VLOWY - Vallourec S.A. (VLOUF) Q4 2022 Earnings Call Transcript
Vallourec S.A. (VLOUF)
Q4 2022 Results Conference Call
March 02, 2023 03:30 AM ET
Company Participants
Philippe Guillemot - Chairman and CEO
Sascha Bibert - CFO
Karim Safsaf - IR
Conference Call Participants
James Winchester - Bank of America
Kevin Roger - Kepler Cheuvreux
Guillaume Delaby - Societe Generale
Jean-Luc Romain - CIC Market Solutions
Daniel Thomson - BNP Paribas
Baptiste Lebacq - ODDO
Presentation
Operator
Good day, ladies and gentlemen, and welcome to Vallourec Q4 and Full Year 2022 Results Conference. My name is George. I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions]
The conference will be chaired by Mr. Philippe Guillemot, Chairman of the Board and Chief Executive Officer; and Mr. Sascha Bibert, Chief Financial Officer. I'll now turn the call over to Mr. Karim Safsaf, Investor Relations Officer. Please go ahead, sir.
Karim Safsaf
Good morning, ladies and gentlemen, and thank you for joining us this morning for Vallourec Q4 and Full Year 2022 Results Presentation. I'm Karim Safsaf, Investor Relations Officer. Joining me today to comment on these results, we have Philippe Guillemot, Chairman and Chief Executive Officer of Vallourec; and Sascha Bibert, Chief Financial Officer. This conference will be recorded and a replay will be available. It is also an audio webcast on our Investor Relations website, and the presentation slides are available for download.
Before I hand over to Philippe Guillemot, I want to add 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. This presentation will be followed by a Q&A session.
Now I would like to give the floor to Philippe Guillemot.
Philippe Guillemot
Thank you, Karim. Welcome, ladies and gentlemen, and thank you for joining us for this update on Vallourec's fourth quarter and full year 2022 results. I am Philippe Guillemot, Chairman and Chief Executive Officer. I'm joined today by Sascha Bibert, Chief Financial Officer; and Karim Safsaf, Investor Relations Officer.
Before proceeding, let me draw your attention to Slide 2 where you can consult our safe harbor statements. Today's agenda, on Slide 3. I will start by giving you an overview of the highlights of the fourth quarter and the full year, followed by an update on the execution of our New Vallourec plan, a word on market environment and then business development. Sascha will then take you through our Q4 numbers under our new segmentation, and I will wrap up with the outlook for 2023.
First, let's look at the highlights of the past year on Slide 4. Our Q4 EBITDA stood at €312 million, up 129% year-on-year and by 58% quarter-on-quarter. This contributed to EBITDA for the full year of €750 million, comfortably within our objective of €650 million to €750 million. Free cash flow generation in the fourth quarter was strong at €266 million, which enabled us to reach our target of being free cash flow positive for the second half at €185 million. And it also contributed to a net debt reduction of €366 million, leaving us with net debt at year-end down to €1,130 billion. Net debt peaked at the end of September 2022 due to prior investment in working capital before declining substantially in the fourth quarter. We expect this trajectory to continue into 2023.
Our performance was supported by the positive worldwide tubes business environment with particular strength in the U.S. Iron ore mine production of 1.4 million tonnes in Q4 was slightly above our prior estimates with positive steps achieved towards the full restart of the mine expected at the beginning of Q2 2023. On the commercial front, we are fully leveraging the positive market conditions of the global tubes sector, thanks to our unparalleled technological expertise and customer service. We have secured several important commercial wins this year, most recently with Petrobras and LLOG, showcasing the excellence of our innovative solutions. All this gives us confidence that we will be able to deliver another improvement in 2023 with an increase in EBITDA, positive free cash flow generation and further net debt reduction.
Our New Vallourec plan is fully on track to generate €230 million recurring EBITDA uplift with a full effect starting in Q2 2024. The plan is well advanced and is being implemented worldwide with new initiatives, starting in Brazil.
Let's turn to Slide 6. By way of reminder, the New Vallourec plan was announced in May 2022. It aims to generate €230 million run rate EBITDA improvement and €20 million CapEx reduction with a full impact starting in Q2 '24. The plan is based on a value over volume strategy, incorporating portfolio rationalization to drive profitable growth. Through the plan, Vallourec targets best-in-class profitability levels closing the gap -- the margin gap with peers over the cycle. The New Vallourec plan aims at making the group cycle-proof, able to generate positive free cash flow before change in working capital even at the bottom of the cycle.
Switching to Slide 7. 2022 was a significant year in the rollout of the New Vallourec plan which, as a reminder, includes the transfer of the OCTG German volumes to Brazil by the end of 2023. In 2022, all the European sulfur plants agreement in connection with the transfer were finalized, substantially derisking the New Vallourec plan and allowing our teams to focus on the execution. 2023 will be a pivotal year of the plan with the closure of our German plants and the full transfer of the oil and gas volume to Brazil, enabling the group to achieve its target industrial footprint for 2024. The process of disposing our German land is well underway. We have signed a contract to sell our Mülheim site for €40 million. The sales process for our much larger site in Düsseldorf-Rath is ongoing.
Let's turn to Slide 9. The tubes business environment remains very well oriented both in terms of volume and prices. As you can see from the chart on the left, the recent evolution in both the U.S. and the Middle East is evolving positively with an upward trend in the Middle East. On the right-hand side, you can see that OCTG prices in both markets remain robust.
Switching to Slide 10. Looking at Vallourec's own performance in this business environment. Our tubes EBITDA per tonne has risen every quarter in 2022, reaching €554 per tonne in Q4. This reflects notably the success of the new pricing policy implemented since Q2 2022 with focus on value over volume. We have recently secured several profitable new business wins: a 3-year long-term agreement with Petrobras for the supply of 110,000 tons of OCTG premium products, associated accessories and specialized physical and digital services, including 16-inch and 18-inch seamless pipes which will be produced in Brazil starting in '24; significant orders from LLOG Exploration Offshore for its technically challenging Salamanca deep water development in the Gulf of Mexico for the supply of 20,000 tonnes of line pipe; and a third major order within the 2021 10-year frame agreement with ExxonMobil Guyana for the supply of 35,000 tonnes of line pipe, including 2,000 tonnes of our state-of-the-art X80 steel grade, a technological breakthrough for deeper water development.
Turning to what we now call our mine and forest segment on Slide 11. Iron ore production stood at 1.4 million tonnes in Q4 2022, slightly above the estimated volume announced at our Q3 results. The civil works related to restoration of Cachoeirinha waste pile have been finalized in October. The solidity of the reinforced structure is confirmed during the rainy season. We have registered the request to release a pile and are expecting a positive outcome beginning of Q2 2023. Post approval, we assume the restoration of full production with 80% capacity utilization in the first months, ramping up to 100% thereafter. In the meantime, alternative waste pipes have been secured to ensure production continuity in Q1 with an estimated volume of 1.5 million tonnes.
Now I hand over to Sascha, who will comment our Q4 2022 results.
Sascha Bibert
Thank you, Philippe, and good morning, everyone. Thank you for participating.
Starting with Page 13. Today, we report strong numbers, and we intend to continue on that path going forward. For Q4 '22, group revenues are up 45% year-over-year and EBITDA increased by 129%. Quarter-over-quarter, EBITDA is up 58%. Free cash flow was very strong contributing to a net debt decrease of €363 million.
Page 14. Now showcasing our new segmentation for the first time. From now on, we split the group into tubes and mine and forest as well as a small holding and consolidation segments. Starting with tubes. Production was almost flat. However, revenues are up strongly, and therefore the average selling price decreased by 47%. This is value over volume at work. By far, the strongest increase came from the U.S. and from the oil and gas business.
Page 15. The strong pricing environment also led to a significant increase in the EBITDA as well as a more than doubling of the EBITDA margin to 19.4%. In Q3, this margin has been 14%. The EBITDA per tonne stands at €554 million, up from €363 million in Q3.
Page 16. The iron ore mine produced 13% less than the fourth quarter compared to a year ago, surely below its potential of around 2.2 million tonnes per quarter on average. The revenues declined less pronounced as in Q4 2021, the quality of the iron ore mine was poor leading to a higher discount to the market price. In that sense, Q4 '21 was an unusual quarter. And in all other quarters of 2022, the year-over-year revenue decline is significantly higher. In spite of similar revenues, the EBITDA declined significantly as we currently have higher costs, both driven by general cost inflation but also by temporarily higher transport costs for the externalization of the waste during the operation with the alternative waste pile. We can furthermore take note that as of today, the iron ore price is standing around $124 per tonne, improved from the lows we have seen last November. Please generally keep in mind that the segment is called mine and forest. The main effect from the forest in the P&L comes from the revaluation effects and their subsequent amortization. In total, those added €23 million positive in fiscal year 2022.
Page 17, and going back to the group level. Starting with the right-hand side, revenues increased predominantly driven by increased prices but also supported by FX. The same is true for EBITDA, where higher tubes prices offset higher costs as well as the reduction in mine and forest EBITDA. Other of €65 million includes, for example, provisions, lower accessory sales following a strong performance in '21 and lower pellet sales. Within EBITDA, SG&A increased slightly on an absolute perspective but continues the positive trend to decline as a percentage of revenues now at 5.8%. While interest expense was almost flat, overall financial income declined due to higher FX losses and a provision we have taken for an equity consolidated company, which is being restructured. The latter, you would not expect to reoccur. Nevertheless, net income turned positive at €78 million.
Page 18. The big positive was the Q4 free cash flow. We guided for a minimum €80 million in order to compensate for the negative free cash flow in the third quarter to then have a positive second half. Actually, we generated €266 million in spite of restructuring/other cash outflows of €62 million and higher than normal CapEx. This positive performance came from a higher cash-effective EBITDA and the reduction of working capital after the significant working capital investments we have made over the course of the first 3 quarters of this year. For the full year 2022, free cash flow is minus €216 million. Please acknowledge that this minus €216 million includes €144 million of restructuring cash-out and €355 million of working capital build. Philippe will comment on our expectations for 2023 in a minute.
Page 19. Net debt declined driven by the aforementioned free cash flow but also by additional items. Those additional items include noncash items totaling €45 million, such as accrued interest and FX, but also other cash elements totaling €53 million including disposals which offset financial lease payments. Liquidity stands at €1.2 billion and no maturities are upcoming. Philippe?
Philippe Guillemot
Thank you, Sascha. Let's look at Slide 21 to discuss our outlook of 2023. Based on our market assumptions as well as our progress throughout 2022, we are confident that 2023 we see a further significant enhancement in our financial results with notably an improvement in EBITDA, which will be driven by both our tube business and mine and forest business. After our positive free cash flow generation in H2 2022, our ambition is to be also free cash flow positive for the full year 2023. This is despite CapEx of around €220 million and the expected onetime New Vallourec restructuring cash outflows of about €350 million. And we expect further net debt reduction in 2023.
Before concluding, a couple of updates on investor outreach. First, we are reinforcing our Investor Relations team with the appointment of a new Head of Investor Relations, Connor Lynagh. Based in the U.S. Connor brings 10 years' experience at Morgan Stanley as lead analyst for the oil services and refining sectors. Furthermore, we will hold a Capital Markets Day in London on September 12. I invite you to mark your calendars accordingly, and look forward to seeing you there.
A few words to conclude on Slide 23. We delivered a strong performance in 2022 with all financial objectives attained, notably a marked uplift in profitability, positive free cash flow and net debt reduction in the second half. Our New Vallourec plan is on track to generate €230 million recurring EBITDA uplift with full effect starting Q2 2024 with new initiatives added. Profitability is increasing in the tubes business, supported by the successful implementation of our value-over-volume pricing policy in a supportive business environment. Our outlook is positive for 2023, where we expect to deliver another improvement in EBITDA to generate positive free cash flow for the year and a further reduction in net debt.
Thank you for your attention. And now Sascha and I are ready to take your questions.
Question-and-Answer Session
Operator
[Operator Instructions] The first question today is coming from Mr. James Winchester calling from Bank of America.
James Winchester
I have two, if that's okay. Firstly, could you provide some color on the international oil and gas market, kind of specifically what level of demand are you seeing? And do you see enough in the supply side to respond to this? And I guess, the follow-up is how is that driving pricing across your portfolio? And kind of on that note, the contracts you are signing today, if you were to assume kind of a normalized input cost, would they be margin accretive to today's kind of 19% tube margin? And I'll follow up on the second one.
Philippe Guillemot
Okay. Thank you, James. Well, first, we are very confident in the demand for our products worldwide. There is -- as you see, there is a level of rig count in the U.S. which seems to stabilize around 750. And our view is that this will remain the case for some time, which obviously drives demand up. As you know, there is a deficit of capacity -- domestic capacity in the U.S. and this will remain the case for the year, and this obviously gives us the opportunity to sustain prices at higher levels than obviously they were 2 years ago.
As far as the Middle East is concerned, there is an increase in demand, which is confirmed month after month. And again, there is a deficit of supply versus demand which give us more pricing power, which translates into the contracts we are signing month after month with expected improved margin that will flow in the P&L in the next quarters.
James Winchester
Okay. That's very clear. And my second one is, you provided the EBITDA per tonne figure for the tubes business. I was wondering if you could provide some color on the regional split here.
Philippe Guillemot
So I will hand over to Sascha.
Sascha Bibert
James, thank you for your question. I will not break that EBITDA per tonne into the regions. But let's just remind ourselves of a few obvious statements. Germany is loss-making. So if we calculate an EBITDA per tonne, it doesn't start with a positive sign. Obviously, that is something that will fall away post 2023. Second obvious thing is that the margin or the EBITDA per tonne in the U.S. is higher than any other region by a good margin. So that number has a high share of U.S. But as we go into 2023 and that was, I think, related to your other question, assuming that the U.S. stays strong, we also expect improvements, due to pricing, to a certain extent also due to cost elements, in other regions going forward.
Operator
Today's next question is coming from Kevin Roger calling from Kepler Cheuvreux.
Kevin Roger
The first one, sorry for that, I know maybe you will not provide a bit more information. But looking at the EBITDA guidance, you are telling us that the EBITDA will improve in '23 versus '22. This is already embarked by the consensus with something like €1 billion expected. Can you provide us a bit more color on the short term? What are the key drivers before? For Q1 and Q2, would you say that we will probably stay at the same level that we had in Q4, 300-plus? Or there are some negative to expect in Q1, Q2? That would be the first question.
The second question is on the disposal in Germany. So good news to see that you have made the first disposal with Mülheim €40 million. Could you just quantify to us the size of Dusseldorf versus Mülheim? I know you will not want to give us the value, but just the size of the Düsseldorf versus Mülheim, please?
And the third one, when we discussed about the moving part for '23, you were often underlining that the German assets will generate higher loss in '23 versus '22, notably because of the gas price. But with the recent fall of the gas price, did it change a bit your expectation for the losses in Germany, meaning that you will see lower losses than expected?
Philippe Guillemot
Okay. I will answer your question on the disposal. Well, first, the numbers are in the presentation on Page 7. As far as the size of the land we are selling, you can see that Duesseldorf-Rath is at 895,000 square meters when Mülheim is at 350,000 square meters. So we are talking about the heart of property, which is almost 3x the size of Mülheim, okay? Obviously, you have to take into account that we are in a different city, different locations. So obviously, size matters but location matters too in real estate as you can easily understand.
As far as our losses in Germany, yes, definitely, there will be higher than expected -- higher than they were in '22. Is the gas price decreasing a good news? Yes, definitely, but premature to quantify. As you know, we hedge. So obviously, we don't -- our costs are not reacting day 1 to any fluctuation of gas price.
Now I hand over to Sascha for your first question on what obviously we can expect for 2023 as far as EBITDA is concerned and how it will be quarter after quarter.
Sascha Bibert
Thank you, Philippe. Kevin, just adding one sentence to Germany. As Philippe just said, the energy development is helpful as far as we have open positions left. But also, let's not forget that another key driver of the year-on-year reduction in the expected operating profit in '23 also has to do with the development of margin versus fixed costs, i.e., in '23, we're ramping down production. We will lose the gross margin faster than we can get rid of the fixed costs. So there's a certain effect from there as well independent of energy. When it comes to the 2023 outlook, I will not turn a qualitative statement now into a quantitative statement. But when it comes to the beginning of the year, Q1 and Q2, we can generally expect that we carry the positive momentum that we have in the business and that you have seen in Q4, also into the first half of the year. There's no reason for that to be fundamentally different.
With that said, traditionally, simply in terms of booking and invoicing, Q1 is usually not the strongest quarter. So on the revenue side, you may want to be somewhat cautious. But again, underlying and margin-wise, I think we can keep our optimism. That is all true for the P&L. When it comes to the cash flow statement, please just remember that the restructuring cash out will not be equally distributed throughout the years. They're throughout the quarters. Therefore, you probably have, relatively speaking, a lower free cash flow in 1Q and 4Q and a relatively stronger second and third quarter.
Operator
Next question is coming from Mr. Guillaume Delaby coming from Societe Generale.
Guillaume Delaby
Yes. Two questions, if I may. A quick one for Sascha and not that quick for Philippe. A question for Sascha. Could you maybe give us a little bit of color regarding potential working capital dynamics in 2023? And the question for Philippe is that you have been basically at the office for now nearly 1 year. Could you maybe quantitatively comment about what has been your key surprises or key good news. And today, are there some, I would say, specific issues which I would say could prevent you from sleeping?
Philippe Guillemot
Okay. Thank you for your question. Yes, you're right. I've been here almost 1 year into the job, and a very, very busy year. No, my -- and I would say a very positive surprise is how fast the whole organization in Vallourec has reacted to the many changes and decisions I've made since I joined. I think it's very impressive to see how fast people in Vallourec can turn an objective into an action plan. And this really translates into the number we are communicating today. And as you know, it's not my first turnaround. I have already 7 behind me, but this one is definitely the fastest I've been able to manage.
What keeps me at night? There are many things given the magnitude of the transformation we are doing at Vallourec. Every day, there are many things that can go wrong and not happen as expected. What matters is all the management routines we are putting in place, and what obviously I pay careful attention to is to make sure that we have properly management routes to quickly identify when there is any deviation in order to react fast. And the routines today, the clock at which I'm beating, I think, the Vallourec clock is on a weekly basis. So every week, I have an update with my colleagues on all the work streams we are implementing to make Vallourec what we want Vallourec to be in '24.
Sascha Bibert
[Foreign Language], Guillaume. I take over for working capital. it's a short question but it's not the easiest one. So next time give me a different one. So in '22, we have had a buildup of working capital for the full year of €355 million. That was basically in anticipation of a new and a much better operational development. I find it unlikely that this will reoccur in 2023. So I would not expect a significant buildup of working capital, certainly not of that magnitude. With that said, if consensus is right and the operational development will stay positive, on the other side, we should also not expect a major release.
So I think in the end, what we will see at the end of the year is the interplay between our optimization initiatives, and Philippe really put a different focus on cash flow. So there are various initiatives throughout the group to improve our working capital, including terms and conditions. That should help. Against that, we will have some outages in various regions that we have to manage also with temporarily higher inventory buildup. And we certainly have good business initiatives, for example, in the Middle East that will also require some working capital. So I think there are positives to negative, but I don't think on either side it will be to the magnitude as we have seen in 2022.
Guillaume Delaby
So if I can risk myself to ask a question and if you can risk yourselves by providing me an answer, is something between €100 million to €200 million additional working capital could be something reasonable?
Sascha Bibert
I think with that, you may turn out to be on the quite conservative side.
Operator
[Operator Instructions] We'll now take a question from Mr. Jean-Luc Romain calling from CIC Market Solutions.
Jean-Luc Romain
My question relates to the transfer of production from Germany to Brazil. How much of this production do you expect to transfer already in 2023? And what will be the total concern in 2024?
Philippe Guillemot
Yes. So yes, we are transferring 140 kilo tonnes that used to be produced in Germany to Brazil, which represents 150 SKUs. Many, 2/3 SKUs were already produced both in Germany and Brazil. So for this, there is no specific challenge. But 1/3, roughly 50 SKUs were only produced so far in Germany, and all the CapEx plan we have started last year and implement this year is to make sure Brazil will be able to produce these SKUs that were only produced in Germany, starting with a large OD carbon pipe I mentioned earlier in my speech.
So as there is a ramp down in Germany, there is a ramp-up in Brazil. And all the tubes that we're -- Brazil was already able to produce, obviously, will now be channeled to Brazil. So any new order we are taking now is channeled to Brazil. And the new -- the few SKUs that only Germany was able to do, this will start to be produced in Brazil next year.
Operator
We'll now move to Daniel Thomson calling from BNP Paribas.
Daniel Thomson
Just one question around your expectations for the U.S. market. You've laid out your expectations for the U.S. rig count. But can you comment on what you're seeing in terms of imports, which have been elevated in recent months, and on the potential for seamless production to increase further in that market. Is hiring becoming less of a bottleneck in the Midlands in the U.S.?
Philippe Guillemot
For the U.S. market, yes, as rightly you pinpointed, there was a surge of imports end of last year. But we expect this to normalize and has started to normalize by the way [indiscernible]. It's true that the labor market is tense. So it's not that easy to ramp up capacity. We are going to improve production, not capacity, but production of our existing assets this year. At least we are ready to do it. So again, the visibility we have as you can imagine in this market is not very long. We have a sense of what Q1 and Q2 are going to be. What about H2? Nobody knows. But our assumption based on the discussion I have with my customers in the U.S. is that there will be a strong demand in H2 mirroring the fact that oil price will remain sustained by the -- yes, the fact that China economy is back at full speed, and you've seen yesterday the latest number, which seems to indicate that it's really happening.
Daniel Thomson
If I can one quick follow up on that. Obviously, we've seen U.S. OCTG pricing coming off. I wondered if you thought that, that was a result of maybe the surge in imports and sort of a temporary thing especially given your comments on going to the second half. Do you think that's temporary in the U.S. pricing? Or is that something that you expect to continue?
Philippe Guillemot
Yes. [indiscernible] mirrors the spot market. And it's clear that with a 1/3 of imports end of last year, distributors have built inventory. As you know, their fiscal year ends end of March. So they are right now entering obviously in a tight rope management of their inventory to land as best as possible. But the demand is still there. And at some point, as I said, all these flows will normalize. And this hopefully will help us maintain prices at good levels. And that's what we see through the discussion we have. As you know, we sell on program, not on spot prices. And so we are not exactly mirroring the spot prices in our pricing policy.
Operator
We'll now go to Kevin Roger from Kepler Cheuvreux with a follow-up question. [Operator Instructions] We'll now go to Mr. Baptiste Lebacq calling from ODDO.
Baptiste Lebacq
Two questions from my side. The first one is dedicated to Brazil and increased capacity. Do you see some maybe bottlenecks in some specific competencies to hire people in Brazil? And the second one is more general, but I will try. Can we -- do you think that you could be positive impacted by the inflation Reduction Act in the U.S.?
Philippe Guillemot
Yes. On Brazil, let's be clear, we have no problem to recruit talented people. By the way, there are many talented people in Brazil. They have a very good education system. And on top, we have experts from Germany who are going to be on short missions to transfer the know-how we have today in Germany to the Brazilian team. So that's how we manage obviously this transfer of know-how. As far as IRA in the U.S., it's positive for us. It's positive on the non-fossil energy projects we're working on, starting with CCUS. Carbon capture projects are definitely boosted and we see a few large oil company very now we increasing the speed with which they are launching a new CCUS project. So definitely, for us, it's a positive news as this project require high-tech seamless tubes, which we can provide. Does that answer your question?
Operator
We are going to try taking the question from Mr. Kevin Roger.
Kevin Roger
Yes. Okay. Sorry. It seems that there was a technical issue. I will try a tricky one. Sorry for that one. But -- so you have hired Connor as Head of Investor Relations in the U.S. Welcome to him. I think this is the first time that you will have someone based in the U.S., and you know that there are a lot of speculation about the future of Vallourec in... [Technical Difficulty]
Philippe Guillemot
Sorry, you have been cut. Karim, can you take care of it?
Karim Safsaf
Roger, can you hear us?
Operator
Sir, your line is open. Mr. Roger, your line is open. Could you just ask your question again, sir?
Sascha Bibert
I think we can anticipate the question.
Operator
Mr. Roger, could you please ask your question again. And I think you've dialed in with 2 lines. Can you just make sure that your phones are correctly open. Gentlemen, I just don't know the line from Mr. Roger is open on my side.
Philippe Guillemot
Okay. Well, I think I have a sense of what was the question. And if I summarize it, is whether you have any intent to move the headquarter out of France. Let's be clear. Since the beginning, since I joined, I have recruited people, and as you have seen I have recruited people from different backgrounds, different nationalities, Italian, Swedish, German, today, Connor, U.S. So what matters for me is to have the most talented team surrounding me.
Well, it happened that Connor is a U.S. citizen, will likely continue to live in the U.S. even though he will travel all over the group to obviously be fully literate on what is Vallourec. What is our, yes, massive transformation plan and how it obviously translates into the numbers we are sharing today with you today and we will share in the future. So that's how you should read it. And as far as the headquarters is concerned, let's be clear, I've managed multinational company myself for the last 25 years. And I can tell you, it's a lot easier to manage companies who are in all geographies from East to West from Paris than it is from other geographies in the world. And last and not least, as you have seen, I have implemented a much linear organization organized around 3 regions: the U.S., Brazil and what's so-called Eastern Hemisphere. I've removed 3 layers of management to do so. And as you can see through the numbers, these organizations have proven to be very, very efficient driven from the headquarters, which is a leaner headquarters in Paris. So for the time being, there is no reason to change a recipe that works.
Operator
[Operator Instructions] We'll now take question from Mr. Jean-Luc Romain from CIC Market Solutions.
Jean-Luc Romain
You just mentioned very high-end tubes for carbon capture, which is understandable due to CO2 streams. What would be the average selling price of those products compare with your reselling price of last year? Would it be higher end than your average selling price?
Philippe Guillemot
No, no. Obviously, it depends on the grade and the can of cube we are using, but yes, they are more or less at the price we have when they are used on all the applications. I think there is no -- the mix is richer. Let's be clear, the mix is richer.
Operator
Okay. We appear to have no further questions. I turn the call back to Mr. Guillemot for any additional closing remarks.
Philippe Guillemot
Okay. Again, thank you very much for attending this call. As you understand, Q4 was a turning point of the turnaround of Vallourec, and more to come. We are obviously committed to our -- to deliver our objective, one of them being to be net debt 0 by '25. And as you can see, we have started on this trajectory in Q4 and will continue to do so in 2023. And on top, obviously, we will continue to close the gap with our peers as far as the profitability of the tubes business is concerned, which is -- and remain obviously the lion's share of our revenue.
Thank you very much. And obviously, paint it in your agenda is the Capital Markets Day that will take place on September 12. Thank you very much.
Operator
Thank you so much, sir. Ladies and gentlemen, that will conclude today's conference. You may disconnect.
For further details see:
Vallourec S.A. (VLOUF) Q4 2022 Earnings Call Transcript