Tenaris Q2 2025 Earnings Report

Tenaris EPS Results

• Actual EPS: $0.99
• Consensus EPS: $0.88
• Beat/Miss: Beat by +$0.11
• One Year Ago EPS: $0.59

Tenaris Revenue Results

• Actual Revenue: $3.09 billion
• Expected Revenue: $3.00 billion
• Beat/Miss: Beat by +$89.13 million
• YoY Revenue Growth: -7.10%

Tenaris Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 31, 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 Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Second-quarter revenues of €3.1 billion (-7% Y/Y, +6% Q/Q) delivered a strong €733 million EBITDA (24% margin) and €538 million free cash flow, leaving net cash at €3.7 billion.
• Negative Sentiment: The U.S. Section 232 steel tariff rose to 50%, creating a €140–150 million quarterly headwind to cost of sales, though it may ultimately reinforce domestic production and pricing.
• Positive Sentiment: A robust offshore pipeline backlog—including awards for Buzios XI (Brazil), Agbami (Nigeria) and the Grand Morgue project (Suriname)—and the Shawcor acquisition strengthen 2026 line-pipe and coating capabilities.
• Neutral Sentiment: Deliveries in Vaca Muerta and the Guyana–Suriname basin of casing, tubing, coatings and new local service hubs support future growth, although project timing remains stretched by financing and development phases.
• Positive Sentiment: Mexico’s Pemex secured a €12 billion financing facility to reduce supplier debt, setting the stage for higher rig activity (currently ~24 rigs) and increased OCTG demand under existing contracts.

Presentation

[Operator]

Good day and thank you for standing by. Welcome to the Second Quarter twenty twenty five Denaris S. A. Earnings Conference Call. At this time, all participants are in a listen only mode.

[Operator]

After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Giovanni Sardagna, Investor Relations Officer. Please go ahead.

[Giovanni Sardagna, Investor Relations Director at Tenaris]

Thank you, Gigi, and welcome to Tenaris twenty twenty five second quarter conference call. Before we start, I would like to remind you that we will be discussing forward looking information during the call and that our 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 Carlos Gomez Alfre, our newly appointed Chief Financial Officer Gabriel Potskufka, our Chief Operating Officer and Guillermo Moreno, 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 second quarter sales reached EUR 3,100,000,000.0, down 7% year on year, but up six percent sequentially, mainly reflecting an increase in North American OCTG prices and stable volumes. Average selling prices in our Tubes operating segment decreased 2% compared to the corresponding quarter of last year, but increased 6% sequentially. Our EBITDA for the quarter was up 5% sequentially to seven thirty three million dollars with our EBITDA margin for the quarter close to 24%. Our margins remain in line with those of the previous quarter.

[Giovanni Sardagna, Investor Relations Director at Tenaris]

Our cost of sales also rose 5%, mainly reflecting product mix differences and higher tariff payments. With operating cash flow of six seventy three million dollars and capital expenditure of $135,000,000 our free cash flow for the quarter was $538,000,000 After a dividend payment of $600,000,000 in May and share buybacks of EUR $237,000,000, our net cash position amounted to EUR 3,700,000,000.0 at the end of the quarter. 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. Our results in the second quarter pointed to the solid industrial and commercial position that Tenaris has built, serving its wide range of customers around the world and the competitive differentiation we have established in key markets. Even as drilling activity in several areas of the world has slowed, our sales rose sequentially together with our EBITDA and net income. Our free cash flow amounted to a solid €538,000,000 while our shareholder distributions between dividend payments and share buybacks amounted to $837,000,000 during the quarter. There is an increase in The U.

[Paolo Rocca, Chairman & CEO at Tenaris]

S. Section two thirty two tariff on the import of all steel product from 50% from 25% to 50%, and the ongoing tariff negotiations has increased market uncertainty. As countries negotiate the so called reciprocal tariff, no country, apart from The UK, has so far been able to negotiate how the Section two thirty two tariff will be applied. We expect that the current broad based approach will eventually be modified towards a more specific product based approach, which takes into account market factor and consider differential tariff and quotas for some countries. The Section two thirty two tariff and the ongoing negotiations will change the competitive environment, favoring more utilization of available domestic capacity and fewer imports.

[Paolo Rocca, Chairman & CEO at Tenaris]

Over time, there will impact on prices once excess inventories are drawn down and imports are reduced from the high levels we have seen in the first half of the year. Tenaris, with its strong U. S. Domestic production base, including the world's most efficient seamless pipe mill at Bay City and its copper steel production facility, supported by its global industrial system, remains well placed to continue serving its U. S.

[Paolo Rocca, Chairman & CEO at Tenaris]

Customer with its highly differentiated Rig Direct service. Our sale this quarter included the successful delivery of pipes and coatings to a wide number of complex line pipe projects around the world. These include Equinor Raya project in Brazil, Konok for Philips Willow project in Alaska, Shell's Bonga project in Nigeria, Azul Ndongo project in Angola and Chevron Leviathan project in The Mediterranean. Looking forward, we will have lower delivery to offshore line pipe project until a new wave of project progress to the development phase in 2026. One such project will be the Grand Morgue project in Suriname.

[Paolo Rocca, Chairman & CEO at Tenaris]

In addition to our Line Pipe and Coating award, we have received the award for the supply of casing and tubing for the project. Key to this achievement was our offer of service, which we will carry out from a base we are now setting up in Suriname. In the fast growing frontier development of the Guyana Suriname Basin, We have set up local service bases to support the operation of ExxonMobil, of Total Energies and other customers in the region. Another major developing region where we have been able to make a difference is the Vaca Muerta shale play in Argentina. Here, as well as casing and tubing, we also supply fracking and coiled tubing services and are instrumental in developing the pipeline infrastructure that will enable the oil and gas to reach global market.

[Paolo Rocca, Chairman & CEO at Tenaris]

During this third quarter, we will complete most of the deliveries for the Vaca Muerta sewer pipeline that will build a crude export capacity to a new deepwater port in Puerto Rosales. Early next year, we should also deliver the pipes for the Duplicar Norte pipeline that will connect the northern development in Vaca Muerta to the main crude export pipelines. In Mexico, Pemex has successfully issued a EUR 12,000,000,000 financing facility this week. This is an important step that should allow Pemex to increase its current low level of operation and pay down some of its supplier debt. We look forward to supplying a higher level of operation under our current contract.

[Paolo Rocca, Chairman & CEO at Tenaris]

With oil prices around $65 a barrel and drilling activity in The United States and Canada lowering, our sales in these countries remain relatively resilient due to our solid customer portfolio. They are focused on improving operational efficiency, which extended the lateral length for which they appreciate our seamless product and Rig Direct service. We are ready now to take any question you may have.

[Operator]

Thank you. Our first question comes from the line of Arun Jayaraman from JPMorgan Securities LLC.

[Arun Jayaram, Research Analyst at JP Morgan Chase & Co]

Yes, Paulo, good morning. I was wondering if you could comment on your thoughts and outlook for the 2025, just given some of the things you cited, tariff impacts, some activity perhaps going down a little bit in The U. S, but give us a sense of how you think about volume trends and margin trends for the second half.

[Paolo Rocca, Chairman & CEO at Tenaris]

Well, thank you, Roman. I think is I mean, there are many moving parts in that are affecting, let's say, the second half. We have visibility on the third quarter, but obviously less visibility on the fourth. What we can say for the third quarter, we expect lower sales on our part due to different factor. Basically, we will have lower invoicing in our fracking operation.

[Paolo Rocca, Chairman & CEO at Tenaris]

We have a kind of black space for three months due to the programming of the company for their operation of fracking in Vaca Muerta. This is something that will, to some extent, reduce slightly our invoicing. We also, after an important wave of delivering of our line pipe, We will have somewhat lower shipment of line pipe during the quarter. Operation in North America will be reflecting some increase in price, which we expect, but also some containment of the activity and the rigs because, let's say, price of oil is today what it is. Even if I compare with our vision three months ago, three months ago, we were more concerned about the impact of potential recession and the lower price of oil.

[Paolo Rocca, Chairman & CEO at Tenaris]

Today, looking at the forecast for the economy worldwide and the perception of the market, we would expect the price of oil to stay around $65 In this environment, there shouldn't be strong reduction in the rig count. So we do not expect for this. In North America, more flexion in Canada because of seasonal reason. And in The U. S, in our way, we'll be compensated by some more activity in Mexico.

[Paolo Rocca, Chairman & CEO at Tenaris]

So overall, we expect lower sales, especially in the third quarter, in the range of the high single digit for our invoicing. In the fourth quarter, it is more difficult to predict or to understand which will be the dynamic of prices. There are tariff that has been raised on the June 4 for the February up to 50%, almost for every country, excluding UK. And the negotiations that are underway today are mostly focusing on the reciprocatory, but are not touching on the $2.32. If this situation is not addressed with a more specific product by product or quota for specific sector in the coming months, inevitably, prices internally, domestic prices in The United States will reflect this.

[Paolo Rocca, Chairman & CEO at Tenaris]

And this will impact in our sales. But today, it's difficult to forecast which will be the impact on the fourth quarter. Also in the third quarter, our slight reduction in sales will take into consideration some repair and maintenance that we usually perform during August. This is our outcome as far as, let's say, overall top line is concerned.

[Arun Jayaram, Research Analyst at JP Morgan Chase & Co]

Okay. That's helpful. It kind of sounds like your commentary is pretty similar, maybe different moving pieces with what you outlined last quarter in terms of the outlook. Paul, was wondering if you could highlight about your project pipeline as you think about 2026 relative to 2025. You highlighted Suriname as a new opportunity for Tenaris.

[Arun Jayaram, Research Analyst at JP Morgan Chase & Co]

But how does the major or large project pipeline look in 2026, thinking about places like the Vaca Muerta?

[Paolo Rocca, Chairman & CEO at Tenaris]

On this, I would like to have Gabriel to give you an a view of how we see, let's say, our load into '26 and what we can do compared to 2025. Gabriel?

[Gabriel Podskubka, Chief Operating Officer at Tenaris]

Yes. Thanks, Paolo. Good morning, Arun. To give you an overall perspective of the offshore market, which is an important driver for the pipeline business and also for the OCTG business in this segment. I would say that the market dynamic is overall positive.

[Gabriel Podskubka, Chief Operating Officer at Tenaris]

We don't see an immediate effect of the deteriorated market environment in drilling activity. As a matter of fact, the deepwater drilling rigs are quite resilient at very good historical levels. And we are working with our customers on many new projects. Some of them are being delayed in the FIDs, but we are confident that in the next few months they will be sanctioned. So overall, context, I would say, is positive.

[Gabriel Podskubka, Chief Operating Officer at Tenaris]

Within this context, we have been building and continue to build an important backlog in this strategic segment, Paolo, and you commented on Suriname, where we just got awarded drilling campaign for OCDG to cover the needs of casing and dewing for these 36 wells that Total will develop in this initial phase of deepwater development. Customer has standardized on dopless technologies and we are getting ready building our service base in country. This is in addition to the award of pipeline and coating that we commented in our prior call. So we are building an important backlog. Also this quarter, we booked the water pipeline in Brazil for Petrobras, Buzios XI project, We also have been awarded OCDG needs of Chevron for their Deepwater campaign in Agbami in Nigeria.

[Gabriel Podskubka, Chief Operating Officer at Tenaris]

So overall, I would say that we are building an important backlog into 2026. As Paolo mentioned, we had a high concentration of pipelines in the 2025. So our pipeline offshore delivered in the second half will be slightly lower, but we believe with great confidence that the 2026 will be a we will have an important contribution overall on the offshore segment.

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you, Gabriel. Just to add that our position in this segment after the acquisition of Shawcor, considering the different plants that can operate in welded and seamless in different parts of the world, plus the global deployment of Shawcor and coating a formidable structure for addressing and assuring short lead time competitive offer quality to our client. I mean, this is the acquisition of Shawcor really gave us has put us on a different perspective for serving our client, and I think we are capturing the benefit for this.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Alessandro Pozzi from Mediobanca.

[Alessandro Pozzi, OIl & Gas Analyst at Mediobanca]

Good afternoon and thank you for taking the questions. The first one is again on the outlook for the 2025. You indicated where sales are going to go. Maybe if you can add some additional color on margins in q three and in q four. Because I think that q three maybe you you can still benefit a little bit from the lag effect with the Pipe Logix, but then you will feel the full impact of tariffs as well.

[Alessandro Pozzi, OIl & Gas Analyst at Mediobanca]

And I believe it should be around 140,000,000 per quarter. I'm not sure if you have some remedies in place to reduce the amount of impact from tariffs and or whether the higher prices will be able to offset this. Because if we look at the Pipe Logics that was out yesterday, it was just a small increase month to month. And, I don't know, maybe we will see, a stronger prices going forward. But your thoughts on, on margins will be very appreciated.

[Alessandro Pozzi, OIl & Gas Analyst at Mediobanca]

And the second question is on South America. I believe sales were down in Q2. Can you give us maybe the outlook for sales in Argentina and explain why maybe the whole point overall in Argentina is still rather flat despite all the investments in Bacamoreto? Thank you.

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you, Alejandro. Now on the first point, first of all, you are right that the 50% tariff of the Section two thirty two is affecting us on a dimension that is close to what we are saying. Remember last time, we were saying with 25%, around EUR 70,000,000 per quarter. Today, we've increased of the tariff to 50%, this number could become higher in the range of the 140,000,150 million for a quarter. Now let me add two considerations.

[Paolo Rocca, Chairman & CEO at Tenaris]

First of all, we don't know where the negotiation with Mexico, Canada, Argentina will end up, and if there will be some consideration, like in the case of UK, for changing or adapting or modifying by product or by country some of the consideration regarding the tariff of the February. We do not know, but we think that would a possibility, because in the end, the relation within the USMCA and the relation in Argentina may justify specific negotiations that include some aspect related to the two thirty two automotive steel and not only on the reciprocal. This is the first consideration that may change this. Second consideration, well, we can react in term of allocation, organization of our production flows, and this tariff is getting in our cost of sale gradually because of the inventory. Some of these tariffs are affecting our steel bar coming into The U.

[Paolo Rocca, Chairman & CEO at Tenaris]

S. There is it take time to flow through our inventory to get into our cost of sales. So you should also consider that the figure we are mentioning are not getting straight into the next quarter, but only gradually into this. And also that we have, let's say, alternative or we can, to some extent, limit part of the impact of this. And then we go to the impact in price.

[Paolo Rocca, Chairman & CEO at Tenaris]

You're right, yesterday, the pipe logic comes out with a very modest increase, but this is the results also of the very high level of import that were unleashed by the elimination of quota when the first round of Tutiridou were introduced with 25%, but no quota. There has been import in The United States from different sources well above the level of quota, there has been a resulting increase in inventory. This inventory are waiting on prices today and will do so for a while, but not forever. I think that after the increase in February on the June 4 to 50%, some of this import gradually will be reduced. Today, there are many product on the sea, on the vessels coming into The U.

[Paolo Rocca, Chairman & CEO at Tenaris]

S, But then the decision has to be taken that will affect September, October and the coming months will be taken with a different scenario and different consideration taking into consideration the higher level of tariff. So prices, in my view, will go up. We'll do so gradually, but to some extent, inevitably over time. Difficult to predict if this will happen and exactly when, but prices will go will need to go up more than what have been done up to now. And this will also contribute to our margin.

[Paolo Rocca, Chairman & CEO at Tenaris]

Having said this, what we can see is the margin for the next quarter, and we expect margin slightly below the margin of this quarter, but always in the range between 2025%. Remember, this is, let's say, where we were guiding last quarter, we will remain within this space between twenty and twenty five, but lower than this quarter, slightly lower than this. In the fourth quarter, for the reason that I mentioned, I think it's more difficult to have an estimate, a reasonable estimate of what will happen. Most will depend from the decision that the importer may take and the reflection on price. In my view, having duty for steel and pipe and bars going up 50% will have an impact on the price of Pipe Logix, even in an environment in which the rig count is not very aggressively increasing, even if it stay or it goes down slowly as we anticipated, there should be impact on prices.

[Paolo Rocca, Chairman & CEO at Tenaris]

This is would be the logical would be logical to happen.

[Alessandro Pozzi, OIl & Gas Analyst at Mediobanca]

Thank you. And on South America?

[Paolo Rocca, Chairman & CEO at Tenaris]

Second question, if it is okay for you. The first one, on South America, South America, you're right that there has been a containment, I would say, of the oil. One is the situation in which the rig count has been went down slightly has been Argentina, as you say. Point in Argentina is that the southern part of the country, there has been a reduction in divestiture from YPF and other companies of their operation in the southern part of the country, and this turned out into a reduction of the number of rigs operating on one side. On the other side, there is the company still having a cautious approach in organizing their investment in Vaca Muerta.

[Paolo Rocca, Chairman & CEO at Tenaris]

The access to finance has limitation. Some operation has been important. For instance, it's been possible to finance the pipeline Vaca Muerta South for bringing oil to the coast. And this is an important program with involving financing for around $2,000,000,000 Also, there's been other financing operation for local company. But still, the country risk is above 700.

[Paolo Rocca, Chairman & CEO at Tenaris]

It's not exactly easy for local player to finance all the operation in line with the more optimistic expectation that we may had maybe six months ago. Today, nothing changed in the positive view of the development of Vaca Muerta for gas and for oil. But the pace of operation, development and growth is slower than we expect. Also, price of oil was there was a moment in which company were more afraid of a price of oil between 60, 55, 60, and this would have clearly had a negative impact, especially in company like the local company in Argentina that are depending very much from their cash flow to be eligible for financing. I think that this situation is improving, still the country risk is important.

[Paolo Rocca, Chairman & CEO at Tenaris]

On the other side, the devaluation of the local currency in the last month, devaluated by around 10%, is reducing cost, so it's also acting in a positive way to in the project, in the profitability of the project and from the cost side of the operation. So I'm confident that Vaca Muerta will continue to expand, increasing demand, drilling over time. But in this semester and in these months, what we are seeing is reduction of rigs because of the South and a very slow movement in increasing rigs and fracking. This is part of the problem of the issue of the white space in our fracking operation until September.

[Alessandro Pozzi, OIl & Gas Analyst at Mediobanca]

Thank you very much. I appreciate the color. Thank you.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Sebastian Erskine from Rothschild and Co, Redburn.

[Sebastian Erskine, Associate - Equity Research at Rothschild & Co Redburn]

Yes. Hi, good morning, Paolo and team. I'd like to start on the commentary around imports. Obviously, it has remained an elevated level in the first half of the year, should step down in the second half. But kind of how much share gain can we expect by Taurus and current domestic producers for imports as a percentage of the mix?

[Sebastian Erskine, Associate - Equity Research at Rothschild & Co Redburn]

And I'm thinking about that in terms of kind of offsetting weaker volumes in the back half of the year, particularly in U. S. Land where the rig count remains under pressure.

[Paolo Rocca, Chairman & CEO at Tenaris]

Well, in overall, import represent a large share of demand in The U. S. In the range of 40%. So let's say, if you imagine 50% tariff on 40% of the supply in a very large market. Even in an environment in which the rig count should stay or go slightly down, we basically expect this.

[Paolo Rocca, Chairman & CEO at Tenaris]

It will also depend from the price of oil. Obviously, it's affecting air cash flow. But even in an environment of relatively slow down on RIG, the impact on import of the tariff, there will be impact on the prices, there will be some substitution. Now, in term of capacity, I think the domestic industry has the ability to increase the production, but the level of utilization is still is pretty high today in the different player of this in the seamless air arena. And probably there is room for increasing utilization in the welded supply of OCDJ, but when the supply is limited to a segment of the market and not to the entire market. These are the reasons why I think over time, the price level in The U. S. Should go up.

[Sebastian Erskine, Associate - Equity Research at Rothschild & Co Redburn]

Really appreciate the color, Paolo. And then my second question on distribution. Obviously, announcing the €1,200,000,000 authorization, it looks like you're kind of front loading the first tranche of €600,000,000 Looks like you completed nearly two thirds of this. Would you be open to bringing forward the second tranche of repurchases, just given the cadence you've already achieved?

[Paolo Rocca, Chairman & CEO at Tenaris]

Well, as you know, the Board approved two tranches of share buyback, and the second tranche will be considered in the Board meeting on the October 29. But this has been approved. But anyway, this is what we expect. This will be reconsidered again and very likely launch after the Board on the October 29.

[Sebastian Erskine, Associate - Equity Research at Rothschild & Co Redburn]

Thank you very much, Paolo. I'll hand it back now. Thank you.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Marc Bianchi from TD Cowen.

[Marc Bianchi, Managing Director at TD Cowen]

Hi, thank you. The first one is real quick. I just wanted to clarify, Paolo, on the third quarter outlook, the high single digit decline was a comment on sales or a comment on volume?

[Paolo Rocca, Chairman & CEO at Tenaris]

It was a comment on sales.

[Marc Bianchi, Managing Director at TD Cowen]

Okay. Thank thank you very much. The other question, relates to supply chain. You talked about, you know, if there's potentially exceptions for USMCA and you could divert some of your steel supply from Mexico. Should we think about that as potentially removing the entire $140,000,000 tariff headwind? Or what's the opportunity there?

[Paolo Rocca, Chairman & CEO at Tenaris]

No, no. The I mean, we can, first of all, expand as much as we can local production of steel. So the Copel operation by the way, we had one accident in Copel one point months ago. We solved it, but this, to some extent reduced to some extent our availability of steel for a while. Now we will pick up again.

[Paolo Rocca, Chairman & CEO at Tenaris]

So we will take advantage of this capacity as much as we can. This is one component that contribute to the reduction of the tariff we pay on the bars. And semis, there are that we need to bring into the states to feed into our rolling mill in Bay City, in Enbridge. This is an action that will depend basically on our ability to operate at maximum capacity, the COP facility. And we are also planning for the investment needed to strengthen this capability, but the investment will take a little more time to get in.

[Paolo Rocca, Chairman & CEO at Tenaris]

Second action is to see if we can cover with welded product some of the demand, and this also may contribute to compensate even if this is may have a higher cost for us, but could be a way of reducing the level of tariff that we may be paying on this. Still, this action will not change substantially reality that we are today that is to pay high tariff from Canada, Mexico, Argentina and Europe. I think that over time, the negotiation with Mexico, Canada, Argentina, and Europe may also, like the case of UK, address some specific product or some specific semi, like the cars or the bar, that are not really producing the states. So if something is not really producing the states, I think it could be possible that the negotiation may modify or reduce this impact. These are the points that could help or be having an impact on the level of tariff that we are paying every quarter.

[Marc Bianchi, Managing Director at TD Cowen]

Got it. Thank you very much for that. The other question I had related to mix, you mentioned some of the pipeline work coming off and some open space in the frac business, and I would think that those are lower margin parts of your business compared to OCTG. Can you just sort of talk about maybe how much of an impact that's having on third quarter or second half and how we should think about those coming back into the revenue profile eventually? Yeah.

[Paolo Rocca, Chairman & CEO at Tenaris]

Well, would ask Gabriel because there are very different products here, know, with very high margin and very much more competitive margin.

[Gabriel Podskubka, Chief Operating Officer at Tenaris]

Yeah. In general, you mentioned the fracking business is a profitable margin, so that has an impact in the third quarter until we pick up that business in the fourth quarter. Then regarding the pipelines, the offshore pipelines that we were mentioning, welded or seamless with an important coating component, are also having important margins, typically higher than the average of Tenaris, while the onshore pipelines, the one that Paulo commented on Vaca Muerta, those that are kicking in, in the third, fourth quarter and 2026, have welded onshore pipelines have margins that are lower than the average of ten ninety. So we have moving parts, the ones that are with lower shipments in the second half out of those of higher margins that will pick up in 2026 again.

[Marc Bianchi, Managing Director at TD Cowen]

Yes. Thank you very much.

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you.

[Operator]

You. One moment for our next question. Our next question comes from the line of David Anderson from Barclays.

[J. David Anderson, Managing Director at Barclays]

Good morning, Paolo. I have a question on The Middle East, so it's probably directed toward Gabriel. I just want to I was curious how you see Middle East overall trending into 2026. Saudi has been slowing activity all year before may not pick up again until the end of next year. If I'm not mistaken, I think on the prior calls, you said Saudi has been reducing its inventory pipe most of the year.

[J. David Anderson, Managing Director at Barclays]

So I'm curious about how you see kind of specifically how the Saudi market when you start seeing the Saudi market start to improve from a pipe standpoint for pipe ordering standpoint next year? And how do you see overall Middle East volumes trending 26 versus 25? Thank you.

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you, David. I will pass to Gabriel.

[Gabriel Podskubka, Chief Operating Officer at Tenaris]

Yeah, thank you, Pablo. Good morning, Yeah, indeed, as you know, in Saudi, we have been seeing austerity measures for the number of months already in line with a lower price environment as we know, so rig count in The Kingdom has been going down, concentrating mainly in the oil, not only, but also we are seeing some gas rates being dropped. The level of activity today is about 15% lower than it was a year from ago, so this is what we are seeing. I would say the inventory level situation is pretty much in line with consumption. We are not having an overhang situation in Saudi anymore. The local supplier network plus Aramco inventories, I think, are pretty lean and in line with demand.

[Gabriel Podskubka, Chief Operating Officer at Tenaris]

So going forward, we would expect our shipment and sales in line with the variation of consumption. To compensate this lower activity in oil in The Kingdom, we have an important pipeline business. I think we mentioned the CCS pipeline award last quarter, so this will contribute and offset part of the OCBG. This is regarding Saudi. The rest of the MENA region and the key markets, drilling activity is quite resilient.

[Gabriel Podskubka, Chief Operating Officer at Tenaris]

We see The Emirates pushing forward with the expansion of oil and gas, with a marginal decrease of some rigs in their unconventional plan, but very marginal. They are still operating today at 120 rigs, which is a historical high level for ADNOC. Kuwait and Iraq are also pressing forward in their activity levels and we see pretty much Qatar on track with their expansion of the LNG project. So overall, I would say for the second half of this year and into 2026, I would say that our shipments in The Middle East will remain fairly stable and solid.

[J. David Anderson, Managing Director at Barclays]

Great. Thank you. Thank you very much. My second question is around Mexico. Paulo, you were talking about some of the challenges that Pemex is facing now with some potentially helping to fix their debt situation. There does seem to be some positive on the horizon. But Pemex's CapEx budget is down 50% and shows activity is plummeting.

[J. David Anderson, Managing Director at Barclays]

I presume you probably supply most of the pipe there from your facility in Barra Cruz. So I'm curious how much of a drag it's been this year, which hasn't really shown up in the numbers, but and secondarily, what kind of opportunity is next year? So how do you sort of see those? I know it's really hard to tell considering Pemex doesn't have a ton of visibility, but how do you see this trending going into next year? Over over I know you're talking about line pipe. I'm talking more OCTG and the like.

[Paolo Rocca, Chairman & CEO at Tenaris]

Yeah. Well, I think that the fact that Pemex has been supported in getting this financing open this financial operation and issuing debt for EUR 12,000,000,000 with a guarantee from the state, from the government. This has been oversubscribed. They had the possibility to collect even more than this at a very competitive rate because in the end, Mexico has a relatively low debt to GDP ratio. So it's a very important sign that the Mexican government is willing to address the situation of Pemex, only in reducing the financial load on the supplier, but also in giving the financial means to pick up back operation.

[Paolo Rocca, Chairman & CEO at Tenaris]

Now we see this in the number of rigs that are starting to operate. Rig today are in the range of 24 rigs, And we were having 19, but even less than 19 in one month, rigs in the recent past. So this, in my view, is a sign that the Mexican government are back in supporting Pemex for the relevance of Pemex in the overall economy for gas production, for oil production and for the level of activity. So this is, most than anything, is a very important sign. Will this be followed by a continuing support within the plan of restructuring of Pemex, well, they also changed the management of Pemex, and this is also a sign that they are addressing this.

[Paolo Rocca, Chairman & CEO at Tenaris]

We know that in the 2025, the Pemex increase in volume is the fact that we'll maintain overall sales into North America for us, more or less stable, compensating for some reduction for the season in Canada and some constraint in some reduction in The U. S. So for sure, we anticipate in this a positive trend. Now when we look at one year from now, I think it's more difficult to have a forecast because in the end, Mexico today has to deal with the negotiation of the new negotiation of the USMCA, the tariff, and we have to redefine some of the strategy even in the energy sector. But I'm very confident that in the end, it will make sense.

[Paolo Rocca, Chairman & CEO at Tenaris]

There are resources available for it. And if the price of oil is where it is, in the range of $65 it makes a lot of sense to develop very reserves that are very profitable, have very low cost of extraction and will make a lot of sense to maintain this trend of support.

[J. David Anderson, Managing Director at Barclays]

Appreciate your comments. Thank you, Paolo.

[Operator]

Thank you. Our next question comes from the line of Derek Potheiser from Piper Sandler.

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

Hey, good morning. Just a question in U. S. Land. So we've seen strength from the gas markets, primarily private driven across the Northeast Haynesville, the Eagle Ford gas window.

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

Just curious your level of exposure to this tailwind in The U.

[Paolo Rocca, Chairman & CEO at Tenaris]

S. I mean, I've always viewed you

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

as primarily attached to the larger customers utilizing Rig Direct, but maybe help us think through about your exposure to the privates and in these particular gas basins.

[Paolo Rocca, Chairman & CEO at Tenaris]

Yes. Well, thank you, Derek. I will ask Guillermo to give us an overview of our exposure to this. Guillermo, is that Yes.

[Guillermo Moreno, President - US Operations at Tenaris]

Thanks, Paulo, and good morning, Derek. Our exposure to gas in The U. Has been mainly in Haynesville and more than in Appalachia. So we are seeing an upside. We are seeing a growth of activity in Appalachia, as you said, mainly from private operators.

[Guillermo Moreno, President - US Operations at Tenaris]

And there are a couple of them that are driven the growth that have been traditional clients. So we are seeing an increase of our sales for gas in Haynesville and then also our market share. And we stay optimistic about further growth in the future and with this of our sales and again our position in the region where we are very competitive because we have basically very close to that play.

[Paolo Rocca, Chairman & CEO at Tenaris]

I also think that the in all the discussion and negotiation that the American administration is establishing, there are a component about purchasing of LNG and developing helping develop growing the LNG in The United States. One way or the other, even if a fraction of this will be realized in the coming year, this means demand for gas. So gas is important. Gas is demanding seamless pipe with, in some case, more complex product. The price of gas today, Liani Hub, supported by the associated gas and specific development for gas, is relatively solid in this moment.

[Paolo Rocca, Chairman & CEO at Tenaris]

And all these negotiations should, to some extent, promote or stimulate investment in energy. So we have to be very focused on this because it will be logical to have increase in the activity in gas in The U. S, in the Lower 48.

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

Got it. That's helpful. I appreciate the comments. Second question, just maybe some color around how much pipes on the ground now in The U. S, just thinking about the distributors as well.

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

Just trying to work through the timing as far as working that down from an activity standpoint, which will also further support pricing just outside of the increased tariff costs. So maybe just give some color around the pipe on the ground and working through that from an activity lens.

[Paolo Rocca, Chairman & CEO at Tenaris]

Yes, yes, yes. I would say that here the problem is that not only the pipe on the ground, but also the pipe on the sea. The ones that are coming into The US before realizing that the 50% tariffs were going to keep them at the customer. Guillermo, you have more can comment on this.

[Guillermo Moreno, President - US Operations at Tenaris]

Yes, for sure. And as you said, Paolo, before, imports in the 2025 increased a lot. If we see this in numbers, the imports of OCTG in The U. S. 2025 was more than 70 higher than the 2024.

[Guillermo Moreno, President - US Operations at Tenaris]

So it was a very relevant increase that coupled with some reduction in activity determined that in this six months the pipes on the ground increase in equivalent of one month of overall consumption in The U. S. So this is putting pressure on prices and not allowing so far pipe losses to increase as expected due to the tariff. And we think that within this quarter, we'll start to see a reduction and more impact on the fourth quarter because it's when we will see, as Pablo said, the shipments defined based on the 50% tariff and not in the 25%, that as we saw were not enough to reduce the level of imports.

[Paolo Rocca, Chairman & CEO at Tenaris]

The level of inventory in terms of months?

[Guillermo Moreno, President - US Operations at Tenaris]

So it went from six to seven months, more or less, from 2024 to 2025, one month of equivalent consumption. You.

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

Very helpful. I'll turn it back.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Kevin Roger from Kepler Cheuvreux.

[Kévin Roger, Head - Energy Equipment & Services at Kepler Cheuvreux]

Yes. Good afternoon. Thanks for taking the time. I have maybe two follow ups, if I may. The first one is on Mexico.

[Kévin Roger, Head - Energy Equipment & Services at Kepler Cheuvreux]

Can you provide us a bit of sensitivity on what kind of revenues you generated in Mexico, for example, back in 2023? And what you are currently generating right now just to understand the potential magnitude of earnings that you can get in the country after the EUR 12,000,000,000 new financing for Pemex? And the second one on the tariff. If everything remains like it is right now, what is your available capacity in The U. S.

[Kévin Roger, Head - Energy Equipment & Services at Kepler Cheuvreux]

And notably on the seamless side? What's part of the volumes that you currently import from, I don't know, Mexico and Canada that you can relocate easily in The U. S. With available capacity, please?

[Paolo Rocca, Chairman & CEO at Tenaris]

Thank you, Kevin. Well, on the first one, the in the past, the number of rigs operated by Pemex were in the range of fifty, forty five rigs. So let's say, you can imagine, today, we are at 24. So this is just giving you a broad indication on which will be the size of the market. Now on top of this, there are private operators.

[Paolo Rocca, Chairman & CEO at Tenaris]

Woodside is operating. And one of the increase that we will have in shipment to Mexico will be in the coming quarter will be the Woodside project, which is a very relevant offshore project, very interesting one that we are supplying for Mexico. So this is just giving you size of the market, and this is the market for mainly OCTG with some aspects in lime paper when the export line are requiring long line for this. So this is, let's say, what would be possible. Now we don't expect this to happen soon.

[Paolo Rocca, Chairman & CEO at Tenaris]

We expect this to be a gradual process of increased reorganization, but still, in my view, the direction in which this is moving is the direction of recovering level of activity.

[Paolo Rocca, Chairman & CEO at Tenaris]

The other point is on capacity. Remember, our main import in The States are bars steel bars to feed to complement our production in copper. The production of steel that we have in The States is very relevant, but we need to complement this with semis round bar coming from outside. This is the most important component of our import in The States on which we pay and we will pay this 50%. Then we also complement some special product for the Gulf Of Mexico that is not produced in The States, mainly coming from Europe, but these are products in which the clients are prepared to pay straight on the tariff because there is basically no alternative, and they need to proceed with product that are not producing to The States in this case.

[Paolo Rocca, Chairman & CEO at Tenaris]

Something on material coming from Canada into The States is going into the North, but it is a very marginal part of the matrix. Okay. Okay. Thanks a lot. Have a good day. Thank you.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Christopher Coupland from Bank of America.

[Christopher Kuplent, Research Analyst at Bank of America Merrill Lynch]

Hi there. Thank you for taking my questions. I've got two. Paolo, the evergreen question, I suppose, is could could you give us an assessment of what you think the M and A environment looks like at this point in time? I mean, it's hard to come up with a forecast for Q, but you sound pretty bullish in terms of price evolution into 2026, at least in The U.

[Christopher Kuplent, Research Analyst at Bank of America Merrill Lynch]

S. So do you think that sort of lack of clarity is throwing up M and A opportunities that perhaps in the past with a different US Administration weren't thinkable? That would be my first question. To you, Paolo.

[Paolo Rocca, Chairman & CEO at Tenaris]

Well, thank you, Christopher. This is, as you know, we have we're the largest player We have a relevant participation in the market. It's not easy to identify suitable target for this. I'm convinced that looking ahead, consolidation is important and also growth along our supply chain is also important.

[Paolo Rocca, Chairman & CEO at Tenaris]

But anything that we can imagine here has a reasonable size that is not, let's say, very relevant. Imagine also when we move on, on the Shawcor operation, it's a very important operation from our point of view. But in term of size of the M and A, not, let's say, something that is transforming the company from the point of view of the size of the operation. So we consider, we look, we study, we monitor also the attitude of the new administration to see if there are change in the approach to vertical or horizontal integration, and we will be very active on this if we perceive that there is room for us.

[Christopher Kuplent, Research Analyst at Bank of America Merrill Lynch]

Thank you. That sounds like you're happy with the current run rate on the buyback program to continue. My second question is more short term. Maybe you can tell us a little bit about your expectations regarding the evolution of net working capital. I suppose you've referenced the increase in inventories.

[Christopher Kuplent, Research Analyst at Bank of America Merrill Lynch]

How do you see your management of inventories considering you've got turnarounds coming up as well, probably well timed?

[Paolo Rocca, Chairman & CEO at Tenaris]

Yes. Thank you, Christopher, on this. I will ask Carlos to comment on working capital. What we expect from our working capital, for sure, this quarter, and our cash flow has been pretty strong, but Carlos? Hi,

[Carlos Gómez Álzaga, CFO at Tenaris]

Christopher. So during the first half of the year, we have been generating cash from our working capital already around €250,000,000 much of that was coming from inventories and some from receivables. So we expect during the next quarter to build up inventories, not part of that, let's say, print down inventory was because of we finished some big projects, so we ship all the material that we have in stock, and now we expect to build some inventory during Q3 and then release some of it during Q4.

[Christopher Kuplent, Research Analyst at Bank of America Merrill Lynch]

Very helpful. Thank you very much.

[Operator]

Thank you. At this time, I would now like to turn the conference back over to Giovanni Sardagna for closing remarks.

[Giovanni Sardagna, Investor Relations Director at Tenaris]

Thank you, Gigi, and thank you all for joining us today.

[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
• Gabriel Podskubka, Chief Operating Officer
• Guillermo Moreno, President - US Operations
• Carlos Gómez Álzaga, CFO

Analysts

• Arun Jayaram, Research Analyst at JP Morgan Chase & Co
• Alessandro Pozzi, OIl & Gas Analyst at Mediobanca
• Sebastian Erskine, Associate - Equity Research at Rothschild & Co Redburn
• Marc Bianchi, Managing Director at TD Cowen
• J. David Anderson, Managing Director at Barclays
• Derek Podhaizer, Senior Research Analyst at Piper Sandler Companies
• Kévin Roger, Head - Energy Equipment & Services at Kepler Cheuvreux
• Christopher Kuplent, Research Analyst at Bank of America Merrill Lynch