Vallourec shares drop on profit warning
PARIS, June 11 (Reuters) - Vallourec shares fell 12 percent after the steel pipe maker warned full-year core profit would drop 10 percent as customers - mainly Brazilian state oil company Petrobras - run down inventories to save money.
The news prompted a raft of downgrades on the stock by financial analysts, with Credit Suisse and Exane BNP Paribas cutting their recommendations to "neutral" from "outperform" and JPMorgan reducing it rating to "underweight" from "neutral".
Vallourec said late on Tuesday that earnings before interest, tax, depreciation and amortisation (EBITDA) would fall by between 80 and 90 million euros in 2014 from 920 million ($1.25 billion) last year.
Petrobras would account for some 60 million euros, and the French company said that throughout Europe, Asia the Middle East and Africa, the level of orders had fallen as other exploration and production companies adjusted their inventories and delayed some tenders for premium products.
"Even though this warning seems to be a one-off, we think that the visibility on Vallourec is too low to start buying the stock again," Barclays France director Franklin Pichard said.
Shares in Vallourec were trading 12 percent lower at 34.745 euros by 0827 GMT, the top losers on the French blue-chip CAC 40 index.
Several major brokerages slashed their price targets for the stock, with Societe Generale cutting its target to 33 euros from 37 euros, with a "sell" recommendation, and JPMorgan lowering its target to 34 euros from 41 euros.
Vallourec said it would cut capital spending for this year by some 100 million euros from an initially planned 500 million to help mitigate the drop in orders as it faces a "more challenging environment".
Petrobras is undertaking a $221 billion five-year oil and gas capital investment programme but is struggling with high debts from the spending and a lack of cash flow as it waits for new production to come on stream.
Vallourec depends on Brazil for about 25 percent of its sales, on Brazilian oil and gas for about 12.5 percent, and on Petrobras itself for between 5 and 10 percent. ($1 = 0.7345 Euros) (Reporting by James Regan and Blaise Robinson, editing by Louise Heavens)
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