Q3 2024 Tenaris SA Earnings Call
Okay.
Operator: Good day and thank you for standing by. Welcome to third quarter 2024 Tenaris S.A. 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.
Speaker Change: Good day and thank you for standing by welcome to <unk> third quarter 2024 to <unk> S. A 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.
Star one one on your telephone.
Speaker Change: You will then hear an automated message advising your hand is raised.
Or withdraw your question. Please press star one one again please.
Speaker Change: Please be advised that today's conference is being recorded.
Operator: I would now like to hand the conference over to your speaker today, Giovanni Sardagna.
Speaker Change: I'd now like to hand, the conference over to your speaker today Giovanni sort of Danya. Please go ahead.
Giovanni Sardagna: Please go ahead. Thank you, Gigi, and welcome to Tenaris 2024 third quarter conference call. Before we start, I would like to remind you that we will be discussing forward-looking information in the course and that our actual results may vary from those expressed or implied during With me on the call today are Paolo Rocca, our Chairman and CEO, Alicia Mondolo, our Chief Financial Officer, Gabriel Podskubka, our Chief Operating Officer, and Luca Zanotti, President of our U.S. Operations.
Speaker Change: Thank you Gigi and well well come to term out as 2024th quarter Conference call.
Giovanni Danya: 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.
Speaker Change: With me on the call today are Paolo Rocca, our chairman and CEO, Alicia Munda Lark, our Chief Financial Officer Gabriel protocols.
Our chief operating officer, and Luca Zanotti President of our U S operations.
Giovanni Sardagna: Before passing over the call to Paolo for his opening remarks, I would like to briefly comment on what the result. Our sales in the third quarter of 2024 reached $2.9 billion, down 10% compared to those of the previous year, and down 12% sequentially, mainly due to lower prices in the Americas and lower demand in the USA, Mexico, and Saudi Arabia, as well as lower line pipes to our Average selling prices in our tubes operating segment decreased 14% compared to the corresponding quarter of last year and 2% Our EBDA for the quarter was up 6% sequentially to $688 million as the previous quarter was affected by an extraordinary provision recorded for an ongoing litigation related to the acquisition of a participation in Newsy Minas in 2012.
Speaker Change: Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results.
Speaker Change: Our sales in the third quarter of 2024 reached $2 9 billion down 10% compared with those of the previous year.
Speaker Change: And down 12% sequentially, mainly due to lower prices in the Americas and lower demand in the USA, Mexico, and Saudi Arabia as well as lower.
Speaker Change: Line pipe see from talking to you.
Speaker Change: Average selling prices not tube, so breaking segment decreased 14% compared to the corresponding quarter of last year and 2% sequentially.
Speaker Change: Our EBITDA for the quarter was up 6% sequentially to 688 million as the previous quarter was affected by an extraordinary provision recorded for an ongoing litigation related to the acquisition of participation and who do you mean us in 2012.
Giovanni Sardagna: Without this extraordinary provision in the previous quarter, the ABDA for the quarter would have declined 16% sequentially. However, our ABDA margin at 23.6% was only marginally lower compared to the margin recorded last quarter on a comparable basis. With operating cash flow of $552 million and capital expenditure of $179 million, our free cash flow for the quarter was $373 million. After share buybacks of $182 million, our net cash position amounted to $4 billion at the end of the year.
Without this extraordinary provision in the previous quarter. The EBITDA for the quarter would have declined 16% sequentially. However, our EBITDA margin at 23, 6% was only marginally lower compared to the March in recorded last quarter on a comparable basis.
Speaker Change: With operating cash flow of 552 million and capital expenditure of Android and 79 million, our free cash flow for the quarter was $373 million after.
Speaker Change: After share buybacks of $182 million net cash position amounted to 4 billion at the end of the quarter.
Giovanni Sardagna: Our Board of Directors approved the payment of an Interim Dividend $0.27 per share or $0.54 per ADR to be paid on November The Interim Dividend is up 35% compared to the Interim Dividend we paid last year. In addition to the dividend, the Board of Directors also approved a share buyback of $700 million to be executed within the next five months.
Speaker Change: Our board of directors approved the payment of an interim dividend 27 cents per share or 54 cents per ADR to be paid on November 20.
Speaker Change: The interim dividend is up 35% compared to the interim dividend, we paid last year.
Speaker Change: In addition to the dividend the board of Directors also approved a share buyback of 700 million to be executed within the next five months.
Paolo Rocca: Now, I will ask Paolo to say a few words before we open the questions. Thank you, Giovanni, and good morning to all of you. In the third quarter, we successfully carried out our extensive program of plant stoppage. We have now largely concluded an important cycle of investment in the maintenance and modernization of our industrial sector. Incorporating innovative technology for steelmaking and heating furnaces and further at the Still Ongoing is an investment at our U.S. Steel Shop. to modernize the dust collection system and expand capacity, which will be concluded this This investment will contribute to significant improvement in productivity and environmental performance with low air pollution.
Speaker Change: Now I will ask Paolo to say a few words before we open.
Speaker Change: Questions.
Paolo: Thank you Joe.
Paolo: And good morning to all of you.
Paolo: In the third quarter, we successfully carried out our extensive program of plant stoppages.
Paolo: We have now largely concluded important cycle of investment and the maintenance and modernization of our industrial system, incorporating innovative technology for steelmaking and heating furnaces and further appeal to Asia.
Speaker Change: So you don't growing is an investment.
Speaker Change: The steel shop.
Speaker Change: To modernize the dust collection system and expand the capacity.
Paolo: Should we conclude at this moment.
Paolo: This investment will contribute to significant improvement in productivity and environmental performance with low air pressure, we're confident that we will see the benefit of these investments over time.
Paolo Rocca: We are confident that we will see the benefit of this investment over time. We have expanded our relationship with international oil companies and consolidated our positioning in complex offshore. This is being reflected in a number of recent awards that will support our Offshore Order Backlog for 2025 and 2021. The Guayana Surinam Basin, where we are already serving ExxonMobil casing requirements under a long-term agreement, Saipem awarded us a line pipe and insulation coating package for the total Grand Morgul development, recognizing the benefits. of our Tenaris Showcore integration. In Brazil, we were awarded a riser and flowline package with thermal insulated coatings for Petrobras Bucio 9 development.
Paolo: We have expanded our relationship with the national oil companies and consolidated our positioning in complex offshore project.
Paolo: This is being reflected in a number of recent awards that will support our offshore order backlog for 2025 and 2026.
Paolo: They're going on a soaring in Beijing, where we are.
Paolo: Already serving exxonmobil casing requirement under a long term agreement.
Paolo: I wanted a line pipe and installation coating package for the total grant more go development recognizing the benefits.
Paolo: Of our 10 Arris Shawcor integration.
Paolo: In Brazil, we were.
Paolo: Awarded as riser and floor line packager with Terra Magnus related coating for Petrobras boost your nine development.
Paolo Rocca: as well as the Conductor Casing and Superchrome Tubing for the Scipia and Atapu Projects. which we are currently delivering the export line, the export pipeline, riser and coating for Equinor Raya. In West Africa, ExxonMobil awarded us the casing for their Block 15 development in Angola. We also secured the offshore line pipe for Shell Bonga project in Nigeria. In the United States, where drilling activity has stabilized. OCSG imports are coming down. Imports from Thailand have come to a halt after they were found to have been violating trade rules. For this year, the Korean import quota has been reduced by 50,000 tons and this will also apply for 2020.
Paolo: As well as the conductor casing and Super Chrome tubing for the CPR at the pool project, which.
Paolo: Which we are currently reviewing the export line.
Paolo: The export pipeline riser and coating for ignore I approach it.
Paolo: West Africa, Exxon Mobil awarded Us the casing for the block 15 development in Angola.
Paolo: We also secured.
Paolo: Sure.
Paolo: Line pipe for shell Bonga project in Nigeria.
Paolo: The United States.
Paolo: Drilling activity has stabilized.
Speaker Change: What is your inputs are coming down impart from Thailand.
Paolo: Come to a halt.
Paolo: After where they were found to have been violating trade rules.
Paolo: For this year the core earnings per quarter has been reduced by 50000 tons and this will also apply for 2025.
Paolo Rocca: The pipelogic index of US OCTG prices has started to rebound with increases over the past two months and we expect this trend will continue in the coming In Canada, trade action implemented in recent months has limited unfairly traded Chinese OCTG. We are being successful in showing the value of our redirect service program by extending the coverage and duration of our service agreement among the larger Canadian operators. These include Petronas who awarded us with a three-year contract for their OCTG requirement in the monthly as they prepare for the start-up next March of the LNG Canada program.
Paolo: The pipe logic index of USO CTG prices has started to rebound with increases over the past two months and we expect that this trend will continue in the coming months.
Paolo: In Canada.
Paolo: The reduction implemented in recent months has limited unfairly traded Chinese or CTG input.
Paolo: We are being successful in showing the value of our rig direct service program by extending the coverage and duration of our service agreement.
Paolo: Among the larger Canadian operators.
Paolo: This includes the Petronas.
Paolo: We're awarded us with a three year contract for their or CTG requirement in the Montney.
Paolo: As they prepare for the start up next much of the LNG, Canada project.
Paolo Rocca: In Argentina, economic conditions are improving and investments are starting to move forward in Bacamor. where there are plans to increase oil exports from the country to 1 million barrels a day before the end of the year. We were awarded the supply contract and received a down payment for the first phase of the Vaca Muerta Sur oil pipeline. which will connect production in the shale to a new deep water port, Punta Colorada, in Rio Negro province.
Paolo: Argentina economic conditions are improving and investment are starting to move forward and back on Nevada, where there are plans to increase oil exports from the country to 1 million barrel a day before the end of the decade.
Paolo: We were awarded the supply contract and receive a down payment for the first phase of the Bakken water sewer oil pipeline.
Paolo: Which will connect the production in the shale to a new deepwater port to Colorado in Rio <expletive> Province.
Paolo Rocca: In the Middle East. While gas drilling activities remain at a stable level, we are seeing some softening in oil drilling activities. In Saudi Arabia, we have just completed deliveries and a special stock replenishment program. Now Aramco is looking to reduce stocks. Increase Cash Flow Even if in the third quarter our shipments remain relatively high, this stocking will have an impact on our sale for the fourth quarter. Our free cash flow remains strongly positive. Even if with the transition to the new government, PEMEX in Mexico has further delayed payments. Free cash flow has amounted to $1.9 billion in the nine months.
Paolo: In the Middle East.
Paolo: While drilling activity remain at the stable level.
Paolo: We are seeing some softening in oil drilling activity.
Paolo: Saudi Arabia, we have just completed deliveries.
Paolo: And a special stock replenishment program and now what I'm always looking to reduce stocks and increase cash flow.
Paolo: Even if in the third quarter, our shipment remain relatively high.
Paolo: This destocking will have any impact on our sales for the for the fourth quarter.
Paolo: Our free cash flow remains strongly positive.
Paolo: Even if we did transition to the new government Pemex in Mexico has further delayed payments.
Paolo: Free cash flow has amounted to $1 9 billion in the nine months and.
Paolo Rocca: and our net cash position at September 30 amounted to $4 billion.
Paolo: And our net cash position at September 30 amounted to 4 billion.
Paolo Rocca: In this situation, our Board of Directors decided to increase our Interim Dividend by 35% to $0.27 per share and to authorize a follow-on share buyback program of around $700 million using the authority granted at the Annual General Shareholder Assembly in June 2012. With this interim dividend and extension of our shared buyback program, we will return close to $2 billion to our shareholders in this calendar.
Paolo: In this situation our board of director.
Paolo: To increase our interim dividend by 35% to 27 cents per share and core to rise.
Paolo: Follow on share buyback program of around 700 million using the authority granted.
Paolo: G&A our shareholder Assembly in June 2020.
Paolo: This interim dividend and extension of our share buyback program.
Paolo: We will return close to $2 billion to our shareholder in this calendar year.
Giovanni Sardagna: We are now opening for any questions you may have. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
Speaker Change: We are now opening for any question you may have.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again please.
Speaker Change: Please standby, while we compile the Q&A roster.
Alessandro Pozzi: Our first question comes from the line of Alessandro Pozzi from Mediovanca. Good afternoon. Thank you for taking my questions.
Speaker Change: Our first question comes from the line of Alessandro Pozzi from Mediobanca.
Alessandro Pozzi: Good afternoon. Thank you for taking my questions.
Alessandro Pozzi: I have three, if I may. The first one is we've seen the results of the U.S. elections. And I was wondering if you can give us your thoughts on how the new administration could have an impact on your business, could have opportunities for you in the U.S. I'm thinking about potential more protectionist approach with higher tariffs or lower quotas, or maybe even on the M&A side, whether potentially now you're looking at maybe acquisitions that may not have been available in the past with the previous administration. And we know that in 2023, the acquisition of Bentley was terminated.
Alessandro Pozzi: Three if I may differ.
Speaker Change: The first one is we've seen the results of the U S elections.
Speaker Change: And I was wondering if you can give us your thoughts on how the new administration could have any impact on on your on your business.
Speaker Change: It could have opportunities for you in the U S. I'm thinking about potential more protection is support with higher types or.
Speaker Change: There were quarters or maybe even on the M&A side, whether potentially now youre looking at maybe acquisitions.
Speaker Change: You may not have been available in the past with the previous administration and we know that in 2020.
Speaker Change: The acquisition of <unk> was terminated.
Alessandro Pozzi: So any any thoughts around the impact of the new administration could be really helpful.
Speaker Change: Any thoughts around the impact of the administration could that be really helpful.
Alessandro Pozzi: The second one, if you can just give us maybe your view on what we should think about the share buyback into next year. You just announced 700 million until March, but I was wondering, beyond March, what sort of, let's say, share buyback program we could envisage? Should we assume on a steady state 1.2 billion for next year? Let's say same as last year.
Speaker Change: The second one if you can just give us maybe.
Speaker Change: Yes.
Speaker Change: Are you on what we should think about that share buyback into next year, you just along with $700 million until March.
Speaker Change: Wondering beyond March was sort of.
Speaker Change: Let's say share buyback program, we could.
Speaker Change: We could envisage.
Speaker Change: Assume on a steady state one 2 billion for next year, let's say semi is the same.
Speaker Change: Similar to last year.
Alessandro Pozzi: And also a final question on outlook for the activities in North America. Some of your peers have suggested potential flat, if not down, activities coming down next year. But it feels like you are more constructive for the U.S. next year, and I was wondering if you can give us your thoughts on how we should see activities into 2025. Thank you.
Speaker Change: And also a final question.
Speaker Change: Outlook for the activities.
Speaker Change: In North America some of your.
Speaker Change: <unk> had suggested potential flat if not down activity is coming down next year, but feels like you're more constructive for the U S. Next year and I was wondering if you can give us your thoughts on how we should see activities.
Speaker Change: 2025, thank you.
Paolo Rocca: Thank you, Alessandro, for your question. Well, to begin with, you are mentioning the impact of U.S. election. I think it is... Very early to understand the changes that may be relevant for us.
Speaker Change: Thank you.
Speaker Change: Alessandro.
Speaker Change: For your question.
Speaker Change: To begin with.
Speaker Change: You are mentioning the impact of U S election.
Speaker Change: I think.
Speaker Change: Very early to understand the change.
Speaker Change: Changes that it may be relevant for us.
Paolo Rocca: Let me say that one first point is that We reduced the level of uncertainty, at least we know today where we are, and everybody in the world, the government of different countries, Nose. What, which will be the new government in the U.S. In this sense, we are reducing the level of uncertainty. This is always something. Positive for Inconstructive for Deciding Strategy and what will be the action from the part of the company.
Speaker Change: Let me say that one first point is that it.
Speaker Change: We reduced the level of uncertainty at least we know.
Speaker Change: Today, where we are and everybody in the world that the government of the different countries.
Speaker Change: No.
Speaker Change: What which will be the new government and the.
Speaker Change: So in this sense, we are reducing the level.
Speaker Change: So this is always something.
Speaker Change: Positive for and constructive for.
Speaker Change: The siding strategy work.
Speaker Change: It will be the reaction from the part of the company and the deepening government now.
Paolo Rocca: Now, in terms of... Where We Seed. area that could be of impact. Well, I think in general, The election of... Donald Trump as a president Even if it will materialize, it will take charge only in January, but it has been perceived as positive for the energy sector. We may expect that the policies... of the new administration will be favorable for the energy sector in facilitating development oriented to export of gas. In particular, we may expect some permitting speed-up that would allow improved evacuation in the Ivanova region.
Speaker Change: In term of.
Speaker Change: Where do we see.
Speaker Change: Area that could be a impact.
Speaker Change: Well I think in general.
Speaker Change: The.
Speaker Change: The election.
Speaker Change: Triumph as a precedent.
Speaker Change: The.
Speaker Change: Even if it will materialize it will take a charge on in January but has been perceived as a positive event for the for the energy sector.
Speaker Change: We may expect that.
Speaker Change: The policies.
Speaker Change: The new administration.
Speaker Change: It will be favorable for the energy sector.
Speaker Change: Facilitating development oriented to export of gas.
Speaker Change: In particular, we may expect some permitting.
Speaker Change: Speedup in that it would allow improve we have a question in the event of agents. So in general I think there is a general perception that Nuomi station.
Paolo Rocca: So, in general, I think there is a general perception that the new administration should have a positive impact on Investment in the Energy Sector in the United States.
Speaker Change: Should have a positive impact on.
Speaker Change: Investment.
Speaker Change: The energy sector.
Speaker Change: United States.
Paolo Rocca: On the second point is on China. The new administration will have a... Policy of restraining The aggression of the Chinese industrial sector in import. to the state, the position on China may... from China in the United States and maybe other part and other region. In this sense also we perceive that this may be that could have a positive impact for a company like us that are operating in this market.
Speaker Change: The second point is on China.
Speaker Change: Yeah.
Speaker Change: In your organization we have.
Speaker Change: Policy of restraining.
Speaker Change: Got the aggressive now of the Chinese.
Speaker Change: The industrial sector in import.
Speaker Change: Into the position on China.
Speaker Change: May.
Speaker Change: Reduce.
Speaker Change: The.
Speaker Change: Let's say the penetration of <unk>.
Speaker Change:
Speaker Change: Deal and other materials from China, and the United States and maybe.
Speaker Change: The other.
Speaker Change: Other part another leisure in this sense or should we perceive that DC.
Speaker Change: Maybe.
Speaker Change: Something.
Speaker Change: That could have a positive impact for a company like us that are operating in this market.
Paolo Rocca: Third area that is important is the question of tariff. This is more uncertain, because in the end, we don't know which will be the policy of the new administration in the relation with Mexico or the rest of the world. I think we have to wait. We have a more clear understanding on the setup of the relation and the decision concerning tariff. In general, we may expect that the new administration will will defend industrial activity in the U.S. and in my view also in the U.S.MCA because in the end the repositioning of the supply chain The Western countries and the U.S.
Speaker Change: So.
Speaker Change: What is important is the question of tariffs. This is more uncertain because in the end.
Speaker Change: We don't know which would be the policy of the organic over the new administration in the relation with Mexico or the rest of the World I think we have to wait until.
Speaker Change: Yeah.
Paolo Rocca: should have.
Paolo Rocca: A positive impact for companies like us that are mainly operating within this space, but this is something that we will understand better.
Paolo Rocca: From the point of view of the relation, for instance, something that is also important for us with Argentina, the new administration should have a positive view and a positive view of the relation with Argentina. From the point of view of Argentina, The election and the new administration is positive news, there is a relation. that could be constructive for supporting the recovery of the Argentinian economy. And in this sense, I think that... This should support investment, for instance, in the development of the energy sector in Argentina and will also have an impact, like the one that we have seen just yesterday, in reducing The risk associated with Argentina, the country risk, will possibly...
Paolo Rocca: be reduced by the strong relation that has been established in the past and I think is possible to influence. the relation and the ability of Argentina to have access to international finance.
Paolo Rocca: I think these are the area in which we are observing and we expect that the change in administration may have a positive impact. on a company like Tenaris that is operating in this environment.
Paolo Rocca: What about potential new M&A opportunities in the U.S.? This is also something that we would, I mean... We need to wait and see all the decisions that gradually the new administration will take and we will see. We have today no hints of if there will be a change in policy on the antitrust or in other areas that could be... Introducing changes that may stimulate or be in favor of M&A policy for a company, for The second point is on the share buyback. Well, we announced the decision that has been taken within the authority of the board.
Paolo Rocca: The board in February will, again in February and before the General Assembly. Analyze and see how the situation is evolving and we'll consider Policy for Shared Buyback at that time. We cannot anticipate today which will be the orientation of the board and eventually of the special assembly, external assembly that will be needed to expand our Shared Buyback Program.
Paolo Rocca: And the last point is... The outlook for North America, I understand you are referring to comment of some of other oil service company on the region.
Luca Zanotti: I will ask here to Luca. to give us his Feeling on the level of activity, I think that also the election in the United States may also have an impact here.
Luca Zanotti: But anyway, Luca, it's up to you. Thank you, Paolo. Good morning, Alessandro. So I understand that you're referring to Q1 2025. And if this is the case... Here we need to see that our activity in the U.S. will increase, and this is going to be mainly driven by three factors. One, our customers are resetting the budget, are going to add a few rigs. I mean, not big things, but they're going to slightly increase. We will complete the rollover of our contracts to the company that has been acquired by our legacy customer. This is another component.
Luca Zanotti: And there are a few small operators that used to be traditionally our legacy customer that went out of activity for a certain period. And now they have recently returned. They are returning right now. And we're going to see the effect of them deploying full speed in the first quarter of 2021. So in terms of activity, we see an increase. And obviously, also in terms of price, we see an increase. As you know, our prices have some lag. So we're going to see the increase that we have seen here in the pipe logics recently. And I think we're going to see another one going ahead, fully reflected into the first quarter of 2025.
Alessandro Pozzi: Okay, it's very clear. Thank you very much. Thank you.
Operator: One moment for our next question.
Arun Jayaram: Our next question comes from the line of Arun Jayaram from JP Morgan Securities, LLC.
Arun Jayaram: Good morning, good afternoon, gentlemen. Paolo, my first question is maybe a follow-up on implications from the new administration. I wanted to get your thoughts on if the new administration did raise tariffs, on imports. So this is a what if kind of scenario. You know, what would be the impact to Tenaris? And I'm just thinking about if you could give us a sense of how much of, you know, North American, you know, of your North American, you know, revenues or volume do you supply with domestic product versus maybe, you know, some of the sourcing out of Veracruz or out of Argentina?
Paolo Rocca: Thank you. Well, first of all, we need to understand that the policy that will be adopted by the new administration, I think the new administration is a strong drive in repositioning supply chain out of China. And they will consider not necessarily only in the United States, it will be, I imagine, a policy oriented to... Decent. repositioning of supply chain that will include also let's say consideration for the USMCA for the American industry itself but also for the relation with countries that are of the U.S. and the West. In this sense, I do not expect, I would expect that this will be analyzed carefully and Taking into consideration, let's say, the existing agreement that are in place.
Paolo Rocca: Now, in the case, by the way, of an increase in general of the tariff within this period, you have to take into consideration that today we'll basically, we are able to produce all what we are selling to the United States on the capacity that we have installed. We may complement some specific product for some specific client, but in general, we have the largest production capability in the United States, so we will be able to react and organized in a more specific way before having a clear understanding. In General If the orientation of TARIS is to defend, the domestic...
Paolo Rocca: Industrial Activity to the States, Tenaris will be physically favored. We have capacity in it, and we will be able...
Arun Jayaram: Great. That's exactly what I wanted to get answered.
Arun Jayaram: My follow-up is just thinking about kind of near-term thoughts on volumes and EBITDA margins. It does look like, Paolo, the second half of 2024 is matching what you mentioned at the recent Investor Day, but maybe the shape is a little bit different with higher 3Q results versus 4Q.
Paolo Rocca: I was wondering if you could give us your thoughts on maybe how EBITDA margins could look in 4Q and if you had any visibility about trends into the first half of 2025. Well, you are right. We are in line with the expectation for the second semester of 2000. We will have... The volume will be slightly lower, something in the range of the mid-teens. compared to the third quarter, the same will... will be basically for the sales and the... The EBITDA, the margin will remain more or less in line with the margin that we had in the third quarter.
Paolo Rocca: So, as you say, the third quarter will be stronger than the fourth quarter. On average, the semester, the second half, will not be far from in line with what we anticipated.
Arun Jayaram: Now... In the first quarter of 2025, we expect to have an increase around in the low teens for volume and revenue and the margin will remain more or less again in line with the second half of 2021. Thank you very much. 2024, sorry, 2024. Thank you.
Operator: One moment for our next question.
Mark Bianchi: Our next question comes from the line of Mark Bianchi from TD Cowen. Hi, thank you. I was curious to hear some more about the upside you see in Argentina and Mexico. I think I heard you say that there was a pipeline award that you have now for Argentina. Maybe talk to us about when that starts to flow through results and then just, you know, any sense of the magnitude of what kind of increase from those countries could be flowing through to Tenaris.
Mark Bianchi: Thank you, Mark. Well, in Argentina, you have followed the changes in the economy are moving in the right direction. Exploitation is going down. The deficit is under control. The law that is being approved is introducing changes in the hydrocarbon sector in the labor area. So the transformation is advancing. The country risk is going down. Agrippina is moving in the right direction. We are starting to see also investment coming into the energy sector at the pace that is allowed by the need to launch projects and so on. We have seen also the sales of Exxon Asset in Vagamoerta has taken an important step, I mean, Exxon decided to assign this to one of the bidders, so now we may expect also that in this case...
Speaker Change: coming into the energy sector, at the pace that is allowed by the need to launch projects and so on.
Speaker Change: We have seen also the sales of Exxon assets in Vagamoerta
Speaker Change: has taken an important step, I mean Exxon decided to assign this to one of the bidders, so now we may expect also that in this case
there will be
Paolo Rocca: Projects that start to be developed. In the case of the pipeline, we receive an order for the first phase of the VACA-MOERTA This is largest pipeline for evacuation of oil. It is the key for opening The door to... production of oil in Vaca Muerta. It's a delivery of this pipeline at the end of the first quarter of 2020. Advanced Payment, we start the cycle of buying steel and start producing, so we will start to deliver at the end of the first quarter. But we also, I expect that with the... different moving parts. Economy and in the Energy Sector.
Speaker Change: project that start to be developed. In the case of the pipeline we receive an order for the first phase of the VACA-MOERTA...
this is
Speaker Change: The largest pipeline for evacuation of oil. It is the key for opening
The door to...
the end of the first quarter.
But we also, I expect that with the
Speaker Change: the different moving parts in the economy and in the energy sector
Paolo Rocca: Some new rigs will start to be added in the coming months, and gradually, the capacity of the system will increase to be prepared for the I think we will see this during 2018. Five Riggs may increase. My view in the range of 40 or plus. rigs compared to what we are today.
Speaker Change: Some new rigs will start to be added in the coming months and gradually the capacity of the system will increase to be prepared for the expansion of the evacuation capacity.
of oil.
Paolo Rocca: Possibly, this will take, let's say, 2025 to materialize, but gradually, by the end of 2025, we should arrive in Argentina with an increased number of We expect between 40% or 50% more than what we have today. That's very good. Yes.
Speaker Change: Possibly this will take, let's say, 2025 to materialize, but gradually, by the end of 2025, we should arrive in Argentina with an increased number of rigs. Expect between 40 or 50 percent more than what we have today.
Thanks.
Thanks for watching!
Paolo Rocca: And Mexico. Mexico, the second point, also in Mexico. Mexico is a... Let's say, the situation we see in Mexico... is influenced by the change in the government. We do not know yet how the new administration, Mexico, will, let's say, Intervene on the energy policy and on the refinancing of the economy. Probably, I think this quarter has been a very low quarter in terms of activity. from Pemex and the rest of the system. It is a... Let's say, expectation for... This is a decision that the new government may take in refinancing Pemex. We are positive in this because we see that the new administration is sending signals that They will promote Investment In the energy sector, not only in the oil and gas, but on the...
That's very good, yes. And Mexico?
Speaker Change: Mexico, the second point concerning Mexico. Mexico is, let's say, the situation we see in Mexico
Speaker Change: is influenced by the change in the government. We do not know yet how the new administration in Mexico will, let's say,
Speaker Change: to intervene on the energy policy and on the refinancing of Pemex. Probably, I think this quarter has been a very low quarter in terms of activity from Pemex and the rest of the system.
refinancing Pemex
Speaker Change: deciding how to promote investment in the energy sector, we are positive in this because we see that the new administration is sending signals that
they will promote
investment
Also in the Renewable.
Mark Bianchi: I think we will see the policy to be articulated and give some visibility in the first quarter of 2021. Okay, very good. Thank you for all of that.
Speaker Change: I think we will see the policy to be articulated and give some visibility in the first quarter of 2025.
Mark Bianchi: I just had one other, as it relates to the capital return, and I know you'll formalize this plan in May, but as we think about your willingness to maybe dip into the cash balance to support capital return, what sort of cash balance does the company need? to just run the business because certainly the current level is much more than you probably need.
Speaker Change: And I know you'll formalize this plan in May, but as we think about your willingness to maybe dip into the cash balance to support capital return, what sort of cash balance does the company need?
Speaker Change: to just run the business because certainly the current level is much more than you probably need.
Paolo Rocca: Well, before getting into this, let me do a correction because I was reviewing the notes here. Before responding to the question of Arun, I was saying that in the fourth quarter, the level of the volume reduction will be in the level of meeting. It will be a single digit down compared to the third quarter. I don't want to be misunderstood. So they're single digits down, double digits up. Sorry, it's not a double digit, it's a single digit. and is double-digit up in the third quarter of 2020. watching. Yep, I'm going to go up. I think.
Speaker Change: I was reviewing the note here, I maybe, before responding to the question of Aruna, I was saying that in the fourth quarter...
Speaker Change: The volume reduction will be in the level of meetings. It will be a single digit down compared to the third quarter. I don't want to be misunderstood on this.
so the single digit down, double digit up
Sorry, it's not double digits, it's single digit.
Speaker Change: and in double digit up in the fourth quarter of 2011.
What, single? Yep, I think we're going to go up.
Paolo Rocca: In the first quarter of 2025, we will go up by around 10%. Thank you for the clarification. Yeah, sorry for the clarification because I have... Now, on the question of the cash... I think this is up to the... Shareholder to the side and to the board to indicate, I think that now when we look at the $4 billion. And without a visible target for M&A or major operation, it is logical and it is rational to proceed in the buyback and in the increase in dividend. But this is also something that we need to evaluate over time.
Speaker Change: Thank you for the clarification. Yes, sorry for the clarification, because I have it here. Now, on the question of the case...
Speaker Change: the shareholder to decide and to the board to indicate. I think that now when we look at the $4 billion
and without a visible target for M&A or major operation
Speaker Change: But this is also something that we need to evaluate over time.
Paolo Rocca: I think that the beginning of in 2025. We will have a better understanding. of Potential Opportunity that we may have. All around the world in expanding our level of activity, and this will be an important factor to consider, which would be the best capital allocation for today. I don't think we are now in the position to determine which will be the capital allocation. Looking ahead, especially in a situation that has so many let's say answer to an 80 different areas in which we operate, no? Thank you very much. I'll turn it back. Thank you.
We will have a better understanding.
of potential opportunity that we may have.
Speaker Change: all around the world in expanding our level of activity, and this will be an important factor to consider, which will be the best capital allocation for Tenaris.
Speaker Change: I don't think we are now in the position to determine which will be the capital allocation.
Let's say, answer to an ET.
in different areas in which we operate, no?
Thank you very much. I'll turn it back.
Operator: One moment for our next question.
Thank you. One moment for our next question.
Stephen Gengaro: Our next question comes from the line of Stephen Gengaro from Stiefel. Thanks. Good morning. Good afternoon, everybody.
Speaker Change: Our next question comes from the line of Steven Gengaro from Stiefel.
Thanks, good morning, good afternoon, everybody.
Stephen Gengaro: I think, too, for me, the first, and it gets to cash usages and maybe even the M&A side, when we think about what you have done over the last 20 years as far as M&A, everything from Maverick on through recent deals, it all seems to be in the same line of business. I'm just curious how you think internally about, would you go outside of those product lines at all and maybe kind of how far outside you'd go from kind of a manufacturing versus a service business? Well, we look at the M&A considering where we can leverage our know-how, our local presence and our positioning.
Steven Gengaro: I think two for me, the first, and it gets to kind of cash usages and maybe even the M&A side.
when we think about the kind of work
Hey
Paolo Rocca: And usually we look at this from the point of view of the competitive advantage that we may have or create through M&A. We do not look at this from a point of view of diversification. We look at this from the point of view of competitive advantage that we can create. Ours is not to diversify, this is up to the shareholder. Ours is to maximize the potential and the capability of the company. So that's the approach that we are taking. And we have limitations, sometimes coming from... size of our operation or from a risk perception that may be, let's say, different from what we are prepared to take.
Speaker Change: We do not look at this from a point of view of diversification. We look at this from the point of view of competitive advantage that we can create.
Speaker Change: the size of our operation, or from a risk perception that may be, let's say, different for what we are prepared to take.
Paolo Rocca: But these are the criteria we are using to evaluate where to move and how. Great. Thank you.
Speaker Change: But these are the criteria we are using to evaluate where to move and how to move.
Paolo Rocca: And the other question I had at a maybe a higher level, but you've alluded to this in the past, and I'm curious what your current thinking is on, you know, on the EBITDA margin front, you've done a great job over the last couple of years, right, getting margins high and maintaining at a pretty healthy level. Where do you see, you know, kind of in, where do you see kind of margins sort of flowing out on a normalized basis? Like, should we think about kind of low to mid 20s as a pretty good normalized run rate?
Speaker Change: Great, thank you. And the other question I had at a maybe a higher level but
Speaker Change: You've alluded to this in the past and I'm curious what your current thinking is on
Speaker Change: You know, on the EBITDA margin front, you've done a great job over the last couple of years, right, getting margins high and maintaining at a pretty healthy level. Where do you see, you know, kind of in...
Speaker Change: Where do you see kind of margins sort of flowing out on a normalized basis? Like should we think about kind of low to mid 20s as a pretty good normalized run rate or how do you think about that?
Paolo Rocca: Or how do you think about that? I think that Tenaris is a highly differentiated... So, uh... really within our realm, which is the realm of oil and gas. Service Company. We are a highly differentiated company. And if you look at how things evolve in the last. then a regional deployment. then on service. And this differentiation translates into, let's say, higher margin compared to. Other Company Operating I don't think we ended up our journey. on how we can create a competitive advantage also for our clients. You see here, for instance, in the acquisition of Showcore and some of the awards that we received in the last During this year, we have been able to build a solid relation with our clients, creating value for them, highly differentiation for us.
I think that Tenaris is a highly differentiated company.
Speaker Change: So, really within our realm, which is the realm of oil and gas
Service Company.
Speaker Change: We are a highly differentiated company and if you look at how things evolved in the last 20 years, we extended our differentiation.
First, on product.
then on regional deployment, then on service.
and other companies operating in the same field.
Speaker Change: During this year, we have been able to build a solid relation with our clients, creating value for them, highly differentiation for us. In this sense,
Paolo Rocca: If you think the change also in the administration and the, let's say... that will be taken about China is also. To my point, to our point of view, is to some extent increasing our demand. because it is a language to focus in. In some cases, to present to the client... Excellent from the point of view of quality, service, deployment, also from the point of view of environment. We are the most low-carbon company with the more aggressive plans for decarbonization. We will... Well now, as you know... We are in construction for the second eolic park in Argentina.
Speaker Change: If you think the change also in the administration and the, let's say, the position
Speaker Change: To my point, to our point of view, is to some extent increasing our differentiation.
offering the reason.
Speaker Change: Excellent from the point of view of quality, service and deployment, also from the point of view of environment.
Speaker Change: We are the most low-carbon company with the most aggressive plans for decarbonization.
We are now in Hanoi, as you know.
Speaker Change: We are in construction for the second eolic park in Argentina.
Paolo Rocca: By the end of 2025, we will be 100% renewable on our supply of energy. I mean, we are investing in this. So, this differentiation, in our view... Look for Margin. My view should be higher than where we are today. Great. No, that's great color. Thank you very much. Thank you.
to look for margin
Speaker Change: then, in my view, should be higher than where we are today.
Great. No, that's great color. Thank you very much.
Operator: As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced.
Speaker Change: Thank you. As a reminder to ask a question please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 1 again.
Operator: To withdraw your question, please press Star-11 again.
Giovanni Sardagna: At this time, I would now like to turn the conference back over to Giovanni Sardagna for closing remarks. Thank you, Gigi. And, well, I think we have another question. Yes. One moment for our next question. Sorry.
Speaker Change: At this time, I would now like to turn the conference back over to Giovanni Sardagna for closing remarks.
Speaker Change: Thank you Gigi and well, I think we have another question.
Yes, one moment for our next question.
Sorry.
Rodrigo Almeida: Our next question comes in the line of Rodrigo Almeida from Santander. I just have a couple of follow-ups here. I think the first one is related to the outlook that we talked about regarding the short-term.
Speaker Change: Our next question comes in the line of Rodrigo Almeida from Santander.
Yeah, I agree.
Speaker Change: I thought it was on the partial line-up, but it wasn't.
Speaker Change: So I just have a couple of follow-ups here. I think the first one is related to maybe the outlook that we talked about regarding the short-term. And I wanted to get an update on the $200 million cost-saving project that you guys are working on and whether this is already included in this guidance that we're talking about for fourth quarter and first quarter. And what is the progress of this cost-saving progress?
Rodrigo Almeida: I wanted to get an update on the $200 million cost-saving project that you guys are working on and whether this is already included in this guidance that we're talking about for the fourth quarter and the first quarter, and what is the progress of this cost-saving project? And then some additional call on South America, where we talked about Argentina a little bit and then we mentioned the project in Brazil, the project with Petrobras, and the project with Equinor as well. How soon could we expect these volumes, especially for Raya, to kick in, and what could be the impact from this project on your revenues for South America, especially for 2025, let's say?
That's probably good, sorry.
Speaker Change: And then some additional call on South America, where we talked about Argentina.
Speaker Change: a little bit, and then we mentioned the project in Brazil, the project with Petrobras and the project with Equinor as well. How soon could we expect these volumes, especially for Raya, to kick in? And what could be the impact from these projects on your revenues for South America, especially for 2025, let's say?
Rodrigo Almeida: Because Raya, I guess, is going to come online very soon, at some point, in the next two or three years. Thank you.
Paolo Rocca: Thank you, Rodrigo. Well, on the first question, we are advancing in our plan. We set the target of the 200 million dollar reduction in our cost. We are advancing in it. We reached the first stage of this plan, the second stage will come from the investment we have done in our facility in the last quarter, but we are proceeding in line with our expectations. We are doing well. I expect that this will be materializing. around more than one third in this first, second semester of 2024 and the rest in the Now. The question of the projects that we are getting in Argentina, in Brazil, or in the AIA, and also in other parts of the world.
Speaker Change: Thank you, Rodrigo. Well, on the first question, we are advancing in our plan.
Speaker Change: We set the target of the 200 million dollar reduction in our cost. We are advancing in it.
Eh...
Speaker Change: We reached the first stage of this plan. The second stage will come from the investment we have done in our facility in the last quarter, but we are proceeding in line with our expectation. We are doing well on this.
Speaker Change: The question of the project that we are getting in Argentina, in Brazil, or in Raia
Speaker Change: and also in other parts of the world. These are large line pipe projects. I will ask Gabriele...
Gabriel Podskubka: These are large Line 5 projects.
Gabriel Podskubka: I will ask Gabriel.
to comment on this, and when...
Gabriel Podskubka: They will, uh, we will be, uh, delivering.
they will, we will be delivering.
Gabriel Podskubka: Yeah, thank you, Paolo. Good morning, Rodrigo. Related to some color that you're asking on Latin America, in addition to what Paolo already explained on Argentina and Mexico. Let me tell you that in Brazil we are proceeding very well with the production and the shipments. of the Raya pipeline. The shipments for this project started on last quarter and will be concluded in the second quarter of 2025, so production of the pipe and concrete coating is proceeding favorably, so this will be a positive impact on Brazil. Regarding the deep water flow lines, riser, and insulation coating that Paolo also commented on, PUCES IX deep water project, this is something that will be delivered into the later part of 2025, so this is also going to be an important contributor of our revenues in offshore Brazil.
So.
Some of these, though.
Speaker Change: Thank you, Paolo. Good morning, Rodrigo. Related to some color that you're asking on Latin America, in addition to what Paolo already explained on Argentina and Mexico,
Speaker Change: Let me tell you that in Brazil we are proceeding very well with the production and the shipment.
Speaker Change: Concrete coating is proceeding favorably, so this will be a positive impact on Brazil.
Speaker Change: Regarding the deep water flow lines, riser and insulation coating that Paolo also commented on BUSIOS9 deep water project, this is something that will be delivered
Speaker Change: into the later part of 2025 so this is also going to be an important contributor of our revenues in an offshore Brazil and there we have regular call-offs for our contracts of conductors
Gabriel Podskubka: And there we have regular call-offs for our contracts of conductors. stainless steel completions as well in Petrobras. So overall, we expect. The Deepwater Brazil will be an important engine for growth in this fourth quarter of 2024 and into 2025 regarding Brazil.
Speaker Change: stainless steel completions as well in Petrobras, so overall we expect
Speaker Change: Deepwater Brazil will be an important engine for growth in this fourth quarter of 2024 and into 2025 regarding Brazil.
Gabriel Podskubka: Then on shore Colombia and Ecuador are areas that have been subdued. during 2024 and we don't expect into 2025 any recovery. In these areas is probably about half of what they used to be a couple of years ago. So these areas we we don't expect any rebound in the short.
Speaker Change: Then, on shore Colombia and Ecuador are areas that have been subdued.
Speaker Change: In these areas is probably about half of what they used to be a couple of years ago. So these areas we don't expect any rebound in the short term.
Gabriel Podskubka: If you go to the Guyana, Suriname... Caribbean region, this is a region that has continuously expanding production. Specially on the Guyana exomobile development where we participate with a large of the conductors and casing tubulars and also with the insulation coat. for the Pipeline Demand in that area that continues at a steady state, six drilling rigs operating in the area and that this will continue to be the case into 2025.
If you go to Guyana, Suriname
Speaker Change: Caribbean region. This is a region that has continuously expanding production especially on the Guyana Exomobile development where we participate with
Speaker Change: a large of the conductors and casing tubulars and also with the insulation coating.
Speaker Change: for the pipeline demand in that area that continues at a steady state. Six drilling rigs operating in the area and that this will continue to be the case into 2025. And Paolo commented in the opening remarks about the important award.
Gabriel Podskubka: And Paolo commented in the opening remarks about the important award. of the Pipeline and Coal Team regarding the total new development in Suriname. The new FID that is opening. A New Basin, this is a pioneer development. that we will start delivering the later part into 2025. This is important because it's the first phase, but probably not the last one. And this award is important, as Paolo was saying. It's a combination, it's a bundle of tubulars. and the coating that the track record show caught to Tenaris and also from the tool's point of view this has been a very complicated and sophisticated spec to meet so it's a testament to our R&D and Production Capability.
Speaker Change: of the Pipeline and Coal Team regarding the total new development in Suriname.
a new FID that is opening.
A new bathing, this is a pioneer development.
Speaker Change: that we will start delivering the later part into 2025. This is important because it's the first phase, but probably not the last one. And this award is important, as Paolo was saying.
Speaker Change: It's a combination, it's a bundle of tubulars and the coating that the track record show caught to Tenaris. And also from the tubular's point of view, this has been a very complicated and sophisticated spec to meet, so it's a testament to our R&D.
Gabriel Podskubka: So these are, these offshore awards are gonna give us a good visibility of the backlog into 2025 and even some of them into 2035.
Speaker Change: and a production capability. So these are, these offshore awards are gonna give us a good visibility of the backlog into 2025 and even some of them into 2026.
Paolo Rocca: Yeah, thank you, Arit. say for us are very important. because a reconfirmation of our ability to get a very complex project in a differentiated way, building a background, even if they are for a long, let's say, project that will come to fruition. or long-term are very, very important for our positioning in the complex offshore and for our building the backlog for the long-term, which is also very important.
Let's say, for us, they are very important.
Speaker Change: because at a confirmation our ability to get in very complex project in a differentiated way, building a backlog even if they are for a long let's say project that will come to fruition.
Speaker Change: for long term are very, very important for our positioning in the complex offshore and for our building the backlog for the long term, which is also very important for us.
Rodrigo Almeida: Thank you so much for the call. Thank you.
Thank you. Bye.
Speaker Change: Perfect, thank you so much for the call, it was very helpful.
Operator: One moment for our next question.
Arun Jayaram: Our next question comes from the line of Arun Jayaram from JP Morgan Securities, LLC. Yeah, Paolo, sorry to double dip here, but I just wanted to see if we could get a little bit more clarification. Just sensing a little bit of confusion from the buy side on your Outlook comments for 4Q and 1Q25. So could you just help us understand what you think the sequential impacts will be to revenue in 4Q and 1Q and just trying to think about revenues versus volume in both of those quarters? Yeah, sorry, I remember that I made a, I gave the wrong indication on the teens and not the teens.
Speaker Change: Our next question comes from the line of Arun Juran from JP Morgan Securities, LLC.
Speaker Change: Yeah, Paolo, sorry to double dip here, but I just wanted to see if we could get a little bit more clarification.
Speaker Change: Just sensing a little bit of confusion from the buy side on your Outlook comments.
Speaker Change: impacts will be to revenue in 4Q and 1Q and just trying to think about revenues versus volume in both of those quarters.
Speaker Change: Sorry Arumel, I gave the wrong indication on the teens and not the teens.
Paolo Rocca: What we expect is that in the fourth quarter, volume and sales will, will be lower than in the third quarter by, let's say, single digit around seven, eight percent, something in this range, lower in the fourth In the first queue in 2025, we expect this to rebound in the range of 10%, instead of talking about teens or not teens, we talk about numbers. But you know, these are Let's say estimation that obviously range around what we are seeing. So they are moving together, volume and revenue, and as I was saying, the margin will stay around the same level that we had in the third quarter.
Speaker Change: by, let's say, single digit, around 7-8%, something in this range. Lower in the 4Q than the 3Q.
Speaker Change: In the first queue in 2025, we expect this to rebound in the range of 10% Instead of talking about teens or not teens, we talk about numbers But you know these are...
Speaker Change: Let's say, estimation that obviously range around what we are seeing. So, they are moving together. Volume and revenue. And, as I was saying, the margin will stay around the same level that we had in the third quarter.
Arun Jayaram: Great, thank you for clarifying that. It is clear now. Super clear. Thank you. Sorry, Arun. Ha ha ha. Talk soon. Thank you.
Great, thank you for clarifying that.
It is clear now.
Speaker Change: Super clear.
Super clear. Thank you.
Speaker Change: Yes.
Speaker Change: Sorry.
Sorry, Eero. Tack så mycket.
Speaker Change: Talk soon.
Speaker Change: Thank you.
Giovanni Sardagna: At this time, I would now like to turn the conference back over to Giovanni Sardagna for closing remarks. Thank you, Gigi, and if there are no other questions, we would like to thank you for joining us for our call, and we hope to see you soon. Thank you.
Thank you.
Speaker Change: At this time I would now like to turn the conference back over to Giovanni started Danya for closing remarks.
Speaker Change: At this time, I would now like to turn the conference back over to Giovanni Sardagna for closing remarks.
Speaker Change: Thank you Gigi and if there are no other questions, we would like to thank you for joining us.
Speaker Change: Thank you Gigi, and if there are no other questions, we would like to thank you for joining us for our call, and we hope to see you soon. Thank you.
Speaker Change: For our call and we hope to see you soon thank you.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Thanks for watching!
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].