Q2 2025 Tenaris SA Earnings Call

Good day, and thank you for standing by. Welcome to the second quarter 2025, the nadis essay earnings conference call. At this time will participants are in a listen-only mode. After the speaker's presentation, there will be a question answer session to ask a question during the session. You will need to press star 1, 1 on your telephone. You will then hear an automated message. Advising your hand is raised to withdraw your question. Please press star 1 1 again.

Please be advised that today's conference is being recorded.

Paolo Rocca: Thank you, Giovanni, and welcome to Tenaris 2025 second quarter conference call. Before we start, I would like to remind you that we will be discussing forward-looking information during the call and that our actual results may vary from those expressed or implied during this call. With me on the call today are Paolo Rocca, our Chairman and CEO; Carlos Gómez-Alcega, our newly appointed Chief Financial Officer; Gabriel Podskubka, our Chief Operating Officer; and Guillermo Moreno, President of our U.S. Operations. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment on our quarterly results. Our second quarter sales reached $3.1 billion, down 7% year on year, but up 6% sequentially, mainly reflecting an increase in North American OCTG prices and stable volumes.

I would now like to hand the conference over to your speaker today. Jovanni sardana investor relations officer. Please go ahead.

Thank you Gigi and welcome to tenaris 2025 second quarter conference call.

Before we start, I would like to remind you that we will be discussing for looking information during the call. And that our actual results May Vary from

From those price to imply during this call.

With me on the call today are Pablo Rocca our chairman and CEO Carlos. Gomez alsa are newly appointed Chief Financial Officer Gabriel PKA, our chief operating officer and Guerra. Moreno, president of our us operations

Before passing over the call to Pablo, for his opening remarks, I would like to briefly comment, our quarterly results.

Paolo Rocca: Average selling prices in our tubes operating segment decreased 2% compared to the corresponding quarter of last year, but increased 6% sequentially. Our EBITDA for the quarter was up 5% sequentially to $733 million, with our EBITDA margin for the quarter close to 24%. Our margins remained in line with those of the previous quarter. Our cost of sales also rose 5%, mainly reflecting product mix differences and higher tariff payments. With operating cash flow of $673 million and capital expenditure of $135 million, our free cash flow for the quarter was $538 million. After a dividend payment of $600 million in May and share buybacks of $237 million, our net cash position amounted to $3.7 billion at the end of the quarter. Now, I will ask Paolo to say a few words before we open the call to questions. Thank you, Giovanni, and good morning to all of you.

Our second quarter sales reached $3.1 billion, down 7% year on year, but up 6% sequentially. This mainly reflects an increase in North American OCTG prices and stable volumes.

Average selling prices in our tubes. Operating segments decreased 2% compared to the corresponding quarter of last year. But increased 6% sequential.

Our abda for the quarter was up. 5% sequentially to 733 million with our abda margin for the quarter close to 24%.

Our margins remained in line with those of the previous quarter. Our cost of sales, also Rose 5% mainly reflecting product mixed differences and higher Target payments.

Its operating cash flow of 673 million and capital expenditure of 135 million are free cash flow for the quarter was 538 million.

After a dividend payment of $600 million in May, and shared by banks of $237 million, our net cash position amounted to $3.7 billion at the end of the quarter.

Now, I will ask Pao to say a few words before we open the cult questions.

Paolo Rocca: Our results in the second quarter pointed to the solid industrial and commercial position that Tenaris has built, serving its wide range of customers around the world and the competitive differentiation we have established in key markets. Even as drilling activity in several areas of the world has slowed, our sales rose sequentially, together with our EBITDA and net income. Our free cash flow amounted to a solid $538 million, while our shareholder distributions between dividend payments and share buybacks amounted to $837 million during the quarter. There is an increase in the U.S. Section 232 tariff on the import of all steel products from 25% to 50%, and the ongoing tariff negotiations have increased market uncertainty. As countries negotiate the so-called reciprocal tariff, no country apart from the U.K. has so far been able to negotiate how the Section 232 tariff will be applied.

Thank you for joining, and good morning to all of you.

Our results in the second quarter pointed to the solid Industrial and Commercial position. That tenaris has built serving, its wide range of customer around the world and the competitive differentiation. We have established in key markets.

Even as drilling activity in several areas of the world. As the load, our seals Rose sequentially together with our Eid and net income.

Our free cash flow amounted to a solid $538 million.

37 million during the quarter.

There is an increase in the US section, 232 tariff, on the import of all steel product.

From 50% from 25% to 50% and the ongoing tariff negotiations has increased Market uncertainty.

As countries, negotiate the so-called, reciprocal tariff, no country apart from the UK.

Paolo Rocca: We expect that the current broad-based approach will eventually be modified towards a more specific product-based approach, which takes into account market factors and considers differential tariffs and quotas for some countries. The Section 232 tariff and the ongoing negotiations will change the competitive environment, favoring more utilization of available domestic capacity and fewer imports. Over time, they will impact on prices once excess inventories are drawn down and imports are reduced from the high levels we have seen in the first half of the year. Tenaris S.A., with its strong U.S. domestic production base, including the world's most efficient seamless pipe mill at Bay City and its coupled steel production facility, supported by its global industrial system, remains well-placed to continue serving its U.S. customers with its highly differentiated Rig Direct program service.

As a so far, been able to negotiate, how the section 232 tariff will be applied.

We expected that the current broad base approach will eventually be modified towards the most specific product based approach, which takes into account Market factor, and considered, differential, tariff, and quarters for some countries.

The section 232 tariff and the ongoing, negotiations will change the competitive environment, favoring more utilization of available domestic capacity and fewer Imports. Over time, they will impact on prices. Once excess inventories are drawn down and imports are reduced from the high levels. We have seen seen in the first half of the year,

Daenerys with a strong us domestic production base, including the world, most efficient seamless by mail at Bay City.

Paolo Rocca: Our sales this quarter included the successful delivery of pipes and coatings to a wide number of complex line pipe projects around the world. These include Equinor Raya project in Brazil, ConocoPhillips Willow project in Alaska, Shell's Bonga project in Nigeria, Azul Ndongo project in Angola, and Chevron Leviathan project in the Mediterranean. Looking forward, we will have a lower delivery to offshore line pipe projects until a new wave of projects progresses to the development phase in 2026. One such project will be the Grand Morgue project in Suriname. In addition to our line pipe and coating award, we have received the award for the supply of casing and tubing for the project. Key to this achievement was our offer of service, which we will carry out from a base we are now setting up in Suriname.

And its couple steel production facility supported by its Global industrial system remains. Well, placed to continue serving, its Us customer with its highly differentiated rig direct service.

Our sale this quarter included, the successful delivery of pipes and Coatings to a wide number of complex line pipe project around the world. This include einor Rya project in Brazil

For Philips, the Willow project in Alaska.

Shells, banga project in Nigeria.

As.

The Dango project in Angola and Chevron, the Leviathan project in the Mediterranean, are looking forward. We will have a lower delivery to offshore line pipe for the project until a new wave of projects progresses to the development phase in 2026.

1 such project will be the grand morgo project in Suriname, in addition to our line pipe and coating award. We have received the word for the supply of casing and tubing for the project.

Key to this achievement was our offer of service.

Paolo Rocca: In the fast-growing frontier development of the Guyana-Suriname basin, we have set up local service bases to support the operation of ExxonMobil, of Total Energies, and other customers in the region. Another major developing region where we have been able to make a difference is the Vaca Muerta shale play in Argentina. Here, as well as casing and tubing, we also supply fracking and coil tubing services and are instrumental in developing the pipeline infrastructure that will enable the oil and gas to reach global markets. During this third quarter, we will complete most of the deliveries for the Vaca Muerta Sur pipeline that will build a crude export capacity to a new deepwater port in Puerto Rosales. Early next year, we should also deliver the pipes for the Duplicar Norte pipeline that will connect the northern development in Vaca Muerta to the main crude export pipelines.

Which we will carry out from a base, we are now setting up in sore.

In the fast growing Frontier development of the Guana Suriname basin.

We have set up local service basis to support the operation of xomo of total energies and other customer in the region.

Another major developing region where we have been able to make a difference is the Baka MOA Shale play in Argentina.

Here as well as casing and tubing. We also Supply fracking and coil tubing services and that is instrumental in developing the pipeline infrastructure that will enable the oil and gas to reach Global Market.

During this third quarter, we will complete most of the deliveries for the vakama Sur pipeline.

There will be a crude export capacity to a new deep water port in Puerto Rosales.

Early next year, we should also deliver the pipes for the duplicar, not the pipeline.

Paolo Rocca: In Mexico, Pemex has successfully issued a $12 billion financing facility this week. This is an important step that should allow Pemex to increase its current low level of operation and pay down some of its supplier debt. We look forward to supplying a higher level of operation under our current contract. With oil prices around $65 a barrel and drilling activity in the United States and Canada slowing, our sales in these countries remain relatively resilient due to our solid customer portfolio. They are focused on improving operational efficiency, which extended the lateral length for which they appreciate our seamless product and Rig Direct program service. We are ready now to take any questions you may have.

That will connect the node and development in vakama to the main crude export Pipelines.

In Mexico.

Pics has successfully issued a $12 billion financing facility. This week, this is an important step that should allow PMX to increase its current low level of operation and pay down some of its suppliers.

We look forward to supplying a higher level of operation, under our current contract.

With oil prices around 65 dollars a barrel.

And drilling activity in the United States and Canada is going our sales in these countries. Remain remain relatively resilient due to our solid customer portfolio.

Their focus on improving operational efficiency which extended the lateral length for which they appreciate our seamless product and redirect service.

Giovanni Sardagna: 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. Our first question comes from the line of Arun Jayaram from JPMorgan Securities LLC.

We are ready. Now, to take any question, you may have

For a star 1 1 again.

Please stand by we compile the Q&A roster.

Arun Jayaram: Yeah, Paolo, good morning. I was wondering if you could comment on your thoughts and outlook for the second half of 2025, just given some of the things you cited, tariff impacts, some activity perhaps going down a little bit in the U.S. Give us a sense of how you think about volume trends and margin trends for the second half.

Our first question comes from the line of our room jar. Raman from JP Morgan Securities LLC.

Yeah, Paulo, uh, good morning. I was wondering if you could comment on your thoughts and outlook for the second half.

of 2025 just given some of the things you cited, you know, terrifying, facts, uh you know, some

Activity, perhaps going down a little bit in the US, but give us a sense of how you think about volume Trends and margin trends for the second half.

Paolo Rocca: Thank you, Arun Jayaram. I think it is, there are many moving parts that are affecting the second half. We have visibility on the Q3, but obviously less visibility on the Q4. What we can say for the Q3, we expect lower sales on our part due to different factors. Basically, we will have lower invoicing in our fracking operation. We have a kind of black space for three months due to the programming of the company for their operation of fracking in Vaca Muerta. This is something that will, to some extent, reduce slightly our invoicing. We also, after an important wave of delivering of our line pipe, we will have somewhat lower shipment of line pipe during the quarter.

Yeah.

Thank you.

Yes.

I think is.

I mean, there are many more.

Moving parts.

In that are affecting that.

Let's say the second half we have visibility on the third quarter, but obviously the less visibility on the fourth what we can say.

For the same for the third quarter.

We expect.

Lower sales on our part.

Two different factor basically.

We would have lower invoicing in our fracking operation we haven't.

Kind of.

Blacks basin for three months.

Due to the programming of the company for their operation.

Operation of fracking in Bakken will add to.

This is something that will to some extent.

Reduced slightly our invoicing.

Also after.

Potent wave of de levering of our line pipe.

We will have a somewhat lower.

Shipment of.

<unk> paper during the quarter.

Paolo Rocca: Operation in North America will be reflecting some increase in price, which we expect, but also some containment of the activity and the rigs because the price of oil is today what it is. Even if I compare with our vision three months ago, three months ago, we were more concerned about the impact of a potential recession and the lower price of oil. Today, looking at the forecast for the economy worldwide and the perception of the market, we would expect the price of oil to stay around $65. In this environment, there shouldn't be a strong reduction in the recount. We do not expect more of this. In North America, more flexion in Canada because of seasonal reasons, and in the U.S., in our world, we will be compensated by some more activity in Mexico.

Operation in North America.

We'll be able to be reflecting some increase in price, which we expect but also some containment of the activity in the rigs.

Because.

Let's say price of oil is today what it is.

Even if I compare with our vision.

Three months ago.

Three months ago, we were more concerned about.

But.

A potential recession.

The lower price for it today.

Looking at the forecast for the economy worldwide and the perception of the market.

We would expect the price of oil to stay around that $65 <unk> in this environment that shouldn't be.

Okay.

The strong reduction in the rig count so it will not be expected towards Asia, and North America more collection in Canada because of seasonal reasons and then do what you say in the USA.

We know what it will be compensated by some more activity.

Paolo Rocca: Overall, we expect lower sales, especially in the Q3, in the range of the high single digit for our invoicing. In the Q4, it is more difficult to predict and to understand which will be the dynamic of prices. You know, there are tariffs that have been raised on the 4th of June, for the 232, up to 50% almost for every country, excluding the U.K. The negotiations that are underway today are mostly focusing on the reciprocal tariff, but are not touching on the 232. If this situation is not addressed with a more specific product by product or quota for a specific sector in the coming months, inevitably, prices internally, domestic prices in the United States will affect this. This will impact our sales, but today it is difficult to forecast which will be the impact on the Q4.

Mexico, So overall.

We expect lower sales, especially in the third quarter.

And the range of the high single digit.

For our invoicing in the fourth quarter.

It was more difficult to predict as I understand it which would be the dynamic of prices.

Todd effect.

Yeah.

That has been raised in the fourth of June for the 232.

Our 250% almost for every country excluding UK.

And the negotiations that are underway today are mostly focusing on the receptor.

Touching on the two three tools.

If this.

Situation is not.

Yeah.

Dressed.

With a more specific product by product or quarter for specific sector.

In the coming in the coming months.

Uh huh.

Inevitably prices in domestic pricing in the United States.

We are effective and there is really impacting our sales, but today, it's difficult to forecast than which would be the impact on the fourth quarter also in the third quarter.

Paolo Rocca: Also, in the Q3, our slight reduction in sales will take into consideration some repair and maintenance that we usually perform during August. This is our outcome as far as, overall top line is concerned.

Slight reduction in sales.

When taking into consideration some very senior and mezzanine lending.

Usually therefore mature in August.

Do you see that what outcome is.

<unk>, let's say.

Overall top line is closer.

Arun Jayaram: Okay. That is helpful. It kind of sounds like your commentary is pretty similar, maybe different moving pieces with what you outlined last quarter in terms of the outlook. Paolo, I was wondering if you could highlight your project pipeline as you think about 2026 relative to 2025. You highlighted Suriname as a new opportunity for Tenaris S.A. But how does the major or large project pipeline look in 2026, thinking about places like the Vaca Muerta?

Okay. That's helpful.

Kind of sounds like your commentary is pretty similar maybe different moving pieces, what you outlined last quarter in terms of the outlook.

Yeah.

Paul I was wondering if you could highlight.

You know your project pipeline as you think about 2026 relative to 2025.

Highlighted Suriname is a new opportunity for generics, but how does the major or large project pipeline look in 2020.

Six thinking about places like tobacco Marcia.

Yes.

Paolo Rocca: On this, I would like to have Gabriel Podskubka to give you a view of how we see our load in 2026 and what we can do compared to 2025. Gabriel.

On this.

I would like to have Gabrielle.

Together you are.

If.

How are we see let's say a lowered into the NT <unk> and what we can do compares with 95%.

Gabriel Podskubka: Thank you, Paolo. Good morning, Arun. To give you an overall perspective of the offshore market, which is an important driver for the line pipe business and also for the OCTG business in this segment, I would say that the market dynamic is overall positive. We do not see an immediate effect of the deteriorated market environment in drilling activity. As a matter of fact, the deepwater drilling rigs are quite resilient at very good historical levels. We are working with our customers on many new projects. Some of them are being delayed in the FIDs, but we are confident that in the next few months, they will be sanctioned. Overall, the context, I would say, is positive. Within this context, we have been building and continue to build an important backlog in this strategic segment.

Yes, Thank you Paolo good morning, everyone.

I'll give you the overall perspective of the offshore market with this.

An important driver for the pipeline business that also Jorge our CTG business.

In this segment I would say that the market dynamic is overall positive.

We don't see any.

The effect of the deteriorated market environment.

Engineering activity as a matter of fact, the deepwater drilling rigs.

Right.

<unk> had very good historical levels.

And we are working with our customers on many new projects some of them are being delayed and the fid's, but we our coffee in the in the next few months they will be sanctioned so overall the the context I would say is positive.

Within this context, we have been.

Building and continue to build an important backlog in this strategic segment outlook and you commented on Suriname.

Gabriel Podskubka: Paolo, you commented on Suriname, where we just got awarded a drilling campaign for OCTG to cover the needs of casing and tubing for these 36 wells that Total will develop in this initial phase of deepwater development. The customer has standardized on Doppler technologies, and we are getting ready to build our service base in the country. This is in addition to the award of line pipe and coating that we commented in our prior call. We are building an important backlog. Also, this quarter, we booked the deepwater line pipe in Brazil for Petrobras, Busios 11 project, and we also have been awarded OCTG needs of Chevron for their deepwater campaign in Agbami in Nigeria. Overall, I would say that we are building an important backlog into 2026. As Paolo mentioned, we had a high concentration of line pipes in the first half of 2025.

We're we just got awarded.

Drilling campaign for <unk> to cover the needs of casing and doing for these 36 wells.

Total.

We'll develop in this initial phase of deepwater.

Element gossamer halftime that is on the up lift technologies and we are getting great building our service base.

In country is in a deal.

To the award of Pilar in Angola that we commented in our prior call. So we are building an important backlog also this quarter we booked.

The water pipeline in Brazil, Pedro basketball, iOS 11 project and we also have been awarded or CTG.

Needs of Chevron for their deepwater campaign in AG.

In Nigeria, So overall I would say that we are building an important bundled into 2026.

Carlo mentioned, we had a high concentration of pipeline in the first half of 2025, so our pipeline offshore delivery in the second half would be slightly lower but we believe we've.

Gabriel Podskubka: Our line pipe offshore deliveries in the second half will be slightly lower, but we believe with great confidence that 2026 will be a, we will have an important contribution overall on the offshore segment.

Confidence that 2023.

We have an important contribution overall.

Paolo Rocca: Thank you, Gabriel. Just to add that our position in this segment, after the acquisition of Tenaris S.A., considering the different plants that can operate in welded and seamless in different parts of the world, plus the global deployment of Tenaris S.A. and coating, is a formidable structure for addressing and assuring short lead time, competitive offer, quality to our clients. This acquisition of Tenaris S.A. really gave us, has put us on a different perspective for serving our clients, and I think we are capturing the benefit of this.

Offshore segment, Thank you Gavin.

Just to add that our position in this segment after the acquisition of Shawcor.

Considering the different plans that can operate in welded and seamless in different parts of the world plus it.

Global deployment of Shawcor and coating.

The formidable structure for addressing in assuring.

Shortly time competitive offer quota.

Quality to it.

Right I mean this is a.

Yeah.

The acquisition of Shawcor are really gave us.

It.

It has put us on a different perspective for serving our client and I think we are capturing the benefits of this.

Giovanni Sardagna: Thank you. One moment for our next question. Our next question comes from the line of Alessandro Pozzi from Mediobanca.

Thank you one moment for our next question.

Our next question comes from the line of Alessandro potency from Mediobanca.

Guillermo Moreno: Good afternoon, and thank you for taking the questions. The first one is, again, on the outlook for the second half of 2025. You indicated where sales are going to go. Maybe if you can add some additional color on margins in Q3 and in Q4, because I think that Q3, maybe you can still benefit a little bit from the lagged effect with the pipe logics, but then you will feel the full impact of tariffs as well. I believe it should be around $140 million per quarter. I am not sure if you have some remedies in place to reduce the amount of impact from tariffs and/or whether the higher prices will be able to offset these, because if we look at the pipe logics that was out yesterday, it was just a small increase month on month.

Hi, good afternoon and.

Thank you for taking my questions.

First one is again on the outlook for the second half of 2020 five.

And you indicated the web sales are going to go.

Maybe if you can add some additional color on margins in Q3 and in Q4, because I think that youre seeing maybe use you can still benefit a little bit from the lag effect with the pipe logics, but then.

We'll feel the full impact of all types as well and I believe it should be around $140 million at the quarter I'm not sure you'd have some.

Remedies in place to reduce the amount of impact from tariffs.

And or whether the higher prices will it be able to offset this because if we look at the pipe logics that was out yesterday. It was just a small increase month to month and.

Guillermo Moreno: I do not know if maybe we will see stronger prices going forward, but your thoughts on margins will be very appreciated. The second question is on South America. I believe sales were down in Q2. Can you give us maybe the outlook for sales in Argentina and explain why maybe the rate point overall in Argentina is still rather flat despite all the investments in Vaca Muerta? Thank you.

Maybe it will receive.

Just on the pricing going forward, but your thoughts on.

Our margins would be.

And the second question is on South America I.

I believe sales were down in Q2.

Can you give us maybe the outlook for sales in Argentina and explain why is the whole point overall in Argentina is still a lot of flops. Despite all the investments and back in line. Thank you.

Paolo Rocca: Thank you, Alejandro. On the first point, first of all, you are right that the 50% tariff of the Section 232 is affecting us on a dimension that is close to what we are saying. Remember last time we were saying with 25%, around $70 million per quarter. Today, with the increase of the tariff to 50%, this number could become higher in the range of the $140 million, $150 million for a quarter. Let me add two considerations. First of all, we do not know where the negotiation with Mexico, Canada, and Argentina will end up, and if there will be some consideration, like in the case of the U.K., for changing or adapting or modifying by product or by country, some of the consideration regarding the tariff of the 232. We do not know, but we think that would be a possibility.

Thank you.

Now on the first point.

First of all Youre right.

The 50% sorry for all the section 232.

Is affecting Gaza.

On a day.

Damian has shown there is close towards we're seeing remember last time, we were saying with 25% around 70 million per quarter today, we've increase of.

The.

The tariff to 50%.

This number could.

The kind of higher in the range of the 140 150.

For fourth quarter now, let me add to consideration first of all.

We don't know where the negotiation with Mexico.

Canada.

Tina will end up and there will be some consideration.

Like in the case of UK for changing or adapting automotive frying by product or by <unk>.

Count right.

Some of the.

Consideration.

Regarding the tariff of the 232, we do not know.

But we think that would be.

No.

Paolo Rocca: Because in the end, the relation within the USMCA and the relation with Argentina may justify specific negotiations that include some aspect related to the 232 automotive steel and not only on the reciprocal. This is the first consideration that may change this. Second consideration, we can react in terms of allocation organization of our production flows, and this tariff is getting in our cost of sale gradually because of the inventory. Some of these tariffs are affecting our steel bar coming into the U.S. It takes time to flow through our inventory to get into our cost of sale. You should also consider that the figure we are mentioning is not getting straight into the next quarter, but only gradually to this. Also that we have alternatives or we can, to some extent, limit part of the impact of this.

Will it be a possibility.

And.

Uh huh.

The.

The relation within this U S MCA and duration of Argentina may justify a specific.

The negotiation that include that.

Some aspect related to the 232.

Tomorrow with this.

Steel and not only on the receipt broker. This is the first consideration that may change this second consideration.

Well, we can react in term of our location and the organization of our production flows.

And.

This study has getting in our cost of sale gradually because of the inventory. Some of this tariff are affecting a lot of steel bar.

Going into the U S that is.

It takes time to flow through our inventory to get them to our cost of sales. So you sold also consider that the.

The figure we are mentioning in order to get things straight into the next quarter, but only.

Rather entities and also that we have.

Let's say alternative Ora, we can to some extent.

Limit.

Part of the impact of these.

Paolo Rocca: Then we go to the impacting prices. You are right. Yesterday, the pipe logic comes out with a very modest increase, but this is the result also of the very high level of import that were unleashed by the elimination of quota when the first round of 232 were introduced with 25%, but no quota. There has been import in the United States from different sources well above the level of quota. There has been a resulting increase in inventory. These inventories are waiting on prices today and will do so for a while, but not forever. I think that after the increase in 232 on the 4th of June to 50%, some of these imports gradually will be reduced. Today, there are many products on the sea, on the vessel coming into the U.S.

And then we go to the impacting price is youre right.

Yesterday, the project comes out very modest.

But this is a result also.

Of the very high level of import.

Delaware unleashed by the elimination of quarter when the first round of tutor at all there.

With 25% by quarter it has been.

Importantly, the United States from different sources.

Well above the level of quota.

And a resulting increase in inventory this inventory out of waiting on prices today.

And.

We'll do so for a while but not forever.

I think that.

After the.

Could ease into <unk>.

The fourth of June to 50%.

Some of these same perfectly gradually.

Sure.

We reduced today that our many product on the sea on the vessels coming into the U S.

Paolo Rocca: Then the decision has to be taken that will affect September, October, and the coming months will be taken with a different scenario and different consideration, taking into consideration the higher level of tariff. Prices, in my view, will go up. We will do so gradually, but to some extent, inevitably over time. It is difficult to predict if this will happen and exactly when, but prices will need to go up more than what has been done up to now. This will also contribute to our margin. Having said this, what we can see is the margin for the next quarter, and we expect margin slightly below the margin of this quarter, but always in the range between 20% and 25%. Remember, this is, let's say, where we were guiding last quarter.

But then the decision has to be taken that will affect September October and the cabinet mindset will be taken with a different scenario and deferring consideration taking into consideration the higher level of tariff so.

Prices.

In my view.

We'd go up we'll do they do soar.

But to some extent inevitably.

OLED.

David go to predict that.

If this will happen and exactly when.

Right.

We'll need to go up.

More than what had been done up to now and then.

We would also contribute to our having said this.

What we can see the margin for the next quarter and we expect margin slightly below the margin of this quarter, but always in the range between 20 and 25 remember this is.

Let's say, where do we were guiding.

Paolo Rocca: We will remain within this space between 20% and 25%, but lower than this quarter, slightly lower than this. In the Q4, for the reason that I mentioned, I think it is more difficult to have an estimate, a reasonable estimate of what will happen. Most will depend from the decision that the importer may take and the reflection on price. In my view, having duty for steel and pipe and bus going up 50% will have an impact on the price of line pipe logic, even in an environment in which the recount is not very aggressively increasing. Even if it stays or it goes down slowly, as we anticipated, there should be an impact on prices. This would be logical to happen.

Last quarter, we will remain within this.

Space between 2025, but.

Lower than.

This quarter slightly lower than this in the fourth quarter.

For the reason that I mentioned.

<unk> is more difficult to.

<unk>.

And estimate a reasonable estimate of what will happen most will depend.

From that AD.

The seizure that the import that may take.

And that reflects an inflection on price in may.

Hello.

Having.

Duty.

Steel and pipe and bars going up 50%.

We'll have an impact.

The price of pipe logic, even in an environment in which the rig count is not very aggressively.

Crazy.

Stay or it goes down slowly as we anticipated this would be impacted.

Prices.

Yes.

This is would be the logic.

Logical to wood.

Be logical to happen.

Guillermo Moreno: Thank you. On South America?

Thank you.

America.

Paolo Rocca: Second question, if it is okay for you, with the first one. On South America, you are right that there has been a containment, I would say, of oil. One, the situation in which the recount has went down slightly has been Argentina, as you say. The point in Argentina is that the southern part of the country, there has been a reduction, a divestiture from YPF and other companies of their operation in the southern part of the country. This turned out into a reduction of the number of rigs operating on one side. On the other side, there is a company still having a cautious approach in organizing their investment in Vaca Muerta. The access to finance has limitations. Some operations have been important. For instance, it has been possible to finance the pipeline in Vaca Muerta South for bringing oil to the coast.

Second question is.

Okay for you or the first one.

South America.

South America.

Youre right.

Dana containment, let's say of <unk>.

John.

Okay.

Is the situation in which the rig count.

As we wind down that is being Argentina as you say.

Finally in Argentina.

Yes.

The southern part of the country.

It has been a reduction of divestitures from <unk> and other companies of their operation in the southern part of the country and this turned out into a reduction of the number of rigs operating on Wednesday.

On the other side.

There is.

The company still having.

Our cautious approach in organizing their investment in <unk>.

Go ahead.

The access to finance that.

Hasnt limitation.

Some operation has been important for instance has been possible to finance at the time.

Lifeline.

Yeah.

Back on the South.

For bringing oil to the Costa and is an important program we are evolving.

Paolo Rocca: This is an important program involving financing for around $2 billion. Also, there have been other financing operations for local companies. But still, the country risk is above 700 points. It is not exactly easy for local players to finance all the operations in line with the more optimistic expectation that we may have maybe six months ago. Today, nothing changes in the positive view of the development of Vaca Muerta for gas and for oil. But the pace of operation, development, and growth is slower than we expected. Also, the price of oil, there was a moment in which companies were more afraid of the price of oil between $55, $60, and this would have clearly had a negative impact, especially in companies like the local companies in Argentina that are depending very much on their cash flow to be available, to be eligible for financing.

Financing for around $2 billion.

Also there has been other.

Financing operation, Florida local company.

But still.

Yeah.

Currently these cases above 700 point is.

It is not exactly easy for local play yet too.

<unk> said all the operation in line with the more optimistic expectation that we may head.

Maybe.

Six months ago.

They.

Nothing changed in the positive view of the development of a comparator for our gas.

And for all of it but.

The pace.

<unk>.

Variation the vitamin thing or is that.

Is that.

Slower than we expected also.

Alright.

Or there was a moment in which.

Company aware more afraid of the price of oil between $6 $55 60, and these would have clearly ahead.

Negative.

But especially in a company like the local company in Argentina that are depending very much want that it can flow to be.

B L.

Eligible for financing.

Paolo Rocca: I think that this situation is improving. Still, the country risk is important. On the other side, the valuation of the local currency in the last months has devaluated by around 10%. It is reducing costs, so it is also acting in a positive way in the profitability of the project and from the cost side of the operation. So I am confident that Vaca Muerta will continue to expand, increasing demand, drilling over time. But in this semester and in these months, what we are seeing is a reduction of rigs because of the south and a very slow movement in increasing rigs and fracking. This is part of the problem of the issue of the white space in our fracking operation until September.

I think that this is a.

The situation is improving still the country. This is important.

On the other side.

The devaluation of the local currency in the last months of the evaluated by around 10%.

Is it reducing cost.

He was also acting in a positive way.

To.

In the in the project and the profitability of the project and from the cost side of the operation So I'm.

I am confident that we will continue to.

Expand and creating demand really over time, but in this.

Semester and in this mindset, what we're seeing is that.

A reduction of rigs because of the south.

And a very little movement in increasing <unk>.

<unk> and fracking. This is part of the problem over the issue of improvement.

The white space.

Now <unk>.

Fracking operation until September.

Guillermo Moreno: Thank you very much. I appreciate the call. Thank you.

Thank you very much I appreciate the color. Thank you.

Giovanni Sardagna: Thank you. One moment for our next question. Our next question comes from the line of Sebastian Erskine from Redburn Atlantic.

Thank you one moment for our next question.

Our next question comes from the line of Sebastian or skin from Rothschild and co redburn.

Sebastian Erskine: Yeah. Hi. Good morning, Paolo and team. I would like to start on the quantity around imports. Obviously, it has remained at an elevated level in the first half of the year. It is a step down in the second half, but how much share gain can we expect by Tenaris S.A. and equivalent domestic producers for imports as a percentage of the mix? I am thinking about that in terms of offsetting weaker volumes in the back half of the year, particularly in U.S. land where the recount remains under pressure.

Yes, hi, good morning, Paolo and team I'd like to start on the on the culture around imports. Obviously has remained at an elevated level in the first half of the year could step down in the second half, but kind of how much share gain can we expect bipartisan couldnt domestic producers for imports as a percentage of the mix and I'm thinking about that in terms of kind of offsetting.

Volumes in the back half of the year, particularly in U S land with the rig count remains under pressure.

Paolo Rocca: Overall, imports represent a large share of demand in the U.S. in the range of 40%. Let us say if you imagine 50% if on 40% of the supply in a very large market, even in an environment in which the recount should stay or go slightly down, we basically expect this. It will also depend on the price of oil, obviously, affecting the cash flow. But even in an environment of relatively slow down on rig, the impact on import of the tariff, there will be an impact on the prices. There will be some substitution. In terms of capacity, I think the domestic industry has the ability to increase the production, but the level of utilization is still pretty high today in the different players on this in the seamless arena. Probably there is room for increasing utilization in the welded supply of OCTG.

Yes.

Overall.

The import.

A large share of demand in the U S in the range of 40% so.

Let's say if you imagine 50%.

On 40% of the.

Of the.

Supply in a very large market.

Even in an environment in which the rig count should stay or go up slightly.

Down we basically expect.

It will also depend from the price of oil obviously is affecting their cash flow, but even in the environment.

I think the slowdown on on <unk>.

Rig.

Yeah.

The impact on.

The impact of the tariff.

Okay.

There will be impact on the prices there will be some substitution now in term of capacity I think the domestic industry.

<unk> had the ability to increase production, but.

Yeah.

The level of utilization.

It still is pretty high today.

In the different player on this in the seamless at arena.

And probably there is a room for increasing utilization in the world.

Paolo Rocca: But welded supply is limited to a segment of the market and not to the entire market. These are the reasons why I think over time the price level in the U.S. should go up.

Supply of CTG, but when the supply is.

Limited to a segment of the market and not to the entire market.

These are the reason why I think over time.

The price level is.

In the U S.

Should go up.

Sebastian Erskine: Really appreciate the call, Paolo. My second question on distribution. Obviously, announcing the $1.2 billion authorization, it looks like you are kind of front-loading the first tranche of $600 million. It looks like you completed nearly two-thirds of this. Would you be open to bringing forward the second tranche of repurchases, just given the cadence you have already achieved?

Really appreciate the color Paolo and then my second question on distribution, obviously announcing the $1 2 billion.

<unk>. It looks like you are kind of front loading the first tranche of 600 million completed nearly two thirds of this would you be open to bringing forward. The second tranche of repurchases just given the cadence you've already you've already achieved.

Paolo Rocca: As you know, the board approved two tranches of share buyback, and the second tranche will be considered in the board meeting on October 29. This has been approved. This is what we expect. This will be considered again and very likely launched after the board on October 29.

Okay.

As you know.

The board approved.

Two tranches of.

Share buyback and.

And then.

Secondly, I understand would be considering the board meeting on the 29.

October.

This will be in a broader but anyway.

We expect that this would be an <unk> can see that again.

Very likely lounge.

After the board on the 20 <unk>.

Sebastian Erskine: Thank you very much, Paolo. I will hand it back now. Thank you.

Thank you very much Paolo I'll hand, it back now thank you.

Giovanni Sardagna: Thank you. One moment for our next question. Our next question comes from the line of Mark Bianchi from TD Cowen.

Thank you one moment for our next question.

Our next question comes from the line of Marc Bianchi from TD Cowen.

Arun Jayaram: Hi. Thank you. The first one is real quick. I just wanted to clarify, Paolo, on the third quarter outlook, the high single-digit decline was a comment on sales or a comment on volume?

Hi, Thank you.

First one is real quick I, just wanted to clarify Paolo on the third quarter outlook. The high single digit decline was a comment on <unk>.

Sales or comment on volume.

Paolo Rocca: It was a comment on sales.

Yes, there was a comment on sales okay.

Arun Jayaram: Okay. Thank you very much. The other question relates to supply chain. You talked about, if there is potentially exceptions for USMCA and you could divert some of your steel supply from Mexico, should we think about that as potentially removing the entire $140 million tariff headwind, or what is the opportunity there?

Okay. Thanks.

You very much.

The other question relates to supply chain.

You talked about you know if there's a potentially exceptions.

For U S MCA and you could divert some of your supply steel supply from Mexico.

Should we think about that as potentially removing the entire $140 million tariff headwind or what's the what's the opportunity there.

Paolo Rocca: No, no. I mean, we can, first of all, expand as much as we can local production of steel. The couple operation, by the way, we had one accident in couple one month and a half ago. We solved it, but this to some extent reduced to some extent our availability of steel for a while. Now we will pick up again. So we will take advantage of this capacity as much as we can. This is one component that contributes to the reduction of the tariff we pay on the bars and semis that we need to bring into the States to feed into our rolling mill in Bay City, in Anchorage. This is an action that will depend basically on our ability to operate at the capacity.

No no.

Yes.

Yeah.

We can.

First of all.

Yeah.

Okay.

Expand as much as we can look at production of steel so that copel operation by the way we had one accident in copper.

One one and a half ago.

We solve it.

We are in this to some extent reduce to some extent our availability of data for a while now we will pick up again. So we will take advantage of this capacity as much as we can this is one component that contribute to the reduction or further if we pay.

<unk> on the boss and SME.

<unk>.

We need to bring it to the states to feed into our rolling mill.

The name, but Asia.

This is an action.

Will depend basically on our ability to.

Giovanni Sardagna: because it is past the end of the year. We are also planning for the investment needed to strengthen this capability, but the investment will take a little more time to get in. The second action is to see if we can cover with a product some of the demand, and this also may contribute to compensate even if this may have a higher cost for us, but it could be a way of reducing the level of tariff that we may be paying on this. Still, this action will not change substantially the reality that we are today that is to pay high tariff from Canada, Mexico, Argentina, and Europe.

Operator to maximum capacity.

Facility and we are also planning for the investment needed to strengthen this capability, but the investment will take.

More time to get there.

The.

Second question is to see if we can call there with where the product some of the demand.

And this also may contribute to compensate you any dcs.

Higher cost for us, but could be a way of.

They do seem lately with the.

The level of studies that we may be.

Paying are these still this action will not change.

Substantially reality.

Yes.

That we have today.

Today that he has to pay the high tariff from Canada and Mexico.

<unk>.

In Europe.

Yes.

Giovanni Sardagna: I think that over time, the negotiation with Mexico, Canada, Argentina, and Europe may also, like the case of the U.K., address some specific product or some specific semi, like the case of the bar, that are not really produced in the States. So if something is not really produced in the States, I think it could be possible that the negotiation may modify or reduce this impact. These are the points that could help or be having an impact on the level of tariff that we are paying every quarter.

I think that over time, the negotiation with Mexico kind of that Argentina, and Europe may or so like is it because of UK address.

Some specifics.

Or some specific semi like because of the bar.

Not really producing the states.

If something is not really produced in this data.

I think it could be possible.

Oh.

The the negotiation.

They modify or reduce this impact this are the point that could help.

Or be having any impact on the level of debt that we are being every quarter.

Paolo Rocca: Got it. Got it. Thank you very much for that. The other question I had related to mix, you mentioned some of the line pipe work coming off and some open space in the frac business. I would think that those are lower margin parts of your business compared to OCTG. Can you just sort of talk about maybe how much of an impact that's having on Q3 or second half and how we should think about those coming back into the revenue profile eventually?

Got it got it thank you very much for that.

Other question I had related to mix you mentioned.

Some of the pipeline, we're coming off in some.

Open space in the in the Frac business and I would think that those are.

Lower margin.

Parts of your business compared to OTT can.

Can you just sort of talk about maybe how much of an impact that that's having on third quarter second half and.

How we should think about those coming back into the revenue profile.

Giovanni Sardagna: Well, I will ask Gabriel Podskubka because there are very different products here, you know, with very high margin and very much more competitive margin. In general, you mentioned the fracking business is an obitable margin. So that has an impact in Q3 until we pick up that business in Q4. Then regarding the pipelines, the offshore pipelines that we were mentioning, either welded or seamless, with an important coating component, they also have important margins, typically higher than the average of Tenaris S.A. While the onshore pipelines, the one that Paolo Rocca commented on, on Vaca Muerta, those that are kicking in in Q3, Q4 and beginning of 2026, those have welded onshore pipelines have margins that are lower than the average of Tenaris S.A.

Eventually yes.

Yes.

Wed ask avnet, because there are very different products here in ours with very high margin and very much more competitive match yeah. In general you mentioned the fracking business is profitable.

Profitable margin so that it has.

Okay.

In the third quarter, and <unk> would pick up that business in the fourth quarter, then regarding the pipeline the offshore pipelines that were mentioned in.

Well it was seamless with it.

Barton co.

The component that also have an important margin.

Typically higher than the average of <unk>, while the onshore pipelines they wanted.

Paolo commented on back on more of those that are kicking in there.

<unk> fourth quarter and the beginning of 2026 of those have.

When did the <unk>.

Onshore by then have margins.

Lower than the average and so we have moving parts the ones that are.

Giovanni Sardagna: So we have moving parts, the ones that are with lower shipments in the second half, out of those of higher margins that will pick up in 2026 again.

Uh huh.

Lower shipments in the second half out of those have higher margins that will pick up in 2026 again.

Paolo Rocca: Yeah. Thank you very much.

Giovanni Sardagna: Thank you.

Yes. Thank you for thank you.

Yes.

Arun Jayaram: Thank you. One moment for our next question. Our next question comes from the line of David Anderson from Barclays.

Yes.

Thank you one enrollment for next question.

Our next question comes from the line of David Anderson from Barclays.

Gabriel Podskubka: Good morning, Paolo. I have a question on the Middle East, so it is probably directed toward Gabriel. I was curious how you see Middle East overall trending into 2026. Saudi has been showing activity all year. Therefore, it may not pick up again until the end of next year. If I am not mistaken, I think on the prior calls, you said Saudi has been reducing its inventory pipe most of the year. I am curious about how you see specifically how the Saudi market, when do you start seeing the Saudi market start to improve from a pipe standpoint, from a pipe ordering standpoint next year? How do you see overall Middle East volumes trending 2026 versus 2025? Thank you.

Hi, Good morning, Paolo I have a question on the middle East So its probably directed towards Gabrielle.

Just wanted to I was curious how you see middle East overall trending into 2026, Saudi has been slowing activity all year.

For may not pick up again until the end of the multiyear if I'm not mistaken I think on the prior call. You said started when reducing its inventory pipe most of the year. So I'm curious about how you see kind of specifically how the Saudi market. When do you start seeing the Saudi market start to improve from a pipe standpoint for pipe ordering standpoint next year and how do you see overall middle.

<unk> volumes trending 26 versus 25, thank you.

Giovanni Sardagna: Thank you, David. I will pass to Gabriel.

Thank you David.

Gabriel Podskubka: Yeah. Thank you. No, no. Thank you.

I will pass to grab it here.

Giovanni Sardagna: Good morning, David. Yeah, indeed, as you know, in Saudi, we have been seeing austerity measures for a number of months already in line with a lower price environment, as we know. The rig count in the kingdom has been going down, concentrated mainly in the oil, not only, but also we are seeing some gas rigs being dropped. The level of activity today is about 15% lower than it was a year ago. This is what we are seeing. I would say the inventory level situation is pretty much in line with consumption. We are not having an overhang situation in Saudi anymore. The local supplier network, plus Aramco inventories, I think are pretty lean and in line with demand. Going forward, we would expect our shipment and sales in line with a variation of consumption.

Thank you.

Good morning, David Yes, Indeed, as you know in Saudi we have been seeing austerity measures for the number of months already in light with a lower price environment.

As we know so well.

Rig count in the chemo has been going down concentrated mainly in the oil not only by the <unk>.

So we are seeing some gas.

Being dropped their level of activity today is about 15% lower than it was a year from <unk>.

I go. So this is what we're seeing.

I would say the inventory level situation.

It's pretty much in line with consumption, we are not having a overhang situation in Saudi anymore. The local supplier network plus Aramco inventories I think are pretty pretty lean and in line with demand. So.

Going forward, we would expect our.

Our shipment and sales in line with a variation of consumption.

Giovanni Sardagna: To compensate this lower activity in oil in the kingdom, we have an important line pipe business. I think we mentioned the CCS line pipe award in the last quarter. This will contribute and offset part of the OCTG. This is regarding Saudi. The rest of the MENA region and the key markets, drilling activity is quite resilient. We see the Emirates pushing forward with the expansion of oil and gas, with a marginal decrease of some rigs in their unconventional plan, but very marginal. They are still operating today at 120 rigs, which is a historical high level for ADNOC. Kuwait and Iraq are also pressing forward in their activity levels. We see pretty much Qatar on track with their expansion of the LNG project.

To compensate this lower activity in oil in the Kingdom, we have an important <unk> business I think we mentioned in the Ccs pipeline awarded last quarter. So this will contribute to offset part of LC BG.

This is regarding Saudi the rest of the of.

The Mena region in the key markets.

In aggregate is quite resilient we.

We see the immediate pushing forward.

With the expansion of oil and gas with a margin increase of some rigs in their unconventional plan, but very marginal they're still operating per day up to 120 rigs, which is a historical high level for avenova.

Kuwait and Iraq got also pressing forward in their activity.

Activity levels, and we see pretty much got that are on track with our expansion of the LNG projects. So overall I would say for the second half of this year and into 2026, I would say that our shipments in the middle East will remain fairly stable and solid.

Giovanni Sardagna: Overall, I would say for the second half of this year and into 2026, I would say that our shipments in the Middle East will remain fairly stable and solid.

Gabriel Podskubka: Great. Thank you.

Great. Thank you.

Paolo Rocca: Thank you very much. My second question is around Mexico. Paolo, you were talking about some of the challenges that Pemex is facing and now with some potentially helping to fix their debt situation, there does seem to be some positive on the horizon. But Pemex's CapEx budget is down 50% this year. Activity is plummeting. I presume you probably supply most of the pipe there from your facility. So I am curious how much of a drag it has been this year, which has not really shown up in the numbers. Secondarily, what kind of opportunity is next year? How do you sort of see those? I know it is really hard to tell considering Pemex does not have a ton of visibility, but how do you see this trending going into next year?

Thank you very much my second question was around Mexico.

Paolo you were talking about some of the challenges that Pemex is facing now with some potentially helping to fix their debt situation. There does seem to be some positive.

On the horizon, but pretty much as capex budgets down 50% this shows activities plummeting.

You would probably supply most of the pipe there from your facility in Veracruz.

I'm curious how much of a drag this year, which hasn't really shown up in the numbers and then secondarily what kind of the opportunity is next year. So how do you sort of see those I know, it's really hard to tell considering pemex doesn't have a ton of visibility, but how do you see this trending going into next year. Overall I know you were talking about line pipe I'm talking more OCG and alike.

Paolo Rocca: Overall, I know you were talking about line pipe. I am talking more OCTG and the like.

Giovanni Sardagna: I think that the fact that Pemex has been supported in getting this financing open, this financial operation, and issuing debt for $12 billion with a guarantee from the states, from the government. These have been oversubscribed. They had the possibility to collect even more than this at a very competitive rate because in the end, Mexico has a relatively low debt-to-GDP ratio. It is a very important sign that the Mexican government is willing to address the situation of Pemex, not only in reducing the financial load on the supplier, but also in giving the financial means to pick up back operations. We see this in the number of rigs that are starting to operate. The rigs today are in the range of 24 rigs. We were having 19, but even less than 19 in one month, rigs in the recent past.

Yeah well.

I think that today.

<unk>.

The fact that Pemex has been.

Supported.

Sure.

Getting this.

Financing opened these financial operation.

Uh huh.

Issuing.

Depth.

412 billion.

We forget antti from.

The state.

State from the government.

Okay.

Is.

These are being oversubscribed.

It had the possibility to.

Collect even more than this at the very competitive rate, because India and Mexico.

Relatively low debt to GDP ratio so.

Is it <unk>.

Very important sign.

The Mexican government is willing to address.

The situation of Pemex set.

Not only in reducing the financial load on the supplier, but also giving the financial means to be cap bank operation now we see this in the number of rigs that are starting to operate the rig today are in the range of 24 rigs and we were.

Having now, but even less than 19 environment <unk> said in the recent past so.

Giovanni Sardagna: This, in my view, is a sign that the Mexican government is back in supporting Pemex for the relevance of Pemex in the overall economy for gas production, for oil production, and for the level of activity. This is, more than anything, a very important sign. Will this be followed by a continuing support within the plan of restructuring of Pemex? They also changed the management of Pemex, and this is also a sign that they are addressing this. We know that in the second half of 2025, the Pemex increase in volume is the fact that we will maintain overall sales into North America for us more or less stable, compensating for some reduction for the season in Canada and some constraint in some reduction in the U.S. For sure, we anticipate in this a positive trend.

These are in my view is a sign that the Mexican government.

R Becker and supporting Pemex for the relevance of <unk> in the overall.

The economy.

Gas production for oil production.

And for the level of activity so.

This is more than anything is it is a very important sign.

Will these be followed by a continuing support within the plan of restructuring of Emmis, where they also changed the management of Pemex and it is also a sign that they are addressing this we know that in the second half of 2025.

The Pemex.

The increase in volume.

Is the fact that we'll maintain overall.

Sales into North America Verizon.

More or less stable compensating for some reduction for the season in Canada, Samsung Strainer and there is some reduction in the U S. So for sure we anticipate.

Giovanni Sardagna: When we look at one year from now, I think it is more difficult to have a forecast because in the end, Mexico today has to deal with the negotiation of the new negotiation of the USMCA, the tariff, and we have to redefine some of the strategy even in the energy sector. I am very confident that in the end, it will make sense. There are resources available for it. If the price of oil is where it is, in the range of $65, it makes a lot of sense to develop very reserves that are very profitable, have very low cost of extraction, and will make a lot of sense to maintain this trend of support.

These are positive trends now when we look at one year from now.

I think is more difficult to have.

Forecast, because India and Mexico today has to.

Deal with them.

The negotiation of the.

The new negotiation of the U S MCA.

And we have to.

Really the redesign some of the.

Strategy, even in the energy sector.

But I am very confident that in the end it will make sense.

There are resources available for it.

And if the price of oil is where it is in the range of 65, it would make a lot of sense to develop very.

The reserves.

Sure.

Very profitable have very low cost of extraction, and we'll make a lot of sense to maintain this trend of support.

Gabriel Podskubka: Appreciate your comments. Thank you, Paolo.

I appreciate your comments, Thank you Paulo.

Arun Jayaram: Thank you. 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. Our next question comes from the line of Derek Podhaizer from Piper Sandler.

Thank you 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.

Our next question comes from the line of Derek <unk> from Piper Sandler.

Paolo Rocca: Hey, good morning. Just a question in U.S. land. We've seen strength in the gas markets, primarily private-driven across the Northeast, Haynesville, the Eagle Ford gas window. Just curious your level of exposure to this tailwind in the U.S. I've always viewed you as primarily attached to the larger customers utilizing Rig Direct, but maybe help us think through your exposure to the privates and in these particular gas basins.

Hey, good morning, just a question in U S land. So we've seen strength from the gas markets, primarily private driven across the north East Haynesville Eagle Ford gas window, just curious your level of exposure to this tailwind in the U S. I mean, I've always videos, primarily attached to the larger customers utilizing rig direct so maybe.

Help us think through about your exposure to the privates and in these particular gas basins.

Giovanni Sardagna: Thank you, Derek. I will ask Guillermo to give us an overview of our exposure to this. Guillermo, it is up to you.

Yes. Thank.

Thank you.

Erica.

I would ask <unk> to give us an overview of our exposure to these gentlemen.

Guillermo Moreno: Yeah. Thanks, Paolo, and good morning, Derek. Our exposure to gas in the U.S. has been mainly in Haynesville more than in Appalachia. We are seeing an upside. We are seeing a growth of activity in Appalachia, as you said, mainly from private operators. There are a couple of them that have driven the growth that has been traditional clients. We are seeing an increase of our sales for gas in Haynesville and also our market share. We stay optimistic about further growth in the future and with this of our sales and again, our position in the region where we are very competitive because we have a base city very close to Gantt Plain.

Thanks, Paul.

Morning, Derek.

Okay.

Exposure to gas I mean.

In the U S has been mainly in things we learned in Appalachia.

So we have seen an upside we are seeing a good also subsidiary in Appalachia as you said mainly from private operators.

And there are a couple of them that are but even the growth that has been traditional clients. So we are seeing in it.

At least of our sales forecast and Haynesville and also our market share.

And we stay optimistic about further growth in the future and with each of our sales.

And our position in the region, where we are very competitive.

Because with our basically very close to that play.

Giovanni Sardagna: Yeah. I also think that in all the discussion and negotiation that the American administration is establishing, there are components about purchasing of LNG and helping develop, growing the LNG in the United States. One way or the other, even if a fraction of this will be realized in the coming year, this means demand for gas. Gas is important. Gas is demanding seamless pipe with, in some cases, a more complex product. The price of gas today in the energy hub, supported by the Associated Gas and specific development for gas, is relatively solid in this moment. All these negotiations should, to some extent, promote or stimulate investment in energy. We have to be very focused on this because it would be logical to have an increase in the activity in gas in the U.S. and lower for the.

I also think that the.

In all the discussion and negotiation.

Economy installation is.

Establishing.

They are a component about.

We're chasing of LNG and developing helping develop growing.

Yes.

<unk>.

Yes.

The LNG in the United States, one way or the other even if a fraction of this will be realized in the coming year.

This means demand for gas so gas is important gas is demanding seamless pipe.

<unk>.

In some cases.

More complex product.

The price of oil got today than they have.

Supported by the associated gas and specific developments for gas.

It's relatively solid in this moment.

And.

All of these negotiation should to some extent.

Yes.

Promo to stimulate investment in energy, so we have to be very focused.

On the set because it would be logical to have.

The increase in the activity in gas.

In the U S.

Lower 48.

Paolo Rocca: Got it. That is helpful. I appreciate the comments. Second question, just maybe some color around how much line pipe is on the ground now in the U.S., just thinking about the distributors as well. Just trying to work through the timing as far as working that down from an activity standpoint, which will also further support pricing just outside of the increased tariff cost. So maybe just hear some color around the line pipe on the ground and working through that from an activity lens.

Got it that's helpful. I appreciate the comments.

Second question, just maybe some maybe some color around how much pipes on the ground now in the U S. Just just thinking about the distributors as well.

Just just trying to work through the timing as far as working that down from an activity standpoint, which will all the also further support pricing just outside of the increased tariff costs and maybe just some color around the pipe on the ground and working through that from an activity lines.

Giovanni Sardagna: Yeah, yeah, yeah. I would say that here the problem is that not only the line pipe on the ground, but also the line pipe on the tee, the ones that are coming into the U.S. before realizing that the 50% tariffs were going to hit them at the custom. Guillermo Moreno, you have more can comment on this.

Yes, yes, yes, but I will tell you that are here. The problem is that not only the pipe on the ground those with 531 that are coming into the year before realizing that the 50% that is we're going to keep them at the custom.

Yes, you got them all you will have them all.

Guillermo Moreno: Yes, for sure. As you said, Paolo Rocca, before, imports in the first half of 2025 increased a lot. If we see this in numbers, the imports of OCTG in the U.S. in the first half of 2025 were more than 70% higher than the second half of 2024. So it was a very relevant increase. That, coupled with some reduction in activity, determined that in these six months, the pipes on the ground increased in the equivalent of one month of overall consumption in the U.S. This is putting pressure on prices and not allowing so far line pipe to increase as expected due to the tariff.

Can you comment on that first of all and as you saw.

Paolo before I mean imports in the first half of 2025 increase a lot if we see this in numbers.

The imports of <unk> in the U S. First half of 2025 was more than 70%, 70% higher than the second half of 2024. So it was very relevant.

Yes.

Copper with somebody is actually an activity.

I mean that in these six months.

Perhaps on the ground increase.

In equivalent of one month's of overall consumption in the U S. So this is putting pressure on prices and not allowing so far.

We increased as expected due to the tariff.

Guillermo Moreno: We think that within this quarter, we will start to see a reduction and more impact on the fourth quarter because it is when we will see, as Paolo Rocca said, the shipments defined based on the 50% tariff and not in the 25% that, as we saw, were not enough to reduce the level of imports.

We think that.

Within this quarter, we'll start to see a reduction and more impact on the fourth quarter, because the scoring we will see.

Let's say the shipment.

Defined based on the 50% that if I'm looking at 25% as.

As we saw were not enough to reduce the level of inputs.

Giovanni Sardagna: Level of inventory in terms of months?

The level of inventory in term of months, so you're going from six to seven months more or less put on.

Guillermo Moreno: It went from six to seven months, more or less, from Q4 of 2024 to Q2 of 2025, one month of equivalent consumption.

Fourth quarter of 2024 to second quarter of 2025, one months of equivalent.

Giovanni Sardagna: Thank you.

Sure.

Thank you.

Thank you.

Paolo Rocca: Thank you. Very helpful. I will turn it back.

Thank you.

Very helpful I'll turn it back.

Arun Jayaram: Thank you. One moment for our next question. Our next question comes from the line of Kevin Roger from Kepler Chevreux.

Yes.

Thank you one moment for our next question.

Our next question comes from the line of Kevin Roger from Kepler Shandra.

Gabriel Podskubka: Yes. Good afternoon. Thanks for taking the time. I have maybe two follow-ups, if I may. The first one is on Mexico. Can you provide us a bit of sensitivity on what kind of revenue you generated in Mexico, for example, back in 2023, and what you are currently generating right now, just to understand the potential magnitude of earnings that you can get in the country after the $12 billion new financing for Pemex? The second one on the tariff, if everything remains like it is right now, what is your available capacity in the U.S., and notably on the seamless side? What part of the volumes that you currently import from, I do not know, Mexico and Canada that you can relocate easily in the U.S. with available capacity, please?

Yes. Good afternoon. Thanks for taking the time, maybe to follow up if I made the first one is on Mexico.

Can you provide us a bit of that.

<unk>.

What kind of revenue you generated in Mexico for example back in 2023 and what you are currently generating right now just to understand the potential magnitude of churn means that you can get into the year.

In the country.

<unk> been in the new financing for the mix and the second one on the tariff if everything remained like it is right now.

What is your available capacity.

And look on the seamless side.

What's part of the volumes that you're currently imports.

From.

In Mexico in Canada that you can relocate easily in the U S. We have available capacity piece.

Giovanni Sardagna: Thank you, Kevin. On the first one, in the past, the number of rigs operated by Pemex were in the range of 50, 45 rigs. You can imagine today we are at 24. This is just giving you a broad indication of which would be the size of the market. On top of this, there are private operators. Woodside is operating. One of the increases that we will have in shipment to Mexico in the coming quarter will be the Woodside project, which is a very relevant offshore project, a very interesting one that we are supplying for Mexico. This is just giving you the size of the market. This is the market for mainly OCTG premium products with some aspects in line pipe when the export lines are requiring a long line for this. This is what would be possible. We do not expect this to happen soon.

Yeah.

Thank you.

<unk> well on the first one.

In the past.

The number of rigs.

The panamax anywhere in the range of <unk>.

<unk> 50, 45 rigs or so let's say you can imagine today. We are at 24. So this is just giving you.

But all the indications are which would be the size of the market now on top of this data private operator would say these operating and one of the increase that we will have in shipment to Mexico will be in the coming quarter will be the the woodside broader which is a very relevant.

Sure that's very interesting one that we are too.

Applying first Mexico, So DJ Joseph giving you the size of the market is the market for mainly for CTG.

<unk>.

<unk> paper when the export liner requiring long.

<unk> for this.

Okay.

Sure.

This is let's say.

What would it be possible now we don't expect these to happen soon.

Giovanni Sardagna: We expect this to be a gradual process of increase and organization, but still, in my view, the direction in which this is moving is a direction of recovering level of activity. The other point is on capacity. Remember, our main import in the States are bars, steel bars to feed, to complement our production in copper. The production of steel that we have in the States is very relevant, but we need to complement this with semis around bar coming from outside. This is the most important component of our import in the States on which we pay, and we will pay this 50%. Then we also complement some special products for the Gulf of Mexico that are not produced in the States, mainly coming from Europe.

Expect that this will be a gradual process set offering could either reorganization, but still in my view.

The direction in which this is moving.

The election of recovery level.

Right.

The other point is on.

Capacity remember our main input in the states are bars.

Steel bar set to feed that to complement our production in copper.

The production of steel that we have in the states is very relevant but we need to complement this with.

<unk> earned by are.

Coming from outside the mall.

Important component.

Of our important in this data on where should we pay and we will pay this 50%.

Then.

We also complement some special product for the Gulf of Mexico that is not produced in the states.

Giovanni Sardagna: These are products in which the clients are prepared to pay straight on the tariff because there is basically no alternative, and they need to proceed with products that are not produced into the States in this case. Something on material coming from Canada into the States is going into the north, but it is a very marginal part of the matrix.

Mainly coming from Europe, but this had a product in which the client are prepared to pay.

Right on.

That is the reason.

Basically an alternative and they need to proceed with products that are not producing into the states.

In this case.

Surfing on material coming from Canada into the states.

Going into the north.

But it is.

Very marginal.

Part of the of the matrix.

Paolo Rocca: Okay. Okay. Thanks a lot. Have a good day.

Okay. Okay. Thanks, a lot have a good day.

Giovanni Sardagna: Thank you.

Thank you.

Arun Jayaram: Thank you. One moment for our next question. Our next question comes from the line of Christopher Copland from Bank of America.

Thank you one moment for our next question.

Our next question comes from the line of Christopher Copeland from Bank of America.

Paolo Rocca: Thank you for taking my questions. I have two. Paolo Rocca, the evergreen question, I suppose, is could you give us an assessment of what you think the M&A environment looks like at this point in time? It is hard to come up with a forecast for Q4, but you sound pretty bullish in terms of price evolution into 2026, at least in the U.S. Do you think that sort of lack of clarity is throwing up M&A opportunities that perhaps in the past, with a different U.S. administration, were not thinkable? That would be my first question to you, Paolo Rocca.

Hi, there. Thank you for taking my questions I've got two.

Paolo the evergreen question I suppose is.

Could you give us an assessment of what you think the M&A environment looks like at this point in time.

Hard to come up with a forecast for Q, but you sound pretty bullish in terms of price evolution into 2026 at least in the U S. So.

Or do you think that sort of lack of clarity is throwing up M&A opportunities that perhaps in the past with a different U S administration.

One one thinkable.

That'd be my first question to you Carlos.

Giovanni Sardagna: Well, thank you, Christopher. This is, as you know, we are the largest player in the United States. We have a relevant participation in the market. It's not easy to identify a suitable target for this. I am convinced that looking ahead, consolidation is important, and also growth along our supply chain is also important. But anything that we can imagine here has a reasonable size that is not, let's say, very relevant. Imagine also when we move on on the Shell Core operation. It's a very important operation from our point of view, but in terms of size of the M&A, it's not, let's say, something that is transforming the company from the point of view of the size of the operation.

Thank you Christopher this is.

As you know we have we're the largest player in the United States, we have a relevant participation in the market.

Okay.

It's not easy to.

Identify.

Suitable target for this I am convinced that looking ahead consolidation.

Is important and also growth.

Our supply chain is also important but.

Yeah.

Anything that we can imagine here.

Right.

Size that he is not.

Very relevant at all.

Imagine you're also when we move on on the Shawcor operation is a very important operation for our interview, but in term of size of the M&A.

Let's say something that is transforming the company from the point of view of the size of the operation. So we consider we look with study.

Giovanni Sardagna: So we consider, we look, we study, and we monitor also the attitude of the new administration to see if there is a change in the approach to vertical or horizontal integration. We will be very active on this if we perceive that there is room for us.

We monitor also the attitude of the new administration to see you there.

Change in the approach.

Two.

Vertical or horizontal integration and we would be very active on diesel if we perceive that there is room for us.

Paolo Rocca: Thank you. That sounds like you are happy with the current run rate on the buyback program to continue. My second question is more short term. Maybe you can tell us a little bit about your expectations regarding the evolution of networking capital. I suppose you have referenced the increase in inventories. How do you see your management of inventories, considering you have got turnarounds coming up as well, probably well-timed?

Thank you that sounds like you are happy with the current run rate on the buyback program.

To continue.

My second question.

More short term.

Maybe you can tell us a little bit about your expectations regarding the evolution of net working capital.

I suppose you reference the increase in inventories.

How do you see your management of inventories, considering you've got turnarounds coming up as well probably well timed.

Giovanni Sardagna: Yes, thank you, Christopher. On this, I will ask Carlos to comment on working capital, what we expect from our working capital. For sure, this quarter, our cash flow has been pretty strong.

Yes. Thank you.

Please.

I will ask Carlos to comment on that.

Working capital what.

What do we expect from our working capital Okay.

For sure this quarter.

Our cash flow has been pretty strong but carlos.

Guillermo Moreno: Hi, Christopher. During the first half of the year, we've been generating cash from a working capital rated around $250 million. Much of that was coming from inventories and some from receivables. We expect during the next quarter to build up inventories. Part of that trend down in inventory was because we finished some big projects. We shipped all the material that we have in stock, and now we expect to build some inventory during Q3 and then release some of it during Q4.

Hi, Christopher so during the first half of the year, we've been generating cash from our working capital was very good.

Around 250 million much of that was coming from inventories and some from receivables. So.

So we expect during the next quarter to build up inventories now part of that.

Okay.

Sure.

Breaking down your inventory was because we finished some big projects.

We shipped.

And now we expect to build some inventory during Q3, and then release some fleet during Q4.

Paolo Rocca: Very helpful. Thank you very much.

Very helpful. Thank you very much.

Arun Jayaram: Thank you. At this time, I would now like to turn the conference back over to Giovanni Sardagna for closing remarks.

Okay.

At this time I would now like to turn the conference back over to Giovanni <unk> for closing remarks.

Sebastian Erskine: Thank you, Gigi, and thank you all for joining us today.

Thank you Gigi and thank you for joining us today.

Arun Jayaram: This concludes today's conference call. Thank you for participating. You may now disconnect.

This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

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