Q2 2022 Tenaris SA Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
Good day, and thank you for standing by and welcome to the second quarter 2022, 10 Arris 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 that period.
Time simply press Star one one on your telephone please.
Be advised that today's conference is being recorded I would now like to hand, the conference over to Giovanni Sardana head of Investor Relations. Please go ahead.
Okay.
Thank you Carmen and welcome to Pan out as 2022 second quarter Conference call.
Before we start I would like to remind you that we will be discussing forward looking information during the call and that our actual results may vary from those expressed or implied during this call.
With me on the call today are Paolo Rocca, our chairman and CEO , Alicia <unk>, our Chief Financial Officer, Michelle MA Vogel, Vice Chairman and member of our board of Directors and MANCO that Vice Chairman and member of our board of Directors Gabriel <unk> President of our Eastern Hemisphere operations and look at their nasty price event.
U S operations.
I would like to start by mentioning that we will host an investor presentation in New York, New York Stock Exchange.
On September 30, and we hope to see many of you there.
Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results.
Our sales in the second quarter of 2022 reached $2 8 billion up 83% compared to those of the previous year and 18% sequentially, mainly led by further pricing gains in North America, a recovery of volumes in the middle East and higher sales in South America.
Average selling prices in our tube operating segment increased 46% compared to the corresponding quarter of 2021.
And 10% sequentially.
Our EBITDA was up 28% sequentially to 806 million, while our EBITDA margin was up at around 29% as higher prices more than offset increases in energy and raw material costs.
Our quarterly net income of 637 million benefit to the gain from a strong contribution from our investment in that.
Cash generated by operating activities during the quarter was $428 million.
Our free cash flow for the quarter was 353 million after capital expenditure of 74 million, while our net cash position at the end of the quarter increased to $635 million. After a dividend payment of 331 million in may.
Now I will ask Paolo to say a few words before we open the call to questions.
Thank you Giovanni and good morning to all of you.
<unk> is reporting second quarter results at a favorable moment for our industry.
Energy security is come to the forefront of public concern.
In a world, where Russian aggression has led to a dramatic reduction in flows of natural gas to Europe .
Current possible sanctions that are creating opportunity about the availability of Russian oil exports.
High energy price and slowing economic growth are starting to have an effect on demand.
A low level of investment in the oil and gas sector over the rest of it the recent here and the longer term challenge or the energy organization are dampening the near term supply response.
They didn't go to they continue to increase in North America, the middle East and other parts of the world.
Leading oil and gas producer act to increase supply to head off potential shortages and alleviate unprecedented LNG prices.
Following the market collapse induced by the pandemic.
We have ramped up our industrial and supply chain operation around the world.
Now operating at high capacity and high level of capacity utilization in many of our product lines.
Since the end of 2020, we have increased our workforce from.
19000 to 24000 employees.
We increased production volumes in our global and Docker system by 75%.
We are prepared to increase production still further in the months ahead.
These efforts are reflected in our result.
In the second quarter, we recorded an EBITDA of 800 million 11, not seen since 2009 on sales of $2 8 billion.
Our net income from continuing operation of $634 million or 23% of net sales is at a record level.
North America has been at the center of these performance and if our effort to increase production.
Our production of rolled and welded pipes, the United States.
Five times since the end of 2002 it as.
As we ramp up our production facilities.
Including our more than a U S base, its email faster than any of our competitors.
Despite the role we have taken in leading the domestic production response to the increase in U S drilling activity.
The United States Department of Commerce.
Our response to a petition from other competitors.
Started to impose preliminary antidumping duties and our OCG product imported from Mexico and Argentina in May.
We will now have to wait until November for the final determination of the case.
In this context in which our customer continued to increase their drilling activity and look to us to meet their tubular requirement. We are hiring of employees to ramp up our U S well production.
Now that the.
HRC prices.
Have fallen and the spread between pipe and hot rolled or cold coffee cost.
The production of welded pipes.
Viable.
We now have 3500 employees in our U S operation.
We continue to invest in strengthening our U S production system.
And design, we announced an agreement to acquire banter seamless pipe mill in Shreveport, Louisiana.
The agreement remains subject to the antitrust clearance from the U S authorities.
This quarter market the recovery in our sales to the Middle East. This is a region, which will be critical to meet the world energy requirement over the next year and one where we have been strengthening our position in the key market.
Saudi Arabia, the Emirates, and Qatar and Kuwait.
And the Emirates, our rig direct service is fully operational now that add in alka previous talks is being used up and is being reinforced with digital process integration.
In Saudi Arabia demand is increasing as we start to implement our recent 10 year agreement with Aramco.
Qatargas as granted as a five year extension to our agreement to supply <unk> from their for their north field expansion for which we will also deliver the pipes for the line to connect the field to the upcoming LNG train.
Great.
We have started to make shipments and a three year supply agreement for KFC, the drilling operation deep gas drilling approach.
We're now delivering pipes out to the two most important deepwater project worldwide.
In Brazil.
But as it has entrusted us with a contract to supply the seamless and welded casing for their bulls yourself pre sold.
Quarterly bandwidth.
We will supply more than 100000 tons of highly differentiated products and services over the next two years.
China, our 10 year contract with Exxon mobile to supply their deepwater exploration and development operation is now fully operational.
And both product we are supplying our collection with duplex technology, and our robust blue dock connector.
In Argentina, we received the advanced payment related to the contract to provide the 180000 tons of pipes.
Pipeline, which is required to deliver gas from the back of my head into shale development to.
To meet domestic demand requirements and provide potential opportunity for exits.
This award highlights our global capability.
In meeting fast track projects requirement.
Already gearing up to produce the pipes.
It's our CF and Confab mirrors. The pipeline is the largest of several pipelines that are required to enable investment to increase production in the world class Vaca <unk> shale formation.
We are operating in an uncertain world.
What are the relative prices of commodities.
Third in an instant and political and economic stability seems to be a distant dream.
It's.
Global production and supply chain capabilities.
And it's vast experience of operating in complex environment.
Provide a stable reference in the oil and gas industry.
Prepared to expand rapidly.
Safe and reliable solution in a fast changing landscape.
We can now.
Obtained any restaurant you may have.
On this.
Thank you and as a reminder to ask a question simply press Star one one on your telephone one moment, while we compile the Q&A roster.
We have a question from the line of Marc Bianchi with Cowen. Please go ahead. Your line is open.
Hi, Thank you.
Very strong results and the outlook is strong.
I was hopeful if we could just talk through free cash flow for the back half you said positive, but I'm just curious as we think about the bridge from EBITDA to free cash flow.
I'm wondering with the working capital outlook is and just any other items, we should be thinking about.
Thank you.
America is say our results are very strong in this quarter, we had positive cash flow.
As I mentioned in the the next semester.
We will have a different situation in the third quarter that will be.
Let's say.
The increase in sale will be limited and in the fourth quarter that we expect to be stronger.
So we expect that our working capital to build up to some extent in the third quarter, because we have to attend.
Several pipeline project.
We have too long.
Let's say supply chain from.
The purchasing it.
Of the steel.
To protect.
Production of the tide there.
Quoting and the delivery so we will have.
Demand for our working capital in the third quarter.
And then the situation will change in the fourth quarter.
In term of days.
As we saw as we said and we have said in the last conference.
We are gradually.
By the end of the year, we will be reducing the overall days of sales.
In our working capital and pay them off.
As far as the.
Capital expenditure expenditure or a concern.
As we say over all of this year.
We will be.
Basic and investing in the range of 400.
30000.
$14 million.
Yeah.
The capex of Daenerys, maybe higher in 2023 when.
We will have to strengthen some thought.
A firewall in that system.
But it.
Then coming six months.
We will be investing in the early <unk>.
The early field in Argentina, these will be properly.
Largest.
Capex.
Outcome for the next six months.
Okay. So.
A lot of.
A lot of moving pieces and all of that but it would seem that the free cash flow run rate in the back half is quite strong perhaps in the ballpark of $2 billion and your dividend is a full year dividend.
On a run rate basis of.
Just under $500 million, so ample free cash flow above the dividend.
How are you thinking about incremental return of capital to shareholders. When the stock price has not gotten much credit for the strong results that you've had.
Here's how you think about a buyback or other types of returns.
Well you know if.
As I was mentioning before even with this slight increase in our increase in working capital in the Tokyo, our free cash flow will be positive in the third quarter in the fourth quarter.
As far as dividend is concerned we will be consistent.
This is <expletive>.
Our.
Expectation in our guidance.
Okay. Thank you for that I'll turn it back.
Thank you one moment for our next question. Please.
Our next.
Comes from Connor Lynagh with Morgan Stanley Your line is open.
Yes, Thank you I.
I was wondering if you could speak about the.
The industrial logic.
Does this provide any.
New offerings is this replacing products that you are.
Hi.
Potentially importing less of as a result of the trade case or is it just a good opportunity you saw out there.
Well, thank you Conor.
I think we knew we need to.
We continue to expand our industrial base.
The United States.
Adding.
The facility for adding.
Value added to our product and also increasing our production capability.
As we mentioned in the prepared remarks.
We expanded very significantly and three hour production data at this stage.
We expect the demand in the way it is.
Dave.
We'll continue to grow and we think that would be important to expand our investor base.
Turn in terms of pure volume, but also in terms of product and in this sense.
The acquisition of <unk>.
<unk> asset.
And failure.
Will help us complementing our overall system.
Production system.
The United States.
Okay got it and just in terms of sort.
Sort of following on <unk> question on capital allocation are there other small deals.
I don't know if you call the smaller or not but you take my point non transformative.
Size deals that you could consider doing with all this cash you're generating whether it be in the U S or abroad.
Yeah.
No as you know we are always.
First of all we have.
The investment underway.
You need daily.
For instance in.
Expanding our heat treatment capability for barrels on pipe.
In the middle East for serving.
In the different facilities and strengthening the industrial capabilities, especially in value added in the heat treatment and trading.
And then Katherine production, so we have a continuous.
The flows of investment in.
In this that we can see that our bottleneck.
This also.
Let's say through for the United States that where we identified bottleneck of the needs.
<unk> that are not.
Raj size investment by data.
Let's see necessary for this this is a.
The.
Let's say.
Our.
Operational.
Basements capital investment that we have in front of us.
Then that add special projects like the.
Wind farm in Argentina.
Clearly 200 million more relevant investment.
Next year we.
We'll focus on some of the bottleneck.
On top of the normal investment too.
Yeah.
Two.
Let's say.
Mostly due to keeping meant for obsolescence and then there is also investment that we had.
That we had.
They are rising.
In our in our.
IP area for automation and for improvement.
Our system.
The business model of <unk>.
Is based on a very direct election relation with client and so.
Sure.
Information technology sector is very important in supporting digital integration client.
Formation and digital.
Development in our supply chain.
Okay.
Alright, I appreciate all the context. Thank you.
Thank you one moment for our next question. Please.
Okay.
Okay.
Our next question comes from David Anderson.
With Barclays. Please proceed.
Hi, good morning Paolo.
Good morning.
At least today you highlight the middle East is starting to grow more meaningfully, but I noticed you didn't mentioned, Saudi which is obviously an enormous driver over there. We're hearing from the service companies about rigs and contracts being mobilized, but we haven't really seen a true inflection yet I was wondering from your vantage point can you kind of tell us how you see overall activity levels in the middle East in the <unk>.
Second half of this year versus the first half and also how does that translate into pipe orders I can't imagine there's too much inventory on the ground still over there. Thank you.
Thank you David.
I will ask Gabriel pet Coke to pick up. This question then on Saudi Thank you Alberto Thank you David.
Indeed, the drilling in this is on a solid recovery path.
As you know the core OPEC countries have been increasing production in line with their increasing quarter, but if you look at the rig count they are still operating at well.
Well below pre pandemic levels. So we expect a.
Our ramp up of activity of the main countries.
Clearly, Saudi being one of the leading factors in this increase were perceiving in interaction with their customers.
This demand for our products will continue to increase.
It's a matter of fact in this quarter.
We got sizable Carlos from Saudi Aramco.
For our 10 year agreement related to premium products and also sizable Carlos.
For our five year agreement for welded products and salary. So theres no question about it about it Saudi is ramping up and we're seeing that in our order backlog of these will be seen clearly in deliveries during the first half of 2023, but that is another area that is growing as well.
As Paolo anticipated, we are in the process of extending our five year agreement.
To support.
There are <unk> for their LNG expansion plans.
There is a momentum also in UAE not knock there is momentum in KFC. So we expect.
All the core countries in the middle east to contribute.
In the growth in the second half and even in 2023.
We believe that the second quarter, there was a noticeable increase as a first step of our growing trajectory for our business in the region, we're going to have a slight reduction in the third quarter due to some punctual shipments, but another important step in the fourth quarter overall, an important increase second half versus first half.
Further growth expected.
In the first half of 2023.
So hopefully this gives you some some color on the region.
That's appreciated Gabriel thank you.
Another theme, which you touched on a couple of times so as offshore it's been a big theme. We've been hearing about this quarter I know you mentioned a couple of the big deepwater projects. Ron I was wondering beyond that what are you seeing are there changes you are seeing the offshore market is there any particular markets in particular that look like they are starting to change we're seeing rigs are starting to be contracted obviously, there's been a lot a lot of <unk>.
Talk about that I'm, just wondering if youre starting to see customers already order pipe for these drilling campaigns, which look like they're going to start next year.
Yes.
For sure there is.
The active recovery of activity in deep offshore.
On one side that we see.
Activity in Guyana and Exxon.
The areas in which we are very much present.
We have long term contracts for exploration development.
And then Pedro but assay in Brazil.
So is having.
Substantial program in which as we mentioned we also are very present with.
Complex products and advanced technology, some of which is proprietary including door place and digital integration with this customer.
For the.
Eastern Hemisphere.
Sure I will ask Gabriel to comment on the major areas in which we can expect activity to pick up.
Good. Thank you Barton, Yes, David also a choice and a strong recovery path.
Is there any fear the area that we perceive as the most promising and with more activity sub Saharan Africa.
In the recent months, we have secured two.
Important agreements.
One with Eni and one with chevron for their drilling needs in offshore Angola, Angola seems to be the country that is more and more active and faster in the recovery.
These are important projects about 40 to 50 wells to be drilled in the next three or four years.
This is a complex mix of products as well requiring our service capabilities. We're also going to expand.
Our service capabilities in the country in Angola.
It is not the only country. This is also complemented by deepwater activity in Ivory coast that is coming along for 2023 more expected activity in Congo, and some revival again in Nigeria. So overall sub Saharan Africa is an area that starts to be having a level of dynamism that we didn't have seen in the last at least six months.
Seven years.
We also expect.
And black sea to be areas.
There's going to be a promising activity large projects are being studied not sanctioned yet, but this might bring some potential upside in the offshore for 2023.
And southeast Asia is also having some areas over.
Pockets of high end activity that is interesting for us in Papua New Guinea, Australia.
Indonesia, so overall.
A positive trend and we expect a positive cycle over.
With the impact in 2023.
Loan words.
Thank you.
Our next question please.
Our next question comes from Alexandra <unk> with Mediobanca.
Good afternoon. Thank you for taking my questions.
Just wanted to go back to the guidance on <unk>.
<unk>.
You mentioned you see no it's going to be a big growth.
We're going to see.
In Q4, just wondering if you can potentially quantify whether we are talking about maybe a flat growth in Q3, and then a double digit growth in.
In Q4.
Any color around that trajectory will be very much appreciated.
Second question.
It's about prices of raw materials, so HFC scrap are they all coming down.
I was wondering when do you think so it's two parts. So first of all when do you think those could be reflected in the P&L I guess, maybe some point in 'twenty. Three maybe you had to know what is in this first half or the second half, but then also.
Why the question on an HFC coming down and well data, becoming more let's say competitive and I was wondering whether that is going to create more competition. They eventually could potentially.
Put some pressure on the pipe projects in the U S.
Thank you.
At a handler.
Well Aldo on the first question.
Okay.
We estimate that overall sales.
In.
In the second semester of 2022 will be a.
Higher than the first semester in the range of high teens.
It will be.
It is having in that range.
Overall, but distributed.
Differently, we have.
Stronger fourth quarter.
And.
More.
Let's say limited increase a small increase in the third quarter due to the stoppages that we have three stoppages in our mill.
In Europe .
Two males stopping for maintenance and the Onemain basically it in the United States and also seasonally yet.
The activity will be slightly lower in the third Q compared to the fourth but semester against the minister the increase will be in the high teens.
<unk> sales now on the second point.
Youre right the price of scrap price of commodity.
Is it going.
Going down to some extent we didn't expect.
Such a trend there maybe three months ago, we were expecting.
The price of commodity will be more stable.
Going into consideration the overall geopolitical situations, but the sense.
Of a possible.
The slowdown of the economic activity in Europe and in the states.
And also some issue in Korea, and China has driven down the price of commodities.
And Youre right this will be.
We will have an effect.
On our profit and loss, but these will be will start to have an effect.
In the fourth quarter.
This year I mean because of.
The <unk> accounting for this and the price of our stock now you should consider also that the.
The cost of energy in Europe .
Is going up in the winter.
Skyrocketing to very very high level for gas in Florida.
Power and also this effect.
It will be reflected in our in our cost overall, starting basically in the in the fourth quarter.
Of the year.
So.
These would be how.
The change in prices.
<unk>.
Metallics.
And as you will be getting to part of our of our.
No Scott obviously.
Exiting to try to minimize the impact of.
All of the energy cost.
Also trying to reposition.
As we can.
Reduction within our global system and also the government in Europe , any with any particular introducing.
Adjusting these days.
Initiatives that will reduce or limit.
The additional cost but.
Clearly this is something highly uncertain and considering the situation in Europe on the on the third question, which is the HRC is clearly the HFC is price is going down faster again, driven by the same so the economy is slowing down.
Especially in the United States and in Europe , but overall around in that area now.
And this is making it welded pipes production and the welded pipe product.
More competitive no doubt, especially in the United States we.
Ramping up our activity in our welded.
The Thai facility to take advantage of.
Of these trend by the way in half two.
Take into consideration that also our competitor.
During the same delimitate is the limiting factor today.
The ability.
Execution in these around path it depends from hiring organizing it and starting the facility.
I think we have some leeway in doing this and we are proceeding.
But also you have to keep in mind that that.
And not only.
The welding capability is limiting the production capability that are of value added.
Component like heat treatment and threading that are important and the bottleneck in this moment the United States is also a bottleneck in capacity.
So we may expect that the welded too.
Be focused on <unk> III that segment more than.
The entire range and as you know <unk> is very strong.
The more sophisticated product in the key three of the product.
Four.
The more demanding part of the column in the shales.
So.
These are out of them.
And the.
The element that you should keep in mind that Glenn.
Understand.
The impact that could have.
Enhanced or increased competition.
The way the product in the future.
That was very helpful and just a follow up on the energy cost what would be the <unk>.
Right.
The higher energy costs in terms of the EBITDA EBITA.
Well I think he is a.
The energy charter is moving wildly now in the last Ah.
One mindset you went up southern Italy, then went down from 220.
The auto.
And Matt.
In megawatts equivalent for gas down again to 180 and I went on the 90. So I think is difficult to have any method of the overall impact that this could have remember this is affecting it.
Basically exclusively.
European Operation.
And particularly our steelmaking operation, but we have some flexibility in how we organize.
Production and how we.
Let's say.
Locate production.
The defense facility.
So.
The initiative by the Italian government, which will be.
Basically a reduction of 25% and the cost of energy.
There was a.
In place until the 30 of June in my understanding will be approved and extended the starting from first of July . So this is what you would also be a factor reducing the impact on our.
Cost.
Okay. Thank you.
You very much I'll turn it back.
Thank you and ladies and gentlemen, as a reminder to ask a question. Please press star one one on your telephone.
And to present background noises, we ask that you. Please mute your line, while receiving the answer from our executive panel one moment for our next question.
We have a question from Frank Mcgann with Bank of America. Please proceed.
Yes. Thank you.
Couple questions on the.
The competitive environment I guess in a couple of regions I'm just a follow up first on the U S. You mentioned that competitors are.
Responding to add some welded capacity I was just wondering how significant you see that in <unk>.
Of volumes coming into the market over the next six to 12 months.
Secondly on Brazil.
It sounds like you've got a major contract.
For casing for boost yields and I was just wondering do you expect to get additional.
Volumes in Brazil seems to be in a way, let's say groundbreaking maybe thats too strong but.
A move that.
It was stronger than I had expected any ways and then thirdly in Colombia, which you mentioned in the release had been quite strong in the quarter and has been strong.
Over the last couple of years.
Good luck.
Seeing any signs that companies are beginning to slow down as a result of the changing government and uncertainty relative to energy policy.
Thank you.
Yes, Thank you Frank.
On the first point.
I'm thinking about them in the U S.
This is basically it will be determined one by the dynamic of the rig count in the future.
Two where the level of import.
So the country entry, but the ramp up of the world.
<unk> within the meaning that I mentioned.
And I would ask to Luca.
To give her to respond on how we see the dynamic of these three factors that are so essential for the competitive environment.
Thank you Paula Hi, Frank Let's go step by step first on the imports when you look at the imports.
And you look.
To the.
Additional input sources, you will see that they have already ramped up.
We might see something more coming Diana, but with Korea capped to another quarter, we don't.
We don't see.
We don't see an explosion of it at least.
At this stage second domestic production domestic production.
We're ramping up.
Our competitors are starting to ramp up well after we start either so they are as Paolo was mentioning before we are at an advantage and of course now that the HFC has come down and this production is now finally viable they will bring in but.
They're going to be facing the bottlenecks that we are all facing so this is not something that youre going to have.
Overnight.
Now the third dimension also the activity there.
<unk> is going up now you'll see the industry has been bringing in on an average of five rigs per week <unk> now now when you start looking at our cost on mass already talking to their egos.
So you don't see these are going ahead with the space through the rest of the year, but still we believe that activity.
It's going to be going now when you put all this together must together you end up with the inventories and this is very important because they've been through it to the underground. According to our calculation is still below four months.
Which is extremely low.
So when you put everything together, we believe we don't believe that the biologics is going to be affected in the short term.
Bye.
Elements of that that was the site.
This guy before.
I don't know if.
These answers your questions or follow up. Thank you look I think this was the main point, let me just add on the question of the level of activity frankly, I think that the.
The concern for energy security.
The need.
Yeah.
Two.
Our tour or to some extent increased level of production.
And the price of oil.
At all factor that should.
That is the level of activity.
In the United States, our full support to sustain the level of activity in the United States. So I think this is the key element to some extent energy.
Maybe.
Decoupling from the overall level of activity is what is happening today, but I think there are sound reasons for this to continue.
Why.
I think activity may.
Drive down.
HRC and the level of activity.
But the energy in this sense.
May may become.
Capital from this.
The second point is Brazil.
Right in Brazil.
We were.
And we're being successful.
Servicing our product line for <unk>.
<unk> and seamless.
Connector with.
Very interesting features robust product.
Use the deep offshore and seamless pipe.
Very complex product and we are now in that and we have a market share that is in the range of 50%.
I think we will a companion the development of.
It over us in the company.
The traditional or a company operating in Brazil and.
We will see.
Let's say.
How this will evolve over time.
The last point on Colombia.
I think it's too early to understand fully the.
Let's say, which will be the.
And then the energy policy Nuomi station and the room in the corner and confidence that trust.
It will expire in.
At eight order.
In Venezuela.
We expect.
The level of operation to increase in our sales to increase slightly over in the third at into for the fourth quarter.
That region.
Well, yes, I know it would be the whole dynamic area.
There will be also some activity in Ecuador These important for us.
But.
Colombia.
Medium term view will depend from the.
Policy debt.
And the trust that it will be establishing the policy of the new administration.
Okay, great. Thank you very much.
Okay.
One moment for our next question please.
We have a question from the line of Carsten Riek with credit Suisse. Please proceed.
Thank you very much for the opportunity.
One question only left plus all the other questions have been answered.
On the Bentler steel <unk> plant acquisition in Shreveport.
<unk>.
I'm just curious.
The Bentler Bentler actually set up the plant with a different intention also putting an electric arc furnace, but it never got to that stage, though there are quite a few state of the art.
Processing lines, but no electric arc furnace.
Is that your attention that you could actually put some money into play put in electric arc furnace in there and finished the Burke Pentland never did.
Or how do you wanted to supply the site.
With ability et cetera et cetera.
Thank you.
Thank you Catherine.
It's a good question because you know the advent of <unk>.
Did you say it.
It's very.
Recently built.
Yeah.
Facility with.
Very sophisticated technology as it goes.
Of.
Producing.
High quality product.
Today's operating.
Below the capacity of the overall capacity will be in the range of 400000.
Tons.
Types.
And that.
As you are saying.
Also.
Let's say room for adding.
It still is still show up in the same facility in the same let's say in the same in the same area and this has been a Taiwanese part of the commitment to that.
Instead of us, having and is creating employment.
And then Asia and it was part of the negotiation.
Originally did with the Louisiana outdoor it.
For sure it does.
As a value.
The permits existing may allow us if we decide to want to speed up very much.
The establishment of steel capacity in the United States, which is by the way something that we have in our agenda. Because we have we are producing now.
Substantial volume of seamless.
And welded pipe also about seamless it particularly in our plant.
And.
The only facility that we have for producing steel easing copel in the north.
We are considering.
This could be an interesting aspect of.
The site.
But.
Still.
We are now submitting our bid to the antitrust.
Waiting for a response from the antitrust.
And we will see.
We expect that this will be by by the way very welcome by the Louisiana Authority, because it will create employment activity.
Also in an area that we know quite well because.
Our company that eastern area in which we have a minority participation as a plant in Australia.
So we have a good knowledge also indirect good knowledge of the area and on the potential for the future expansion at that age.
Okay perfect. So it has got tonality and that is what you bought in that as well.
Yes. It is.
Thank you very much.
Thank you one moment for our next question. Please.
Our next question comes from Stephen <unk> with Stifel. Please go ahead.
Thanks, Good morning, gentlemen.
Yeah.
So just a question for me when I look at the EBITDA margin performance, which is clearly very healthy I've got to go back to 2013 14 to to see those level of margins and I was just curious.
Just from a big picture when you think about the business. When you think about the changes in the organization since then.
How do you think about the sustainability.
The current EBITDA margin profile and even the potential to see it move a bit higher from here.
Alright.
Thank you Steven.
This I think we will comment on this.
It is true that the.
The.
EBITDA is.
Record level compare though.
Many many years.
Go.
Net income is an absolute.
Record level or somehow so we are progressing now.
This is being driven by.
By increasing the level of rates set by the.
The strengthen of the global positioning of tinnitus, because to date and Arris is really if you think the only truly global player capable of reacting to the needs of the industry in a very uncertain and volatile environment. So.
There has been a very strong factor for us we have mail.
In many countries around the world, finishing mail from Africa Middle East.
Two cats actually Stan to different region in which we are able to accompany.
This.
The value.
<unk> is gaining value worldwide.
And pursuing.
Pursuing a strategy that no other competitor really able to pursue so in this environment.
The strength of our operation in the states the states or in Canada kind of that also.
Very importantly for us in which we have.
Facility for seamless and now again.
So.
In Latin America.
In Utah.
It's in Romania in Italy, but also.
Finishing facility.
Africa, and Middle East, which we have planned.
Saudi Arabia.
And we can provide the different countries in the region. This is contributing to the results that youll see here is an efficient system and when the demand.
Yes.
It's happening today in the United States.
We are clearly following any increasing.
Absolute EBITDA in our ratio.
This is this station today now.
Is the long term positioning.
That is giving the results now but in my view will continue to give the results.
In the future.
If.
And especially for <unk>.
The geopolitical situation then need of energy security in the Ethernet region.
Continue to be a serious concern when you look at the price of energy and Europe , you realize that the energy sector in this moment worldwide.
Is exposed to wild volatility and.
Investment in this sector.
Should recover to levels that were at the level of <unk>.
Five years ago, otherwise it will be.
Sure sure.
Of.
Conventional gas oil and.
Product that could be we require a higher level of activity.
So I am confident that gradually.
Investment in the exploration and development of the oil and gas will go back.
Maybe not to the level of peak in the past, but we'll go back to levels higher of the level of the last three years in.
In this environment I think that.
Is extraordinarily position.
Four expand his operation capturing time.
Okay.
For the reason that it was mentioned in the different regions.
Great. Thank you and just as a follow up.
We've heard from some other oil service companies.
About your about customers' concerns about supply availability in 2023 units, it's leading to.
Early discussions.
Earlier contracts earlier locking up of capacity for next year are you seeing that in any of your markets.
Well, we perceive a tension in the market, but we have been able to comply with the increasing demand of our clients.
As we say it increased.
All of the production in the states and we are continuing we will continue to expand in welded and possibly also to the extent possible in seamless.
Capacity worldwide.
There is Samsung.
We are acting and we will that the reason why in 2000, I mean in the coming quarter in 2003, we will have to.
The two invest also too.
So some of the bottleneck into this.
Recall, we are in a position to serve our clients.
There is attention this is reflective in that high level of price.
We will be investing to assure that our client.
Count on <unk> on availability of product everywhere in.
The world.
Great. Thank you.
One moment for our next question please.
Yeah.
Our next question comes from Luigi de Bellis with equity. Please go ahead.
Yes, good afternoon to everybody I have three questions. The first one is on the antidumping case.
Can you give us your feeling expectation about the final determination.
Do you expect the revision.
Of the duties.
The second question on the Argentina, how do you see the market developing in second half and the first half of 2023 of your backlog.
And the last question a follow up on the prices so.
Also I would call prices continue to decline and you mentioned it the tight supply and low level of event risk.
What is the outlook on the old CTG, but as you said looking forward, where do you expect this dynamic on the ultra rugged caused will impact the pipe logic pricing and if yes when thank.
Thank you.
Thank you Luigi on the first one we are really convinced that there is no ground for proving injury in our antidumping and this antidumping case and then if you look at the results of all of the compound operating in this sector.
C injury anyway.
On the contrary the price level went up.
We know this because we are the largest domestic manufacturer pipe. So we added the one that really should have been most affected by this and in fact, we are all.
So.
Having good results and the environment to United States, we production in the United States.
So we think that there is really no ground for these and we are very good.
Now on the second point of Argentina.
The approval of the them.
The pipeline from <unk>.
So you can always one place, let's say in the region of organization.
The first step, but he has a long.
Pipeline is very important.
It's a very important infrastructure.
Moreover.
She'll be followed by a second major pipeline and.
The new Minister of economy yesterday announced that they are actively looking for building the case for proprietary investment in this.
Argentina.
Clearly affected by high volatility and stability, but.
Energy development of Vaca <unk> is it something.
That he is shared by every car Ts and everybody and every component of.
The Argentinian.
Political and.
Alright.
So.
This development will open the door for other pipeline that are connecting to this line and allowing development of <unk>.
Oil development for export and for domestic market, but especially for export and of gas.
Yeah in winter is importing gas at prices that are sustainable because the price of LNG that worldwide.
Hi, and will be high in the next winter so.
Everybody.
I understand there are elements of investment in the energy sector.
The other pipeline will drive drilling Becca.
Okay got it.
Development of resources.
And maybe also.
Development in the downstream area.
Adding value on this and that increasing exports of the country. So I'm very confident that.
Yeah.
Whatever happens there.
The development resources is going to come on the issue of prices in total of course I will ask.
Luca.
So it gave us a view on where we see the pipe logic the pricing.
Yeah.
Moving.
Okay and if the issue is thank you Paolo hydrogen I believe that you're bringing about the very good questions, but to answer to this I would need to go back to the supply demand balance that that somewhat already talked.
Before.
And when you look at the possibility of imports.
Who can.
Coming up.
Stronger than what they are today and the speed that the domestic English, we will need to pick up production.
Given the fact that we don't see activity stalling, we see activity keep on increasing through the end of the year I believe that.
We are well positioned to see a pipe logics that needle sustainer.
The levels that that.
The range now.
Now at the certain point in time, obviously, we're going to be adding from violence, but but in the short term, we don't see the HFC.
As a single factor to be.
In NAFTA to bring these price plans.
That action.
Yeah.
Thank you Luca.
As before.
The question advantage of security is becoming more and more important in the agenda of everybody even the end of the American administration.
The cries of energy in Europe is a clear warning.
That there is no conflict between energy transition progressing.
And the need to invest in conversion in conventional oil and gas.
For supporting this study the data.
Transition.
So frankly, if also say I really believe that the coupling between the dynamic of the economy.
What should be done in the energy sector not only in 2022.
The coming quarters and positive on this.
Thank you Paolo Thank you Luca.
Thank you and that's all the time, we have for Q&A I will pass the call back to Giovanni <unk> for final remarks.
Thank you Carmen and thank you all for joining us for our conference call.
We hope to see you all in New York at the end of September . Thanks.
And with that we conclude today's conference call. Thank you for participating and you may now disconnect.
Okay.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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