Tenaris Announces 2024 Third Quarter Results

The financial and operational information contained in this press release is based on unaudited consolidated condensed interim financial statements presented in U.S. dollars and prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standard Board and adopted by the European Union, or IFRS. Additionally, this press release includes non-IFRS alternative performance measures i.e., EBITDA, Free Cash Flow, Net cash / debt and Operating working capital days. See exhibit I for more details on these alternative performance measures.

LUXEMBOURG, Nov. 06, 2024 (GLOBE NEWSWIRE) -- Tenaris S.A. (NYSE and Mexico: TS and EXM Italy: TEN) ("Tenaris") today announced its results for the quarter ended September 30, 2024 in comparison with its results for the quarter ended September 30, 2023.

Summary of 2024 Third Quarter Results

(Comparison with second quarter of 2024 and third quarter of 2023)

 
                                         3Q 2024    2Q 2024       3Q 2023 
                                         -------  ------------  ------------ 
  Net sales ($ million)                    2,915  3,322  (12%)  3,238  (10%) 
  Operating income ($ million)               537    512     5%    868  (38%) 
  Net income ($ million)                     459    348    32%    547  (16%) 
  Shareholders' net income ($ million)       448    335    34%    537  (17%) 
  Earnings per ADS ($)                      0.81   0.59    37%   0.91  (11%) 
  Earnings per share ($)                    0.40   0.29    37%   0.46  (11%) 
  EBITDA* ($ million)                        688    650     6%  1,004  (31%) 
  EBITDA margin (% of net sales)           23.6%  19.6%         31.0% 
 
 

*EBITDA in 2Q 2024 includes a $171 million loss from the provision for ongoing litigation related to the acquisition of a participation in Usiminas. If this charge was not included EBITDA would have amounted to $821 million, or 24.7% of sales.

Net sales in the third quarter were affected by lower prices in the Americas and lower demand in the USA, Mexico and Saudi Arabia as well as lower line pipe shipments in Argentina. Margins were relatively resilient with our EBITDA margin falling 1.1% quarter on quarter on a comparable basis while net income recovered after the extraordinary provisions recorded by Tenaris and its associate company Ternium in the last quarter.

During the quarter, our free cash flow amounted to $373 million and, after spending $182 million on share buybacks, our positive net cash position amounted to $4.0 billion at September 30, 2024.

Interim Dividend Payment

Our board of directors approved the payment of an interim dividend of $0.27 per share ($0.54 per ADS), or approximately $300 million, according to the following timetable:

   -- Payment date: November 20, 2024 
 
   -- Record date: November 19, 2024 
 
   -- Ex-dividend for securities listed in Europe: November 18, 2024 
 
   -- Ex-dividend for securities listed in the United States and Mexico: 
      November 19, 2024 

Follow-on Share Buyback Program

Tenaris's Board of Directors approved a $700 million follow-on share buyback program under the authority granted by the annual general meeting of shareholders held on June 2, 2020.

Under the previous $1.2 billion share buyback, which ran from November 5, 2023 to August 2, 2024, the Company purchased a total number of ordinary shares representing 6.07% of its total issued share capital measured as at the launch of the program. This follow-on share buyback program will cover up to $700 million (excluding customary transaction fees), subject to a maximum of 46,373,915 ordinary shares representing the remainder 3.93% of the Company's issued share capital (measured also as at the launch of the original program) that may be repurchased under the above-referred authority (which authorizes repurchases up to a maximum of 10% of the share capital).

The decision and opportunity of launching this follow-on buyback program is driven by the Company's significant cash flow generation and strong balance sheet.

The follow-on buyback program is expected to be launched in the near future and finish by March 26, 2025. It will be executed by a primary financial institution on the Milan Stock Exchange, with the intention to cancel the ordinary shares acquired through the program.

The buybacks may be ceased, paused and continued at any time, subject to compliance with applicable laws and regulations.

Tenaris will provide updates on the buyback program via press releases and on the Investors section of its corporate website. The buybacks will be carried out subject to market conditions and in compliance with applicable laws and regulations, including the Market Abuse Regulation 596/2014 and the Commission Delegated Regulation $(EU)$ 2016/1052.

Market Background and Outlook

Oil prices appear relatively stable and support industry investment despite uncertainty about Asian demand growth and geopolitical tensions.

The decline in OCTG prices in North America that we have seen over the past two years has now come to an end as drilling activity has stabilized and the level of US OCTG imports has come down.

The new government in Mexico is implementing its energy policy, drilling activity in the near term is subdued, while next year we expect that it will recover. In Argentina, the economic environment is improving, which should support investment in pipeline infrastructure and drilling activity in the Vaca Muerta shale.

In the Middle East, while gas drilling activity remains at a stable level, we see some reduction in oil activity and rationalization of inventories, including pipes, to protect cash flow.

In the fourth quarter, our sales and EBITDA will be lower than the third quarter, affected by lower sales in Mexico and Saudi Arabia and the delayed impact of OCTG pricing in the Americas. Overall, our 2024 second half results will be in line with our investor day guidance in September. Going into 2025, we expect our sales and EBITDA to recover with an increase in shipments in North America and the Middle East and a rebound in OCTG prices in North America.

Analysis of 2024 Third Quarter Results

Tubes

The following table indicates, for our Tubes business segment, sales volumes of seamless and welded pipes for the periods indicated below:

 
  Tubes Sales volume (thousand metric 
  tons)                                     3Q 2024    2Q 2024      3Q 2023 
                                            -------  ------------  --------- 
  Seamless                                      746    805   (7%)   744   0% 
  Welded                                        191    228  (16%)   169  13% 
  Total                                         937  1,033   (9%)   913   3% 
 
 

The following table indicates, for our Tubes business segment, net sales by geographic region, operating income and operating income as a percentage of net sales for the periods indicated below. During this quarter, the coating service results attributable to the coating business acquired from Mattr, which were previously included in our Others segment, have been reclassified to our Tubes segment and comparative amounts have been reclassified accordingly.

 
  Tubes                                    3Q 2024    2Q 2024       3Q 2023 
                                           -------  ------------  ------------ 
  (Net sales - $ million) 
  North America                              1,273  1,439  (12%)  1,700  (25%) 
  South America                                484    599  (19%)    608  (20%) 
  Europe                                       280    269     4%    231    21% 
  Asia Pacific, Middle East and Africa         754    823   (8%)    556    36% 
  Total net sales ($ million)                2,790  3,130  (11%)  3,095  (10%) 
     Coating services to third parties 
      included in Tubes ($ million)             70     67     5%     19   273% 
  Operating income ($ million)                 527    459    15%    841  (37%) 
  Operating margin (% of sales)              18.9%  14.7%         27.2% 
 
 

Net sales of tubular products and services decreased 11% sequentially and 10% year on year. Sequentially, volumes decreased 9% and average selling prices excluding the coating services on third parties pipes decreased 2%. In North America sales declined due to lower prices throughout the region and lower activity in the United States and Mexico. In South America we had lower pipeline sales in Argentina and lower conductor sales in Brazil partially compensated by a start of shipments to the Raia offshore line pipe project. In Europe sales increased thanks to the continued shipments to the Sakarya offshore line pipe project and higher sales of OCTG in Romania and Turkey which more than compensated for lower sales in the North Sea. In Asia Pacific, Middle East and Africa further sales in Saudi Arabia under inventory replenishment program, stable sales to the United Arab Emirates and a high level of shipments to Iraq, attenuated a drop in sales in sub-Saharan Africa, China and the rest of the Middle East.

Operating results from tubular products and services amounted to a gain of $527 million in the third quarter of 2024 compared to a gain of $459 million in the previous quarter and a gain of $841 million in the third quarter of 2023. In the second quarter of 2024 our Tubes operating income included a $171 million loss from the provision for ongoing litigation related to the acquisition of a participation in Usiminas and a $14 million gain from a positive legal claim resolution in Mexico. Excluding these two effects Tubes operating income in the second quarter of 2024 would have amounted to $616 million and the current quarter would have been 14% lower following the decline in prices and sales.

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