of me rather than trying to draw lessons from the past. And I urge my team to do exactly the same. They need to focus on what they can control and look ahead to execute our plan, which is the best way to ensure we go through the crisis in the best possible way. So these are my main comments to your question.
[Operator Instructions] Our next question comes from Amy Wong of UBS.
A question on the additional structural measures that you're launching today. How -- what do you want to take away from this in terms of how can we think about -- is this going to be additional cost savings that you are looking to get from 2021 onwards? Can you give us some more color around how to think about the impact of that?
Yes. The simple answer to this question, Amy, is that these measures essentially target 2 things. One is to adapt our footprint to our business perspectives. So it's a pure adaptation, making sure we don't keep entities under loaded or idled which, of course, generates additional unnecessary costs. And the streamline of our SG&A will also fuel the savings target that we have for '21 and '22. Our focus on savings is not going to stop this year. I think I commented to all of you already, it's a clear and essential pillar of our activity as managers to make sure that we continue hunting down potential for savings and competitiveness increase so that we ensure our future in a market, which is still marred by global overcapacity and [ competition ].
And along the same lines, are these measures in any way related to the plan to convert the debt to equity? Is it part of the package that you guys are discussing with your creditors, the necessary actions that you must take?
No, no. On this one, I'm going to be very direct. It's irrelated. And for a clear and simple reason is the discussions with our creditors, the negotiations are hardly starting. And so it's not been a driver for us taking the decision. The driver is really acknowledging our business outlook as realistically as we can and converting this in projected activity all over the world and, therefore, the necessity to adapt our industrial footprint to this projected activity. And same thing for SG&A. Our general footprint in Europe, in particular, has reduced. So therefore, arguably, you need to adapt also the overheads to this reduced footprint and the general activity for the group when you take into account the outlook needs to be reflected in the level of SG&A that we cannot perform. And so it's a pure operational and industrially driven sets of measure.
Okay. And just an unrelated question, just going back to your outlook comment. I'm just conscious that you keep stressing the point that the activity levels are going to be quite similar for the next few quarters. But clearly, in the third quarter, you benefited from fairly high deliveries of high alloy products, which was helpful to your price/mix. So embedded in your Q4 deliveries, do you -- would you still have that price/mix impact?
Yes, Amy, I think I will refer you to the general statement on 2020, where you will see that in EA-MEA, we do confirm that on a full year standpoint, delayed projects in EA-MEA by IOCs and NOCs are offset by the deliveries of high alloy products. We are not commenting specifically on this segment item going forward, let's say, beyond 2020.
Moving to our next caller, we have Jean-Francois Granjon of ODDO BHF.
Just a quick question. I will come back on the EBITDA level. So I understand that for the Q3, the good level coming from cost-cutting and probably a positive contribution for the mine in Brazil. So do you expect the same level of magnitude for the Q4 due to cost-cutting and positive contribution from Brazil? And for next year, I understand that you expect a similar level for the business and no strong improvement. Due to the cost-cutting plan or the new measure you take, do you expect an improvement or not for the EBITDA level for 2021 compared to 2020?
So maybe on Q4, Francois, as you know, never we give a forecast for the quarter to come. One of the main reasons being that the exact timing of deliveries of some shipments to some customers is always never fully defined. So it would be giving you, in some cases, wrong indications. Overall, though, what we can say with this high cautiousness is that in Q4 compared to Q3, of course, we are continuing to implement strong savings, at least as significant as Q4 as the ones we've got in Q3. One small negative we may have is that we anticipate so far some limited decline from the price of iron ore. But again, overall, no big material change with little insights I gave you, especially for iron ore.
And for next year?
And for next year, it's -- I will be back to the overall comments we made that at least for the coming quarters, we don't see any material change in most of our markets. We will continue implementing savings. I was mentioning earlier on that very nice deliveries of special alloy tubes in EA-MEA will probably decline next year. At some point of time, there will be the very early signs of market improvement in North America, maybe translating more material figures. But too early to mark any strong tendency for 2021, except that at the time being, we don't see in the coming quarters material changes overall.
At this time, this concludes our questions for today's event. Thank you all for contributing, I will now hand over to your host for any final remarks.
Okay. Thanks. No final remarks. Thanks, everyone. Stay safe, and we'll be in touch. Bye.
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