Tenaris S.A. Q3 FY2025 earnings call

• In the U.S. and Canada, despite slower drill rig activity, sales were maintained with mills operating at record levels of production and high efficiency. Around 90% of U.S. OCTG sales are produced in the U.S.
• Offshore projects: contributing to GranMorgu in Suriname and TPAO Sakarya deepwater development in the Black Sea, building an offshore order backlog for next year.
• Argentina: election results improving financing for Vaca Muerta shale play, increased energy production with a new 95-megawatt wind farm reducing carbon emissions.
• Europe: boiler and heat exchanger pipes production at full capacity, steel safeguard measures benefiting operations.

Tenaris' third quarter sales reached $3 billion, up 2% year-on-year but down 3% sequentially. The Tubes operating segment saw average selling prices decrease 1% year-on-year and sequentially. EBITDA for the quarter was $753 million, up 3% sequentially, with a margin of 25%. Excluding a $34 million one-off gain from the return of U.S. antidumping deposits, EBITDA would have been $719 million (24% of sales). Operating cash flow was $318 million, capital expenditure was $185 million, resulting in free cash flow of $133 million. After share buybacks of $351 million, net cash position declined to $3.5 billion at the end of the quarter.

• Expect fourth quarter sales to be close or in line with third quarter levels.
• EBITDA expected to be lower in single digits due to tariff impact on cost of sales.
• Anticipate market balance improvement as inventory levels normalize with further reductions in imports expected.

• Tariff impacts on cost of sales, with higher costs expected to be included in cost of goods sold in the fourth quarter.
• Inventory levels remaining above normal, affecting price trends.
• Uncertainty in trade negotiations and their potential impact on operations.

Q: Arun Jayaram from JPMorgan asked about implications of Argentinian elections and margin trends in Q4.

A: Paolo Rocca discussed the election as a turning point improving financing for shale plays and Guillermo Moreno commented on inventory levels and price recovery.

Q: Matthew Smith from Bank of America inquired about sales mix and shareholder distributions.

A: Paolo Rocca talked about sales mix trends and dividend increase, with Board to decide on buyback after current tranche.

Q: Marc Bianchi from TD Cowen asked about EBITDA progression and pipe in transit.

A: Paolo Rocca and Guillermo Moreno discussed tariff impact on EBITDA and import statistics showing reductions.

Q: Alessandro Pozzi from Mediobanca asked about Q1 outlook and market share.

A: Paolo Rocca and Gabriel Podskubka commented on tariff negotiations, Middle East business, and market share gains.

Q: Sebastian Erskine from Rothschild & Company Redburn asked about Mexico and input costs.

A: Paolo Rocca and Carlos Gomez Alzaga discussed Mexico's project impact and input cost trends.

Q: John Anderson from Barclays asked about Middle East pipe sourcing.

A: Gabriel Podskubka explained sourcing from domestic mills and other regions.

Q: Kevin Roger from Kepler Cheuvreux asked about regional profitability and working capital.

A: Paolo Rocca discussed diversified profitability and working capital changes due to PEMEX payments.

Q: Paul Redman from BNP Paribas Exane asked about U.S. inventory and shareholder buyback.

A: Guillermo Moreno commented on inventory types and shareholder's buyback positioning.

Q: Rodrigo Almeida from Santander asked about Argentina oilfield services and South American operations.

A: Paolo Rocca and Gabriel Podskubka discussed Argentina's oilfield activity and Petrobras contracts in Brazil