Q4 2023 Tenaris SA Earnings Call - Q&A
Good day, and thank you for standing by welcome to the fourth quarter and full year 2023, the Noughties 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 one on your telephone.
Giovanni: We'll then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again please be advised that today's conference is being recorded I would now like turn the conference over to your speaker today Giovanni sort of Danya. Please go ahead.
Giovanni Sardagna: Thank you Gigi and west come to acknowledge 2023 fourth quarter and annual results conference call.
Giovanni Sardagna: Before we start I would like to remind you that we will be discussing forward looking information in this call and 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 Mondello, our Chief Financial Officer, Gabriel protocols, our chief.
Operating officer, and Luca Zanotti President of our U S operations.
Speaker Change: Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results.
Speaker Change: During the fourth quarter of 2023 sales reached $3 4 billion down 6% compared with those of the corresponding quarter of the previous year, but up 5% sequentially.
Speaker Change: Mainly driven by high level of shipment to the middle East and offshore pipeline project.
Speaker Change: Bind with inclusion of our newly acquired show called pipe coating business.
Speaker Change: Which offset the ongoing price declines in the Americas.
Speaker Change: Our EBITDA for the quarter was down 3% sequentially to 975 million and that EBITDA margin declined 29%, mainly reflecting lower pricing in the Americas.
Speaker Change: Our net income for the quarter at $1 1 billion was positively affected by a good result from non consolidated companies.
Speaker Change: Positive financial results and an important net deferred tax gain.
Giovanni: Average selling prices in our tubes operating segment decreased by 11% compared to the corresponding quarter of 2022 and 6% sequentially.
Giovanni: During the quarter cash flow from operation was $836 million.
Giovanni: Following the payment of an interim dividend of 235 million in November last year 240 million spent on share buybacks.
Giovanni: And capital expenditures of 167 million during the fourth.
Giovanni: The board of directors decided to propose for the approval of <unk>.
Giovanni: The annual general shareholders' meeting to be held at the beginning of May the payment of an annual dividend of 60 cents per share or <unk> 20 cents per ADR.
Giovanni: Which includes the interim dividend of 20 cents per share or 40 cents per ADR that we paid at the end of.
Giovanni: Of November last year.
Giovanni: If approved a dividend of 40 cents per share or 80 cents per ADR will be paid on may 26.
Giovanni: The dividend proposal they proposed to annual dividend for this year is 18% higher compared to the annual dividend paid last year.
Giovanni: Now I will ask Paolo to say a few words before we open the call to questions.
Paolo Rocca: Thank you Giovanni and good morning to all of you.
Paolo Rocca: We ended the year with a stronger fourth quarter supported by a high level of shipment to the middle East.
Paolo Rocca: And for offshore project.
Paolo Rocca: Thanks to the good performance of our industrial supply chain system, we were able to anticipate some premiums our shipment to our own.
Paolo Rocca: And that our recent tender award.
Paolo Rocca: We were also able to include the first contribution from our newly acquired of Shawcor pipe coating business.
Paolo Rocca: After the expedited take all the necessary antitrust approvals.
Paolo Rocca: 2023 has been an outstanding year for dynamics.
Paolo Rocca: Record financial result, under most metrics net sales of $14 9 billion.
Paolo Rocca: EBITDA of $4 9 billion net income of 4 billion operation operating cash flow of $4 4 billion as.
Paolo Rocca: Global supplier.
Paolo Rocca: <unk>.
Paolo Rocca: We have developed a unique position present in the most challenging development in the oil and gas industry, serving his most important players.
Paolo Rocca: With these results and net cash of $3 4 billion in our balance sheet, we are increasing returns to shareholders we have to.
Paolo Rocca: Reporting to increase our annual dividend to <unk> 60 per cent per share.
Paolo Rocca: Together with the share buyback program, we initiated in November this would imply a 10% yield to shareholders for the year at current prices.
Paolo Rocca: We have extended the perimeter of our operation through a series of acquisition.
Paolo Rocca: Saudi Arabia, we increased our stake in <unk> to gain a controlling position in this large diameter welded pipe mill, producing conductor casing and large diameter line pipe.
Paolo Rocca: Well yeah, because these are the shawcor pipe coating business, we are strengthening our line pipe business, especially for offshore line pipe, where shawcor has a leading position in anti corrosion and installation coatings.
Paolo Rocca: The United States.
Paolo Rocca: We increased the flexibility and overall capacity of our U S and data system by acquiring additional acute treatment and driving facilities.
Paolo Rocca: Each of these integrations to our global industrial system.
Paolo Rocca: And hence our capacity to serve our wide customer base with a growing range of products and services.
Paolo Rocca: Our global integrated industrial and supply chain system.
Paolo Rocca: And shipped over 4 million tons of pipes to customer around the world.
Paolo Rocca: Many of these pipes are there either directly to our customer.
Paolo Rocca: As shown in the field.
Paolo Rocca: Our rig direct service program.
Paolo Rocca: Which now serve over 500 rigs worldwide.
Paolo Rocca: Under this program, which requires investment in working capital service yard infrastructure logistic and digital systems, we enhanced customer intimacy and differentiation.
Adding services to simplify customer operation.
Paolo Rocca: Do some site among our required.
We have our rig direct program, which now incorporates our run ready service well.
We are reducing inventories in North America, and transforming the supply chain.
We are advancing with our rig direct service in other region around the world.
In North America, we have strengthen our positioning among large operator.
We were recently awarded a long term agreement by Exxon mobile to serve their unconventional operation in the United States, which confirms the preference the large operators are giving to our industrial footprint.
The life product and supply services.
We are now serving each of the 10 largest operator in the country.
Maintaining a stable level of operation, even as the overall U S rig count has declined.
Paolo Rocca: We are also strengthening our position among major operator in Canada.
Our sales for offshore operations project grew more than 50% during the year.
Yes.
The development of prolific deepwater reserves is transforming the commentary we are serving exxonmobil operation under a long term contract wording, Brazil, we are supplying Petrobras with a wide range of products for the Bossier development.
We are supplying a number of offshore gas pipeline development around the world.
Our sales are growing in the middle East where.
Where do we have increased our local content and present.
Saudi Arabia.
So.
While postponing some of it's offshore or just pension is expanding its gas drilling activity.
Including the development of the Asa for intervention unconventional reserves.
We are supplying premium seamless so CTG following a tender awarded to replenish depleted stocks and that ramping up deliveries of conductor and surface casing from our local welded pipe subsidiaries.
The expansion of gas drilling activity will also provide valuable opportunities.
For sales of line pipe.
Aimco proceed we feel its master gas pipeline program.
Last week, we now we're entering new industrial complex in Abu Dhabi.
Along with officials from <unk> and the ministry of industry and advanced technology.
This includes a new premium trading facility training facility.
And then expand the service, yet which will support the rig direct service, we are providing to us and that our long term agreement.
As well as contributing to the industrial development of the Emirates.
Our industrial system.
Waiting at the high level throughout the year as performed well in supporting our positioning worldwide.
In safety however.
We had three fatalities in our operation after four years without and we are deeply sorry for the loss of life and awareness for enforcing all our preventive action with a particular focus on the activities of contractor working in our system.
We made significant advances in our de Carbonization program.
After a $200 million investment we successfully put into operation our first wind farm in Argentina.
And we are now moving forward what are we at a similar investment will be the second wave.
The Buena Ventura Wind farm is now supplying 100 megawatt of power through the important interconnected grid to our industrial facility in companion meeting close to 50% of its total electric power requirement.
Attributing to a lower cost advantage.
As we look forward to 2024 <unk>.
It's extended global reach.
Enhanced competitive differentiation and exceptional financial position is well placed to strengthen is positioning around the world.
The current favorable market condition in the middle East and offshore I would expect that to continue through the year right in the Americas, we are consolidating our solid position ready to take advantage of any further opportunities that EMEA arise.
I would like to give a special thanks to our employees.
Without the continuous efforts and commitment of our many achievements during 2020 would not have been possible.
Yes.
I will leave now the floor open for any questions. You may have thank you.
Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your data to be announced to withdraw. Your question. Please press star one one again please.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Ireland, Youre wrong from J P. Morgan Securities LLC.
Yes, good morning.
Paolo the net cash balance now has grown from $921 million to.
To over $3 $4 billion as of yearend and I was wondering if you could highlight some of your longer term thoughts on deploying some of this excess cash on the balance sheet in terms of inorganic M&A opportunities like you did with shawcor or perhaps what the next phase of <unk>.
Cash returned to shareholders could look like.
Just given just how much cash there is net cash on the balance sheet.
Thank you.
Youre right that the company is arriving.
At the end of 2023, we have a very strong.
Cash.
Well.
As we did in the past we will consider all the option on one side that we need to continue on some organic investment to complete though in advance now.
<unk>.
Program.
We should also.
Focus on the area of digitalization and automation that will enhance our competitiveness. This is important for us. So we will have organic growth more than anything else in.
Improving our competitiveness.
And advancing and they kind of monetization on the other side.
We see opportunities for.
Growing along our value chain. An example has been Shawcor and also the investment we did in Italy and in.
The states.
In coating or an increasing capacity in area in which we really need to be ready to react to the needs of our of our clients because rig data is demanding or now in data and supply chain.
This structure, we are also prepared.
So analyze opportunities set.
Different region that May add is that in.
And then can complete.
A lot of deployment worldwide, but.
We know that we for you we don't identify a clear strategy that is.
Is it growing.
Allow us to grow and to enhance our profitability.
As we did last year, we have we.
We can put a pause.
To return to our shareholder.
Either as in the buyback or in dividend. According to the results of the business, we're contemplating all of the option and keeping it.
Our option open in this field.
Yeah.
Great and my follow up Paul you mentioned.
That scenario expects sales in the first half of 2004, it would be very similar to the second half of 2023.
It appears that maybe the shawcor pipe coating business. It was maybe one of the drivers of that as well can you help us think about how margins could look like in the first half of 2024 and on an EBITDA basis.
Well as you say.
We expect the invoicing.
First half of 2024.
To be in line with the invoicing in the second half 'twenty three.
You should consider.
On one side that some of the advances that we have done in the contract in Saudi on the other side also.
The inclusion of Shawcor and particularly.
<unk>.
Of the of a very large project.
In Mexico and altimeter.
Ed.
Let's say.
Implies an extraordinary invoicing level for Shawcor.
When we look at the EBITDA.
You know we have to take into consideration.
The reduction.
And prices.
That has taken place in the United States following the pipe logic.
Our sense is that this.
Should stabilize but.
We will have an influence.
In our in our marriage into but still.
We think that we should be able to maintain our margin in the first half.
Around 25%.
Yes.
Great. That's helpful. Thanks, a lot.
Thank you one moment for our next question.
Our next question comes from the line of Alessandro Pozzi from Mediobanca.
Oh, Hi, there. Thank you for taking my questions.
First one is on your results.
Q4.
One of the key facts there'll be behind.
And the numbers being above consensus was potentially shipments.
Shipments due to Saudi Arabia.
I was wondering as we go into 2024, how are we how are we.
Sure.
Think about the level of sales overall from the middle East.
And in particular from last February.
In Qatar as well.
And also as we look at.
Q1, you mentioned that sales are going to be flat for the first half that was one day EQ1 goal to be at.
<unk> four.
Sales and margins and then we're going to see a recovery from Q2 or the recovery is more.
For margins.
Backend loaded in 2024, thank you.
Thank you Alessandro well firsthand.
The.
We think that in 2024 hour sales in the middle East will increase substantially.
I will ask.
Gabrielle to meet an overview because.
We are present in different countries with different perspective. It is interesting to see how we can grow there. Thank you Paolo good morning, Alessandro Indeed, where we the Paolo last weekend in Saudi Arabia, we sit in our operations.
In the sense that we have is the activity in Saudi will remain very strong. Despite this announcement of a change in the target over.
Sustained capacity remaining of that million barrels, we see bidding activity continue at high levels at this level of 300 plus rigs.
Getting them is the increasing focus on drilling for gas, which is an increase of demand of gas.
In Saudi driven by the economic expansion and also the aim.
We are making.
Okay.
Bye bye.
In the power generation market. So we see drilling on gas it has been going on and will continue to grow.
In the years to come.
As a matter of fact to date to give you as a reference the gas driven or CPG demand is about two thirds of.
CPG demand in Saudi Okay. So this we expect to continue on this is positive for our presence in the Kingdom with the addition of GPC I think we have a unique setting in the kingdom.
Being able to supply to Aramco every setting of every type of oil conventional unconventional oil and gas onshore and offshore.
So I think we're very well positioned to.
To capture these labored over increase activity. We are also exposed.
Through the pipeline business, which is also growing in Saudi.
Currently we are providing and we are producing.
Mitogenesis Hulu.
Pipelines, which our offshore oil pipelines and projects that are going ahead or not impacted by by the recent announcements.
We see opportunities in gas trunk lines.
That are being developed in Saudi like Footages, Jeff what would a phase II or even the Mastercard Mastercard.
Master gas phase III. So we are very calm.
Confidence.
On our backlog and capabilities in Saudi which will have virtually no impact.
Very limited impact on the announcement this is in terms of salary so.
We expect the level of achievement that we havent felt in the fourth quarter to continue at very high levels throughout 2024 on top of that Paolo commented in the opening remarks from the integration of Abu Dhabi, we are there as well.
Nobody is going ahead with the drilling.
Drilling plans today, we are serving on adjusting time.
On a just in time basis about seven theory every month with our service center in rig direct model. So we are creating value.
I hadn't seen loyalty with the abnormal as well so.
There are also.
The important plans for expansion in Qatar, Egypt, Iraq, So we believe that middle East in general.
Being already increasing second half of 'twenty three versus perhaps first half of 'twenty three and we expect this to continue.
Into 2000.
Thank you.
On the second question, which is basically about the margin in 2024, I think we have a visibility for the first part of the year.
We have not.
How much visibility on the entire year.
The factors that are affecting margins.
Oh I'm sorry, it is Dave with the evolution of prices.
North America, reflecting the pipe logic, we are seeing the pipe logic.
Coming down in the recent months.
In our view it should be.
<unk>.
The coming months.
And this will be.
Let's say sampling and that will be important to effect.
Resolved, so we will compensate with increasing volume of waste.
The USA where do our.
Client base is solid even in an environment in which the rig count to remain substantially stable.
<unk> will compensate to some extent by the increased sales.
And in industrial.
Sorry that.
Consolidation of Shawcor, and they need and the increase of business of welded pipes.
Also in the middle East and not only the middle East.
Thanks, Joanne today in oil.
Lowered slightly our imagine thats the reason why I'm, saying, we should be around 25%.
If that answer at least for the coming six months.
Okay, and just a follow up on Chaco, what would be the contribution from the new business in 2004.
In terms of revenue.
We are expecting.
Any invoicing above 300 million $300 million to $350 million.
Depending on our.
On the contract that we may capture for a second part of the year.
And these will contribute with margin that add.
Below let's say.
25, because the business is a different business, yet, even though service, but I wouldn't.
Underestimate.
The relevance of <unk>.
The synergy between our business and to Vietnam for Shawcor do you offer.
Combining <unk> line pipe from the finance remained welded and seamless.
With.
The state of the art well recognize it.
Putting especially for complex applications like installation.
In our view is important now we have to work on it to materialize to expand our offer to add service to our clients and we will see the extent of these synergies.
Yes.
In our view should exceed.
The contribution of the single business.
In our business.
Okay, that's very clear thank you very much.
Okay. Thank you one moment for next question.
Our next question comes from the line of Marc Bianchi from TD Cowen.
Hi, Thank you.
I know, it's hard to have visibility.
Visibility into the back half of the year, but I'm curious you probably have some large projects internationally that are ramping up that should be contributors to your revenue and your margin.
It sounds like Theres, some invoicing with Shawcor that may be is going to be benefiting first half that goes away in the second half could you maybe just talk us through the moving pieces going from first half to second half recognizing these are all variables that we can't be can't have precision, but just so we can understand it.
Hey.
We're saying there is we don't have so much visibility but.
As you were saying we have.
The business in the offshore in the Middle East that is clearly strengthening.
Then we have.
Some uncertainty in area like Argentina.
In Mexico to some extent in Argentina.
Okay.
Not clear.
If the new government to waiver be able to advance.
In key reforms that may promote.
Increasing burden or new investment.
In the oil and gas business.
This is clearly one of the driver for the economy in Argentina and will be one of the important piece of any government program for the future.
How fast this would happen is now clear to us today.
Mexico the <unk>.
The election, a new administration.
The financial position of Pemex.
It's been weak.
The last year and may limit their ability to develop.
Larger resources that are Mexico, obviously.
Then there is probably the most important piece set.
The term in the medium term in 'twenty for that is that the evolution of the U S market.
U S and Canada buys, especially the U S.
Sure.
Dynamic of price and the evolution of our volume in rigs.
And also the.
What would happen with gas.
Considering the recent decision by the maturation is kind of a question Mark.
I would ask here to Luca.
Yes.
You gave us some color on how we see.
The U S.
<unk> for us.
In the in the coming in the coming quarters.
Yes, Thank you Paolo and good morning, Mark.
Look specifically to the U S and on the pipe logic is the way we see knowledge.
That.
It should be bottoming out obviously, there are uncertainties, but there are some key fox source of that.
It's worth taking into consideration number one is that the level of imports went though it is down at.
One of the lowest figures.
In the recent history and the fact that for quite some time on the rig activity is stabilizing around.
I think southern <unk> 30.
Alright.
In the AI space.
Obviously.
And other things that needs to be considered.
When you look at the biologics and our prices in Asia.
How is the exposure of the fiber largely depending on the mix and if you saw mark and not all the items are behaving the same way.
Production casing was much more resilient than tubing for example, and our exposure is very large.
On the production casing.
When we go to the activity again, we think that the activity is going on.
Going to be stable in the states and maybe we have some downside at least Congress Ben.
<unk> in the short term how the price.
We react but again the activity is not equal out throughout the original so if you look at Permian activity has been much more resilient than the average of the of the market and it is not even.
Even among different operators Paolo was mentioning our very large exposure to the 10 largest operators, saying all this data and when you look at this activity.
So when you look at the activity of these customers that you will see that that actually they grew in.
In the recent in the recent past so I believe that.
To.
Summarize that.
We see stabilizing prices stable market that in the very good exposure to the most resilient part of our.
Our agents and customers, yes, thank you Luca.
Pathologic index is important for us is guiding.
Not only <unk>, but also other part of our contract in the region.
Is influencing.
More than half.
Half of our.
Contract around the world to some extent.
Uh huh.
Influenced by the evolution and this is a variable that is not easy to predict that.
For the long run we are seeing this through stabilized because we see also that the importantly, United States either at the probably the lowest level in recent in the recent quarters. So the decline in the imports.
Sure.
In some momentum lead to.
Stabilization of the syndicate and this is a very important factor for understanding our level of margin initiatives.
Is the implication if pipe logic stabilizes here.
February March we get to a bottom.
That the second half margin would be better than 25%.
When considering the delay that we have between the price.
The level of five logic and.
The lag.
Four four affecting the contract.
There will be enough.
Really not so relevant but still there are many moving pieces here and also I come back to my first statement visibility on the second half.
It's not having that we have today, we can see in the first half and the number of the ones that we are done.
Anyway, I think we are pretty confident on these in.
In the second half, where we have to see at least what is happening in the economy.
In the coming quarter.
Before having some.
Let's be clear a picture.
Yes.
Makes sense. Thank you very much.
Thank you one moment for our next question.
Yes.
Our next question comes from the line of Kevin Roger from Kepler Chevron.
Yes, good afternoon, thanks for taking the time.
Just wanted to follow up on your comments.
Regarding the margin development and impact of the <unk>.
<unk> index.
Because basically the trained on the Bachelor Cheeks index have been very let's say in Q2 and Q3, but when you look at movement that we have seen in Q4, we will.
Facing a kind of one 2% month on month.
Thanks, so much.
Much less negative than it used to be so why would you said that the impact from the mountain IDT will be stronger in <unk>.
Q1, 24 compared to Q4 <unk>.
'twenty three.
Well.
Compared to what we have seen sequential Q4, you should treat because you maintain the margin that is probably better than you anticipated when you when you're testing in the Q3 earnings.
Just trying to understand why for more of a limited decline.
In the projection that we have.
Should see a stronger impact on the margin entity.
Okay.
There is a lag between that.
The indicator and the contract.
As you can imagine.
We are now seeing in the.
The next quarter, we will see reflected the weakness of the indicator and third Q. So.
To some extent, we see third into fourth.
And to some extent that these led.
Will lead to a decline in prices.
In.
Yeah.
And our sales in the U S not data with this declining sale in price in the first Q will be compensated to some extent by increasing volume in the United States, but this is maintaining the top line, but it is affecting our our profitable.
It is in our imaging.
Lately.
Not a big change but.
We anticipated in the fourth quarter.
A slight reduction on the <unk>.
Margin and we expect this trend to.
To extend into the first quarter of next year.
Okay understood and maybe the follow up if I may please.
You just mentioned.
That's subject.
Can you give us some color to try to understand what could be the effects of the.
Forex.
On your account for the coming what sells and what would be the potential plus you have the government decides to move on.
<unk> project.
Looking about.
Okay.
Argentina, No you are referring to Argentina.
Dana I think we did that.
Very good job in defending the financial position of the company in face of.
Southern devaluation in the range of 120%.
And.
All of them.
<unk>.
Is let's.
Let's say it comes from.
Our strategy of defending and stabilizing our position as Metro is again trying to reduce the risk.
On foreign exchange.
And southern change like the one that we had in.
In the fourth quarter I think we can support.
Maintain the strategy and <unk> been affected by other shift possible shift in the products. So we can on the sensor from a financial point of view manage.
The environment the situation in Argentina.
The potential of Argentina, and energy of the potential opportunity for US is huge we have very large market share in.
Supply in the energy business in Argentina like in 2023, we were able to Brazil the major.
Pipeline.
NASA location pipeline in Argentina.
Our pipes.
<unk>.
Dsos associated activity in drilling it.
For gas and that it was wrong.
<unk>.
The new government succeed in getting.
For more of the hydrocarbon sector through in the coming months that we expect that there will be investment in the area.
We will see investment in pipelines that we will see a rebound of.
Ah.
DVT and oil and gas and drilling.
For resources.
This and the signal that the government is successful in getting through its program of reform.
We'll be we'll give a strong incentive for.
Motivating investment in the energy sector.
This is could be an upside.
Yes.
Argentina is very very important for us.
<unk>.
2023, invoicing exceeded 2 billion during the year.
If.
The let's say.
Got it.
Positive sign.
On the stability of the account and the position of the government I think we could see.
The positive trend of investment that may reflect in the second part or even in the first part of 2025.
Within the time.
The different in vivo that could be.
Advance during this period.
Okay. Thanks.
Thank you one moment far next question.
Our next question comes from the line of David Anderson from Barclays.
Hi, Good morning, a question on your Middle East business. So revenue in Mena has doubled over the past year clearly the middle East business itself has inflected.
You talked about opening a new facility, a new training facility and training facility in Abu Dhabi.
I'm curious is that facility going to serve the entire middle east or is that just for Abu Dhabi and then kind of a broader question your footprint in the middle East you've talked about a number of.
I think you have the conductor pipe and I think you also have a welded facility in Saudi are you looking to expand your footprint in the Middle East do you have what you want is this an area, where you're considering investing more to build out that footprint.
Thank you I will ask Gabriel to give some color on diesel.
Thank you David Yes, there is and this is an area, where we have expanded our footprint in the last years.
GPC under facility and I would argue that you mentioned.
And last week.
Which is primarily intended to serve a knock.
With Abbvie, but these facility that certainly increases the capacity of premium trading for <unk>. So it is a facility that we intend to fortify with a major analysis of the region so could potentially.
Serve other customers in the region and then.
Going back to the point that you asked about it is the final setup that we have in middle East.
I think Paulo mentioned.
We're always looking for opportunities.
There has been increasing.
Good evening exported internationally that.
There is a whole trends I think we have discussed this in the puzzle.
Industrializing the different countries and converting this.
Richness in the oil and gas.
Into in the <unk> session on the rectification of the industry. This is a process that we have.
Being a combining the process.
It appears that we have developing other geographies around the world our engaging progressing.
The strategy.
Our business is growing and I think we have.
The capabilities the willingness.
Convenient housing hour.
Our footprint is and this has been very distinctive in the historically, we have differentiated in the middle east with products.
We have brought into services like the rig direct in.
Sure.
In a knock.
Local content and industrialization is also part of our service brewing.
Proven to be successful.
<unk>.
Thank you Gabriel and just as a follow up to that thank you.
In the remarks earlier, you had said that you are providing the pipe anja for unconventional project. There I'm. Just curious is the rig direct to potential with aramco or does aramco procure their products differently, where that where that model may not makes sense would that particular NOC.
Yes today.
It is not there, but the potential is there.
<unk> has already changed their supply chains from foreign producers to the local network and ecosystem approach on the different product lines.
The supply chain that we have today in the kingdom is getting us closer to think of the potential today the interaction the demand planning and the procurement cycle.
<unk> today is different than what it was two or three years ago, where they were buying one two years in advance to date the synchronization between the manufacturing facilities in Saudi.
And the rigs in Saudi is.
Much more of a view so I think we're heading into a further integration down the line.
Potentially heading that direction. Okay, yes. Thank you Gabriel I appreciate it.
Youre welcome.
Thank you one moment for our next question.
Our next question comes from the line of Jamie Franklin from Jefferies.
Oh, hi, Thank you for taking my questions.
Three quick ones from me. So firstly I just wanted to clarify on U S volumes. If you can give us any color on the direction of change of the volumes.
To what extent.
<unk>.
In the first quarter and then the second point, which has been also to some.
Just on the devaluation of the peso.
Actually there are several moving parts there in terms of the positive FX impact but also.
A deferred tax liability. So we just wanted to understand.
Could it be any further impacts in the first quarter.
And then final question just on expectations for working capital through 2024.
Yes.
Jamie.
The last question.
On Capex for the entirety of that is correct.
Our working capital.
Working capital yes.
Yes.
On the first one newsroom.
If you can.
Expand on on where do we see that we can increase yes.
Volume there sure.
If we can see there are the three main let's say segment, which are the Gulf of Mexico the onshore.
And the line pipe.
I will say that we see.
On the Gulf of Mexico kind of stable volume heading into first quarter.
Underlying fiber line, but in general, it's more or less equal by <unk>.
Getting back to the point that we were making before on our large exposure to the largest operator and they are more active regions.
We see a significant increase.
He also CTG volume.
If I had to give a number will be high single digits.
Yes.
Because also I mean.
The contract that we're signing including the Exxon Paul Good afternoon.
With driver.
Some increase in volume for for CTG.
And.
Really the position of the nicely at the moment with the major player is.
And display here.
Be more resilient.
Being the level of operation now.
One question that we will see and they are important whether that is also the effort of consolidation.
In this in this environment this will lead.
To a change of the approach.
The structure of the call on longer lateral or some modification in the way the company will address.
The access to locations that are coming from a different expectation, but I think we would see these.
A little bit later on.
More into their back end of the 2024 here, but in our view this could be a favorable effect for a company like dynamics in all of that has solid ties with these major operator.
The second point is on.
The devaluation in the.
Possible impact.
In the first quarter.
Here at ECS.
A few of these okay. Thank you Paolo Hello Jami.
If we sell exchange rate.
Costs increased by almost 120% in the middle of December.
After that they will get them in.
<unk>.
Set nickel impact at the rash of 2% nine months things that they've always.
Does the valuation impact.
Positive in our financial results since we were short so the exposure time something happens.
<unk>.
It was a negative impact in our.
Therefore, our tax asset.
Okay.
Sorry, because it's produced in the notion of David Please call value.
Fixed asset.
Got it.
Can all impact we continually not of enough 2% every month, we have not seen.
Another negative impact in our tax.
Position.
That is when you the valuation that we can expect.
Im kind of FX in there.
In that segment.
So with that we will see that but at the moment, we're not seeing that.
Thank you.
DCF for the evaluation and the third point is on working capital.
We do not expect a major change in working capital.
Analyses.
It requires.
Important working capital to operate the rig day rate.
Run rate anymore.
Way of operation.
In this environment.
Potential stability volume not big.
Big changes in it we would be able to maintain the working capital.
Releasing possibly some of it.
During 2024 because of a more efficient operation.
We're continually striving to.
Reduce the lead time in our plant and delayed timing of supply chain.
And this progress will reflecting <unk>.
Working capital from inventories on the part of receivable. If we are able to maintain the level of invoicing. These will not change too much.
Okay very clear thank you very much.
Thank you one moment far next question.
Our next question comes from the line of Joseph <unk> from Bank of America Securities.
Good afternoon, gentlemen, congrats on a strong set of results I have two questions.
We can talk about the moving parts on the cost side.
The EBIT dollar equation.
Do you have any further comments on potential impact of the.
The Red Sea on logistics, given the situation is likely to persist for at least.
The next quarter.
My second question is with regards to the dividend, obviously youre 60 cents per share represents a nearly 20% uplift year on year is this a growth rate that you see being sustained moving forward.
And then lastly, maybe I'll ask about the capex expectations for the full year 2004. Thank you.
Thank you.
Well on the cost side.
We don't see major.
Major changes because we will have some.
Improvement in our cost.
Following the devaluation in Argentina, but the on the other side the other part of our cost system.
Moving in the opposite direction.
Something that will be all.
Auto is relevant that will be the evolution of the hot rolled coils.
Because.
Our system today is at acquiring.
Place or hot roll coils.
On the market.
<unk>.
Clara volume when we have welded.
Presenting.
Between 15, and 20% of our sales.
In general apart from the hot rolled coil.
That could have.
Movement less predictable, we see some decline in price and raw material increase in hot rolled coil may compensate. These so we do not expect major impact on our EBITDA today from movement in the cost.
When we talk about the Red Sea.
He had Gabriele you can tell us because the region. These are region, mostly affecting.
Yeah.
The Eastern Hemisphere region, Yes, Paolo just to comment on the rates. It is something that we have been monitoring very very closely in that tax.
To start with you in November with practically no no no effect in.
December but we are having a limited impact in this first quarter 'twenty.
<unk> said before.
Around.
50000 tons of the.
4 million tons, plus that we manage every quarter.
Going through areas that are.
Affected by the conflict in the Red Sea.
Majority of these vessels have been diverted.
Through South Africa with delays of about 15 to 20 days.
Longer delivery time, we are monitoring.
And in constant communication with our customers. So none of our customers are suffering.
Any impact in their operations.
These diversion of 15 20 days also affect some extra logistic cost in terms of fuel timing a limited insurance.
Well in the range I would say a $3 million in the quarter. So I would say is quite limited and since we also have a couple of industrial system.
Multi sourcing of denim at this and we have experienced with many logistic providers I think we are able to manage this.
These crises.
Relatively limited impact.
Thank you Gavin.
Second question.
Well.
He then policy.
We'll be defined.
Bye bye the shareholder are individuals we don't.
Sure.
Say much on the future dividend policy, where occupancy that this 20% increase together with the buyback is a significant return to shareholder money and all of the 10% that I was mentioning in Manitowoc.
Paolo Rocca: The third point, which is the Capex, we expect capex to be in the range of 700 million for 2012 before considering the second.
Well part of the second.
Wind farm in Argentina.
Be executed during 2034.
We are in this range.
And this is what we see now.
Okay. Thank you very much maybe just following up on that $3 million number is that the number.
You incurred in the fourth quarter or the number that you expect to incur in the first quarter from the first quarter logistical impact in the first quarter and this is something that is.
Conflict.
Maintain emphasis probably.
To predict down the line.
<unk> is in the first quarter.
Speaker Change: Thank you very much.
Sure.
Thank you.
At this time I would now like to turn the conference back over to Giovanni started Danielle for closing remarks.
Danielle: Thank you Gigi and thank you all for joining us.
Our conference call.
Soon.
This concludes today's conference call. Thank you for participating you may now disconnect.
Danielle: Okay.
[music].
Okay.