Yahoo Finance Tenaris S.A. (NYSE:TS) Q1 2024 Earnings Call Transcript
Tenaris S.A. (NYSE:TS) Q1 2024 Earnings Call Transcript April 26, 2024
Tenaris S.A. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, and thank you for standing by. Welcome to Q1 2024 Tenaris S.A. 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. [Operator Instructions] 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 2024 first 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 Móndolo, our Chief Financial Officer; Gabriel Podskubka, our Chief Operating Officer; and Luca Zanotti, our President of our U.S. Operations. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results. Our first quarter sales reached $3.4 billion, down 17% year-on-year and flat sequentially, as an increasing volume and the full consolidation of the coating business acquired in the previous quarter offset the impact of lower selling prices in the Americas.
Average selling prices in our tubes operating segment decreased 15% compared to the corresponding quarter of 2023 and 6% sequentially. Our EBITDA for the quarter was up 1% sequentially to $987 million. Our EBITDA margin remained flat at around 29% as the reduction in average selling prices was offset by a strong operating performance, a positive contribution for our newly acquired coating business, and a $25 million gain from legal claim’s resolution in Mexico and Brazil. With operating cash flow of $887 million and capital expenditures of $172 million, our free cash flow for the quarter was $715 million. Following share buybacks of $311 million during the quarter, our net cash position increased to $3.9 billion, up from $3.4 billion at the end of last year.
Now, I will ask Paolo to say a few words before we move the call to question.
Paolo Rocca: Thank you, Giovanni, and good morning to all of you. We have had a good start to the year, maintaining our sales and EBITDA at the same level as in the fourth quarter of last year, despite the unfavorable pricing environment that is affecting our sales in the Americas. This reflect the strength of our global positioning as well as the solid performance across our business lines. In the coming quarters, however, our results will be affected by a soft U.S. rig count, affected by low natural gas prices, by an increase in the OCTG imports, and an extended decline in prices. Our free cash flow will remain solid. During the quarter, our newly acquired TenarisShawcor pipe coating operation, where we successfully completed an exceptionally large project with concrete weighted coating for a pipeline in Mexico, made positive contribution to our sales and EBITDA.
TenarisShawcor was also awarded a $108 million project to supply wet insulation and anti-corrosion coating, or the offshore pipeline for the ExxonMobil Whiptail development in Guyana. This project will be supplied during 2025. Around the world, offshore projects are moving forward, and with our extended reach, we are providing a wide range of integral solutions for this complex development. The Middle East is another area which has seen growing inactivity. In Saudi Arabia, we are benefiting from the increasing demand for their gas development program and the consolidation of our GPC large diameter welded pipe operation. In the United Arab Emirates, with our new premium threading facility in full operation, we have been awarded a 2-year extension of our Rig Direct contract.
By our long-term agreement with QatarEnergy LNG has also been extended for 3 years to cover the drilling in the northwest field to supply the latest expansion program. In Canada, we have been successfully repositioning our variation and extending our Rig Direct program following the Canadian government decision to impose normal value on Chinese OCTG imports and the investment we made in our Sault Ste. Marie mill. As the LNG Canada and other LNG projects move forward, operators are increasing their operation in the Montney shale, and we recently awarded a long-term Rig Direct contract to supply a major operator there. We participated in the several week conference last month, where we were able to serve you on the energy transition and the prospect of the oil and gas market over the long-term.
What came out from the discussion? With the sense that more pragmatic approach to the complexities of the transition is required. We should focus on reducing emission using all means available across the energy industry and its value chain. At the same time, due to the enormous cost and complexity of the transition, oil and gas will continue to be required for many years to support the growing demand for secure, affordable energy, particularly from developing countries and to support technological development such as artificial intelligence. This year, in the third quarter, when we have a seasonal slowdown in demand, we will implement a major investment and maintenance program that has been postponed over the last 2 years of intensive operation.
This really will involve stoppages in our five steel shops and our main seamless rolling mills. In Argentina, we will install an electric arc furnace that will be fed by a Consteel scrap reheating furnace by our DRI plant. Once we complete our second wind farm in 2025, the new furnace will use 100% renewable energy to produce steel with a minimal level of carbon emission. In the U.S., we will upgrade our Koppel steel shop, installing a new backhaul system to reduce missions. In several of our facilities, we are enhancing our capabilities to produce high alloy chrome products as demand for these high value products is growing. In Mexico, we will have the first major maintenance of our Tamsa medium diameter rolling mill in 4 years. In addition to a maintenance shutdown at overseas [ph] steel shop.
This investment will be executed within our previous CapEx guidance, but they will limit to some extent our capacity during the second half. We are now ready for any question you may have.
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