Tenaris Q2 Earnings Call Highlights
Key Points
- Interested in Tenaris S.A.? Here are five stocks we like better.
- Second-quarter performance weakened as sales fell 4% to $3 billion and EBITDA declined 12% sequentially to $649 million, pressured by Strait of Hormuz shipping disruptions, lower fixed-cost absorption, and higher raw-material and logistics costs.
- Tenaris approved a higher interim dividend of $0.59 per share ($1.18 per ADR), totaling about $600 million, supported by $396 million in quarterly free cash flow and $3.6 billion in net cash.
- Management expects second-half revenue and EBITDA to be roughly in line with the first half, while potential upside could come from resumed Gulf shipments, stronger fourth-quarter volumes and pricing, rising North American drilling activity, and an expanding offshore project backlog.
Tenaris (NYSE:TS) reported second-quarter sales of $3 billion, down 4% from both a year earlier and the prior quarter, as shipping disruptions in the Middle East delayed deliveries to customers in Iraq, Kuwait and Qatar.
Investor Relations Officer Giovanni Sardagna said the effective closure of the Strait of Hormuz for most of the quarter prevented vessels from entering the Gulf. Average selling prices in the company’s tube operating segment were broadly flat year over year and sequentially.
Quarterly EBITDA declined 12% sequentially to $649 million, while net income fell 13% to $492 million. Sardagna attributed the decline primarily to lower fixed-cost absorption as well as higher raw-material and logistics costs.
Operating cash flow totaled $580 million and capital expenditures were $121 million, resulting in free cash flow of $396 million. Following a $606 million dividend payment during the quarter, Tenaris ended the period with net cash of $3.6 billion.
Dividend Increase and Capital Returns
The company’s board approved an interim dividend of $0.59 per share, or $1.18 per American depositary receipt, totaling about $600 million. The dividend is scheduled to be paid Nov. 25.
Chief Executive Officer Gabriel Podskubka said the board’s decision to increase the interim dividend reflected Tenaris’ “strong balance sheet and sustained cash generation.” He said the company has favored dividends as a means of returning capital because of their simplicity and their role in preserving share liquidity.
Podskubka said the board remains committed to shareholder returns broadly in line with prior levels, while retaining financial flexibility amid an uncertain environment and possible growth opportunities. He noted that future dividends remain subject to board decisions and shareholder approval, but indicated that the company’s historical pattern has been an interim payment representing about one-third of the total annual dividend, followed by the remaining portion in May.
Hormuz Disruption Alters Second-Half Assumptions
Tenaris has removed a near-term reopening of the Strait of Hormuz from its base-case forecast for the second half of 2026. The company previously assumed a relatively short disruption, but Podskubka said prolonged uncertainty prompted management to change that premise.
The company now has approximately $130 million of material destined for Iraq, Kuwait and Qatar that is excluded from its base-case outlook. If navigation through the strait is restored, Tenaris expects it would take roughly 70 to 90 days to ship the material from its mills and invoice customers.
Podskubka said the delayed shipments would represent upside to the company’s outlook, particularly because the products involved are premium, special-grade materials with relatively strong margins. Operations in Saudi Arabia and the United Arab Emirates have been less affected, he said, with Aramco and ADNOC maintaining drilling activity and Tenaris continuing supply despite added logistics challenges.
Management expects second-half revenue and EBITDA to be in line with the first half, with the third quarter resembling the second quarter. The company expects a more meaningful increase in volumes and some pricing improvement in the fourth quarter, excluding any potential resumption of northern Gulf deliveries.
Podskubka said fourth-quarter volumes are expected to exceed 1 million tons, which should improve fixed-cost absorption. He also said raw-material costs have increased throughout the year, but Tenaris is raising prices and expects the positive impact of those increases to be reflected in fourth-quarter sales and margins.
North American Activity and Investments
Tenaris is seeing increased drilling activity across the United States, Canada and Argentina as customers pursue energy security and diversify supply sources, Podskubka said.
Guillermo Moreno, president of Tenaris’ U.S. operations, said U.S. activity has increased by nearly 10% since the beginning of the conflict in Iran, representing about 50 additional rigs. The company expects another 10 to 15 rigs to be added through the rest of the year.
Moreno said Tenaris expects U.S. shipments to increase in line with customer activity. Pipe Logix pricing has risen around 9% since the start of the year, with at least another 5% increase anticipated by year-end, he said. Tenaris’ own prices typically follow Pipe Logix movements with a one-quarter delay.
In the U.S., Tenaris is adding shifts at its industrial facilities. Its Bay City mill is operating at record production levels, while the company continues investments at its Koppel steel shop and Ambridge seamless pipe mill. It is also expanding deployment of a high-torque wedge connection designed for longer laterals.
Moreno said U.S. imports have remained contained in 2026, supported by Section 232 tariffs and trade cases against unfairly traded imports. Assuming favorable determinations in the newer trade cases, he said Tenaris expects imports to remain at similar levels in coming quarters unless prices rise more substantially.
In Canada, Tenaris has launched a $230 million investment program intended to increase effective capacity at its Sault Ste. Marie mill. Management said the project will strengthen the company’s domestic supply capabilities. Canadian activity declined seasonally in the second quarter after a strong first quarter, but the company expects drilling activity in both oil and gas to improve over time.
Offshore Backlog and Argentina Developments
Tenaris said its offshore project backlog has increased and is expected to contribute to sales beginning in the fourth quarter and continuing into 2027.
The company cited several developments, including Eni and TotalEnergies’ sanctioning of the Cronos project, which will transport deepwater gas from Cyprus to an LNG facility in Egypt. Tenaris has supported Eni on pipeline requirements and OCTG supply for four wells associated with the project.
Tenaris also inaugurated a service center in Suriname with TotalEnergies and government officials to manage the OCTG supply chain for the GranMorgu project. The company has begun deliveries of line pipe and coating for the Sakarya project in the Black Sea.
Management said shipments for Sakarya, a welded SAW pipeline project from Brazil to Turkey, began in the third quarter and are expected to continue for three or four quarters. While the project is significant, Podskubka said its average price and margin are below Tenaris’ companywide average, creating a modest product-mix effect.
In Argentina, nine high-specification rigs have been added in Vaca Muerta since the start of the year, bringing the total operating count to 42. Podskubka also pointed to plans by YPF, Eni and XRG to advance the $30 billion Argentina LNG project, for which a final investment decision is expected by year-end.
Tenaris expects its third fracking unit in Argentina to begin operations in the fourth quarter. Podskubka said the fracking business is EBITDA-margin accretive to Tenaris’ overall average, though he did not disclose a specific profitability figure.
About Tenaris (NYSE:TS)
Tenaris SA is a global manufacturer and supplier of steel tubular products and related services, primarily serving the oil and gas industry as well as other energy and industrial markets. Its product portfolio centers on seamless and welded steel pipes used for casing, tubing and line pipe applications, alongside a range of specialty and mechanical steel tubes. The company also provides value‑added technical solutions, including premium connections, heat treatment and surface protection, to support drilling, completion and production activities.
Tenaris operates an integrated industrial and commercial network that combines manufacturing, distribution and field services.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].
Where Should You Invest $1,000 Right Now?
Before you make your next trade, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.
Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now...
Source MarketBeat
