NYSE:TS Tenaris Q3 2023 Earnings Report $33.49 +0.07 (+0.21%) As of 11:14 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Tenaris EPS ResultsActual EPS$0.91Consensus EPS $1.18Beat/MissMissed by -$0.27One Year Ago EPSN/ATenaris Revenue ResultsActual Revenue$3.24 billionExpected Revenue$3.08 billionBeat/MissBeat by +$153.42 millionYoY Revenue GrowthN/ATenaris Announcement DetailsQuarterQ3 2023Date11/1/2023TimeN/AConference Call DateThursday, November 2, 2023Conference Call Time8:00AM ETUpcoming EarningsTenaris' Q1 2025 earnings is scheduled for Wednesday, April 30, 2025, with a conference call scheduled on Thursday, May 1, 2025 at 8:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress ReleaseEarnings HistoryCompany ProfilePowered by Tenaris Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 2, 2023 ShareLink copied to clipboard.There are 11 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to the Third Quarter 2023 Tenaris S. A. Earnings Conference Call. At this time, all participants are in a listen only mode. Operator00:00:12After the presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to turn the call over to the Head of Investor Relations, Mr. Giovanni Sardagna. Speaker 100:00:40Thank you, Carmen, and welcome to Tenaris 2023 3rd quarter conference call. Before we start, I would like to remind you that we will be discussing forward looking information in the call and that our actual results may vary from those expressed or implied during this call. Speaker 200:00:56With me Speaker 100:00:57on the call today are Paolo Roca, our Chairman and CEO Alicia Mondolo, our Chief Financial Officer Gabriel Podkuzka, our Chief Operating Officer and Luca Zanotti, President of our U. S. Operations. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results. Our sales in the Q3 of 2023 reached $3,200,000,000 up 9% compared to those of the corresponding quarter of last year, but down 21 Percent sequentially, mainly due to lower volumes and prices throughout the Americas, lower quarterly shipments to offshore projects and lower pipeline shipments in Argentina. Speaker 100:01:42Average selling prices in our Tubes operating segment increased 2% compared to the corresponding quarter of last year, but declined 5% sequentially. As anticipated, our EBITDA, Excluding a one off gain of $32,000,000 fell just short of $1,000,000,000 with the margin at 31%. The sequential EBITDA decline was mainly driven by the ongoing price declines in the Americas. Our net income for the quarter at EUR 547,000,000 was affected by non cash charges of EUR 144,000,000 related to the re measurement and recycling of CTA to the income statement of our direct and indirect investment in Usiminas. Cash generated by operating activities during the quarter was €1,300,000,000 while Our free cash flow for the quarter was $1,100,000,000 with a further reduction in working capital of 415,000,000 Our net cash position at the end of the quarter rose to EUR 3,300,000,000 Our Board of Directors approved the payment of an interim dividend of $0.20 per share or $0.40 per ADR to be paid on November 22. Speaker 100:03:04The interim dividend is up 18% compared to the interim dividend we paid last year. In addition to the dividend, the Board of Directors also approved a share buyback of EUR 1,200,000,000 to be executed within the next 12 months. Now I will ask Paolo to say a few words before we open the call to questions. Speaker 200:03:27Thank you very much, Giovanni, and good morning to all of you. As anticipated, our 3rd quarter results were affected by, among other factors, lower onshore drilling activity And an ongoing adjustment in market price level in the Americas and the lower level of shipment in certain regions following a strong second quarter. On the other hand, we had another extraordinary quarter for cash flow with the generation of $1,100,000,000 of free cash flow, making the $3,100,000,000 in the year to date. With this cash flow adding to our already strong financial position, Yesterday, we announced the launch of our 1st share buyback program together with an 18% increase in our interim dividend. The share buyback program, which is for an amount of up to EUR 1,200,000,000 is to be carried over carried out over the next We consider that buying back our own shares would constitute a better use of our excess cash then our current liquidity investment. Speaker 200:04:37During the quarter, we invested $90,000,000 on the acquisition of additional heat treatment And trading facilities in Houston, which will help us to debottleneck our U. S. In data system. We also acquired a small pipe coating facility located close to our Darmina plant in Italy for $10,000,000 and announced the acquisition of the larger ShowCore Global Pipe Coating Business. This remains subject to the extension of regulatory approvals and is expected to be concluded by the end of the year. Speaker 200:05:13The expansion of our pipe coating operation at the global level will help us to serve customer with an integrated offer for complex and offshore line pipe projects. In North America, we expect a recovery in drilling activity As we look toward 2024, in the United States, the relatively low level of drilling and completed wells and the DUC And the crude oil inventories, favorable oil price and rising natural gas prices Should support an increase in investment as oil and gas companies reset their budgets for the next year. With OCTG inventory declining from excess level, the decline in prices for several product items is starting to slow down. The Pipe Logic Index can be subdivided into different product site and groups whose performance is not uniform. For example, item groups such as surface casing and tubing, which are most Export to low quality imports have fallen farther than higher quality product item groups, such as production casing, which are largely produced by domestic producers. Speaker 200:06:33We expect that if inventory continue to come down, Market pricing should start to stabilize by the end of the year. At the same time, we are increasing the level of differentiation through our Rig Direct service. By the end of 2023, around 85 of our OCTG sales in the U. S. Will be supplied under our Rig Direct service model and 75% of those sales will be done with our new run ready service included. Speaker 200:07:04This compare with 65% 30%, respectively, at the end of last year. In Canada, we also expect drilling activity to pick up as we head into the peak winter drilling season. We are repositioning ourselves following the revision of normal values on Chinese OCTG import made by the Canadian government earlier this And an expected increase in activity in the Monterey Shale. In the Middle East, the Saudi market is growing particularly strong And investing pipeline construction under his Master Gas 3 plan. We recently won a tender with a value of $600,000,000 To supply seamless casing and tubing with short delivery times for this increased activity as Aramco has reduced stock levels during the pandemic. Speaker 200:08:03Our recently consolidated GPC subsidiary, which invoiced $52,000,000 during the quarter, is positioning itself to supply the large diameter conductor Our new premium trading facility in the Emirates, in United Arab Emirates will begin operation this month. This will be the 1st industrial facility of its kind in the Emirates And it's being built along with a special Tenaris University training facility to increase the local content provision under our multiyear rig direct agreement with ADNOC. Offshore drilling and pipeline Action activity is in an expansionary cycle. We have been quick to capture the 1st wave of the cycle And our sale to offshore project will be 50% higher in 2023 than they were last year. Our positioning in Guyana In Brazil, we've been central to this achievement. Speaker 200:09:09And in October, at the OTC event in Rio, Petrobras awarded us a 2022 best supplier recognition in the category of goods for drilling and completing well. Our research and development area and technical teams continue to develop material and product Solution tested for the specific conditions involved in more complex low carbon energy applications, such as CCS, carbon capture and storage injection wells and hydrogen storage vessels. In October, we were awarded a contract to supply high chrome alloy tubing for carbon injection wells for the EU funded Portos project in Rotterdam. The materials were selected to withstand the high corrosion risk and expected cryogenic thermal shocks. In Argentina, our first 100 Megawatt Wind Farm has entered full operation And is delivering power through the interconnected grid to our operation in Campana. Speaker 200:10:20We have secured the opportunity for a second 90 megawatt Wind Farm and we will go ahead with $214,000,000 investment to be completed within 24 months. Both wind farms will provide cost competitive Electric power with capacity factor of 55% and above with no subsidy. With the investment in the wind fabs and our ongoing investment in energy efficiency, we expect to meet almost 100% of our energy requirement in Argentina The utilization is central to our strategy. One investment that is currently coming on stream is a $20,000,000 digital global programming and scheduling system that will help us to improve production lead times, cost and compliance. With favorable market condition ahead, We are strengthening our competitors and focusing on service and margin differentiation. Speaker 200:11:28We are now ready for any question you may have. Operator00:11:33Thank you. I will open the lines for questions. Please stand by and wait for your name to be announced. One moment for our first question. It comes from the line of Alessandro Pozzi with Mediobanca. Operator00:11:52Please proceed. Speaker 300:11:54Hi, there. Thank you for taking my questions Congratulations on the good sets of results. My first question is on the average selling price. As you pointed out, There are different categories, they are seeing different movement in prices. And if I look at your average selling price in Q3, It's not that different from Q4 in 2022, marginally down, but not as much as the Pipe Logics. Speaker 300:12:23So the question here is, is there a growing disconnect between your ASP and the pipe logic or is it just It's a matter of the time lag between the 2 and we will see your ASP actually falling in line with the Pipe Logics maybe in the coming quarters. And on this point, maybe if you can give us Some color on where you see sales going in Q4 and Q1 with the EBITDA margin. That's the first question. The second question is on the share buyback. Maybe if you can clarify when you're planning to Start the share buyback and whether maybe Techint is going to participate or when we will know whether Techint is going Speaker 200:13:17Thank you, Alessandro. As far as your first question is concerned, The association between the pipe logic indicator and our overall price is influenced by many different factors. On one side, The majority of our prices are driven by different factor compared to the pipe logic. Some of the formulas Taking into consideration costs or different variable independent from the pipeline. Even within the U. Speaker 200:14:05S. And North America, that is more influenced by PackLogic, the formula We have with our client reflecting specific product within the Pipe Logic portfolio that in some case are not moving in the same direction as the average of Pipe Logic. There are difference between, for instance, premium or complex product and more simplex product. So I don't think we can drive a strict correlation between the pipeline and the overall Average price of Tenaris. Yes, we have a more strict correlation with our operation in North America. Speaker 200:14:58But North America is very important in our overall sales. So I will ask Luca Zanotti to add some color on the relation between the Pipe Logic Index and the dynamics of our prices. Speaker 400:15:17Yes. Thank you, Paolo. Good morning, Alessandro. As Paolo was saying, when we look at the North America and we look how the demand is structured, you see that Always more and more, we have a predominance of seamless heat treated. If you look at, for example, A key component of the demand, which is the production casing, which is more or less 40%, 45% of the total market, the great majority of this is seamless. Speaker 400:15:51When we cope this with the structure of the Pipe Logics and the price, you see that these items are the ones that So far less of the decrease within the Pipe Logics. So for you to come up with a conclusion, you should put together the structure of the market And the way the different items are moving within the pipe logics. And this is one point that is worth mentioning. The second point that It's worth mentioning is that when you look at the United States, Our formula with our customers are not necessarily 100% related to the Pipe Logics. We are adding indicators. Speaker 400:16:40And obviously, these indicators in this context are much less volatile than the Pipe Logics itself. I believe that these are the two main reasons why you see a sort of not perfect match between our prices even in the United States When you look at the pipe logics. Speaker 200:17:01Then Gabriel, you can comment on The wide range of prices and the dynamic that is very different that we have in many other markets of our system. Speaker 500:17:14Yes, Paolo. Thank you very much and good morning, Alessandro. Indeed, the dynamics of the prices in the international markets Defer from the dynamics of the Pipe Logics, internationally, we are benefiting from an increased demand On Middle East and Offshore Markets, and we have at the same time a tight supply of premium products, sophisticated grades, Sour service or high chromium grades as well. So these segments are not linked or influenced By no means by the Pipe Logics, the products required, the competitive environment completely differs from that influenced by Pipe Logics. So in international markets, we continue to see in the high end of the market opportunities to enrich our mix and drive prices up. Speaker 500:18:03There is typically a lag of 6 months to 9 months in this part of the world from booking prices into deliveries, But we see a positive trajectory on the international pricing into the end of this year and into 2024. Thank you, Gabriel. Speaker 200:18:21And on the second question, which is the share buyback, The share buyback will be executed in quarterly tranche from now until within 1 year. And we didn't receive any specific information on this from our majority shareholder. Speaker 300:18:43Okay. Thank you. And just a follow-up on the evolution of margins for the next couple of quarters. Is there Speaker 200:19:01To the extent to which the pipe logic is influencing, at least as Luca was explaining, part Of our sale in North America and in some case also other market, we will see this reflected In our margin with some delay, so the decline that you have seen in this quarter Will also be reflected in the next and possibly according to the evolution of PipeLogic in the coming months, November December, we will see if this trend will continue or not. To this extent, this will be reflected Our margin, as you have seen last quarter, we anticipated the margin In the range of 30%, and this is where we are today. Considering all the factor, I think that we can have slightly lower margin in next quarter, but we will remain, Let's say, between 25% and 30% over time. This is our also our long term view. Speaker 300:20:18Okay. And potentially picking up from Q2 pipe logic stabilizes. Is that fair? Speaker 200:20:28Difficult to predict, there are many factors that will be influencing demand and supply In let's say during the first half of twenty twenty four, there is The activity that is important, the level of drilling, the demand of pipe, The level of import is also relevant. Import went down, but we have to see if this is a trend that will continue. In general, we perceive a reduction in the level of inventory in the market, which is positive For giving support to the overall price level in the U. S. Speaker 300:21:14Thank you very much for the color. I'll turn it back. Thank you. Operator00:21:19Thank you. One moment for our next question please. And it comes from the line of Arun Jayaram with JPMorgan Securities. Speaker 600:21:33Yes, good morning. My first question is on the U. S, Perhaps for Luca, I was wondering if you could comment on what you're seeing in terms of the import of products into the U. S? How is lower pricing impacting imports into the U. Speaker 600:21:54S? Speaker 200:21:57Thank you, Rona. Luca, you can comment on this, no? Because it's Yes. Speaker 400:22:03And I can tie back to what Paolo you were Same on the inventory. So when you look at the imports, we have seen imports to go down. And this is basically with the exception of Koreans that are complying with their quarterly, All the importers have come down, both ERW and Simplus. Now one thing that was not mentioned before, But it is important that also the domestic production, especially on the ERW side came down, which helped reducing the inventory on the ground during this month. But getting back to your point, obviously, as price goes down, some importers will start to face The 25% imposed on the Section 232, especially as they complete their quota. Speaker 400:22:55And in the case in which we're going to see A recovery in demand starting in 2024. Obviously, this is going to have an impact on the possibility of some Very low imports to come in. However, we believe that the imports are high and This is a problem that the domestic industry is going to take care of. Speaker 600:23:24Okay. And then just a quick follow-up is, What about the potential if the imports are declining into the U. S, could that impact international pricing If the imports find a new home? Speaker 200:23:41Well, I don't think There is a clear overlapping because between the material that some companies importing in the States And the international market. For instance, the space for welded product outside the United States is very limited. I mean, The demand, international demand is different. There could be some redirection of importer, but it's a much lower scale to what is important in the States because the overlapping also this is a market Speaker 300:24:22In Speaker 200:24:22which qualification, establishing the product in every different place In the different company, it is a complex process. In the U. S, it is easier for a producer with Relatively limited experience and track record to penetrate or some segment of the low end in the market. Speaker 600:24:51Great. And Paul, I just want to get a quick thoughts on the Argentinian election. Obviously, there's a candidate who is Proposing dollarizing Argentina, but just some quick thoughts. I know we still don't know the outcome yet. Speaker 200:25:07There is a we are in an election process. There will be a balotage in 2019 November. Whoever wins the ballot age will assume the presidency on the 10th December. I think that whatever the outcome of the balotage, there will be the need in Argentina for an Adjustment program that will require reduction of public spending and devaluation. And it's possible that economic activity may be reduced to, They align some of the variable that today are out of Normal situation for a country like Argentina. Speaker 200:26:04So We will see. There is no clear indication on the results the ballot engine, there is no entry indication on the program that will be implemented after the assumption. Okay. Thank you. Operator00:26:22Thank you. One moment for our next question please. Comes from the line of Marc Bianchi with TD Cowen. Speaker 700:26:36Thank you. Maybe following up to the last question, you had previously discussed Some concern on South America in the back half of the year because of election uncertainty. Speaker 800:26:49Could you Speaker 700:26:49talk about how that's evolved? Obviously, there may be still some uncertainty for Argentina, but the rest of the region, and thoughts heading into 2024 would be helpful. Speaker 200:27:02Well, I mentioned Argentina. As I say, we expected That after the assumption, Argentina will need to implement, as I was saying, an adjustment program That will have some impact on, as I say, the exchange rate, public spending, No doubt, to some extent, we may expect reduction of The level of economic activity, but any government will need To promote export and attraction of investment, Argentina has The very important potential for attractive investment in the oil and gas sector, In the agricultural sector, in lithium in development of renewable And in other area of its economy, I think this will be Part of the program of any of the 2 candidates and also The condition of the agricultural sector in 2023 has been extremely difficult Due to the drought that affected the country, this will help the next government in facing the challenges of the adjustment process. So This is where we stand. And I think that in the case that the program is successful, the need to develop infrastructure In the energy sector for oil and gas is very relevant. We We think that there are potential in Paca Muerta that is very important. Speaker 200:29:07As far as Brazil It's concern, Brazil is more stable, developing its oil and gas industry. Petrobras has very ambitious Target for increasing its production level, contract like the one that we signed with Equinor are indicating that also the private sector and private company are investing in Brazil with large project that has Relevant infrastructural content, areas in which we participate From Confab, in all the segment of drilling and Evacuation line pipes that are used for this. In the case of Mexico Also in the case of Mexico, it will be logical for Mexico to after The new refinery is coming on stream to invest in the energy sector And to support financially Pemex and also to what we see today is that There are private company investing in development of Mexican Resources. But it's also true that this Financial situation of payments is very difficult. And we as other companies in the oil service system In this moment, we are facing some delay in payment from payments. Speaker 200:30:45It will be very important Over the coming months, let's say, for Pemex, at the same time, To expand this operation if possible and also to reduce the payable to Part of a supplier, one of these is Tenaris. The case of the rest of the Latin America, In Colombia, after the election, we expect that some of the decision on the oil and gas Sector may be reconsidered and I feel there could be also in the case of Colombia During 2024 2025, let's say, some recovery from the situation where we are today After the reduction during 2023, there has been pretty strong, either stable or improving. Speaker 700:31:50Okay. Thank you for that, Paolo. I want to ask a couple more quick ones on sort of the direction of Business over the next couple of quarters. Volumes were down 17% in 3rd quarter. It sounds like you're anticipating volumes I'm curious if you think a 1,000,000 tons a quarter is sort of the right number to be thinking about for 4th quarter and entering 2024, and then if there's any regional comments around that. Speaker 200:32:22Yes, you're right. I mean, this is where what we expect. The situation in Argentina may influence Some of the decision on the pipeline and moving this in time between the different quarters. But basically, we are in the range that you mentioned. This is what we expect in the coming quarter. Speaker 700:32:50Okay, great. And then the other one was just related to profit per ton. The guidance of 25% to 30% or so for the Q4 would suggest you're maybe over $800 a ton of EBITDA. The long term average has been around $500,000,000 and there's another company out there saying the normalized price or average margin is $500,000,000 Do you think you can maintain this $800,000,000 and why do you think it would be better than the long term average? Speaker 200:33:22Well, I think that there has been a structural change both on the side of the market and on the positioning of Tenaris in this market. Today, I think the relevance Of the activity and the investment in the U. S. It's much more accessible for Tenaris. We have deployed our asset in the last 5 years especially, but even we started With our investment in the States in 2007 on a substantial way. Speaker 200:34:10And this is positioning Tenaris very differently in a very important area of oil and gas market. So we are in this sense structurally different. We are also structurally different because of the expansion of the differentiated product and services. The Rig Direct is giving us additional margin. My view and my view, we can defend the differentiation Coming from the rig delivery and the level of service that we are adding to our product delivery. Speaker 200:34:47This was not the situation 5 years ago, we progressed over time. Also, our positioning in the Gulf, Middle East is substantially different today with the investment in Saudi Arabia, the new plant in the Emirates. The let's say, the positioning of Tenaris has changed. So the combination Of the change in the market, because you also know, the concentration We'll also help concentration of oil producer in the traditional oil company. To some extent, it's favoring Producer like Tenaris that has an established global footprint And there are, let's say, having standard from quality to safety to environment that fit with the demand of international company. Speaker 200:35:53Also this has introduced in my view a structural change that justify The level of margin higher than the level of margin that is the average of the last 10 years. Speaker 700:36:07Thank you very much. Operator00:36:11Thank you. One moment for our next question please. All right. And it comes from the line of Luc Lamoine with Piper Sandler. Speaker 900:36:23Good morning. Just one question. With your rig direct program in the U. S, you have pretty good insight into some of the larger operators' programs. Just wanted to see if you could comment on how you see future activity unfolding over the next 3 to 6 months? Speaker 200:36:39Thank you, Luca. I think Luca, you can Yes, sure. And Speaker 400:36:47Good morning, Leo. As I was saying before, we see activity increasing from the current levels. And when we look at, let's say, a large portion of either our direct customers or customers' Prospects that we are in a relationship. We see this going up. And our, let's say, estimation of this Activity increase is very much in line with what the drillers that already hold our Sorry, the earnings call, I have said, we see activity moving up 5%, 6% from current levels Into Q1 of 2024. Speaker 400:37:37This is what we're seeing. Speaker 900:37:41Okay. That's perfect. Thanks so much. Operator00:37:47Thank you. It comes from the line of David Anderson with Barclays. Speaker 800:38:02Hi, good morning. So If we assume that the rig count U. S. Rig count volumes here in the next month or so, can you talk about how you see volumes trending over the next 12 months? Middle East continues to ramp up as you highlighted Saudi and UAE. Speaker 800:38:16Offshore should be float to speed by mid year. I would think volumes in the second half of 24 should be up quite a bit compared to the second half of this year, perhaps even up double digits. Am I thinking about kind of that trajectory, right, in terms of how you're seeing the market developing Speaker 200:38:35Thank you, David. I think It's difficult to guide expectation for such a long distant The future, because the world is moving on, let's say, faster on different aspects. There are conflicts around There are issues that are really out of our control. We can perceive and we can see our horizon in the next Couple of quarter, that is the one that we try to represent. It's difficult to understand for us where we could be In the 2nd part of 2024. Speaker 200:39:14Probably, The area on which we can have a medium term is the area of offshore project There are, let's say, possibly more stable over time once they have decided they go. Gabriel, maybe in this sense you can add some comment on what you see For the 2nd part of medium term, let's say, 2024. Speaker 500:39:46Sure, Paolo. Good morning, David. Indeed, offshore drilling continues to increase. The number of rigs that we have operating today globally in the offshore are even increasing the pre pandemic levels, Both in shallow water and deep water. So every discussion that we have with our customers, FID projections, capital projections indicate That is a multiyear cycle. Speaker 500:40:09The activity is robust and will continue to grow. There is traction virtually in all offshore basins around the world. And as a matter of fact, Tenaris has already benefited from this growing trend. If you consider As we are closing November December shipments, but our sales revenues in 2023 will be at least 50% Higher year on year 2022. So this is already a trend that is embedded in our sales in 20 And we see this continuously increasing. Speaker 500:40:44We have seen during the quarter also some signs of increased Activity in exploration is an important niche for us, and we had some awards on exploration campaigns in Egypt, Mongolia, Offshore Colombia as well. So we have a strong backlog in offshore, mainly on the development of CTG and pipeline. With deliveries into 2024 and some of these projects will even arrive to deliveries into 2025. We see this as a at the early part of a multiyear cycle. And I think our acquisition of the coating facility In Italy, an announcement of the Shawcor Oating division is a sign overconfidence On this segment where we already have a differentiated portfolio and have an established position. Speaker 500:41:36So we see that This will be an ongoing contribution within the portfolio. Speaker 200:41:44Thank you, Gabriel. Still, let me add you. We have some caveat. The situation of in the world is exposed to Very different issued coming that could come out Disruption, I would say, that would come out. The price of LNG globally continue to be influenced by the situation in Europe. Speaker 200:42:14Price of oil may be influenced also by the situation in Middle East. Our operation also, for instance, in the Eastern Mediterranean sandal project It's been canceled. In general, also in Latin America, election here in Mexico, now in Argentina. So The overall view is the one that we expressed, but we need to take into consideration The potential for disruption that is for sure something that exists in 2024. Speaker 800:42:49Yes. Very much understood, Paolo. One final question as it relates to the buyback that you announced today. Is this Targeting just the open float of shares or will the closely held shares be participating in the buyback as well? Speaker 200:43:09I don't know. I mean, we launched the program having in mind the That we can get from our cash by investing in the company compared to the investment we can get by managing the liquidity. This is A key factor for the decision. As I mentioned, we will have an intermediate bank to Perform the acquisition in the coming 4 quarters starting next week probably, And we will see. I don't think we can add a small one on this. Speaker 800:43:49Okay. Thank you very much, Paolo. Appreciate it. Operator00:43:52Thank you. And we have time for one more question. One moment please. And it comes from the line of Jamie Franklin with Jefferies. Speaker 1000:44:06Hi there. Thank you for taking my question. I was just wondering if you could give us any color on CapEx plans for 2024 and 2025. Obviously, there's been the announcement of this second investment in a wind farm in Argentina, which is great to see. Beyond that, Should we be expecting further bolt on M and A? Speaker 1000:44:25And where specifically would you be looking? And What about the possibility of adding seamless capacity internationally? Is that an option? Thank you. Speaker 200:44:38Thank you, Jamie. Our We will be spending in CapEx in the range of $350,000,000 in the 1st semester of 2024. And we plan to spend Similar amount in the second half. So we're running at a pace of around 700,000,000 In CapEx, we have among our Investment, as you mentioned, in the wind farm in Argentina, the wind farm in Argentina, we completed the first one In line with our budget, more or less with very small difference, We consider that this is an area in which is the first priority for decarbonizing Tenaris Because we can do it in very effective condition and very competitive condition, we could continue with the development of the second Wind Farm. Then we have Intervention in improving In Argentina, improving our operation in the steel shop, reducing also Our energy consumption goes in the same direction and add, let's say, improve operational condition We also have investment in our patient in Dalvin and in the U. Speaker 200:46:20S. In our steel shopping corporate. So these are basically the issue that are, let's say, Receiving investment of, let's say, relevant size. Then we will have to, Let's say to consolidate the acquisition of Shokor and see once we receive the Antitrust clearance, if this goes on, maybe that this will require, let's say, Additional investment or consideration for this that we cannot predict now. I think these are The main area. Speaker 200:47:07We do not see after the acquisition of Republic Specific target or areas for our M and A, but we, as always, are Analyzing and considering our strategic positioning in every region of the world, Tenaris is a global player, is leader Worldwide has to maintain, let's say, an exercise of Strategic focus in all of the region in which we operate to understand how we can strengthen structurally our Position, but for the time being, we have nothing so relevant to consider. Speaker 1000:47:55Thank you. Thank you. Speaker 400:47:57And ladies Operator00:47:57and gentlemen, this concludes the question and answer period. I would like to turn the call back To Giovanni Sardagna for his closing comments. Speaker 100:48:08Thank you, Carmen. And well, thank you all for joining us And now on our quarterly call and we'll see you soon. Thanks. Operator00:48:17Thank you, ladies and gentlemen, for your participation and you may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallTenaris Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release Tenaris Earnings HeadlinesTenaris initiated with an Outperform at BNP Paribas ExaneApril 23 at 3:52 AM | markets.businessinsider.comStifel Nicolaus Issues Pessimistic Forecast for Tenaris (NYSE:TS) Stock PriceApril 17, 2025 | americanbankingnews.comCrypto’s crashing…but we’re still profitingMost traders are panicking right now. Bitcoin’s dropping. Altcoins are bleeding. The stock market’s a mess. The news is screaming fear. But while most traders watch their portfolios tank…April 25, 2025 | Crypto Swap Profits (Ad)Brokerages Set Tenaris S.A. (NYSE:TS) PT at $46.00April 16, 2025 | americanbankingnews.com4 Analysts Have This To Say About TenarisApril 15, 2025 | benzinga.comTenaris S.A. Releases 2024 Annual Report Highlighting Financial and Sustainability PerformanceApril 4, 2025 | tipranks.comSee More Tenaris Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Tenaris? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Tenaris and other key companies, straight to your email. Email Address About TenarisTenaris (NYSE:TS), together with its subsidiaries, produces and sells seamless and welded steel tubular products and related services for the oil and gas industry, and other industrial applications. The company offers steel casings, tubing products, mechanical and structural pipes, line pipes, cold-drawn pipes, and premium joints and couplings; and coiled tubing products for oil and gas drilling and workovers, and subsea pipelines. It also manufactures sucker rods used in oil extraction activities and tubes for plumbing and construction applications; and offers oilfield/hydraulic fracturing services and energy and raw materials, and financial services. The company operates in North America, South America, Europe, the Middle East and Africa, and the Asia Pacific. Tenaris S.A. was founded in 2001 and is based in Luxembourg. Tenaris S.A. operates as a subsidiary of Techint Holdings S.à r.l.View Tenaris ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step In Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 11 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to the Third Quarter 2023 Tenaris S. A. Earnings Conference Call. At this time, all participants are in a listen only mode. Operator00:00:12After the presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to turn the call over to the Head of Investor Relations, Mr. Giovanni Sardagna. Speaker 100:00:40Thank you, Carmen, and welcome to Tenaris 2023 3rd quarter conference call. Before we start, I would like to remind you that we will be discussing forward looking information in the call and that our actual results may vary from those expressed or implied during this call. Speaker 200:00:56With me Speaker 100:00:57on the call today are Paolo Roca, our Chairman and CEO Alicia Mondolo, our Chief Financial Officer Gabriel Podkuzka, our Chief Operating Officer and Luca Zanotti, President of our U. S. Operations. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results. Our sales in the Q3 of 2023 reached $3,200,000,000 up 9% compared to those of the corresponding quarter of last year, but down 21 Percent sequentially, mainly due to lower volumes and prices throughout the Americas, lower quarterly shipments to offshore projects and lower pipeline shipments in Argentina. Speaker 100:01:42Average selling prices in our Tubes operating segment increased 2% compared to the corresponding quarter of last year, but declined 5% sequentially. As anticipated, our EBITDA, Excluding a one off gain of $32,000,000 fell just short of $1,000,000,000 with the margin at 31%. The sequential EBITDA decline was mainly driven by the ongoing price declines in the Americas. Our net income for the quarter at EUR 547,000,000 was affected by non cash charges of EUR 144,000,000 related to the re measurement and recycling of CTA to the income statement of our direct and indirect investment in Usiminas. Cash generated by operating activities during the quarter was €1,300,000,000 while Our free cash flow for the quarter was $1,100,000,000 with a further reduction in working capital of 415,000,000 Our net cash position at the end of the quarter rose to EUR 3,300,000,000 Our Board of Directors approved the payment of an interim dividend of $0.20 per share or $0.40 per ADR to be paid on November 22. Speaker 100:03:04The interim dividend is up 18% compared to the interim dividend we paid last year. In addition to the dividend, the Board of Directors also approved a share buyback of EUR 1,200,000,000 to be executed within the next 12 months. Now I will ask Paolo to say a few words before we open the call to questions. Speaker 200:03:27Thank you very much, Giovanni, and good morning to all of you. As anticipated, our 3rd quarter results were affected by, among other factors, lower onshore drilling activity And an ongoing adjustment in market price level in the Americas and the lower level of shipment in certain regions following a strong second quarter. On the other hand, we had another extraordinary quarter for cash flow with the generation of $1,100,000,000 of free cash flow, making the $3,100,000,000 in the year to date. With this cash flow adding to our already strong financial position, Yesterday, we announced the launch of our 1st share buyback program together with an 18% increase in our interim dividend. The share buyback program, which is for an amount of up to EUR 1,200,000,000 is to be carried over carried out over the next We consider that buying back our own shares would constitute a better use of our excess cash then our current liquidity investment. Speaker 200:04:37During the quarter, we invested $90,000,000 on the acquisition of additional heat treatment And trading facilities in Houston, which will help us to debottleneck our U. S. In data system. We also acquired a small pipe coating facility located close to our Darmina plant in Italy for $10,000,000 and announced the acquisition of the larger ShowCore Global Pipe Coating Business. This remains subject to the extension of regulatory approvals and is expected to be concluded by the end of the year. Speaker 200:05:13The expansion of our pipe coating operation at the global level will help us to serve customer with an integrated offer for complex and offshore line pipe projects. In North America, we expect a recovery in drilling activity As we look toward 2024, in the United States, the relatively low level of drilling and completed wells and the DUC And the crude oil inventories, favorable oil price and rising natural gas prices Should support an increase in investment as oil and gas companies reset their budgets for the next year. With OCTG inventory declining from excess level, the decline in prices for several product items is starting to slow down. The Pipe Logic Index can be subdivided into different product site and groups whose performance is not uniform. For example, item groups such as surface casing and tubing, which are most Export to low quality imports have fallen farther than higher quality product item groups, such as production casing, which are largely produced by domestic producers. Speaker 200:06:33We expect that if inventory continue to come down, Market pricing should start to stabilize by the end of the year. At the same time, we are increasing the level of differentiation through our Rig Direct service. By the end of 2023, around 85 of our OCTG sales in the U. S. Will be supplied under our Rig Direct service model and 75% of those sales will be done with our new run ready service included. Speaker 200:07:04This compare with 65% 30%, respectively, at the end of last year. In Canada, we also expect drilling activity to pick up as we head into the peak winter drilling season. We are repositioning ourselves following the revision of normal values on Chinese OCTG import made by the Canadian government earlier this And an expected increase in activity in the Monterey Shale. In the Middle East, the Saudi market is growing particularly strong And investing pipeline construction under his Master Gas 3 plan. We recently won a tender with a value of $600,000,000 To supply seamless casing and tubing with short delivery times for this increased activity as Aramco has reduced stock levels during the pandemic. Speaker 200:08:03Our recently consolidated GPC subsidiary, which invoiced $52,000,000 during the quarter, is positioning itself to supply the large diameter conductor Our new premium trading facility in the Emirates, in United Arab Emirates will begin operation this month. This will be the 1st industrial facility of its kind in the Emirates And it's being built along with a special Tenaris University training facility to increase the local content provision under our multiyear rig direct agreement with ADNOC. Offshore drilling and pipeline Action activity is in an expansionary cycle. We have been quick to capture the 1st wave of the cycle And our sale to offshore project will be 50% higher in 2023 than they were last year. Our positioning in Guyana In Brazil, we've been central to this achievement. Speaker 200:09:09And in October, at the OTC event in Rio, Petrobras awarded us a 2022 best supplier recognition in the category of goods for drilling and completing well. Our research and development area and technical teams continue to develop material and product Solution tested for the specific conditions involved in more complex low carbon energy applications, such as CCS, carbon capture and storage injection wells and hydrogen storage vessels. In October, we were awarded a contract to supply high chrome alloy tubing for carbon injection wells for the EU funded Portos project in Rotterdam. The materials were selected to withstand the high corrosion risk and expected cryogenic thermal shocks. In Argentina, our first 100 Megawatt Wind Farm has entered full operation And is delivering power through the interconnected grid to our operation in Campana. Speaker 200:10:20We have secured the opportunity for a second 90 megawatt Wind Farm and we will go ahead with $214,000,000 investment to be completed within 24 months. Both wind farms will provide cost competitive Electric power with capacity factor of 55% and above with no subsidy. With the investment in the wind fabs and our ongoing investment in energy efficiency, we expect to meet almost 100% of our energy requirement in Argentina The utilization is central to our strategy. One investment that is currently coming on stream is a $20,000,000 digital global programming and scheduling system that will help us to improve production lead times, cost and compliance. With favorable market condition ahead, We are strengthening our competitors and focusing on service and margin differentiation. Speaker 200:11:28We are now ready for any question you may have. Operator00:11:33Thank you. I will open the lines for questions. Please stand by and wait for your name to be announced. One moment for our first question. It comes from the line of Alessandro Pozzi with Mediobanca. Operator00:11:52Please proceed. Speaker 300:11:54Hi, there. Thank you for taking my questions Congratulations on the good sets of results. My first question is on the average selling price. As you pointed out, There are different categories, they are seeing different movement in prices. And if I look at your average selling price in Q3, It's not that different from Q4 in 2022, marginally down, but not as much as the Pipe Logics. Speaker 300:12:23So the question here is, is there a growing disconnect between your ASP and the pipe logic or is it just It's a matter of the time lag between the 2 and we will see your ASP actually falling in line with the Pipe Logics maybe in the coming quarters. And on this point, maybe if you can give us Some color on where you see sales going in Q4 and Q1 with the EBITDA margin. That's the first question. The second question is on the share buyback. Maybe if you can clarify when you're planning to Start the share buyback and whether maybe Techint is going to participate or when we will know whether Techint is going Speaker 200:13:17Thank you, Alessandro. As far as your first question is concerned, The association between the pipe logic indicator and our overall price is influenced by many different factors. On one side, The majority of our prices are driven by different factor compared to the pipe logic. Some of the formulas Taking into consideration costs or different variable independent from the pipeline. Even within the U. Speaker 200:14:05S. And North America, that is more influenced by PackLogic, the formula We have with our client reflecting specific product within the Pipe Logic portfolio that in some case are not moving in the same direction as the average of Pipe Logic. There are difference between, for instance, premium or complex product and more simplex product. So I don't think we can drive a strict correlation between the pipeline and the overall Average price of Tenaris. Yes, we have a more strict correlation with our operation in North America. Speaker 200:14:58But North America is very important in our overall sales. So I will ask Luca Zanotti to add some color on the relation between the Pipe Logic Index and the dynamics of our prices. Speaker 400:15:17Yes. Thank you, Paolo. Good morning, Alessandro. As Paolo was saying, when we look at the North America and we look how the demand is structured, you see that Always more and more, we have a predominance of seamless heat treated. If you look at, for example, A key component of the demand, which is the production casing, which is more or less 40%, 45% of the total market, the great majority of this is seamless. Speaker 400:15:51When we cope this with the structure of the Pipe Logics and the price, you see that these items are the ones that So far less of the decrease within the Pipe Logics. So for you to come up with a conclusion, you should put together the structure of the market And the way the different items are moving within the pipe logics. And this is one point that is worth mentioning. The second point that It's worth mentioning is that when you look at the United States, Our formula with our customers are not necessarily 100% related to the Pipe Logics. We are adding indicators. Speaker 400:16:40And obviously, these indicators in this context are much less volatile than the Pipe Logics itself. I believe that these are the two main reasons why you see a sort of not perfect match between our prices even in the United States When you look at the pipe logics. Speaker 200:17:01Then Gabriel, you can comment on The wide range of prices and the dynamic that is very different that we have in many other markets of our system. Speaker 500:17:14Yes, Paolo. Thank you very much and good morning, Alessandro. Indeed, the dynamics of the prices in the international markets Defer from the dynamics of the Pipe Logics, internationally, we are benefiting from an increased demand On Middle East and Offshore Markets, and we have at the same time a tight supply of premium products, sophisticated grades, Sour service or high chromium grades as well. So these segments are not linked or influenced By no means by the Pipe Logics, the products required, the competitive environment completely differs from that influenced by Pipe Logics. So in international markets, we continue to see in the high end of the market opportunities to enrich our mix and drive prices up. Speaker 500:18:03There is typically a lag of 6 months to 9 months in this part of the world from booking prices into deliveries, But we see a positive trajectory on the international pricing into the end of this year and into 2024. Thank you, Gabriel. Speaker 200:18:21And on the second question, which is the share buyback, The share buyback will be executed in quarterly tranche from now until within 1 year. And we didn't receive any specific information on this from our majority shareholder. Speaker 300:18:43Okay. Thank you. And just a follow-up on the evolution of margins for the next couple of quarters. Is there Speaker 200:19:01To the extent to which the pipe logic is influencing, at least as Luca was explaining, part Of our sale in North America and in some case also other market, we will see this reflected In our margin with some delay, so the decline that you have seen in this quarter Will also be reflected in the next and possibly according to the evolution of PipeLogic in the coming months, November December, we will see if this trend will continue or not. To this extent, this will be reflected Our margin, as you have seen last quarter, we anticipated the margin In the range of 30%, and this is where we are today. Considering all the factor, I think that we can have slightly lower margin in next quarter, but we will remain, Let's say, between 25% and 30% over time. This is our also our long term view. Speaker 300:20:18Okay. And potentially picking up from Q2 pipe logic stabilizes. Is that fair? Speaker 200:20:28Difficult to predict, there are many factors that will be influencing demand and supply In let's say during the first half of twenty twenty four, there is The activity that is important, the level of drilling, the demand of pipe, The level of import is also relevant. Import went down, but we have to see if this is a trend that will continue. In general, we perceive a reduction in the level of inventory in the market, which is positive For giving support to the overall price level in the U. S. Speaker 300:21:14Thank you very much for the color. I'll turn it back. Thank you. Operator00:21:19Thank you. One moment for our next question please. And it comes from the line of Arun Jayaram with JPMorgan Securities. Speaker 600:21:33Yes, good morning. My first question is on the U. S, Perhaps for Luca, I was wondering if you could comment on what you're seeing in terms of the import of products into the U. S? How is lower pricing impacting imports into the U. Speaker 600:21:54S? Speaker 200:21:57Thank you, Rona. Luca, you can comment on this, no? Because it's Yes. Speaker 400:22:03And I can tie back to what Paolo you were Same on the inventory. So when you look at the imports, we have seen imports to go down. And this is basically with the exception of Koreans that are complying with their quarterly, All the importers have come down, both ERW and Simplus. Now one thing that was not mentioned before, But it is important that also the domestic production, especially on the ERW side came down, which helped reducing the inventory on the ground during this month. But getting back to your point, obviously, as price goes down, some importers will start to face The 25% imposed on the Section 232, especially as they complete their quota. Speaker 400:22:55And in the case in which we're going to see A recovery in demand starting in 2024. Obviously, this is going to have an impact on the possibility of some Very low imports to come in. However, we believe that the imports are high and This is a problem that the domestic industry is going to take care of. Speaker 600:23:24Okay. And then just a quick follow-up is, What about the potential if the imports are declining into the U. S, could that impact international pricing If the imports find a new home? Speaker 200:23:41Well, I don't think There is a clear overlapping because between the material that some companies importing in the States And the international market. For instance, the space for welded product outside the United States is very limited. I mean, The demand, international demand is different. There could be some redirection of importer, but it's a much lower scale to what is important in the States because the overlapping also this is a market Speaker 300:24:22In Speaker 200:24:22which qualification, establishing the product in every different place In the different company, it is a complex process. In the U. S, it is easier for a producer with Relatively limited experience and track record to penetrate or some segment of the low end in the market. Speaker 600:24:51Great. And Paul, I just want to get a quick thoughts on the Argentinian election. Obviously, there's a candidate who is Proposing dollarizing Argentina, but just some quick thoughts. I know we still don't know the outcome yet. Speaker 200:25:07There is a we are in an election process. There will be a balotage in 2019 November. Whoever wins the ballot age will assume the presidency on the 10th December. I think that whatever the outcome of the balotage, there will be the need in Argentina for an Adjustment program that will require reduction of public spending and devaluation. And it's possible that economic activity may be reduced to, They align some of the variable that today are out of Normal situation for a country like Argentina. Speaker 200:26:04So We will see. There is no clear indication on the results the ballot engine, there is no entry indication on the program that will be implemented after the assumption. Okay. Thank you. Operator00:26:22Thank you. One moment for our next question please. Comes from the line of Marc Bianchi with TD Cowen. Speaker 700:26:36Thank you. Maybe following up to the last question, you had previously discussed Some concern on South America in the back half of the year because of election uncertainty. Speaker 800:26:49Could you Speaker 700:26:49talk about how that's evolved? Obviously, there may be still some uncertainty for Argentina, but the rest of the region, and thoughts heading into 2024 would be helpful. Speaker 200:27:02Well, I mentioned Argentina. As I say, we expected That after the assumption, Argentina will need to implement, as I was saying, an adjustment program That will have some impact on, as I say, the exchange rate, public spending, No doubt, to some extent, we may expect reduction of The level of economic activity, but any government will need To promote export and attraction of investment, Argentina has The very important potential for attractive investment in the oil and gas sector, In the agricultural sector, in lithium in development of renewable And in other area of its economy, I think this will be Part of the program of any of the 2 candidates and also The condition of the agricultural sector in 2023 has been extremely difficult Due to the drought that affected the country, this will help the next government in facing the challenges of the adjustment process. So This is where we stand. And I think that in the case that the program is successful, the need to develop infrastructure In the energy sector for oil and gas is very relevant. We We think that there are potential in Paca Muerta that is very important. Speaker 200:29:07As far as Brazil It's concern, Brazil is more stable, developing its oil and gas industry. Petrobras has very ambitious Target for increasing its production level, contract like the one that we signed with Equinor are indicating that also the private sector and private company are investing in Brazil with large project that has Relevant infrastructural content, areas in which we participate From Confab, in all the segment of drilling and Evacuation line pipes that are used for this. In the case of Mexico Also in the case of Mexico, it will be logical for Mexico to after The new refinery is coming on stream to invest in the energy sector And to support financially Pemex and also to what we see today is that There are private company investing in development of Mexican Resources. But it's also true that this Financial situation of payments is very difficult. And we as other companies in the oil service system In this moment, we are facing some delay in payment from payments. Speaker 200:30:45It will be very important Over the coming months, let's say, for Pemex, at the same time, To expand this operation if possible and also to reduce the payable to Part of a supplier, one of these is Tenaris. The case of the rest of the Latin America, In Colombia, after the election, we expect that some of the decision on the oil and gas Sector may be reconsidered and I feel there could be also in the case of Colombia During 2024 2025, let's say, some recovery from the situation where we are today After the reduction during 2023, there has been pretty strong, either stable or improving. Speaker 700:31:50Okay. Thank you for that, Paolo. I want to ask a couple more quick ones on sort of the direction of Business over the next couple of quarters. Volumes were down 17% in 3rd quarter. It sounds like you're anticipating volumes I'm curious if you think a 1,000,000 tons a quarter is sort of the right number to be thinking about for 4th quarter and entering 2024, and then if there's any regional comments around that. Speaker 200:32:22Yes, you're right. I mean, this is where what we expect. The situation in Argentina may influence Some of the decision on the pipeline and moving this in time between the different quarters. But basically, we are in the range that you mentioned. This is what we expect in the coming quarter. Speaker 700:32:50Okay, great. And then the other one was just related to profit per ton. The guidance of 25% to 30% or so for the Q4 would suggest you're maybe over $800 a ton of EBITDA. The long term average has been around $500,000,000 and there's another company out there saying the normalized price or average margin is $500,000,000 Do you think you can maintain this $800,000,000 and why do you think it would be better than the long term average? Speaker 200:33:22Well, I think that there has been a structural change both on the side of the market and on the positioning of Tenaris in this market. Today, I think the relevance Of the activity and the investment in the U. S. It's much more accessible for Tenaris. We have deployed our asset in the last 5 years especially, but even we started With our investment in the States in 2007 on a substantial way. Speaker 200:34:10And this is positioning Tenaris very differently in a very important area of oil and gas market. So we are in this sense structurally different. We are also structurally different because of the expansion of the differentiated product and services. The Rig Direct is giving us additional margin. My view and my view, we can defend the differentiation Coming from the rig delivery and the level of service that we are adding to our product delivery. Speaker 200:34:47This was not the situation 5 years ago, we progressed over time. Also, our positioning in the Gulf, Middle East is substantially different today with the investment in Saudi Arabia, the new plant in the Emirates. The let's say, the positioning of Tenaris has changed. So the combination Of the change in the market, because you also know, the concentration We'll also help concentration of oil producer in the traditional oil company. To some extent, it's favoring Producer like Tenaris that has an established global footprint And there are, let's say, having standard from quality to safety to environment that fit with the demand of international company. Speaker 200:35:53Also this has introduced in my view a structural change that justify The level of margin higher than the level of margin that is the average of the last 10 years. Speaker 700:36:07Thank you very much. Operator00:36:11Thank you. One moment for our next question please. All right. And it comes from the line of Luc Lamoine with Piper Sandler. Speaker 900:36:23Good morning. Just one question. With your rig direct program in the U. S, you have pretty good insight into some of the larger operators' programs. Just wanted to see if you could comment on how you see future activity unfolding over the next 3 to 6 months? Speaker 200:36:39Thank you, Luca. I think Luca, you can Yes, sure. And Speaker 400:36:47Good morning, Leo. As I was saying before, we see activity increasing from the current levels. And when we look at, let's say, a large portion of either our direct customers or customers' Prospects that we are in a relationship. We see this going up. And our, let's say, estimation of this Activity increase is very much in line with what the drillers that already hold our Sorry, the earnings call, I have said, we see activity moving up 5%, 6% from current levels Into Q1 of 2024. Speaker 400:37:37This is what we're seeing. Speaker 900:37:41Okay. That's perfect. Thanks so much. Operator00:37:47Thank you. It comes from the line of David Anderson with Barclays. Speaker 800:38:02Hi, good morning. So If we assume that the rig count U. S. Rig count volumes here in the next month or so, can you talk about how you see volumes trending over the next 12 months? Middle East continues to ramp up as you highlighted Saudi and UAE. Speaker 800:38:16Offshore should be float to speed by mid year. I would think volumes in the second half of 24 should be up quite a bit compared to the second half of this year, perhaps even up double digits. Am I thinking about kind of that trajectory, right, in terms of how you're seeing the market developing Speaker 200:38:35Thank you, David. I think It's difficult to guide expectation for such a long distant The future, because the world is moving on, let's say, faster on different aspects. There are conflicts around There are issues that are really out of our control. We can perceive and we can see our horizon in the next Couple of quarter, that is the one that we try to represent. It's difficult to understand for us where we could be In the 2nd part of 2024. Speaker 200:39:14Probably, The area on which we can have a medium term is the area of offshore project There are, let's say, possibly more stable over time once they have decided they go. Gabriel, maybe in this sense you can add some comment on what you see For the 2nd part of medium term, let's say, 2024. Speaker 500:39:46Sure, Paolo. Good morning, David. Indeed, offshore drilling continues to increase. The number of rigs that we have operating today globally in the offshore are even increasing the pre pandemic levels, Both in shallow water and deep water. So every discussion that we have with our customers, FID projections, capital projections indicate That is a multiyear cycle. Speaker 500:40:09The activity is robust and will continue to grow. There is traction virtually in all offshore basins around the world. And as a matter of fact, Tenaris has already benefited from this growing trend. If you consider As we are closing November December shipments, but our sales revenues in 2023 will be at least 50% Higher year on year 2022. So this is already a trend that is embedded in our sales in 20 And we see this continuously increasing. Speaker 500:40:44We have seen during the quarter also some signs of increased Activity in exploration is an important niche for us, and we had some awards on exploration campaigns in Egypt, Mongolia, Offshore Colombia as well. So we have a strong backlog in offshore, mainly on the development of CTG and pipeline. With deliveries into 2024 and some of these projects will even arrive to deliveries into 2025. We see this as a at the early part of a multiyear cycle. And I think our acquisition of the coating facility In Italy, an announcement of the Shawcor Oating division is a sign overconfidence On this segment where we already have a differentiated portfolio and have an established position. Speaker 500:41:36So we see that This will be an ongoing contribution within the portfolio. Speaker 200:41:44Thank you, Gabriel. Still, let me add you. We have some caveat. The situation of in the world is exposed to Very different issued coming that could come out Disruption, I would say, that would come out. The price of LNG globally continue to be influenced by the situation in Europe. Speaker 200:42:14Price of oil may be influenced also by the situation in Middle East. Our operation also, for instance, in the Eastern Mediterranean sandal project It's been canceled. In general, also in Latin America, election here in Mexico, now in Argentina. So The overall view is the one that we expressed, but we need to take into consideration The potential for disruption that is for sure something that exists in 2024. Speaker 800:42:49Yes. Very much understood, Paolo. One final question as it relates to the buyback that you announced today. Is this Targeting just the open float of shares or will the closely held shares be participating in the buyback as well? Speaker 200:43:09I don't know. I mean, we launched the program having in mind the That we can get from our cash by investing in the company compared to the investment we can get by managing the liquidity. This is A key factor for the decision. As I mentioned, we will have an intermediate bank to Perform the acquisition in the coming 4 quarters starting next week probably, And we will see. I don't think we can add a small one on this. Speaker 800:43:49Okay. Thank you very much, Paolo. Appreciate it. Operator00:43:52Thank you. And we have time for one more question. One moment please. And it comes from the line of Jamie Franklin with Jefferies. Speaker 1000:44:06Hi there. Thank you for taking my question. I was just wondering if you could give us any color on CapEx plans for 2024 and 2025. Obviously, there's been the announcement of this second investment in a wind farm in Argentina, which is great to see. Beyond that, Should we be expecting further bolt on M and A? Speaker 1000:44:25And where specifically would you be looking? And What about the possibility of adding seamless capacity internationally? Is that an option? Thank you. Speaker 200:44:38Thank you, Jamie. Our We will be spending in CapEx in the range of $350,000,000 in the 1st semester of 2024. And we plan to spend Similar amount in the second half. So we're running at a pace of around 700,000,000 In CapEx, we have among our Investment, as you mentioned, in the wind farm in Argentina, the wind farm in Argentina, we completed the first one In line with our budget, more or less with very small difference, We consider that this is an area in which is the first priority for decarbonizing Tenaris Because we can do it in very effective condition and very competitive condition, we could continue with the development of the second Wind Farm. Then we have Intervention in improving In Argentina, improving our operation in the steel shop, reducing also Our energy consumption goes in the same direction and add, let's say, improve operational condition We also have investment in our patient in Dalvin and in the U. Speaker 200:46:20S. In our steel shopping corporate. So these are basically the issue that are, let's say, Receiving investment of, let's say, relevant size. Then we will have to, Let's say to consolidate the acquisition of Shokor and see once we receive the Antitrust clearance, if this goes on, maybe that this will require, let's say, Additional investment or consideration for this that we cannot predict now. I think these are The main area. Speaker 200:47:07We do not see after the acquisition of Republic Specific target or areas for our M and A, but we, as always, are Analyzing and considering our strategic positioning in every region of the world, Tenaris is a global player, is leader Worldwide has to maintain, let's say, an exercise of Strategic focus in all of the region in which we operate to understand how we can strengthen structurally our Position, but for the time being, we have nothing so relevant to consider. Speaker 1000:47:55Thank you. Thank you. Speaker 400:47:57And ladies Operator00:47:57and gentlemen, this concludes the question and answer period. I would like to turn the call back To Giovanni Sardagna for his closing comments. Speaker 100:48:08Thank you, Carmen. And well, thank you all for joining us And now on our quarterly call and we'll see you soon. Thanks. Operator00:48:17Thank you, ladies and gentlemen, for your participation and you may now disconnect.Read morePowered by