Tenaris’ Earnings Call Highlights Resilience Amid Challenges

Tenaris ((TS)) has held its Q3 earnings call. Read on for the main highlights of the call.

Tenaris’ Resilient Performance Amidst Mixed Challenges

The recent earnings call for Tenaris highlighted the company’s resilience and robust performance in key regions, despite facing challenges such as tariffs and high inventory levels. The sentiment expressed during the call was generally positive, with notable sales and EBITDA growth, strategic expansions, and increased dividends. However, these positives were somewhat offset by the impact of tariffs on costs and working capital challenges, leading to a mixed outlook.

Resilient Sales and EBITDA Growth

Tenaris reported third-quarter sales of $3 billion, marking a 2% increase year-on-year. The company’s EBITDA also saw a sequential rise of 3% to $753 million, maintaining a strong EBITDA margin of 25%. This growth underscores Tenaris’ ability to navigate challenging market conditions effectively.

Strong Performance in North America

Despite a slowdown in overall drill rig activity, Tenaris maintained its sales levels in the U.S. and Canada. This stability is attributed to the strength of its customer portfolio, which has helped the company weather regional challenges and maintain a solid market presence.

Increased Dividend Payment

The Board of Directors approved a 7% increase in the interim dividend per share compared to last year. This decision reflects the company’s confidence in its financial health and commitment to delivering value to its shareholders.

Expansion of Energy Production in Argentina

Tenaris has commenced operations at a new 95-megawatt wind farm, contributing to powering its operations in Campana with renewable energy. This expansion highlights the company’s commitment to sustainability and operational efficiency.

Offshore Order Backlog Growth

The company is building a robust offshore order backlog, including significant projects like the TPAO Sakarya deepwater development in the Black Sea. This growth in orders positions Tenaris well for future opportunities in the offshore sector.

Impact of Tariffs on Costs

Tenaris is experiencing increased costs due to tariffs, which are impacting its EBITDA by approximately $40 million in the fourth quarter. This challenge underscores the ongoing pressures from global trade policies.

Inventory and Import Challenges

High levels of imports and inventory in the U.S. are putting pressure on prices, with inventories on the ground amounting to around seven months’ supply. This situation presents a significant challenge for the company in managing its supply chain effectively.

Lower Sales in Certain Regions

Sequential sales declined by 3%, mainly due to lower sales to the North Sea and decreased shipments for offshore line pipe projects in the Middle East. This decline highlights regional challenges that the company is working to address.

Working Capital Challenges

An increase in receivables, particularly from PEMEX, has led to a negative movement in working capital of EUR 300 million. This issue highlights the financial management challenges Tenaris is facing in certain markets.

Forward-Looking Guidance

Looking ahead, Tenaris anticipates maintaining stable sales levels in the next quarter, despite potential impacts from tariffs and inventory adjustments. The company remains committed to operational efficiency and sustainability, as demonstrated by its increased energy production in Argentina through new wind farms. This forward-looking guidance reflects a cautious yet optimistic outlook for the company’s future performance.

In conclusion, Tenaris’ earnings call painted a picture of a company that is resilient and strategically positioned for growth, despite facing several challenges. The overall sentiment was positive, with strong sales and EBITDA growth, strategic expansions, and increased dividends. However, the impact of tariffs and working capital challenges remains a concern, leading to a mixed outlook for the future.