Good day, and thank you for standing by. Welcome to Quarter Two 2024 Tenaris S.A. Earnings Conference Call. At this time all participants are in a listen only mode. [Operator Instructions] 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. Please go ahead.

Thank you, Gigi and welcome to the Tenaris 2024 second-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 our actual results may vary from those expressed or implied during this call. With me on the call today are Paolo Rocca, our Chairman and CEO, Alicia Móndolo, our Chief Financial Officer, Gabriel Podskubka, our Chief Operating Officer and Luca Zanotti, President of our US Operations. I would like to start by mentioning that we will host an investor presentation in London on September 24. We hope to see many of you there. 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 $3.3 billion, down 18% year-on-year and 3% sequentially, mainly due to slightly lower volumes and average selling prices during the quarter. Average selling prices in our tubes operating segment decreased 17% compared to the corresponding quarter of last year and 1% sequentially as lower prices have been greatly offset by favorable sales mix. Our EBITDA for the quarter was down 34% sequentially to $650 million, due to lower selling prices and an extraordinary provision recorded for an ongoing litigation related to the acquisition of a participation in Usiminas in 2012. Our EBITDA margin for the quarter was close to 20%. Without this historical provision our EBITDA would have been $821 million and our EBITDA margin would have been 25%. With operating cash flow of $935 million and capital expenditure of $161 million, our free cash flow for the quarter was $774 million, after a dividend payment of $459 million in May and share buybacks of $492 million, our net cash position amounted to $3.8 million at the end of the quarter. Now, I will ask Paolo to say a few words before we open the call to questions.

Thank you, Giovanni, and good morning to all of you. During the first two quarter, our sales have remained remarkably resilient, considering the market environment in which drilling activity is reduced and OCTG prices have been falling in the United States. This reflected the differential market positioning we have built up in North America, with our Rig Direct service model, as well as in offshore projects around the world. The particularly high level of shipment we have been making in the Middle East and the contribution for our newly acquired TenarisShawcor coating business. I would also like to highlight our strong free cash flow of $774 million during the second quarter, when we were able to achieve a $285 million reduction in working capital. Thus we were able to maintain our excellent net cash position of $3.8 billion, while we distributed $950 million to our shareholders. Industry spending on offshore projects, particularly in complex deepwater operation has increased since 2023 and is set to increase further in the year ahead. For these projects that we are a preferred supplier for the majors, with a fully integrated offer of pipes and services. This includes large-diameter conductor and surface casing with connectors. Intermediate and production casing, tubing and accessories, stainless high chrome alloy steels Dopeless connection tested for use in the new extreme application required by the Gulf of Mexico development. We are also supplying the 3D mapping services for high collapse application as well as offshore line pipe and deliver with a full range of Tenaris Shawcor coatings and advanced project management services. This quarter we renewed our long-term contract for Shell operation in the Gulf of Mexico, and have been selected by ExxonMobil for their upcoming operation in Angola. We were also awarded the supply of casing and offshore line…

Thank you. [Operator Instructions] Our first question comes from the line of Marc Bianchi from TD Cowen. Q – Marc Bianchi: Hi thank you. And I was hoping you could talk a little bit more about the progression of margin in the back half here. So now we've got volume, I heard you, down 10% to 15% in the back half with some weaker pricing. Maybe you could talk about the margin progression. But perhaps, first, before you say that or along with that, talk to us about your expectation for the progression of pipe logics from here, just so we can understand the context.

Thank you, Marc. As I mentioned in the remark in the last conference, we are expecting the pipe logic to destabilize somewhat. But the level of import is being relatively high than what was our expectation and so the pipe logic is -- registered a minus 3% that appears here today on comparable set of data. And we expect that this will continue to maybe remain stabilized, but probably after one month more, in which there could be some further reduction. We think it should stabilize and also we think that the import to some extent should recede, as I mentioned in the opening remark. It's an important variable. Maybe Luca, you may add, which is your perception of pricing in the US market. That is important also for other region for us because it's part of the formula that we have in some of the countries, especially in the Americas.

Yeah. Thank you. Hi, Marc. I believe that -- I will go back to what I said or what we said already in the last earnings call. And here, Marc, the problem is the following. The industry -- the OCTG industry was somewhat tricked by some expectation of increased activity at the beginning of 2024. And for this reason, distributors placed impulse order that has been flowing in during the first quarter and the second quarter of 2024. Now, as we all know, this expectation of increased demand did not materialize, and so these imports ended up remaining in the inventory. Now, imports are expected to go down. Actually, they already went down a bit in the second quarter. And we expect this to go down thanks also to some trade enforcement action that we've been able to successfully implement as a domestic industry. And to a certain extent, even Section 232, with the decrease in prices, will start to bite. Also, we do expect a reduction in the domestic side of the supply. And so as Paolo was -- to conclude, as Paolo was mentioning before, the advancement is going to take a little bit more than what originally we expected, but we see no reason why this should not happen going forward.

Thank you, Luca. The second question was about the margin. We were guiding in the last conference call for our margin to be between 20%-25%. We ended up with this quarter close to the high part of this range. I think that in the second semester, we should be around the lower end of this range.

Okay. Thank you, Paolo. And may I just confirm? When you said that second half down 10% to 15%, was that a comment about volume or a comment about revenue?

No, it is a comment about volume. This is what we see today. We see volume going down for the reason that we mentioned in the prepared remark. And this is due to the factor that we mentioned, basically. There is something that we also -- just to recap briefly with what we mentioned, the uncertainty in Mexico and in Argentina, just waiting for decision of the energy policy in Mexico and how Argentina could finance a development of a converter that we frankly see as inevitable. So we are convinced that that is ample scope for expansion and for demand in Argentina in line pipe and OCTG. But the point is that the macroeconomic environment is postponing the moment to should this project could be reliably finance. So we are optimistic in the sense that on the development and is an area in which were very strong, but do we need to reduce due to the fact that in this month or in the second semester there will be not so much movement on this.

Makes sense. And thank you very much. I'll turn it back.

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

Hi. And good afternoon. Thank you for taking my questions. The first one is on the US market. You mentioned have a good level of production and yet drilling activity remains quite muted. As a number of operators focus more on efficiencies and productivity. I was wondering are we in a paradigm change where we are going to see even lower, let's say drilling operations and for the four fewer rigs basically, we could see even higher production. And is that a concern for you for OCTG demand going forward in the US. And one thing in US there has been a change as you mentioned in the pipe logics. Is the new basket more reflective a better of your mix? And I was wondering if you can give us maybe your thoughts on that how the basket is change and whether it can capture better basically your average selling price? That's the first question. The second question is that on the working capital side on the and on the share buyback and the share buyback is going to terminate quite soon over the next maybe or next few days. Or within weeks certainly, are we going to have a new share buyback a new announcement with the November results, because I believe there is still some room in the share buyback as you the mandate is about 10% of the shares outstanding and potentially there could be another maybe $700 million to go before the next AGM or before next AGM? Thank you.

Thank you, Alessandro. And the on the first one on demand in the US. Frankly, I don't think there are a structural reason that discourage investment. And we mentioned last conference call the role that interest rate has. It's clearly a reduction in the interest rate which support the financing of project by the smaller company and vehicles could help but the price of oil in the range of $75, $80 is a good ground for investing in shale development, but it's also true that consolidation has led to some stop and reflection by some of the operator. So probably, the time we have now the six months we have ahead with election in the United States interest rates are still relatively high compared to what we could expect in a long term. And a consolidation or in on its way is maintaining a level of drilling activity at this point even. If it's clear, that the efficiency and productivity of the wells realize there is let's say gradually improving. So the production is at very high level. But I think that the overall scenario is positive in days and there should be a recovery in the line and also associated level of demand and rig count over time. The program here as Luca was mentioning is more on the side of the import. The important 40% of the market is very high fair the market, and I think the issue is here how to contain the pressure on imports on the domestic input. Now, on the second point the PipeLogix, as I mentioned we expect to continue this biggest stabilization of PipeLogix after and let's say the impact of these 3% on these months and the next one. But the mix has changed. Luca you can give comment on the change in the basket?

Yes, one point before we move into the basket specifics, I believe that this change of even if the PipeLogix ratings is directionally correct. I believe that this change in basket may have introduced the I have some let's say perturbations of the reading. So we need to see going forward. But to answer specifically to your question yes the change in basket is more reflective of one the product range that is being sold in the United States in general and specifically was there. We are selling in particular one of the let's say major it changes that the PipeLogix into the ocean displayed between in the semi-premium space where we differentiate between a buttress compatible connections and high torque connections like our wedge 400 series 441, 461, which as you know are our best sellers always have been our best seller over the last let's say many quarters. So, the answer is yes.

I was asking because I mean if we look at the old one is down 3% and the new one is a completely different picture up month-to-month. So, I'm not sure I mean easy going down or based on what you see based on your basket?

Sorry, can you repeat it because I'm not sure I fully understood the question on Alessandro.

Yes because there is a big difference between the two indices. The old one is pointing to a meaningful decline 3%. But the new one is I think is more lab month-to-month. So which one is the new one you're saying is more reflective of your business and therefore prices are starting to go up a little bit?

Yes. In the end what they did, that they took out some items and they put in other items and the items that we took out or coming in at an absolute lower price than the one they put in and so overall you see this increase in--

Responding to your question I think that the new basket is probably more in line with our mix for sure. So we should be able probably to have a lower reduction in our basket in our sales compared to let's say to the original basket that is going down 3%. We should be able to have a lower reduction in days. If this is a let's say the analogy of the market by the way it comes out yesterday I think we need to compare. Remember in some formula we are not using the index as a whole but we are using a specific part of the basket adjusting to the need of the client. So, there are different formula internationally or locally. And they I would say that the impact is it's different in different clients because the clients are selecting indicator that best reflect the demand. Other point you made on the on the share buyback, we are still doing buyback of the last tranche of the program that we launched last year and we will continue to complete this this program. And then I think it's up to the Board in November to decide what to do and how to take into consideration the environment. The situation and everything how to proceed or not on this. I will leave this to the decision for the next Board. The next Board have the ability to continue using the delegation from the Asian assembly or having extraordinary assembly to de-lever further expansion of the program. I mean there are no limitation in this but the point is that they will evaluate the circumstances for the decision.

Very clear. Thank you very much.

Thank you. One moment for our next question. Our next question comes from the line of Arun Jayaram from JPMorgan Securities LLC.

Yes, good morning. Paolo, I was wondering if you could elaborate on some of some of the destocking trends that you mentioned in the Middle East? And then as you think about reducing your prior expectations for second half volumes do you see this more as just lower demand? Or do you expect some of this volume perhaps in Argentina and Mexico to shift and into 2025?

Thank you, Arun. On the second point as I told you before and I'm very confident that Argentina has a relevant plans for developing that come out of them by different operator and they will -- there will be activity in the infrastructure in drilling. And so in gas you have seen it that our announcement of the decision taken in the new LNG plant. It will take time to formalize finance get all the clearance for the project, but this will go on over time. And then also the export of oil will go on. So I'm very positive on the medium-term but is a new government six months in charge and I'll say amounts in charger a difficult situation to put under control from the point of view of inflation and fiscal equilibrium. So Argentina will recover credibility and access to the market, but it will take a little more time. We were all probably over optimistic in thinking that this could be done in shorter term, but even with that. In the case of Mexico a changing government imply changes also in this area of energy and the appointment in the key energy company Pemex and CFE has not been done yet. So it's more difficult to understand which is the policy of the new government and cloud Shane [ph] when looking in the future. Pemex needs action by the government in refinancing part of this debt. But it is clear that Mexico needs energy. This last month we had shortages of electrical power. We had disruption in data and it is clear that there is need of investments. So I'm also a positive but the assumption the new government will assume in October something of the sense that we were expecting maybe in the second half will materialize later on? There will be let's say any policy action will take you would have impacted later. So we are positive on this, but we expect the postponement of some of the demand. As far as the Middle East nor is this aspect is concerned I would ask Gabriele to give an overview of how we look at -- we see the situation and the demand in these six months.

Good morning, Arun. Regarding the Middle East as Paolo anticipated in opening remarks the drilling activity remains strong with NOC operating at high levels. For example, Saudi Aramco still at the 300 rigs, increasing on non-conventional, reducing on the offshore oil keeping that level UAE as well operating at healthy levels of 120 rigs. So I would say that we see stability in the consumption of OCTG in the region in the main operators. At the same time, we see some of these NOCs in the region rebalancing their inventories and entering into a destocking mode next semester. So this is something that is important to mention and it will affect our shipments in the second half of the year. In addition to that, we have the competition and the delivery of the NFE pipeline in Qatar. There are some other large projects in the regions that are still not defined that we will see more into 2025. So this will also affect second half comparison versus first half. So overall we want to be a reduction still at high level of shipments in the second half of the region in the release in the second half, but lower than the record shipments that we had in the first half over here.

Great. Just my follow-up is on the buyback. Paolo, the company at the end of the quarter had $3.8 billion of net cash. I assume you don't want to in turn to narrow into a bank, but just some thoughts on capital allocation what you think is the most prudent use of excess cash on the balance sheet?

Well on this, last year we opened the door for a share buyback and that is combined with our dividend policy. At the same time, we are looking for potential opportunity for investing capital with high return in our business. If we don't identify opportunity within our sector that has potential impact, well it will be up to the shareholder and to the Board to decide what to do. In the meantime, we manage prudently our cash. We are not a banker to it to protect the best we can the liquidity in and to have return on it that you can see in our financial statements.

Great. Thanks a lot.

Thank you. Our next question comes from the line of Christopher Kuplent from Bank of America.

Yeah, thank you very much. A lot of my questions have been answered, but maybe I can try again and ask you what you're hoping to present that will be new in September without, obviously, expecting you to tell us the details and the content. But I'm intrigued by the timing you expect to be through maintenance by then do you expect that we will have a better outlook on pricing progression in the US by then? Or do you expect to have more visibility on exactly what you've just highlighted opportunities for M&A or not, i.e. in other words the capacity to deploy your balance sheet for future buybacks, et cetera. And if I can sneak in one more on the litigation provision that you've taken what kind of time lines are you attaching to that if we're looking for a resolution anytime soon? Thank you.

Thank you, Christopher. Well, I think in -- it passed some time since the last time we did an Investor Day, the company has changed in this perimeter that our new region and new business and the profile of the company has changed and also our market and our competitive environment has changed. I think would be useful to meet with our rules of investor and to present where we are and where we see the key markets in, which we have a very relevant a presence. Also our industrial profile is changing, because we are in reducing technological change where more find these and we think that we will be prepared to increase efficiency and productivity and to reposition also our industrial structure from the point of view of decarbonization and the environmental for today. And I think will be important to after some years in which we did and have this opportunity, to have an overview of where we are and also on the point that you mentioned how is our capital allocation and what we see in the medium run as a, let's say, the path that the Company could follow including, the Aspect concerning capital allocation. This is the first point on. The second point is the case for that we have in Brazil and in which we are registering a provision. Let me tell you that we are -- we have been requires that to make a provision as a result of this adverse decision by the Superior Court of Justice in Brazil in a litigation against the CSN for the acquisition 12 years ago of Genus. Let me tell you that and I believed that such a decision is contrary -- is really contrary to the applicable substantive and procedural law. We cannot comment so much on it. This is not something that we landed in very quickly. We expected there will be additional lead space for litigation and we will pursue this as much as we can in all the areas. We plan to defend our position, because remember this is a position that has been a conferred in long lying a decision by the Minister of veto authority and also by all the level of court decision before. So, we will file all the motions and appeals that are available to us. This would be the small from an appeal will need to be resolved before the KL become final and there will be also included the determination of the actual payout amount, if any, that should be made. This will be made by a lower court in a separate proceeding. So it will take time to get the definition on this. And we are -- we will do all we can to defend our position and establish, let's say, our right to operate as we operate in 2012.

Great. Appreciate that. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Luigi De Bellis from Equita Oscient.

Hi. Good morning. Just three questions from me. The first one is on the cost. You mentioned that you are acting to reduce costs. Can you elaborate on the size of the cost reduction expected? And when do you expect the run rate impact of these actions? The second question is on working capital. So excellent reduction in second quarter, how do you expect this to evolve during the second half of the year? And the last question on the outlook. So can you elaborate on the exit speed in Q4 in terms of sales and profitability? And if you expect a better quarter entering 2025, if you have visibility on this considering the course, so the end of de-stocking in Middle East your visibility on US direct clients? Thank you.

Thank you, Luigi. These are on the first point. As we mention in our press release and in our opening remark, we see this lower volume in the second semester and we took advantage of the situation for doing all the extraordinary maintenance and investment using this time also to address some of the extraordinary maintenance work that we had that are needed in because we were working at almost full capacity for a long period of time. During this year, we will expand the level of automation to renew the process and the technology in some of the core area of our business. We have been successful also in this -- say in this last year and the previous year in developing the full potential of our stronger facility. So facility like Bay City, today are operating at a record level. So we have efficient facility, core facility that are operating even above the level that we were originally planned. So we need to restructure, reorganize also this closing or reducing operation some of the facility in particularly the United States, but not only the United States. This will allow us to reduce our overall costs. At the same time, we think we can address some specific issues in which we can reduce costs. We have a plan of action for this set. We think we can it reached savings in the range of $200 million per year at over -- let's say that could materialize and with between now and the June 2025. This is a broader number that our issue like devaluation or a big change in appreciation of the exchange rate that are relevant for our labor cost all around the world. And some of this is in pretty double something is something that is more…

Yes, Paolo.

To the extent to which we think we have visibility.

Morning, Luigi. Obviously election and the result of the election are going to be a factor together with the cost of capital. And so there are a number of variables that are obviously beyond our control and depending on the combination of these valuable plays out -- play out. We may see a different scenario in terms of overall activity. Now when we get to our sales, probably the point that is worth mentioning is that, there are still two big let's say, consolidation that have not been yet cleared by the antitrust being a Diamondback with Endeavour and ConocoPhillips with Marathon. And obviously should this transaction go through as we all expect, this will be an important upside on our sales being Diamondback and Conoco, two very important customers within our portfolio.

And therefore the Middle East and let's say the rest of the market including the offshore. Gabriel, in a sense that we know that there is no so much visibility, but still.

Yeah. Thank you, Paolo. Yeah, Luigi, in terms of the international markets including Middle East and the offshore in general the outlook is quite positive fundamentals are there. The NOCs in the Middle East continue to invest. There are infrastructure projects as well going on and in the offshore space the level of FIDs that have been announced and are in the pipeline that we expect that that will sustain a multiyear cycle of a high-level of CapEx. But as Paolo said, this is a -- we have partial visibility into the 2025. We already have some contracts that go into 2025, but this does not pertain to all segments and countries and regions evolved. So overall I would say, a positive outlook in the midterm, but this is a bit far down the timeline.

Thank you.

Thank you. At this time, I'm showing no further questions. I would like to turn the conference back over to Giovanni Sardagna, for closing remarks.

Thank you, Gigi, and thank you all for joining us. And we hope to see you in London, at the end of next month.

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