Tenaris Q1 2025 Earnings Report

Tenaris EPS Results

• Actual EPS: $0.94
• Consensus EPS: $0.80
• Beat/Miss: Beat by +$0.14
• One Year Ago EPS: $1.27

Tenaris Revenue Results

• Actual Revenue: $2.92 billion
• Expected Revenue: $2.88 billion
• Beat/Miss: Beat by +$37.54 million
• YoY Revenue Growth: -15.10%

Tenaris Announcement Details

• Quarter: Q1 2025
• Date: 4/30/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 8:00AM ET

Tenaris (NYSE:TS), together with its subsidiaries, produces and sells seamless and welded steel tubular products and related services for the oil and gas industry, and other industrial applications. The company offers steel casings, tubing products, mechanical and structural pipes, line pipes, cold-drawn pipes, and premium joints and couplings; and coiled tubing products for oil and gas drilling and workovers, and subsea pipelines. It also manufactures sucker rods used in oil extraction activities and tubes for plumbing and construction applications; and offers oilfield/hydraulic fracturing services and energy and raw materials, and financial services. The company operates in North America, South America, Europe, the Middle East and Africa, and the Asia Pacific. Tenaris S.A. was founded in 2001 and is based in Luxembourg. Tenaris S.A. operates as a subsidiary of Techint Holdings S.à r.l.

Tenaris Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Please be advised that today's conference is being recorded.

[Operator]

I would now like to turn the conference over to Giovanni Sardagna, Investor Relations Officer. Please go ahead.

[Giovanni Sardagna, Investor Relations Director at Tenaris]

Thank you, Liz, and welcome to Tenaris twenty twenty five first quarter conference call. Before we start, I would like to remind you that we will be discussing forward looking information in the call and that actual results may vary from those expressed or implied during this call. With me on the call today are Paulo Rocca, our Chairman and CEO Alicia Mondolo, our Chief Financial Officer Gabriel Potcusca, our Chief Operating Officer and Guillermo Moreno, newly appointed President of our U. S. Operations.

[Giovanni Sardagna, Investor Relations Director at Tenaris]

Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results. Our fourth quarter sales reached $2,900,000,000 down 15% year on year, but up 3% sequentially due to higher seasonal volumes in Canada and higher onshore sales in The U. S, while our average selling price declined due to market and product mix effects with lower sales of OCTG premium products in Mexico, Turkey and Saudi Arabia, in addition to lower sales of seamless line pipe for offshore projects. Average selling price in our Tubes operating segment decreased 11% compared to the corresponding quarter of 2024 and five percent sequentially. On a comparable basis, our EBITDA rose 6% and net income remained in line with the results of the previous quarter.

[Giovanni Sardagna, Investor Relations Director at Tenaris]

Our EBITDA margin increased slightly to 24 due to a good operating performance and better absorption of fixed and semi fixed costs, thanks to higher volumes. With operating cash flow of $821,000,000 and capital expenditure of 174,000,000 our free cash flow for the quarter was $647,000,000 Following share buybacks of $237,000,000 during the quarter, our net cash position increased to 4,000,000,000 up from €3,600,000,000 at the end of last year. Now I will ask Paolo to say a few words before we open the call to questions.

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you, Giovanni, and good morning to all of you. I will start mentioning a change in our management team, Guillermo Moreno, who is with us on the call today, has taken the position of President of our U. S. Operation. Guillermo has more than 35 of experience in Tenaris.

[Paolo Rocca, Chairman & CEO at Tenaris]

He has led our U. S. Commercial operation over the last five point five years, prior of which, was President of our Canadian operation. We wish him all the best in his new position. We began 2025 with a good performance in the first quarter.

[Paolo Rocca, Chairman & CEO at Tenaris]

Not only did we deliver quarter on quarter increase in sales and EBITDA on a comparable basis, but our free cash flow rose to $647,000,000 as we achieved a significant reduction in working capital. In Canada, we have been consolidating our Rig Direct strategy with long term agreements, which have given us more stability and visibility in our operation. This winter season, we shipped a record quarterly volume of OCTG. In The U. S, we have increased deliveries and continue to extend the range of services under our Rig Direct program.

[Paolo Rocca, Chairman & CEO at Tenaris]

These results reflect the value perceived by our customer in working closely with us under long term agreements as they seek further operational efficiencies. They include most of the largest shale operator with a longer backlog of Tier one acreage and the most resilient operation. In Argentina, we began pipe deliveries for the new Vaca Muerta Sur pipeline, which will add 550,000 barrel a day of additional oil export capacity and is expected to come into operation next year. As local operator increase their investment in this highly productive shale play, we are expanding our new fracking and coiled tubing service unit with an investment in a third set of equipment, which should come into operation next year. Our project backlog for offshore project is solid, and we expect to have further opportunities with a new wave of FID that we expect to be sanctioned in 2026.

[Paolo Rocca, Chairman & CEO at Tenaris]

This backlog is made up of highly differentiated OCTG line pipe connector and coating products. Here, our recent success in qualifying products for high pressure 20 ks deepwater project in The U. S. With Shell and BP, and the value we bring through the integration of Shawcor coating technology give us an edge in tackling future challenges. In the coming months, we will supply line pipe for the Ndunggo and Bonga North offshore project in West Africa.

[Paolo Rocca, Chairman & CEO at Tenaris]

In Australia, we received a multi year award from Chevron to supply the backfill wells for Gorgon and Wheatstone project in Australia. In The Middle East, we made a record quarterly level of shipment to Arnauk under our long term service agreement, as they started the new shale drilling operation. We also commenced a pipe shipment for a major gas processing facility in Algeria. The major NOCs in the region have long term planning cycles, and we expect that their operation will remain relatively resilient through the year. The last conference call, we mentioned that we were heading for unchartered territories.

[Paolo Rocca, Chairman & CEO at Tenaris]

The subsequent chain of announcement on tariff and counter tariff has not dispelled this uncertainty on the global macroeconomic and geopolitical situation. This has fueled the expectation for a lower level of economic activity and lower demand for oil. Price of oil has been additionally affected by the production increases announced by the OPEC plus If the price of oil remained near or below $60 per barrel, there will inevitably be a slowdown in North American shale drilling activity. While a long cycle sanction project will likely continue, a new project sanctioning may be subject to delays. As we face this less favorable macroeconomic and oil price environment, we are preparing for lower levels of activity ahead.

[Paolo Rocca, Chairman & CEO at Tenaris]

We do so from a position where we expect to demonstrate the resilience and the solidity of our customer portfolio, our flexible industrial and supply chain system and our solid balance sheet. In the longer term, the outlook for our industry remains secure in a world where demand for reliable sources of affordable energy will continue to grow. I will stop here and open the floor for any questions you may have.

[Operator]

Our first question comes from Alessandro Pozzi with Mediobanca.

[Alessandro Pozzi, OIl & Gas Analyst at Mediobanca]

Thank you for taking my questions. I think during your opening remarks, you mentioned a potential slowdown in activities in The U. S. I was wondering, are you already seeing companies pulling back on CapEx? And what sort of, let's say, level of rig count do you expect now by year end?

[Alessandro Pozzi, OIl & Gas Analyst at Mediobanca]

And you also mentioned that potentially ahead of what could be maybe a slower second half, you may be willing to take some maybe cost saving initiatives. I was wondering if you can maybe give us more color around that. Thank you.

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you, Alessandro. Effective, as you mentioned, I think that the change that are occurring at the geopolitical and macroeconomic level induce expectation of a lower level of economic activity, and also the price of oil, the demand and the price of oil is reflecting this expectation and the announcement by the OPEC plus of increasing production. The combined effect, as you can see, is a reduction in the price of oil. This if the situation stabilize at the present level, and this is something that may or may not happen because everything has been moving very fast in the last couple of months, action, counteraction, and so on tariff and on different areas have moved many variables. So if this situation is stabilized and the price of oil remains in this range, the oil company will have to adequate the level of CapEx to the reduced level of cash flow.

[Paolo Rocca, Chairman & CEO at Tenaris]

So we expect that gradually, there will be a reduction in the level of operational rig count, especially in the area and in the project, like in The United States, that could be discontinued or postponed with less effort and change. How deep this could be? Well, as we mentioned in our outlook, we do not expect this to impact the second quarter of twenty twenty five. We have a pretty solid backlog. We do not expect, let's say, a major change, and we continue to maintain our estimate for results in line or slightly better than what we had in the first quarter.

[Paolo Rocca, Chairman & CEO at Tenaris]

But when we look at the second half, there is uncertainty. We may estimate the reduction in the level of drilling activity in The U. S, But we are confident that the project worldwide, especially the offshore, but also some of the program of drilling of National Oil Company will continue independently from the change in the price in the temporary short term price of oil. This project has a horizon of ten, fifteen years and are undertaken by a company with with strong balance sheet and strong financial capability. So there is an effect of reduction in activity.

[Paolo Rocca, Chairman & CEO at Tenaris]

We expect this in the world of fields, to a larger extent, The U. S, and especially in The U. S. In the oil production, because as you know, the gas is supported by the LNG demand. We do not expect such a reduction in gas.

[Paolo Rocca, Chairman & CEO at Tenaris]

The price of gas also has different dynamics. Canada, considering that the drilling activity driven by gas has a larger share, is stronger, more than 40%, forty five % of the activity is driven by gas. There could be a reduction, but mostly driven by oil in the second half also. In the rest of the world, will see. If this level of price stabilize and the expectation of the economy remain at that level or get worse, there could be postponement of long term project that may be launched in 2026, but this is too early to say.

[Paolo Rocca, Chairman & CEO at Tenaris]

So this is there is a high degree of uncertainty if we look at the second half on and into 2026.

[Alessandro Pozzi, OIl & Gas Analyst at Mediobanca]

Yes. And I mean, if we look beyond the Q1 Q2, and is there any visibility at the moment for Q3? Do you think potentially the lower oil prices could impact Q3? Or is it too early? Or you have a view on how Q3 could shape up?

[Paolo Rocca, Chairman & CEO at Tenaris]

As I said before, if the price will remain at the present level around or below $60 gradually, CapEx of the oil company may be reduced, and we will see the first effect in Q3. But as I say, still we have high uncertainty on the evolution on the main variable everything is on the move but if the oil stays there we will start to see reduction in activity in my view in the third Q of twenty twenty five

[Alessandro Pozzi, OIl & Gas Analyst at Mediobanca]

Okay, thank you very much.

[Operator]

Our next question comes from Arun Jayaram with JPMorgan.

[Arun Jayaram, Analyst at JPMorgan Chase]

Yes, good morning. Paula, was wondering if you could maybe give us your updated views on how the implementation of U. S. Terrorists and Steel is impacting or will impact your operating results? Obviously, we've seen some improvement in price in terms of the Pipe Logix indices.

[Arun Jayaram, Analyst at JPMorgan Chase]

And maybe you could also highlight if you've seen any changes in imports to The U. S. Just as the Section two thirty two quotas have been removed as part of the implementation of U. S. Tariffs?

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you, Rome. Well, tariff, as you know, the two thirty two applying to steel is today affecting, in part, our operation for our import of steel and some import of pipe into The U. S. Even if we produce almost all of our pipes in The U. S, but we still are importing some of the steel bars that goes to our plant in Bay City and Enbridge.

[Paolo Rocca, Chairman & CEO at Tenaris]

We estimate the impact of this in the range of EUR 70,000,000 per quarter of additional tariff on one side. On the other side, as you mentioned, the Pipe Logix has been moving up, and we consider that all in all, the price increase that we will see reflected gradually in our contract in The U. S. Will offset this increase in tariff. I think this is basically the trend, what we can expect.

[Paolo Rocca, Chairman & CEO at Tenaris]

I would like to have Guillermo that is leading through this To add some comment, before going a little more deep into this, one brief mention on import that you were asking for. In the first quarter, import, there's been a higher level of import compared to the previous quarter. Some of this has been anticipation of the coming tariff by an importer. They decided to raise the level of import at this point. This happened not only in our sector but also in other areas of the economy.

[Paolo Rocca, Chairman & CEO at Tenaris]

There has been an increase in the stocks in the entire economy in the expectation of tariff, but we will see, depending on the negotiation underway, also how this will evolve in the coming quarter. But I will ask you to give Germo some additional comment on the situation and the reaction of The U. Client to this environment.

[Guillermo Moreno, President - US Operations at Tenaris]

Yes. Thank you, Paolo, and good morning, Arun. As you said, in the first quarter, we see we saw an increase of imports after four quarters of reduction of imports and a destocking of the market. We were expecting a rebound and this become effective in the first quarter. For the second quarter, we still expect similar level, a little bit downward, and I think that the second half will depend a lot on what happens with activity.

[Guillermo Moreno, President - US Operations at Tenaris]

However, we expect that the administration will focus on the purpose of the February, where the objective is to increase the utilization of the domestic industry. With regards to, as you said, about activity, we have a good visibility with our clients because of our Rig Direct. Most of them have not so far announced any drops of RICs. However, they are in the process of analyzing, but we would expect that there will be some adjustments starting in the second half of the year.

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you, Igsero.

[Arun Jayaram, Analyst at JPMorgan Chase]

Great. And Paulo, just the clarification, you mentioned $70,000,000 of potential tariff costs impacts per quarter, but that would be reflected in your flat EBITDA margin guide already, so that it's not affecting your margins per se?

[Paolo Rocca, Chairman & CEO at Tenaris]

No. First of all, the 70,000,000 per quarter that I mentioned will come in gradually during the coming three quarters. So this will be and then this is basically will be will also be reflected in the accounting due to the IFRS gradually. So for different reasons, this is the estimate, the running cost that we will have, but we will arrive there gradually because these numbers are entering into our cost of sales gradually and also because it will depend from our ability to expand production in copper as much as we can, reduce import of steel over time. So it's a broader estimate, may materialize in the fourth quarter as an impact in our cost, provided that we are, let's say, we are not able to strengthen local production or negotiate because we don't know where the negotiation with Mexico and with Europe may advance.

[Paolo Rocca, Chairman & CEO at Tenaris]

If there are changes in this negotiation, this may turn out into a reduction potential reduction of the 25% of the two thirty two for this specific semis that we are bringing to the state.

[Arun Jayaram, Analyst at JPMorgan Chase]

Great. And my second question is Paulo, Giovanni mentioned how the net cash balance at the company has reached $4,000,000,000 So I wanted to get your thoughts on reinvestment opportunities. I believe that you've exhausted your share buyback authorization and thoughts on potentially at the next annual meeting in May for the company to re up the buyback authorization?

[Paolo Rocca, Chairman & CEO at Tenaris]

Yes. As you say, we completed the buyback under the authorization that the Board of Directors had in the assembly. One of the points of the agenda is exactly to renew the authorization for a buyback of up to 10% of the outstanding share. And then the new Board of Directors will consider what to do and if to proceed the program that has been carried on since last year.

[Arun Jayaram, Analyst at JPMorgan Chase]

Understood. Thank you very much.

[Operator]

Our next question comes from David Anderson with Barclays.

[J. David Anderson, Managing Director at Barclays]

Thank you. Good morning. Paulo, I certainly recognize all the uncertainty in second half of the year. But if oil prices just stay where they are and if tariffs don't change from here, I'm just curious how you're seeing volumes in the second half progressing here. I certainly recognize The U.

[J. David Anderson, Managing Director at Barclays]

S. Is more sensitive to commodity prices, but your rig direct model encompasses most of the larger operators who are probably not going to change the programs too much. And then thinking about the rest of the world in that mix, I wouldn't think volume should fall too much in the second half, but could you potentially just give us a range of kind of outcomes that you think could happen?

[Paolo Rocca, Chairman & CEO at Tenaris]

I think it's too early to give a prediction of the decision of the oil company. But you are right in the consideration that our portfolio of clients is mainly consisting of the major oil company, company that has large asset in the shale. They are developing their asset on the basis of long term program. They are taking the decision with medium and long term horizon, are not subject to, let's say, short term input given by the level of cash flow, so they can plan. So our portfolio is this.

[Paolo Rocca, Chairman & CEO at Tenaris]

We have our own stock in house to serve this as a Rig Direct, so we expect that whatever decision they may take or whatever the trend in the market, our portfolio client should be more resilient to the rest of the market. This is also other factor that we need to consider. There are components of the supply metrics in the states like import. There may be subject to a renewal of quota or other changes in the negotiation with the different countries that are shipping their pipe to United States. It is true that with the new two thirty two, they have no quota, but they paid 25%, but I think that the administration will keep a close look at the volume coming from these countries and we'll consider this in the negotiation.

[Paolo Rocca, Chairman & CEO at Tenaris]

So this is a factor. The other component of the matrix supply is also the welded pipe for local producer. In this moment, the price of hot rolled coils is increased very fast since the introduction of tariff, and the pipe logic is increasing, but not at the same pace. So there are other components of the supply chain that may be squeezed in this environment and reduce the pressure of supply in an environment of slightly reduced or strongly reducing demand. This we do not know.

[J. David Anderson, Managing Director at Barclays]

Appreciate the color. Thank you. A separate question. You'd mentioned offshore a few times in your remarks, and I was just wondering within your mix of volumes, should we expect that offshore component to start growing later this year into 2026? There's a number of offshore developments starting next year, talk about kind of longer programs that shouldn't be affected.

[J. David Anderson, Managing Director at Barclays]

I wouldn't think offshore should be impacted here. But I was just wondering if you start to see those volumes coming through your numbers later this year into 2026. And just kind of what you're hearing from your customers in terms of that potential offshore activity in 2026?

[Paolo Rocca, Chairman & CEO at Tenaris]

Yes. Thank you, David. Before passing to Gabriel, the question for the review of the offshore landscape, I can tell you that the overall invoicing that we are getting from the sale of Connect, CTG, line pipe and coating is very relevant for Tenaris. So it's a very important component of our overall positioning. Gabriel, can you give

[Gabriel Podskubka, Chief Operating Officer at Tenaris]

Thank you, Paolo. Good morning, David. Indeed, the offshore market, as Paolo was saying, is very important for Denaris. And I would say with a high degree of resilience in an environment of high uncertainty. Tenaris is absolute leader in this space, as we mentioned in some of the opening remarks.

[Gabriel Podskubka, Chief Operating Officer at Tenaris]

For example, we have been selected to be the supplier of choice for one of the most recent FIDs in the water, which is a Shell Bonga project in Nigeria. Here we are going to deliver a full supply of subsea pipeline and risers. We will also deliver insulation coating services that we will produce in our coating facility in Port Harcourt in Nigeria, and we also are going to be the leading supplier of OCDG for the 25 wells that are required for this development. This is one of the main examples of the contracts or the backlog that we have for offshore, which is quite high. This has been an area of strength for Venaris in 2024 and will be in 2025, and even some of these backlog goals into 2026.

[Gabriel Podskubka, Chief Operating Officer at Tenaris]

We don't expect the short term volatility in oil prices to affect the development of the projects that are already sanctioned. These projects have been sanctioned on a horizon of a long span, a decade or more, and also it is important to mention that many of these deepwater break evens have been very competitive in the range of 30 or even lower than that, so we expect the offshore to be a very resilient segment for the analysis into the rest of 2025 and even into 2026.

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you, Gary.

[J. David Anderson, Managing Director at Barclays]

Thank you. Appreciate it.

[Operator]

Our next question comes from Sebastian Erskine with Redburn Atlantic.

[Sebastian Erskine, Analyst at Redburn Atlantic]

Yes. Hi, good morning. Thanks for taking my questions. The first one, just had a question on the cost structure. I noticed in the first quarter kind of quite a large 9% sequential step down in unit labor costs and to a lesser extent on raw materials.

[Sebastian Erskine, Analyst at Redburn Atlantic]

Is there anything specific you can flag on that and kind of what we can expect in terms of a quarterly cadence going forward to the end of the year?

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you, Sebastian. I think that the we have seen a pretty stable evolution of key component, slightly down on the trend for iron ore. Scrap went up slightly following the increasing the hot rolled coil in The U. S. But basically, in an environment in which economic growth or the dynamic of the economy is turning more sour, we do not see that we should have a cost impact.

[Paolo Rocca, Chairman & CEO at Tenaris]

On the contrary, if the reason economy is slow down in some of the world, we should see some reduction from where we are today in our basic input. And then you were mentioning the variance of labor. As you know, we are in the process of restructuring of some of our operations to increase productivity and to continuously proceed in achieving savings and increasing productivity in our operation. This may have an impact gradually on the overall labor cost in our operation.

[Sebastian Erskine, Analyst at Redburn Atlantic]

Appreciate the color there. Thank you. And then just a second one on Mexico. I mean, the situation sort of appears to have further deteriorated with Pemex sort of growing supply debt. I mean could you give us an update on sort of where you see some movement to the upside in that geography?

[Sebastian Erskine, Analyst at Redburn Atlantic]

And given some of the commentary of your peers being quite sort of sanguine and negative.

[Paolo Rocca, Chairman & CEO at Tenaris]

Well, two points. On one side, we've been able to reduce our exposure to Pemex, to operations that allow us to substantially reduce our exposure, and you see this in the increase in the reduction in our working capital and in the cash flow. On the other side, when we look at the operation of Pemex, I maintain the position that I told you in the last quarter. I mean, the situation of Pemex has been continuously deteriorating. Today, they are arriving at the level of rigs operation that is extremely low.

[Paolo Rocca, Chairman & CEO at Tenaris]

I think we are in the range of 16 rigs and the level of production is in the range of $1,600,000 to $1,000,000 even lower because there has been for a few quarter reduction every month of production. It may start to be dry for a while, but it's there. So today, the situation is clearly very difficult, but in my view, it's unsustainable. The government come out and presented a plan for refinancing to some extent Pemex and designing an energy plan that would bring back resources to Pemex and plan for getting back to drilling and to development resources, but this is supposed to happen, but we do not know when this plan will materialize. For the time being, we have listened to the President of Mexico and expoing the lines of these plans, but we do not see the action in Pemex to implement this yet.

[Paolo Rocca, Chairman & CEO at Tenaris]

But I'm confident that Mexico could not leave Pemex in the situation that it is now, and there will be in some moment in the coming quarter action following the planning that is being presented.

[Sebastian Erskine, Analyst at Redburn Atlantic]

Thank you very much. I'll hand that back now. Thank you.

[Operator]

Our next question comes from Steven Gengaro with Stifel.

[Stephen Gengaro, Managing Director at Stifel Financial Corp]

Thank you. Good afternoon. Good morning, everybody. Excuse me. So I had a question about the raw material costs in The U.

[Stephen Gengaro, Managing Director at Stifel Financial Corp]

S. Market versus the pricing. And I'm just sort of thinking back to prior periods where when the market was strong enough and raw material costs were higher, think you generally more than offset the increase. And today, it's a little bit different with the potential for lower activity. How do you think those two items balance themselves out in the second half of the year?

[Stephen Gengaro, Managing Director at Stifel Financial Corp]

Like do you think you can manage through it to hold margin? Or do you think the input costs in the face of potentially lower demand will be a headwind on margins in the second half of the year?

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you, Steven. Frankly, I do not think that our main concern in this moment should come from raw material. The all the tariff, the change, the retaliation, and the uncertainty on the reciprocal tariff are creating some gap between the price situation within The United States and the pricing in the international market. This is very true for the hot rolled coils, to some extent also for the scrap and some raw material. But in this moment, I would say our concern is more the overall level of economic activity and the risk of a recession and some down trend in the overall level of activity.

[Paolo Rocca, Chairman & CEO at Tenaris]

This is more of a concern. Also, we have five steel shop operating all in the world, some operating in The States One in The States, the other in other regions, in Latin America, in Europe. And I think we can manage this change in the value and these gaps from the prices internally in The States or outside in the rest of the world. Also, Tenaris is a highly differentiated product. The raw material has an impact on our overall cost, but it is not the same impact that you may have in companies that are focused on lower value added products like long or flat product to some extent.

[Paolo Rocca, Chairman & CEO at Tenaris]

So it's important, but in this moment, I don't think this is our main concern.

[Stephen Gengaro, Managing Director at Stifel Financial Corp]

Great. Thank you. And the other question I wanted to ask you about is given the Rig Direct model that's in place, can you just give us a sense for if we do see a reversal in price at all as a result of lower activity? What's sort of the timing on when we would see that start to get start to show up in the numbers? Would it be third quarter?

[Stephen Gengaro, Managing Director at Stifel Financial Corp]

Would it be later? Just based on sort of the rig direct mile and sort of the relationships you have with your key customers.

[Paolo Rocca, Chairman & CEO at Tenaris]

Well, this is a question that is not easy to project in the second half. Also because of the change in tariff, the uncertainty on quota, what will the US administration do to limit importing to the states? This is a very important factor to determine the dynamic. Up to now, we have seen the pipe logic growing slowly, but moving on even this month. Here, maybe, Guillermo, you can add some color on the factor that may influence pricing in the medium term.

[Guillermo Moreno, President - US Operations at Tenaris]

Yes.

[Guillermo Moreno, President - US Operations at Tenaris]

As you said, since the beginning of the year, the prices in the market have increased like 10%. As you know, and we have discussed in previous calls, because of the formulas of our direct long term agreements, we have some inertia. So we don't expect any in case there is a reduction in the prices, we don't expect any impact in the third quarter and eventually it could start to affect to go into our P and L in the fourth. However, I think it's too early to say. As we said before, still we have not heard from many of our clients a reduction in their activities, though we are expecting them to come out probably with some during maybe May.

[Guillermo Moreno, President - US Operations at Tenaris]

I think that in one month we'll have a better visibility of their decisions about second half. But I don't see any impact on the contrary. I mean, due to the inertia of our formulas, prices in third quarter should go up because of so far we have seen that increase.

[Stephen Gengaro, Managing Director at Stifel Financial Corp]

You.

[Operator]

Our next question comes from Derek Pothaiser with Piper Sandler.

[Derek Podhaizer, Senior Research Analyst at Piper Sandler Companies]

Hey, good morning. Just to kind of wrap up all the conversations around tariffs and the impact on pricing and obviously we have an activity outlook that has deteriorated over the last three months. But I remember last quarter, you discussed reaching a 25% margin target in the back half of the year. Obviously, we now have this potential activity role in The U. S.

[Derek Podhaizer, Senior Research Analyst at Piper Sandler Companies]

But considering the pricing increases, considering the tariffs, we're going keep an eye on Section two thirty two quotas. Do you still think 25% EBITDA margin is still a good target for the second half of the year?

[Paolo Rocca, Chairman & CEO at Tenaris]

Well, I think many things happened between that estimation and today. I mean, the changes have been substantial. Today, we are looking at the price of oil in the range of below $60 This, no doubt, will have an impact on us. Still considering all the factors that we mentioned, stability of our portfolio, differentiation in market that could be most affected by a slowdown, I think we should be able to maintain our over time, our margin between the 2025%, but will be difficult today to stay at the 25% margin rate with this environment in the second half of this year. But we will still stay, let's say, within this range, looking at the environment as it is today.

[Derek Podhaizer, Senior Research Analyst at Piper Sandler Companies]

Great. I appreciate the color, the comments there. And then just maybe if we can expand. So the North America revenue was up 10% quarter over quarter. I know that includes Mexico, obviously, which your region has clearly deteriorated.

[Derek Podhaizer, Senior Research Analyst at Piper Sandler Companies]

So surprised to see the strength there. You talked about Canada seasonal recovery, but you also mentioned the increased sales through U. S. Rig Direct. I just wanted to get your take, maybe if we can expand on that.

[Derek Podhaizer, Senior Research Analyst at Piper Sandler Companies]

Have you seen maybe a front loading of budgets as your largest E and P operators look to order steel OCTG ahead of the tariff impact and potentially other impacts that could be coming throughout the year? Just maybe some thoughts on why you had such a strong quarter for North America driven by The U. S. Side, just considering Mexico was such a drag?

[Paolo Rocca, Chairman & CEO at Tenaris]

No. Our business model, we sell on Rig Direct. We invoice directly when they use the pipe at the rig. And today, more than 95% of our clients are operating on this way. So in the end, we are copying very precisely the exact level of operation.

[Paolo Rocca, Chairman & CEO at Tenaris]

There is no room for anticipating stocks in most of our sales. There are maybe line pipe, also in this, I don't think the company had the space for, let's say, anticipating order. So we are just following copying the curve or the activity. Our current has been resilient. I mean, the level of their operation after consolidation by the different company has, to some extent, been solid.

[Paolo Rocca, Chairman & CEO at Tenaris]

Now in Canada, we had a record season. I mean for us, it's been a record quarter and the record season also for Canada. In Canada, the level of drilling has been high. Our Rig Direct model in Canada is expanding. So also in Canada, we are copying the level of operation.

[Paolo Rocca, Chairman & CEO at Tenaris]

We do not see any anticipation of sales. Now on this ground, we are making our forecast for the second Q, and it is a positive forecast because we have a portfolio, we have this stability, we can predict, we think, pretty well the combination of volume and price in that region. When we look ahead in the second half of the year, this is much more difficult because the company will recalculate probably during the coming three, four months, And they will maybe reorganize, replan some of the development. And we will see this happening, but probably during the quarter, the second quarter at the end of the second quarter, we will understand better the perspective for the second quarter. We will also better understand if the administration will limit import to some extent, and if the expectation of the economy and the oil will continue to be as they are today, which is, let's say, a pretty pessimistic point of view for the future.

[Derek Podhaizer, Senior Research Analyst at Piper Sandler Companies]

Great. Thanks for all the comments. I'll turn it back.

[Operator]

Our next question comes from Jamie Franklin with Jefferies.

[Jamie Franklin, Equity Analyst at Jefferies]

Hi, there. Thank you for taking my questions. Just a couple of clarifications. So I wanted to come back on costs firstly. And last year at 2Q results, you gave a target for $200,000,000 cost savings to be realized by 1H twenty five.

[Jamie Franklin, Equity Analyst at Jefferies]

Can you please quantify approximately how much of that has already been recognized as of 1Q twenty twenty five results? Secondly, regarding the decline in sales in South America in the quarter. The press release mentions lower prices in Argentina. Could you please just elaborate on that? And any further color you could give us on possible timing of orders in Argentina later this year, please?

[Jamie Franklin, Equity Analyst at Jefferies]

Thank you.

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you, Jamie. Well, on the first point, I think we have been able to capture more than half of the $200,000,000 savings that we planned in the middle of last year. This is coming from different sources, productivity increase, efficiency in our plant, some reorganization of our supply chain to also reduce the cost of input. And we are proceeding and we expect that this will contribute in the end, it will contribute to our margin because these savings are getting into our IFRS cost of sales over time, not immediately because this is the logic of it. So we will proceed in this sense and we think we will get the expected reduction by the second, the end of the second.

[Paolo Rocca, Chairman & CEO at Tenaris]

Talking about Argentina, the overall level of price, What is going down is the mix because we are combining line pipe project and OCTG. And in the line pipe project, we have lower level of price for these. These are welded products like the new VAMOS line pipe project and so on. In the case of the OCTG, we are reflecting formulas in the majority of our contract are considering the pipe logic as a key factor, one of the factors. There are other in some of the contract, but mainly these will be Pipe Logix.

[Paolo Rocca, Chairman & CEO at Tenaris]

And so, for instance, we may see increase of some percentage point in this. There has been a change of mix in Argentina because the RICs in the Vaca Muerta space has been increasing, are today in the range of above 43%, forty four % I think now as they were in the range of thirty one point five years ago, I mean two years ago. So the increase is there in the Vaca Muerta space, But in the Southern part of the country, YPF and the other company has been self selling asset, less productive asset to focus on Vaca Muerta, and this has reduced the number of rigs operating in the South. So when you look at the overall number, you see an increase that appears to be more limited. And probably also during the rest of 2025, we will see a slight increase in the level of RIX but in terms of price, think overall we will follow the pipe logic and you will see this the price apart from the mix between welded and seamless.

[Jamie Franklin, Equity Analyst at Jefferies]

That's great. Thank you.

[Operator]

Our next question comes from Daniel Thompson with BNP Paribas.

[Daniel Thomson, Equity Research Analyst at BNP Paribas]

Hi, good afternoon. Thanks for taking my question. Just a follow-up on the shareholder returns comments and thinking around the balance sheet. Obviously, the share price has taken a significant step down on the lower oil price environment already. And given your positive longer term outlook, buybacks could represent one of the most attractive uses of cash here.

[Daniel Thomson, Equity Research Analyst at BNP Paribas]

So I just wondered how the lower share price factors into your thinking on repurchases and the pace of those repurchases that you've demonstrated under the existing program relative to maybe wanting to maintain a more defensive cash balance into the potentially weaker period? And the second one is a bit more straightforward, just on the mechanics of any reauthorization. What

[Daniel Thomson, Equity Research Analyst at BNP Paribas]

is

[Daniel Thomson, Equity Research Analyst at BNP Paribas]

the timeline between any reauthorization being issued in May and actually beginning with the implementation of the buyback? Are there any subsequent approvals required after that May meeting or not? Thank you.

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you, Daniel. Well, as I was saying before, the extension of the authorization of buyback is in the agenda of the General Assembly. We expect it to be approved. Then it will be up to the new Board of Directors to consider the different factors, the situation, perspective for eventual acquisition, possible use of cash, decide which course of action to take. We will bring all this evidence to the Board, and after the general assembly and the assumption of the new authority in the board, the board will consider this and see which is the best use of the cash that we have in the company.

[Daniel Thomson, Equity Research Analyst at BNP Paribas]

All right. Thank you.

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you.

[Operator]

That concludes today's question and answer session. I'd like to turn the call back to Giovanni Sardagna for closing remarks.

[Giovanni Sardagna, Investor Relations Director at Tenaris]

Thank you, Liz. And well, we would like to thank you all for joining us today in our conference call. Thanks.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Giovanni Sardagna, Investor Relations Director
• Paolo Rocca, Chairman & CEO
• Guillermo Moreno, President - US Operations
• Gabriel Podskubka, Chief Operating Officer

Analysts

• Alessandro Pozzi, OIl & Gas Analyst at Mediobanca
• Arun Jayaram, Analyst at JPMorgan Chase
• J. David Anderson, Managing Director at Barclays
• Sebastian Erskine, Analyst at Redburn Atlantic
• Stephen Gengaro, Managing Director at Stifel Financial Corp
• Derek Podhaizer, Senior Research Analyst at Piper Sandler Companies
• Jamie Franklin, Equity Analyst at Jefferies
• Daniel Thomson, Equity Research Analyst at BNP Paribas