Tenaris S.A.

Good day and thank you for standing by. Welcome to the Q1 2023 Tenatis Essay Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. 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.

Giovanni Sardagna Thank you, Gigi, and welcome to Tenaris 2023 first quarter conference call. Before we start, I would like to remind you that we will be discussing forward-looking information during this call and that our actual results may vary from those expressed or implied during the call. With me on the call today are Paolo Rocca, our chairman and CEO, Alicia Mondolo, our chief financial officer, Gabriele Pozzusca, in his new position as chief operating officer, and Luca Zanotti, president of our US operations. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results. Our four-quarter sales reached 4.1 billion, up 75% year-on-year and 14% sequentially, mainly driven by higher sales of OCTG and line pipe for offshore projects around the world, in addition to a peak of shipments to a large pipeline project in Argentina. Average selling prices in our tube operating segment increased 32% compared to the corresponding quarter of 2022, but declined 1.5% sequentially. Our EBITDA for the quarter was up 16% sequentially, close to $1.5 billion. Our EBITDA margin reached $35.7 as lower costs of raw materials and energy costs combined with a better absorption of fixed costs on higher volumes, more than offset small decline in selling prices. With operating cash flow of $921 million and capital expenditure of $117 million, our free cash flow for the quarter was $804 million. At the end of the quarter, our net cash position increased to $1.7 billion, up from $921 million at the end of 2022. Now, I will ask Paolo to say a few words before we open the call to questions.

Thank you, Giovanni, and good morning to all of you. In this first quarter, Tenari achieved many records. Net sales, EBITDA, and net income all exceeded the previous record results of the fourth quarter last year. Our industrial supply chain system combined to deliver the highest level of shipment since 2008, with a more differentiated production mix. Production records were exceeded in many of our plants, including at the Bay City. Our rig direct service performed at record levels. In March, we served 540 rigs and executed over 1,200 field services activities at customer rigs around the world. Our newly introduced run-ready service, which delivers pipes to a rig ready to be run, is quickly gaining traction and now covers 45% of our U.S. rig direct shipment. Our sale of WEDSeries 400 connections, designed for shale application, and our sale of dopless connection and blue dock and easy dock connectors for offshore application also reach record level. During the year, we expect our sales of this specialized product, as well as our wedge series 600 and new blue connections, to exceed previous annual records. In April, Tenaris completed the delivery of 176,000 tons for the first phase of the Nestor Kirchner gas pipeline, thereby fulfilling its commitment to do so before the coming Argentine winter season. This task was only achieved thanks to the record production levels at our Valentina Sina Welder plant in Argentina, complemented by additional production from our Brazilian plant and the dedicated coordination between various companies within the Tequint group. This project represented a logistical challenge involving the dispatch of more than 600 kilometers of pipes. and delivering pipes for the QatarGas Northfield expansion project before the end of the year. While North America was the main driver for our sales growth in 2022, this year's sales for offshore projects and to the Middle East will rise strongly. In the first quarter, sales to offshore projects around the world rose 40% quarter-on-quarter and will increase further in the second quarter to represent close to 20% of our sales of tubes. In the Middle East, investment in oil and gas development has been increasing, while OCDG stocks, particularly in Saudi Arabia, are low. Our sales in the region are increasing, and further tenders are expected. The United States OCDG consumption has leveled off, but imports by distributors have surged. to reach record levels in the first quarter of 2023, following the run-up in prices of last year. OCG inventories on the ground have increased rapidly and now exceed customary levels, putting pressure on prices, particularly in non-hydrated items. In Canada, meanwhile, a parallel surge in Chinese imports in the second half for 2022 and early 2023 has resulted in excess inventories on the ground. The Canadian authorities revised normal value levels for Chinese OCTG imports in March with potential retroactive effect. North American market conditions should stabilize later this year as OCTG inventories return to normal levels. Also, our shipment will remain at a good level throughout the year, exceeding 2022 volumes. The pricing environment in the Americas will affect our overall level of sales and margin in the coming quarters. In the first quarters, our cash flow formulation reaches a good level as we stabilize inventory levels and should increase further and strengthen our already solid balance sheet. In the meantime, we proceed with our investment program to modernize our industrial system and reduce the bottlenecks that limit our production capabilities in high range and specialty products. We will increase the capacity of our Italian steel shop to produce special high alloy steels. And in Argentina, we are replacing a steel furnace with technology that will reduce carbon emission and improve operational efficiency and capacity. In the United States, we will modernize our steel shop to reduce its environmental impact on the surrounding communities. We will also install a heat treatment furnace in Italy with lower carbon emissions that will expand our capacity for serving offshore pipelines. Other investments include our new premium trading line in the Emirates, expanding capacity in our trading line for the use of our dupless technology in offshore applications, and our wind farm in Argentina in October. We will also complete the rollout of our new integrated production system across our main production centers, allowing us to optimize meal production schedules and reduce our lead times. In April, Gabriel Poskuzka was appointed as our Chief Operating Officer. He will be responsible for coordinating the company's sales and marketing, supply chain and production operation, as well as its product and service development. Gabriel had an extensive experience in every area of Tenerife, He's very well prepared for handling the very complex agenda on Tenaris on the time that are coming, and he will be up to undoubtedly up to this task. So I will now leave the floor open for any questions you may have.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Alessandro Pozzi from Mediobanca.

Hi, good afternoon. I have a couple of questions. The first one is on the outlook for the rest of the year. You mentioned a gradual decline in sales and EBITDA margins, of course, from record levels. But I was wondering if you can give us a bit more color of where you see potentially sales going and margins in Q2, which I think probably you should have sufficient visibility. and maybe attempt a forecast for the end of the year where we could see basically sales coming down to which level. And also remaining on the guidance, you mentioned an increase in cash flow gradually throughout the year. I was wondering, you still have a fairly high working capital in absolute terms. shall we see some of the reversal in working capital throughout the year and what sort of a free cash flow we could see because the free cash flow may be towards the $3 billion rather than the $2 billion for 2023. That's all for me. Thank you.

Thank you, Alessandro, for your question. Well, on the first one, as you were guiding, as we mentioned, The prices, as you can see in the trend, in the downward trend of the pipe logic, is to some extent affecting from now on also our overall pricing. In the United States, this is basically driven by the incoming flows of imports and leveling off or containment of the level of rigs and the operation. But in other parts of the world, in the Middle East and in the offshore, we see price still getting up, and there is price in power for specialty products in that area. But in this environment, combining all, we see some reduction in the overall price. Having said this, we expect our margin in the second quarter to remain or being slightly lower than our margin in the first quarter. Then the trend beyond the second quarter will be influenced by many factors. Today there is some uncertainty in the market and we will see how the different factors, price foil, operation, and the financial tension in the United States may influence what is coming. But that's the reason why we guide for a gradual decline in our results.

Now, when we talk about... in Q2 should we expect a single-digit decline as well?

We expect in sales a single-digit decline, but as I was saying, we expect to slightly lower or similar level of margin in the second Q. As far as the cash flow is concerned, When our sales are leveling up, our need of working capital is also contained. So finally, we begin to reduce our inventory to contain our receivable. So we expect slightly higher cash flow in the next quarter and sustained cash flow also in the rest of the year. Your point on the free cash flow, Also free cash flow will be very strong. Our investment will increase from around $380 million in 2022 to something in the range of $650 million in 2023. So this will not really change So much will affect our free cash flow and our free cash flow will be solid in our view in all of 2023 in every quarter.

Okay. So basically it's a step up from Q1. So probably higher than the 800 million that you delivered in Q1 over the next few quarters. So potentially above 3 billion for the full year.

What I'm saying is that it will be higher in the first quarter. Then we will see the effect of the working capital.

Okay, understood. Thank you very much.

Thank you. One moment for our next question. Our next question comes from the line of Mark Bianchi from Cowen.

Hi, thank you. I understand there are several factors affecting second half, as you mentioned, Paolo, but if you were to just flow through current pricing, what we're seeing in the spot market and what your current metallic and other costs are, because there's some lag. So I guess the question is, you know, when all of that flows through, does that imply further downside to margins or I don't know, or. international pricing and other things enough to offset that.

Thank you, Mark. When we look at our cost, it's true that we had some spike in hot-roll coils very recently, but then prices of iron ore, of ferrole and so, are going down. This will not get into our profit and loss in the coming quarter. Maybe by the fourth quarter, we may start to see something of this. It will depend also from how this, the level of volume will move on. But as I say, guiding in the second half, we have to take into consideration many factors, level of activity, pressure of import in the United States, some of the costs that could have an impact in a relatively short term. But as a whole, I think that our margin will get normalized in the level around 30% that we were mentioning in the past.

Okay, that's very helpful. Thank you. On the US activity or North America activity, one of the large drilling contractors provided an outlook for the June quarter where their rig count could fall by something like 19 to 24 rigs, which is a surprisingly large drop relative to what everybody else is saying. You guys have some pretty good visibility with Rig Direct. I'm curious if you could put that in rig count terms, what you see and what your customers are saying.

Yes. Thank you, Mark. Well, as you say, on one side, we see the number of rigs internationally and globally to go up, but in the United States, we have seen some reduction. I will ask Luca to give a view of the level of activity that we may expect from our client in the States. Yes, thank you, Paolo.

Hi, Mark. Look, yes, we have seen these statements Now, there are others that are forecasting much lower. But I believe that in the end here, it very much depends on the combination of your customer portfolio. Now, if you see what has happened so far, and according to Enverus, you've seen that the rig activity went down mainly on the small private that lost almost 100 rigs. So depending on where your exposure is, you may have different effects on your sales. When it gets to Tenaris, as you know, we are a large exposure to big operators that didn't show this dramatic drop. On the contrary, actually, they've been adding rigs through Q1. We expect this to be not the same as other operators in our space that may have exposure to a different customer portfolio. I go back to what Paolo was saying. We see a level off, but we don't see at this stage a dramatic decrease in activity as far as our portfolio is concerned. Obviously, there are uncertainties going through the second quarter, and so we're going to revise this.

I think it's important to follow the dynamic of price of oil. As we were saying in the last quarter, we still expect that the different factors affecting the market of supply and demand in oil should act to maintain the level of price in the range between $70 and $80. And in that condition, our client should maintain a relatively solid level of operation.

Great. Thank you very much.

Thank you. One moment for our next question. Our next question goes in the line of Stephen Gangaro from Stifel.

Thanks. Good morning. Good afternoon, everybody. I guess two things to me. If we just start with the balance sheet, the cash, the expected free cash flow, you're obviously in a very good spot from that perspective. Have you How do you think about giving more cash back to shareholders given the balance sheet and the free cash flow expectations? It seems like you could be more aggressively returning capital. I'm just thinking about how you approach that.

Thank you, Stephen. Yesterday we presented our results, our cash flow to the board. The board and the assembly will decide about that. evident use of cash. They were happy with the results. They will take this into consideration, but I think that then they will decide during the coming quarter considering the different options that we may have.

Is there any framework or way we should be thinking about how much net cash or cash you need on the balance sheet just from an operating perspective?

Well, you know, we are considering Teneri is the leading player in the world in this business and always has to consider the option of positioning in different scenarios, how to to expand its value chain. These are points that are always considered. At the same time, we have a track record of dividend that is also kept in good consideration by the board in taking decision on this. What we can see is that working capital should stabilize at this point, and we do not expect of cash by the working capital. On the contrary, to some extent, we should be able to get cash flow from inventory receivable in the coming quarters.

Thank you. And another question on the margin front, and maybe thinking about it. You know, the last couple of quarters, you've had extremely high EBITDA margins. And, you know, we can go back in history, and it's hard to find times that you were at these levels, if ever. But when we think about your business and sort of what you guys have done structurally to improve the efficiency of operations, your global footprint, the Bay City facility, et cetera, where would a margin – I'm trying to sort of think about – maybe you can help us understand – How much of the margin uplift and sustainability of margin is related to simply input cost versus selling prices versus all the internal improvements Tenaris has made? Is there a way to think about sort of like we were talking about going from 20% EBITDA margins to mid-30s? How much of that is simply price versus input? How much of that is how well Tenaris has done improving efficiency of operations?

Thank you, Stephen. Well, I would say that over the years, the expansion in results in Tenaris in absolute terms and in terms of margin is mainly due to the organic growth, the investment in our facility, the progression in establishing our business in the United States. The Tenaris of today is very different of 10 years ago. The participation in the U.S., in North American market in general, is above 50% of our revenues in this. So the company has changed. And also the level of service to our client, rig direct, run ready, there are components of the value and are contributing to the margins. of the company has also increased very much, not only in the States, but also in Latin America and Middle East and in other areas. This has contributed to, in my view, a sustainable increase in our level of margin in the different in the different situation for the market that we faced. That's the reason why we can today guide the medium term margin in the range of the 30% because of the work done in our value chain, in our reorganization and improvement in our operation. and expansion of our market and our service proposal. I think this is there. It's something that is being achieved. In this moment in particular, the inflow of import in the United States is having an impact on the shorter price. And you see this in the pipe logic. And to some extent, this is reverberating in our level of sales. not only to the states. But I don't think that this is really sustainable over the medium or long term.

Great. Nath, thank you for the detail. That's very helpful.

Thank you.

As a reminder, to ask a question, please press store 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our next question goes to the line of Kevin Roger from Kepler Chevro.

Yes, can you hear me? Yes, very good. Yes, perfect. Hi, thanks for all the time. Sorry for that, but it will be two kinds of follow-up. You just clarified that you expect the ABDA margin to stabilize around 30%. Another way to look at it, would it be fair to assume, therefore, that your EBITDA run rate would be at least around a billion dollars on a quarterly basis? That would be the first question. And the second question, Paolo, I I really understand that any decision around the dividends will be decided at the board level, etc. But if I can be curious and ask, what would be your personal view on that side? What would be your position at the board? What would you propose in terms of mindset, returning extra cash with special dividends or whatever? Just to maybe get a bit of sense on your personal view rather than the board, if I may be curious, please.

Well, thank you very much, Kevin. On the first point, we are in the range that you are saying, basically. This is what we can see now. I mean, obviously, these are issues that could be influenced by a factor like a recession in the States or so. These are always things that move and could be affected by this. On the question of dividend, I have no personal opinion. I just present to the board alternative and option, and they decide. So I cannot help you on this.

OK, fair enough. Thanks for that.

Thanks.

I'll try.

Thank you. One moment for our next question. Our next question comes from the line of David Anderson from Barclays.

Hi, good morning, Paolo. I want to ask you some questions about the longer cycle markets that impact your business over the next few years. Maybe just talk about offshore markets a little bit. We're seeing a wave of re-contracts that have been signed over the last 12 months. Subsea orders are piling up. FTI had some nice numbers this morning. And now we're hearing service companies are talking about the opportunity as well. Can you just talk about how you see the offshore impacting your volumes and kind of when that should start hitting? Is that a second half of 23 event for you? Is that more of a 24 event? And do any markets in particular stand out for Tenere's offshore-wise?

Well, thank you, David. I think this is a long-term evolution, but I will ask to Gabriel to... give a view of if this is a long-term trend and where we can see action in this.

Thank you, Paolo. Good morning, David. Indeed, offshore drilling continues to increase steadily. The global offshore recount already reached the pre-pandemic levels, and everything indicates that this will continue to grow. FID projections, CAPE projections, the discussions that we have with our various customers indicate that this is going to be a multiyear growth cycle. We are quite confident about that. And what we perceive, this is also happening in many basins at the same time. Tenaris, as you know, is an undisputed leader in this segment with a differentiated product and service portfolio. So we are very well positioned to take advantage of this trend. I would mention, for example, that we are ramping up shipments in Latin America. long-term agreements that we have in Brazil and Guyana. These are two key deepwater basins that will experience growth over the next few years, where we supply differentiated technologies such as blue dock connectors and casing with dopless technology. This is one area that will continue to grow into 2023 and beyond. Another hotspot has been the offshore seamless pipelines. We see a lot of activity in building infrastructure to support this increased drilling. And in the last few months, we have booked several deep water pipelines in North Sea, Sub-Saharan Africa, Black Sea. So we see this area also as a bright spot into the future. So overall, we believe the volumes are going to increase. This is already happening in quarter one, and this will continue to happen in the rest of the year. But we believe that this is going to be a multi-year cycle, and also this Some of in this segment, we have some long-term contracts that have formulas that will escalate pricing over time. And there are also new projects, new spot contracts coming on, which probably will be delivered in 2024. And certainly new contracts are being booked at higher prices. So we need to think of the offshore impacting positively, gradually in 23 and 24 in volume and in pricing.

Gabriel, that's what I was going to follow up with. I mean, I know the pipelines are a little bit of a different story, but generally speaking, you know, your OCTG offshore should be margins that are accretive to that normalized 30% margin number. Is that a fair statement to say in general? Okay.

Yes, correct. And the same would apply with the seamless structure pipeline. On the welded pipeline, for example, the one that we mentioned in Qatar and some in other legacy contracts, Average pricing and margin are lower than average. But when we're talking about the new cycle of deepwater offshore seamless pipelines, margins there are also quite differentiated.

Even there, wow, that's surprising because you usually think the pipelines are the lower margin business. Gabriel, while I have you here, maybe we can talk a little bit about the Middle East as well. Sort of just kind of curious kind of repricing opportunity you've seen over there. I heard one of your competitors recently raised pricing rather significantly on a recent contract. Should we expect Tenere to likewise be kind of start recapturing pricing here as contracts are renewed? Do you see, are there contract renewable opportunities coming up in the Middle East?

There are, David, indeed. The environment there in the Middle East is also very, very positive. Investments are being deployed in line with the capacity expansions announced by the NOC. Despite the announcement of OPEC Plus on refusing production, we don't see anything impacted negatively. Activity on the ground is increasing. The NOCs are moving on, increasing the level of purchasing and COLOS. Saudi Arabia, UAE, Qatar, also in Iraq, we are seeing a higher demand for our products. So there as well, where we have long-term agreements, we have formulas and renegotiation, and new contracts, new orders are coming at a distinctive, different pricing. So we see that over time to be impacting positively into 2023, and we already have good visibility in the Middle East into 2024. This is another multi-year growth cycle.

Sounds like some very good, positive, consistent trends. Good to hear. Thank you very much. Appreciate it.

Thank you, David. This is really the new contract coming at prices that are different from the old one, but some of the old contracts like a big line pipe contract for Qatar, we will continue to stay in our number until the end of the year with very low margin. This one big contract, because some of this is long term. Okay.

Thank you. One moment for our next question. Our next question comes from the line of Daniel Thompson from BNP Paribas Exane.

Hi, good morning. Just two questions on pricing, please. Apologies if I missed it earlier, but I was wondering what level of pipe logics pricing in the U.S. underpins the 30% normalized margin assumption you gave out earlier? Is it all the way back to longer-term average prices that we've seen over the last decade, or is the level of pricing closer to where we are today? My second question is on international pricing. Given we don't always have the same level of visibility across the different regions, Can you just provide some color on where we sit today in terms of normalized pricing levels across the key regions like the Middle East, Latin America, and China? Thank you.

Thank you, Daniel. On pricing, because you mentioned the PipeLogic, I think I will ask Luca to comment on the pricing dynamic.

Yes, Paolo. Good morning, Daniel. Look, here I believe that it is important that we speed a little bit what we see in pipe logics between different categories. And this is a trend that is already happening. So we have the seamless on the one side. And if you look what happened so far from the peak, seamless is down 14%. While when you look at the DRW, it's down 20%. So it is very difficult to talk about pipe logics as a whole because we're going to see this gap amplifying. And in relative terms, this is going to be an advantage to our operations that are heavily relying on seamless. On establishing what will be the plateau, it is very difficult to see because this is related to the influx or the surge that Paolo was mentioning before. And we need to see how this evolves. Obviously, as already said, we don't see this as a sustainable trend going forward. And we're going to see later on how this will evolve. But here it's very important that you pick the difference between the different categories. And even within seamless, there are some product range and some technology that are faring better than the rest.

Yeah. Then, as far as the international market, Gabriel?

Yes, Paolo. Daniel, regarding prices in the international market, we see a strong momentum following the increase in demand in the Middle East and offshore that was mentioned before. The market is already tight, and we are in the early part of this cycle. We believe that the market will become tighter. This is particularly noticeable for high-end products, special grades, premium connections, complex pipelines where we are particularly strong and focused. So in this environment, customers are prioritizing security supply rather than price. So we expect that there's going to be pricing tailwind supporting our business in the international market driven by Middle East and offshore. with some legacy and timing from contract negotiation or contract booking into our books because, as you know, in this part of the world, there is a typical legacy of six to nine months or even more these days to see that into our shipments and invoicing.

Thank you, Gabriel. That's clear. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Luigi Develis from Equita SIM.

Yes, good afternoon. Just two questions for me. The first one is on the Argentina. You flagged the further pipeline projects will be subject to higher uncertainty. Can you elaborate more on the outlook for the remaining part of 2023 and going forward for Argentina? The second question on the U.S. market, so you mentioned a pressure of imports in U.S. due to the higher prices of last year, but how do you expect the evolution of imports in the coming months? When do you expect this pressure reasonably to easy to reduce? Thank you.

Yes, thank you Luigi. Well, now we are completing the delivery of pipe of the first stage of a very long pipeline, and it's absolutely true that Argentina has plans and the need of continue to invest in the infrastructure of transporting oil and gas. This is very important for Argentina. In any scenario, Argentina, will need to expand its export capability for oil and to reduce imports during winter season of LNG. So the need is there. Still, if I should say, the macroeconomic situation of Argentina is very difficult to play. There are different exchange rates. It's not easy to important, needed input for realizing this expansion today. Argentina is heading in some moment in the coming quarters for a devaluation and for a change for a new election before the end of the year. So I think there will be delays in launching some of the projects that are, let's say, needed and designed. Have in mind oil and gas. Still, we are actively working on this, on the possibility of financing, and the government is doing the same. And if there is room for improving the macroeconomic condition, Some of these projects may go on and maybe something may happen before in our sales before the end of the year, but this is very uncertain in this moment. Second point is on the import in the United States and what we may see for the future. Yes, Paolo.

Let's start looking at what happened so far. So far we have a glut of imports that in our understanding and also according to the public publications available are linked to purchases that have been done many months ago and due to the long lead time are all getting together in the first quarter. Now, it has to be highlighted, however, this surge of imports is more related to the low-end side of the product lineup, as I was referring before. So here there is a time delay that is taking care, and as we progress into the year, this component should be down as the purchase order by the importers are going to align to the consumption in the United States. And the second element which is very important for me to consider is also that the current condition in terms of cost of capital are much worse than the one that were present when some purchasing decision were made in the past. So the two things together should indicate that we should see the imports to normalize as we move through 2023.

Yeah, thank you, Luca. So you can see that, I mean, the price pressure in the United States is to some extent offset, but an opposite price pressure in the international market. But it's true that U.S. today is very important for our overall sales, and that's the reason why we are Mentioning gradual decline due to this pressure on price particles.

Thank you very much.

Thank you. One moment for our next question. Our next question comes from the line of James Winchester from Bank of America.

Brilliant. Thank you. Afternoon, everyone. Hopefully two quick ones for me, and sorry if I missed them earlier. Firstly, I wanted to check, does your free cash flow guidance for the second quarter imply a working capital inflow and just any color of that kind of heading into year end? And then secondly, do you think or is the board considering a special dividend at all, just given the amount of cash you're going to be generating? Thank you.

Well, on the first one, yes, there is some contribution to our free cash flow by the reduction in the working capital. The second question is what I say before. It's really up to the board to consider the different option and to propose to the assembly the dividend distribution. Okay, brilliant. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Arun Jirama from JP Morgan.

Good morning. I wanted to get some thoughts on your expectations for volumes this year. In 2022, you guys shipped 3.5 million tons of volumes. In 1Q, you did 1.1 million. So you're on a trajectory to do more than 4 million tons this year. Is that still a good run rate? And then I just wanted to ask a question as we think about 2024. How much of your 2023 volumes would you call discrete in nature related to some of the large pipeline projects that may not repeat as we think about 2024?

Thank you, James. As I was saying, first of all, you are right, our volume overall in 2023 will be higher than the volume in the previous year. So the volume will be higher in 2023. In 2024, I think that the pipeline in Argentina, the one that could be delayed during this year, will arrive and will need to be built. This is a program that any government should undertake because it has a very high return for the country. And we are well positioned for this because the combination of our Brazilian and Argentinian operation together with our sister company, Ternium, is a very strong position in reacting fast and having short-term delivery for this. So I think that in 2024, we should have pipelines sales of important size for Argentina and maybe also for Brazil in one year from now. So it's true that in the coming quarter we finish the delivery of the NKR and probably we have less, for sure, less pipeline delivery, but in 2024 this will pick up again.

Understood, understood. And is there any way to think about volumes in 24? I don't know if your visibility, I mean, we've been thinking that it's probably down a little bit year over year, but still probably in the upper, you know, close to 4 million tons next year?

No, in 24, it's very difficult to have visibility, but I mean, it will depend on the evolution of the sector. Tenaris will be extremely well positioned for capturing demand in the case that by the oil company, national, international, and independent, we will depend on the industry.

Okay. And my final question, Paolo, is how does changes in the pipe logic index indices in the U.S., how does that impact your international pricing power? Does it influence it in any shape or form? Are any of your international contracts linked to PipeLogix in the US? I wonder if you could elaborate a little bit on that.

Well, we have a long-term, short-term agreement with different clients, but PipeLogix to some extent is entering some of the formalities, but I will ask Gabriel to give an overview of the relation between the two worlds, the world of pipe logic import production in the U.S. and the world of international business.

Sure, thank you, Paolo. Arun, to think about that, I would say, to simplify, because here there are many moving targets and contracts on the geographies, but I would say that in the Middle East and in the offshore markets, I would say the impact of the pipe logic is near or close to zero. Then, when you have some markets in the region, Mexico, Canada, and Argentina as well, there, there is a trend or some correlation between the evolution of the pipe logics and prices in those markets. Not in a direct way in all of them, because there are formulas and different other factors, but the pipe logics on certain markets of America has an impact as well, while on the other side of the Atlantic, on the Eastern Hemisphere, I would say not at all.

Many thanks. Thank you.

Thank you.

One moment for our next question. Our next question comes from the line of Guglielmo Marco Opipari from Justin Ver Securities.

Hi, good afternoon. I have a question on M&A. Do you have any M&A negotiation at the moment? Because I heard some rumors about possible interest on asset of Valoret in Brazil. Can you confirm or not? Thanks.

no we we never make comment on anything and in this case we have no comment at all okay thanks thank you at this time i'm showing no further questions i would not like to turn the conference back over to giovanni sardana for closing remarks well thank you gigi and thank you all for joining us in our conference call

Thanks.

Thank you, everybody.

This concludes today's conference call. Thank you for participating. You may now disconnect.