NYSE:TS Tenaris Q2 2024 Earnings Report $33.50 +0.08 (+0.24%) As of 11:19 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Tenaris EPS ResultsActual EPS$0.59Consensus EPS $0.97Beat/MissMissed by -$0.38One Year Ago EPS$1.90Tenaris Revenue ResultsActual Revenue$3.32 billionExpected Revenue$170.13 millionBeat/MissBeat by +$3.15 billionYoY Revenue Growth-18.50%Tenaris Announcement DetailsQuarterQ2 2024Date7/31/2024TimeAfter Market ClosesConference Call DateThursday, August 1, 2024Conference 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 Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 1, 2024 ShareLink copied to clipboard.There are 10 speakers on the call. Operator00:00:00Good day, and thank you for standing by. Welcome to Quarter 2, 2024 Tenaris S. A. Earnings Conference Call. At this time, all participants are in a listen only mode. Operator00:00:12After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Giovanni Sardagna. Please go ahead. Speaker 100:00:43Thank you, Gigi, and welcome to Tenaris 20 24 Second 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. With me on the call today are Paolo Roca, our Chairman and CEO Alicia Mondoro, our Chief Financial Officer Gabriel Potkuka, our Chief Operating Officer and Luca Zanotti, President of our U. S. Operations. Speaker 100:01:13I would like to start by mentioning that we will host an investor presentation in London on September 24, and we hope to see many of you there. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results. Our 2nd quarter sales reached $3,300,000,000 down 18% year on year and 3% sequentially, mainly due to slightly lower volumes and average selling prices during the quarter. Average selling prices in our tubes operating segment decreased 17% compared to the corresponding quarter of last year and 1% sequentially as lower prices have been greatly offset by favorable sales mix. Our EBITDA for the quarter was down 34% sequentially to $650,000,000 due to lower selling prices and an extraordinary provision recorded for an ongoing litigation related to the acquisition of a participation in Usiminas in 2012. Speaker 100:02:16Our EBITDA margin for the quarter was close to 20%. Without this extraordinary provision, our EBITDA would have been 8 $21,000,000 and our EBITDA margin would have been 25%. With operating cash flow of 935,000,000 dollars and capital expenditure of $161,000,000 our free cash flow for the quarter was 774,000,000 dollars After a dividend payment of $459,000,000 in May and share buybacks of $492,000,000 our net cash position amounted to $3,800,000,000 at the end of the quarter. Now I will ask Paolo to say a few words before we open the call to questions. Speaker 200:02:59Thank you, Giovanni, and good morning to all of you. During the 1st two quarters, our sales have remained remarkably resilient, considering a market environment in which drilling activity has reduced, and OCTG prices have been falling in the United States. This reflected the differential market positioning we have built up in North America with our Rig Direct service model as well as in offshore projects around the world. Particularly high level of shipment we have been making in the Middle East and the contribution for our newly acquired Tenaris Shocor Coating Business. I would also like to highlight our strong free cash flow of $774,000,000 during the second quarter. Speaker 200:03:47When we were able to achieve a $285,000,000 reduction in working capital. Thus, we were able to maintain our excellent net cash position of $3,800,000,000 while we distributed $950,000,000 to our shareholders. Indoti spending on offshore projects, particularly in complex deepwater operation, has increased since 2023 and is set to increase further in the year ahead. For this project, we are a preferred supplier for the majors with a fully integrated offer of pipes and services. This includes large diameter conductor and surface casing with connectors, Intermediate and production casing, tubing and accessories, stainless, high chrome alloy steels, duplex connection tested for use in the new extreme application required by the Gulf of Mexico development. Speaker 200:04:47We are also supplying the 3 d mapping services for high collapse application as well as offshore line pipe delivered with a full range of Tenaris Shocker Coatings and advanced project management services. This quarter, we renewed our long term contract for shale operation in the Gulf of Mexico and have been selected by ExxonMobil for their upcoming operation in Angola. We were also awarded the supply of casing and offshore line pipe and coatings by Woodside Trion project in Mexico. In the second half, we will begin deliveries of coated line pipe for Equinor Raya project in Brazil, and we have an extensive backlog of order for offshore project going into 2025. Today, however, as we look toward the second half, we see that our sale will be lower than the sale in the 1st semester, affected mainly by 3 factors. Speaker 200:05:53In the United States, a record level of oil and gas production are being sustained even as drilling activity has decreased and reduced the overall demand for pipe. At the same time, OCTG imports, particularly from Asian countries, remain high, accounting for 40% of demand, which compares with the 20% for other steel product always in the USA. This level of imports is affecting pipe prices and is causing damage to the domestic industry. In the Middle East, activity and consumption from the region remain at a good level. But in the main countries, we see a destocking trend beyond our original expectation. Speaker 200:06:43This combined with the completion of deliveries for the NFE Offshore Pipeline in Qatar will affect our sales in the region in the second half. The change in the government in Mexico and the uncertainty surrounding the policy for the energy sector are limiting drilling investment in the country. In Argentina, the necessary stabilization of the macroeconomic environment is delaying investment in drilling and the development of infrastructure in Vaca Muerta. This factor will affect our sales and results in the second half, when we expect that our sales volume will be 10% to 15% below those of the first half. And there will be further adjustment to our prices in the Americas, reflecting market condition. Speaker 200:07:36This quarter, as anticipated, we are carrying out important investment and maintenance stoppages in many areas of our industrial system aimed at recovering full operational capacity, improving efficiency and reducing our carbon footprint. This investment includes a major overhaul of our medium rolling mill in Mexico, the installation of a new electric arc furnace in our Argentine steel shop, the revamping of our copper steel shop in the United States to increase capacity and reduce environmental impact and the finishing line of our Italian mill. We are also starting the construction of our 2nd wind farm in Argentina, which will have a capacity for 92 megawatts and will allow us to supply 100% of the need of Argentina from renewable resources. The level of demand is requiring an adjustment in our industrial operation. Concentration of production in the more efficient facilities and the reduction of logistic and operational cost. Speaker 200:08:49Looking further ahead, we expect that all the region in which we have a strong competitive position will drive an increase in our activity over time. Our global reach, competitive product and service differentiation and unique portfolio of long term agreements with established customer position us favorably for serving the growing demand of energy across the world. I will leave now to any question you may have. Thank you. Operator00:09:19Thank you. Our first question comes from the line of Marc Bianchi from TD Cowen. Speaker 300:09:49Hi, thank you. I was hoping you could talk a little bit more about the progression of margin in the back half here. So now we've got volume, I heard you down 10% to 15% in the back half with some weaker pricing. Maybe you could talk about the margin progression, but perhaps first, before you say that or along with that, talk to us about your expectation for the progression of Pipelogix from here, just so we can understand the context. Speaker 200:10:22Thank you, Marc. As I mentioned in the remark, in the last conference, we're expecting the pipe logic to destabilize in some of them. But the level of import has been relatively higher to what was our expectation. And so the Paypalogic is registered in minus 3% that appeared yesterday on comparable set of data. And we expect that further reduction. Speaker 200:11:15We think it should stabilize and also we think that the import to some extent should recede, as I mentioned in the opening remark. It's an important variable. Maybe, Luca, you may add, which is your perception of pricing in the U. S. Market, that is important also for other region for us because it's part of the formula that we have in some of the countries, especially in the Americas. Speaker 400:11:48Yes. Thank you. Hi, Marc. No, I believe that I will go back to what I said or what we said already in the last earnings call. And here, Mark, the problem is the following. Speaker 400:12:04The industry, the OCTG industry was somewhat tricked by some expectation of increased activity at the beginning of 2024. And for this reason, distributors placed imports order that have been flowing in during the Q1 and the Q2 of 2024. Now as we all know, this expectation of increased demand did not materialize. And so these imports ended up remaining in the inventory. Now imports are expected to go down. Speaker 400:12:45Actually, they already went down a bit in the Q2, and we expect this to go down. Thank also to some trade enforcement action that we have been able to successfully implement as a domestic industry. And to a certain extent, even Section 232 with the decrease in prices will start to bite. Also, we do expect a reduction in the domestic side of the supply. And so as Paolo was to conclude, as Paolo was mentioning before, the adjustment is going to take a little bit more than what originally expected. Speaker 400:13:26But we see no reason why this should not happen going forward. Speaker 200:13:35Thank you, Luca. The second question was about the margin. We were guiding in the last conference call for our margin to be between 20%, 25%. We ended up with this quarter close to the high part of this range. I think that in the second semester, we should be around the lower end of this range. Speaker 300:14:03Okay. Thank you, Paolo. And may I just confirm, when you said the second half down 10% to 15%, was that a comment about volume or a comment about revenue? Speaker 200:14:15No, it's a comment about volume. This is what we see today. We see volume going down for the reason that we mentioned in the prepared remark. And this is due to the factor that we mentioned basically. There is something that we also just to recap briefly what we mentioned, the uncertainty in Mexico and in Argentina, just waiting for decision of the energy policy and how Argentina could finance a development of our Comerter that we frankly see as inevitable. Speaker 200:15:04So we are convinced that there is ample scope for expansion and for demand in Argentina, in LINE PEP, in OCTG. But the point is that the macroeconomic environment is postponing the moment which this project could be reliably financed. So we are optimistic in this sense on the development and this is an area in which we are very strong. But we need to register the fact that in this month, in the 2nd semester, there will be not so much movement on this. Speaker 300:15:40Yes, makes sense. Thank you very much. I'll turn it back. Operator00:15:46Thank you. One moment for our next question. Our next question comes from the line of Alessandro Pozzi from Mediobanca. Speaker 500:15:56Good afternoon. Thank you for taking my questions. The first one is on the U. S. Market. Speaker 500:16:05You mentioned a record level of production and yet drilling activities remains quite muted as a number of operators focus more on efficiencies and productivity. I was wondering, are we in a paradigm change where we are going to see even lower, let's say, drilling operations and for fewer rigs, basically, we could see even higher production. And is that a concern for you for OCTG demand going forward in the U. S? And while saying in U. Speaker 500:16:38S, there has been a change, as you mentioned, in the Pipe Logics. Is the new basket more reflective better of your mix? And I was wondering if you can give us maybe your thoughts on how the basket has changed and whether it can capture better basically your average selling price? That's the first question. The second question is on the working capital sorry, on the share buyback. Speaker 500:17:11And the share buyback is going to terminate quite soon or the next maybe on the next few days or within weeks, certainly. Are we going to have a new share buyback, a new announcement with the November results? Because I believe there is still some room in the share buyback. The mandate is about 10% of the shares outstanding. And potentially, there could be another maybe EUR 700,000,000 to go before the next AGM or before the next EGM, let's Thank you. Speaker 200:17:49Thank you, Alessandro. On the first one on demand in the U. S. Frankly, I don't think there are structural reason that discourage investment. We mentioned last conference call the role that interest rate has clearly a reduction in the interest rate with supported financing of project by the smaller company and this could help. Speaker 200:18:17But the price of oil in the range of 75,000,000 to 80,000,000 is a good ground for to some stop and reflection by some of the operator. So probably the time we have now, the 6 months we have had with election in the United States, interest rate still relatively high compared to what we could expect in a long term and consolidation on its way is maintaining level of drilling and activity at this point. Even if it's clear that the efficiency and productivity of the wells realized is, let's say, gradually improving, so the production is at very high level. But I think that the overall scenario is positive in this. There should be a recovery in the line and also associated level of demand and rig count over time. Speaker 200:19:43The problem here, as Luca was mentioning, is more on the side of the import. Import 40% of the market is very high share of the market. And I think the issue is here how to contain the pressure on imports on the domestic industry. Now on the second point, the pipe logic, as I mentioned, we expect to continue to expect stabilization of Biologics after, let's say, the impact also of these 3% on these months and on the next one. But the mix has changed. Speaker 200:20:31Luca, you can give Yes, I mean Moment on the change in the basket. Speaker 400:20:41Yes. One point before we move into the basket specifics. I believe that this change of even if the pipe logic readings is directionally correct, I believe that this change in basket may have introduced some, let's say, perturbations of the reading. So we need to see going forward. But to answer specifically to your question, yes, the change in basket is more reflective of 1. Speaker 400:21:18The product range that is being sold in the United States in general and specifically the ones that we are selling, in particular, one of the, let's say, major changes that Pipe Logics introduced is a split between in the semi premium, let's say, space, where we differentiate between batteries like or batteries compatible connections and high torque connections like our Wedge 400 series, 441, 461, which, as you know, are our best seller or have been our best seller over the last, let's say, many quarters. So the answer is yes. Speaker 500:22:05I was asking because, I mean, if we look at the old one, it's down 3% and the new one gives a completely different picture, up month to month. So I'm not sure, I mean, is it going down or up based on what you see, based on your basket? Speaker 400:22:24Sorry, can you repeat it? Because I'm not sure I fully understood the question, Alessandro. Speaker 500:22:28Yes, because there is a big difference between the two indices. The old one is pointing to a meaningful decline, 3%, but the new one is, I think, is more up months and months. So which one so the new one are you saying is more reflective of your business and therefore prices are starting to go up a little bit? Speaker 400:22:54Yes. I mean, in the end, what they did, they took out some items and they put in other items. And the items they took out were coming in at an absolute lower price than the one they put in. And so overall, you see this increase. Speaker 200:23:08But responding to your question, I think that the new basket is probably more in line with our mix. For sure. So we should be able probably to have a lower reduction in our basket, in our sales compared, let's say, to the original basket that is going down 3%. We should be able to have a lower reduction in this. This is, let's say, the analogy of the basket. Speaker 200:23:40By the way, it comes out yesterday, I think we need to compare. Remember, in some formula, we're not using the index as a whole, but we're using specific part of the basket adjusting to the need of the client. So there are different formula internationally or locally. And I would say that the impact is different in different clients because the clients are selecting indicator that best reflect their Speaker 500:24:16demand. Now Speaker 200:24:17the point on the you made on the share buyback, We are still doing buyback of the last tranche of the program that we launched last year, and we will continue to complete this program. And then I think it's up to the Board in November to decide what to do and how to taking into consideration the environment, the situation and everything, how to proceed or not on this. I will leave this to the decision for the next board. The next board have the ability to continue using the delegation from the general assembly or having a strong assembly to deliver further expansion of the program. I mean, there are no limitation in this. Speaker 200:25:18But the point is they will evaluate circumstances for the decision. Speaker 500:25:25Very clear. Thank you very much. Operator00:25:29Thank you. One moment for our next question. Our next question comes from the line of Arun Jiram from JPMorgan Securities LLC. Speaker 600:25:42Yes, good morning. Paolo, I was wondering if you could elaborate on some of the destocking trends that you mentioned in the Middle East. And then as you think about reducing your prior expectations for second half volumes, do you see this more as just lower demand or do you expect some of this volume perhaps in Argentina and Mexico to shift into 2025? Speaker 200:26:17Thank you, Arum. Well, on the second point, as I told you before, I'm very confident that Argentina has relevant plans for developing Vaca Muerta by different operator. And there will be activity in the infrastructure, in drilling. And so in gas, you have seen that there are announcement of the decision taken in the new LNG plant. It will take time to formalize, finance, get all the clearance for the project. Speaker 200:26:56But this will go on over time. And then also the export of oil will go on. So I'm very positive on the medium term, but the new government 6 months in charge or 7 months in charge, difficult situation to put under control from the point of view of inflation and fiscal equilibrium. So Argentina will recover credibility and access to the market, but it will take a little more time. We were all probably over optimistic in thinking that this could be done in shorter term, but it will happen. Speaker 200:27:33In the case of Mexico, change in government, implied changes also in the territory of energy and the appointment in the key energy company, Pemex and CFE, has not been done yet. So it's more difficult to understand which is the policy of the new government and Cloudera Scheinbahn looking in the future. Pemex needs action by the government in refinancing part of this debt, but it's clear that Mexico needs energy. This last month, we had shortages of electric power. We had disruption and it's clear that there is need of investment. Speaker 200:28:24So I'm also positive, but the assumption that we're going to assume in October, something of this that we were expecting maybe in the second half will materialize later on. There will be, let's say, any policy action will take will have impact later. So we are positive on this, but we expect the postponement of some of the demand. As far as the Middle East in all areas as aspect is concerned, I would ask Gabriel to give an overview of how we look at we see the situation and the demand in these 6 months. Speaker 700:29:22Good morning, Arun. Regarding the Middle East, as Paolo anticipated in the opening remarks, the drilling activity remains strong with the NOC operating at the high levels. For example, Saburamco still at the 300 rigs, increasing on the unconventional, reducing on the offshore oil, keeping that level. UAE as well, operating at healthy levels of 120 rigs. So I would say that we see stability in the consumption of OCDG in the region in the main operators. Speaker 700:29:54At the same time, we see some of these NOCs in the region rebalancing their inventories and entering into a destocking mode in the next semester, okay? So this is something that is important to mention and will affect our shipments in the second half of the year. In addition to that, we have the completion of the delivery of the NFE pipeline in Qatar. There are some other large projects in the regions that are still not defined that we will see more into 2025. So this will also affect second half comparison versus first half. Speaker 700:30:34So overall, there is going to be a reduction, still at high level of shipments in the second half of the region in Middle East in the second half, but lower than the record shipments that we had in the first half of the Speaker 600:30:51year. Great. Just my follow-up is on the buyback. Paolo, the company at the end of the quarter had $3,800,000,000 of net cash. I assume you don't want to turn Tenaris into a bank, but just some thoughts on capital allocation or what you think is the most prudent use of excess cash on the balance sheet? Speaker 200:31:21Well, you know on this last year, we opened the door for share buyback. This combined with our dividend policy. At the same time, we are looking for potential opportunity for investing capital with high return in our business. If we don't identify opportunity within our sector that has potential impact, well, it will be up to the shareholder and to the board to decide what to do. In the meantime, we manage prudently our cash. Speaker 200:32:17We are not a bank, but we try to protect the best we can the liquidity and to have return on it that you can see in our financial statement. Speaker 600:32:38Great. Thanks a lot. Operator00:32:41Thank you. One moment for our next question. Our next question comes from the line of Christopher Kuplent from Bank of America. Speaker 800:32:53Yes, thank you very much. A lot of my questions have been answered, but maybe I can try again and ask you what you're hoping to present that will be new in September without obviously expecting you to tell us the details and the content. But I'm intrigued by the timing. Do you expect to be through maintenance by then? Do you expect that we will have a better outlook on pricing progression in the U. Speaker 800:33:21S. By then? Or do you expect to have more visibility on exactly what you've just highlighted, opportunities for M and A or not, I. E, in other words, the capacity to deploy your balance sheet for future buybacks, etcetera? And if I can sneak in one more on the litigation provision that you've taken. Speaker 800:33:43What kind of timelines are you attaching to that if we're looking for a resolution anytime soon? Thank you. Speaker 200:33:53Thank you, Christopher. Well, I think it passed some time since the last time we did an Investor Day, the company has changed in its perimeter. There are new region and new business. The profile of the company has changed and also our market and our competitive environment has changed. I think it will be useful to meet with our world of investor and to present where we are and where we see the key industrial profile is changing because we are introducing technological change. Speaker 200:34:51We are modifying this and we think that we were we will be prepared to increase efficiency and productivity and to reposition also our industrial structure from the point of view of decarbonization and environmental footprint. I think it will be important to after some years in which we didn't have this opportunity to have an overview of where we are and also on the point that you mentioned, how is our capital allocation and what we see in the medium run as, let's say, the path that the company could follow, including the aspect concerning capital allocation. This is the first point. On the second point, the case for that we have in Brazil and in which we are registering a provision. Let me tell you that we are we have been required to make provision as a result of this adverse decision by the superior court of justice in Brazil in a litigation against CSN for the acquisition 12 years ago of Jiminias. Speaker 200:36:30Let me tell you that Tenaris believe that such a decision is really contrary to the applicable substantive and procedural law. We cannot comment so much on it. This is not something that will end in very quickly. We expect there will be additional space for litigation, and we will pursue this as much as we can in all the areas. We plan to defend our position because remember, this is a position that has been confirmed in long line of decision by the administrative authority and also by all the level of court decision before. Speaker 200:37:28So we will file all the motion and appeals that are available to us. This will be this motion and appeal will need to be resolved before the case become final. And there will be also included the determination of the actual payout amount, if any, that should be made. This should be made by a lower court and a separate proceeding, so it will take time to get the definition on this. And we are we will do all we can to defend our position and establish, let's say, our right to operate as we operate in 2012. Speaker 100:38:17Great. Appreciate that. Thank you. Operator00:38:21Thank you. One moment for our next question. Our next question comes from the line of Luigi Develis from Equita SIM. Speaker 900:38:33Hi, good morning. Just three questions for me. The first one is on the cost. You mentioned that you are acting to reduce cost. Can you elaborate on the size of the cost reduction expected? Speaker 900:38:44And when do you expect the rate impact of this action? The second question on working capital, so excellent reduction in second quarter. How do you expect this to evolve during the second half of the year? And the last question on the outlook. So can you elaborate on the exit speed in Q4 in terms of sales and profitability? Speaker 900:39:06And if you expect a better quarter entering 2025, if you have visibility on this, considering it's also the end of destocking in Middle East, your visibility on U. S. Redirect clients? Thank you. Speaker 200:39:25Thank you, Luigi. This is on the first point. As we mentioned in our press release and in our open remark, we see this lower volume in the 2nd semester, and we take advantage of the situation for doing all the extraordinary maintenance and investment using this time also to address some of the extraordinary maintenance work that we are that are needed in because we were working at almost full capacity for a long period of time. During this, we will expand the level of automation, renew the process and the technology in some of the core area of our business. We have been successful also in this in the last year and the previous year in developing the full potential of our stronger facility. Speaker 200:40:38So facility like Bay City today are operating at record level. So we have efficient facility, core facility. That are operating even above the level that we were originally planned. So we need to restructure, reorganize also this closing or reducing operation in some of the facility, in particularly the United States, but not only the United States. States, this will allow us to reduce our overall cost. Speaker 200:41:16At the same time, we think we can address some specification in which we can reduce cost. We have a plan of action for this. We think we can reach savings in the range of $200,000,000 per year over, let's say, that could materialize between now and June 2025. This is a broad number. There are issue like devaluation or exchange in appreciation of the exchange rate that are relevant for our labor cost all around the world. Speaker 200:41:59Some of this is unpredictable, something is something that is more under our control. As a whole, this adjustment plan is justified by the slowdown that we have seen in the sales in the second semester of the year, But we will not affect our capability to enter in 2025 and respond to, let's say, the opportunity that I mentioned that we see going on. The second point, this was the related to the U. S? No, working capital. Speaker 200:42:47Working capital exclusively all over the working capital. Well, working capital has been giving us a positive contribution to our cash flow in the 2nd Q, extraordinary positive contribution, will continue to support our cash flow in the coming quarter because we are reducing our inventory. We have good progress in our collection. So we expect this to continue to contribute, but probably not in the same volume and same amount as in the second Q. The third question is what we see and the visibility that we have in 2019 for the next year. Speaker 200:43:40I think that at this point in time, we really do not have full visibility of this. The different region I mentioned, the Latin America, and as I tell you, I am positive on it. As far as U. S, over time, election are important in the U. S. Speaker 200:44:03But maybe, Luca, you can add to the extent to which you think we have visibility? Speaker 400:44:13Good morning, Luigi. Obviously, election and the result of the election are going to be a factor together with the cost of capital. And so there are a number of variables that are obviously beyond our control. And depending on the combination of these variable plays out, we might see a different scenario in terms of overall activity. Now when we get to our sales, probably the point that is worth mentioning is that there are still 2 big, let's say, consolidation that have not been yet cleared by the antitrust, being Diamondback with Endeavor and Conoco Phillips with Marathon. Speaker 400:45:00And obviously, should this transaction go through, as we all expect, this will be an important upside on our sales being Diamondback and Conoco, 2 very important customers within our portfolio. Speaker 200:45:19And then for the Middle East and let's say, the rest of the market, including the offshore, Gabriel, your sense, we know that there is not so much visibility, but still Speaker 700:45:34Yes. Thank you, Paolo. Yes, Luigi, in terms of the international markets, including Middle East and the offshore in general, the outlook is quite positive. The fundamentals are there. The NOCs in the Middle East continue to invest. Speaker 700:45:49They're in infrastructure projects as well going on. And in the offshore space, the level of FIDs that have been announced are not in the pipeline. We expect that, that will sustain a multiyear cycle of high level of CapEx. But as Paolo said, this is a we have partial visibility into the 2025. We already have some contracts that go into 2025, but this does not pertain to all segments and countries and regions involved. Speaker 700:46:20So overall, I would say positive outlook in the midterm, but this is a bit far along the timeline. Speaker 900:46:33Thank you. Operator00:46:36Thank you. At this time, I'm showing no further questions. I would like to turn the conference back over to Giovanni Sardagna for closing remarks. Speaker 100:46:45Thank you, Gigi, and thank you all for joining us, and we hope to see you in London at the end of next month.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallTenaris Q2 202400:00 / 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.com$2 Trillion Disappears Because of Fed's Secretive New Move$2 trillion has disappeared from the US government's books. The reason why is a new, secretive move being carried out by the Fed that has nothing to do with lowering or raising interest rates... but could soon have an enormous impact on your wealth.April 25, 2025 | Stansberry Research (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. 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There are 10 speakers on the call. Operator00:00:00Good day, and thank you for standing by. Welcome to Quarter 2, 2024 Tenaris S. A. Earnings Conference Call. At this time, all participants are in a listen only mode. Operator00:00:12After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Giovanni Sardagna. Please go ahead. Speaker 100:00:43Thank you, Gigi, and welcome to Tenaris 20 24 Second 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. With me on the call today are Paolo Roca, our Chairman and CEO Alicia Mondoro, our Chief Financial Officer Gabriel Potkuka, our Chief Operating Officer and Luca Zanotti, President of our U. S. Operations. Speaker 100:01:13I would like to start by mentioning that we will host an investor presentation in London on September 24, and we hope to see many of you there. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results. Our 2nd quarter sales reached $3,300,000,000 down 18% year on year and 3% sequentially, mainly due to slightly lower volumes and average selling prices during the quarter. Average selling prices in our tubes operating segment decreased 17% compared to the corresponding quarter of last year and 1% sequentially as lower prices have been greatly offset by favorable sales mix. Our EBITDA for the quarter was down 34% sequentially to $650,000,000 due to lower selling prices and an extraordinary provision recorded for an ongoing litigation related to the acquisition of a participation in Usiminas in 2012. Speaker 100:02:16Our EBITDA margin for the quarter was close to 20%. Without this extraordinary provision, our EBITDA would have been 8 $21,000,000 and our EBITDA margin would have been 25%. With operating cash flow of 935,000,000 dollars and capital expenditure of $161,000,000 our free cash flow for the quarter was 774,000,000 dollars After a dividend payment of $459,000,000 in May and share buybacks of $492,000,000 our net cash position amounted to $3,800,000,000 at the end of the quarter. Now I will ask Paolo to say a few words before we open the call to questions. Speaker 200:02:59Thank you, Giovanni, and good morning to all of you. During the 1st two quarters, our sales have remained remarkably resilient, considering a market environment in which drilling activity has reduced, and OCTG prices have been falling in the United States. This reflected the differential market positioning we have built up in North America with our Rig Direct service model as well as in offshore projects around the world. Particularly high level of shipment we have been making in the Middle East and the contribution for our newly acquired Tenaris Shocor Coating Business. I would also like to highlight our strong free cash flow of $774,000,000 during the second quarter. Speaker 200:03:47When we were able to achieve a $285,000,000 reduction in working capital. Thus, we were able to maintain our excellent net cash position of $3,800,000,000 while we distributed $950,000,000 to our shareholders. Indoti spending on offshore projects, particularly in complex deepwater operation, has increased since 2023 and is set to increase further in the year ahead. For this project, we are a preferred supplier for the majors with a fully integrated offer of pipes and services. This includes large diameter conductor and surface casing with connectors, Intermediate and production casing, tubing and accessories, stainless, high chrome alloy steels, duplex connection tested for use in the new extreme application required by the Gulf of Mexico development. Speaker 200:04:47We are also supplying the 3 d mapping services for high collapse application as well as offshore line pipe delivered with a full range of Tenaris Shocker Coatings and advanced project management services. This quarter, we renewed our long term contract for shale operation in the Gulf of Mexico and have been selected by ExxonMobil for their upcoming operation in Angola. We were also awarded the supply of casing and offshore line pipe and coatings by Woodside Trion project in Mexico. In the second half, we will begin deliveries of coated line pipe for Equinor Raya project in Brazil, and we have an extensive backlog of order for offshore project going into 2025. Today, however, as we look toward the second half, we see that our sale will be lower than the sale in the 1st semester, affected mainly by 3 factors. Speaker 200:05:53In the United States, a record level of oil and gas production are being sustained even as drilling activity has decreased and reduced the overall demand for pipe. At the same time, OCTG imports, particularly from Asian countries, remain high, accounting for 40% of demand, which compares with the 20% for other steel product always in the USA. This level of imports is affecting pipe prices and is causing damage to the domestic industry. In the Middle East, activity and consumption from the region remain at a good level. But in the main countries, we see a destocking trend beyond our original expectation. Speaker 200:06:43This combined with the completion of deliveries for the NFE Offshore Pipeline in Qatar will affect our sales in the region in the second half. The change in the government in Mexico and the uncertainty surrounding the policy for the energy sector are limiting drilling investment in the country. In Argentina, the necessary stabilization of the macroeconomic environment is delaying investment in drilling and the development of infrastructure in Vaca Muerta. This factor will affect our sales and results in the second half, when we expect that our sales volume will be 10% to 15% below those of the first half. And there will be further adjustment to our prices in the Americas, reflecting market condition. Speaker 200:07:36This quarter, as anticipated, we are carrying out important investment and maintenance stoppages in many areas of our industrial system aimed at recovering full operational capacity, improving efficiency and reducing our carbon footprint. This investment includes a major overhaul of our medium rolling mill in Mexico, the installation of a new electric arc furnace in our Argentine steel shop, the revamping of our copper steel shop in the United States to increase capacity and reduce environmental impact and the finishing line of our Italian mill. We are also starting the construction of our 2nd wind farm in Argentina, which will have a capacity for 92 megawatts and will allow us to supply 100% of the need of Argentina from renewable resources. The level of demand is requiring an adjustment in our industrial operation. Concentration of production in the more efficient facilities and the reduction of logistic and operational cost. Speaker 200:08:49Looking further ahead, we expect that all the region in which we have a strong competitive position will drive an increase in our activity over time. Our global reach, competitive product and service differentiation and unique portfolio of long term agreements with established customer position us favorably for serving the growing demand of energy across the world. I will leave now to any question you may have. Thank you. Operator00:09:19Thank you. Our first question comes from the line of Marc Bianchi from TD Cowen. Speaker 300:09:49Hi, thank you. I was hoping you could talk a little bit more about the progression of margin in the back half here. So now we've got volume, I heard you down 10% to 15% in the back half with some weaker pricing. Maybe you could talk about the margin progression, but perhaps first, before you say that or along with that, talk to us about your expectation for the progression of Pipelogix from here, just so we can understand the context. Speaker 200:10:22Thank you, Marc. As I mentioned in the remark, in the last conference, we're expecting the pipe logic to destabilize in some of them. But the level of import has been relatively higher to what was our expectation. And so the Paypalogic is registered in minus 3% that appeared yesterday on comparable set of data. And we expect that further reduction. Speaker 200:11:15We think it should stabilize and also we think that the import to some extent should recede, as I mentioned in the opening remark. It's an important variable. Maybe, Luca, you may add, which is your perception of pricing in the U. S. Market, that is important also for other region for us because it's part of the formula that we have in some of the countries, especially in the Americas. Speaker 400:11:48Yes. Thank you. Hi, Marc. No, I believe that I will go back to what I said or what we said already in the last earnings call. And here, Mark, the problem is the following. Speaker 400:12:04The industry, the OCTG industry was somewhat tricked by some expectation of increased activity at the beginning of 2024. And for this reason, distributors placed imports order that have been flowing in during the Q1 and the Q2 of 2024. Now as we all know, this expectation of increased demand did not materialize. And so these imports ended up remaining in the inventory. Now imports are expected to go down. Speaker 400:12:45Actually, they already went down a bit in the Q2, and we expect this to go down. Thank also to some trade enforcement action that we have been able to successfully implement as a domestic industry. And to a certain extent, even Section 232 with the decrease in prices will start to bite. Also, we do expect a reduction in the domestic side of the supply. And so as Paolo was to conclude, as Paolo was mentioning before, the adjustment is going to take a little bit more than what originally expected. Speaker 400:13:26But we see no reason why this should not happen going forward. Speaker 200:13:35Thank you, Luca. The second question was about the margin. We were guiding in the last conference call for our margin to be between 20%, 25%. We ended up with this quarter close to the high part of this range. I think that in the second semester, we should be around the lower end of this range. Speaker 300:14:03Okay. Thank you, Paolo. And may I just confirm, when you said the second half down 10% to 15%, was that a comment about volume or a comment about revenue? Speaker 200:14:15No, it's a comment about volume. This is what we see today. We see volume going down for the reason that we mentioned in the prepared remark. And this is due to the factor that we mentioned basically. There is something that we also just to recap briefly what we mentioned, the uncertainty in Mexico and in Argentina, just waiting for decision of the energy policy and how Argentina could finance a development of our Comerter that we frankly see as inevitable. Speaker 200:15:04So we are convinced that there is ample scope for expansion and for demand in Argentina, in LINE PEP, in OCTG. But the point is that the macroeconomic environment is postponing the moment which this project could be reliably financed. So we are optimistic in this sense on the development and this is an area in which we are very strong. But we need to register the fact that in this month, in the 2nd semester, there will be not so much movement on this. Speaker 300:15:40Yes, makes sense. Thank you very much. I'll turn it back. Operator00:15:46Thank you. One moment for our next question. Our next question comes from the line of Alessandro Pozzi from Mediobanca. Speaker 500:15:56Good afternoon. Thank you for taking my questions. The first one is on the U. S. Market. Speaker 500:16:05You mentioned a record level of production and yet drilling activities remains quite muted as a number of operators focus more on efficiencies and productivity. I was wondering, are we in a paradigm change where we are going to see even lower, let's say, drilling operations and for fewer rigs, basically, we could see even higher production. And is that a concern for you for OCTG demand going forward in the U. S? And while saying in U. Speaker 500:16:38S, there has been a change, as you mentioned, in the Pipe Logics. Is the new basket more reflective better of your mix? And I was wondering if you can give us maybe your thoughts on how the basket has changed and whether it can capture better basically your average selling price? That's the first question. The second question is on the working capital sorry, on the share buyback. Speaker 500:17:11And the share buyback is going to terminate quite soon or the next maybe on the next few days or within weeks, certainly. Are we going to have a new share buyback, a new announcement with the November results? Because I believe there is still some room in the share buyback. The mandate is about 10% of the shares outstanding. And potentially, there could be another maybe EUR 700,000,000 to go before the next AGM or before the next EGM, let's Thank you. Speaker 200:17:49Thank you, Alessandro. On the first one on demand in the U. S. Frankly, I don't think there are structural reason that discourage investment. We mentioned last conference call the role that interest rate has clearly a reduction in the interest rate with supported financing of project by the smaller company and this could help. Speaker 200:18:17But the price of oil in the range of 75,000,000 to 80,000,000 is a good ground for to some stop and reflection by some of the operator. So probably the time we have now, the 6 months we have had with election in the United States, interest rate still relatively high compared to what we could expect in a long term and consolidation on its way is maintaining level of drilling and activity at this point. Even if it's clear that the efficiency and productivity of the wells realized is, let's say, gradually improving, so the production is at very high level. But I think that the overall scenario is positive in this. There should be a recovery in the line and also associated level of demand and rig count over time. Speaker 200:19:43The problem here, as Luca was mentioning, is more on the side of the import. Import 40% of the market is very high share of the market. And I think the issue is here how to contain the pressure on imports on the domestic industry. Now on the second point, the pipe logic, as I mentioned, we expect to continue to expect stabilization of Biologics after, let's say, the impact also of these 3% on these months and on the next one. But the mix has changed. Speaker 200:20:31Luca, you can give Yes, I mean Moment on the change in the basket. Speaker 400:20:41Yes. One point before we move into the basket specifics. I believe that this change of even if the pipe logic readings is directionally correct, I believe that this change in basket may have introduced some, let's say, perturbations of the reading. So we need to see going forward. But to answer specifically to your question, yes, the change in basket is more reflective of 1. Speaker 400:21:18The product range that is being sold in the United States in general and specifically the ones that we are selling, in particular, one of the, let's say, major changes that Pipe Logics introduced is a split between in the semi premium, let's say, space, where we differentiate between batteries like or batteries compatible connections and high torque connections like our Wedge 400 series, 441, 461, which, as you know, are our best seller or have been our best seller over the last, let's say, many quarters. So the answer is yes. Speaker 500:22:05I was asking because, I mean, if we look at the old one, it's down 3% and the new one gives a completely different picture, up month to month. So I'm not sure, I mean, is it going down or up based on what you see, based on your basket? Speaker 400:22:24Sorry, can you repeat it? Because I'm not sure I fully understood the question, Alessandro. Speaker 500:22:28Yes, because there is a big difference between the two indices. The old one is pointing to a meaningful decline, 3%, but the new one is, I think, is more up months and months. So which one so the new one are you saying is more reflective of your business and therefore prices are starting to go up a little bit? Speaker 400:22:54Yes. I mean, in the end, what they did, they took out some items and they put in other items. And the items they took out were coming in at an absolute lower price than the one they put in. And so overall, you see this increase. Speaker 200:23:08But responding to your question, I think that the new basket is probably more in line with our mix. For sure. So we should be able probably to have a lower reduction in our basket, in our sales compared, let's say, to the original basket that is going down 3%. We should be able to have a lower reduction in this. This is, let's say, the analogy of the basket. Speaker 200:23:40By the way, it comes out yesterday, I think we need to compare. Remember, in some formula, we're not using the index as a whole, but we're using specific part of the basket adjusting to the need of the client. So there are different formula internationally or locally. And I would say that the impact is different in different clients because the clients are selecting indicator that best reflect their Speaker 500:24:16demand. Now Speaker 200:24:17the point on the you made on the share buyback, We are still doing buyback of the last tranche of the program that we launched last year, and we will continue to complete this program. And then I think it's up to the Board in November to decide what to do and how to taking into consideration the environment, the situation and everything, how to proceed or not on this. I will leave this to the decision for the next board. The next board have the ability to continue using the delegation from the general assembly or having a strong assembly to deliver further expansion of the program. I mean, there are no limitation in this. Speaker 200:25:18But the point is they will evaluate circumstances for the decision. Speaker 500:25:25Very clear. Thank you very much. Operator00:25:29Thank you. One moment for our next question. Our next question comes from the line of Arun Jiram from JPMorgan Securities LLC. Speaker 600:25:42Yes, good morning. Paolo, I was wondering if you could elaborate on some of the destocking trends that you mentioned in the Middle East. And then as you think about reducing your prior expectations for second half volumes, do you see this more as just lower demand or do you expect some of this volume perhaps in Argentina and Mexico to shift into 2025? Speaker 200:26:17Thank you, Arum. Well, on the second point, as I told you before, I'm very confident that Argentina has relevant plans for developing Vaca Muerta by different operator. And there will be activity in the infrastructure, in drilling. And so in gas, you have seen that there are announcement of the decision taken in the new LNG plant. It will take time to formalize, finance, get all the clearance for the project. Speaker 200:26:56But this will go on over time. And then also the export of oil will go on. So I'm very positive on the medium term, but the new government 6 months in charge or 7 months in charge, difficult situation to put under control from the point of view of inflation and fiscal equilibrium. So Argentina will recover credibility and access to the market, but it will take a little more time. We were all probably over optimistic in thinking that this could be done in shorter term, but it will happen. Speaker 200:27:33In the case of Mexico, change in government, implied changes also in the territory of energy and the appointment in the key energy company, Pemex and CFE, has not been done yet. So it's more difficult to understand which is the policy of the new government and Cloudera Scheinbahn looking in the future. Pemex needs action by the government in refinancing part of this debt, but it's clear that Mexico needs energy. This last month, we had shortages of electric power. We had disruption and it's clear that there is need of investment. Speaker 200:28:24So I'm also positive, but the assumption that we're going to assume in October, something of this that we were expecting maybe in the second half will materialize later on. There will be, let's say, any policy action will take will have impact later. So we are positive on this, but we expect the postponement of some of the demand. As far as the Middle East in all areas as aspect is concerned, I would ask Gabriel to give an overview of how we look at we see the situation and the demand in these 6 months. Speaker 700:29:22Good morning, Arun. Regarding the Middle East, as Paolo anticipated in the opening remarks, the drilling activity remains strong with the NOC operating at the high levels. For example, Saburamco still at the 300 rigs, increasing on the unconventional, reducing on the offshore oil, keeping that level. UAE as well, operating at healthy levels of 120 rigs. So I would say that we see stability in the consumption of OCDG in the region in the main operators. Speaker 700:29:54At the same time, we see some of these NOCs in the region rebalancing their inventories and entering into a destocking mode in the next semester, okay? So this is something that is important to mention and will affect our shipments in the second half of the year. In addition to that, we have the completion of the delivery of the NFE pipeline in Qatar. There are some other large projects in the regions that are still not defined that we will see more into 2025. So this will also affect second half comparison versus first half. Speaker 700:30:34So overall, there is going to be a reduction, still at high level of shipments in the second half of the region in Middle East in the second half, but lower than the record shipments that we had in the first half of the Speaker 600:30:51year. Great. Just my follow-up is on the buyback. Paolo, the company at the end of the quarter had $3,800,000,000 of net cash. I assume you don't want to turn Tenaris into a bank, but just some thoughts on capital allocation or what you think is the most prudent use of excess cash on the balance sheet? Speaker 200:31:21Well, you know on this last year, we opened the door for share buyback. This combined with our dividend policy. At the same time, we are looking for potential opportunity for investing capital with high return in our business. If we don't identify opportunity within our sector that has potential impact, well, it will be up to the shareholder and to the board to decide what to do. In the meantime, we manage prudently our cash. Speaker 200:32:17We are not a bank, but we try to protect the best we can the liquidity and to have return on it that you can see in our financial statement. Speaker 600:32:38Great. Thanks a lot. Operator00:32:41Thank you. One moment for our next question. Our next question comes from the line of Christopher Kuplent from Bank of America. Speaker 800:32:53Yes, thank you very much. A lot of my questions have been answered, but maybe I can try again and ask you what you're hoping to present that will be new in September without obviously expecting you to tell us the details and the content. But I'm intrigued by the timing. Do you expect to be through maintenance by then? Do you expect that we will have a better outlook on pricing progression in the U. Speaker 800:33:21S. By then? Or do you expect to have more visibility on exactly what you've just highlighted, opportunities for M and A or not, I. E, in other words, the capacity to deploy your balance sheet for future buybacks, etcetera? And if I can sneak in one more on the litigation provision that you've taken. Speaker 800:33:43What kind of timelines are you attaching to that if we're looking for a resolution anytime soon? Thank you. Speaker 200:33:53Thank you, Christopher. Well, I think it passed some time since the last time we did an Investor Day, the company has changed in its perimeter. There are new region and new business. The profile of the company has changed and also our market and our competitive environment has changed. I think it will be useful to meet with our world of investor and to present where we are and where we see the key industrial profile is changing because we are introducing technological change. Speaker 200:34:51We are modifying this and we think that we were we will be prepared to increase efficiency and productivity and to reposition also our industrial structure from the point of view of decarbonization and environmental footprint. I think it will be important to after some years in which we didn't have this opportunity to have an overview of where we are and also on the point that you mentioned, how is our capital allocation and what we see in the medium run as, let's say, the path that the company could follow, including the aspect concerning capital allocation. This is the first point. On the second point, the case for that we have in Brazil and in which we are registering a provision. Let me tell you that we are we have been required to make provision as a result of this adverse decision by the superior court of justice in Brazil in a litigation against CSN for the acquisition 12 years ago of Jiminias. Speaker 200:36:30Let me tell you that Tenaris believe that such a decision is really contrary to the applicable substantive and procedural law. We cannot comment so much on it. This is not something that will end in very quickly. We expect there will be additional space for litigation, and we will pursue this as much as we can in all the areas. We plan to defend our position because remember, this is a position that has been confirmed in long line of decision by the administrative authority and also by all the level of court decision before. Speaker 200:37:28So we will file all the motion and appeals that are available to us. This will be this motion and appeal will need to be resolved before the case become final. And there will be also included the determination of the actual payout amount, if any, that should be made. This should be made by a lower court and a separate proceeding, so it will take time to get the definition on this. And we are we will do all we can to defend our position and establish, let's say, our right to operate as we operate in 2012. Speaker 100:38:17Great. Appreciate that. Thank you. Operator00:38:21Thank you. One moment for our next question. Our next question comes from the line of Luigi Develis from Equita SIM. Speaker 900:38:33Hi, good morning. Just three questions for me. The first one is on the cost. You mentioned that you are acting to reduce cost. Can you elaborate on the size of the cost reduction expected? Speaker 900:38:44And when do you expect the rate impact of this action? The second question on working capital, so excellent reduction in second quarter. How do you expect this to evolve during the second half of the year? And the last question on the outlook. So can you elaborate on the exit speed in Q4 in terms of sales and profitability? Speaker 900:39:06And if you expect a better quarter entering 2025, if you have visibility on this, considering it's also the end of destocking in Middle East, your visibility on U. S. Redirect clients? Thank you. Speaker 200:39:25Thank you, Luigi. This is on the first point. As we mentioned in our press release and in our open remark, we see this lower volume in the 2nd semester, and we take advantage of the situation for doing all the extraordinary maintenance and investment using this time also to address some of the extraordinary maintenance work that we are that are needed in because we were working at almost full capacity for a long period of time. During this, we will expand the level of automation, renew the process and the technology in some of the core area of our business. We have been successful also in this in the last year and the previous year in developing the full potential of our stronger facility. Speaker 200:40:38So facility like Bay City today are operating at record level. So we have efficient facility, core facility. That are operating even above the level that we were originally planned. So we need to restructure, reorganize also this closing or reducing operation in some of the facility, in particularly the United States, but not only the United States. States, this will allow us to reduce our overall cost. Speaker 200:41:16At the same time, we think we can address some specification in which we can reduce cost. We have a plan of action for this. We think we can reach savings in the range of $200,000,000 per year over, let's say, that could materialize between now and June 2025. This is a broad number. There are issue like devaluation or exchange in appreciation of the exchange rate that are relevant for our labor cost all around the world. Speaker 200:41:59Some of this is unpredictable, something is something that is more under our control. As a whole, this adjustment plan is justified by the slowdown that we have seen in the sales in the second semester of the year, But we will not affect our capability to enter in 2025 and respond to, let's say, the opportunity that I mentioned that we see going on. The second point, this was the related to the U. S? No, working capital. Speaker 200:42:47Working capital exclusively all over the working capital. Well, working capital has been giving us a positive contribution to our cash flow in the 2nd Q, extraordinary positive contribution, will continue to support our cash flow in the coming quarter because we are reducing our inventory. We have good progress in our collection. So we expect this to continue to contribute, but probably not in the same volume and same amount as in the second Q. The third question is what we see and the visibility that we have in 2019 for the next year. Speaker 200:43:40I think that at this point in time, we really do not have full visibility of this. The different region I mentioned, the Latin America, and as I tell you, I am positive on it. As far as U. S, over time, election are important in the U. S. Speaker 200:44:03But maybe, Luca, you can add to the extent to which you think we have visibility? Speaker 400:44:13Good morning, Luigi. Obviously, election and the result of the election are going to be a factor together with the cost of capital. And so there are a number of variables that are obviously beyond our control. And depending on the combination of these variable plays out, we might see a different scenario in terms of overall activity. Now when we get to our sales, probably the point that is worth mentioning is that there are still 2 big, let's say, consolidation that have not been yet cleared by the antitrust, being Diamondback with Endeavor and Conoco Phillips with Marathon. Speaker 400:45:00And obviously, should this transaction go through, as we all expect, this will be an important upside on our sales being Diamondback and Conoco, 2 very important customers within our portfolio. Speaker 200:45:19And then for the Middle East and let's say, the rest of the market, including the offshore, Gabriel, your sense, we know that there is not so much visibility, but still Speaker 700:45:34Yes. Thank you, Paolo. Yes, Luigi, in terms of the international markets, including Middle East and the offshore in general, the outlook is quite positive. The fundamentals are there. The NOCs in the Middle East continue to invest. Speaker 700:45:49They're in infrastructure projects as well going on. And in the offshore space, the level of FIDs that have been announced are not in the pipeline. We expect that, that will sustain a multiyear cycle of high level of CapEx. But as Paolo said, this is a we have partial visibility into the 2025. We already have some contracts that go into 2025, but this does not pertain to all segments and countries and regions involved. Speaker 700:46:20So overall, I would say positive outlook in the midterm, but this is a bit far along the timeline. Speaker 900:46:33Thank you. Operator00:46:36Thank you. At this time, I'm showing no further questions. I would like to turn the conference back over to Giovanni Sardagna for closing remarks. Speaker 100:46:45Thank you, Gigi, and thank you all for joining us, and we hope to see you in London at the end of next month.Read morePowered by