Tenaris S.A.

Good day and thank you for standing by. Welcome to Q4 and full year 2024 Tenates 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, Investor Relations Officer. Please go ahead.

Thank you, Gigi, and welcome to Tenates 2024 Fourth Quarter and Annual Results 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 Potskoska, our 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. During the fourth quarter of 2024, sales reached 2.8 billion, down 17% compared with those of the corresponding quarter of the previous year and 2% sequentially, mainly driven by lower volumes and lower average selling prices as price declines in North America were partially offset by a favorable product mix. Our ABDA for the quarter was up 6% sequentially to 726 million and our ABDA margin increased to 25.5, mainly reflecting the partial reversal of a provision for ongoing litigation relating to the acquisition of a participation in USI Minas. Without taking into account this one-off effect, our ABDA declined 4% sequentially to 659 million with a margin of 23%. Average selling prices in our tube operating segment decreased by 7% compared to the corresponding quarter of the previous year and 1% sequentially. During the quarter, cash flow from operation was 492 million. Our net cash position at the end of the quarter decreased to 3.6 billion following the payment of an interim dividend of 299 million in November of last year, 454 million spent on share buybacks and capital expenditures of 182 million during the quarter. The board of directors had decided to propose for approval of the annual general shareholders meeting to be held at the beginning of May the payment of an annual dividend of 83 cents per share or 166 cents per ADR, which includes the interim dividend of 27 cents per share or 54 cents per ADR that we paid at the end of November last year. If approved, a dividend of 56 cents per share or 112 cents per ADR will be paid on May 21st. 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. 2024 was a good year for Tenaris in many aspects. We consolidated our leading industry position with a number of major achievements. We delivered a solid financial result accompanied by higher returns for shareholders and completed a number of investments which are improving our industrial efficiency and reducing our environmental footprint. It was, however, married by an accident that took place at the end of the year which claimed the lives of two of our employees. The accident occurred in the heavy equipment maintenance shop of our main plant in Argentina. This is a major setback for Tenaris which has an absolute commitment to safety with its employees and its communities. We deeply regret the loss of life and are reinforcing all our action on preventive activities with a focus on critical risk. We ended 2024 with an EBITDA of 3.1 billion and net income of 2.1 billion or net sales of 12.5 billion. Frequent flow amounted to 2.2 billion, all of which was distributed to shareholders through dividends and share-buybacks. We are proposing to increase the annual dividend per share by 38% over that for the previous year. At the same time, we maintain our net cash position of 3.6 billion. In North America, consolidation among major shale operators has continued and we have strengthened our service differentiation with these operators to price the operational efficiency, the reliability, and the quality that we provide through our RIG Direct service. We have extended our range of wedge series 400 connections and now provide 24-7 digital well integrity solutions supported by technical specialists and remote monitoring capabilities in addition to our more established run-ready service. Exomori have honored us with their 2024 Supplier of the Year Award for our extensive efforts in supply chain integration worldwide. We have served their operation in various parts of the world over many years and since 2024, we have been serving all their US shale operations as well as their offshore operations in Burjina under long-term agreement. We were recently awarded the casing supply for the first US shale wells in Shell's Sparta 20K project in the US deepwater following many months of extensive work on product development and testing and the development of 3D mapping technology that enhances pipe collapse resistance using ultra-high collapse steel grades. This complements an award to supply BP's Cascada 20K project and consolidates our leading position in the latest frontier in deepwater development. We also consolidated our leading position in the Gujana Suriname Deepwater Basin with an award to supply line path and insulation coating for total grand morgue development. This achievement was possible thanks to our successful integration of Showcore and its pipe coating technologies and project management capabilities. For other deepwater development, we are delivering line pipe and coating for Equinor Raya project in Brazil and have recently completed deliveries for an offshore pipeline for TPAO Sagaria project in the Black Sea. In the Middle East, our contribution to the development of local industrial capabilities are being recognized. In Saudi Arabia, we recently won a tender for a major CCS pipeline after Aramco had distinguished our GPC facility with a special quality award. In Abu Dhabi, we extended our long-term agreement with Adnok while our premium threading facility was certified as an Industry 4.0 digital leader by the Minister of Industry and Advanced Technology. In Mexico, our sales have been affected by a steep decline in drilling activity amidst the financial difficulties of Pemex. We have, however, taken the opportunity to reduce our credit exposure. In Argentina, drilling activity on oil and gas production in Vaca Muerta is ramping up as pipeline and energy infrastructure investment moves forward. Over the next month, we will be supplying the oil pipeline that will connect Vaca Muerta to a new deep water port in Puerto Rosales in Chubut and expect further pipeline investment during the year. During the year, we completed a series of investments in our industrial system aimed at improving the efficiency of our operation as well as contributing to our decarbonization and environmental objectives. These include the installation of a new electric car furnace with modern continuous charging technology in Argentina, the modernization of our copper steelmaking facility in the United States, increasing its effective capacity, and the installation of new heat treatment furnace and finishing pipeline at our Dalmine mill in Italy. At the same time, we are advancing with our second wind farm in Argentina and other investment aimed at increasing the share of renewable energy used in our operation. We have also been investing to increase the level of automation and digital system in our industrial and supply chain system and extend -by-pipe traceability. As we will show in our annual report that will be published on April 1, April 1, we continue to make progress towards our target to reduce the carbon emission of our operation. As the perimeter of our operation has expanded with recent acquisition, we have decided to reset the baseline for our target to cover this expanded perimeter as well as to include intermilled transportation and other changes aimed at improving reporting transparency. Looking ahead with the change in the administration in the United States, we are heading into uncharted territories when it comes to geopolitics and the global trading system. Changes in tariff and other events could significantly alter the established market environment. Tenerife, with its unique positioning both globally and in North America, the competitive differentiation and financial strength is well placed to navigate the uncertainties ahead. Before closing, I would like to thank Alicia Mondolo, head of her well-earned retirement, for her contribution to Tenerife and the Tequint Group over more than 40 years. I'm very pleased that we will still be able to benefit from her wise advice in the time ahead. I would also like to thank all of our employees for their constant commitment and engagement without which the results and achievement of the past year would not have been possible, as well as also our customer, our supplier, and all the community in which we operate for their ongoing support. I'm open now for any questions you may have.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Arun Jheram from JPMorgan Securities, LLC.

Good morning, Paolo and team. My first question is on tariffs. Paolo, if the 25% tariffs on imported steel tubulars are implemented by the U.S. 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?

Thank you, Arun. As we say in the opening remark, we are entering to uncharted territories because we have different layers of tariffs that have been announced by the American administration, one of which is the 25% tariff in the frame of the 232. But I would expect that in general the introduction of the 25% in the 232 will have impact on different aspects. On one side, it's very likely that the level of price in the market will gradually increase because in the end, the market imports are relevant, has a relevant share of the U.S. OCTG, particularly OCTG product. So the impact of the 25% tariff will reflect in our view into an increasing price. As far as the quotas are concerned, we have no indication which is the intention of the U.S. administration, but overall the 232 overall orientation has been in the past and today to support the domestic industry and to allow to raise the level of utilization within the United States. So we expect that the administration will monitor carefully the volume coming from the different sources with the overall aim of defending the interests of the domestic industry. In this sense, Tenaris is well positioned. We are producing almost all of our needs of pipes in the United States, so we think we are well positioned to manage what is coming. It is true that we are producing large part but not all of our needs. We may be paying tariff on some of the steel that we may be importing, but still this will not affect substantially our overall position in the States. This is what we can expect in our view from the introduction of the tariff on the 232. As you say, we will understand better in March when this will announce the details of what will be the approach. And at the same time, in the coming weeks, we will also understand the extent of other tariff that may be introduced that could have an impact on our business in the US or worldwide.

That is 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 is clear. Maybe a follow-up, Paula. Teneres 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 Teneres between just OCTG, long-haul pipe and some of the services that you provide in Argentina between coil tubing and as well in frac. I think you have some pressure pumping capacity in country.

Yes. We are very positive on the development and investment in the energy sector in Argentina. We commented also in the last quarter that we expect a substantial increase of the rigs operating in Baca Moherta. Now, this is happening in preparation of the expansion of the capacity of evacuation of oil from Baca Moherta. The big pipeline that is called the VM VEMOS is under construction. We have the order for the pipes and the order for the construction has also been negotiated and signed. So this pipeline will go on and the oil companies are preparing the wells and the upstream to supply the additional volume that will be exported from Argentina. At the same time, there are some additional pipelines that need to connect this part of Baca Moherta to the pipeline, the main pipeline. So we see this network of pipeline going on with contract and part of which is also for us. And we see the company mobilizing rigs for this. We were saying that the rigs in Baca Moherta could increase for the 31, 32 that were operating last year to a level of 42 or plus by the end of the year. Things are moving. Some companies are taking decisions now. Maybe we may have an important increase in the rig. We are preparing for this. We are also expanding our capability in the fracking. We are adding a set for responding to something that we expect an increase in the demand for fracking. In January, in Argentina, we reached in the market the record for fracking during one month. And also, we see that our sets are fully booked for the coming months. We are adding one that will come during the course of 2025 and accompanying the base in Neocane and CoilTube for satisfying this need. So we are positive in this. And hopefully, this trend will go on during 2026 just to increase the production of oil that will be able to evacuate from Baca Moherta. The capacity of the VEMOS is large and will require investment to be filled up. Great. Thank you.

Thank you. One moment for our next question. Our next question comes in the line of Alessandro Pozzi from MedioVanca.

Thank you, Gigi. I have two questions. And they are related to the reaction of the share price today. And I'm still trying to figure out if it's maybe the outlook that's been perceived to be a little bit less constructive compared to what you mentioned in the last call or maybe whether it's just expectations around the 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 the margins evolution in Q1 and maybe in the first half of 2025. Because we've seen the recovery in pipe logic. 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 political outlook. And that's my two questions.

Thank you, Alessandro. Well, on the first one, we say in the outlook in our press release, we expect the first quarter to have margin more or less in line with the margin of the fourth few. This is the results I would say of two drivers. On one side, we will have in the first quarter of 2025 less volume to Europe. In reality, the big pipelines and OCTG that we sold in Turkey that are considered in our line as part of the line of Europe. In the fourth quarter, we did substantial shipment in that region. That will not be repeated in the first quarter. On the other side, there is a positive impact of the increase in price and some increase in volume in some of the region, including the United States. So the results of this is our expectation of margin that will more or less online or hopefully a little better if the pipelines continue to drive up in February, March. Now, as far as the first half and so the second half, we expect improvement. But an increase in our margin, a slight increase in our margin. But this will be influenced by the tariff decision on the beginning of March. Because if tariffs are announced and the administration is making clear the approach to the quota for different countries, then the market will anticipate a reaction and will move on. And we may see a change in, let's say, the recovery in prices. We see a, let's say, positive trend, frankly, because in the we expect the administration is acting exactly in the direction of strengthening the domestic industry. And we are a domestic industry for the American market. So we are positive in the results of this. And we are prepared to absorb the marginal cost that will derive from the supply of steel and eventually the payment of some tariff on it. This is where we are. This is what we can see. You we must admit that our visibility for, let's say, the second quarter and even beyond this is pretty limited considering the number of moving parts that are affecting our market and our sectors today.

Okay. So do you expect maybe marginal improvement in Q2 in margins? I was wondering, should we expect maybe margins to recover to 25% at some point during 2025?

Well, we will expect to increase from where we are to now. In the range that you're mentioning, we should, this is what we can expect for the second quarter and going beyond. Thank you. And there is a second question. Is the buyback on this? Let's say on the buyback, this decision will be taken first of all by the board of directors of 1st of April in evaluating the situation and in deciding if how to include or if to include this item in the agenda or the general assembly that we'll meet in May. This will be up to the board and then up to the assembly of the company to decide if we give to the board of directors authority to enter into a new program of buyback after May. For the time being, we are advancing in our buyback. The present product is almost completed.

Okay. And I mean, it will be influenced by whether you can do acquisitions in the US. There was an attempt to acquire a Bentleys some time ago. But the Trump administration just the other day confirmed the new merger review guidelines of the previous administration. So maybe in the US may not be as likely as we thought maybe before.

Well, but the board will consider all the elements, the situation, the dynamic of the market, the opportunity that we have to allocate our capital. We have a larger cash in our book. So the decision will be taken, taken into consideration opportunity for investment, perspective of the business and the long term view for the company.

Thank you

very much. Thank you. One moment for our next question. Our next question comes from the line of Mark Bianchi from TD Cowan.

I thank you. At 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?

I don't think there has been a change in the overall view for this, but for sure since the meeting that we had, many things happened in the world and the position and the policy of the new American administration is for sure a factor that will need to be considered by the board in deciding the strategy for the future. Many things concerning the opportunity for investment, the dynamic of the energy sector. I personally think that the new administration have a stronger drive in supporting the energy industry. They are launching a program for the energy sector in the frame of energy emergency. They are speeding up the process of permitting and so on and so forth. So something will be moving in my view in the energy sector. It may be that in this environment also the opportunity for acquisition in area or part of the world that could be interesting for the areas, maybe more open and we will have to reconsider this and analyze this and the perspective of the company as a basis for deciding what to do and suggest to the board what to do.

Wonderful. It makes clear sense. Thank you. 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 is some incremental plan in place from them. We are 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?

Well, what happened to the activity in oil and gas in Mexico is something let's say unexpected to some extent and in my view unsustainable. Pemex reduced the investment and is reducing its production from a little more than 1.8 million barrels a day to the present 1.6 million barrels a day and in the recent months they are losing production at a rate of around 50,000 barrels a day per month. They are reducing rig from something like 65 rig to around 23. Rigs are basically idle on the field for lack of inputs and lack of resources. This is an unsustainable situation in my view in the frame of the policy of the new administration. I expect this could be going on for a while but could not be the long-term perspective of Pemex. I would expect that in the second half of this year the Mexican government will have to decide a policy and an approach to refinancing Pemex in a way that the country could let's say make develop the huge sources in the oil and gas sector. Today what we see is an unprecedented reduction in the activity. What we expect in the second half of 2025 in my view is a new policy and then it will take time to recover. That's for sure. I mean there will be a reset in the policy in Mexico in my view and there will be a recovery that could be at a pace that will be inevitably not too fast considering the financial constraint. Now this is an over observation in Mexico. The negotiation around the future of the USMCA, the tariff that are supposed to be implemented by the new American administration, all of this may have an impact on the economy of Mexico on the long-term development of it. We will see. We don't have now the element to evaluate let's say which will be the impact of the overall in the overall relation between Mexico, United States and Canada and which will be the future of the USMCA. This will be important also for the development of the energy sector.

Wonderful. Thank you very much, Paola. I'll turn it back.

Thank you. One moment for our next question. Our next question comes from the line of Derek Pothiser from Piper Sandler.

Hey, good morning. Maybe we could spend some time on the supply and 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 what they're importing. Any sort of impact on section 232 when it comes to quota reductions, primarily to South Korea, maybe other places where a new quota has been put on. Just some help around that as we can frame up the supportive nature of OCT pricing when we think about the remainder of 2025. Just more of the supply and demand dynamics that you're seeing. With the demand side, we've seen the rate count recover off the quarter seasonality. What are you expecting as we move forward in 2025? Just considering the outlook there. Just some help around the supply and demand would be great.

Yeah. Well, thank you, Derek. I would ask Luca Zanotti to comment on the supply-demand balance, the level of inventory, what we can expect in our view for the US market.

Thank you, Paolo. Morning, Derek. So many questions here, but one by one. Supply-demand. What we see is that recently the level of imports came down significantly. In the whole quarter, it was slightly more than 30%, which helped to ease the inventory that is sitting on the ground today, including our inventory is in the range of about as we calculate in the range of the last six months. So from the inventory standpoint, we believe that the situation is somewhat normalized. We see less imports. We have seen less imports during the last quarters. There are structural measures that have been taken by the US domestic industry against some countries like Thailand, where the preliminary definition of the customer is that they were circumventing the OCDG anti-dumping. So we expect this not to come back again. This is seamless. And so overall, if you look at the import side, we have seen something that is a decreasing trend. Now, we may see that at the beginning of 2025, we may see a rebound as they reset their budget. But the situation in terms of supply-demand is much more balanced than what we saw last quarter and two quarters ago. Now, the second question was, if I'm not mistaken, sorry. Yeah, sorry. You're

about to die.

So the second concern, the quarter, the way the section 232, which is one of the parties that the administration is putting forward, there are many others that they are studying. So as Paolo was saying before, we are in uncertain territory here because we actually don't know. The way the section 232 quarters are structured is that the quarter is going to go away. So everybody is going to be paying 25%. Now, how this will evolve in the future, we don't know. But as Paolo was mentioning before, we do know that the spirit of the section 232 was to create a stronger domestic supply chain. And so we are sure that the administration will be carefully monitoring the impulse evolution because they need to stick to increasing the domestic capacity utilization. So we are confident that the overall effect is going to be positive for the domestic industry.

Now, that's helpful. Thank you. Yeah, and then maybe just on the demand side, just seeing the US recovery 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?

If I may, here we need to split a little bit the situation because what we do see is a different behavior. If we take the major and the large independent, we still see that they are very, very disciplined and the ongoing consolidation process is typically leading to rationalization of operations, more efficiency. So we don't see this increasing a lot in these circumstances. Obviously, this may change going forward, but at this stage, we see pretty constant level in this segment. What we do see coming in are some smaller independent or private operator, and certainly we have seen much more interest in terms of gas. Gas linked to the new LNG that are being approved, so we see this happening. So we see, let's say, constant activity on the major and independent, some smaller players getting in with new rigs, and we see interesting developments as far as gas is concerned. And I believe that these will consolidate even further going through 2025.

Okay, that's helpful. And then just to 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 Canary's position? Where are you seeing the pockets of strength? And also, where are you seeing some of the activities softness that we kind of hear out there?

Well, for this, I will ask Gabriel to give an overview of how we see the evolution of the business in Saudi Arabia.

Yeah, thank you, Paolo. Thank you, Derek, for the question. On Saudi Arabia, I'm probably taking the opportunity to talk about the whole Middle East, where we see a drilling activity that is fairly stable at a very strong level. On the drilling that is associated with gas, we see areas that are very resilient, even growing. This is the case of unconventional gas in Saudi Arabia, targeting increase of gas for power generation in the kingdom. But this is not only the case for Saudi. We see expansion of LNG in Qatar, in UAE, and targets of self-sufficiency in other GCC countries. So we expect also AdNOK to increase its gas plants. We expect Kuwait in deep drilling areas to drill and increase rates related to gas. So gas is a very resilient and growing area in the Middle East. Then when we go to the oil side of the business, the dynamic is a bit more uneven. There is evident idle capacity of crude production in the Middle East, and different countries and companies are taking different decisions. We see on one side UAE expanding capacity of crude in an area where Tenerife is very well positioned. We see, for example, Saudi Arabia softening some of the drilling associated to oil, especially in the offshore oil, stopping that quest for an increase in ulterior capacity. Of crude production. So this is what we see in the kingdom. It's also to mention, as Amirat Paolo noted in the open remarks, that Saudi Arabia is also going forward with projects related to energy transition. We mentioned the CCS project. This is an initiative that Saudi Arabia is leading to capture transport and store CO2, 9 million tons per year. This requires a pipeline of more than 300 kilometers. This is an important order of $250 million approximately that we will start delivering during the third quarter of 2025 and complete before the end of 2026. So we see overall the Middle East has been, in 2024, a point of strength for Tenerife and will continue to be the case for 2025. And even though we had a slight decrease of our revenues in the fourth quarter of 2024, we expect a rebound as early as first quarter of 2025. Great. Thank you. I appreciate

it. Thank you. I'll turn it back. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Kevin Roger from Kepler Chovra.

Yes, good afternoon. I would like, if I may, please, coming back on the US tariff and the potential impact. The first one will be on your production cost. Can you give us some colors currently on what percentage of the billets that you currently use locally are outsourced from Europe or someone 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 fear that the Korean guys that are currently on the 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?

Thank you, Kevin. Well, in the first point, let's say, you know, we have a steel shop, full operation, the copper station, in which we have been investing and are preparing for eventually expansion of our operation that is feasible. The question of expanding the back house and exhaust fumes system just to achieve increased production. So we have the possibility of increasing our, let's say, local production of steel. And then we are reporting or complementing steel from different sources. We are also buying locally from different suppliers in the United States to complement the steel that we can supply from Mexico, from Argentina, from Italy, or from Romania. So we have very many different sources for supplying what is missing of this. All the steel shop, and you can imagine the size, will be devoted to the US operation, plus local supply and plus many different sources. Some of which we don't know if we will be affected by tariff or not, because in the end, there will be a negotiation starting, but we do not know how this negotiation will end up with Europe or with Mexico or with Argentina especially. So this is where we are in terms of the supply. We feel comfortable that in the end, whatever scenario, we will come out with a fully integrated line, pretty efficient compared to any other competitor. As far as Korea is concerned, I have no doubt that the American administration will be very careful in not allowing anybody to even pay in quota, flooding the market, and reducing utilization of the domestic producer. This is what they said, this is what they did, and this is what they are going to do to contain this one way or the other by agreement or by other things. So I'm not really concerned that this would be a credible scenario for the future considering where we are today. And this is not only valid for Korea, it's valid also for other players that may see more room for increase, but I frankly don't think that there will be open season for them. Now, as far as Pemex, we are reducing our exposure. I think that you will see this in the working capital cash flow. We are generating important cash flow there. We are doing agreement that allows us to reduce this in the close to this quarter around $140 million. And this, our program will allow us to continue but at a different pace.

Okay, understood. Thanks a lot for the call.

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

Hi, good afternoon. Just one question, please. I'm just trying to think about the impact of the price rises in PipeLogix outside of the US. I was wondering if you could remind us what proportion of your ex-US contracts have an element of PipeLogix 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? Thank you.

Thank you, Daniel. Well, the PipeLogix is important in the formulas for the long-term agreement in the States, obviously, then in Mexico, in Canada, in the rest of South America, including Argentina, Colombia, and in some specific contract. But basically, I mean, you say in the Americas, but not so much used outside the Americas, where the formulas are more related to the cost structure of our pipes. This is where they are. The PipeLogix increased 9% from August to today in January, and we expect this to continue to increase even before the application of tariff. And it will get into our contract with a delay between one quarter and two quarters. Gradually, this will get into it, and we will see it. So then, in the moment in which tariff will be introduced, expectation will step in, and we don't know what may happen in the months of March or April. But this is where we can estimate and consider today.

Okay, very clear. Thank you.

Thank you. One moment for our next question. Our next question comes on the line of Mick Pickup from Barclays.

Good afternoon, everybody. Sorry to ask again about the U.S., but can I just disaggregate the U.S. market into seamless and welded? If my math is correct, you're importing some seamless tubes into the U.S. from outside the U.S., and obviously, that's part of this uncertain territory. Can you just talk about your ability to ramp up some welded production should the need arise?

Well, we have capacity on the ground for doing it, but also you know, the price will be moving, and also the price of hot-roll coil will be moving. I will ask Luca to expand on this relation, welded seamless and the situation for the import of the pipes that are complementing our sales to the states.

Yes. To summarize, Nick, today our sales in the United States is for the great majority seamless. You know that our strategy and the rate is to provide the whole well, and so you can think of what is the portion of weld that goes into the surface and intermediate and think that this is more or less our proportion in our sales between seamless and weld. Now, as far as your second question, which is capacity in welded, obviously we are super well positioned in terms of capacity because we could easily ramp up even further our capacity in our EICMAN plants. And we have, because we do believe that we're going to see some line pipe also coming through, we have a nice plan in Wilder Kentucky that can step in if needed. As Paolo was saying, this will depend on the relative positioning of the market prices and the cost of HRC, which are the two main inputs for the welded production. But in terms of capacity, we're probably the best placed in the United States. We are the best placed in the United States.

Thank you, Luca. You know, in the case of weather, we depend entirely from domestic industry for the supply of hot roll coils. So we are really depending on the equilibrium between price by logic and the local hot roll coils. I think that in the US, maybe not immediately, but over time, the policy of the new government and the Trump administration will be to speed up all the permits process. And we may see additional line pipe and additional connection and evacuation. And also to some extent, this may, let's say, open the way for some development that maybe we do not see exactly now, but we may see in six months time.

Thank you.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. At this time, I'm showing no further questions. I would now like to turn the conference back to Giovanni Sardegna for closing remarks.

Thank you, Gigi, and thank you all for joining us and hope to see you soon. Thank you.

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