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Tenaris S.A. Form 6-K Summary: Nine Months Ended September 30, 2024

Business Context and Reporting Period

This Form 6-K filing presents the Consolidated Condensed Interim Financial Statements for Tenaris S.A., a global leader in steel pipe manufacturing, for the nine-month period ended September 30, 2024. The report was signed on November 6, 2024. The company operates primarily through its "Tubes" segment, which accounts for the vast majority of revenue, and serves the oil & gas, industrial, and power sectors globally.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Net sales decreased by approximately 15.5% year-over-year, driven primarily by lower volumes and pricing in the oil & gas sector. The Tubes segment saw sales drop from $10.99 billion to $9.21 billion.
• Profitability Compression: Operating income fell by 46.8% to $1.86 billion. Gross margin declined from 42.8% in 2023 to 35.8% in 2024.
• Significant Litigation Provision: A major non-recurring charge of $173.9 million was recorded in "Other operating expenses" related to the ongoing litigation with CSN regarding the 2012 acquisition of Usiminas. This followed a June 2024 decision by Brazil's Superior Court of Justice (SCJ) reversing a previous favorable ruling.
• Shareholder Returns: The company completed a $1.2 billion share buyback program in August 2024, purchasing 71.7 million shares. Additionally, cash dividends paid totaled approximately $459 million in the period.
• Investment Activity: Net cash used in investing activities was $1.71 billion, largely due to a $1.28 billion increase in investments in securities and $512 million in capital expenditures.

Outlook, Risks, and Contingencies

• Follow-on Buyback: The Board approved a new share buyback program of up to $700 million, expected to run until March 26, 2025.
• Dividend: An interim dividend of $0.27 per share ($0.54 per ADS) was approved on November 6, 2024, payable November 20, 2024.
• Argentina Exposure: The company faces significant foreign exchange risk in Argentina. Argentine subsidiaries represent ~20% of sales and ~10% of equity. The company holds a net short exposure of $89.1 million in Argentine pesos and holds $290.8 million in U.S. dollar-denominated Argentine bonds, which are subject to volatility and potential devaluation losses.
• Legal Contingencies:
  • CSN/Usiminas: Potential indemnification could reach up to $177.3 million (BRL 966.2 million) based on the SCJ decision, though the company continues to appeal.
  • Petrobras: Civil claims for damages against Confab (a subsidiary) are estimated at $60.1 million. Criminal proceedings against former executives are ongoing, though the company is not a party.
  • Veracel: Litigation regarding a 2007 accident remains pending with an estimated exposure of $19.8 million, though the company contests liability.
• Customer Concentration: Pemex (Mexico) represents approximately 20% of the company's overall credit exposure. Payments have been delayed, creating uncertainty regarding the timing of collection.

Investor Verification Checklist

• Usiminas Litigation Outcome: Verify the status of the appeal against the SCJ decision and the potential final liability exposure beyond the $173.9 million provision.
• Argentina FX Policy: Monitor the stability of the Argentine peso and the government's "crawling peg" policy, as further devaluation could impact the valuation of local assets and the $290.8 million bond portfolio.
• Pemex Credit Risk: Assess the trend in receivables from Pemex and the likelihood of further payment delays or write-offs.
• Oil & Gas Demand: Evaluate the sustainability of the revenue decline in the core Tubes segment and the impact of global energy transition on long-term demand.
• Capital Allocation: Confirm the execution timeline and volume of the new $700 million share buyback program.