Tenaris S.A.(US:TS)2020-11-07 23:30Financial Data and Key Metrics Changes - Third quarter sales were $1 billion, down 43% year-over-year and 18% sequentially, primarily due to declining drilling activity in the U.S. and globally [5] - EBITDA for the quarter was $107 million, up 83% sequentially, with an EBITDA margin recovering to around 11% [5][6] - Free cash flow generated was $376 million, representing 37% of revenues, with a net cash position of $1.1 billion at the end of the quarter [6] Business Line Data and Key Metrics Changes - The average selling prices for Tubes declined by 9%, impacting overall sales [5] - The company achieved significant efficiency in industrial operations despite low production levels, contributing to improved margins [8] Market Data and Key Metrics Changes - The rig count in the U.S. increased from 246 to close to 300, indicating a gradual market recovery [32] - In Argentina, rig count increased to 25 rigs, showing positive signs despite economic difficulties [31] Company Strategy and Development Direction - The company established a joint venture in China with Baogang Baotou Steel to enhance its presence in the onshore oil and gas industry [9] - In Canada, the company closed its Prudential mill to consolidate production, investing $72 million to strengthen competitiveness [10] - The company is focusing on the energy transition, participating in projects related to hydrogen mobility and infrastructure [12] Management's Comments on Operating Environment and Future Outlook - Management noted that the third quarter represented the bottom in terms of volume and sales, with expectations for gradual improvement in the fourth quarter and into 2021 [14] - The ongoing pandemic and government measures are expected to slow down the recovery in global oil consumption and investment [14] Other Important Information - The Board approved an interim dividend payment of $0.07 per share, to be paid on November 25 [6] - The company is advancing its strategic agenda while supporting local health and education systems during the pandemic with a $6 million fund [9] Q&A Session Summary Question: Margin improvement and moving parts from Q2 to Q3 - Management highlighted that margin improvement was due to less disruption from COVID than expected, effective execution of cost reduction plans, and additional demand in certain markets [20][22] Question: Impact of input costs versus pricing - Management acknowledged rising input costs but noted that inventory streamlining mitigated immediate impacts on margins [24][26] Question: Market share growth and rig count recovery - Management confirmed that they likely gained market share and noted a gradual increase in rig count, particularly in the U.S. [31][32] Question: Structural cost reductions and their permanence - Management indicated that many cost reductions are structural and will remain, with ongoing efforts to streamline operations [39] Question: Cash flow and CapEx outlook - Management projected CapEx for 2021 to be around $160 million to $170 million, with continued positive cash flow expected [87] Question: Inventory levels and market conditions - Management reported that inventory levels in the U.S. have decreased to around 11 months, with a need for larger operators to resume drilling for further recovery [52] Question: Strategic acquisitions and market positioning - Management expressed openness to strategic acquisitions, leveraging financial strength to position the company for long-term growth amid industry consolidation [94]