Q3 2020 Tenaris SA Earnings Call

Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience, ladies and gentleman today's conference is scheduled to begin shortly he's going to get a standby. Thank you for your patience.

[music].

<unk> earnings conference call at this time, all participant lines are in a listen only mode. After the speakers presentation. There will be a question and answer session. That's the question. During the session you will need to press star one on your telephone.

He said why such a day's conference is being recorded if you require any further assistance. Please press star zero I would not like to hand, the conference over to your speaker today Giovanni something yeah. Thank you. Please go ahead Sir.

[music], Thank you, Judy and what Kimpton Tonight and government guarantee.

I see well kept his last conference call.

Before we start to remind you that.

Okay cool.

Cool that's our actual results may vary from those expressed in flight.

The school.

We have now become today a problem at all.

Do you have your chairman <unk>, Chief Financial Officer, Jeff <unk> light truck.

Good morning, Michael.

Nice try.

Right.

Yep.

Hi, Scott.

And your cancellations.

Because I don't see I see them on why you watch a penny.

Before passing over the call to bottom up where you get the remarks I'd like you to come my thought was that.

Oh, well sort of see it wont be as well.

<unk> percent compared to the corresponding.

Okay last year, and 18% sequentially, a screen TV rights, but actually they want to continue to decline.

I'm gonna requirements, despite the ongoing impact of the Pan Damian and government measure to contain it.

We have been able to operate effectively and our customer maintain continuity in their operation.

We have been a very efficient in our industrial operations during the quarter. Despite of the low level of production and we made good progress on our programs to reduce structural costs and inventories.

This has been and continues to be.

A very difficult time for our employees.

They are showing greater resilience and it is thanks to their commitment and effort that we were able to obtain these results.

Our communities and also be an affected but it gave us an outstanding support all along with these period.

During this time, we have deployed six.

Million dollar fund, which has been helpful in supporting local health and educational system that has been under severe stress.

We continue to advance with our strategic agenda.

In China, we have established that joint venture we've state on a ball gag about who still a large integrated dealmaker remainder Mongolia with more than seamless pipe, making facilities supply encasing and tubing to China onshore oil and gas field.

The joint venture in which we have a 60% shareholding.

Will install a premium training facility with an initial annual capacity of 40000 tons to thread that an Irish either at premium connection on ballgown with the pipes.

Long. These say we are supplying gasoline theirs as part of the project to Decarbonise part of Los Angeles by increasing the use of hydrogen zero emission fuel cell trucks.

In Europe, we are supporting bite of deployments in Germany, Netherlands, Denmark, France, and Austria as a partner to the main players involved in setting up the infrastructure of hydrogen refueling stations.

We are advancing we've systematic effort a worldwide to reduce inventory and lead time to support our direct operation to achieve this we are increasing the use of digital technology took out our supply chain operation.

This is contributing to a more efficient use of working capital and has strengthen our free cash flow generation over the past quarters in the year to date, our free cash flow is amounted to 1.2 billion.

Or 31% of Boise.

Looking forward, we expect to continue reducing our labor of inventories.

Also not to the same extent the past two quarters and maintain a positive free cash flow.

Given these results our board of directors decided that the company would make an interim dividend payment later this month.

Over the past week, a second wave of pandemic infection has truck Europe, and the United States, which is likely to slow down the recovery in the global economy, and the oil consumption as well as an investment in oil and gas drilling at David.

That didn't work her in the third quarter and maybe just to reaffirm your expectation that this is still a bottom for margins that you said fourth quarter and 21, it should be higher off of this point would love just maybe understand those moving pieces, including the cost out program that you're under.

[noise], taking thank you.

A thank you Shona as you were saying in fact, our modern improves.

Even beyond the what was the what what are you doing this fixation I would say.

There are three point here on one side that the the we were on beating.

Some I'm more relevant impact on Covid.

Contagious.

In the county in which we operate and we've our clients we anticipate some disruption.

In out of our ability to manage and death of agility and some disruption also India television to have our client but in fact.

He said he didn't happen to the extent to which.

That we we adding considering four hour unit projection.

The second point is that.

The execution.

Of of our.

Cost reduction plant.

And the the efficiency with which over industrial operation works.

The we achieve.

Target.

Improving efficiency almost in all of our facility.

And at the same time, we executed.

Pretty well.

Our planes for cost reduction and containment of cost of our people because in the end even today, we continue to have part of our workforce.

He's either suspended ora out of the plan to for reasons related to the Kobe. So we couldn't the containment of.

Costa and efficient Soho abrasion as being the preliminary the key for.

The increase in margin that we saw in the third quarter.

The last point as being that.

Demand we're being.

Having.

Some additional demand.

Not into the United States, which behave in more or less in line with our forecasts.

But.

Some other market in Latin American market.

Markets and which.

We had.

Some.

Additional volume compared well what is your expectation that has been no.

Strolling Ivy charger.

Charges or benefit in these periods between the second and the third view this is business as usual or no specific.

No particular outta.

Extort unity expenditure apart from.

The cost of.

Innovation and reducing what people and as you can see the Indy Peerman dead impairment.

The Prudential facility that we decided to close.

That would be I would say the externals unity.

Element in our in our.

The results.

That's very helpful and against a really impressive.

Resolved in terms of execution one other piece maybe get your feedback on what we think about other influences on margins would be the impact of input costs versus pricing for your products. Maybe you could just give us a little more insight into what's happening with your raw input costs on steel et cetera versus what's happening with.

<unk> logics pricing.

They'll pretty challenged and how you be able to kind of overcome some of those impacts on your margin progression.

Eh Eh on this.

We are seeing any could easing prices.

Four.

Nor cultural toys and the other you can put.

In our system.

But during this month's we streamline a very much.

Our our.

Our inventories, though so plays chain. So, Indiana, we are using two large extended inventory that we had inside and so the new prising is getting into our cost of sale very slowly and will continue to do so for a for a.

Why I mean it.

We are reducing for chasing and we are streamlining all of the inventory and the chain throw an inventory of raw material to the inventory of walk in process to the mandatory all ready for delivery.

Material.

We are not seeing the set as it being factor in this quarter any we shouldnt CD in the coming to quarter promoted. This we will have an impact later on even the volume increased and now what production level goes up gradually between ink.

In this quarter, it so dukes or so in the coming quarter as well.

Pricing. These concern you have seen that pipe logic start to move up because the industry is reflecting the cost of raw material.

Into the pricing and decent now what are you should continue.

The increase in the value of cultural cause in the United States has been based substantial and so this.

We graduated it should graduate translate into overall increase in pricing starting in North America, and we would see for the rest of the world.

Right that makes a lot of sense <unk>.

<unk> very well done thank you.

Thank you or Sean.

Thank you all our next question comes from the line of Ian Mac person confirming your line itself and.

Thank you power also congratulations much better than we had expected on upon the quarter and the outlook.

I thought that we were may be expecting third quarter revenues be down as much as 30%. They obviously sell bye.

Less than 20% do you think that there was.

Obviously, you spoke you know the economic impact in the quarter for Covid destruction said it was a little bit less bad than you would expected.

But when we look at what rig count did and then the headline <unk>.

Decline in pricing it looks like you either grew your market share or maybe benefited from restocking.

And I Wonder if you have a view one those two elements as they fed into Q3 and then my other question I just wanted to see if you might give us a little more specifics on the fourth quarter trajectory with regard to the how much improvement you expect for for revenue as well as EBITDA on the fourth quarter. Thank you.

Thank you.

Thank you for the road appreciation.

Eh.

Right, we were expecting a reduction in a sale in the range of 30% in the end and we ended up with something even lower than 20% and this is the point that I made in the first question I mean, there's been much less disruption in operation due to Covid that we were anticipating that in some market.

<unk>.

We had some reaction for it to sergeant Tina in spite of the difficulties in the economy.

I'll make a situation of Argentina recounting Argentina went up to 25 right said, we were close to zero before so that has been.

Sam positive sign there.

And also some.

Crazy market share.

The hour.

Iraq model.

Gave us some advantage I think ASB in the United States.

And that we have been able to probably to increase to some extent on like a chair.

This a combine after effect of the set the results in higher and higher sales.

For the <unk>.

We expect.

To be able to increase.

This again that imagine any not something substantial because the industries recording very slowly, but if you look at the recount in the United States.

HM.

<unk> from the 246, when tapper close to 300. So there has been a reaction that he's a reaction in the market.

And we should be able.

Four two to have an increase.

And accordingly, or so to preserve our cost efficiency hopefully we have no.

Back on the set so we should be able to increase also.

Graduating I would imagine.

Okay. So no no specifics, but what you're saying is a very moderate increases on on both points.

Alright.

There is no.

Hey.

Relevant single market action in this in the fourth quarter.

That are changing the landscape both of these salman so turn it.

The arriving from the defendant issuing including DDD.

The U S election so.

That could have an impact on some decision of talking on non smoking by the companies.

Understood. Thank you.

Thank you all our next question comes from the line of Marc Bianchi from Cowan. Your line is now then.

Thank you.

Again impressive results and I guess the question that a lotta people have with the cost reductions that you were able to achieve is how much of that is is truly structural uhm. It sounds like there isn't.

Much costs coming back in fourthquarter, but as we talk about increasing activity throughout 21 I'd be curious to hear how much you think of the cost savings that you've been able to achieve are are truly permanent.

Thank you America.

I think.

We are.

And.

Which we implemented a number of action to reduce costs that we'd stay for the future will not be let's see.

We will not be.

Getting back on these.

The reduction that has been the reduction of headcount some region concentration of operation.

The more efficient facility some other.

And there is one factor that he has the absorption that should play in our favor because the level of operation on the level of production will be higher than the fourth quarter compared to the third quarter. So this will result in a better absorption in the lower.

Court.

Factor that will help us and it may help us also in the beginning of 2021.

So I think we the cost savings that we achieve.

Yeah.

And there will be some additional go through reduction due to the debate.

On top of the set.

Our plan now we advanced on our plan, we implemented in large part of it but we still consider that it that easy 20% of our reduction plan and streamlining plan that needs to be.

Lamented.

Medium term actual like the concentration in kind.

Canada.

Variation in one disorder.

Some that are relevant in the medium term would have an impact on the wrong, but there are also option that we're taking on.

That we would have an impact into coming.

Three quarter.

That in our view will contribute to further reduction in cost.

Hello is the the the target previously was 220 million by the end of the year and it would appear that you're over and above that here in the third quarter, maybe I've got that wrong, but.

It appears to target as opposed to the 220 now can you comment on what what that new target might be and as you mentioned, there's maybe 20% remaining what would that be in dollar terms.

With the target or target.

No ethics structure, but then that are seating that we have been able to achieve in the reduction of third party construct reduction in the body of will cost.

Tool debate than a sofa so on top of what we are reducing in our structure that.

He is more or less in line with what you're saying.

I think we achieve.

Maybe something more than the number you will see because.

That I'd also factor like.

The exchange rate in the region in which we operate these adding to the reduction we would've landing at the beginning but on top of decent that he's I think the reduction that we are getting from other sources, including debated absorption and so we ended up with.

And the number grows to the number that you had mentioned.

Yep.

Thanks, very much I'll turn it back.

Thank you. Our next question comes out of a lineup Tom Zang from credit Clean. Your line is now then.

Yes, hijack thanks, very much for taking my questions Uhm I'll go to and I'll tell them one by one if that's okay. So it's just on product mix Uhm. I mean, you guys mentioned in queue to that would be a negative mix effect into Q3 and at that point, you said it would extend into queue for.

Is that still the case T C. A we can mix going into the next quarter and yeah I'll spell that.

A yes, we.

Will confirm over there were saying there has been.

A change in pricing due to a mix and we expect.

To remain you know when we talk about the product means we are also considering the different region different product until is a combination the mix say as a combination of many different factor.

And we expect that in the fourth quarter, we will maintain the meek.

The German product.

That were.

Similar to what we have.

Q.

There is no major changes not that we had some specific.

Change of a region.

Small change in between region in between product.

And these these driving.

And pricing.

Okay.

And just a second question on the containment of the costs could you remind us if any of that is linked to government eight schemes for example, in Italy or in Europe, and what the Hell because on how long does a careful.

Uhm, so any government eight four the cost savings.

It was the week.

I would say that he has no specific program beside the casting ticket up <unk>.

At 830 that Kobe.

That's the one at that as being a scheme to support to either people.

You need 30 doing the easy for two months these.

These will go on.

Now the the last degree.

I think these announcing that.

'cause integral Fiona will be extended emptied monitor any study. This is a factor that help us to support the cost to find the people is not.

Reducing two zero, but he said to me.

India region, there are some action to lead to reduce the cost of between since we have none of these in Argentina and.

What we have done.

<unk>.

Negotiated with the Union.

Suspension agreement that allow us to opiate eight and keep the other people with some reduction in cost for the boat, but no specific major program.

In other countries.

Uhm, just with Italy, <unk> would you be able to share roughly what percentage of stuff would be on that uhm I need to go out to you on a policy.

A way I can tell you they give you a figure it is there all this.

Just a moment to we have roughly 20% of our overall workforce.

And the.

Deeper and ski.

Part of this population not only in Italy Overdoor.

In Italy, and these moment in this month's production is.

Relatively high because we have some pipeline underway and these momentous so the use of cutting through as soon as is reduced to a minimum Indies.

These period.

We are almost okay.

More important in the third queue, but not now.

Okay, that's probably very helpful. Thank you I'll turn it back.

Thank you. Our next question comes from the line of thing that Anderson from Berkeley. Your line is now open.

Uhm I. Good morning, I was wondering if we could just talk a little bit about the inventory levels in the broader United States.

I think the last one last week talk the last quarter I think there was something in the neighborhood about 14 months or so I was wondering if you give us an update there and I know the lower 40, Rick has picked up a bit but looks like it's mostly private operators I'm. Just wondering in your mind do you need to see the bigger e&ps in the majors really start to resume drilling before this can start to worked out.

Thank you.

Thank you.

I think that eventually to some extent.

The veteran underground started with them, but I will ask.

<unk>.

Comment on this.

Yes. Thank you follow the morning, Dave money, everybody, yes, as far as your first question Deva on the even for Ya, we see even telling coming down.

Now we are in the range of 11 months.

Months.

As we speak that.

And we see some item <unk> relative Scott.

And the damn solve all makes a operators Italian <unk>, yes, you're right what we've seen out of his mall relatively smaller private.

Okay, I thought they thought of adding links and.

And then we need to see if they'd be good guy we start to play in the future.

And really the main thing the growth of that we have seen we have saying today.

Okay. Thank you very much and Paolo you would talked about an opportunity to in China with the JV with a spreading sorting mail uhm, China has been not really into an area, where you've looked at very closely in the past I think you've tried to stay with some more commoditize Asian markets can you just talk about others are are you sort of different your.

<unk> on the market to sort of see if this is an area you Wanna get bigger in I'm, just curious kind of what you're kind of broader strategic views are on that Asian market.

Yeah.

Our strategy for for China has been a some floor to supply.

Eh more demanding segment in the market.

Yeah.

So the project that are more complex broad that acquired complex product so to focus on these segments.

We were operating theater Mmm from Qingdao is not only oil and gas engine, though we are also manufacturing.

<unk> for the automotive business I mean is it.

A an industrial center that is producing.

Specialty products for the oil industry.

For the multiple complex project about the also for automotive now. We proceed in these a threat as you because in the agreement with vulgar and.

We would establish a premium facility.

Mongolia that will have access to.

<unk> two comp.

Complex projects <unk> and CNBC in China, we invest in China for China in the floor.

The segment.

Mmm.

We can have.

[noise] margin that are interesting.

And differentiation for this yet.

But we feel that.

We need also to combine supply of our pipes.

From coming.

Coming from different it was at the new old with with a component of types of produce locally.

These will position our set of where do we want to be in China, We will never be and will not planning to be messing with us in China to producing China for expert.

We are and I need to focus on.

The complex product niche.

Makes sense. Thank you for the clarification.

Thank you. Our next question comes from the lineup Igor Levy <unk> T. I T <unk> now open.

Hi, guys could you provide an update on the IPSCO integration and have you started to regain market share that it's called lost during the.

The process of the transaction.

Yeah. Thank you.

I would pass this too.

Luka.

But let me comment just one general comment that he's a consolidation on the way in the United States and UFC and these oil company or.

<unk>.

Sorry, the 18th and.

As I was saying the opening remarks.

This is a very important transformation that.

You know what view.

And Ah what positioning in the state that Luka you can comment on.

That's a D.

They set top of the nineties plus IPSCO in these matters.

Yeah. Thank you bottle money I I work.

As I as I get the opportunity to to say over the last conference call as well our integration we each squeeze completed I mean, we have minds hearing other thing is six Burma and this page there is no more each call for for US the only piece that still needs to be complete.

Do that using best Man thing our scheme shop facilities up in Coppell, There's gonna come a line in April My 2021, but this is the last let's say the last piece right. He's on the way and we're gonna get it.

Gone according to glance and of course, I mean as follows saying there is a consolidation and secondly, I start seeing the benefits expected funding small integration common gaming bourgeois Avenue was as well so yeah, we I imagine these as a sistema and we are heading where we were.

Hello.

Yeah.

Thank you to look at it.

But the point that Ah I think.

In the U S.

The operator that are consolidating the car.

<unk>.

Pioneer.

They'd add a moving on to shave.

Ah client with whom will work very well they are demanding.

Huh.

For a product quality for delivery for service for technical status, they like long term.

Relation and so in this consolidation our proposal for the redirect our long term relational also on a much wider.

<unk> because at all client and we also serve everywhere in the World you know, what we always giving us.

A competitive advantage.

We feel that.

We will be well positioned in the east composition, giving at also the speed shop capability carpet.

Expanding our product range we've.

<unk> jaw some technology that is.

Relevant for the shade of set.

It should be a good fit.

Great that thank you for that and.

Another question I had is on your entry into the hydrogen space and how you're experienced the technology related to your existing business. We'll give you an advantage to secure market share as hydrogen games traction as a transportation fuel.

And <unk> is it just at the beginning.

Hydrogen.

Carbon capture and storage.

Technology.

G. After amount I mean.

That is in a number of application that requires large infrastructure imagine that if the world move for instance in that will sales for truck transportation into a more extended use of hydro <unk>.

And then there will be an infrastructure that needs to be built using protection that it quite pace that acquired versus hydrogen has relatively.

Low energy Compton's by volume that so in the end needs extreme pressure. So we will need to operate versus with very high pressure exposed to risk of brittle Frank in the steel so <unk> technology that we develop and now.

For the oil and gas industry it could be apply to the deployment of product that our aim for decent restructure today. This is.

Still very limited, but to the extent to each of the world move on these energy transition in a much more active ways.

It won't need to set up a structure for the set.

We will have an.

With a segment that will be good or.

And he's growing fast these segments.

I mean.

Irani here, we are continually growing still.

Is this technology.

Is.

Transforming the main the governance with dignity seizure on the infrastructure support so but.

But we we see we need to be present to develop the product to assure the client.

They can soar technical programme of our product and feel too transportation pressure on it so he's demanding.

Hydrogen pressure at a high so did the steel we are available for this.

May be used for for expanding our share in this segment.

Great. Thank you very much I'll turn it back.

Thank you. Our next question comes from the line of neck constant Pankey from X same. Your line is now then.

Hi, guys and thank you for taking my question.

I mean I must be <unk>.

And bowling I appreciate there's a note of uncertainty even covid.

Some of the U S services companies to talk to you in the industry is talking about and more meaningful recovery that he comes in the U S potentially in the second half.

<unk> based on the inventory inventory if overhand situation at the moment.

<unk> do we think at this point in 2021 W. Stocks, you saved picking up meaningfulness, what could potentially lost 30 count that we're gonna see slightly ahead about what are your thoughts on all the profession timing on that.

Well.

So what we know that these leveled off.

Re operation.

Will not be enough to.

Sure continuity of oil production in the states at the level of.

11 million by our other day.

I mean, what do we know that in some moment mmm.

30 of drill.

Uncompleted way.

Go down.

The level of Riggs should come App.

A just to support the level of operation in the states that allow level of production at the age of 10 to 11 million about it a day so.

<unk> will go up.

My view now the question of timing.

Is it rented by Covid bye.

It could be also influenced by political decision.

Let me ask a look at.

In Israel.

The scenario for gradual increase.

The one that we see four during 2002 as well.

Yes, Paul all thank you no I I I believe I don't have much to answer for you old out to your explanation that.

Of course, there are certain things that buzzer as we saw that is it and number of a doctor that that's coming down and I'm able to sustain a little people actually on April 2021, but longer Paramount. According to all the houses that we see we should have and he got the Kappa emailed it to sustain that.

The production 11 in the levels that that you said that so I I'm fully alive will you said that now.

Now the dining out with a bang go on how they might be more than that whether or not that is gonna happen, so and I won't be nearly as a matter of time, but we want to see it and go over to him and in your account.

And the U S.

Thank you.

[laughter].

Thank you. Our next question comes on the line of Connor.

Hum Morgan Stanley. Your line is now open.

Yeah. Thanks, I was wondering if we could discuss the capacity closure Canada.

Where the must much of your capacities idled at the moment, but what what sort of drove the decision to permanently closed capacity there and if we remain in a relatively similar.

Improving somewhat but not going substantially higher environment should we think about more capacity closures from you or do you feel good with weird capacity is right now.

A what.

Thank you.

The decision and kind of is driven by the need to streamline our industrial operation we hit in Canada, basically three facility and.

An extensive network of.

Yachts and service point.

But to keep two facility one in so some murray the other one and.

Calgary in this condition.

Is adding to our fixed costs and by moving because what we are doing basic ability we are moving production of.

When that product to also to salsa Murray revamping.

Cavemanned, so to make it to transform it into.

Very high state of the art performance facility streamlining the layout in a way that we have high productivity and installing into a space that we have and then go to this.

Rebooting, the fixed costs maintenance costs and so in one facility and keeping is Q4, what other facility for accessory and sometimes.

Production.

<unk>.

Cid Aperitive.

We should be able to reduce our costs.

And at.

At the same time, we are bringing their facility closer to the major source of cultural court.

All Matthew Dofasco the plan that are operating in the eastern part of Canada. So.

In our view, we have savings from a production point of view, we are saving lives structural point, we are updating.

And we are improving on logistics, that's makes sense for the marketing ratio. It sure is increasing our big direct is very high above 95.

My present.

And then we are.

Very keen in.

Eh.

Strengthening our position, Canada, so more than a closer to capacity.

Is it re positioning of capacity in a difference at that but that we expect to be more efficient what how can I say more competitive.

Okay got it that's that's helpful. I I guess the we just got this briefly earlier and just regards to China, but you know it. It seems like you guys have have had some niche opportunities in Russia, Saudi Arabia now China are there any other market for that you feel you can sort of take advantage of of.

Current market conditions and increase your foothold or otherwise expand your capacity is there anything we should be watching out for on that front over the next couple of years there.

Well.

You know you mentioned some of these but our desk.

But.

To give.

Give a brief view of.

The move from an industrial and commercial point of view and our deployment in the east and let me see it because it's a pretty large our footprint is pretty impressive and all of the region governance.

Yeah. Thank you <unk> I'm, calling on for your question Indeed, our footprint, maybe three <unk> Street. The large we mentioned today that announcement of of the new J V. China that works on Blumenthal, where procedure I need <unk>.

Well, what if I could you be into now.

Don't get on the bus about Russia.

Right now slowing down one would be the deployment of that project on.

On Siberia, but they're pretty much for me to.

Go ahead done that a great <unk> complementing minutes. So I have to do that we have cats, so probably in Russia maybe.

Maybe the deep these one of the most of the rest of your guns area yearly we see that the recount in January these taken care of local markets and bold, but I've gone down 30.

30%.

Versus free Kobe levels.

<unk>.

The middle East that you, a Saudi Arabia, Kuwait cut batter.

Yeah, B B C has reduce much less and saying the range of 15% to 20%.

So decided yet where we have procedure and we have a manufactured in February Libya. We have recently completed this quarter. The New service Center you eat cause we bear.

For the increase of the <unk> the government that we have here.

<unk>.

In the late there next year, we're going to.

So I'm gonna be going nowhere, new for any facility for payment connections you a.

So besides time would be against that we are we are seeing some other idiot.

Have been impacted.

Much more that has been important what else can they possibly you'd acts like somebody that maybe where the recount have plummeted.

About 60 70 it has been.

So bored the guidance you poor thing I do enjoy the 20th.

But unfortunately, the pay so cute minutes, we go down into.

2021, also guess I'd be standing so Nader that we mentioned before we had to make.

So are there any first half of 2020.

<unk> you too there.

Okay policies on productions of.

Alright, so as well our facility and we have that we've got that you've done where look I've gone ahead and is very important b O, but anything at the local level of activity for the next few months.

So we're looking at the opportunities clearly with a downturn opportunities happier we are pretty much.

For instance, in every bathing and then I'll see it looks I had in Africa.

Centres in in in Ghana.

Oh, but I didn't go to <unk> in a G D I put it in Nigeria as well so we are pretty much having now.

But I'm much for instance.

Mm mm.

I'm ready to take on on opportunities I would not be still as much further what do you think that I'm I'm gonna say that.

Tigers he'd be as part of the word on a b.

Slower than what we've seen there was something to foster plays up North America, either up or down.

So for now we have been having some resilience on the sheep and expect that to continue the fourth quarter.

Especially for the middle East, but.

But not sure do you have a new <unk>.

On the back no got just two and your C. V V 11th we will.

We will see a slowdown into the early 2021.

Yeah. Thank you <unk> Avenue.

You were asking if if we are moving in with our footprint.

The chain well in some markets like for instance in Argentina. We are now performing call to service I mean, we look for Fortuity to enhance our service component and in some cases, we have piloted understanding.

How this could be done in order to be included in our supply chain innovate effective way.

Thank you very much.

Thank you. Our next question comes from the line I'm Gonna send a policy for many Ivanka. Your line is now then.

Hi, there I. Thank you for taking my end questions has too.

Defense will need some ashville I think for me. It is surprising <unk> was that probably need to take a short was positive even before the walkie capital putting the opposition aside I think that was possible, possibly comes to Capex come down Pylos and I was wondering as we go into 2021, what sort of Capex do.

You see it just bare minimum maintenance Capex, you expect to make a few more investments and as a result, and you on what the free cash flow maybe.

2021 also because I think we're gonna see it working capital built eat next year.

Well thank you.

A when they did it.

Castro is you are seeing a.

<unk>.

A very positive.

And these quarters because of the reduction in inventory, we will continue to reduce inventor because if we are willing to reducing changes in the way we programming that did utilization of our chain. So there is a structural change it in the lead time and the the level.

Of inventory that we think we need to define level of operation. So the digitalization of the change should the give us the.

The reduction of the time.

Overtime. So we will continue on.

Stalker reduction.

At the lower face because when they production increase.

Inevitably it has to.

Increase to authenticate Demov Capex this year, we will be spending around $200 million.

Who would into those are the 20, we think that stealing 2021.

The overall expenditure we stay in the range of 106.

$70 million.

So a slightly lower than in 2020, without considering special project or something but.

Including.

The kind of.

Did a good day.

<unk> in Canada, any China, but without any other let's say.

Outside obviously that control before I do that though.

Yeah. So we shouldn't expect any you have been working capital. Thank you wanted on queue to next year.

A yes.

If.

Let's say to a lower level, but we will have.

Some additional construal coming from the work we've got it.

Okay.

My second question is I'm not cute for what sort of like one of my service charges do expect if any nah in queue for and what could be the improvement in that it would be done lodging.

Going to keep for.

Eight.

Is.

In the queue for we're going to have.

Steven is expenses in the range of two media.

There will be a charge of us evidence expediency cute.

Without these stone the term of adjusted EBITDA, we will be in the middle.

This is what we expected.

For the fourth quarter.

Okay. That's been hassled. Thank you.

Thank you. Thank you.

Thank you. Our next question comes from the lineup Frank Mccann from Bank of America. Your line is now then.

Uhm, yes. It is.

Typically in in periods like this you have.

Been able to augment your portfolio I'm Gonna know, you've just announced uhm the Mongolia plant, but looking at acquisitions I was just wondering obviously, you've just incorporate at school as well, but are there are other assets that you would look at it and this kind of environment given the strength of your balance sheet and.

And perhaps some some distressed assets that might be available at attractive prices.

Well.

Eh, we're always sad considering strategic option that okay, and and what we know here is that.

The industry in fits of a long term and your energy renovation.

Our client will consolidate we're really fine.

The way they operate they would react to these and you'll know these anywhere.

Also the service industry is doing this you'll see the movement.

Different company, taking and.

We feel that we also have to.

Look around the keep for financial strength, I think we can leverage on our financial drank too.

Stand how to position of the company that TG Cody for the long run in the process of energy utilization. We have two can see the different adoption and we will be I mean, now what a financial position give us.

Degree of Leabo freedom too.

Can see the.

Strategic deploy.

Deployment throw a physician or expansion.

That will position as it is.

Is it clearly that.

Now what industry for the future.

Okay. If I could follow up also just in terms of EBITDA margins following up with the last.

Question, the <unk> or color the.

If you're in the mid teens in the in the fourth quarter and did you looking out towards 2021, I think there'd been some expectation that she doesn't 21 would remain challenging given that you're starting from a lower base in the second half from the higher base that you had in the in the first half of 2020, particularly the first quarter are you thinking now the 2021.

Could be.

A stronger union potentially than 2020, given the pick up your you expect in in some markets.

A as I was mentioning we expect.

<unk>.

<unk>.

To increase his lowly we will for sure, but what it costs.

Reduction.

They said it will depend sir from the.

The dynamics of the market.

This is our view that these will be that equal weighting slowly even during the first half of 2021.

Okay. Thank you very much.

Thank you. Our next question comes from the lineup Kevin Roger partial your line is now.

Yes, good evening, everyone. Thanks for taking the the Christian to just one for me is really cheap too busy <unk> cash style. So you have one on one <unk> right now how do you expect to be free cashflow put the T V. In the coming welfare. So I was wondering what's your mindset.

Do you use them to discuss by Oh do you concede they'll discuss do you want to to keep them. Many moment have enough cash to you want to increase the reason to show <unk>. So what's your what's your mindset hold on <unk>. Please.

When a.

We have a long term view for dinner.

Denarius, we'd always considering the traditional leave the show a shed older deposited strategic positioning of the company on the longer on Indiana generalization.

The the the the net.

Financial position of tenacity.

A.

It's a very strong competitive advantage of in these long term.

<unk> and planning for the company that could be opportunity that comes out that he had the chance we can maintain a table.

Predictable relation with our shut older.

And who can also face.

<unk>.

Let's say a dresser opportunity.

Risk if any so D C and the criteria that I think.

The board and it should older is adopting in.

[noise] in defining priorities for the long term development of the company.

Okay. Okay. Thanks.

Thank you at this time I'm showing no further questions I would like to turn the call back all the channels on it to have a <unk> a closing remark.

Well, thank you D G and it's all for today. Thank you <unk> speak so thanks.

Okay. Thank you very much to everybody. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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