Tenaris S.A. (TS) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture. While there are positive elements like stable market position, strong offshore projects, and shareholder returns, there are concerns over medium-term guidance, margin pressures, and geopolitical volatility. The Q&A highlights stability in the short term but lacks clarity in medium-term forecasts, contributing to a neutral sentiment. The absence of significant financial growth metrics and the cautious outlook for 2026 further balance out any positive sentiment from operational efficiency and shareholder returns.
Key Financial Performance
Sales $3 billion, up 5% year-over-year and 1% sequentially. The increase is attributed to resilient sales to Rig Direct customers in the U.S. and Canada, and the resumption of fracking and coiled tubing services in Argentina.
EBITDA $717 million, down 5% sequentially, representing 24% of sales. The decline is due to the full impact of the 50% Section 232 tariffs in the U.S.
Average Selling Prices (Tube Operating Segment) Decreased by 1% year-over-year and remained flat sequentially. No specific reasons for the change were mentioned.
Cash Flow from Operations $787 million. No year-over-year change or reasons for the figure were provided.
Net Cash Position $3.3 billion, decreased due to the payment of an interim dividend of $300 million, $537 million spent on share buybacks, and $123 million in capital expenditure during the quarter.
Annual EBITDA $2.9 billion for the year. No year-over-year change or reasons for the figure were provided.
Net Income $2 billion for the year. No year-over-year change or reasons for the figure were provided.
Net Sales $12 billion for the year. No year-over-year change or reasons for the figure were provided.
Free Cash Flow $2 billion for the year, all of which was distributed to shareholders through dividends and share buybacks. No year-over-year change or reasons for the figure were provided.
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Operating Highlights
Run-ready and well-integrated services: Tenaris continues to develop and roll out services that increase safety and reliability at well sites.
Advanced coated line pipe solutions: Tenaris is working with major oil and gas companies to support fast-track development and complex operations.
Fracking and coiled tubing services: Tenaris is expanding its fracking and coiled tubing service business in Argentina, with plans to add a third set of equipment by year-end.
U.S. and Canada market: Strengthened market position and extended differentiation under Rig Direct service model.
Offshore projects: Opportunities to renew order backlog with new offshore projects sanctioned globally.
Latin America: Resumed services in Venezuela and expanded operations in Argentina's Vaca Muerta fields.
Middle East: Consolidated presence with long-term agreements in Qatar and enhanced services in the UAE and Saudi Arabia.
U.S. production and supply chain: Achieved record production and supply levels, with 90% of U.S. seamless pipe requirements met domestically.
Environmental sustainability: Brought a second wind farm in Argentina into operation, supplying energy for electric steel shop and operations in Canada.
Dividend increase: Proposed a 7% increase in annual dividend per share.
Carbon emission reduction: Progressed towards midterm target of reducing carbon emission intensity.
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Risk or Challenges
Section 232 Tariffs: The extension of Section 232 tariffs to include all steel products, including steel bars required for seamless pipe operations, and the subsequent increase to 50%, poses a significant cost challenge for U.S. operations.
Lower Rig Count in U.S.: The reduction in rig count in the U.S. oil and gas industry could negatively impact demand for Tenaris' products and services.
Mexican Oil and Gas Activity: Financial difficulties faced by Pemex have negatively impacted oil and gas activity in Mexico, which could affect Tenaris' operations in the region.
Venezuelan Operations: Resumption of services in Venezuela is contingent on U.S. government intervention and Chevron's operations, introducing uncertainty and potential operational risks.
Conventional Drilling in Saudi Arabia: Reduced conventional drilling activity in Saudi Arabia could impact Tenaris' sales and operations in the region.
Geopolitical Environment: Disruptive geopolitical conditions could pose risks to Tenaris' global operations and supply chain.
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Guidance & Outlook
Market Trends and Demand: Major oil and gas companies are seeking new production reserves to meet a more resilient long-term demand outlook. They are focusing on deepwater development and exploration in frontier regions, moving beyond shales with fast-to-decline curves.
Offshore Projects: Tenaris is working with major companies on new offshore projects, including Shell's Sparta 20K project in U.S. deepwater, ExxonMobil's operations in Guyana, TotalEnergies' GranMorgu development in Suriname, and TPAO Sakarya gas development in the Black Sea. These projects present opportunities to renew the order backlog.
Latin America Operations: In Argentina, domestic companies have raised over $4 billion to develop infrastructure and expand production in the Vaca Muerta fields. Tenaris is supplying pipelines and expanding its fracking and coiled tubing services, with plans to add a third set of equipment by year-end. In Venezuela, services to Chevron operations are resuming, with increased drilling activity expected.
Middle East Operations: Tenaris has secured a long-term agreement for OCTG supply to Qatar's Northwest field development and enhanced Rig Direct services to ADNOC in the Emirates. In Saudi Arabia, despite reduced conventional drilling, Tenaris expanded its local large-diameter facility to supply line pipes for gas infrastructure development.
Environmental Sustainability: Tenaris is progressing towards its midterm target of reducing carbon emissions intensity. The company has brought a second wind farm in Argentina into operation, supplying energy for its electric steel shop and operations in Canada.
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Shareholder Return Plan
Interim Dividend Payment: An interim dividend of $300 million was paid in November last year.
Proposed Annual Dividend: The Board of Directors proposed an annual dividend of $0.89 per share or $1.78 per ADR, which includes the interim dividend of $0.29 per share or $0.58 per ADR already paid.
Dividend Increase: If approved, a dividend of $0.60 per share or $1.20 per ADR will be paid on May 20, representing a 7% increase compared to the previous year's dividend per share.
Share Buyback Program: $537 million was spent on share buybacks during the fourth quarter of 2025.
Total Shareholder Return: Free cash flow of $2 billion was distributed entirely to shareholders through dividends and share buybacks.
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Key Q&A
Q:What is the outlook for the first quarter and beyond, and are there nuances with volume and price to consider?
A:Management expects relative stability in performance and market position during the first quarter, with results in line with the fourth quarter. However, they find it difficult to provide a medium-term forecast due to market and geopolitical volatility.
Q:How much of the margin resilience in the fourth quarter was due to actions like offsetting tariff headwinds?
A:Management noted continuous efforts to improve operational efficiency, including producing more steel in the U.S. They expect slightly lower tariff levels in the first quarter compared to the fourth quarter, contributing to stable top-line and margin data.
Q:Have there been any signs of pricing pressure in the international business?
A:Management observed general pricing stability in international markets, especially for premium products driven by offshore and Middle East demand. However, there is slight deterioration in lower-end applications, which is not a significant part of their business.
Q:What is the philosophy around the share buyback program?
A:The company has a $1.2 billion share buyback program running from May 2025 to May 2026. Management indicated that factors relevant to the decision have not changed significantly, and future decisions will depend on cash availability and other considerations.
Q:What are the expectations for the Pipe Logix pricing indices and import trends?
A:Management noted that the Pipe Logix for welded pipes is dragging down overall indices due to imports from regions like Southeast Asia. They expect antidumping actions to gradually align Pipe Logix with higher hot-rolled coil prices, but not immediately in the first quarter.
Q:How is Argentina expected to perform in 2026 compared to 2025?
A:Management expects increased investment confidence in Argentina post-election, with higher drilling activity anticipated in the second half of 2026. However, progress has been slower than expected due to country risk and industry consolidation.
Q:What is the margin trajectory for Tenaris in 2026, considering factors like hot-rolled coil prices and offshore projects?
A:Margins are under pressure due to rising hot-rolled coil prices and declining ERW margins, with impacts expected in the second quarter. Offshore projects like Suriname and Sakarya are expected to contribute positively, with strong backlog execution in 2026.
Q:What are the expectations for working capital and cash levels in 2026?
A:Management expects working capital to be neutral for 2026, with some increases in the first quarter due to accounts receivable. They aim to maintain sufficient cash for operations and potential expansion opportunities.
Q:What is the outlook for the Middle East and Mexico in the coming quarters?
A:Activity in the Middle East remains high, with potential rig count increases in Saudi Arabia later in 2026. In Mexico, Pemex has received significant government support, but private sector activity remains slow, with clearer plans expected by mid-2026.
Q:What is the impact of potential changes to U.S. steel tariffs on Tenaris?
A:Management believes potential changes may focus on redefining derivatives rather than altering the 50% tariff level. They do not expect significant changes to the core 232 tariffs.
Q:What are the expectations for the U.S. shale industry and its impact on Tenaris?
A:Management sees stable activity in 2026, with potential shifts from oil to gas drilling. They acknowledge increased efficiency in the shale industry but find it difficult to predict a production plateau.
Q:What is the outlook for Venezuela and its potential contribution to Tenaris?
A:Tenaris is well-positioned in Venezuela, serving Chevron and preparing for potential activity increases. They expect $50 million in revenue for 2026, with significant upside potential depending on broader industry developments.
Q:What are the expectations for the 'Other' business segment and CapEx in 2026?
A:The 'Other' segment, including fracking services in Argentina, is expected to grow in the second half of 2026. CapEx is projected to be slightly lower than 2025 levels, with potential adjustments during the year.
Q:Review of Unclear Management Responses
A:Management avoided providing a clear medium-term forecast for the first quarter and beyond, citing market and geopolitical volatility. They also did not provide specific details on the impact of potential changes to U.S. steel tariffs or the exact timing of pricing adjustments in the Pipe Logix indices.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ADR dividend
ADR end
Annual General
Annual Results
Argentina tubing
CEO Chief
Canada resilience
Conference today
Directors approval
General Meeting
Meeting beginning
Officer Chief
Officer President
Results Conference
Section tariff
Tenaris Annual
Tube segment
approval Annual
beginning payment
benefit buyback
buyback capital
dividend share
end dividend
end payment
expenditure Directors
flow cash
payment dividend
period benefit
price Tube
program word
resilience Argentina
result Section
sale United
sale result
segment cash
share ADR
share period
tariff selling
TS Transcript
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The earnings call presents a mixed picture. While there are positive elements like stable market position, strong offshore projects, and shareholder returns, there are concerns over medium-term guidance, margin pressures, and geopolitical volatility. The Q&A highlights stability in the short term but lacks clarity in medium-term forecasts, contributing to a neutral sentiment. The absence of significant financial growth metrics and the cautious outlook for 2026 further balance out any positive sentiment from operational efficiency and shareholder returns.
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The earnings call presents a mixed outlook. Financial performance shows strong sales and a positive cash position, but margins are expected to decline due to tariffs. The Q&A reveals concerns about future EBITDA impacts and uncertainties in guidance, yet there's optimism in market expansions and shareholder returns. The strategic plan indicates potential growth in 2026, but short-term challenges remain. Overall, the sentiment is balanced, leading to a neutral prediction for stock price movement.
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