Q4 2024 Tenaris SA Earnings Call
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Thank you for watching!
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 2024 sales reached $2 8 billion down.
Speaker Change: Down, 17% compared with those of the corresponding quarter of the previous year, and 2% sequentially, mainly driven by lower volumes and lower average selling prices as price declines in North America were partially offset by a favorable product mix.
Speaker Change: Our EBITDA for the quarter was up 6% sequentially to 726 million and our EBITDA margin increased to $25 five mainly reflecting the partial reversal of a provision for litigation relating to the acquisition of our participation in two minutes.
Speaker Change: Without taking into account this one off effect, our EBITDA declined 4% sequentially to $659 million with a margin of 23%.
Speaker Change: Average selling prices in our tubes operating segment decreased by 7% compared to the corresponding quarter of the previous year and 1% sequentially.
Speaker Change: During the quarter cash flow from operations was 492 million.
Speaker Change: Our net cash position at the end of the quarter decreased to $3 6 billion.
Speaker Change: Following the payment of an interim dividend of 299 million in November of last year.
Speaker Change: And that 54 million spent on share buybacks and capital expenditures of 182 million during the quarter.
Speaker Change: The board of directors has decided to propose for approval.
Speaker Change: General shareholders' meeting to be held at the beginning of May the payment of an annual dividend of 83 cents per share or Android 60 seats Sansbury Dr.
Speaker Change: Which includes the interim dividend of 27 cents per share or 54 cents per ADR that we paid at the end of November last year.
Speaker Change: If approved a dividend of 56 cents per share or 112 cents per ADR will be paid on may 21st.
Speaker Change: Now I will ask Paolo to say a few words before we open the call to questions.
Paolo: Thank you Giovanni and good morning to all of you.
Speaker Change: Our 2024, when it was a good year for Soliris in many aspect we.
Speaker Change: We consolidated our leading industry position with a number of major achievements, we delivered a solid financial result.
Speaker Change: Our companion by higher returns for shareholder.
Speaker Change: Completed a number of investments which are improving our efficiency.
Speaker Change: Using our environmental footprint.
Speaker Change: However, mirrored by an accident that took place at the end of the year, which claimed the lives of two of our employees. The accident occurred in the heavy equipment maintenance shop of our main plant in Argentina.
Speaker Change: This is a major setback for dynamics.
Speaker Change: Which has an absolute commitment to safety.
Speaker Change: With its employees and its communities.
Speaker Change: We deeply regret the loss of life.
Speaker Change: Reinforcing all our action on preventive activities with a focus on critical risk.
Speaker Change: We ended 2024 with an EBITDA of $3 1 billion.
Speaker Change: Net income of $2 1 billion or net sales of $12 5 billion.
Speaker Change: Free cash flow amounted to $2 2 billion, all of which was distributed to shareholders.
Speaker Change: Through dividends and share buybacks.
Speaker Change: We are proposing to increase the annual dividend per share by 38% over that for the previous year at the same time.
Speaker Change: We maintained our net cash position of $3 6 billion.
Speaker Change: In North America consolidation among the major shale operators has continued and we have strengthened our service differentiation with these operators comprise the operational efficiency.
Speaker Change: And the quality that we provide through our rig direct service.
Speaker Change: We have extended our range of wedge series for either the connection and now provide 24, seven digital well integrity solutions supported by technical specialists and remote monitoring capabilities. In addition to our more established a run rate of this service.
Speaker Change: If somebody.
Speaker Change: Have honor us with their 2020 for supplier of the year award for our extensive effort and supply chain integration worldwide.
Speaker Change: We have seven day operation in various parts of the world over many years.
Speaker Change: And since the 2024, we've been serving all of their U S shale operation.
Speaker Change: There's data offshore operation in China, and the long term agreement.
Speaker Change: We were recently awarded them.
Speaker Change: Chasing supply for the first wells in Shell's part the 20 K project.
Speaker Change: The U S. Deepwater following many months of extensive work on product development and testing.
Speaker Change: And the development of three D mapping technology that enhance pipe collapsed the resistance using their ultra high collapsed steel grades.
Speaker Change: These complement an award to supply bps, Caskey, 20, K project and consolidate our leading position in the latest frontier in deepwater development.
Speaker Change: We also consolidated our leading position in the vagina, Suriname deepwater basin with an award to supply line pack and insulation coating for total Grand mortgage development.
Speaker Change: This achievement was possible. Thanks to our successful integration of Shawcor is pipe coating technologies and project management capabilities.
Speaker Change: What other deepwater development, we are delivering the line pipe and coating it can or ARIA project in Brazil.
Speaker Change: And have recently completed deliveries for an offshore pipeline for Tpa or secondary a project in the Black Sea.
Speaker Change: The middle East our contribution to the development of local industrial capability ought to be.
Speaker Change: Saudi Arabia.
Speaker Change: We recently won a tender for a major ccas pipeline after at Amoco had distinguish our GPC facility.
Speaker Change: Special quality award.
Speaker Change: We extended our long term agreement with hard rock.
Speaker Change: While our premium thriving facility or <unk>.
Speaker Change: Certified.
Speaker Change: In industry four zero digital leader by the Ministry of industry and advanced technology.
In Mexico, our sales are being affected by a steep decline in drilling and drilling activity that means to the financial difficulties of paybacks.
Speaker Change: We have however, taken the opportunity to reduce our credit exposure.
Speaker Change: In Argentina drilling activity in oil and gas production in Vaca <unk>.
Speaker Change: He is ramping up as pipeline and LNG infrastructure investment that moves forward.
Speaker Change: Over the next months, where would it be supplying the oil pipeline.
Speaker Change: We connect vaca water to a new deepwater port in Port Arthur as Alice in Chubut and expect further pipeline investment during the year.
Speaker Change: During the year, we completed a series of investment in our industrial system aimed at improving the efficiency of our operation as well as contributing to our de carbonization and environmental debate objectives.
Speaker Change: This included the installation of a new electric arc furnace, which more than continuous charging technology in Argentina.
The modernization of our copper steelmaking facility in the United States.
Speaker Change: Trading is effective capacity at <unk>.
Speaker Change: The installation on the new heat treatment furnace and finishing line.
Speaker Change: A dial in Italy.
Speaker Change: At the same time, we are advancing with our second wind farm in Argentina.
Speaker Change: In other investment aimed at increasing the share of renewable energy use in our operations.
Speaker Change: We have also been investing to increase the level of automation and digital system in our industrial and supply chain system.
Speaker Change: Extend by by pipe traceability.
Speaker Change: As we will show in our annual report that will be published on April one.
Speaker Change: First we continue to make progress towards our target to reduce the carbon emission of our operation.
Speaker Change: And the perimeter of our operation has expanded with the recent acquisition, we have decided to reset the baseline for our target to cover these expanded perimeter as well as to include intermediate transportation and other changes aimed at improving our reporting transparency.
Speaker Change: Yeah.
Speaker Change: Looking ahead with the change in Germany station in the United States.
Speaker Change: We are heading into uncharted territories, when it comes to geopolitics and the global trading system.
Speaker Change: Changes in tariff.
Speaker Change: Rent.
Speaker Change: Significantly altered establish a market environment that is.
Speaker Change: Its unique positioning both globally and in North America.
Speaker Change: The competitive differentiation and financial strength is well placed to navigate the uncertainty ahead.
Speaker Change: Before closing I would like to thank Alicia.
Speaker Change: Hello.
Speaker Change: I've had a well earned retirement for a contribution to <unk> and that the Keane group over more than 40 years I am very pleased that we will.
Speaker Change: Still be able to benefit from her wise adviser in the time ahead.
Speaker Change: I would also like to thank all of our employees for their constant commitment and engagement without which the results and achievements of the past year would not have been possible.
Speaker Change: Israelis are also our customer our supplier.
Speaker Change: And all the communities in which we operate for their ongoing support.
Speaker Change: Open now for any question you may have.
Speaker Change: Thank you.
Speaker Change: A reminder to ask a question. Please press star one one on your telephone.
Speaker Change: Wait for your name to be announced to withdraw your question. Please press star one one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of viral Zurab from J P. Morgan Securities LLC.
Zurab: Good morning Paulo and team. My first question is on on tariffs Paulo, if the 25% tariffs on imported steel tubular or imply that implemented by the U S Commerce Department.
Zurab: Would you still expect section 232 quotas to remain in place.
Zurab: And I guess the follow up is if section 232 quotas are removed, but tariffs are implemented how do you see the impact on.
Zurab: Oh, CTG pricing and import.
Zurab: Trends.
Zurab: If that were to occur.
Zurab: Thank you Oh.
Zurab: As we say.
Zurab: In the opening of the America.
Zurab: I mean, we are entering into uncharted territory, because we have different layers of story that has been announced.
Zurab: The American administration, one of which.
Zurab: Is it.
25% tariff in the frame of the 232.
Zurab: But.
Zurab: Yeah.
Zurab: I would expect.
Zurab: That in general.
Zurab: The introduction of the 25%.
Zurab: The 232.
Zurab: We will have impact on different different aspects on one side.
Zurab: Likely.
Zurab: The level of price.
Zurab: In the United States.
Zurab: Will.
Zurab: Gradually increase because in the end.
Zurab: The market.
Zurab: Important relevant as a relevant share of the U S.
Zurab: Or CPG, particularly on CTG.
Zurab: Product.
Zurab: So the impact of the 25% tariff.
Zurab: Will reflect in our view into.
Zurab: Increasing price.
Zurab: Yeah.
Zurab: As far as the <unk>.
Zurab: Quote are concerned we have no indication, which is the intention of the U S Army station, but.
Zurab: Overall, the 232 overall.
Zurab: The orientation has been in the past and today.
Zurab: To support the domestic industry.
Zurab: To allow to raise the level of utilization within the United States. So we expect that demonstration we'll monitor carefully.
Zurab: Volume coming from the different sources with the overall aim of.
Zurab: Defending the interest of the domestic industry.
Zurab: In this handset that is set is well position.
Zurab: We are producing.
Zurab: Almost all of our need a.
Zurab: Five sites in the United.
Seth: Hey, Seth.
So we think we are well positioned to manage what is Ken It is true that we had.
Seth: Producing large part, but not all of our steel Nida and.
Seth: We may be.
Seth: Pain.
Paris or some of the steel that we may be importing.
Seth: This will not let's say.
Seth: <unk> substantially our overall position.
Seth: This is what we can.
Seth: I expect in our view from the introduction of the tariff on the total.
Seth: As you say as you know.
Seth: We wait to understand better and.
Trey and Marshall when these when the announcer.
Seth: The details of what will be.
Seth: Products and at the same time.
The coming weeks and.
Seth: We will also understand.
Seth: The extent.
Seth: Sorry for that and maybe introduce said that code.
Seth: Have any impact on our business.
Seth: In the reverse.
Seth: Or worldwide.
That's helpful. That's helpful.
Seth: To understand.
Seth: Your view on that so expect maybe pricing to get better.
Seth: And then.
Seth: Perhaps that the policies are supportive of domestic manufacturing and you.
Seth: Manufactured the bulk of your <unk>.
Seth: In North America support your North America sales through domestic manufacturing that's clear.
Paul: Maybe a follow up Paul.
Paul: <unk> is a unique lens into what is going on in Argentina.
Paul: So I was wondering if you could help us think about some of the potential growth prospects for generic between.
Paul: Just OTT G <unk>.
Paul: A long haul pipe and some of the services that you provide in Argentina between coiled tubing and as well and frankly I think you have some pressure.
Paul: Pressure pumping capacity.
Paul: In country.
Paul: Yes.
Paul: We are very positive on the development and the investment in the energy sector in Argentina. We commented also in our in the last quarter that we expect a substantial increase of the rigs operating.
Speaker Change: How much of that now.
Paul: Now.
Paul: This.
Paul: Is that planning and preparation of the expansion of the capacity.
Paul: A question of oil coming back Atlanta, the big pipeline that is called the VM Ramos.
Paul: Is it.
Paul: Yeah.
Paul: The action, we have the order for the pipes.
Paul: And.
The order for the construction is also.
Paul: Negotiated.
Paul: Sign so these pipeline or way to go on and the oil company IATA preparing the well set.
Paul: And the upstream to supply the volume of the additional volume that will be exported.
Paul: Argentina at the same time.
Paul: There are some additional pipeline.
Paul: That needs to connect the disparate impact of Vaca <unk> editor.
Paul: Two they did.
Paul: Yeah.
Paul: The pipeline the main pipelines. So we see these network of pipeline going on now with contract and part of which is also for us and.
Paul: And we see the company mobilizing rigs.
Paul: These.
Paul: We were saying that the <unk> in Vaca <unk> equity increased for the 31 30 that were operating last year to a level of 42 world plus.
Paul: By the end of the year things are moving some company have taken decision now maybe.
Paul: We may have.
Paul: Important increase in dairy we.
Paul: We are preparing for the say so we are also expanding our capability.
Paul: In the fracking.
Paul: Adding.
Sure.
Paul: Set for responding to something that we expect an increase in the demand for fracking in January in Argentina with each of them.
Paul: In the America recorded for fracking during the winter months.
Paul: And also we see that our SaaS.
Paul: Fully booked.
Paul: For the coming months, we are adding one that will come in during the course of 2025 and compounding this.
Paul: The base in UK and <unk>.
Paul: Satisfying this need so we are positive in the sense.
Paul: And hopefully this trend will go on during 2026 just to increase there.
Paul: The production of oil that will be able to evacuate from.
Paul: Throw back away.
Paul: The capacity of the they must set.
Paul: Larger and will require investment to be filled up.
Paul: Great. Thank you.
Paul: Okay.
Paul: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Alessandro Pozzi from Mediobanca.
Gigi: Thank you Gigi.
Alessandro Pozzi: Two questions.
Alessandro Pozzi: And.
Alessandro Pozzi: Related I guess to the.
Alessandro Pozzi: The reaction of the share price today, and I'm still trying to figure out if it's maybe.
Alessandro Pozzi: The outlook, there's been perceived to be a little bit less constructive compare to what.
Alessandro Pozzi: What you mentioned in the last call or maybe what are just the.
Alessandro Pozzi: Expectations around announcement of share buybacks.
Alessandro Pozzi: And that leads to the first question I was wondering if you can maybe.
Alessandro Pozzi: Give us your thoughts about what could be sales and margin evolution.
Alessandro Pozzi: In Q1, and maybe in the first half of 2025, because we've seen.
Alessandro Pozzi: The recovery in pipe logics, so maybe it's natural to expect a progression in top line and margins.
Alessandro Pozzi: In the coming quarters.
Alessandro Pozzi: The second question is on the shelf.
Alessandro Pozzi: Share buyback of course the lots.
Alessandro Pozzi: Then the program is ongoing.
Alessandro Pozzi: And you probably cannot say much about the new one.
Alessandro Pozzi: I was wondering.
Alessandro Pozzi: Shall we.
Alessandro Pozzi: The new buyback to be in line with the $1 2 billion that you announced.
Alessandro Pozzi: Initially.
Alessandro Pozzi: Or perhaps.
Alessandro Pozzi: <unk> you.
Alessandro Pozzi: Maybe you want to allocate some capital to potential acquisitions.
Alessandro Pozzi: In the west.
Alessandro Pozzi: They could expand your capacity given.
Alessandro Pozzi: The new let's say geopolitical.
Alessandro Pozzi: Okay.
Alessandro Pozzi: And.
Alessandro Pozzi: And that's and that's my two questions.
Alessandro Pozzi: Thank you Alessandro.
Speaker Change: First of all on the.
Alessandro Pozzi: We say in the outlook.
Alessandro Pozzi: In our press release.
Alessandro Pozzi: We expect the.
Alessandro Pozzi: The first quarter to have a margin.
Alessandro Pozzi: More or less in line with the margin of the <unk>.
Alessandro Pozzi: This is the results I would say.
Alessandro Pozzi: Two.
Alessandro Pozzi: Driver on one side, we will have in the first quarter of 2025.
Alessandro Pozzi: Less.
Alessandro Pozzi: Volume to Europe.
Alessandro Pozzi: Reality is big.
Alessandro Pozzi: Big pipelines CTG that we sold in Turkey that IATA.
Alessandro Pozzi: Considering our nine as part of the line of Europe.
Alessandro Pozzi: In the fourth quarter, we did a substantial shipment in that region that will not be repeated in the first quarter on the other side that is the positive impact of the increase in price and some increase in volume and some of the region, including the United States. So the composite there.
Alessandro Pozzi: All of this is.
Alessandro Pozzi: Our expectation of.
Alessandro Pozzi: The margin that will be.
Alessandro Pozzi: More or less online or hopefully a little better.
Alessandro Pozzi: The pipe logic continue to drive up.
Alessandro Pozzi: February Matt.
Alessandro Pozzi: Now as far as the first half and so the second time.
Alessandro Pozzi: We expect.
Alessandro Pozzi: Improvement, but.
Alessandro Pozzi: Any crazy now what matches lighting, raising our margin, but these will be influenced by the <unk> decision on the beginning of March.
Alessandro Pozzi: If tariffs were announced and the administration is making clear the approach to the quarter four different countries.
Alessandro Pozzi: Then the market, we'd anticipate a reaction and we'll move on and we may see a change.
Alessandro Pozzi: In.
Alessandro Pozzi: Let's say recovery in prices.
Alessandro Pozzi: We see it.
Alessandro Pozzi: Let's say positive trends frankly, because at the end.
Alessandro Pozzi: We expect the administration is acting.
Alessandro Pozzi: Exactly in the direction of strengthening the domestic and domestic.
Alessandro Pozzi: Domestic industry for the American Mac. So we are positive and the result of this and we are prepared to absorb.
Alessandro Pozzi: The margin of course that will derive from the supply of steel and eventually the payment of some <unk> on it.
Alessandro Pozzi: This is where we are and this is what we can see.
Alessandro Pozzi: We've asked.
Alessandro Pozzi: Admitted that our visibility.
Alessandro Pozzi: Four.
Alessandro Pozzi: Let's say.
Alessandro Pozzi: The second quarter and even beyond this.
Alessandro Pozzi: It's pretty limited considering the number of moving parts.
Alessandro Pozzi: That are affecting our.
Alessandro Pozzi: Our market that our sector today.
Alessandro Pozzi: Okay.
Alessandro Pozzi: Okay. So do you expect maybe imagine an improvement in Q2 in margins I was wondering.
Alessandro Pozzi: Should we expect maybe.
Alessandro Pozzi: Just tell me club up to 25% at some point during.
Alessandro Pozzi: During 2025.
Well.
Alessandro Pozzi: With respect to increase from where we are now.
Alessandro Pozzi: In the ranges that you're mentioning or we should and this is what we can expect.
For the second quarter.
Alessandro Pozzi: And beyond.
Alessandro Pozzi: Okay. Thank you.
Alessandro Pozzi: There is a second question is the buyback.
Alessandro Pozzi: Okay.
Alessandro Pozzi: Let's say the buyback.
Alessandro Pozzi: These said the decision.
Alessandro Pozzi: When we were taken first of all by the board of Directors first of April.
Alessandro Pozzi: Evaluating the situation and in deciding how.
Alessandro Pozzi: How to include.
Alessandro Pozzi: Or <unk> to include.
Alessandro Pozzi: This item in the agenda of the General Assembly that will made in May.
So.
These will be up to the board of that and then up to the assembly of the company to decide if we can.
Alessandro Pozzi: Give to the board of director of the authority to enter into a new program of buyback after.
Alessandro Pozzi: For the time being we are advancing in our in our buyback.
Alessandro Pozzi: Dependent product in almost completed.
Alessandro Pozzi: Okay.
Alessandro Pozzi: It will be influenced by whether you can do.
Alessandro Pozzi: Acquisitions in the U S.
Alessandro Pozzi: Yeah.
Alessandro Pozzi: There was that.
Alessandro Pozzi: And attempt to acquire Bentler some time ago.
Alessandro Pozzi:
Alessandro Pozzi: Tom Administration, just yesterday confirmed the new manager maybe the guidelines of the previous administration. So maybe.
Alessandro Pozzi: In the U S may not be as likely as we thought maybe before.
Alessandro Pozzi: But the board will consider all the element.
Alessandro Pozzi: The situation in the dynamic of the market.
Alessandro Pozzi: The opportunity that we have to allocate our capital we have a larger.
Sure.
Alessandro Pozzi: Cash.
Alessandro Pozzi: Cachet in our book.
Alessandro Pozzi: So the decision will be taken taken into consideration.
Alessandro Pozzi: The opportunity for investment.
Alessandro Pozzi: <unk> of the <unk>.
Alessandro Pozzi: Business set and the long term view for the company.
Alessandro Pozzi: Thank you very much.
Alessandro Pozzi: Thank you one moment for our next question.
Marc Bianchi: Our next question comes from the line of Marc Bianchi from TD Cowen.
Marc Bianchi: Hi, Thank you.
First to follow up if we could on the buyback discussion just quickly.
There were some comments at your September analyst event in London that sort of talked about plans around the buyback.
Marc Bianchi: Is it fair to conclude that those comments from September are still sort of in place and youre thinking about it the same way or has there been a change in in the board's view of how the buyback should be positioned.
Marc Bianchi: I don't think that has been a change.
Marc Bianchi: In the overall view for the sake, but for sure.
Marc Bianchi: It seems that the main thing that we have many things happening in the world.
Marc Bianchi: The position and the policy of the New American administration.
Marc Bianchi: <unk> is for sure a factor that will need to be.
Marc Bianchi: Cedar by the board in deciding the strategy for the future many thing.
Marc Bianchi: Concerning.
Marc Bianchi: The opportunity for investment the dynamic of the energy sector I personally think that the new organization have a stronger <unk>.
Marc Bianchi: In support of the energy industry.
Speaker Change: Downstream program, Florida.
Marc Bianchi: Taylor.
Marc Bianchi: They organize the energy sector in the frame of energy emergency they are speeding Apple the pro in the process of.
Marc Bianchi: Permitting and so on its fourth so something will be moving in our in my view in the energy sector and maybe that in this environment.
Marc Bianchi: Also the opportunity for acquisition.
Marc Bianchi: In <unk> and part of the world that could be interesting for us maybe model and we have we will have to reconsider these and analyze this.
Marc Bianchi: The perspective of the company.
Marc Bianchi: As the basis for the sign to the West suggested to the board Waterloo.
Marc Bianchi: Wonderful.
Marc Bianchi: The clear sense. Thank you.
Marc Bianchi: The other question I had was on on Mexico. So.
Marc Bianchi: You talked about the sharp decline in activity I think the market has been uncertain as to how Mexico.
Marc Bianchi: Unfolds from here, but it seems like maybe there's some incremental plan in place from them.
Marc Bianchi: Just not sure exactly what it is so kind of curious on one.
Marc Bianchi: What are you hearing in terms of the pace of activity recovery in Mexico.
Marc Bianchi: And what is reflected in this first half outlook that you thought you would.
Marc Bianchi: With the market.
Well.
Marc Bianchi: What happened to the T V.
Marc Bianchi: In oil and gas in Mexico.
Marc Bianchi: Is it something.
Marc Bianchi: Let's say.
Marc Bianchi: And expect it to some extent.
Marc Bianchi: And in my view on sustainable Pemex.
Marc Bianchi: The reduced.
Marc Bianchi: <unk> and he is reducing as production from one and even more than one eight.
Marc Bianchi: Better today to the fragrance one six.
Marc Bianchi: Mainly on that at a day and in the recent months.
Marc Bianchi: They are losing production at a rate of around <unk>.
Marc Bianchi: 50000 barrel a day per month.
Marc Bianchi: Reducing rig from.
Marc Bianchi: So having like 65 rigs to around 23 rigs.
Marc Bianchi: <unk> basically idle.
Marc Bianchi: On the field for lack of inputs and lack of.
Marc Bianchi: Resources. This is an unsustainable situation.
Marc Bianchi: Situation in my view.
Marc Bianchi: In the frame of the policy of the New administration. So I expect this could be let's say going on for.
Marc Bianchi: But could not be.
Marc Bianchi: Let's say the long term perspective of Pemex I would expect that in the second half.
Marc Bianchi: Of this year.
Marc Bianchi: The Mexican Ivano, we'd have.
Marc Bianchi: The size of the policy.
Marc Bianchi: And an approach to refinancing payments in a way that accounts recourse debt.
Marc Bianchi: Let's say.
Marc Bianchi: Mick.
Marc Bianchi: Hello.
Marc Bianchi: The huge.
Marc Bianchi: So all set.
In the oil and gas sector. So today.
Marc Bianchi: What do we see.
Marc Bianchi: It really is.
Unprecedented reduction in that activity, what we expect in the second half of 2000 and phase I in my view.
Marc Bianchi: Is a new policy and then it will take time to recover that's for sure I mean that will be.
Marc Bianchi: A reset in the policy in Mexico in my view and that it would be.
Marc Bianchi: Call it it could be basically.
Marc Bianchi: Yeah.
Marc Bianchi: Navy tablet.
Marc Bianchi: Not too fast considering the financial close right now.
Marc Bianchi: Now this is.
Marc Bianchi: And overall observation that Mexico at all.
Marc Bianchi: Yeah.
Okay.
Marc Bianchi: The negotiation.
Marc Bianchi: Around the future of the U S MCA tariff.
Marc Bianchi: Is that supposed to be implemented.
Marc Bianchi: Right.
Marc Bianchi: New American administration all of these may have an impact.
Marc Bianchi: On the.
Marc Bianchi: The economy in Mexico on the long term.
Marc Bianchi: Much of it we will see we don't have now the element at all.
Marc Bianchi: Evaluate let's say, which will be the impact of the overall in the overall relation between that.
Marc Bianchi: Yeah.
Marc Bianchi: Mexico, United States, and Canada, and which will be the future of the U S. MCA. These would be important also for the development of the energy sector.
Speaker Change: Wonderful. Thank you very much Pablo I'll turn it back.
Marc Bianchi: Thank you one moment for our next question.
Speaker Change: Yes.
Speaker Change: Our next question comes from the line of Derek part Heizer from Piper Sandler.
Speaker Change: Hey, good morning, just maybe if you could spend some time on the supply demand picture in North America, maybe you could just walk us through Gibson.
Speaker Change: It gives us an idea of how much pipe is on the ground today, maybe the health of the distributors out there and kind of what they are importing any sort of impact on section 232, when it comes to quota reductions primarily to South Korea, maybe other places where a new quota has been put on just sort of help around that as we can kind of frame up.
Speaker Change: The supportive nature of proceeds pricing when we think about the remainder of 2025. So just just more of the supply demand dynamics that youre seeing in the demand side, we've seen the rig count recover kind of off the fourth quarter seasonality and what are you expecting as we move forward into 'twenty five.
Speaker Change: Just considering the outlook there just sort of help her out in spite of that'd be great.
Speaker Change: Yes.
Speaker Change: Right.
Thank you Eric.
Speaker Change: I'd ask Luke.
Speaker Change: Luca Zanotti to comment on the supply demand balance the level of inventory of what we can expect in our view for the U S.
Speaker Change: Cricket.
Speaker Change: Yes.
Speaker Change: Yes.
Pablo Martin: Thank you Pablo Martin direct so many questions here, but one by one supply them at what we see is that listen to me.
Pablo Martin: The level of imports that came down significantly in.
Pablo Martin: In the fourth quarter were largely more than 30%, which apps to E.
Pablo Martin: The.
Pablo Martin: Inventory that is sitting on the ground there today, including.
Pablo Martin: Our inventory is in the range of calculating the range of.
Pablo Martin: It has been six months so.
Pablo Martin: On the inventory standpoint, we believe that that the situation is somewhat.
Pablo Martin: Normalized.
Pablo Martin: We see less imports.
Pablo Martin: We have seen less imports during the last quarter.
Pablo Martin: There are structural measures that has been taken up by the.
Pablo Martin: U S domestic English.
Pablo Martin: Against some countries like Thailand.
Pablo Martin: Well.
Pablo Martin: The preliminary designation of the testimony that they were circumventing the CPG.
Pablo Martin: Antidumping, So we expect Lisa not to come in and back again a disease is.
Pablo Martin: Seamless.
Pablo Martin: And so overall if you look at the imports side that we are seeing something that is interesting.
Pablo Martin: Now we may be that at the beginning of 2025, we may see a rebound.
Pablo Martin: Yes.
Pablo Martin: What I said.
Pablo Martin: Yeah Margaret.
Pablo Martin: But the situation in terms of supply demand is much more beyond that.
Pablo Martin: What we saw last quarter and to be able to say.
Pablo Martin: What does it all.
Pablo Martin: The Southern Star Wars phenomena stake out sorry.
Speaker Change: Yes, sorry, Youre about yes, yes.
Pablo Martin: Yes, yes.
Pablo Martin: So there's no.
Pablo Martin: Concerning the quarter.
The way the.
Pablo Martin: <unk>.
Pablo Martin: Et cetera, totally too, which is one of the parties that you're almost there Sean is putting forward now many of them.
Speaker Change: They are starting so as Paolo was saying before we.
Speaker Change: I am traveling territory, because we actually don't know, but the way.
Speaker Change: The.
Speaker Change: The section two difficult quarters our structure.
Speaker Change: Is that the quota is going to go away.
Speaker Change: <unk>.
Speaker Change: So everybody is going to be paying 25% now how this will evolve in the future. We don't know, but as Paolo was mentioning before we do know that the spirit of the section 22 was to create a stronger.
Speaker Change: Domestic supply chain and so we assure that the administration will be yes.
Speaker Change: So monitoring the impulse evolution.
Speaker Change: Because they need to sneak two in <unk>.
Speaker Change: Domestic capacity utilization. So we are confident that the overall effect is going to be positive.
Speaker Change: Totally domestic English there.
No that's helpful and then maybe just.
Speaker Change: Yes, and then maybe just on the on the demand side, just seeing the U S rig count recovery here I mean, just off the seasonality bought I mean whats your expectation when you talk to your customers just kind of the outlook for the rest of the year just from where you see it today.
Speaker Change: If I may.
Speaker Change: We need to.
Speaker Change: Split a little bit the situation because what we do see is a different behavior. If you take out the major in the large independent, but we still see there they are very very disciplined and the ongoing.
Speaker Change: Consolidation process, typically leading to rationalization of operations and more efficiency. So we don't see these are increasing a lot.
Speaker Change: These circumstances, obviously these may change going forward.
Speaker Change: But at this stage, we see a pretty constant level in this segment, while we do see coming in that also.
Speaker Change: Some are smaller independent.
Speaker Change: Private operator, and certainly we are seeing a much more interest in terms of gas gas.
Speaker Change: Gasoline not linked.
Speaker Change: To the new LNG.
Speaker Change: They are being approved.
Speaker Change: So we see these this happening so we see.
Speaker Change: Let's say cost constant activity on the major large independent.
Speaker Change: The smaller player gaming game with new <unk>, and we see interesting developments as long as gas is concerned and I believe that these will consolidate.
Speaker Change: You've answered them going.
Speaker Change: We would likely 25.
Speaker Change: Okay. That's helpful. And then just a follow up maybe moving over to Saudi Arabia, maybe you can just kind of walk through the puts and takes there.
Speaker Change: With conventional versus unconventional fields oil versus gas onshore versus onshore everywhere, whereas to nourish position, where are you seeing the pockets of strengths and also where are you seeing some of the activity softness that we kind of hear out there.
Speaker Change: For this I would ask.
Speaker Change: Two to give you an overview of how we see the.
Speaker Change: We have all the evolution of the business in Saudi Arabia, Yes. Thank you Paolo. Thank you Eric for the question on Saudi Arabia, and probably take the opportunity to talk about the whole middle East where we see.
Speaker Change: And drilling activity that is fairly stable at a very strong level.
Speaker Change: On the drilling that is associated with gas.
Speaker Change: We see.
Speaker Change: Areas that are very resilient, even growing this is the case of unconventional gas.
Speaker Change: In Saudi Arabia.
Speaker Change: Targeting.
Speaker Change: Increase of gas for power generation in the Kingdom.
Speaker Change: But this is not only the case for Saudi we see expansion of LNG in Qatar and UAE.
Speaker Change: <unk> targets of self sufficiency and other GCC countries. So we expect.
Speaker Change: Also at <unk> to increase its gas plants, we expect Kuwait in deep drilling areas to drill an increase.
Speaker Change: <unk> related to gas so gas is a very resilient and growing area in the middle East then when we go to the oil side of the business.
Speaker Change: The dynamics are a bit more uneven.
Speaker Change: There is evident idle.
Speaker Change: Paucity of crude production in middle East and different countries and companies have taken different decisions, we don't want to type.
Speaker Change: Expanding capacity of groups.
Speaker Change: They're working very well precision.
Speaker Change: For example February Libya.
Speaker Change: Often in some of the drilling of 52 oil, especially in the offshore oil.
Speaker Change: Stopping that.
Speaker Change: With for an increase in multi year.
Speaker Change: Capacity of group production. So this is what we see in the Kingdom is also to mention something that Paolo noted in the opening remarks.
Speaker Change: Saudi Arabia is also.
Speaker Change: Going forward with projects related to energy transition, we mentioned the Ccs.
Speaker Change: Project.
Speaker Change: Saudi Aramco is leading.
Speaker Change: To capture a transport.
Speaker Change: <unk> C 029 million tons per year, and this requires a pipeline of more than 300 kilometers is an important order of $250 million approximately that we will start delivering during the third quarter of 2025 and complete before the end of 2020, So we see.
Speaker Change: Overall, the middle East has been.
Speaker Change: In 2020 for a point of strength for the analysis and we will continue to be the case for 2025, and even though we had a.
Speaker Change: Slight decrease of our revenues in the fourth quarter of 'twenty 'twenty four we expect that rebound.
Speaker Change: As early as the first quarter of 2025.
Speaker Change: Great very helpful color I appreciate it.
Speaker Change: Thank you I'll turn it back thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Kevin Roger from Kepler Chevron.
Speaker Change: Yes, good afternoon.
Speaker Change: If I may please going back on the U S tariffs and the potential to impact the <unk>.
Speaker Change: First one would be on your production cost can you give us some corals currently what percentage of <unk> pellets.
Speaker Change: Do you currently use locally.
Speaker Change: <unk>.
Speaker Change: From Europe or somewhere in that just to understand exactly what percentage of <unk>.
Speaker Change: Raw material costs could be impacted by.
Speaker Change: 25% tariffs and the second one just to be sure that Taiwan understood. What you just say if we have the 25%.
Speaker Change: Terry.
Speaker Change: And that's in the meantime older to quota removed.
Speaker Change: From the 200, <unk> don't you feel that the Korean guys.
Speaker Change: During the quarter with 400000 tons, something like that will potentially be able to massively increase.
Speaker Change: They are important because I get it that we've had just a 25% tariffs we remain very very competitive.
Speaker Change: That will be the two point on the tariff please.
And the last one.
Speaker Change: Titles to peak, if you can give us some kudos on currently Pemex well it sounds a little bit of receivables that you have currently with the Pemex. Please.
Speaker Change: Thank you.
Speaker Change: <unk>.
Speaker Change: Well in the first point.
Speaker Change: Let's say the.
Speaker Change: We have a steel shop.
Speaker Change: The full operation of that is the cockpit and which way.
Speaker Change: <unk> been investing in that.
Speaker Change: Preparing for eventually expansion of our operation that is feasible.
Speaker Change: The question on expanding in the bag house and exhaust fueling system just to achieve it.
Speaker Change: Increased production, so we have the possibility of increasing.
Speaker Change: Let's say.
Speaker Change: Local production of steel and then.
Speaker Change: We are.
Speaker Change: 14 of complement in steel.
From different sources, we are also buying locally.
Speaker Change: <unk>.
Speaker Change: Different supplier in the states it.
Speaker Change: To complement this deal that we can supply from Mexico from Argentina from Italy or from Romania. So we have very many different sources for supplying the what is missing of these.
Speaker Change: All the steel shop, and you can imagine the size.
Speaker Change: It will be devoted to the U S operation plus look so good.
Speaker Change: Hi.
Speaker Change: Sir.
Speaker Change: Many different resources, some of which we don't know if we would be affected by that if or not because in the end that would be a negotiation starting but we do not know how these negotiations will end up with Europe, or with Mexico or wafer Argentina, especially so this is where we are in that most of the supply.
We feel comfortable that in the end whatever scenario, we will come out with a fully integrated the line pretty efficient compared to any other.
Speaker Change: Competitor as far.
Speaker Change: As Korea is concerned I have no doubt that.
The American administration will be very careful and not allowing the antibody to.
Speaker Change: Even the big quarter.
Speaker Change: The flooding the market and reducing utilization of the domestic.
Speaker Change: Okay.
Speaker Change: This is what they say that they do what they did is what they are going to do to contain the set one way or the other by agreement or by other things So I am not.
Speaker Change: Really concerned.
Speaker Change: That these would be <unk>.
Speaker Change: Edible scenario for the future costing anywhere we are today and they didn't not only value for Korea is valid also for either player that may.
Speaker Change: See more room for increase but I frankly don't think that there is there will be open season for them.
Speaker Change: Now.
Speaker Change: Pemex.
Speaker Change: We are reducing our.
Speaker Change: The exposure.
Speaker Change: I think that.
Speaker Change: You will see these in the working capital.
Speaker Change: Cash flow, we are generating an important cash flow there.
Speaker Change: We are doing.
Speaker Change: Agreement that allow us.
Speaker Change: To reduce the <unk> in the range of.
Speaker Change: Let's say.
Speaker Change: Close to this quarter around the $140 million.
Speaker Change: And they say.
Speaker Change: Our program will allow us to continue but at a different pace.
Speaker Change: Yeah.
Speaker Change: Okay. Okay understood. Thanks, a lot for the color.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of Daniel Thompson from BNP Paribas exam.
Daniel Thompson: Hi, Good afternoon, just one question please.
Daniel Thompson: I'm just trying to think about the impact on the price rises in pipe logic.
Daniel Thompson: Outside of the U S. I was wondering if you could remind us sort of what proportion.
Daniel Thompson: Your your ex U S contracts have an element of pipe logics.
Daniel Thompson: In them.
Daniel Thompson: And what's the sort of timeframe for feed through.
Daniel Thompson: There and.
Daniel Thompson: Did have a U S pricing increasing.
Daniel Thompson: Considering the various lags.
Daniel Thompson: When could we expect that to feed through to those contracts and then feed through to your P&L beyond that thank you.
Danielle: Thank you Danielle.
Daniel Thompson: The project is.
Speaker Change: Importantly, and therefore, what is for the long term agreement.
Speaker Change: So obviously then in Mexico in Canada.
Speaker Change: In the rest of South America, including Argentina, Colombia.
Speaker Change: In some specific contracts, but.
Speaker Change: Basically I mean, you say in the in the Americas.
Speaker Change: But not.
Speaker Change: So much used outside of the Americas, where the formula.
Speaker Change: More related to the cost structure of our pipes.
Speaker Change: This is where they are in the pipe logic increased 9% from August to today.
Speaker Change: In January and we expect these to continue to increase even before the obligation of 30.
Speaker Change: <unk>.
Speaker Change: Hey will.
Speaker Change: Getting to.
Speaker Change: Our contract with the delay between one quarter to quarter.
Speaker Change: Gradually it is we'll get into it.
Speaker Change: And we will see it. So then in the moment in which that will be introduced.
Speaker Change: Expectation will step in and we don't know.
Speaker Change: What may happen in the months of March.
Speaker Change: Or <unk>.
Speaker Change: But.
Speaker Change: This is where do we.
Speaker Change: What we have.
Speaker Change: Ken estimating consider today.
Speaker Change: Okay very clear thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Okay.
Mick Pickup: Our next question comes from the line of Mick pickup from Barclays.
Mick Pickup: Good afternoon everybody.
Mick Pickup: Im sorry to ask again about the U S. But can you just disaggregate the U S market, the seamless and welded.
Mick Pickup: My math is correct you are reporting some.
Mick Pickup: Seamless chips into the U S from outside the U S and obviously that's part of this uncertain territories can you just talk about your ability to ramp up some wealthy production should the need arise.
Mick Pickup: What we have we have capacity on the ground for doing it.
Mick Pickup: But I also know.
Mick Pickup: <unk> will be moving and also the price of hot rolled coil women with you, but I will ask.
Mick Pickup: Luca.
Mick Pickup: To expand.
Mick Pickup: On.
Mick Pickup: This validation where that seamless and.
Mick Pickup: The deterioration for the import of the pipe that are complementing our sales.
Mick Pickup: States.
Mick Pickup: Yes.
Mick Pickup: Just to summarize.
Mick Pickup: Hey.
Mick Pickup: Today, our phased.
Based on the early stage.
Mick Pickup: Portland gained majority.
Mick Pickup: Seamless.
Mick Pickup: That's our strategy.
Mick Pickup: And he is there to provide the hall.
Mick Pickup: Well and so you can think of are what is the portion of well that goes into the surface and intermediate that and think that this is more or less out of water.
Mick Pickup: Propulsion.
Mick Pickup: I will say is it between seamless.
Mick Pickup: And well now as far as your second question, which is capacity in well there that obviously, we are super well positioned in terms of capacity because we could easily ramp up even further our capacity in our <unk> plants.
Mick Pickup: And.
Mick Pickup: We have.
Because we do believe that we're going to see some line pipe also coming through we have a.
A nice planning.
Mick Pickup: While the Kentucky that can step in if needed.
Mick Pickup: We are seeing yet.
This will depend on the relative positioning of the market prices and the cost of HFC, which are the two main inputs for.
Mick Pickup: I'll call it <unk>.
Mick Pickup: But in terms of capacity, we're probably the best place to Mbia's dates, but we not only we have the best place on the <unk>.
These days.
Speaker Change: Okay. Thank you Luca.
Speaker Change: In the case of whether we depend entirely from a domestic industry for the supply of hot rolled coils. So we're really depending on the equilibrium between price biologic and local.
Speaker Change: Hot rolled coil.
Speaker Change: I am.
Speaker Change: I think that in the U S.
Speaker Change: Maybe not immediately but over time the policy of the new government and the <unk>.
Speaker Change: <unk> session will.
Speaker Change: We need to speed up all the permit process and.
Speaker Change: And we May see additional line pipe and additional connections and evacuation.
Speaker Change: And also to some extent.
Speaker Change: These may.
Speaker Change: Hey.
Speaker Change: Open the way for some development there maybe we do not see exactly now, but we may see in six months time.
Speaker Change: Thank you.
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.
Speaker Change: At this time I am showing no further questions.
I'd now like to turn the conference back to Giovanni <unk> for closing remarks.
Speaker Change: Thank you Gigi and thank you all for joining us and hope to see you soon thank you bye.
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: Okay.