Tenaris (TS) Q3 FY25 earnings call: guidance and Q&A

How will the Argentinian election results impact Tenaris's business in the country, particularly for Vaca Muerta development and frac fleet deployment, given recent softness?

Paolo Rocca highlighted the election as a turning point, with a clear victory for President Milei's party, leading to improved investor perception and financial support from the American administration. This has reduced country risk and increased access to foreign financing for oil companies (e.g., Tecpetrol's EUR 750 million bond issuance). He expects a gradual increase in investment and rig activity in Vaca Muerta, with more substantial programs in 2026-2027, and positive long-term project stimulus like the NEI LNG facility.

“So we are positive on Argentina, and the election has been a turning point, in my view, in stimulating the level of activity in the energy sector and not only in the energy sector.”

asked by Arun Jayaram · answered by Paolo Rocca

Given the recent fractional declines in the US pipe logic index, what is the outlook for margins in Q4, especially with implied relatively flat sales?

Paolo Rocca acknowledged the pipe logic index decline, attributing it to accumulated stock before tariffs and a slight decline in rig count. He expects gradual recovery in prices. Guillermo Moreno added that US inventory levels are at around 7 months, above normal, and further import reductions are expected in Q4 FY25 and H1 FY26, which should allow prices to increase. Paolo Rocca guided for Q4 EBITDA to be lower in the single-digit range due to a $40 million impact from tariffs entering cost of sales, with margins expected between 20-25%.

“Today, the level of inventories on the ground are at around 7 months, so above normal levels. And as soon as this happens, prices will have some more power to increase.”

asked by Arun Jayaram · answered by Paolo Rocca / Guillermo Moreno

Given the 7% interim dividend increase and strong cash generation, how sustainable is the current buyback level ($1.2 billion announced last year, $600 million remaining), and what are the early thoughts for next year's decision?

Paolo Rocca stated that the company will execute the second tranche of the current buyback program. He noted that the Board approved a dividend level in line with the previous year in absolute terms but higher per share due to the buyback's impact. He emphasized the 11% return for shareholders and that the Board will decide on future buybacks after the current one is completed.

“As we mentioned in the opening remarks, by the way, the 11% return for shareholder is, let's say, good -- showing a good performance of the company.”

asked by Matthew Smith · answered by Paolo Rocca

Can management provide an outlook for Q1 FY26, including potential tariff changes, and comment on expected tender levels for the Middle East and deepwater projects in 2026?

Paolo Rocca highlighted the unpredictability of tariffs, noting current quarterly payments of $150 million. He expects increasing tariff costs in Q1 FY26 but also Tenaris's actions to reduce imports by increasing US production. He mentioned ongoing negotiations for tariff reductions with Argentina, Mexico, and Europe. Gabriel Podskubka described the Middle East business as stable, with Saudi drilling activity bottoming out and early signs of rebound, and other GCC producers increasing capacity. He noted a strong offshore backlog building for 2026, with new FIDs expected.

“But I expect that over time, with Argentina due to the extraordinary relation -- special relation that has been established between treat Trump, President Milei and the administration, there's going to be a discussion on this.”

asked by Alessandro Pozzi · answered by Paolo Rocca / Gabriel Podskubka

How significant is the opportunity from emerging unconventional plays like Jafurah (Saudi) and ADNOC's plans (UAE) for Tenaris's Middle East business over the next few years, given the high well counts?

Gabriel Podskubka expressed excitement about unconventional opportunities. He stated Tenaris is participating in Jafurah, which has been steadily increasing rigs, and holds an important share in seamless and conventional space in Saudi, including pipelines. For UAE, ADNOC's accelerating unconventional operations also present an opportunity where Tenaris is leading in market share. He expects growth from these areas. He also clarified that pipe for Saudi pipelines is sourced domestically (Jubail mill), welded OCTG is produced domestically, and seamless components are sourced from local mills then finished. For UAE, material comes from Argentina and Mexico, finished in Abu Dhabi.

“So this is exciting and is the part that has been more resilient the decrease of rigs for Saudi that I was referring before.”

asked by John Anderson · answered by Gabriel Podskubka

Can management provide color on profitability differences between US and international regions? Also, explain the EUR 300 million negative working capital movement in Q3, specifically if it's a one-off or a broader trend?

Paolo Rocca explained that profitability is driven more by product mix than region, with complex offshore products being most profitable and onshore welded line pipe being less so. He noted that the US has an average profitability but still differentiates by product type. Carlos Gomez Alzaga confirmed the Q3 working capital increase was mainly due to delayed PEMEX payments, which are expected to reverse in Q4. He also mentioned that tariffs incorporated into inventory contribute to higher stock costs, which will remain relatively high.

“So I wouldn't say that it is a regionally driven profitability. In fact, I would say, is more delivered by the mix of different projects and sales.”

asked by Kevin Roger · answered by Paolo Rocca / Carlos Gomez Alzaga