Tenaris S.A.(US:TS)2021-05-02 13:25Financial Data and Key Metrics Changes - Sales in Q1 2021 reached $1.2 billion, down 33% year-over-year but up 5% sequentially, primarily driven by a recovery in North America [5] - EBITDA for the quarter was $196 million, up 2% sequentially, with an EBITDA margin stable at around 17% [6] - Net income for the quarter was $106 million, benefiting from a strong contribution from the investment in Ternium [6] - Working capital increased by $83 million mainly due to higher inventories, with free cash flow amounting to $25 million [7] Business Line Data and Key Metrics Changes - Average selling prices in the Tubes operating segment declined 4% year-over-year and 5% sequentially due to a poorer geographic sales mix [5] - The U.S. market showed signs of recovery with increased drilling activity, although still below pre-pandemic levels [9] - Pipe prices are on an upward trend, reflecting increased demand and raw material costs [9] Market Data and Key Metrics Changes - The international rig count has bottomed at around 38% versus pre-pandemic levels, with expectations for gradual activity ramp-up in 2021 [21] - The Middle East segment saw particularly low sales in Q1, but a recovery is expected in 2022 due to new contracts [21][22] Company Strategy and Development Direction - The company is focusing on strengthening its position in the U.S. market and expanding its Rig Direct service model [10] - A substantial backlog of orders is expected to exceed $3 billion, supporting significant sales increases in the Middle East from 2022 [12] - The company is investing in decarbonization efforts, with a target to reduce carbon intensity by 30% by 2030, involving an investment of $150 million over four years [15][58] Management's Comments on Operating Environment and Future Outlook - Management noted that while the pandemic is subsiding in some regions, many operations are still in critical conditions, emphasizing the importance of health and safety [15] - The company expects significant increases in sales and EBITDA margins in the upcoming quarters, particularly in North America [27][70] - Management anticipates that the demand for oil and gas will continue to grow in the coming years, with consolidation trends expected in the OCTG market [65] Other Important Information - The company is advancing its digital tools to optimize operations and reduce lead times [14] - A contract for the supply of pipes for an offshore pipeline in Norway was awarded, reflecting the company's involvement in low-carbon energy projects [13] Q&A Session Summary Question: Insights on Kuwait tender and revenue expectations - Management confirmed that the Kuwait contract will significantly increase shipments in 2022, with expectations for a recovery in Middle East sales [20][22] Question: Impact of hiring on startup expenses - Management indicated that while there will be some startup costs, these are included in the EBITDA margin guidance [24] Question: Volume and ASP expectations for Q2 and Q3 - Management expects significant increases in volume and sales prices, particularly in North America, with a target EBITDA margin of around 20% for Q3 [27][28] Question: Raw material costs and cost of goods sold - Management explained that the impact of rising raw material costs will be gradual, with cost containment due to increased production levels [31][34] Question: Energy transition projects and margins - Management noted that margins for carbon capture and hydrogen projects are similar to those for complex offshore pipelines [35] Question: Volume growth expectations - Management anticipates significant volume growth exceeding 10% in the next two quarters, driven by increased market activity [61] Question: Consolidation trends in the OCTG market - Management acknowledged ongoing consolidation trends and expressed readiness to consider value-creating opportunities in the market [65]