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.