Tenaris S.A.

Good day and thank you for standing by. Welcome to Quarter 2, 2024 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 11 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.

Thank you, Gigi, and welcome to Tenaris 2024 Second Quarter Conference Call. Before we start, I would like to remind you that we will be discussing forward-looking information in the call. and that our actual results may vary from those expressed or implied during this call. With me on the call today are Paolo Rocca, our Chairman and CEO, Alicia Mondolo, our Chief Financial Officer, Gabriele Podkurka, our Chief Operating Officer, and Luca Zanotti, President of our U.S. operations. I would like to start by mentioning that we will host an investor presentation in London on September 24, and we hope to see many of you there. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results. Our second quarter sales reached 3.3 billion, down 18% year-on-year and 3% sequentially, mainly due to slightly lower volumes and average selling prices during the quarter. Average selling prices in our tubes operating segment decreased 17% compared to the corresponding quarter of last year. and 1% sequentially as lower prices have been greatly offset by favorable sales mix. Our ABDA for the quarter was down 34% sequentially to 650 million due to lower selling prices and an extraordinary provision recorder for an ongoing litigation related to the acquisition of a participation in Usiminas in 2012. Our ABDA margin for the quarter was close to 20%. Without this extraordinary provision, our EBITDA would have been $821 million and our EBITDA margin would have been 25%. With operating cash flow of $935 million and capital expenditure of $161 million, our free cash flow for the quarter was $774 million. After a dividend payment of $459 million in May and share buybacks of $492 million, our net cash position amounted to $3.8 billion at the end of the quarter. 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. During the first two quarters, our sales have remained remarkably resilient, considering a market environment in which drilling activity has reduced, and OCTG prices have been falling in the United States. This reflected the differential market positioning we have built up in North America with our rig direct service model, as well as in offshore projects around the world. The particularly high level of shipment we have been making in the Middle East and the contribution for our newly acquired Tenaris shock core coating business. I would also like to highlight our strong free cash flow of 774 million during the second quarter. when we were able to achieve a 285 million reduction in working capital. Thus, we were able to maintain our excellent net cash position of 3.8 billion, while we distributed 950 million to our shareholders. Indutrious spending on offshore projects, particularly in complex deepwater operations, has increased since 2023 and is set to increase further in the year ahead. For this project, we are a preferred supplier for the majors with a fully integrated offer of pipes and services. This includes large diameter conductor and surface casing with connectors, intermediate and production casing, tubing and accessories, stainless, high chrome alloy steels, dopless connection tested for use, in the new extreme application required by the Gulf of Mexico development. We are also supplying the 3D mapping services for high-collapse application, as well as offshore line pipe delivered with a full range of Tenere shock core coatings and advanced project management services. This quarter, we renewed our long-term contract for shale operation in the Gulf of Mexico, and have been selected by ExxonMobil for their upcoming operation in Angola. We were also awarded the supply of casing and offshore line pipe and coatings by Woodside for the Trion project in Mexico. In the second half, we will begin deliveries of coated line pipe for Equinor Raya project in Brazil. And we have an extensive backlog of order for offshore project going into 2025. Today, however, as we look toward the second half, we see that our sale will be lower than the sale in the first semester, affected mainly by three factors. In the United States, a record level of oil and gas production are being sustained even as drilling activity has decreased and reduced the overall demand for pipe. At the same time, OCTG imports. particularly from Asian countries, remain high, accounting for 40% of demand, which compares with 20% for other steel products, always in the USA. This level of import is affecting pipe prices and is causing damage to the domestic industry. In the Middle East, activity and consumption from the region remain at a good level, but in the main countries, we see a stocking trend beyond our original expectation. This, combined with the completion of deliveries for the NFE offshore pipeline in Qatar, will affect our sales in the region in the second half. The change in the government in Mexico and the uncertainty surrounding the policy for the energy sector are limiting drilling investment in the country. In Argentina, The necessary stabilization of the macroeconomic environment is delaying investment in drilling and the development of infrastructure in Vaca Muerte. This factor will affect our sales and result in the second half, when we expect that our sales volume will be 10 to 15% below those of the first half. And there will be further adjustment to our prices in the Americas, reflecting market conditions. This quarter, as anticipated, we are carrying out important investment and maintenance stoppages in many areas of our industrial system, aimed at recovering full operational capacity, improving efficiency, and reducing our carbon footprint. This investment includes a major overhaul of our medium diameter rolling mill in Mexico, the installation of a new electric arc furnace in our Argentine steel shop, the revamping of our copper steel shop in the United States to increase capacity and reduce environmental impact, and the finishing line of our Italian mill. We are also starting the construction of our second wind farm in Argentina, which will have a capacity for 92 megawatts and will allow us to supply 100% of the need of Argentina from renewable resources. The level of demand is requiring an adjustment in our industrial operation, concentration of production in the more efficient facilities, and the reduction of logistics and operational costs. Looking further ahead, we expect that all the regions in which we have a strong competitive position will drive an increase in our activity over time. Our global reach, competitive products, and service differentiation and unique portfolio of long-term agreements with established customer, position us favorably for serving the growing demand of energy across the world. I will leave now to any question you may have.