The General Meeting of Shareholders of Tubos Reunidos Group was held today. The accounts for financial year 2015 and all items proposed on the agenda have been approved by a large majority.
The Chairman of the Company, Pedro Abásolo, announced in his speech that “Tubos Reunidos Group has decided to initiate the development of a new Strategic Plan 2017-2020 to better compete in the future by consolidating a new business model as a global and competitive supplier of premium piping solutions”.
The current crisis, the Chairman noted, “has forced us to deviate from compliance with the quantitative targets we had set for 2017, but we shall try to achieve them when the market is back to normal, as opportunities in the medium term still exist.”
The New Model for Tubos Reunidos will be defined by the following parameters:
- Consolidated as premium products specialists in various segments of the energy sector.
- Enhancing the strategic agreement with Marubeni Itochu Steel and reaching other similar strategic agreements.
- Being structurally competitive.
- Commercially positioned at the global level in its target geographic markets.
- Industrially diversified with local presence close to the customers in growth markets, including the USA and Asia.
- Completing the transformation process from the manufacturing management model to comprehensive solutions service provider model.
In parallel to the development of this Plan, the Chairman of Tubos Reunidos stated “we are also implementing an Extraordinary Efficiency Programme to better address the context in the short term”:
- With the implementation of new measures.
- Involving the management team and the board in the development and implementation.
This Programme, in which very short term goals predominate, basically consists of four projects which contain specific measures:
- Improved revenue
- Reduction of variable and fixed expenses
- Reduced overhead
- Financing and debt management
For its part, the General Manager of Tubos Reunidos, Enrique Arriola, analysed the business performance of the company in financial year 2015 and on the first half of 2016: “Our results in 2015 were impacted by the worst crisis in the oil sector in last 40 years. We have made efforts to adapt, implementing a plan of economic and structural measures.”
The demand for OCTG piping decreased 35% worldwide and 54% in North America, reducing sales and margins of the Group, as a result of lower utilisation of production capacity.
The General Manager stated that “the implementation of a set of measures in all cost lines, along with commercial reinforcement and new offices in Mexico, Colombia, Malaysia and Dubai; increased sales of products with higher added value and new customer approvals, have mitigated, but not compensated, for the drop in sales in the oil and gas segments, especially in North America”.
The mix of higher added value products has increased from 67% to 73%.
Regarding investment, in 2015 the Group completed the Investment Plan 2012-2016, with an amount in the year of 37.4 million euros. Once the scheduled plan was completed, the Company already has an objective premium products' portfolio already developed and industrialised, having faced a technological challenge with its own R&D+i.
Tubos Reunidos's management priority still was the debt reduction target, the optimisation of working capital and strengthening its liquidity position. Thus, net financial debt was reduced by 4.5 million euros compared to 2014, amounting to 167.1 million euros as of December 2015.
Oil prices at the beginning of the year reached record lows in January, prompting the announcement of new investment cuts. Although a turnaround took place in the second quarter in the price of oil and raw materials, the semester as a whole continued to be affected by decreasing demand and high competition.
The Company implemented additional measures to adapt to this environment with the presentation of ERTES on both the Amurrio and Galindo facilities.
In May 2016 the threading activity of the new Marubeni-Itochu (MISI) plant began, enabling the Group to:
- Have a sales growth of high value-added piping manufactured in the Amurrio plant already in 2016.
- Strengthen its commercial position in top-tier customers to whom it had no access previously.
- Open new geographic markets for its new products including Europe, Africa, Middle East and Asia.
- It involves the supply of a comprehensive service offer to the end customer including among others:
In June, Tubos Reunidos signed, along with the other shareholders, an agreement with Mubea Group for the sale of all the shares of the Inauxa and EDAI companies, the latter including its subsidiaries Inaumex and Inautek. The price obtained for all of the shares was 33 million euros.
The operation is part of the objectives of the Group, established in its Strategic Plan, focusing its core business as a supplier of seamless piping solutions globally.
Tubos Reunidos works in order to compensate for the weakening market, streamlining opportunities for the new TRPT plant, with a business focus on special products out of the oil & gas sector and in better located segments such as the automotive and power generation sectors and gas production in the Middle East. Furthermore, the scope of measures for cost reduction and efficiency improvements intensifies, strengthening liquidity and financial strength.
As a result of the measures adopted, the Company expects to achieve improved results in the second half of the year.
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