Q1 2022 Tenaris SA Earnings Call
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Today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
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Good day, and thank you for standing by and welcome to the Q1 2022 generic SA earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require new further assistance. Please press star Zero I would now like to hand, the conference over to your Speaker today Giovanni said Bank. Please go ahead.
Okay.
Thank you Gigi and west come to them at least 2022 first quarter conference call.
Before we start I would like to remind you that we will be discussing forward looking information in this call and that electronics Arts may vary from those expressed or implied during this call.
With me on the call today are Paolo Rocca, our chairman and CEO of lithium envelope, our Chief Financial Officer, you several Vogel Vice Chairman and member of our board of Directors My quota Vice Chairman and member of our board of directors, Yeah, but help schools got precedent of our eastern Hemisphere operations and Luca Zanotti President of our <unk>.
S operations before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results.
Our sales in the first quarter of 2022 reached $2 4 billion doubling those of the previous year and up 15% sequentially, mainly driven by higher prices in the Americas and higher shipments of line pipe in Europe , and South America.
Average selling prices in our tubes operating segment increased 41% compared to the corresponding quarter.
One and 12% sequentially.
Our EBITDA for the quarter, which included.
$12 million of severance charges related to the discontinuation of running and basketball to keep them in business in Brazil, and the closure of NK tubes in Japan was up 30% sequentially to 627 million.
Our EBITDA margin reached 26, 5% as higher prices more than offset increases in energy and raw material costs.
During the quarter working capital increased by 609 million, mainly reflecting our crazy receivables following the increase in safe and I get inventories, partially offset by increase in trade payables.
Then they got people operating cash flow of 27 million in capital expenditure of 67 million of free cash flow for the quarter was negative 94 million.
But at the end of the quarter, our net cash position was 562 million.
Now I will ask Paolo to say a few words before we open the call to questions.
Thank you very much.
Good morning, before with you.
We are pleased to have a team here in Luxembourg before these conference call after more than two years of a pandemic.
Use the travel restriction.
Were visiting customer again, an all around to nowadays how our teams have amazing.
While we maintain the ban if he's a flexible walking ritchie.
So our last conference call the World has changed.
The Russian invasion of Crania deeply affecting the global politics and markets.
Energy markets have been disrupted.
Government, particularly in Europe , and the United States due to replace the Russians as booked any bullish financial Samsung when individuals companies and institutions.
Security of supply because it become a prime concern as prices rise along with concern about supply shortfalls at.
At the same time inflation has increased all around the world casting valves on future global growth.
Did I leave the unique positioning because the better but all around the world has an important role to play in supporting the oil and gas companies in their commitment to develop regional energy independence.
Little color value chains.
The time of supply chain disruption and economic uncertainty.
In North America, we have been quick to a companion recovery in drilling activity. Following the pandemic induced collapsed in 2002 it censored.
The recovery began we have been steadily ramping up production in our U S and the other system.
Adding 1400, new employees over the last 18 months.
We had 3100 and they play in the United States and expect to add it's probably 700 in the rest of the year.
Our more than our Bay City Mill has been operating at full capacity since March and where are you open to many of the facility we had to shut down following the outbreak of the pandemic.
You have gain head start on our competitors and this put us in a good position to respond to the requirement of our customer.
They expanded operation in the region.
That's in America is an important producer of oil and gas for the western hemisphere, developing prolific deepwater and shale resource denied.
The extensive local manufacturing and service capabilities. It has been over the years in Argentina, Brazil, Colombia and Mexico.
Please remain on the line your conference will resume shortly please remain on the line your conference will resume short.
Lee.
Yeah.
Okay.
Oh, yes.
Okay.
Pardon me speakers you may continue.
Yes, sorry for the interruption I understand that I was commenting about the Europe as Europe seeks additional supplies of natural gas to replace imports from Russia, New pipeline. So we'd have to be developed it in the Mediterranean and Black seas denied.
His extensive expertise in supplying complex fast track pipeline project from its planting entity in Brazil, we are already supplying the <unk> pipeline project. The <unk> part of the Black Sea and expect to supply the Cassiopeia pipeline project in the Straits of CCD later this year.
The middle East will be an important supplier of Florida gas throughout the region in any global <unk> has.
<unk> has developed a strong presence in the region with local manufacturing content and service capabilities. Our sales to these regions will increase significantly in the rest of the year.
The region activity increases and stocking activity comes to an end.
And I am curious switching from its previous practice of awarding quarterly tenders to rewarding long term contract by providers, including our recently awarded to any of the contract for the supply of premium products now I will say if you wore the about our first quarter results in which we pass.
A number of long standing performance milestone.
Sales were up 100% year on year.
And our EBITDA margin above 26% reached 11 last seen in 2014.
Our COVID-19, Kim came in strongly at 500 million.
And level, we have not reached this since 2008.
In addition, we had a record volume of seamless pipe shipments, which reflected the good performance of our industrial system to ramping up production in a short time.
Working capital increased during the quarter supporting our growth in sales.
For the next quarter, we expect to return to positive free cash flow and to reduce our days of operating working capital.
At the end of March we published our 2021 sustainability report.
Could you comment on the actions, we are taking to improve our sustainability, including our progress on reducing our carbon emission intensity for the first time. The main numbers in this report, including our scope three carbon emission.
Good.
Current marketing vitamins is one which plays to <unk> strength and the exceptional positioning they were built up over many years.
We are performing well and expect to exceed these results in the quarters ahead, I will stop here and pass the call for any question you may have and.
And sorry again for the disruption.
In the communication.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of Conor learning from Morgan Stanley . Your line is now open.
Yes. Thank you.
In the release you alluded to some of the concerns that we've been hearing which you can see the increase in raws input prices and it is.
Certainly it seems like you have confidence you're going to be able to offset that with pricing I guess I would just love some additional color in terms of what's driving that confidence.
And then what are you seeing in the market, that's giving you that conviction.
Thank you Conor.
Well.
First of all I think that there are two different.
And vitamin one for the Americas say, United States, Canada, and South America.
In which the imbalance between supply and demand is driving prices up we have seen the pipe logic moving.
Even the Es to database strongly and the international pricing that is also rising, but <unk> balance let's say.
It is a.
Moving.
And allowing us to raise prices, but probably at a different pace now.
Now.
What is driving our.
Our confidence in pricing.
We perceive.
The imbalance between <unk> and.
Oil industry that either I.
Aggressively addressing that.
<unk>.
The need to.
To substitute the dependency from Russia.
And our ability and the ability of our competitor in a raising level of production we are moving up more slowly.
Easy to hide that incorporate people and.
Let's say.
Ram Fab operation.
We're doing this.
I think.
Pretty effectively.
But still we perceive that there is a tension in the prices.
Sustained by the increasing cost.
Strong also due to the disruption in the supply chain from our input.
But we are able to transfer the increasing cost to our clients in these same vitamin <unk> annually.
And that we can continue to dual source.
The coming quarters.
That's helpful. Thank you.
You were alluding to the troubles ramping capacity.
Can you just speak to what Youre seeing in terms of competitor behavior, certainly we're aware that youre wrapping some of your mills in the U S.
Our competitors responding as well and what do you see the likely.
If you can put a number to it for growth and competitive capacity I'm, particularly interested in the U S. Given the shortfall there, but if you have any comments globally that would be appreciated as well.
Well globally.
Globally.
He did.
The conflict deriving from Russian invasion.
Is it creating disruption in the supply chain.
Cranium supplier and Russian supplier to some extent a.
Losing access to international markets on the other.
Syed the disruption caused by Covid in China is also to some extent affecting the global supply now.
Yeah.
And in United States.
Yeah.
The ramp up.
The panel very matched from our ability to.
Incorporate additional head count to train them and to prepare them I think our competitor as basically doing.
Similarly for data and data also raising their capacity but.
Yeah.
We have let's say limitation and our competitor will also.
In the case of United States.
As a room for increasing capacity on the welded side, but also this is to some extent condition by the high price of hot rolled coils and some of the uncertainty on the future price of oil towards voice. So he is not easy today to lock in.
The supply and price for these producer.
Luca maybe you can add.
On.
The difficulty with the C. V now were on top of any of them and then our competitor in a moment specifically in automatic yes. Thank you Paolo.
The corner yeah.
To get that production back again, you need first to bring up plants that have been idle and diseases.
Norway is easier.
Look like.
Second you need to or it could be Poland annually to train people and this is and therefore to tell it in this environment is very complicated and there is no difference.
For anybody that has tried to execute these ramp up.
The good news for houses that we started off back in October 2020, this process and so we have already been able to bring geena.
More than 1300 employees.
At this stage at Ara.
Trained and that the coronal we'd share with you on our base our expansion.
On the following seven assets that are coming in.
Just to give you a number for it as to be able to get.
13 under the employees in our facilities, we have run through 25000 prospects.
So this is the size of the endeavor that we've been in.
And I believe that that waiver is trying to do this now.
Is gonna be facing more difficulties than that there was that the first slide either and certainly we are among those.
Pat.
There is a concern and we are according to plan all of our plants are really up and running which is already good at this stage and now it's a matter of managing the additional crew that we need that to bring everything to the maximum capacity.
Thank you Luca.
Thanks, very much for the comprehensive answer.
Thank you. Our next question comes from the line of Alan Spence from Jefferies. Your line is now open.
Okay.
Thanks, and good afternoon, guys two questions I'll take them one at a time.
First one is on guidance and you've been very helpful around the revenue and margins for the second quarter and second half, but only at free cash flow comment on Q2, I'm just wondering what's preventing you from guiding more confidently around what you see free cash flow doing in the second half.
Okay.
Yes.
Well.
As we explain in our press release.
We are.
We will be reducing the use of <unk>.
Working capital in the coming quarters.
The same time the level of invoicing revenues will continue to grow so we are.
On one side, the foreign closing prices raising debt and also to some extent the volume we would increase our.
Our.
Sales on the other side.
<unk>.
We need to.
Yes.
It means that the inventory set.
And some of the road.
There are entering into operation today.
Why is that shipment from one plant to the other four finish off treatment.
And this had a route that has relatively long lead time and the required a relatively higher level of inventory in spite of these <unk>.
The number of days of liquidity becomes Amazon in the coming quarter, we expect the days to go down and as I say.
We will be able to.
Have a healthy.
Free cash flow coming from our seats.
Yes.
Got it thank you.
And second one just on the seamless market share gains I think last quarter, you talked about them being potentially more sticky.
And perhaps can be seen that we're welded declining again.
Where do you think welded could be in terms of your shipment mix in say six to 12 months once we've got those facilities back to full capacity.
Well basically we will see well the production in the United States to increase slowly while we ramp up some operational these will not be very fast Buck.
The fourth quarter of the year.
The welded component driven by the pipelines cells.
South America will kick in and we'd be very relevant in Argentina.
As opposed to supply.
The ties for the pipelines connecting <unk> to.
Scientists over the counter he said this is it.
When I add that and 80000.
The tons of five said that will be welded and supply to the market starting for the fourth quarter. So welded weathered the pipes will increase for the two reasons.
Even considering that today in the United States.
There is a scope for welded.
Pipe is not unlimited, it's more focused on the surface casing that he is required.
Clint will be supplied by weather.
Yes.
Yes.
Okay. That's really helpful. Thank you very much.
Okay.
Thank you. Our next question comes from the line of Frank Mcgann from Bank of America. Your line is now open.
Okay. Thank you very much.
I have two questions. The first one would be.
In terms of the anti dumping case what are you.
Seeing right now or I'll.
How are you thinking of that if you get a display.
Initial ruling was negative how how that will affect your business.
Question would be.
Excuse me.
A little bit bigger.
Longer term oriented.
The changes that we've seen I mean 12 months ago.
18 months ago.
Oil industry looks extraordinarily different than it does right now now.
Seems to be a new burst of life.
Im wondering how youre seeing that changing the longer term competitive landscape as well as the energy transition pace.
And how that might affect your strategy on the medium to long term.
Okay.
Thank you thank you Frank.
On the first point.
Basically you know.
Antidumping request.
In Asia <unk>.
Or.
The termination of managing and the elimination of the injury to the industry.
Frankly, I think that in these conditioning today condition.
There is no way that it could be injury could be determined.
For an industry that is of showing recorded record results.
The last quarter in the coming quarter. So I mean, this is not in our view something possible but independently.
Independently from the imagine that could be determined.
I think we can.
And we will continue to maintain.
Ramp up of our operation in the United States, which is number one because India and do we need to operate on the shorter supply line that we can have but to some extent also to continue to supply some of the product.
Could the producers.
The input from.
The other countries.
This is how we see the let's say the evolution of the situation for the antidumping.
Our number one priority the ramp up of the operation in the United States with a focus on this but we are very confident that we can continue to import.
The products that are needed.
Or that data at <unk>.
Hi.
And in which we are.
We have been present for many many Esa.
From imports now on the second point.
What I think is.
It's very clear that had the conflict and disruption in all the market, but mainly energy market first and not only energy, but also a better car for steel.
And the geopolitical impact on inflation in them.
Let's say the possible impact on GDP growth is changing all the variable that we were going to see that improve well was 18 months ago.
Also use that shifting priority.
These moment.
Europe needs to focus on how to.
Substitute or reduce dependence for oil and gas.
From Russia, and always from Russia, and there is a clear drive to strengthen.
The.
Sourcing from different countries, but also from renewable in May.
Maybe even accelerating in its utilization, but this is not the same in other region in other region the need to put the dependency could be.
Achieved by.
Maintaining.
The high level of investment in the gas and oil industry.
Would it be for LNG or four.
Directly production of oil and gas there is a consideration that some of the reserves remains trended in Russia.
For a different reason of gas and avoid and that the world needs to make up for these losses.
Okay.
In the short medium and to some extent lagging gas long term these requires that invest.
Investment in the oil industry. So the priority are moving these doesn't means that and as utilization is out of.
Yes, Jane but it means that we need to.
See that also the transition that he is the only way to allow blood utilization to head to toe.
<unk> is more sway.
Okay.
Okay. Thank you I was just wondering perhaps if you have an update on your.
Project in the Italian plants, and the hydrogen project, how that's going.
Yes.
Well we are.
Advancing you would always at pilot project, we are checking.
Testing the use of hydrogen we have different projects in which we are testing technology, we are testing technology for <unk>.
Supplying.
Yeah.
Our furnaces with hydro agenda, and these broader things going on the furnaces in fabrication and we will continue to reset with the burner that could operate.
We have gas or hydrogen and we are also proceeding in the project for production of hydrogen that could supply. These but the size of this project today is still let's say the size of a pilot project will not change the metrics what is changing the metrics out of the big investments we're doing in.
Sure.
In the wind farm at the moment in Argentina.
This out of the project that will lets.
Let's say may cause move towards our target of zero to emissions reduction.
As you know is 30% device <unk>.
The wind farm.
Oh.
Today the project in Argentina.
Analyzing.
And we are in our portfolio, what we can do.
In our <unk> now.
Independent region in which we operate that could drive either two to our dock.
Okay, great. Thank you very much.
Thank you. Our next question comes from the line.
I really ziram from JP Morgan Chase your line is now open.
Yes. Good morning, I was wondering if you could go through kind of your thoughts on the supply demand balance.
In the U S.
We think that demand could approach called.
2019 levels of 505 million tonnes per annum.
And we think.
Effective productive capacity is around $3 7 million tonnes per annum, but would love to get your thoughts on that.
And again, how you think that the.
The impact of the Russian.
Ukraine conflict could impact.
Yes.
The market here in the U S as well as internationally.
Because we did.
It has been important.
Supplier to the global <unk> market.
Thank you.
I don't want to <unk>.
And I will ask Luca.
To comment on how we see it.
The supply demand balance.
<unk>.
In the states.
Oh I see.
Frankly <unk>.
<unk>.
There is no scope of basically any operational needs.
You state that.
You can comment on the overall balance yes, I wont good afternoon good morning.
Believe that your numbers in terms of.
Consumption is.
Premium line with what we want to see we may see something.
Even at a slightly higher if.
The leaks.
Our continuing operating at this level of efficiency, let's remember now.
According to Baker Hughes, we ceased letting there's been seven onwards, but these are 700 are all high specs.
<unk> saw the consumption.
Oh, the pipe intensity is pretty high but the overall bottom line I believe that you are in the ballpark.
In terms of.
Supply.
It is difficult to come up with.
An exact number.
And why is that difficult because you don't only need to look at.
What is the rolling capacity, but also what is the heat treatment and finishing capacity so on that one I cannot help.
Too much.
Given the difficulties that you would have to put together a number but the results of the supply demand supply bass is felt on the tight.
And this is what.
We are seeing and this is all success abating as I was trying to say before up by the difficulties to ramp all these facilities up.
Maximum our maximum capacity and to conclude on Pmk TNK is zero Hall today.
The I states historically, they were covering a space.
Between two 5% to 3% of the market that.
Now they are not.
Importing any buy in.
In the United States.
Personally I don't see these changing.
In the short in the short term and so this is an additional.
Supply disruption element that needs to be taken in consideration.
In.
In all of the evaluation.
That we are doing gear also related to the antidumping.
What.
Thank you Luca.
Also had to take into consideration on the really the Russian as you.
The API is withdrawing its certification certification to Russia means and for the rationale.
Today.
Thanks.
Very difficult if not impossible to operate not only in the United States, but worldwide because of the difficulties to overcome.
<unk> financial restoration, the logistic solution reinsurance and movement of.
Of vessels in and out of Russia. So part of the disruption is for sure.
Disruption that is hitting the rationale for that was it.
One of the reason also.
That had a price.
Yeah.
Solid also outside the United States.
Yeah.
Okay, great Great and just my follow up is I was wondering if you could comment.
What youre seeing kind of inter nationally.
And your expectations as we start to see a bit more of a recovery.
International what this could mean for volumes as we come into 2020.
Three and then the margin profile that you didn't expect.
From from International.
International.
Parts of the business you did basically.
Dissipate call EBITDA margins in this 27% range in the back half, but I wanted to get some thoughts on what you're seeing internationally.
Yes, as you were saying.
Now, we're saying in all we see is that we should be able to manage that and to maintain a decent margin.
Jenny this range for the Sierra.
Also to the.
The strength.
The increase in shipments of Rome.
The Eastern Hemisphere Foundation donation of it isn't but I would ask.
Okay.
<unk> to give an overview of what can we expect from this side of our business to her. Thank you Paolo Good morning, Ireland, Yes, indeed, the drilling in the in the middle East continuous and a solid recovery path.
Something that we have anticipated we are seeing our customers increasing demand.
Something that we would see starting in the second quarter throughout the rest of the year and into 2023.
We got very good visibility with our long term agreements.
In the core countries of the middle East that give us confidence we will have a first jump starting the second quarter.
And.
Probably later in the year as the pipelines as well.
In Qatar, we joined on an improved pricing environment will also contribute to a further increase in the revenues.
Into the next year also given the geopolitics and the things about energy security Apollo was commenting before we are starting to see in the last few weeks.
Also on increased.
Or new projects related, especially to gas even the new conditions, we are expecting the projects in the black sea in the eastern Mediterranean that are still out in the study phase.
Dose.
Come on stream in the next few months, we're also starting to see in sub Saharan Africa.
New short cycle gas projects in growing one in Mozambique.
Also within renewed price of oil Angola expected activity to increase also fast track projects in Ivory coast. So there is a lot of movement and increasing demand.
And also we are engaging with our customers given the increase in raw material.
Logistics and energy.
The revision of our pricing structures, we have formulas.
But given the pace of the increases that we have suffered in the last few months.
In some cases, we are accelerating the impact of those formulas or even claiming surcharges too.
To offset some of the cost increases that might not be fully reflected in the.
In the formulas as well and certainly new offers are already consider renewing X expectations on pricing our margins.
Given that the market.
For our products is increasing strongly and we are perceiving a tighter market conditions. So this will take some time as usual in the second half year, the pace and the nurse on these price improvements are going to be seeing later, but towards the end of the year into 2023.
Both.
And pricing improvement.
Great. Thanks, a lot.
Okay.
Yeah.
Thank you. Our next question comes from the line of Marc Bianchi from Cowen. Your line is now open.
Hi, Thank you.
I was hopeful that you could provide a little more precision on the outlook for second quarter.
You talked about growth in sales higher volumes, maybe if you could help quantify that and what the.
Mix of price and volume looks like.
Yeah.
Thank you.
Well I think we will.
<unk> continue to increase our revenues in the range over the mid teens for the next quarter.
And.
Let's say margin.
We will be solid.
<unk>.
We say stable margin.
There are you know in our portfolio, we have still some or there with previous price previous to this.
Ramp up of prices.
That are phasing out the garage woody and the newly the new or that are coming in at a higher price. So we expect also to be able to increase prices.
Or are these.
I don't know exactly how.
The impact of that.
Cost will have a.
Because we don't know is there could be some disruption in the gas supply side.
Renewed over so we are cautious from these point of view there could be.
Okay.
Some disruption in this gas for all of which could be let's say something with it and we may take into consideration but.
All in all we expect increasing revenue as I say in the crazy on price.
And.
Margin in line with the margin we are having today.
Yeah.
Yeah.
And so that would put you at a at another really nice positive revision to where consensus is for second quarter and we've seen a really nice improvement in your business over the last several quarters, but it doesn't seem like the stock gets a lot of credit for that.
It goes back to maybe some of the questions that corner was asking about sort of the durability of margins and I think investors fear that youre kind of at peak margins and things could rollover I understand next couple of quarters that looks very strong, but maybe I wanted to give you the opportunity to talk about.
Maybe anything structurally changed in the business that gives you confidence in the durability of margins.
Through cycle.
Well I think that the conflate these changing the world and the oil and the energy industry has to react diseases structural change at <unk>.
Very well positioned to respond to these changes.
To support the energy industry in this repositioning that will imply.
Substitution of oil and gas coming from Russia, I think that he is very well positioned and that.
Yeah.
The present course of things that we should also.
It would be able to increase our managing to some extent the bodies that we have as alternative so to anything on that.
On the cost side, depending mostly from the cost of energy and you would offer which is a factor that we cannot really control and could lead to disruption that could be a factor and the second point is.
If.
Canadian inflation and a reaction by central Bank of Mei.
Drive down the growth this could be also something that could be let's say the factor overtime. So on one side that the fundamentals are good.
Driving guys in.
It's a higher margin level, but we have to keep in mind and let's say the the so to end it here and I imagine the market also Lisa take.
Taking this into consideration when they look at.
All of the oil and service company now.
Yep Yep. Thank you for the comments I'll turn it back.
Okay.
Thank you. Our next question comes from the line of Carsten Riek from Credit Suisse. Your line is now open.
Thank you very much a few questions left from my side, Oh to take them one by one.
The first one is again on the global uncertainties as you already highlighted we talk about a lot about the supply side, which is the easier part of the equation here.
Have you actually run few recessionary scenarios and what could that actually mean for the implication for the OTT demand if there any risk in your opinion.
On the on the demand side.
The first one.
Well.
I can tell you. This is more speculative because nobody knows but I imagine that the inflation is driving a reaction by the central Bank of these will drive Sams roll down of GDP growth.
In Europe for sure and in the rest of the World also the disruption of the Covid in China is unpredictable to today, so but still will contributor in spite of these I think that the conflict in the change of circumstances.
That is affecting the world is a long term trend in the energy industry are too rich. So in my scenario price of energy would remain strong even in an environment in which.
The world entered into a mild recession.
Okay perfect. The second question.
Sorry for coming back on this on the second half 'twenty, two guidance, which was very strong.
Do you already already have something in your order backlog, which gives you the confidence.
Is the order backlog already filling quite nicely in the second half.
Or is it just because of your anticipation of rising steel prices into supply demand.
Shifts you actually anticipate in the second half that you gave that guidance.
No no.
Really.
Very much booked.
Till the end of the year and two three.
Sorry.
As I was saying ramping up to our operation.
The.
And I.
I mean demand is there no doubt, but on this on the size on the side of the cost as I say before.
So if anything because when he answered the cost of energy in Europe .
Just a question of Mac is that is.
I'd say any disruption in the supply from <unk>.
Yeah.
These we would have an impact.
On the entire supply chain.
Demand is there.
Yeah.
Good.
The other question I have is.
Pretty much on Hickman, <unk> <unk> and <unk>.
Generally you announced boosting the production in your world. It moved here in and Hickman, but we have not seen that in the mountains in the numbers yet instead, the welded shipments actually dropped to the lowest number recorded more than a decade.
Did the expansion of volumes already stopped or has the process being postponed by the reversal of the HFC prices in North America market.
Yes.
I ask Luke to comment on these and remember that our welded component is always set.
The EBIT by two.
Side of the business the Big line pipe, mainly from Argentina, and from Brazil and the.
The year W.
The line.
Mainly in the states.
So this is sometimes he is.
I mean, he sees freelancing these trend, but Luca how do we begin ramping up on the welded high cost and good morning.
No because it was seen before.
The Hickman is nicely ramping up we actually have all the lines are operating over there now we are trying to bring up.
<unk>.
We both use already year revenue pipes.
In.
In March we are producing even more in in April and in the.
And the.
Production is currently.
He is going to come in come up according to plans.
The plant is operating.
Well we have.
<unk> done a good job in maintaining while he was idle and bringing it back up.
As I was really commenting today the main bottleneck over there, but it is not at a nice concern on AIDS worldwide.
As concern he has that.
Capability of our.
Hiring and training.
People.
That can safely and effectively operate operate the plant, but no they're not.
Papa as not being a.
Hold back.
The HFC.
As you'll see today is a moment in which there is enough space for a well to to come in.
Perfect.
One line.
The second part of the enemy.
Yep.
Sorry, one last question in your fourth quarter presentation, you highlighted.
Significant improvement in the middle Eastern Africa volumes, but revenues in the first quarter at least dropped another 13% quarter on quarter is the recovery postponed or other factors hindering currently a recovery.
And again on Liza cousin, I would ask Gabriele.
To give you an answer is correct then in the first quarter, we were pretty short.
I understand that we will be raising <unk>, yes, indeed, we are anticipating already in the previous quarters.
The recovery on the volumes in the Middle Eastern Africa would start in the second quarter. We see what we are expecting would be an important first jump second quarter and third and then further on our fourth quarter and 203, a further and further increase so this was a.
Already as plan and we confirm there.
The increasing guidance starting in the second quarter.
Perfect. Thank you very much for answering the questions.
Okay.
Yes.
Thank you. Our next question comes from the line of Alessandro closing from the lung cancer. Your line is now open.
Hi, there good afternoon.
I have a couple of questions.
The first one.
I think in your opening remarks.
You mentioned a couple of times have potential opportunities when it comes to new pipeline.
Contract.
You mentioned cash payout and bank of America can you, maybe just give US again the numbers are in terms of volumes that you expect from those opportunities that I understand that you mentioned 180000 is whether is that Q4 number or is it a number for a project. So if you can give us.
It would be more color there and also on the backend with the pipeline I was wondering is that project going ahead or is that requiring financing from the government.
Well.
Well thank.
Thank you Alessandro.
I mentioned pipeline because we have some.
Pipeline that is seamless.
The windows come in will be the lever in the coming quarter or this is.
But as I got here to some extent.
The Qatar gas.
Sean.
Some of these categories.
Partly welded also.
And then we have the South America with the.
The situation.
And the prices of LNG, Argentina that has huge resources in Vaca <unk> is moving.
He is moving on.
Investment in the infrastructure to reduce the cost of buying LNG in winter and to start the development the opportunity Forex burka gradually it will take time over time from from <unk>.
I think that they do with the pipeline.
The first one is it is only one product type.
Step in a much larger infrastructure investment I think Argentina that in this moment as you know it has a high inflation country with an agreement of monetary fund is not a situation that I would call stable in macroeconomic terms, but still I think.
The first type C financed and there are other investment in pipeline.
In increasing capacity of exports from the region and Canadian capacity until moving gas from one to the other to draw from the field.
The treatment plan to the data in that way and we are very well positioned in all of these now there will be a second stage second steps over time for sure.
That needs to developing that infrastructure for these so this is part of something that will move on so seamless.
A number of project.
Sean.
Pipeline in Argentina important and then there are something that is more let's say not so close but that we can.
Element to offer.
Eastern Mediterranean Black Sea.
And the lines that are connecting Mediterranean source of gas outside Russia with Europe is that essentially Europe will have to substitute the gas from Russia in a period of 12345 years.
As a something that we've.
Gone over time.
This in some cases are complex pipeline and see offshore like in the case of the eastern.
Some of these at a N N but.
High potential and all that.
And asset and.
Project and we are highly specialized.
Our plant in Europe and Brazil.
So.
Opportunity or short term large volume in the second half of 'twenty two.
And I think.
Important opportunity going on 23.
Thank you I believe you mentioned 180000 before was that related to a specific project.
Yes. This is the adjusted the first stage of the big but the pipeline connecting that come out of it that way if the second half of the company then there should be a second stage of the sad that he is also off of similar size that important asset.
But there are other projects under discussion now the question of financing.
We will also expand from.
Let's say the evolution of the macroeconomic.
Situation in Argentina.
Thank the refinancing for the first stage of this.
Second that.
We require.
Hey.
Yes.
That the government.
Let me cover to access that.
The financial system to be able to support the expansion of the simpler, but it should be possible considering that.
The cost of gas in Argentina.
Yeah.
Is that at all and these very competitive so in the end.
Okay.
There are many of these on that to be the DC infrastructure and the connection from Vaca <unk> without all of the international market.
Okay. Thank you.
Second one okay.
You mentioned stable margin in Q2 I guess.
That's because you have lots of uncertainties you have potential disruption of gas from Russia, you have but then there are potential antidumping case, those entity were to be removed.
Uh huh.
Would it go.
Would it be.
Uh huh.
Should we assume a further increase in margins maybe towards the 30% if we didn't have the antidumping.
We didn't have any disruption in our supply from from from Russia.
Yes.
Like that you're still increasing and cost are you seeing increasing prices for your clients.
Well, we're aiming for the he said and I think it should be possible, but wish you have to take into consideration.
A situation that is but I think the many challenges so thats.
The reason why we are saying.
And this is how we are guiding the market in D C vitamin D, which apparently.
Traditional can be more positive, but we have to take into consideration that.
That asset entity on the Ethernet is wrong.
Yeah.
Understood Alright, thank you very much I'll turn it back.
Okay.
Thank you at this time I am showing no further questions I would like to turn the call back over to Giovanni <unk> for closing remarks.
Well, sorry again for the technical problems, we had during our opening remarks.
Thank you all for joining us.
Thank you.
Yes.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.
[music].