Tenaris Announces 2024 Third Quarter Results
The financial and operational information contained in this press release is based on unaudited consolidated condensed interim financial statements presented in U.S. dollars and prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standard Board and adopted by the European Union, or IFRS. Additionally, this press release includes non-IFRS alternative performance measures i.e., EBITDA, Free Cash Flow, Net cash / debt and Operating working capital days. See exhibit I for more details on these alternative performance measures.
LUXEMBOURG, Nov. 06, 2024 (GLOBE NEWSWIRE) -- Tenaris S.A. (NYSE and Mexico: TS and EXM Italy: TEN) ("Tenaris") today announced its results for the quarter ended September 30, 2024 in comparison with its results for the quarter ended September 30, 2023.
Summary of 2024 Third Quarter Results(Comparison with second quarter of 2024 and third quarter of 2023)
3Q 2024
2Q 2024
3Q 2023
Net sales ($ million)
2,915
3,322
(12%)
3,238
(10%)
Operating income ($ million)
537
512
5%
868
(38%)
Net income ($ million)
459
348
32%
547
(16%)
Shareholders' net income ($ million)
448
335
34%
537
(17%)
Earnings per ADS ($)
0.81
0.59
37%
0.91
(11%)
Earnings per share ($)
0.40
0.29
37%
0.46
(11%)
EBITDA* ($ million)
688
650
6%
1,004
(31%)
EBITDA margin (% of net sales)
23.6%
19.6%
31.0%
*EBITDA in 2Q 2024 includes a $171 million loss from the provision for ongoing litigation related to the acquisition of a participation in Usiminas. If this charge was not included EBITDA would have amounted to $821 million, or 24.7% of sales.
Net sales in the third quarter were affected by lower prices in the Americas and lower demand in the USA, Mexico and Saudi Arabia as well as lower line pipe shipments in Argentina. Margins were relatively resilient with our EBITDA margin falling 1.1% quarter on quarter on a comparable basis while net income recovered after the extraordinary provisions recorded by Tenaris and its associate company Ternium in the last quarter.
During the quarter, our free cash flow amounted to $373 million and, after spending $182 million on share buybacks, our positive net cash position amounted to $4.0 billion at September 30, 2024.
Interim Dividend Payment
Our board of directors approved the payment of an interim dividend of $0.27 per share ($0.54 per ADS), or approximately $300 million, according to the following timetable:
Payment date: November 20, 2024
Record date: November 19, 2024
Ex-dividend for securities listed in Europe: November 18, 2024
Ex-dividend for securities listed in the United States and Mexico: November 19, 2024
Follow-on Share Buyback Program
Tenaris's Board of Directors approved a $700 million follow-on share buyback program under the authority granted by the annual general meeting of shareholders held on June 2, 2020.
Under the previous $1.2 billion share buyback, which ran from November 5, 2023 to August 2, 2024, the Company purchased a total number of ordinary shares representing 6.07% of its total issued share capital measured as at the launch of the program. This follow-on share buyback program will cover up to $700 million (excluding customary transaction fees), subject to a maximum of 46,373,915 ordinary shares representing the remainder 3.93% of the Company's issued share capital (measured also as at the launch of the original program) that may be repurchased under the above-referred authority (which authorizes repurchases up to a maximum of 10% of the share capital).
The decision and opportunity of launching this follow-on buyback program is driven by the Company's significant cash flow generation and strong balance sheet.
The follow-on buyback program is expected to be launched in the near future and finish by March 26, 2025. It will be executed by a primary financial institution on the Milan Stock Exchange, with the intention to cancel the ordinary shares acquired through the program.
The buybacks may be ceased, paused and continued at any time, subject to compliance with applicable laws and regulations.
Tenaris will provide updates on the buyback program via press releases and on the Investors section of its corporate website. The buybacks will be carried out subject to market conditions and in compliance with applicable laws and regulations, including the Market Abuse Regulation 596/2014 and the Commission Delegated Regulation (EU) 2016/1052.
Market Background and Outlook
Oil prices appear relatively stable and support industry investment despite uncertainty about Asian demand growth and geopolitical tensions.
The decline in OCTG prices in North America that we have seen over the past two years has now come to an end as drilling activity has stabilized and the level of US OCTG imports has come down.
The new government in Mexico is implementing its energy policy, drilling activity in the near term is subdued, while next year we expect that it will recover. In Argentina, the economic environment is improving, which should support investment in pipeline infrastructure and drilling activity in the Vaca Muerta shale.
In the Middle East, while gas drilling activity remains at a stable level, we see some reduction in oil activity and rationalization of inventories, including pipes, to protect cash flow.
In the fourth quarter, our sales and EBITDA will be lower than the third quarter, affected by lower sales in Mexico and Saudi Arabia and the delayed impact of OCTG pricing in the Americas. Overall, our 2024 second half results will be in line with our investor day guidance in September. Going into 2025, we expect our sales and EBITDA to recover with an increase in shipments in North America and the Middle East and a rebound in OCTG prices in North America.
Analysis of 2024 Third Quarter Results
Tubes
The following table indicates, for our Tubes business segment, sales volumes of seamless and welded pipes for the periods indicated below:
Tubes Sales volume (thousand metric tons)
3Q 2024
2Q 2024
3Q 2023
Seamless
746
805
(7%)
744
0%
Welded
191
228
(16%)
169
13%
Total
937
1,033
(9%)
913
3%
The following table indicates, for our Tubes business segment, net sales by geographic region, operating income and operating income as a percentage of net sales for the periods indicated below. During this quarter, the coating service results attributable to the coating business acquired from Mattr, which were previously included in our Others segment, have been reclassified to our Tubes segment and comparative amounts have been reclassified accordingly.
Tubes
3Q 2024
2Q 2024
3Q 2023
(Net sales - $ million)
North America
1,273
1,439
(12%)
1,700
(25%)
South America
484
599
(19%)
608
(20%)
Europe
280
269
4%
231
21%
Asia Pacific, Middle East and Africa
754
823
(8%)
556
36%
Total net sales ($ million)
2,790
3,130
(11%)
3,095
(10%)
Coating services to third parties included in Tubes ($ million)
70
67
5%
19
273%
Operating income ($ million)
527
459
15%
841
(37%)
Operating margin (% of sales)
18.9%
14.7%
27.2%
Net sales of tubular products and services decreased 11% sequentially and 10% year on year. Sequentially, volumes decreased 9% and average selling prices excluding the coating services on third parties pipes decreased 2%. In North America sales declined due to lower prices throughout the region and lower activity in the United States and Mexico. In South America we had lower pipeline sales in Argentina and lower conductor sales in Brazil partially compensated by a start of shipments to the Raia offshore line pipe project. In Europe sales increased thanks to the continued shipments to the Sakarya offshore line pipe project and higher sales of OCTG in Romania and Turkey which more than compensated for lower sales in the North Sea. In Asia Pacific, Middle East and Africa further sales in Saudi Arabia under inventory replenishment program, stable sales to the United Arab Emirates and a high level of shipments to Iraq, attenuated a drop in sales in sub-Saharan Africa, China and the rest of the Middle East.
Operating results from tubular products and services amounted to a gain of $527 million in the third quarter of 2024 compared to a gain of $459 million in the previous quarter and a gain of $841 million in the third quarter of 2023. In the second quarter of 2024 our Tubes operating income included a $171 million loss from the provision for ongoing litigation related to the acquisition of a participation in Usiminas and a $14 million gain from a positive legal claim resolution in Mexico. Excluding these two effects Tubes operating income in the second quarter of 2024 would have amounted to $616 million and the current quarter would have been 14% lower following the decline in prices and sales.
Others
The following table indicates, for our Others business segment, net sales, operating income and operating income as a percentage of net sales for the periods indicated below:
Others
3Q 2024
2Q 2024
3Q 2023
Net sales ($ million)
125
192
(35%)
143
(13%)
Operating income ($ million)
10
52
(81%)
27
(64%)
Operating margin (% of sales)
7.9%
27.3%
19.0%
Net sales of other products and services decreased 35% sequentially and decreased 13% year on year. Sequentially, sales declined mainly due to lower sales of coiled tubing, sucker rods and oil services in Argentina.
Selling, general and administrative expenses, or SG&A, amounted to $454 million, or 15.6% of net sales, in the third quarter of 2024, compared to $497 million, 15.0% in the previous quarter and $433 million, 13.4% in the third quarter of 2023. Sequentially, the decline in SG&A is mainly due to lower shipment costs due to a reduction in volumes shipped and a decrease in services and fees, taxes and others.
Other operating results amounted to a gain of $11 million in the third quarter of 2024, compared to a loss of $170 million in the previous quarter and a $36 million gain in the third quarter of 2023. In the second quarter of 2024 we recorded a $171 million loss from provision for ongoing litigation related to the acquisition of a participation in Usiminas.
Financial results amounted to a gain of $48 million in the third quarter of 2024, compared to a gain of $57 million in the previous quarter and a gain of $67 million in the third quarter of 2023. Financial result of the quarter is mainly attributable to a $50 million net finance income from the net return of our portfolio investments offset by other financial results.
Equity in earnings (losses) of non-consolidated companies generated a gain of $8 million in the third quarter of 2024, compared to a loss of $83 million in the previous quarter and a loss of $110 million in the third quarter of 2023. These results are mainly derived from our participation in Ternium (NYSE:TX). The previous quarter included an $83 million loss from the provision for ongoing litigation related to the acquisition of a participation in Usiminas on our investment in Ternium.
Income tax charge amounted to $134 million in the third quarter of 2024, compared to $138 million in the previous quarter and $278 million in the third quarter of 2023. With a similar income before equity earnings of non-consolidated companies and income tax, the tax charge of the quarter was sequentially lower mainly due to a lower impact of the foreign exchange devaluation in Mexico on the fiscal values of fixed assets and inventory.
Cash Flow and Liquidity of 2024 Third Quarter
Net cash generated by operating activities during the third quarter of 2024 was $552 million, compared to $935 million in the previous quarter and $1.3 billion in the third quarter of 2023. During the third quarter of 2024 cash generated by operating activities includes a net working capital reduction of $48 million.
With capital expenditures of $179 million, our free cash flow amounted to $373 million during the quarter. After share buybacks of $182 million in the quarter, our net cash position amounted to $4.0 billion at September 30, 2024.
Analysis of 2024 First Nine Months Results
9M 2024
9M 2023
Increase/(Decrease)
Net sales ($ million)
9,679
11,454
(15%)
Operating income ($ million)
1,860
3,497
(47%)
Net income ($ million)
1,558
2,812
(45%)
Shareholders' net income ($ million)
1,520
2,789
(45%)
Earnings per ADS ($)
2.67
4.72
(43%)
Earnings per share ($)
1.34
2.36
(43%)
EBITDA* ($ million)
2,326
3,890
(40%)
EBITDA margin (% of net sales)
24.0%
34.0%
*EBITDA in 9M 2024 includes a $174 million loss from the provision for ongoing litigation related to the acquisition of a participation in Usiminas. If this charge was not included EBITDA would have amounted to $2,499 million, or 25.8% of sales.
Our sales in the first nine months of 2024 decreased 15% compared to the first nine months of 2023 as volumes of tubular products shipped decreased 4%, tubes average selling prices decreased 15% excluding the coating services on third parties pipes, while sales in the Others segment remained flat. Following the decrease in sales, mainly due to the tubes average price decline, EBITDA margin declined from 34% to 24% and EBITDA declined 40%. EBITDA in the first nine months of 2024 includes a $174 million loss from the provision for ongoing litigation related to the acquisition of a participation in Usiminas, included in other operating expenses. Additionally, related to the same case, net income includes an $86 million loss from our participation in Ternium.
Cash flow provided by operating activities amounted to $2.4 billion during the first nine months of 2024, including a a reduction in working capital of $324 million. After capital expenditures of $512 million, our free cash flow amounted to $1.9 billion. Following a dividend payment of $459 million in May 2024 and share buybacks for $985 million in the nine months, our positive net cash position amounted to $4.0 billion at the end of September 2024.
The following table shows our net sales by business segment for the periods indicated below:
Net sales ($ million)
9M 2024
9M 2023
Increase/(Decrease)
Tubes
9,212
95%
10,987
96%
(16%)
Others
467
5%
467
4%
(0%)
Total
9,679
11,454
(15%)
Tubes
The following table indicates, for our Tubes business segment, sales volumes of seamless and welded pipes for the periods indicated below:
Tubes Sales volume (thousand metric tons)
9M 2024
9M 2023
Increase/(Decrease)
Seamless
2,328
2,428
(4%)
Welded
687
707
(3%)
Total
3,016
3,136
(4%)
The following table indicates, for our Tubes business segment, net sales by geographic region, operating income and operating income as a percentage of net sales for the periods indicated below:
Tubes
9M 2024
9M 2023
Increase/(Decrease)
(Net sales - $ million)
North America
4,301
6,071
(29%)
South America
1,699
2,476
(31%)
Europe
802
754
6%
Asia Pacific, Middle East and Africa
2,410
1,687
43%
Total net sales ($ million)
9,212
10,987
(16%)
