Tenaris' quarterly net sales fall 7% on Brazil, Europe weakness

Tenaris reported a 7% decline in Q2 2025 net sales to $3.09 billion, primarily due to reduced shipments in Brazil and Europe. Despite the sales contraction, EBITDA rose 13% to $733 million, benefiting from the absence of prior year litigation provisions. The company anticipates further sales declines in the second half of the year driven by lower drilling activity and project contributions, while also expecting U.S. steel tariff hikes to impact U.S. Oil Country Tubular Goods (OCTG) imports and affect margins.

Analysis

Tenaris reported a 7% year-over-year decline in second-quarter net sales to $3.09 billion, a direct result of a 5% drop in tube segment volumes due to lower shipments to Brazil's Raia offshore project and reduced offshore line pipe sales in Europe. While reported EBITDA rose 13% to $733 million, this figure is flattered by the absence of a $171 million litigation provision that impacted the prior-year period, masking underlying operational weakness. The company's forward-looking guidance is negative, with management forecasting a sales decline in the second half of the year compared to the first, driven by lower drilling activity and a smaller contribution from line pipe projects. Furthermore, margins are expected to be compressed by the recent U.S. tariff hike on steel imports to 50%, which is also anticipated to cause a near-term reduction in U.S. Oil Country Tubular Goods (OCTG) imports.

Key Decisions for Investors

• Investors should view the 13% EBITDA growth with skepticism as it's primarily due to a favorable comparison against a prior-year litigation charge, and instead focus on the 7% revenue decline and negative forward guidance.
• Given the explicit warnings of sales declines and margin compression from tariffs in the second half of the year, it may be prudent to re-evaluate long positions and monitor for signs of stabilization in drilling activity.
• The confluence of project-specific weakness in key markets and intensifying trade policy headwinds presents a significant near-term risk to the company's profitability and stock performance.