Tenaris S.A. (TS) Q3 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook: while there are positive aspects like increased dividends and share buybacks, there are also challenges such as decreased sales and price reductions. The Q&A reveals uncertainties regarding the impact of US policies and M&A opportunities, but management's expectation of stable margins and increased future activity provides some optimism. The absence of clear guidance on certain issues tempers the overall sentiment, leading to a neutral prediction for the stock price movement.
Key Financial Performance
Sales $2.9 billion, down 10% year-over-year due to lower prices in the Americas and lower demand in the USA, Mexico, and Saudi Arabia.
Average Selling Prices Decreased 14% year-over-year in the tubes operating segment, reflecting lower demand.
EBITDA $688 million, up 6% sequentially; without an extraordinary provision from the previous quarter, EBITDA would have declined 16% sequentially.
EBITDA Margin 23.6%, only marginally lower compared to the previous quarter on a comparable basis.
Operating Cash Flow $552 million.
Capital Expenditure $179 million.
Free Cash Flow $373 million for the quarter; $1.9 billion for the nine months.
Net Cash Position $4 billion at the end of the quarter.
Interim Dividend $0.27 per share, up 35% compared to last year.
Share Buyback $700 million authorized to be executed within the next five months.
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Operating Highlights
New Contracts: We were awarded the supply contract and received a down payment for the first phase of the Vaca Muerta Sur oil pipeline.
OCTG Service Agreements: We are being successful in showing the value of our RIG Direct Service Program by extending the coverage and duration of our service agreement among the larger Canadian operators.
Market Positioning in Offshore Projects: We have expanded our relationship with international oil companies and consolidated our positioning in complex offshore projects.
US Market Dynamics: In the United States where drilling activity has stabilized, OCTG imports are coming down.
Canadian Market Positioning: In Canada Trade action implemented in recent months has limited unfairly traded Chinese OCTG import.
Vaca Muerta Developments: In Argentina, economic conditions are improving and investments are starting to move forward in Vaca Muerta.
Plant Modernization: We have now largely concluded an important cycle of investment in the maintenance and modernization of our industrial system.
Productivity Improvements: This investment will contribute to significant improvement in productivity and environmental performance.
Shareholder Returns: Our Board of Directors decided to increase our interim dividend by 35% to $0.27 per share and to authorize follow-on share buyback program of around $700 million.
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Risk or Challenges
Sales Decline: Sales in Q3 2024 reached $2.9 billion, down 10% year-over-year and 12% sequentially, primarily due to lower prices in the Americas and reduced demand in the USA, Mexico, and Saudi Arabia.
Price Decrease: Average selling prices in the tubes operating segment decreased by 14% compared to the same quarter last year and 2% sequentially.
Supply Chain Challenges: OCTG imports in the US are decreasing, with imports from Thailand halted due to trade violations, and a reduction in Korean import quotas for 2025.
Economic Conditions in Argentina: Economic conditions are improving, but investments are still moving slowly, with delays in payments from Pemex in Mexico due to government transition.
Stocking Impact: In Saudi Arabia, Aramco is looking to reduce stocks, which may impact sales in Q4 2024.
Regulatory Issues: Trade actions in Canada have limited unfairly traded Chinese OCTG imports, affecting market dynamics.
Offshore Project Risks: While there are new awards in offshore projects, reliance on international oil companies and complex projects may pose risks if market conditions change.
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Guidance & Outlook
Investment in Industrial System: Concluded an important cycle of investment in maintenance and modernization, incorporating innovative technology for steelmaking and heating furnaces.
Expansion of Offshore Projects: Expanded relationships with international oil companies, securing awards that support offshore order backlog for 2025 and 2026.
RIG Direct Service Program: Extended coverage and duration of service agreements among larger Canadian operators, including a three-year contract with Petronas.
Vaca Muerta Pipeline Contract: Awarded supply contract for the Vaca Muerta Sur oil pipeline, connecting shale production to a new deep water port.
Interim Dividend: Increased interim dividend by 35% to $0.27 per share, totaling $0.54 per ADR.
Share Buyback Program: Authorized a share buyback program of $700 million to be executed within the next five months.
Free Cash Flow: Free cash flow for the nine months reached $1.9 billion, with a net cash position of $4 billion as of September 30.
Future Revenue Expectations: Expecting a rebound in US OCTG prices and positive trends in offshore project awards.
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Shareholder Return Plan
Interim Dividend: $0.27 per share or $0.54 per ADR, to be paid on November 20, 2024, which is a 35% increase compared to the interim dividend paid last year.
Share Buyback Program: $700 million share buyback program to be executed within the next five months.
Total Shareholder Return: Close to $2 billion will be returned to shareholders in the calendar year 2024 through the interim dividend and share buyback program.
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Key Q&A
Q:How could the new US administration impact your business, particularly regarding protectionist policies and M&A opportunities?
A:It's early to understand the changes, but the new administration may positively impact the energy sector, facilitating gas exports and potentially reducing Chinese material penetration. However, we need to wait for clearer tariff policies.
Q:What are your thoughts on the share buyback program beyond March?
A:The board will review the situation in February before making any decisions on the share buyback program.
Q:What is your outlook for North America activities in 2025?
A:We expect an increase in activity driven by customer budget resets and the return of small operators.
Q:If the new administration raises tariffs, what would be the impact on Tenaris?
A:We need to wait for the new administration's policy. However, we can produce most of what we sell in the US domestically.
Q:What are your near-term thoughts on volumes and EBITDA margins?
A:We expect a slight decrease in volume in Q4, with margins remaining stable. In Q1 2025, we anticipate a low-teens increase in volume and revenue.
Q:Can you provide insights on the upside in Argentina and Mexico?
A:In Argentina, we expect increased investment in the energy sector, with pipeline deliveries starting in Q1 2025. In Mexico, we await clarity on the new administration's energy policies.
Q:What is the status of the $200 million cost-saving project?
A:We are on track with the cost-saving project, expecting to realize more than one-third of the savings in the second half of 2024.
Q:What is your view on M&A opportunities outside your current product lines?
A:We focus on leveraging our competitive advantages rather than diversifying into unrelated areas.
Q:What are your thoughts on normalized EBITDA margins?
A:We believe our differentiation will allow for higher margins than current levels.
Q:What is the expected impact of the Raia pipeline project in Brazil?
A:Production and shipment for the Raia pipeline are proceeding well, with completion expected in Q2 2025.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding potential M&A opportunities in the US, stating they need to wait for the new administration's decisions. Additionally, they did not provide specific figures or clarity on the future share buyback program beyond March.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
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TS Transcript
Tenaris S.A. (TS) Q3 2025 Earnings Call Transcript
Unknown10-31
The earnings call presents a mixed outlook. Financial performance shows strong sales and a positive cash position, but margins are expected to decline due to tariffs. The Q&A reveals concerns about future EBITDA impacts and uncertainties in guidance, yet there's optimism in market expansions and shareholder returns. The strategic plan indicates potential growth in 2026, but short-term challenges remain. Overall, the sentiment is balanced, leading to a neutral prediction for stock price movement.
Tenaris S.A. (TS) Q2 2025 Earnings Call Transcript
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The earnings call presents a mixed outlook. While there are positive developments like the multi-year award from Chevron and record shipments, the guidance for the second half of 2025 is weak, with expected sales declines and tariff impacts. The Q&A reveals concerns about margin pressures and uncertainties in the fourth quarter. The share buyback program is a positive factor, but the lack of clear guidance and potential for lower activity due to oil prices and tariffs balance the sentiment to neutral.
Tenaris S.A. (TS) Q1 2025 Earnings Call Transcript
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The earnings call highlights mixed signals: financial performance shows a decline in sales but an increase in EBITDA and net cash position, indicating operational efficiency. However, macroeconomic uncertainties, potential impacts from low oil prices, and tariff challenges create concerns. The Q&A reveals high uncertainty and management's vague responses about future impacts, particularly regarding oil prices and Pemex. Share buybacks are a positive factor, but overall, the lack of clear guidance and potential risks balance the positives, leading to a neutral sentiment.
Tenaris S.A. (TS) Q3 2024 Earnings Call Transcript
Unknown11-7
The earnings call presents a mixed outlook: while there are positive aspects like increased dividends and share buybacks, there are also challenges such as decreased sales and price reductions. The Q&A reveals uncertainties regarding the impact of US policies and M&A opportunities, but management's expectation of stable margins and increased future activity provides some optimism. The absence of clear guidance on certain issues tempers the overall sentiment, leading to a neutral prediction for the stock price movement.
TS Report
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
