Tenaris SA Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Alessandro Pozzi - Mediobanca - Analyst : I think during your opening remarks, you mentioned a potential slowdown in activities in the US. I was wondering, are you really seeing companies pulling back on CapEx? And what sort of, let's say, level of rig count do you expect now by year-end? And you also mentioned that potentially ahead of what could be maybe a slower second half, you may be willing to take some cost-saving initiatives. I was wondering if you can maybe give us more color around that.

Question: Alessandro Pozzi - Mediobanca - Analyst : And I mean, if we look beyond the Q1 -- Q2 and is there any visibility at the moment for Q3? Do you think potentially, the lower oil prices could impact Q3? Or is it too early or do you have a view on how they could shape up?

Question: Arun Jayaram - JPMorgan - Analyst : Paolo, I was wondering if you could maybe give us your updated views on how the implementation of US tariffs and steel is impacting or will impact your operating results. Obviously, we've seen some improvement in price in terms of the Pipe Logix indices. And maybe you could also highlight if you've seen any changes in imports to the US just as the Section 232, quotas have been removed as part of the implementation of US tariffs.

Question: Arun Jayaram - JPMorgan - Analyst : Great. And Paolo, just a clarification. You mentioned $70 million of potential tariff cost impact per quarter, but that would be reflected in your flat EBITDA margin guide already. So it's not affecting your margins per se.

Question: Arun Jayaram - JPMorgan - Analyst : Great. And my second question is, Paolo, Giovanni mentioned how the net cash balance of the company has reached $4 billion. So I wanted to get your thoughts on reinvestment opportunities. I believe that you've exhausted your share buyback authorization and thoughts on potentially at the next annual meeting in May for the company to re-up the buyback authorization.

Question: David Anderson - Barclays - Analyst : Paolo, I certainly recognize all the uncertainty in the second half of the year. But if oil prices just stay where they are and if tariffs don't change from here, I'm just curious how you're seeing volumes in the second half progressing here? I certainly recognize the US is more sensitive to commodity prices. But your Rig Direct model encompasses most of the larger operators, who're probably not going to change the programs too much and then thinking about the rest of the world in that mix. I wouldn't think volume should fall too much in the second half, but could you potentially just give us a range of kind of outcomes that you think could happen?

Question: David Anderson - Barclays - Analyst : A separate question. You mentioned offshore a few times in your remarks. And I was just wondering, within your mix of volumes, should we expect that offshore component to start growing later this year into 2026. There's a number of offshore developments starting next year, talking about kind of longer programs that shouldn't be affected. I wouldn't think offshore should be impacted here. But I was just wondering if you start to see those volumes coming through your numbers later this year into 2026 and just kind of what you're hearing from your customers in terms of that potential offshore activity in '26?

Question: Sebastian Erskine - Redburn Atlantic - Analyst : The first one, I just had a question on the cost structure. I noticed in the first quarter kind of quite a large 9% sequential step down in unit labor costs and to a lesser extent on raw materials. Is there anything specific you can flag on that and kind of what we can expect in terms of a quarterly cadence going forward to the end of the year?

Question: Sebastian Erskine - Redburn Atlantic - Analyst : And then just a second one on Mexico. I mean the situation sort of appears to have further deteriorated with Pemex sort of growing and supply debt. I mean, could you give us an update on sort of where you see some movement to the upside in that geography? And given some of the commentary of your peers being quite sort of sanguine and negative?

Question: Stephen Gengaro - Stifel - Analyst : So I had a question about the raw material costs in the US market versus the pricing. And I'm just sort of thinking back to prior periods where when the market was strong enough and raw material costs were higher, I think you generally more than offset the increase. And today, it's a little bit different with the potential for lower activity. How do you think those two items balance themselves out in the second half of the year? Like do you think you can you can manage through it to hold margin? Or do you think the input costs in the face of potentially lower demand will be a headwind on margins in the second half of the year?

Question: Stephen Gengaro - Stifel - Analyst : And the other question I wanted to ask about is: given the Rig Direct model that's in place, can you just give us a sense for if we do see a reversal in price at all as a result of lower activity? What's sort of the timing on when we would see that start to show up in the numbers? Would it be third quarter? Would it be later just based on sort of the Rig Direct model and sort of the relationships you have with your key customers?

Question: Derek Podhaizer - Piper Sandler - Analyst : Just to kind of wrap up all the conversations around tariffs and the impact on pricing. And obviously, we have an activity outlook that has deteriorated over the last three months. But I remember last quarter, you discussed reaching a 25% margin target in the back half of the year. Obviously, we now have this potential activity role in the US. But considering the pricing increases, considering the tariffs, we're going to keep an eye on Section 232 quotas. Do you still think 25% EBITDA margin is to look at target for the second half of the year?

Question: Derek Podhaizer - Piper Sandler - Analyst : And then just maybe if we can expand. So the North America revenue was up 10% quarter-over-quarter. I know that includes Mexico, obviously, which is a region that has clearly deteriorated. So surprised to see the strength there. You talked about Canada seasonal recovery, but you also mentioned the increased sales through US Rig Direct. I just wanted to get your take, maybe if we can expand on that. Have you seen maybe a front-loading of budgets as your largest E&P operators look to order steel OCTG ahead of the tariff impact and potentially other impacts that could be coming throughout the year? Just maybe some thoughts on why you had such a strong quarter for North America driven by the US side, just considering Mexico was such a drag.

Question: Jamie Franklin - Jefferies - Analyst : Just a couple of clarifications. So I wanted to come back on costs, firstly. And last year at 2Q results, you gave a target for $200 million cost savings to be realized by 1H '25. Can you please quantify approximately how much of that has already been recognized as of 1Q '25 results? Secondly, regarding the decline in sales in South America in the quarter. The press release mentions lower prices in Argentina. Could you please just elaborate on that? And any further color you could give us on possible timing of orders in Argentina later this year, please? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 12:00PM, TENR.MI - Q1 2025 Tenaris SA Earnings Call

Question: Daniel Thomson - BNP Paribas - Analyst : Just a follow-up on the shareholder returns, comments, and thinking around the balance sheet. Obviously, the share price has taken a significant step down on the lower oil price environment already. And given your positive longer-term outlook, buybacks could represent one of the most attractive uses of cash here. So I just wondered how the lower share price factors into your thinking on repurchases and the pace of those repurchases that you've demonstrated under the existing program relative to maybe wanting to maintain a more defensive cash balance into the potentially weaker period? And second one is a bit more straightforward, just on the mechanics of any reauthorization. What is the time line between any reauthorization being issued in May and actually beginning with the implementation of the buyback? Are there any subsequent approvals required after that May meeting or not?