Kevin Roger

Kévin Roger asked about the profitability of the business based on region (U.S. versus international), inquiring if there are significant differences or if profitability levels are normalizing.

Answer

Paolo Rocca, Chairman and CEO, stated that profitability is difficult to differentiate by region due to Tenaris's diversified product portfolio and project-specific variations. He noted that profitability is more driven by the mix of different projects and sales, with onshore welded line pipe being less profitable and complex offshore products (e.g., coated line pipe with insulation) being more profitable. The U.S. has an average profitability with internal differentiations. Kévin Roger also asked about the $300 million negative movement in working capital in Q3, questioning if it's a one-off related to Pemex receivables expected to recover in Q4. Paolo Rocca confirmed the increase was driven by delayed Pemex payments, expected to reverse in Q4. He added that higher inventory costs due to tariffs (estimated $80 million impact in Q3, increasing by $40 million in Q4) will keep inventory levels relatively high, with potential improvements from speeding up receivables in other areas.

Kévin Roger asked for color on the profitability differences between Tenaris's U.S. and international businesses, and for an explanation of the $300 million negative movement in working capital in Q3, specifically if it was a one-off related to increased receivables from Pemex.

Answer

Chairman and CEO Paolo Rocca explained that profitability is more product-driven than regionally driven, with complex offshore products (e.g., coated line pipe) being most profitable and onshore welded line pipe being less so. He confirmed that the increase in working capital was primarily driven by delays in Pemex payments, which is expected to reverse in Q4. He also noted that higher cost inventory due to tariffs contributed to the working capital increase and will remain relatively high.

Kévin Roger requested a revenue sensitivity for Mexico to gauge the potential upside from a Pemex recovery and asked about Tenaris's available seamless capacity in the U.S. to potentially relocate production from Mexico or Canada.

Answer

Chairman & CEO Paolo Rocca indicated Mexico's potential by comparing the current 24 active rigs to past levels of 45-50. Regarding capacity, he clarified that the primary U.S. imports are essential steel bars to feed its mills, not finished products that could be easily relocated, as U.S. facilities are meant to be complemented by, not replace, these imports.

Kevin Roger asked for specifics on the potential U.S. tariff impact, including what percentage of steel billets are outsourced and could be affected. He also questioned whether removing quotas under Section 232 would allow Korean producers to increase imports. Lastly, he asked for the current level of receivables from Pemex.

Answer

Chairman and CEO Paolo Rocca explained that Tenaris has diverse steel sources, including its own U.S. production and imports from various countries, making them comfortable with their supply chain. He expressed confidence that the U.S. administration would prevent a flood of imports from Korea or others. Regarding Pemex, he stated that Tenaris is actively reducing its exposure and generated significant cash flow from this effort, mentioning a reduction of around $140 million in the quarter.