Q1 2021 Tenaris SA Earnings Call
[music].
Yeah.
Good day and thank you for its funding by welcome to the first quarter 2021 thing the Irish S. A earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at the time if anyone should require assistance during the conference. Please.
Press Star then zero on your thoughts don't tell the phone and they do you mind on this conference call is being recorded.
I would now like to turn the conference over to your host Speaker Giovanni said Danya head of Investor Relations. Please go ahead Sir.
Yeah.
Thank you Nora and the wells tend to deny these 2021 post quarter of comfort school.
Before we start I would like to remind you that we will be discussing forward looking information and the school and its an excellent results may vary from those price.
True.
Moving from those expressed or implied during this conference call.
With me on the call today are Paolo Rocca, our chairman and CEO Alicia among the law of Chief Financial Officer, Michelle on the Brogan, Vice Chairman and member of our board of directors.
On quarter, Vice Chairman and member of our board of directors of any input cost got price it until the Easter atmosphere of operation and Luca Zanotti President of our U S operations.
Before passing over the call to Paolo for his opening remarks, I would like to briefly comment of course somebody of results.
And.
Sales and the first quarter reached one 2 billion down 33% compared to those of the previous year, but up 5% sequentially, mainly driven by the recovery in sales and North America.
I shall be offset by lower sales in the eastern hemisphere.
Average selling prices enough tubes operating segment declined 4% compared to the corresponding quarter of stars on the 20, <unk> and 5% sequentially, mainly due to a quarter of geographic sales mix.
Our EBITDA for the quarter, which included 23 million of additional cost associate.
The two day week or stormy and Texas.
It was up 2% sequentially to Andre and 96 million reflect the cause.
The improvement and that and that's simple four months.
Our EBITDA margin was stable at around 17%.
Total net income of 106 million and benefited from a strong contribution from our investment and tenure.
During the quarter on working capital increased by 83 million, mainly due to Y ear and bank police, which reflect the increased level of activity we.
Operating cash flow of 70 me on and capital expenditures of four.
And 5 million odd feet of free cash flow amounted to $25 million.
On a positive financial position remained flat during the quarter of thought around one 1 billion.
Now I will ask Paolo to say a few words before we open the call for questions. Thank you.
And thank you Giovanni and good morning total of you.
Our first quarter results show the progress, we're making with all of our repositioning of the U S market. Despite the impact of the Texas freezer, which affected production volume as well as of course.
They didn't activity has been increasing steadily through the first part of the year.
The always remained significantly below pre pandemic levels and he is supported by current oil and gas price levels and operating cash flow.
Inventory of returning to more normal level.
And I tried I don't on an upward trend and reflecting increased demand the until about the idea of course.
We've of hot rolled coil price is making the welded pipe production and competitive at current price levels. There is an opportunity of putting that into the strengthened its position and the market and expanded the range of cost of them.
This opportunity is reinforced by the ongoing consolidation in the shale sector, where our customer has offered us the opportunity to extend our services to the newly acquired operations.
And as a result, we continue to advance our rig direct service model is the preferred way of working among the many operators and consolidate our all sort of generic title and wedge product production casing of particularly wildly.
And we are expanding of our service to reach the smaller operators.
The U S.
We will fully deploy a lot of unique ADR capability as we ramp up of our Bay City mill during the school and capacity.
Reopening our carnival planned and.
And the startup of the co op and the.
From operation and and bridge, the seamless pipe mills, and together, we feed and search to see at the finishing facilities.
We will incorporate the 1000 employee into our U S operations easier.
And we are also strengthening our position and the middle East of Starwood sacrificing the ads and the tender and 2019, we are well position and the recent weighted deep drilling tender to take the majority share of the and the saga.
This will be a two year agreement with deliveries expected to begin in 2000, and then it goes to.
And in this and other long term agreement and we have been awarded and we are building of substantial backlog of Florida and expected to exceed the $3 billion, which will be with support of significant decrease in sales in the region from 2020.
We continue to force 40 data of our positioning and growing offshore regions, such as Rajiv did weigh on our Suriname basin and.
And the black sea extending customer adoption of our specialized the angel card that.
We have just been awarded one of the million contract for the supply of pipes for it.
Our pipeline and the Black sea based on deliveries from our plant at the minute.
And the end of the.
And then in the city, which is increasingly Tony the ease of attention to the energy transition, we are a companion to our customer and <unk>.
Develop low carbon and energy businesses over the.
The past quarter, we were awarded the contract for the supply of types of for the offshore pipeline to be the intake notably for the.
The northern and large carbon transportation and storage project.
With the deliveries of expected next year.
We were also awarded a five year agreement for the supply of storage.
From the supply of storage vessels for the network of either and filling station. The challenge is rolling out in California.
Our research and problems of development teams and working with customers and industry experts of to explore the specific requirement and develop new products to support the the nations ex us.
And as I was the sales and margin recall that following the pandemic we heard of.
Focus on supporting the expansion with new digital tools aimed at reducing the lead time and inventory.
Glad to report on what are we good ex operation and strengthening of the operation of the power customers.
Denying the programming of voting Doctor system and supply chain management of agents.
Even if the pandemic subside and some region many of our operation of the counties with the impact of the pandemic is theoretically.
It is essential and we maintain our discipline to protect the health safety and wellbeing of our employees and secured our operations as well as our support for all the communities.
Following our announcement last quarter of problem.
Taylor and Mr. <unk> carbon intensity reduction targets were.
And looking closely at all of our dry and therefore, the carbonization of all of it operations.
We are advancing we've and investment that would reduce the carbon footprint and improve efficiency for large diameter pipes, and our domain and made in Italy.
We welcome the effect of that our customer are starting to look more closely at our environmental performance and we believe that we have a competitive advantage here.
We had a way of the this would be a critical area for a lot of competitiveness and the economy is and we will use of our solid financial position to strengthen our differentiation.
And a more complete picture of what we are doing that is the interesting to read the sustainability of the board that we publish and not us.
Yeah.
We are open now to.
See the.
And your question of you who may have.
If you have a question at this time please press the star and then the number one key on your Touchtone telephone. If your question has been answered or you wish taking loans yourself from the queue. Please press the pound key just a reminder.
Okay.
Thank you for your.
Participation. Please standby, while we compile the Q&A roster.
Your first question comes from the on the line of Ian Mcpherson with Siemens Your line is open.
Thank you.
Paolo as I was interested to hear about your you are bidding on the Kuwait tender.
The three year contract starting next year, how would you characterize.
The volume and the the mix of that.
Tender relative to your current business because yes.
And <unk>.
Look at your Middle East region revenues.
In 2000.
19% and 20, they were one two and one 3 billion of revenues per year and you are obviously down.
Very significantly this year, but as we as we expect the OPEC region to reopen it sounds like you're also taking share.
And I wanted to see how your expectations for the revenue level on that and that region could progress next year as you.
As you take on that contract in addition to your existing business.
Alright, thank you.
And Youre right the.
Our middle East the stadiums and down this quarter they will recover.
Silver and.
And.
Let's say much more tens of thousands range.
I think the hourly gravity and of course.
The geezer.
In view of the business.
And at midnight, Eastern and specifically of.
The way the these big substantial debt.
Thank you Paolo good morning, again and in fact as you were pointing out of this this quarter in the Middle East and Africa segment was particularly high.
No we had some and of pipelines and coating projects in Saudi and West Africa and also some.
And so and a lower OCD shipments into cut that on the Iraq.
From the activities of point of view the international rig count has bottomed at the level of around 38% versus pre pandemic levels and.
And from this low point, we expect the gradual ramp up of activity during 2021 and as you were pointing out during your question.
It needs to be led by by the OPEC countries and so while we're sales will partially recovered and the upcoming two quarters as we had assumed shipments.
The in Qatar and Iraq, why do we phase out the the previous Kuwait contract now going but if you go to do the award I took the opportunity to congratulate.
Our team and the Middle East was on an outstanding job and positioning <unk> for this important and award in Kuwait and.
Contract will be slightly above the kind of a million dollars.
Representing about 65% the share.
And <unk> tubular needs for the.
The drilling segment. The drilling is a is of critical area for our for the country to meet its gas production targets, the very demanding drilling conditions of the boys and the environment is our HB HD. So all the factors contributing to a high and.
Product mix, Okay. The contract will last probably three to three and a half of years started being as Paolo mentioned.
The early 'twenty to 'twenty two so these compounded with the with the odd Noga Award and other L. D. As these will substantially increase our level of shipments into 2021 onwards.
That's very helpful. Thank you for the detail now and I also wanted to ask it is good to see that the business is expanding you you say youre hiring 1000 people over the course of this year.
It's been we've had such extreme cyclicality recently, you are just finishing the.
The restructuring expenses from the past.
Year, plus so are there going to be any incremental.
Startup expenses.
That we should think about associated with this.
The hiring and the reactivation of of capacity that that would be separate from your your 20% EBITDA objectives for the third quarter.
And.
And Youre right. We will we are now ramping up.
Operation.
And the USA.
Responding to the increasing demand this will lead the to a significant increase in LSA, the second Q and in the queue.
The following the increase in demand.
We are indeed, the startup we are incurring in the call.
Cost of decent but.
And we added when we.
It's a mentioning sort of guiding the the level of EBITDA biology.
We are considering these include any bleed.
And the Tam of this expenditure is related to CBD that I don't think of eating now like.
On the Gainesville from the seat. So these are the.
The we're hiring people and we raised the level of innovation and the CBOE Mcadams and keep.
And debt.
We cannot and don't see that these are the substantial additional tankage on.
Some of the human expenditure would be required by the couple of the.
And and the range of the new ways that we of eds testing from idle, but I think we are.
Considering basing our forecast.
The.
The increase.
And volume and revenue on it.
And would be important and.
And these two.
To support us to respond to this increasing volume.
It is important that we execute very effectively and efficiently and be safe.
And that's what he said.
Sure.
Understood. Thank you Paolo.
Your next question comes from the line of Marc Bianchi with Cowen Your line is open.
Thank you.
And so.
And it sounds like second quarter third quarter.
Volume and sales will be pretty strong for <unk>.
North America I was curious if you could.
Perhaps quantify the expectation overall.
Or maybe volume and ASP and.
The second quarter third quarter, I am sure Theres, some uncertainty, but maybe if you could give us a little bit of a guide there would be helpful.
Well.
You'll see our results net in the coming quarters, when we characterize the mark.
A significant increase in may.
Mainly in the UA scent and none of them of any debt.
And.
And while the DVD.
And that is the we recover of that.
Slide and the on these diseases.
And blind that outside of mix.
That amount of.
Yeah.
Sales and will.
And it will be affected them more by the increase in the of the sales in the U S now and the U S.
And also price.
The.
The increase of ingot and more than offset the.
The increase that we have and the coast so.
Going on the ingredient sales and that will be significant.
And the <unk>.
Yeah.
And we expected that we are able to raise gradually.
The EBITDA margin.
But the mix between sales and the North America.
Ed.
And basically a lower price of the tongue and it.
The Morris and I think really more simple mix compared to the debt.
All of it.
<unk>.
B.
And let's say.
Containing and the increase in out of overall average price of it Tom.
Mhm, Okay. That's very helpful. Thank you.
So the target is to be around 20% for third quarter.
I know, there's some moving parts in terms of your inventory of.
Perhaps scrap and other metal costs that are perhaps below where the leading edge market prices are I'm curious, how you see things evolving beyond third quarter, just between everything we've seen and the pricing and pipe logics and the tight market that you mentioned and and also on the raw material side.
Well as I can see.
We expect hitting and the could easing and price and.
Negative and you see and the type of logic debt.
To offset what we see as being could easy now where the room at the of the ESCO.
And now referring to the hot rolled coil the real is increasing very very much but I'm, referring to the growth of drop right on or.
Now this increase in price and the great anybody logic is translating into an and crazy in our phase, but I would say only gradually because of we have constructed our rig day rate.
This is more of that.
Is basically the debt on.
On the contract and the agreement.
And with clients that have some kind of delay and refinance a portion of that.
And I have nothing drawing soul of being clear.
And price is getting into the last day to say.
But he is getting there. So this is what we expect and when the increasing and that the volume is.
And as I say will be significant debt.
You can imagine how you can kind of imagine how things we live all of the.
The EBITDA, we'd reflect of these mix between the U S and <unk>.
The rest of the world on a more complex mix and the other region.
Okay, great. Thank you Paolo.
Your next question comes from the line of Igor Levi with BT and <unk>. Your line is open.
Hey, guys.
So your raw material the raw material costs have risen quite high at this point, but your cost of goods sold surprisingly continue per ton and they continue to go down even this quarter. So could you talk about how you were able to drive that cost decrease on a per ton basis and.
What raw material costs are currently embedded in your inventory or the basically mark to the to where the market is right now.
And thank you Lee.
Sure.
And then.
The cost of the raw material.
Is it getting into our cost of goods sold only grads on it because you're on all four of <unk>.
We will see the full impact of all of the increase of the cost that we have today on.
Let's say in the basically in the third and fourth quarter, I mean getting into our cost of goods sold on whether you could add one let's.
That's the reason why I'm, saying and.
And the price increase were more than offset in absolute terms and the.
And Canadian cost clearly, but we will see the cost of debt.
Hey, good evening on the.
On a gradually the effect as I say.
And we'll be embed the cost of good feel of the.
They need and third Q and for Q.
Great.
And so.
And there is one concept.
On the absorption and any vitamins and which we are raising strong and fast.
And what level of production and also the absorptions on.
The.
It's contributing to.
And containment of our cost of goods sold.
Also you will notice that a lot of differentiation went down from the.
Fourth quarter into the first quarter because in the last two quarters of last year, we had the anticipated depreciation of Guyana and Florida.
And I think they've seen and amount of around $40 million.
The said he's no longer affecting go on the depreciation so.
You will see in the.
And the containment of the cost of goods sold also the impact of absorptions on.
And do it much higher level of production.
Great. Thank you for the color on that.
And then on the energy transition theme.
It was great to hear the youre participating on the carbon capture and hydrogen projects already.
Would you be able to comment on the type of spec of pipe that is required for those applications and how does the margin on those on that type of work compared to what you're earning on your oil and gas business.
Yes.
When the.
In the specific case all of the northern light.
And these are.
For all of the Doctor.
The complex broad of debt.
And.
I mean, the margin of not very different from the imagine that we have on complex offshore pipeline of any of these case the.
The full range of product that goes into hydrogen and development and kind of on capture or particular information on that.
The he's a.
And let's say the comp.
Complex.
Net of product to.
Face of the challenges of.
Hi, those are and and CEO of too, but in the case of ignore the night.
The let's say the math and that we expect a stimulus of the imaging alpha none of that complex.
The pipeline and social the issue here is embraced on manner and the case of H two H.
H, two hydrogen and corrosion in the case of Seo to the product that should reduce debt and breadth of them and corrosion.
Right.
And so on which.
We had a clear differentiation for instantly know STD and therefore, either organic clearly, we have and much higher and managing but when we talk about line pipe and I know the night you can compare of he's managing conflicts of cyclic.
Great very helpful and I'll turn it back.
Your next question comes from the line of minority non with Morgan Stanley. Your line is open.
Yes. Thank you.
You were alluding to this dynamics of on your prepared remarks, but just wanted to get some incremental color on this and so when we look at the price of seamless pipe versus welded pipe there at least part of the data we track about as close as they've ever been.
Certainly I think you alluded to debt leading to some market share opportunities for you, but is there of pricing tailwind from the the lower grade products pushing on the higher grade products, how should we think about that.
Sorry.
And I didn't get the versa.
Asking for the and it can even.
Repeat the last part of the questions and then yes.
Yes basically.
Is the is the pricing.
The momentum in welded which seems to be more significant than that on the seamless is there is there of delayed followed through we should expect from that or where should we think about it as more of just driving incremental market share 40 of seamless production.
And yet you're perfectly right. The if you look at the pipe logic, the welded pipe increase the since the bolt on volume.
And 45% in the case of where the 32% in the case of seamless the ingredient and the need today and when did that sort.
Reflecting the increase in hold sort of COVID-19 now this is gaining gas and the opportunity to and the veins and gaining market share in it.
Top line that are shifting from when the debt.
And two seem let's say.
Because of it.
All of the price pressure of they're facing a and the width.
So this is an opportunity for.
Gaining market share the client about the he's also the stimulus.
<unk>.
And let's say increasing price is set.
And I will say.
Youll see deeds getting into our sales.
Yeah.
Over the time following the <unk>.
And I am of the Formula.
And that are embedded in the network construct on the at any of that.
But youre right ease and opportunity to put out and we mentioned it and the opening of dramatic because it may be always hunting debt.
And he is changing especially in the North America, and the U S and in.
And Canada.
And changing the competitive lead and this is also true for some.
And the.
Pipeline.
And.
The rest of the day, John where there are alternative between seamless and the way that the increased cost of world of the worldwide of the hot rolled coil and plate worldwide debt.
The leaves some room for our large diameter seamless mean, especially from each day.
Got it that's helpful context, I was wondering if we could maybe just returned to the pricing.
Versus cost dynamic it sounds like basically the.
The pricing that you already sort of expect to receive based on your contracts as getting you already to that 20% Mark I guess the question is if we were to.
Mark raw materials to market sort of where things are today do you need to realize further price increases.
The pipe logic or whatever.
The marker you have out there in order to get to that 20% or is the 20% guidance based on what you already know you are going to receive on pricing.
It makes sense, but.
No the plan the guidance, we're giving you on the 20% related to an environment of the increase volume and sales of the Senate and the good either.
And could add.
And.
Okay.
Increasing and the ne ne and.
Sales, reflecting the debt.
Price increases and.
And that has been basically.
In the market today and we'd be addition on increasing my view and the pipe logic, but when we are guiding the 20% that we had of basically guiding on the price increases happened that day today and some margin net income than we may expect and on a substantial of the.
And the stability and pricing as part of our raw material, but.
And that will reflect in our cost of sales.
We'll see.
During the match on any of the second quarter and more substantial.
Substantially and the third and fourth DC out of the premises and on which base. He said we are guiding now and my view each.
The rigs.
Accounts continue to raise debt all of it of time.
And the and the price of cultural coil.
The remain.
The level of the present level of Illinois, EBIT lower there will be room for additional increases and the price and the price.
This is what we expect.
Got it and that's helpful. Thank you.
Yeah.
Your next question comes from the line of Alessandro Pozzi with the level of Banco Your line is open.
Small Amelia Banca that's okay.
The I was wondering.
Guidance for the St.
On a Q3 rather than Q2.
I was wondering what was the main reason for the shift and it was just to go on to that.
I was wondering what is the main reason behind the shift.
And modality in the ink.
Q2.
So just two of three or so you mentioned the much higher volumes in the.
And then we got about the same time I think the rig count is going down there on the beach and the rate of growth. So I was wondering should we look at is there and.
What type of lag in months is between cash.
And the volumes in the.
In North America. Thank you.
Thank you, Alex and I think.
I would ask.
Luca.
Give some color on how we perceive things going on and North America and this is Ed.
And let's say EBITDA and which we expect.
The larger expansion and our volume of sales for the coming quarter Luke.
And look at.
Yeah. Thanks, Paolo good morning morning of the Sandal no yes.
Yes, I mean, our focus on our base as you know and the great majority of our contracts.
And so two long term contracts and what we see as a growth is linked to the forecast of the thought of that.
And our customers are giving Gaza and the short term so.
What are you seeing the next quarter and most likely and the following it's volume that we're pretty sure. We can we can materialize now.
And the.
Rig count.
According to the small which is what I believe we expect the east to keep on the two.
The people on and trade Zynga, we may have.
And some upsides there.
However, as the Paolo already mentioned and you're going to see a significant increase of volume are from.
One from the last quarter and then let's see.
From Q2, Q on and also for Q3 to.
So Q2 of them.
As far as the the price set of concern.
Going back to what Paolo I was saying.
We believe that that in the and that also considering debt that the inventory on the ground broken on the six months.
Mark According to <unk>.
Expectation, we should see pipe logics ought to continue a whopper.
And because there is still at a very low spread between the seamless and ended the year of value and this will be and upsides of our forecast.
Thank you and on the shift of guidance on <unk>.
To the Juicy.
So I can't predict and songs.
And the reason why and when.
I mean it.
And we perceive as debt.
During.
Q2, we will see.
And it's a gradual increase that was saying the of our sales price.
Strong increase volume on that.
But we gave it a financing that we consider the more.
And let's say.
Indicating a medium term trend, but we would see part of DC and the second force.
Okay. Thank you and just the kind of.
And do you have any indication of what the EBITDA could be in Q2.
And we are moving at all.
And any vitamin and tougher and cleanest here Dave.
EBITDA would increase and absolute but in term of managing you at all if we exclude the <unk>.
And it takes us for each day.
The first of all at the AAD and the range of 19% and.
We ended the modest in terms of managing and great.
And.
The absolute tournament will increase.
Okay and is that going.
And any one offs and tissue.
For the moment, we have no indication of and nothing similar to the Texas fee that had been net of any substantial.
The.
I think that.
Unless there is it sounds like related to the to the Sunday and the outstanding disruption on that.
On the sourcing and counted at debt are more exposed that we do not see.
Particular issue that could affect one of the school.
Thank you. Thank you very much.
Your next question comes from the line of Amy Wong with UBS. Your line is open.
Good afternoon, I have a couple of questions. Please.
The focus on the short term and then one on the longer term and the short term and thinking about.
The comments about eastern hemisphere recovering in the second half, but you also typically have a third quarter of seasonal decline in your volume. So how do we think about the dynamic of the recovery and the cyclical into kind of what should we be expecting and volumes in the.
And particularly on the blip from QQ <unk> and lastly, the short term question on the longer term I just wanted to go back to your announcement a couple of months ago about reducing your carbon emission intensity by 30% by 2030.
Can you quantify the sort of investments or that you may need to make in terms of your plants and equipment and you can.
To achieve that kind of.
EBITDA reduction.
Yes.
And the first question on.
And we.
Projected increase in volume in the second Q and the third Q.
And.
And both of them independently from the season and then.
That is affecting the remainder of Europe and even.
The mix it will reflect in the strong increase in the in.
North America.
The increase also in the Europe in all of it.
Of the.
The D and that's.
Sales of components that we add of selling to non energy.
And then industrial.
And the secondary related total mill that will increase.
And debt.
Slightly less of it on.
He has done and as we see it.
That's the reason why.
The Crazy now of the order price of sale, we reflect the change and makes sense.
And he is competing vs increase.
The.
In terms of.
Kind of a reduction.
Commissioner of the 30% of reduction and our and our yield coordination we expect the.
And to invest and the range of 150, mainly on net and the next four years.
To achieve the targets the part of this investment will you realize the theater.
Particularly in the study we are the.
That's the thing do on.
And of course and.
Of Dcs.
But the.
I mean, each one of them.
The distributed the.
On the base period of time.
Vijay on what program today, we are continually and exploring.
Opportunities for.
It's a.
And.
Four and deemed it.
Additional program of projects that could reduce our got upon the full screen.
But these are willing and we have in hand, the completely for the time.
Yeah.
Okay. Thanks for that just follow up on that total of 150 is.
And investment to achieve that change what about operating costs well, let me think on when you kind of move up to that point well one of the cost per ton be substantially different or how do we think about that.
No I think the <unk> the program that we have of Ara.
Program of investments that are justified by the economics of the existing foundation.
But I mean as it is the ease of change for eastern and the price of Caterpillar and some of the age of any which will have a day then.
And then we will have to consider the addition of program based on different economics. These program and has a return and the condition and existing to the conviction.
Okay. Thank you very much and I'll turn it on it.
Your next question comes from the line of lots of Kids ski with Bank of America. Your line is open.
Alright. Thank you gentlemen, a couple of question if I may try to clarify your volume and pricing outlook for convenient store.
So on shipment.
The last two quarters, you grew shipments by about 10% every quarter when youre alluding to throw on growth in the next two quarters does it mean that growth will be higher than the 10% and if you could perhaps give us the range of the growth that would be very helpful. And then on the ally right and.
The February the trend of less favorable mix, but higher sales price.
Alright, and don't want them all.
Would it be flat of the debt.
And the outlying price for the year actually bought them and in Q1 or it's too early to say thank you.
Yes.
The weighted on them and crazy.
The volume.
Paying significant significantly higher than 10%.
And the.
I think.
Where do we see the.
The result of increasing the market and northern.
Connecticut, and increasing our market share.
And as far the price if I understand the win.
The question is I would say the.
Increase in the type of logic.
And as.
And we get into our sales price at least some delay because of the nature of it on the rig day rate agreement with the dividend guidance, but we'll get there and we expect the price pipe logic also to continue of the grease.
In the coming months.
And now what forecast.
We are not considering these additional income is substantial.
But the.
And we consider that he was head count.
That's great. Thank you Paolo and if I can squeeze and longer to you're on question.
And the lot and doing the deep.
Yeah.
<unk> market globally and has kept some plenty of consolidation threatened and cap of.
In one of the distributors and do that and the months and months.
And then the eastern Chemosphere do you see the scope for and you feel all of that.
And full consolidation of CTG globally.
And EPS and you do not.
Got it.
Willing to become a consolidate and finally.
Well this is a low.
As a medium long term view.
And the forecast we are expecting.
The let's say.
Following the energy transition, we expect the the demand and drilling for oil and gas the continuing to grow in the coming years now because we need to substitute the part of the core that is being that is use the badgley.
On a in China, and now the kind of reset and the two shifts at Atlantic City, and a way that the leaving more room for that so overall, we still expect the railing to the goal to grow in the coming five and ESA and then the PK and the M.
The demand for oil and gas of death of the dose that was.
And in this environment.
Or the market maybe of your growing put away and that we need to be managing that on a day on the long term the.
And the consolidation of what will be important in our market.
The Internet is clearly the stronger of a leading player and visa.
And financially very strong and well.
Yeah.
As we did in the past the considering that option the.
Could create the value of whatever should over there.
Related to consolidation and we wouldn't be prepared for the when.
And we see the total of 22, so it could become.
Okay, great. Thank you very much.
Your next question comes from the line of sights on sort of asking with Jefferies International Your line is open.
Hello, and thank you for taking my question.
Just and.
And we'd like to now and then.
And the environment of.
Rising input costs and.
The rising HRC prices.
And what impact would this have on your working capital investment and the coming quarters. Thank you.
And thank you for that and.
In this environment.
We will.
And of increased volume for our own operation that we win.
And.
Gradually increase our inventories, but what is most of the picking up of working capital and we'd be receivable.
On.
And I say of OSA, leading cause of use that receive all of the C will be higher in the inventor.
During the first quarter, we raise our level of event that occurred on the theory outlet and we do not expect.
And very substantially and craze.
The inventory.
Because we think that we should be able now to manage our rig day rates.
Moderator.
We the more efficient user of the.
Based on the working capital and true go to contain the increase in our.
Got it on it in other world, we expect that.
The increase of working capital less.
And the increase in Atlanta and Dallas.
And.
The deal that would be of a sofa of.
Cash flow to support.
And he is.
Now part of our coil is not one of our.
And I was I mean.
And as a component of a lot of advantage when it right at the rates out of mandate.
And just cut off.
On auto and the the labor and energy.
The increase the production there now.
And you say handset.
We see that cultural coined the enhanced high price.
And if any.
The high prices during 2021 net.
It's not the key component of our.
Got it.
Working capital.
We're more focused on seamless and the more manta.
And that.
The <unk> zone four.
Four of these.
Thank you very much.
Your next question comes from the line of <unk> Vos of with Coker and Palmer. Your line is open.
Okay.
And just.
I know that people have tried to ask this question. So maybe if I can rephrase.
Sure that I understand how you guys are thinking about <unk> and <unk>.
And it seems like when you talk about significant increases you are talking about maybe.
Hi, Alan and 10% revenue growth in Q2, and you are talking about right around 19% gross margin.
And maybe then I think in response to your questions too.
I think it it seems like you still think CQ revenues would still be high and from <unk>.
And <unk> seasonality, but EBITDA margins and only 20% and Ma.
Hi.
Are you seeing that correctly.
Yes.
Basically the it.
And as I mentioned before and the increasing.
Yes.
And the higher then.
And the 10% and the next COO and continue to growth.
And the.
The change and the makes sense.
The increase in from the price, let's say this is the gradually and the in the cost of sales keep in mind. The the absorption is an important component because India and the when we increased production and our cost of low trade with total debt is affected by the.
The impact from that set of solar.
This is containing our costs and these helping and I would imagine.
Got it.
And just on like I think <unk> talked about gross margins I meant EBITDA margin.
And in terms of working capital for the full year.
I Couldnt understand what Youre trying to say could you please repeat that and the <unk>.
Last question.
Hi.
And for the year.
Okay.
Well the working capital for the year and what I'm, saying is during 2021 net.
Working capital will increase because of the inquiries and sales.
And we absorb.
Catherine the resource is set.
And then creating sales.
And Paul but.
And probably the strongest component of the increase it will be and.
On the ingredient receivable.
Because of.
And you're creating sales.
And fly any crazy receivable last year, and EBITDA and Atlantic we were generating cash flow in a moment of the reduction of sales in 2021, and a great I'll say that we'd have sort of capital in.
And to some extent and vehicle and then.
We expect will be of fiction.
And then be able to support the higher level of sales, which net net and I mean, the input of comparing footings and will be the best.
That's helpful. Thank you for taking my questions.
Next question comes from the line of Luigi de Bellis of really create the same your line is open.
Yeah.
With me on the Argentina, and Mexico, How did you see the development of the country in the coming quarters and.
2022 of work thank you.
And thank you.
Well.
We expect that the level of.
GDP in the.
And.
South America.
Total.
And to increase.
Hello.
The Mexico.
And.
And we move on that but very gradually and that will be non southern change, even if the price of oil.
Racing is supporting the decision to continue the investment of repayments and by the private operate the comprehensive data on that.
We are expecting and Argentina the.
Negotiation of the plan got of course.
The beginning of the CA is stabilizing the reading for the gas for the next four years, so and Janet.
And we expect the the level of activity to be.
And the stable and we let Alan and PC.
The five rigs operating debt.
Continuing now.
And there could be disruption debt.
And from Nathan and rezoning.
Including the pandemic.
And this operation, but the need is what we see now when we look at the Tiger and America.
The.
We perceive.
2021, and more quality vehicle and paint and so the 2020.
And Argentina, not already the David openings and the demand there, but I think we'd be some pipeline and win.
And that also contribute to an increase of our sales.
In the and the second part and the second part of the EBITDA and even in the second and the second quarter.
And there is the.
The project in the gut.
The avian in Suriname.
And the northern pass on of the continent, very important benefit and.
And they continue on and go on.
On the Apache.
So I think.
The company had either.
Audio on developing the different feel the gain.
On a net Suriname that D. C is the important component of complex, but all of that also would be higher in the second.
2021 contains from 2000 and so the core considering Mexico.
And the net.
America.
We expect the back of the 22.
Yes.
Thank you.
Okay.
Your next question comes from the line of Alejandro Demichelis with it and they use securities. Your line is open.
Yes, good morning, gentlemen, and thank you very much for taking my question actually two questions. The first one Paolo to go back to your volume guidance Yeah.
So with the say increasing in of Cid, and North America, Youll meals going back to full capacity and so on can we actually see at some point the C. Diff.
On the call volume soft and our is going back to pre COVID-19 levels. When you were doing 800 850000 tons per quarter. That's the first question and then the second question is one of Argentina.
And how you seen any kind of impact from the social demonstrations and glaucoma.
This month.
Yes.
On the first.
And I would say debt activity and seamless weighted.
And I assume of that site.
The back pretty close to that and.
The total of 22.
Perceive of the stronger.
And let's say demand from the contract and entities and from of getting back at kind of and back of the offshore because that we perceive that the offshore project.
All of that.
Let's say.
Yes.
Moving on and we will see the set in.
Total of in 'twenty, two once fully out of probably.
Yes.
Steve and me, saying it.
The large pipeline that in.
And as he is putting and sensor.
And that in some moment in the past the worst of supporting.
Our sales of welded pipe and Brazilian debt, we do not see DC yet.
And.
Bob.
Total revenue in 2022, we will see on.
Also the level of activity in the in.
And Brazil picking up.
The more strongly so.
We're going in the direction and.
Total of 20 tools and heritage and we were able to deploy.
All of the.
And as capacity.
And the capacity that is kind of ex of acquisition and fill of the investments and realized.
The last four years.
We are avoiding debt action.
Okay.
But we.
We would see the said.
Good afternoon.
Okay.
But in terms of seamless.
You'll see that happening in 2021, and we'll close to that number in 2021 yet.
By the end of the theater by the third.
Good day.
EBITDA.
And we'd be looking at a very high level of operation.
And.
That's clear thank you.
And there are no further questions at this time I would like to turn the call back over to the speaker Giovanni for the Dania head of Investor Relations. Please go ahead Sir.
Yes.
Thank you and all right and.
Well. Thank you all for joining us and are well.
The conference call.
We hope to.
Meet you soon hopefully.
We will be out of this and we will start to meet you again.
Thank you bye.
Thank you very much to everybody and thank you.
This concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.
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And.
Moving.
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