Q3 2022 Tenaris SA Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Yeah.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Yeah.
Good day and thank you for standing by welcome to the Q3 2022 generic 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.
Ask a question during the session you will need to 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 your speaker today Giovanni sort of Danya. Please go ahead.
Thank you Gigi and welcome to <unk> 2822 third quarter Conference call.
Before we start I would like to remind you that we will be discussing forward looking information in the call.
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, Guillermo Vogel, Vice Chairman and member of our board of Directors, Mark Graff, Vice Chairman and member of our board of Directors Gabriel <unk> President of our Eastern Hemisphere operations 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 our quarterly results.
Our sales in the third quarter of 2022 reached almost 3 billion up 70% compared with those of the previous year and 6% sequentially.
Mainly led by further pricing gains, which more than offset lower shipments, which were affected by lower deliveries to pipeline projects and seasonal factors.
Average selling prices in our tubes operating segment increased 54% compared to the corresponding quarter of 2021 and 12% sequentially.
Our EBITDA was up 17% sequentially to $946 million, while our EBITDA margin was up at around 32% as higher prices more than offset increases in energy and raw material costs.
Sure.
Our quarterly net income of 606 million was slightly down sequentially as it was affected by non operating items, which impacted the results from our equity participation in <unk>.
And in our financial expenses.
Cash generated by operating activities during the quarter was $242 million.
Our free cash flow for the quarter was <unk> hundred.
$13 million after capital expenditure of $129 million.
While our net cash position at the end of the quarter increased to $700 million.
Our board of directors approved the payment of an interim dividend of 17 cents per share or 34 cents per ADR to be paid on November 23rd.
The interim dividend is up 30% compared to the interim dividend, we paid last year.
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.
At the end of September we celebrated the 20th.
<unk> on the New York Stock exchange.
And the closing date.
The following day, we held an Investor day, where we presented our view that an increasing investment will be needed in energy and that all sources will be needed to meet the growing demand for energy there will a companion population and GDP growth in the long run.
This includes the investments in oil and gas, which in recent year has fallen behind what is required to maintain production in a sector that still account for the majority of primary energy demand.
We highlighted the transformation.
He has made over the past 20 years.
And we have grown to become a company that is uniquely position to service the tubular need of our sector globally in the east ahead, and how the current environment, we are reaching record levels in our financial results.
Our third quarter results.
The sales and margin improvements in.
We have shown over the previous 18 months.
With an EBITDA of $946 million and the margin above 30.
We are confident that we can continue to build on these results in the quarter ahead.
Last week, the International Trade Commission in the United States, the terming that CTG imports from certain countries, including Argentina.
Echo.
Have enjoyed the domestic industry.
As the largest producer and investor in the domestic industry.
I find it difficult to understand these findings.
Which contradicts the evidence the domestic OCC prices.
At their highest level ever level and.
The domestic producer of showing record results for their tubular businesses.
That said.
And that has continued to be strongly positioned to serve the growing needs of the U S oil and gas industry and to improve the competitiveness of our rig direct service model.
More than 80% of our supply of casing and tubing to the U S market is being met from domestic production.
And its being complemented by importers from our global industrial system.
The ITC ruling.
And the antidumping duties will not substantially changed distribution.
However, we are already moving rapidly to ramp up our domestic production and we will invest further in expanding our production capacity.
Strengthening our redirect service model.
It is where it is the service we provide through rig director our U S customer appreciate the new line of Web series 400 connections.
That we develop for using production casing.
In long horizontal wells.
Today <unk>.
A majority of these customers have standardized on the use of these connections.
In the production strings for their shale operations.
In September I visit to Canada.
Where we created a new welded pipe line.
The facility at <unk>.
In the presence of the honorable Mary and measure the Canadian Ministry of trade.
<unk> will strengthen our competitiveness in the Canadian market and the service, we provide to our customer in a market with an arris has opportunities for further growth.
During August we renewed our long term framework agreement with NII.
Five years, covering data or CTG requirement.
Loss 20 countries.
And supporting the drilling and pipeline operations.
Further 10 countries around the world.
And AI will play an important role in addressing the European energy crisis, and this partnership is a very well over the one fortinet and our position in deepwater project and suicide in Africa pipelines and drilling operation in the Middle East and in limited at all.
Also it will be important for the newly emerging Ccs development like high net in the U K.
Where do we will be supplying the injection well with specialty tested materials.
Over the next year, we expect the middle East and the deep offshore will be areas that will drive further growth in sales.
The middle East.
The emirate setting.
As announced in is because the acceleration and expansion of its oil and gas production capacity expansion plant.
<unk> is working closely with AD hoc and that our long term agreement, where we are providing 50% of their of CTG requirements with rig direct services and are investing in a local premium trading facility, which will be beginning operation next year.
So the Amazon Qatargas Sir.
We also have long term supply agreement in place also have plans to increase their drilling activity.
In the third quarter, we increased deliveries of casing and our Blue dock connector to Exxonmobil deepwater operation in Guyana.
In the following quarters, we expect it to increase sales for a number of deepwater operations in the Gulf of Mexico.
In Brazil.
In Africa and in Australia.
Yeah.
We have established a strong competitive positioning in the deepwater market.
Based on our quality and reliability of our extensive range of products.
And our ability to serve customers in remote and complex environment.
In Argentina, we have began shipment for the Nestor Kirchner pipeline.
This and other pipeline infrastructure investment.
Moving forward.
There is a growing consensus around the importance for the country of realizing the potential of backup lines that shale development.
Even in an environment of high geopolitical and macroeconomic risks and slowing global economic growth.
The analysis is well prepared to build on our leading position at established over the years in the energy market.
At the same time, we continued to invest in our industrial system.
To reduce production bottleneck improve operational efficiency and safety.
To reduce carbon emission and environmental impact of our operation.
Yeah.
We are ready now to take any question you may have.
Yes.
Thank you as a reminder to ask a question you will need to press star one one on your telephone please standby, while we compile the Q&A roster.
Our first question comes from the line of Marc Bianchi from Cowen.
Thank you.
I think you addressed this paolo but I just wanted to be sure.
Trade case.
As as you move forward.
Do you need to.
Increase your imports for any reason I know you've sort of repositioned the imports in response to the trade case, but I'm just wondering if some of that might be temporary and you can only do that for so long.
Thank you Mark for your question.
Yes.
In the first place.
We will.
Commit.
To raise the level of production.
Our facilities in United States, So the step up.
Our effort to hire people, which is an important constraint today, because we have still the capacity that we cannot say there is.
Second we will.
Lounge investment.
Now.
The bottleneck part of our <unk> system, and then as I say I'm out of Africa.
Yes.
We will rely on our input from different sources to complement the product or the specific.
Situation in which we may need.
Support from imported to the local capacity we think.
We have.
No problem.
In doing this from different sources.
Okay, great. Thank you the other question I had.
Relates to the welded volumes, which.
Grew.
Significantly again for the second quarter in a row.
I am curious what your outlook is for welded versus seamless going forward.
What the impact may be to margins if any.
Well.
The you see the world.
Our relative production and sale to go after this is basically driven by the pipelines.
South America and <unk>.
Also in the Middle East.
Yes.
In the case of Argentina.
Started the de levering of our net of cash and a pipeline and say this is part of what we see in our increase in the welded component.
And during the coming quarters.
We will deliver.
A larger volume of these.
I think the decent.
We'll have only marginal impact is through that we may have some lower margin on some of these project. It depends from the project, but we will not be a very significant impact.
Now we are managing.
Understood. Thank you very much.
Thank you one moment for our next question.
Our next question comes from the line of a room J wrong from J P. Morgan.
Yes, good morning.
I wanted to.
See if you could maybe first start with the international market and I'd be interested to see.
In the U S. I think you mentioned, 80%.
There are a lot of your volumes today are coming through rig direct.
How about internationally.
How much of your order flow comes from rig direct.
And.
Is there the potential to shift more of your international customers I think youre doing this in Latin America.
Towards some of the pipe logic indices.
Some of your North American I think Latin American customers are on.
Thank you.
In general, we can say that globally worldwide, our rig day rate.
Yes.
<unk> sorry in the range of.
60% of our CTG sales this is something somewhat higher in the United States is lower.
And international market.
But I will.
Ask to GAAP to.
To give some.
Of the area in which we are stronger regular actor.
And also on the issue on the prices to which extent.
The international prices are following.
Copying some of the trend of the pipe logic.
Okay. Thank you Pablo and good morning, everyone regarding the rig direct us as Paolo was saying.
Our global <unk>.
Service capability that we have deployed in Latin America, and North America, but it's also have gained momentum over the years in the international markets.
Today, we are serving the majority of our customers in the North sea on the rig direct.
So have in Continental Europe established operations, where rig direct is there pretty much our standard and as you know very well we have introduced also in the middle is another key area.
These things here.
We're nearing the rig direct.
We support and have now 50%.
Of the requirements of all CTG.
Our service by <unk>.
Service Center State of the Art Service Center in Abu Dhabi. This is a practice that we expect to continue in the region.
In a way a showroom for the region because there are clear advantages.
Availability cash flow.
At this level for the operators is also practice.
Has been extended in some pockets in Africa.
China for example, in Indonesia, and Australia. So this is a practice.
At a different level of <unk> and.
Yossi.
Bringing on momentum.
Bringing it.
Say, the synchronization of the manufacturing capabilities with the.
With consumption.
Regarding the point of a pricing Paolo.
In the international market, we are seeing.
A positive trend in pricing clearly in the last few quarters, the pricing moving up trying to offset.
The cost increases, but I think now we're at a different stage, where the increase in demand.
<unk>.
Creating another positive.
Dynamic on pricing.
Lead times are getting longer customers.
Are projecting there.
The new demand.
In offshore the Chilean and complex projects in the Middle East.
Raising the awareness of material availability to be able to execute the projects. This is particular, particularly noticeable in premium connection high alloys and deepwater pipeline as well.
So we are seeing a positive momentum.
In terms of pricing and this will become very visible.
Ward.
As we progress into 2023.
Great.
Just my follow up would be where we were at <unk> analyst day yesterday, and they highlighted how they're seeing an inflection point in the deepwater in middle East just as you were mentioning this morning I was wondering if you could talk about deepwater offshore.
You posted.
Almost a 32% EBITDA margin in <unk>.
You highlighted some some opportunities in Qatar Guyana, Brazil.
And so what are the things we're thinking about in terms of the model as you see a higher mix of deepwater offshore do you think this would be accretive to your margin profile on a go forward basis.
To some extent.
As I mentioned.
We expect that.
The coming quarter, we will continue.
To increase our sales.
And to some extent also slightly the margin partially this is true is driven also.
By the more.
Complex project.
And for sure the deepwater per order at the new mention.
Broader than ratio that demand for material.
On our capacity of supply we have a very differentiated position for these projects and so as you were saying this is contributing positively.
Our match.
Great. Thanks, a lot.
Thank you as a reminder to ask a question you will need to press star one one on your telephone.
Our next question comes from the line of Stephen <unk> from Stifel.
Hi, Thanks, Good morning, good afternoon, everybody.
So two things the first is more of your perspective curiosity.
The trade case.
It seems like OCC prices are awfully strong than there is supply demands Titan we were surprised by the outcome.
Do you think about.
The outcome, there and does that change your sort of thought process on just sort of how you run the U S business going forward.
Thank you Steven.
I think we need to.
React adjust.
So their conclusion.
Of the trade case, and I will say before.
We will.
Step up our.
Production level in.
In the U S.
And this is it.
Something that we could do by.
Concentrating on hiring of people aren't using a forward capacity, but also on the investment in the bottom right.
On this set for a more specific comment I will ask two.
Luca Zanotti to give additional commentary.
Okay.
As you know.
Because we have been saying this for quite some time already we were already engaged in a ramp up of assessor and.
Obviously.
In the wake of the.
Antidumping decision, we want to accelerate on this that we still have capacity that is ready to come online that the only thing that we are missing Gaza.
People buy the plants actually blip ahead of that to come back. So we can accelerate that on that side and we have significant capacity that can be added.
And at the same time.
Paolo was mentioning we are also looking at that.
National investment that could strengthen assassin.
Our industrial footprint.
We still experience a bottleneck with this said I believe that we are positioned to.
Be able to.
Follow in our company.
Author of the domestically and we're still seeing that going forward.
2020.
Yes, I think this is important.
Positioning ourselves and we will adjust.
Just to be able to companion.
Growing demand from our clients in the United States.
So just just so that I want to make sure I completely understand.
The duties you've been paying you said the press release since since early May So your quarter reflects the impact of those of those duties already right. So.
Okay.
So is that a true statement that you are your margins, which are quite strong in the quarter already reflect.
The impact of the duties are paying and so theoretically that could even get your margins could actually get a little better as you sort of work through some issues with U S production to offset maybe some of the some of the cost increases am I thinking about that right.
Youre right.
We're paying.
Do you think <unk> seen.
Since the establishment of a preliminary duty in EMEA and this is embedded in our in our.
Cost of goods sold up to now.
And we continue to be embedded in our cost of goods sold in the coming quarter.
To some extent in.
And our overall complementing.
Effort to.
<unk> compliments remain part of our domestic production will also rely on capacity coming from the country affected.
Bye.
The antidumping duty.
Great. Thank you for the details.
Okay.
Thank you.
Minder to ask a question you will need to press star one one on your telephone.
Our next question comes from the line of Alessandro Pozzi from Mediobanca.
Hi, Thank you for taking my question.
The first one is on.
On Brazil.
I think that's probably one of the few region.
In South America.
To be a strong guide.
Competition.
And I was wondering if.
You can use the maybe the building Dante Dante journey.
Moving to.
To be a bit more aggressive in Brazil and going after high.
<unk> market share.
And overall, if you can maybe comment about strategy in <unk>.
The number of offshore development it would be sanctioned over the next few quarters.
The second question is on working capital.
We've seen quite a quite a big increase in Q3 is that just a function of the higher pricing or maybe if you can give us some more color.
Any items that have pushed the.
Build in working capital in Q3.
And last question if I may just on the offshore revenues before the revenue is it can you.
Hello.
We are and where you expect it to grow next year as a percentage of the group revenues. Thank you.
Thank you.
Alessandro.
First question concerning Brazil Brazilian.
Contract.
Yeah.
The tender.
Lounged for covering the demand one of long term.
The timing of long time frame now for Petrobras mainly.
We have a strong position.
Angel, 50%, considering casing and conductor.
<unk>.
Sure in these contracts.
The position.
It's not something that will change in the short term.
We reached this position.
And we will basically delivering on these the reason not so much we can do and not something that we intend to do.
The other short term demand.
Uh huh.
That is by the way very reduced.
In the case of Brazil.
The key question of working capital.
Through our working capital.
Please.
The third Q.
This is driven by increase in the banker in our stock and increasingly receivable now costs are going up prices.
<unk>.
And our volume is it.
Growing we expect that also in the fourth Q.
Our overall.
Sales.
We'll go up in the range of 20% so.
We need to.
Build up the inventory needed to.
To support this increase in sales.
And in the next quarter also there will be increase in the working capital, but this time, mainly due to trade receivable because increasing the volume of sales is increasing higher pricing and higher volume.
So we would have to increase our receivable while the inventories will stabilize.
Much more.
This is the trend we expect to for the working capital increase.
On the left.
I don't think we will disclose for competitive reason.
Sure that these projects may have in our sales, but I can tell you that are very relevant.
For our overall business worldwide when you look at the offshore.
Shell offshore and deep offshore with different competitive environment.
In the tools segment.
Okay.
You mentioned.
On the Vulcan.
Okay.
No.
Uh huh.
Yeah.
No.
I was mentioning the increase in sales, 20% that I mentioned is in the fourth quarter of 2000.
So and I'm, saying that then.
The also.
In the next quarter in the first quarter with really three there will be.
Some increase.
But it will be the single digit range.
In Q1, Q1, and Q2 over the next year.
Well.
In Q1 of these wells, we can evaluate that then when they go on.
On a longer time.
Anything could happen there is a lot of uncertainty worldwide and.
From different point of view.
Well, thank you very much.
Thank you.
I'd now like to turn the conference back over to Giovanni <unk> for closing remarks.
Thank you Gigi and thank you all for joining US we look forward seeing you soon thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Good day and thank you for standing by welcome to the Q3 2020 to <unk> 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.
Ask a question during the session you will need to 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 your speaker today Giovanni saw Danielle. Please go ahead.
Thank you Gigi and welcome to <unk> 2022 third quarter Conference call.
Before we start I would like to remind you that we will be discussing forward looking information in the call and that 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, Guillermo Vogel, Vice Chairman and member of our board of Directors, Mark Graff, Vice Chairman and member of our Board of Director Gabriel podcast, Scott President of our Eastern Hemisphere 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 our quarterly results.
Our sales in the third quarter of 2022 reached almost 3 billion up 70% compared to those of the previous year and 6% sequentially.
Mainly led by further pricing gains, which more than offset lower shipments, which were affected by lower deliveries two pipeline projects and seasonal factors.
Average selling prices enough tubes, operating segment increased 54% compared to the corresponding quarter of 2021 and 12% sequentially.
Our EBITDA was up 17% sequentially to 946 million, while our EBITDA margin was up at around 32%.
Higher prices more than offset increases in energy and raw material costs.
Yes.
Our quarterly net income of 606 million was slightly down sequentially as it was affected by non operating items, which impacted our results from our equity participation in <unk>.
And in our financial expenses.
Cash generated by operating activities during the quarter was $242 million or free cash flow for the quarter was $13 million after capital expenditure of $129 million.
While our net cash position at the end of the quarter increased to $700 million.
Our board of directors approved the payment of an interim dividend of 17 cents per share or 34 cents per ADR to be paid on November 23rd.
The interim dividend is up 30% compared to the interim dividend, we paid last year.
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.
At the end of September we celebrated the 20.
<unk> on the New York Stock exchange.
And the closing date.
Following day, we held an Investor day, where we presented our view that an increasing investments will be needed in energy and that all sources would be needed to meet the growing demand for energy there will a companion population and GDP growth in the long run.
This includes the investment in oil and gas, which in recent year has fallen behind what is required to maintain production in a sector that still account for the majority of primary energy demand.
We highlighted the transformation that <unk> has.
He has made over the past 20 years.
And we have grown to become a company that is uniquely positioned to service the tubular need of our sector globally in the east ahead, and how the current environment, we are reaching record levels in our financial results.
Yes.
Our third quarter results reflected the sales and margin improvements that we have shown over the previous 18 months, we're going to be down $946 million and the margin above.
Yeah.
We are confident that we can continue to build on these results in the quarters ahead.
Last week, the International Trade Commission in the United States, the terming that CTG imports from certain countries, including Argentina and Mexico.
Having enjoyed the domestic industry.
As the largest producer and investor in the domestic industry, we find it difficult to understand these findings.
Which contradicts the evidence the domestic CTG prizes.
At their highest level ever level and the domestic producer of showing record results for their tubular businesses.
That said.
And that has continued to be strongly positioned to serve the growing needs. So the U S oil and gas industry and to improve the competitiveness of our rig direct service model.
More than 80% of our supply of casing and tubing to the U S market is being met from domestic production.
And its being complemented by importers from our global industrial system.
The ITC ruling and the antidumping duties will not substantially change the situation.
However, we are already moving rapidly to ramp up our domestic production and we will invest further in expanding our production capacity.
Strengthening our redirect service model.
It is where it is the service we provide through rig direct.
Our U S customer appreciate the new line of wedge series for Android the connections that.
That we develop for using production casing and long horizontal wells.
Today, the majority of these customers have standardized on the use of these connections in the production strings for their shale operations.
Yes.
In September I visit to Canada, where we created a new welded pipe line.
<unk> it's <unk>.
In the presence of the honorable Mary in Asia, The Canadian Ministry of trade.
We will strengthen our competitiveness in the Canadian market and the services, we provide to our customer.
Market within Arris has opportunities for further growth.
Renewables, we renewed our long term framework agreement with NII.
Five years, covering data or CTG requirement across 20 countries.
Supporting the drilling and pipeline operations.
For the 10 countries around the world.
NII will play an important role in addressing the European energy crisis, and this partnership is a very volatile over the one <unk>.
And our position in deepwater project and suicide in Africa pipelines and drilling operation in the Middle East and in limited at.
Also it can be really important for the newly emerging Ccs development like high net in the U K.
Where do we will be supplying the injection well with specialty tested with Dts.
Over the next year, we expect the middle East and the deep offshore will be areas that will drive further growth in sales.
The middle East.
The amyris.
As announced in this because the acceleration and expansion of its oil and gas production capacity expansion plant.
He is working closely with our democracy.
Our long term agreement, where we are providing 50% of their old CTG requirements with rig direct services and are investing in a local premium trading facility, which will be beginning operation next year.
So did Amazon cut that Augusta, where do we also have long term supply agreement in place also have plans to increase the training.
In the third quarter, we increased deliveries of casing and our blue dock connector to Exxonmobil deepwater operation anyway Yana.
In the following quarters, we expect to increase sales for a number of deepwater operations in the Gulf of Mexico.
Brazil.
<unk> said on Africa, and Enos here and there.
We have established a strong competitive positioning in the deepwater market.
Based on our quality and reliability of our extensive range of products.
And our ability to serve customers in remote and complex environment.
Jestina, we have began shipment for the Nestor Kirchner pipeline.
This and other pipeline infrastructure investment.
Moving forward.
There is a growing consensus around the importance for the country of realizing the potential of back online is that shale development.
Yeah.
Even in an environment of high geopolitical and macroeconomic risks and slowing global economic growth dynamics.
The analysis is well prepared to build on our leading position at established over the years in the energy market.
At the same time, we continue to invest in our system.
To reduce production bottleneck improve operational efficiency and safety.
To reduce carbon emission and the environmental impact of our operation.
Okay.
We are ready now to take any question you may have.
Yes.
Thank you as a reminder to ask a question you will need to press star one one on your telephone please standby, while we compile the Q&A roster.
Our first question comes from the line of Marc Bianchi from Cowen.
Thank you.
I think you addressed this paolo but I just wanted to be sure.
Trade case.
As as you move forward do you need to.
Increase your imports for any reason I know you've sort of repositioned the imports in response to the trade case, but I'm just wondering if some of that might be temporary and you can only do that for so long.
Thank you Mark for your question.
In the first place.
We will.
Commit.
To raise the level of production.
Now our facilities in United States, So the step up.
Our effort to hire people, which is an important constraint today, because we have still the capacity that we cannot see days.
And second we will.
Lounge investment.
No.
The bottle neck part of our <unk> system, and then as I say biomarker.
Yes.
We will rely on our input from different sources to complement the product or the specific.
Attrition in which we may need.
Support from imported to the local capacity we think.
We have an.
No problem.
In doing this from different sources.
Okay, great. Thank you the other question I had.
Relates to the welded volumes, which.
Grew significantly again for the second quarter in a row.
I'm curious what your outlook is for welded versus seamless going forward.
What the impact may be to margins if any.
Well.
<unk>.
You see the world.
Our well production and sale to.
This is basically driven by the pipeline.
South America and <unk>.
Also in the Middle East.
In the case of Argentina, we started the delivering of the Nestor Kirchner pipelines that is part of what we see now an increase in the weather component.
And during the coming quarters.
We will deliver.
A larger volume of these.
Yeah.
I think the decent.
We'll have only marginal impact is through that we may have some lower margin on some of these projects. It depends on the project, but will not be a very significant impact.
Now we are managing.
Understood. Thank you very much.
Thank you one moment for our next question.
Our next question comes from the line of a room J wrong from J P. Morgan.
Yeah good morning.
I wanted to.
See if you could maybe first start with the international market and I'd be interested to see.
In the U S. I think you mentioned, 80%.
There are a lot of your volumes today are coming through rig direct how about internationally.
How much of your order flow comes from rig direct.
And.
Is there the potential to shift more of your international customers I think youre doing this in Latin America.
Towards some of the pipe logic indices.
Some of your North American I think Latin American customers are on.
Thank you.
And generally we can say that globally worldwide our rig.
Great.
Sure.
Sorry in the range of.
60% of our CTG sales this is something somewhat higher in the United States is lower.
And international market.
But I will.
Ask to gap.
To give you some.
View of the area in which we are stronger on a regular director.
And also on the issue on the prices the Leach extent.
The international prices are following or copying some of the trend of the pipe logic.
Okay. Thank you Pablo and good morning, everyone.
Regarding the rig direct as.
Paul was saying.
Our global service capability that we have deployed in Latin America, and North America, but it's also have gain momentum over the years in the international market today.
Today, we are serving the majority of our customers in the North sea and the rig direct.
Also have in Continental Europe .
Tablet operations, where rig direct is there pretty much our standard.
And as you know very well we have introduced also in the middle is another key area.
Both of these things here.
Pioneering the rig direct.
Bobby supporting at 50%.
Of the requirements of OLED.
But knock are serviced by <unk>.
Service Center state of the out of service Center in Abu Dhabi. This is a practice that we expect to continue in the region.
In a way a showroom for the region because there are clear advantages.
Availability cash flow.
Service level for the operator is also a practice.
Has been extended in some pockets in Africa in Ghana.
For example, in Indonesia, and Australia. So this is a practice at a different level of <unk> and <unk>.
Yossi.
Bringing on momentum.
<unk>.
Let's say the synchronization of the manufacturing capabilities with the.
With consumption.
Regarding the point of your pricing power in.
In the international market, we are seeing.
Positive trends in pricing really in the last few quarters, the pricing moving up trying to offset the cost increases, but I think now we're at a different stage where are they increasing demand.
Yes.
Creating another positive.
Dynamic on pricing.
Lead times are getting longer customers they are projecting there.
The new demand.
So in offshore to pull Julien and complex projects in the middle East.
Raising the awareness of material availability to be able to execute the projects. This is particular, particularly noticeable in premium connection high alloys.
Deepwater pipeline as well.
So we are seeing a positive momentum.
In terms of pricing and this will become very visible.
Ward.
As we progress into 2023.
Great.
Just my follow up would be where we were at <unk> analyst day yesterday, and they highlighted how they're seeing an inflection point in the deepwater in middle East just as you're mentioning. This morning I was wondering if you could talk about deepwater offshore.
You posted.
Almost a 32% EBITDA margin and <unk>.
You highlighted some some opportunities in Qatar Guyana, Brazil.
And so one of the things we are thinking that in terms of the model as you see a higher mix of deepwater offshore do you think this would be accretive to your margin profile on a go forward basis.
Does that make sense.
As I mentioned.
We expect that.
The coming quarter, we will continue.
To increase our sales.
And to some extent also slightly the margin partially this is true is driven also.
By the more.
Complex project.
And for sure the deepwater per order at the new mansion.
<unk> the demand for material.
Okay.
On our capacity of supply we have a very differentiated position for these projects and so you are saying this is contributing positively.
Our match.
Great. Thanks, a lot.
Thank you as a reminder to ask a question you will need to press star one one on your telephone.
Our next question comes from the line of Stephen <unk> from Stifel.
Hi, Thanks, Good morning, good afternoon, everybody.
So two things the first is more of your perspective curiosity.
The trade case.
It seems like <unk> prices are awfully strong than there is supply demand is tight and we were surprised by the outcome. How do you think about the.
The outcome, there and does that change your sort of thought process on just sort of how you run the U S business going forward.
Thank you Steven.
I think we need to.
React adjust.
So the conclusion.
Of the trade case, and I will say before.
We will.
Desktop hour.
Production level in.
In the U S.
And this is it.
Something that we could do by.
Concentrating on hiring of people aren't using a forward capacity, but also on the investment and the bottleneck.
On the set for a more specific comment I will ask two.
Luca Zanotti to give additional commentary.
Okay.
As you know.
Because we have been saying this for quite some time already we were already engaged in a ramp up of all the sensor and the <unk>.
Obviously.
On.
On the week off.
Antidumping decision, we want to accelerate on this so we still have capacity there.
He is ready to come online that the only thing that we are missing Gaza.
People buy the plants actually blip ahead of that to come back. So we can accelerate that on on that side that we have significant capacity that can be added.
And at the same time.
Pablo has mentioned and we are also looking at that.
National investment that could strengthen assassin.
Our industrial footprint.
Thanks <unk>.
Are we still experience a bottleneck with this said I believe that we are positioned to.
Be able to.
Paulo and company.
<unk> of the domestic.
We're seeing that going forward.
2020.
Yes.
It is important that we are positioning ourselves and we will adjust.
Just to be able to companion.
Growing demand from our clients in the United States.
So just just so that I want to make sure I completely understand.
The duties you've been paying you said at the press release since since early May So your quarter reflects the impact of those of those duties already right. So.
Okay.
So is that a true statement that you are your margins, which are quite strong in the quarter already reflect.
The impact of the duties youre paying and so theoretically that could even get you.
Margins could actually get a little better as you sort of work through some of the issues with U S production to offset maybe some of the cost increases am I thinking about that right.
Youre right.
We're paying.
Do you think.
<unk>.
The establishment of a preliminary duty in EMEA.
And this is embedded in our in all of that.
Cost of goods sold up to now.
And we continue to be embedded in our cost of goods sold in the coming quarter.
To some extent.
And our overall complementing.
Effort to.
I mean, the effort compliments remain part of our domestic production will also rely on capacity coming from the country affected.
Bye.
The antidumping duty.
Great. Thank you for the details.
Okay.
Thank you.
Remind her to ask a question you will need to press star one one on your telephone.
Our next question comes from the line of Alessandro Pozzi from Mediobanca.
Hi, Thank you for taking my question.
The first one is on.
On Brazil.
I think that's probably one of the few region.
In South America.
A strong guide.
Competition, there and I was wondering if.
You can use the maybe in the room.
Adding the antidumping, Germany according to.
To be a bit more aggressive in Brazil and going after high.
Market share.
Overall, if you can maybe comment about strategy in <unk>.
Number of offshore development it would be sanctioned over the next few quarters.
The second question is on the working capital.
We've seen quite a quite a big increase in Q3 is that just a function of the higher pricing or maybe can you give us more color.
Andy.
Eitan has pushed the build in working capital in Q3.
And last.
Last question, if I may just on the offshore revenues before the revenue is it can you tell us maybe where we are and where you expect to go next year.
At this time of the group revenues. Thank you.
Thank you.
Alessandro.
First question concerning Brazil, Brazil.
Contract.
Sure.
And the tender.
Lounged for covering the demand one of long term.
The long time frame and outflow Pedro but asked mainly.
We have a strong position.
Range of 50% considering casing and conductor.
Sharing these contracts.
As a solid position.
It's not something that will change in the short term.
We reached this position.
And we will basically delivery on these the reason not so much we can do it and not something that we intend to do.
The other short term demand.
That is by the way very reduced.
In the case of Brazil.
Indicating the question of working capital.
Through our working capital.
Crazy in the third Q.
This is driven by increase in the banker in our stock and increasing our receivable now cost going up prices.
<unk> App.
And our volume is it.
Growing we expect that also in the fourth Q.
Our overall.
Sales.
We were up in the range of 20% so.
We need to.
Build up the inventory needed to support this increase in sales.
In the next quarter or so there will be an increase in the working capital, but this time, mainly due to trade receivable because is increasing and the volume of sales is increasing the higher pricing and higher volume and so we would have to increase our receivable.
While the inventories will stabilize.
Much more.
This is the trend we expect to for the working capital increase.
Yes.
On the left.
I don't think we will disclose for competitive reason.
Sure that these projects may have in our sales, but I can tell you that are very relevant.
For our overall business worldwide when you look at the offshore.
Shallow offshore and deep offshore.
With different competitive environment in the tools segment.
Yes.
Okay. Thank.
You mentioned.
The Vulcan.
A quick question on the growth in sales.
Well first of all.
Next year.
Oh I was mentioning the increase in sales, 20% that I mentioned is in the fourth quarter of 2000.
And I'm, saying that then.
Also.
Yeah.
In the next quarter in the first quarter with 33.
It will be.
Some increase.
But it will be the single digit range.
Q1, Q1, and Q2 of next year.
Well.
In Q1 is what do we can evaluate that then when it will.
On a longer time I mean.
Anything could happen there is a lot of uncertainty worldwide.
Different point of view.
Alright. Thank.
Thank you very much.
Thank you I would now like to turn the conference back over to Giovanni <unk> for closing remarks.
Thank you Gigi and thank you all for joining US we look forward seeing you soon thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.