Tenaris S.A. (NYSE:TS) Q3 2025 Earnings Call Transcript

Tenaris S.A. (NYSE:TS) Q3 2025 Earnings Call Transcript October 31, 2025

Operator: Good day, and thank you for standing by. Welcome to the third quarter Tenaris S.A. Earnings Conference Call. [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, Investor Relations Officer. Please go ahead.

Giovanni Sardagna: Thank you, Gigi, and welcome to Tenaris 2025 Third 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 the call. With me on the call today are Paolo Rocca, our Chairman and CEO; Carlos Gomez Alzaga, our Chief Financial Officer; Gabriel Podskubka, our Chief Operating Officer; and Guillermo Moreno, President of our U.S. operations. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment on our quarterly results. Our third quarter sales reached $3 billion, up 2% year-on-year, but down 3% sequentially, mainly reflecting lower sales to the North Sea and lower shipments for offshore line pipe projects in the Middle East, partially offset by a resilient level of sales to our rig direct customers in the U.S. and Canada.

Average selling prices in our Tubes operating segment decreased 1% compared to the corresponding quarter of last year and 1% sequentially. Our EBITDA for the quarter was up 3% sequentially to $753 million with our EBITDA margin for the quarter at 25%. Our EBITDA for the quarter included $34 million gain recorded for the return of U.S. antidumping deposits paid on OCTG imports from Argentina for which the duty rate has been revised downward. Without this one-off gain, our EBITDA would have been $719 million or 24% of sales. With operating cash flow of $318 million and capital expenditure of $185 million, our free cash flow for the quarter was $133 million. After share buybacks for $351 million, our net cash position declined to $3.5 billion at the end of the quarter.

Our Board of Directors approved the payment of an interim dividend of $0.29 per share or $0.58 per ADR to be paid on the 26th of November. The interim dividend per share is up 7% compared to the interim dividend per share we paid last year. Now I will ask Paolo to say a few words before we open the call to questions.

Paolo Rocca: Thank you, Giovanni, and good morning to all of you. Our results in third quarter once again highlight the unique industrial and commercial position. We have built around the world with competitive differentiation in key markets as well as an efficient industrial performance. In the United States and Canada, where overall drill rig activity has slowed, we maintain our level of sales. Thanks to the relative strength of our customer portfolio that due to the efficient operation, could maintain the level of activity even as oil prices soften. They have chosen to work with us for the long term and appreciate the reliable quality and performance of our product and the benefit that our differential Rig Direct services provide in maintaining the efficiency of their operations.

Considering the high level of tariff rate and trade restrictions, we have been increasing production in the United States and Canada to ensure a reliable supply of high-quality products to our customers. Our mill in Bay City, in Hickman and Sault Ste. Marie operated at record levels of production and high levels of operational efficiency through the quarter. Around 90% of our U.S. sales of OCTG are produced in the United States, with the remaining 10% being mainly imported for special application that nobody produced in the United States. In a dynamic and changing world, one of the key strengths of Tenaris is our uniquely flexible global industrial system, where we can produce locally in many regions of the world, maintaining the same high level of quality through our fully integrated quality and HSE management system.

Two weeks ago, I was in a Sault Ste. Marie to celebrate 25 years of operations in Canada with our employees and the local mayor and the MP. This mill, which is the core of our industrial presence in Canada was idle when we arrived in 2000. Today, following many years of investment, it is a leading supplier of seamless and welded pipe with accessories and coatings for the Canadian oil and gas industry. Now the industry is expanding through the development of the Montney shale and export to LNG to Asia. To extend the scope of our Rig Direct service in the region, we opened a new service yard in British Columbia, while the mill in Sault Ste. Marie is further ramping up production to supply this operation. Offshore projects, especially complex deepwater development, which can provide significant new sources of oil and gas to meet the world’s growing demand for energy, continue to move forward.

Last quarter, we mentioned the contribution we will be making to the GranMorgu development in Suriname. Now we are also gearing up for the supply of coated seamless risers and flow lines and welded line export line and casing for TPAO Sakarya deepwater development in the Black Sea. With this project, we are building a strong offshore order backlog for deliveries from the middle of next year as we look forward to the confirmation of other major offshore process FID. In Argentina, the results of the Congressional midterm election are improving the condition for the financing of the development of the Vaca Muerta shale play. Additional rigs are being put into operation, local companies are raising fresh dollar financing for their operations, while NEI has confirmed its interest in participating in the development of new LNG export facility.

Tenaris has also increased its energy production in Argentina. In September, we started operation at a new 95-megawatt wind farm, which in addition to our previously installed 100-megawatt wind farm is now powering our steel shop and pipe facility in Campana. In October, the 2 wind farms plus a small complement from our thermal electric plant provided all the power we require for our operation in Campana, with no power purchased from the local network. The new wind farm is a further step to our goal of reducing carbon emission and improving the sustainability of our operations. Around the world, demand for electric energy is accelerating. Our production line for boiler and heat exchanger pipes in Europe is operating at full capacity. As China continues to increase its overwhelming level of steel exports, Europe is also taking action to contain steel import with the strengthening of its steel safeguard measure which should benefit our operations in the region.

In this volatile environment, Tenaris continues to demonstrate the resilience of its operation and financial performance, which is allowing us to distribute a cash return of around 11% to shareholders for the ACV. We can now take any questions you may have.

Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Arun Jayaram from JPMorgan Securities, LLC.

Arun Jayaram: Arun Jayaram from JPMorgan. Paolo, I was wondering if you could maybe elaborate a little bit more on the implications to Tenaris from the Argentinian elections. And perhaps narrowing in and the fact that you did mention in third quarter, you saw lower activity levels, some softness in frac and coiled tubing services. What is your outlook for the fourth quarter in 2026 in Argentina, particularly as you deploy an incremental new build frac fleet?

Paolo Rocca: Well, thank you, Arun. Well, I would say that the Argentina election is marking an important turning point. The expectation of the market were for a substantial — let’s say, for a balanced results, but the real results has been a clear victory of the party of President Milei with more than 40%. This has changed, let’s say, the perception by the investor about the future sustainability and the ability to continue the transformation plan in Argentina by the present administration, even if this was a midterm election still is changing the proportion and the presence in the Congress, in the two chambers. So it will allow and give more leeway for the administration for pushing ahead with this transformation plan. This has been combined with a very strong support from the American administration and a substantial financial support by the American administration.

This has changed the perception and the view of the financial community. There has been a very important increase in the level of stock exchange in the range of 30%. There has been a substantial reduction in the country risk, almost 400 basis points down, which was not expected or anticipated by the market. This is important because it has changed also the willingness of financial operators to support initiative and business in Argentina. The oil company, in particular, will have enhanced access to foreign financing for their development project. Just in this week, yesterday, there has been a first issuance of bonds, Tecpetrol with EUR 750 million. In this week, also YPF will do something similar. So the access to finance by the oil company, in our view, will be stimulating the level of investment.

In the moment or at least in the last 6 months, the constraint on the finance operation has been a factor in the decision-making for new investment and for big project that could be developed in the coming 2, 3, 4 years. So we expect that gradually, there will be increase in the investment in development of the asset in Vaca Muerta and also a stimulus to long-term project. One example could be the NEI project for LNG. If you refer to the first quarter, I would anticipate some increase in the number of rigs operating in the country. And gradually, we will see possibly something more during 2026 and 2027 when more substantial program will proceed. So we are positive on Argentina, and the election has been a turning point, in my view, in stimulating the level of activity in the energy sector and not only in the energy sector.

Arun Jayaram: Great. That’s super helpful. Paolo, I was wondering if you can maybe provide your thoughts on how margins could trend in the fourth quarter. As you know, in the U.S., the last couple of pipe logic index readings have been fractionally down 1.3%. The prior month, 0.5% this during October, thoughts around margins in the fourth quarter because I do think the guidance implies relatively flat sales on a sequential basis.

Paolo Rocca: Well, you are right in describing the evolution of one index — relevant index, that is pipe logic. As we mentioned in the last conference call, in a market that is — in which the important material represent share in the range of 40%. When — like what has been done in June this year was raising the level of tariffs to 50%, sooner or later, as we anticipated in last conference call, we’ll have some impact on the price. The point is that the accumulation of stocks before the set of the tariff in the market and a slight decline in the number of rigs are keeping pressure on prices. But as I say in the last quarter, I think that gradually sooner or later, we will see, let’s say, the impact of this situation and the level of price will start to recover. On this more specifically level of stock, I would ask Guillermo to have his point of view from inside concerning, let’s say, the potential evolution of this in the future.

Guillermo Moreno: Thank you, Paolo and Arun. Yes, I mean during the first 3 — so far this year, we have seen a high level of imports, very high during the first semester. We started to see some decrease in the third quarter. But still, we have not seen the full impact of the 50% tariff in those imports. So we are expecting further deductions during the current quarter, and particularly in the first semester of 2026 that should allow the market to be much more balanced. Today, the level of inventories on the ground are at around 7 months, so above normal levels. And as soon as this happens, prices will have some more power to increase.

Operator: Our next question comes from the line of Matt Smith from Bank of America.

Matthew Smith: I wanted to start off with a very strong sales print in the quarter, some surprises on the mix as well, especially welded sales up in the quarter. You also referenced a bit of a pull forward in Middle East orders. So just hoping you could reflect on those trends within the quarter and how you expect those mix effects to potentially change or not to change as we head into the fourth quarter, please?

Paolo Rocca: Thank you, Matt. As you see, the — we think we had a good level of sales and we also expect for the next quarter to have a level of sales close or in line with the third quarter. Now there has been strong sales of welded mainly due to 2 factors. One is OCTG, oil country tubular goods in the United States. Areas in which also to respond to the pressure of tariff, we are substituting some of the intermediate and surface casing with welded product instead of seamless product. This had an impact. The other point is the delivery of the big pipeline, VMOS as it’s called, there is the big oil pipeline that is enhancing the evacuation of Vaca Muerta in the first stage, the 350,000 barrel a day and subsequently 550,000.

So it’s very big pipeline. We are finishing the delivery of the pipe for it just in the third quarter. This has been one of the reasons. Looking ahead is likely that in the fourth quarter, this ratio get back to the previous levels. I mean we do not have similar strong delivery for the pipeline. While in the case of OCTG, we will continue to maintain the share of weld. So you can expect that this could be slightly lower.

Matthew Smith: Okay. Perfect. Then I wanted to change tack on to shareholder distributions, if I could, a 7% increase in the interim DPS level today. I mean, given the extent of the cash power, you still sat on the strong performance you reported and the recent sort of announcement was referenced to the controlling shareholder family. I just wondered how sustainable the market should view the current buyback level by which I’m really referring to the $1.2 billion announcement made last year. I mean that looks like something that’s very affordable for 2026 too from my perspective. I know you still have the $600 million to complete first of that original announcement, but I was hoping you could already talk to next year’s decision and your early thought process there, please?

Paolo Rocca: Well, what we have in front of us, we will execute the second tranche of the buyback. And as you saw, the Board approved a level of dividend more or less in line in absolute term with the previous year but higher per share due to the buyback impact. This is what we have in front of us. And then it will be up to the Board to decide what to do once we completed this second buyback. As we mentioned in the opening remarks, by the way, the 11% return for shareholder is, let’s say, good — showing a good performance of the company. I mean, in this moment, Tenaris has shown resilience in a very volatile environment and delivering to the shareholder, I mean, a very substantial return in our view.

Operator: Our next question comes from the line of Marc Bianchi from TD Cowen.

Marc Bianchi: The press release commented on some additional tariff cost headwind in 4Q related to this, I guess, second to 30% to 25%. We previously talked about that, I think, being the 25% being equivalent to about $70 million of quarterly EBITDA or quarterly cost. Is that the right way to think about the progression from 3Q to 4Q on an EBITDA basis? It sounds like maybe there could be some offsets. You mentioned the mix of more OCTG that should be a favorable benefit to margins. Maybe you could help us understand a little bit better the EBITDA progression from 3Q to 4Q.

Paolo Rocca: Thank you, Marc. Well, in the next quarter, we will see, as I mentioned, maybe some lower volume but potential sales in line or close to what we have seen in the 3Q but we expect the EBITDA to be lower in the range of single digit because of the impact of the tariff in our cost of sales. We are paying tariff on the bars of steel that we are bringing into the states for supporting our rolling mill. We pay the 50% tariff on this. But this tariff is getting in our inventory and is released gradually while we proceeded in the cost of goods sold. So in the third quarter, we pay a higher number, a higher amount compared to what is included in our cost of sales. But in the fourth quarter, we expect an additional, let’s say, that this tariff included in our inventory will get into our cost of sales.

So we will have higher cost of sale for this region. We expect this in the range of $40 million that will, let’s say, affect our EBITDA in absolute terms. Then there are other factors that could contribute to this, but this is our estimate today. In terms of the margin, as we anticipated, also in the last conference we continue to expect margin in the range between 20% and 25%, not far slightly lower than the one we had in the third quarter.

Marc Bianchi: Okay. That’s very helpful. And just to clarify on the starting point for the EBITDA comment, was that the $753 million that included the $34 million gain? Or are you excluding that when you talk about being down single digits?

Paolo Rocca: No, no. I’m talking about the adjusted EBITDA because I’m considering EBITDA without, let’s say, the recovery we had on the antidumping. We think that considering this, there is a normalized EBITDA. In the coming quarter, we will have a lower EBITDA for the reason that I mentioned.

Marc Bianchi: Very clear. The other question I had was on the — I think last quarter, we talked about some pipe that had been shipped from Asia before the second round of 232, and that was still in transit and that needed to get landed and integrated into the market before things stabilized, I guess. I mean, I understand that you mentioned the inventory on the ground is still a bit of a problem, but how do we see this pipe in transit issue playing out?

Paolo Rocca: Guillermo, maybe you can say if this is — how this situation evolves?

Guillermo Moreno: Yes. Yes. This is correct, Marc, what you said. I mean the impact of the additional 25% that were implemented in June, we said that we were going to start the full effect of this during the fourth quarter of the year. And this is what we expect. Now due to the shutdown of the government of the — in the U.S., we don’t have import statistics, but our understanding is that they are going down, and we will see further reductions in the following quarters.

Operator: Our next question comes from the line of Alessandro Pozzi from Mediobanca.

Alessandro Pozzi: First one is on the outlook. You provided a description of what you think is going to happen in Q4, any chance you can venture a little bit further out in Q1 and see what could be the main moving parts as we go into 2026. And also while we are on the topic maybe any color on the level of tender that you expect Middle East and the deepwater for 2026. And the second question is on Q3, strong sales, especially in North America, it feels like you are gaining some market share. But if you can maybe elaborate a bit more on the reason for the increase in sales in Q3 despite lower rig count in the U.S., of course, all U.S., would be appreciated.

Paolo Rocca: Thank you, Alessandro. Just on the first point, which is the forecast. Let me — I mean, it will be very relevant what’s happened with the tariff because just to summarize, today, we are paying every quarter an amount in the range of $150 million this tariff. And as I said before, in the third quarter, only a part, a substantial part of this enter into our cost of sales. But looking ahead in the coming quarter, we will have increasing cost getting into our cost of sales. But on the other side, we are doing — taking action to reduce the tariff by increasing production into the states for steel, for pipe. We expect production in our copper plant — steel plant to increase from now on, continuously and contribute to a reduction in our import of this.

And also, we are expanding our production in pipe. So also the sum of the import that is complementing our sale will be reduced. So we have our own plan for reducing this. But there is also the negotiation underway. All the country from which we are shipping steel into the States, Argentina, Mexico, Europe, from Italy and Romania have a negotiating table with the United States and there could be some reduction or negotiation that may affect the 232 for steel — in this case, for still semi-labor product, not for finished product probably. So this is not predictable today. But I expect that over time, with Argentina due to the extraordinary relation — special relation that has been established between treat Trump, President Milei and the administration, there’s going to be a discussion on this.

With Europe also maybe there could be an agreement in line with the U.K. agreement and with Mexico also, there could be negotiating table. So this will be relevant and will affect our performance also in the coming quarter in the medium term. Probably, we won’t see any change here in the fourth quarter apart from what I mentioned, but looking in 2026, we need to consider also a potential change in the level of tariff for our steel bars on top of what we can do ourselves. As far as the Middle East and the situation in this, I will ask Gabriel to comment on this.

Gabriel Podskubka: Thank you, Paolo. Alessandro, the Middle East business, I would say, is overall stable at good levels. If we break down the important components. Saudi, as you know, has been decreasing activity in the first half of the year, but we see this drop in rates stabilize. We believe that Saudi has bottomed in its drilling activity. And even there are some early indications that there might be a rebound of rigs into 2026, but this is something a bit too early for us to factor in our forecast. Another component of our business in Saudi is our pipeline business. And last month, in September, we started deliveries of the large CCS pipeline. So this is something that we accompany us well into 2026. So line pipe offsetting some of the lower OCTG in Saudi.

When we look outside Saudi, the key producers in the GCC, UAE, Kuwait, Iraq, they’re all pressing ahead, increasing capacity and offsetting depletion in line with the core of increasing crude production. So we see those plans steadily going ahead. Qatar, which is more of an LNG story, we see Qatargas preparing for the new campaign of the North Field West, 50 wells that would probably supply towards the end of ’26 and ’27. So overall, a lot of moving pieces, but I would say, the Middle East, stable and resilient into next year. There was also a comment on offshore, Alessandro. We commented that the shipment for offshore in the second half was a bit lower in the first half, where we had a lot of offshore pipelines in Brazil, in South Subsaharan Africa that were not repeating in the second half.

But as Paolo mentioned in the opening remarks, we are building a strong backlog into 2026. The Sakarya Phase 3 is a good example. And we are seeing some other projects moving ahead with likely FID in the first part of the year. So overall, we are pretty much positive and constructive on the contribution of offshore into 2026.

Paolo Rocca: Thank you, Gabriel. On the last point, that is the market share, I think we are gaining some market share. But let me tell you I think the reality is that our clients are gaining market share for different reasons into the space of North America. I will let Guillermo to comment on this, even if this is in your view sustainable.

Guillermo Moreno: Yes, I think that it is sustainable. Our clients are mainly the large operators that have shown much more resilience and the smallest one, and we expect this to continue. Now regarding the correlation of demand of OCTG with rig count there, we need to be very careful because as we have explained in other conference calls, most of the tractors, particular hours are increasing productivity and efficiency. And therefore, the impact on the demand of OCTG is on the downward trend is lower than if you just take into account the rig count. So you need to take both into account. But indeed, our market shares have slightly increased due to the resilience of our clients.

Paolo Rocca: Yes. I would add just one comment. The large operator are more resilient in front of a perception of a reduction of the price of oil. They have more productive plays. They operate in more productive plays. They have better efficiencies. So the operator we are serving tends to be more stable and resilient even when the perception of price of oil over time may be subdued consider, let’s say, maybe months ago.

Alessandro Pozzi: Okay. And sorry, on the — you mentioned intensity. Can you give us maybe an update on where we are in terms of intensity now versus the, let’s say, a year ago? And how much improvement there was?

Paolo Rocca: Yes. You mean OCTG consumption?

Alessandro Pozzi: Yes.

Paolo Rocca: I would say that it’s around 2% to 3% higher. So if you see a rig count reduction of 5%, you need to consider that half of this has been compensated by an increase of productivity, right, the days that it takes them to drill a well, but also because they are extending the lateral length.

Operator: Our next question comes from the line of Sebastian Erskine from Rothschild & Company Redburn.

Sebastian Erskine: The first one, just on Mexico. So you secured some work from Woodside for the Trion project. And I think recent news flow more broadly has been positive for Mexico as kind of PEMEX’ strategic plan is being flushed out and the mixed contracts are being signed. In your view, how much of a factor is Mexico going to be on a volume perspective in 2026 versus this year? What was the potential upside from that region?

Paolo Rocca: Sorry for the region you were mentioning which region, can you repeat?

Sebastian Erskine: Yes, sure. Just in Mexico, just obviously …

Paolo Rocca: First of all, on the question of Trion and other private companies, that are, let’s say, operating, what we see is that this is starting to move on in different direction, also some of the contract — new contract that PEMEX is giving for drilling are moving on. The first one has been assigned this will imply additional drilling in Mexico, this is one point, including the project like Trion and outside that are going on. Second point is the financial situation of PEMEX. After the refinancing operation for $12 billion, PEMEX is more — I mean, is recovering ability to consider, let’s say, payment to the supplier during the 3Q, we didn’t receive, but now we are receiving payment, and we expect during the fourth quarter to receive a substantial payment on our receivable, you’ll notice the receivable has been going up.

One of the reasons has been the delay in payments, but we expect this to improve and we expect, let’s say, the recovery in the financial reason of PEMEX to have an impact some moment. In our — for the visibility that we have in the coming quarter, we do not see a major change. But we consider the refinancing signal that over time, during 2026, there will be additional activity by the private company and maybe hopefully by PEMEX also.

Sebastian Erskine: Really appreciate that. And just a quick one on kind of unit raw material costs. It looks like you benefited from some kind of meaningful deflation in the third quarter, particularly in hot rolled coil. Can you give an update what you’re expecting on the input cost into the fourth quarter and for the moving parts kind of ex tariffs?

Paolo Rocca: We do not expect a major change because the situation of high inventory, there basically containing the impact of tariff is also something that is to some extent, affecting the hot rolled coil. I mean the price of other coil is higher, but it’s not higher as much as one could have expected for the size of the increase in the import of this. I think that maybe, Carlos, looking at our — the impact of hot rolled coils on our cost of sales, you can add something. I don’t see major change in…

Carlos Gomez Alzaga: No. There is small increase for next quarter, then flat and going down. The effect that we’re going to see in our costs next quarter is the effect of tariffs, as you mentioned already. The impact of tariffs in our cost of goods sold will increase during this quarter to achieve almost the full effect of the tariffs.

Operator: Our next question comes from the line of David Anderson from Barclays.

John Anderson: Just want to get back to the Middle East, if we could, please. Specifically on the emerging unconventional resource plays in Saudi and UAE. So Aramco just signed contracts in the third phase of Jafurah is now planning to drill something in the order of 400 or 500 wells next year. And the UAE, ADNOC has recently talked about 300 wells annually starting drilling in 2027. Presumably, all that’s going to be seamless as it is in the U.S. I was wondering if you could talk about this opportunity for Tenaris. I mean if we just kind of run the rough numbers here, this seems like a pretty substantial uptick if we kind of use the same numbers that we see in the U.S. shale and applied over there. Can you just talk about how important this is for your Middle East business over the next couple of years, please?

Paolo Rocca: Thank you, David. And Gabriel, if you can comment.

Gabriel Podskubka: Yes, David, indeed, we are excited about the unconventional opportunity in the Middle East. As you mentioned, this is something that is not new. Jafurah has been there and increasing rigs steadily over the last 3 years since the development started. And this is an area that we are participating. As of today, we have an important share in the seamless and conventional space in Saudi and that also demand pipelines for connectivity and transportation of gas in the Kingdom. So this is exciting and is the part that has been more resilient the decrease of rigs for Saudi that I was referring before. Clearly, the gas development in Saudi is the most resilient that they are targeting to replace oil for internal consumption.

Going to UAE. There is also an opportunity of unconventional is a bit smaller, but ADNOC is accelerating in their own operations and with partners they are bringing and they have some partnerships of some concessions. And there, we are also leading in terms of market share and position all the unconventional plays. So within the broad scope of supply that we have with ADNOC unconventional is an area that we are participating and leading. So it’s an area that we expect growth as well going forward.

John Anderson: And just a quick follow-up. Where do you source that pipe? I don’t think you manufacture any seamless in the Middle East? I know you’ve got a welded facility, I think you have a JV with Aramco in Saudi, but I don’t think you have any seamless production over there. Where do you source that from a project like this? That’s a lot of pipe.

Gabriel Podskubka: Yes. For the — in Saudi Arabia for pipelines, we saw domestically for our SAW large OD pipeline mill in Jubail. When you go to the OCTG side, there is a mix string of welded and seamless. The welded we produce ERW welded for surface casing, domestically sort on coils of Saudi and our production of pipes in the kingdom. And for the similar component, we source linen from the local mills in Saudi and then we finished to our connection. When we go to UAE, all our material is brought from our main mills in Argentina and Mexico and to a large extent, also credit in our finishing facility that we have in Abu Dhabi. So it’s a mix of combination of pieces with a heavy component of domestic product.

Operator: Our next question comes from the line of Kevin Roger from Kepler Cheuvreux.

Kevin Roger: Yes, two, if I may. The first one is on the profitability of the business based on the region, the different region. And I was wondering if you can give a bit of color on where do you stand U.S. versus international right now in terms of profitability? Is there any big difference or the things that are normalizing close to the same level? That would be the first question, please. And the second one is related on the working capital and maybe you have, in a way, given the answer with PEMEX, but just trying to understand the EUR 300 million negative movement in working cap in Q3 when you say that it’s an increase in receivables. Is it something in where a one-off that you expect to recover in Q4? Or there is something else beyond this movement, please?

Paolo Rocca: Thank you, Kevin. Well, on the first line, Tenaris is selling in the different region, a very diversified portfolio of products. So it’s pretty difficult to say profitability for the market. For instance, when we’re talking about offshore, depending if it is in Africa, in the Gulf or in the Southeast Asia or in the Mediterranean, we have a range of products, including line pipe with coating that following an acquisition of Shawcor. In some cases, represent an invoicing even superior or higher than the invoicing on pipes. So it’s difficult to do differentiation region. We have differentiation due by product. Some of the most competitive products are the onshore welded line pipe. There are examples in Argentina or in Saudi Arabia.

These are, let’s say, the tail of our profitability, while the most profitable area could be the line pipe coated with insulation for complex offshore product. In the U.S., there is an average, but still in the U.S., there are also there differentiation between production casing and surface casing or tubing. So I wouldn’t say that it is a regionally driven profitability. In fact, I would say, is more delivered by the mix of different projects and sales. When you talk about working capital, we are seeing the increase in the working capital, this is driven by the delay in payment of PEMEX, and this is something that we expect we will be going in the opposite direction in the fourth quarter. The other component of the increase in stock is due to the incorporation of tariffs into our stock will probably stay at the same level.

So the inventory has a higher cost, inventory or bars because of the impact of the tariffs. As we mentioned, the tariff had an impact in the third quarter in the range of $80 million and will increase something in the range of $40 million, incorporating in our inventory in the fourth — this is the reason for some lower EBITDA. It is also something that will remain relatively high. Then that is all what we can do in speeding up the receivable of some other areas like Middle East that may contribute to improvement of the — let’s say, to reduction of the need of working capital during the 4Q. In this sense, 3Q has been a kind of extraordinary, I would say, in terms of absorption.

Operator: Our next question comes from the line of Paul Redman from BNP Paribas Exane.

Paul Redman: I just had a quick question on inventory levels in the U.S. and where you expect imports to fade quicker. Would that be more on the seamless or the welded from and where are inventories for heater product? And then secondly, for our press release earlier this month, earlier this month, I think it was talking about some [indiscernible] now being included in the buyback process. I just wanted to confirm whether there’s any change here or anything else we should know about on that change in positioning?

Paolo Rocca: Sorry, can you repeat the second question? Just to be sure I understand you well.

Paul Redman: Yes, your largest shareholder is now wanting to be included in the buyback process. I believe this is a change from its previous positioning. I just want to understand whether you’re aware of any change in positioning here?

Paolo Rocca: Yes. Okay. Understood. Now the first one is on inventory. Here, Guillermo, if you can.

Guillermo Moreno: Yes. When we look at the imports it’s more on welded pipes on seamless. And regarding the increase of inventories on the ground that we have seen lately has also been higher on the ERW than in seamless. Now, looking forward, the expectation is that both ERW and seamless inventories on the ground will go down.

Paolo Rocca: Yes. On the second one, the controlling shareholder has informed that it may start selling shares but will not go below a certain threshold. And then we’ll see this in the public information because the shareholder is also by the rule is indicating when the movements are above the 1%. This is what we can say about this.

Operator: Our next question comes from the line of Rodrigo Almeida from Santander.

Rodrigo Reis de Almeida: So just a couple of questions here from my side. The first one, I’m not sure if we talked about this during the call, but regarding Argentina, right, regarding the oilfield services business in Argentina. If you could give us an update on how things are evolving there? Are we talking a little bit about the Argentina macro environment, but how could this business, say, help results maybe over the next few quarters. I think this will be nice to hear from you. And then I have another question here. When you look into South America, we saw a nice contracts recently signed with Petrobras, which I suppose could somewhat offset the Raia project that just ended. So if you could give us some color on how we pick about the South American operations going forward.

Paolo Rocca: Thank you, Rodrigo. Well, about Argentina, as I comment, I think, the oil company, including YPF and all the other will have more access to financing and willingness of the investors to support this has been clearly reacting to the results of the election in a very positive way. What does this mean for us? Well, it means additional rigs there are coming into operation gradually because this, you cannot bring it. The number of rigs idle in the country is almost 0 now. So will increase only slightly. But there will be action to bring into the country additional rigs for operations during 2026. It means that fracking operation will increase, and this is important for our division that is doing fracking in Argentina.

We can expect increase in invoicing by fracking operations and all by our sales of pipe and services over time will not be immediate, but will have an impact in the coming quarter. So more sales. Now in the line pipe, the project of LNG, the CS project promoted by Pan America and together with partners like YPF and so is going on and will — in the present situation, we will see the tender and the FID has been done in June and we expect in 2026 that the process of construction of pipeline will start and also the assignment of the contract for the pipes. These kind of movements are important from our point of view and will enhance the market for us. In the case of Petrobras, I will ask Gabriel comment on the contract.

Gabriel Podskubka: Yes. Thank you, Paolo. Rodrigo, in terms of drilling activity in Brazil, we see steadily increasing by Petrobras and the other majors that are being in the — especially in the deepwater play in Brazil. And there are many moving parts of the supply of Tenaris, both in OCTG and line pipe. In the OCTG, we have a long-term agreement with Petrobras and the other majors for the large OD connectors, which we produce locally in our facility in [indiscernible]. We are also suppliers in certain fields of the seamless casing as well with Petrobras. And we also have an important contract for completions of 13 chrome and CRA given the — our service conditions of completions in Petrobras. So we believe that this, together with the pipeline, the seamless pipeline bookings that are also carrying insulation coating.

I mentioned, I believe in the last few calls, Búzios 9 and Búzios 11. The contribution of these different segments will contribute to offset the conclusion of the big Raia SAW pipeline that we had and we enjoyed until the first half of this year. So a lot of moving parts and it’s very interesting, the breadth of the portfolio and the position that Tenaris has in Brazil.

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

Giovanni Sardagna: Thank you, Gigi, and thank you all for joining us, and I hope to see you soon around and thank you.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.