20-F: Tenaris Reports Record Financial Results for 2023, Proposes Increased Dividend and Continues Share Buyback Program

Tenaris announces record financial results for 2023, driven by strong performance in the energy sector, and proposes an increased dividend and continuation of its share buyback program to enhance shareholder returns.

Summary

• Tenaris reports record financial results for 2023, including net sales of $14.9 billion, EBITDA of $4.9 billion, net income of $4.0 billion, and operating cash flow of $4.4 billion.
• The company proposes to increase its annual dividend to 60 cents per share and continues its share buyback program, implying an 8% yield to shareholders at current prices.
• Tenaris expanded its operations through acquisitions, including increasing its stake in GPC in Saudi Arabia and acquiring the Shawcor pipe coating business.
• The company's globally integrated industrial and supply chain systems produced and shipped over four million tons of pipes in 2023.
• Tenaris's Rig Direct service program now serves over 500 rigs worldwide, enhancing customer intimacy and differentiation.
• Sales for offshore operations and projects grew more than 50% during the year, with significant contracts in Guyana and Brazil.
• Tenaris inaugurated a new industrial complex in Abu Dhabi to support its Rig Direct service to ADNOC.
• The company successfully put into operation its first wind farm in Argentina, supplying 100 MW of power to its industrial facilities in Campana.
• Tenaris is moving forward with a similar investment to build a second wind farm.
• The company's community education programs reach 10,500 students, with the Roberto Rocca Technical School nominated as one of the top ten schools in the world for innovation.
• Tenaris expects favorable market conditions in the Middle East and offshore to continue through 2024, while consolidating a solid position in the Americas.

Sentiment

Score: 8

Explanation: The document presents a highly positive outlook, driven by record financial results, strategic acquisitions, and a commitment to shareholder returns. While some risks are acknowledged, the overall tone is optimistic and confident.

Positives

• Record financial results indicate strong operational performance and market demand.
• Increased dividend and share buyback program demonstrate commitment to shareholder returns.
• Strategic acquisitions expand the company's market reach and service capabilities.
• Successful implementation of the Rig Direct service program enhances customer relationships and efficiency.
• Investment in renewable energy sources contributes to decarbonization efforts and reduces energy costs.
• Strong financial position with a net cash of $3.4 billion provides flexibility for future investments and growth.

Negatives

• Three fatalities occurred in the company's operations, highlighting the need for improved safety measures.
• Aramco is postponing some offshore oil expansion plans, which could impact future sales opportunities.
• The company experienced some delays in the delivery times to customers in relation to orders that had to be diverted because of the ongoing shipping crisis in the Red Sea.

Risks

• Downturns in oil and gas prices could reduce demand for the company's products.
• Climate change legislation and increasing regulatory requirements may reduce demand for fossil fuels.
• Intense competition in the global steel pipe market could impact pricing and market share.
• Increases in raw material and energy costs could hurt profitability.
• Adverse economic or political conditions in countries where the company operates could disrupt operations.
• An escalation of the Russia-Ukraine war and other armed conflicts may adversely affect operations.
• Cyberattacks could have a material adverse impact on the company's business and results of operations.
• The company faces potential product liabilities and environmental risks.

Future Outlook

Tenaris expects favorable market conditions in the Middle East and offshore to continue through 2024, while consolidating a solid position in the Americas, ready to seize further opportunities as they arise.

Management Comments

• Paolo Rocca stated that 2023 has been an outstanding year for Tenaris with record financial results under most metrics.
• Paolo Rocca noted that the company is increasing returns to shareholders and is well-placed to strengthen its positioning around the world.
• Paolo Rocca gave a special thanks to employees, customers, shareholders and suppliers.

Industry Context

The announcement reflects the ongoing trends in the energy sector, including the increasing importance of offshore operations, the growing demand for gas, and the need for companies to adapt to the energy transition by investing in renewable energy and reducing carbon emissions.

Comparison to Industry Standards

• Vallourec, a major competitor, has undergone financial restructuring and is focusing on high-value premium joint products.
• U.S. Steel Corporation is being acquired by Nippon Steel Corporation, which could reshape the competitive landscape in the U.S. market.
• TMK, a Russian company, has been monetizing its international assets and focusing on its domestic market.
• Chinese producers are increasing their presence in the global steel pipe market, particularly in the commodity sector.
• Tenaris is differentiating itself through its Rig Direct service program and its focus on high-value products and services.

Legal Proceedings

• Tenaris is involved in ongoing legal proceedings, including claims related to the Veracel celulose accident and the U.S. antidumping duty investigations.
• The company resolved the investigation by the SEC related to Petrobras-related proceedings and claims.

Related Party Transactions

• The company engages in various related party transactions, including purchases of steel products and raw materials from Ternium and Usiminas, sales of raw materials to Ternium, and the supply of electric energy from Techgen.
• The company has a shareholders agreement with Techint Holdings S.r.l. regarding the governance of Ternium.
• The company has a shareholders agreement with Ternium and Tecpetrol regarding the governance of Techgen.

Stakeholder Impact

• Shareholders will benefit from increased dividends and share buybacks.
• Employees will benefit from a flexible and agile working environment that encourages health, safety and wellbeing, accountability, inclusion and trust, allowing them to develop their skills and careers while contributing to our goals.
• Customers will benefit from the company's expanded product and service offerings and its commitment to quality and innovation.
• Suppliers will be encouraged to adopt sustainable practices through the company's Sustainable Sourcing Policy.
• The company's operations contribute to economic development in the communities where it operates.

Next Steps

• The company will propose the payment of an annual dividend at the upcoming general shareholders meeting.
• The company will continue its share buyback program.
• The company will continue to integrate its recent acquisitions.
• The company will continue to invest in renewable energy and reduce its carbon emissions.
• The company will continue to monitor market conditions and adapt its strategy accordingly.

Key Dates

Keywords

Tenaris, financial results, dividend, share buyback, acquisitions, oil and gas, steel pipes, EBITDA, Rig Direct, wind farm, decarbonization