Tenaris SA Q4 2024 Earnings Call Transcript

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

Question: Arun Jayaram - JPMorgan - Analyst : My first question is on tariffs. Paolo, if the 25% tariffs on imported steel tubulars are implemented by the US Commerce Department, would you still expect Section 232 quotas to remain in place? And I guess the follow-up is, if Section 232 quotas are removed but tariffs are implemented, how do you see the impact on OCTG pricing and import trends, if that were to occur?

Question: Arun Jayaram - JPMorgan - Analyst : That's helpful to understand your view on that. So expect maybe pricing to get better and then perhaps the policies are supportive of domestic manufacturing and you manufacture the bulk of your North America -- support your North America sales through domestic manufacturing. That's clear. Maybe a follow-up, Paolo. Tenaris has a unique lens into what is going on in Argentina. So I was wondering if you could help us think about some of the potential growth prospects for Tenaris between just OCTG long-haul pipe and some of the services that you provide in Argentina between coiled tubing and as well in frac. I think you have some pressure pumping capacity in country.

Question: Alessandro Pozzi - Mediobanca - Analyst : I have two questions and they are related, I guess, to the reaction of the share price today. And I'm still trying to figure out if it's maybe the outlook that has been perceived to be a little bit less constructive compared to what you mentioned in the last call or maybe whether just expectations around announcement of share buybacks. And that leads to the first question. I was wondering if you can maybe give us your thoughts about what could be sales and margins evolution in Q1 and maybe in the first half of 2025 because we've seen the recovery in Pipe Logix. So maybe it's natural to expect a progression in top line and margins in the coming quarters. And the second question is on the share buyback. Of course, the program is ongoing still and you probably cannot say much about the new one. But I was wondering, shall we assume the new buyback to be in line with the $1.2 billion that you announced initially? Or perhaps you -- maybe you want to allocate some of the capital to potential acquisitions in the US that could expand your capacity given the new, let's say, geopolitical outlook. And yes, that's my two questions.

Question: Alessandro Pozzi - Mediobanca - Analyst : So do you expect maybe a marginal improvement in Q2 in margins? I was wondering, should we expect maybe margins to recover to 25% at some point during 2025?

Question: Alessandro Pozzi - Mediobanca - Analyst : And I mean, it will be influenced by whether you can do acquisitions in the US. I mean, there was an attempt to acquire Benteler some time ago. But Trump administration just the other day confirmed the new merger review guidelines of the previous administration. So maybe M&A in the US may not be as likely as we thought maybe before.

Question: Marc Bianchi - TD Cowen (Research) - Analyst : First to follow up if we could, on the buyback discussion just quickly. There were some comments at your September analyst event in London that sort of talked about plans around the buyback. Is it fair to conclude that those comments from September are still sort of in place and you're thinking about it the same way? Or has there been a change in the Board's view of how the buyback should be positioned?

Question: Marc Bianchi - TD Cowen (Research) - Analyst : The other question I had was on Mexico. So you talked about the sharp decline in activity. I think the market has been uncertain as to how Mexico unfolds from here, but it seems like maybe there's some incremental plan in place from them. We're just not sure exactly what it is. So kind of curious on, one, what are you hearing in terms of the pace of activity recovery in Mexico? And what is reflected in this first-half outlook that you've shared with the market? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, TENR.MI - Q4 2024 Tenaris SA Earnings Call

Question: Derek Podhaizer - Piper Sandler Companies - Analyst : Just maybe if you could spend some time on the supply-demand picture in North America. Maybe you could just walk us through, give us an idea of how much pipe is on the ground today, maybe the health of the distributors out there and kind of what they're importing, any sort of impact on Section 232 when it comes to quota reductions, primarily out of South Korea, maybe other places where a new quota has been put on. Just some help around that as we can kind of frame up the supportive nature of OCTG pricing when we think about the remainder of 2025. So just more of the supply and demand dynamics that you're seeing. And with the demand side, we've seen the rig count recover kind of off the fourth-quarter seasonality. And what are you expecting as we move forward in '25, just considering the outlook there? Just some help around the supply-demand would be great.

Question: Derek Podhaizer - Piper Sandler Companies - Analyst : Yes. And then maybe just on the demand side, just seeing the US rig count recover here. I mean, just off the seasonality bottom, what's your expectation when you talk to your customers as kind of the outlook for the rest of the year just from where you see it today?

Question: Derek Podhaizer - Piper Sandler Companies - Analyst : And then just a follow-up, maybe moving over to Saudi Arabia. Maybe just kind of walk through the puts and takes there with conventional versus the unconventional fields, oil versus gas, onshore versus onshore. I mean, where is Tenaris position? Where are you seeing the pockets of strength? And also where are you seeing some of the activity softness that we kind of hear out there?

Question: Kevin Roger - Kepler Cheuvreux (France) - Analyst : I would like, if I may, please going back on the US tariff and the potential impact. The first one would be on your production cost. Can you give us some color currently on what percentage of the billets that you currently use locally are outsourced from Europe or somewhere else, just to understand exactly what percentage of raw material costs could be impacted by any 25% tariff? And the second one, just to be sure that I well understood what you just said. If we have the 25% tariff and that in the meantime, all the quota are removed from the 232, don't you feel that the Korean guys that are currently under quota with 400,000 tons, something like that, will potentially be able to massively increase their imports because I guess that with just a 25% tariff, they will remain very, very competitive? That will be the two points on the tariff, please. And the last one, outside those topics, if you can give us some colors on currently Pemex. What are the level of receivables that you have currently with Pemex, please?

Question: Daniel Thomson - BNP Paribas Exane (UK) - Analyst : Just one question, please. I'm just trying to think about the impact of the price rises in Pipe Logix outside of the US. I was wondering if you could remind us sort of what proportion of your ex-US contracts have an element of Pipe Logix in them? And what's the sort of time frame for feed-through there? And if we did have US pricing increasing, considering the various lags, when could we expect that to feed through to those contracts and then feed through to your P&L beyond that?

Question: Mick Pickup - Barclays - Analyst : Sorry to ask again about the US. But can I just disaggregate the US market into seamless and welded? If my math is correct, you're importing some seamless tubes into the US from outside the US and obviously that's part of this uncertain territories. Can you just talk about your ability to ramp up some welded production should the need arise?