Tenaris S.A. 2023 Third Quarter Results Summary
Business Context and Reporting Period
Tenaris S.A., a global manufacturer of tubular products and services for the oil and gas industry, reported unaudited consolidated results for the quarter ended September 30, 2023. The filing includes a press release detailing financial performance, operational metrics, and strategic initiatives, prepared in accordance with IFRS.
Key Financial Metrics
| Metric | 3Q 2023 | 3Q 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Net Sales ($ million) | 3,238 | 2,975 | 11,454 | 8,142 |
| Operating Income ($ million) | 868 | 803 | 3,497 | 1,950 |
| Net Income ($ million) | 547 | 608 | 2,812 | 1,746 |
| EBITDA ($ million) | 1,004 | 946 | 3,890 | 2,379 |
| EBITDA Margin | 31.0% | 31.8% | 34.0% | 29.2% |
| Free Cash Flow ($ million) | 1,127 | 113 | 3,107 | 372 |
| Net Cash Position ($ million) | 3,300 | 700 | 3,300 | 900 |
Note: Net income for 3Q 2023 includes a non-cash charge of $144 million related to the remeasurement of investments in Usiminas. EBITDA includes a one-off gain of $32 million from the transfer of court awards regarding Venezuelan nationalized assets.
Material Changes vs. Prior Periods
- Sequential Decline (3Q vs. 2Q 2023): Net sales decreased 21% to $3.2 billion, driven by lower activity and prices in the Americas, reduced offshore shipments, and lower pipeline sales in Argentina. Operating income fell 32% to $868 million.
- Year-Over-Year Growth (3Q 2023 vs. 3Q 2022): Net sales increased 9% to $3.2 billion. Operating income rose 8% to $868 million, despite the sequential drop, reflecting strong performance in the first nine months.
- Volume and Price Dynamics: In 3Q 2023, total tubes sales volumes decreased 17% sequentially, while average selling prices dropped 5%. North America and South America were the primary drivers of the sequential decline.
- Investment Impact: A $144 million non-cash loss from the Usiminas investment significantly impacted net income, though excluding this item, net income would have been $691 million.
Guidance, Outlook, and Strategic Actions
- Capital Allocation: The Board approved a $1.2 billion share buyback program (up to 6.4% of outstanding shares) and an interim dividend of $0.20 per share ($0.40 per ADS), totaling approximately $236 million.
- Market Outlook: Management expects US drilling activity to bottom out and recover in 2024. Offshore drilling is increasing globally, particularly in Brazil and Guyana. Middle East activity is expected to rise. However, 4Q 2023 sales in the Americas may face pressure from price adjustments, while Middle East and offshore sales should support total volumes.
- Sustainability Investment: Tenaris fully operationalized the Buena Ventura Wind Farm in Argentina (103.2 MW) and approved a $214 million investment for a second wind farm to be completed in 2025, aiming to reduce CO2 emissions by over 250,000 tons annually.
- Risks: Forward-looking statements are subject to risks including volatility in oil and gas prices, global economic conditions, and potential supply interruptions in natural gas markets.
Key Facts for Investor Verification
- Non-IFRS Adjustments: Verify the impact of the $144 million Usiminas non-cash charge and the $32 million Venezuelan asset gain on reported profitability.
- Cash Position: Confirm the net cash position of $3.3 billion, which supports the new buyback and dividend initiatives.
- Working Capital: Note the $415 million reduction in working capital during the quarter, primarily due to a decrease in trade receivables.
- Segment Performance: Review the divergence between the Tubes segment (96% of sales) and the Others segment, particularly the sequential volume decline in seamless and welded pipes.
- Buyback Execution: Monitor the execution of the $1.2 billion buyback program, which is subject to market conditions and regulatory compliance.