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Tenaris S.A. Form 6-K Summary: Nine Months Ended September 30, 2023

Business Context and Reporting Period

Tenaris S.A., a global leader in steel pipe manufacturing and distribution, reported its Consolidated Condensed Interim Financial Statements for the nine-month period ended September 30, 2023. The filing was submitted to the SEC on November 1, 2023. The company operates primarily through its "Tubes" segment, serving the Oil & Gas, industrial, and power sectors globally. Significant operational changes during the period included the consolidation of Global Pipe Company (GPC) in Saudi Arabia and the acquisition of Republic Tube LLC's facility in the U.S.

Key Financial Metrics

Note: All figures are in thousands of U.S. dollars unless otherwise stated.

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased by approximately 41% year-over-year, driven by higher volumes and pricing in the Oil & Gas sector. The Tubes segment accounted for $10.99 billion of total sales.
• Profitability Expansion: Operating income more than doubled to $3.50 billion. Gross margin improved significantly due to favorable raw material cost dynamics and operational efficiency.
• Financial Results: Net financial results swung from a loss of $41.7 million in 2022 to a gain of $127.9 million in 2023, largely due to higher interest income and favorable foreign exchange results.
• Equity in Non-Consolidated Companies: This line item decreased from $196.0 million in 2022 to $38.5 million in 2023. The 2022 figure included significant earnings from associates, while 2023 included a $25.5 million net loss related to the increased participation in Usiminas.
• Cash Flow: Operating cash flow surged to $3.56 billion compared to $0.64 billion in the prior year, reflecting strong earnings and working capital management. However, investing activities consumed $3.13 billion, primarily due to changes in investments in securities and capital expenditures.

Guidance, Outlook, Risks, and Unusual Items

Management Commentary and Outlook: Management highlighted a robust demand environment for oil country tubular goods (OCTG). The company continues to monitor the energy transition and climate change impacts. No specific forward-looking financial guidance (e.g., full-year revenue targets) was provided in this filing.

Unusual Items and One-Time Gains:

• Venezuela Awards Sale: The company sold its rights to arbitration awards against Venezuela for $82 million, recognizing a gain of $33.3 million in "Other operating income."
• Business Combinations: Gains were recognized from the acquisition of GPC (step-acquisition gain of $4.5 million and bargain purchase gain of $11.5 million) and the Isoplus anticorrosion coating division (bargain purchase gain of $3.2 million).
• Usiminas Investment: A net loss of $25.5 million was recorded due to the remeasurement of previously held interest upon increasing the stake in Usiminas.

Risks and Contingencies:

• Argentina Foreign Exchange: Severe restrictions on foreign currency in Argentina limit the ability to repatriate funds. The company holds U.S. dollar-denominated Argentine bonds with a valuation gap between local and international markets, creating a negative equity reserve of approximately $147 million.
• Legal Proceedings:
  • CSN Claim (Usiminas): A Brazilian court case regarding a 2012 acquisition remains pending at the Superior Court of Justice. Potential exposure could reach approximately $176 million if the claim is upheld, though Tenaris believes the claims are groundless.
  • Petrobras: Civil claims for damages in Brazil are estimated at $64.3 million. The SEC investigation was settled in June 2022.
  • Class Action: A securities class action regarding the "Notebooks Case" is in the final stages of settlement approval, with a proposed payment of $9.5 million.
• U.S. Antidumping Duties: Tenaris is subject to antidumping duty deposits on imports from Argentina (78.30%) and Mexico (44.93%) pending appeals.

Key Facts for Investor Verification

• Share Buyback Program: On November 1, 2023, the Board approved a $1.2 billion share buyback program, representing approximately 6.4% of outstanding shares.
• Dividend Distribution: An interim dividend of $0.20 per share ($0.40 per ADS) was approved on November 1, 2023, totaling approximately $236 million.
• Argentina Exposure: Argentine subsidiaries represented 22% of total sales and 9% of total equity. Investors should verify the impact of ongoing currency controls on liquidity and asset valuation.
• Acquisition Integration: Verify the operational integration and financial contribution of the newly consolidated Global Pipe Company (GPC) and the Republic Tube facility.
• Legal Reserves: Monitor the status of the CSN lawsuit in Brazil and the final approval of the U.S. class action settlement.