20-F: Tenaris Reports Solid Financial Results for 2024, Proposes Dividend Increase

Tenaris consolidated its industry position in 2024, delivering solid financial results and completing strategic investments, despite a fatal accident and challenges in Mexico.

Summary

• Tenaris had a good year in 2024, consolidating its leading industry position and delivering solid financial results.
• However, a fatal accident at the main plant in Argentina marred the year.
• EBITDA reached $3.1 billion and net income $2.1 billion on net sales of $12.5 billion.
• Free cash flow amounted to $2.2 billion, all of which was distributed to shareholders through dividends and share buybacks.
• The company is proposing to increase the annual dividend per share by 38% over the previous year.
• Tenaris maintained a net cash position of $3.6 billion.
• The company is strengthening its service differentiation in North America with larger operators through its Rig Direct service.
• Tenaris is establishing a leading position for 20K projects in the US deepwater.
• The company consolidated its leading position in the Guyana-Suriname basin with an award to supply line pipe and insulation coating for Totals GranMorgu development.
• In Saudi Arabia, Tenaris won a tender for a major CCS pipeline after Aramco distinguished its GPC facility with a special quality award.
• Sales in Mexico have been affected by a steep decline in drilling activity amidst the financial difficulties of Pemex, but Tenaris has reduced its credit exposure.
• Drilling activity and oil and gas production in Vaca Muerta is ramping up, providing an opportunity to increase the range of products and services.
• Tenaris completed several investments in its industrial system aimed at improving efficiency and contributing to decarbonization and environmental objectives.
• The company continues to make progress towards its target to reduce the carbon emissions of its operations and is advancing with the construction of a second wind farm in Argentina.
• Tenaris is resetting the baseline for its carbon emissions target to cover an expanded perimeter and enhance reporting transparency.
• The impact of community investments continues to grow as Tenaris focuses on extending the reach of its technical education programs.
• Looking ahead, Tenaris is heading into uncharted territory with the change in administration in the United States, which could significantly alter the established market environment.
• Tenaris believes it is well placed to navigate the uncertainties and opportunities ahead.

Sentiment

Score: 7

Explanation: The document presents a balanced view, highlighting both positive financial results and negative events. The outlook is cautiously optimistic, acknowledging uncertainties but expressing confidence in Tenaris's ability to navigate them.

Positives

• Solid financial results with $3.1 billion EBITDA and $2.1 billion net income.
• Strong free cash flow of $2.2 billion, all distributed to shareholders.
• Proposed 38% increase in annual dividend per share.
• Maintained a strong net cash position of $3.6 billion.
• Recognition from ExxonMobil as supplier of the year.
• Awarded casing supply for Shell's Sparta project and consolidated position in Guyana-Suriname basin.
• Won tender for major CCS pipeline in Saudi Arabia.
• Completed investments to improve industrial efficiency and reduce environmental footprint.
• Progress towards carbon emission reduction targets and construction of a second wind farm.
• Expanded community investments and technical education programs.

Negatives

• A fatal accident at the main plant in Argentina claimed the lives of two employees.
• Sales in Mexico have been affected by a steep decline in drilling activity due to Pemex's financial difficulties.

Risks

• Downturns in international oil and gas prices could reduce sales and profitability.
• Climate change legislation and increasing regulatory requirements aimed at transitioning to a lower-carbon economy may reduce demand for our products and services and result in unexpected capital expenditures and costs, and negatively affect our reputation.
• The physical risks resulting from climate change, including extreme weather conditions and shifts in weather patterns, have in the past and may in the future adversely affect our operations and financial results.
• Competition in the global market for steel pipe products may cause loss of market share and hurt sales and profitability.
• Sales may be affected by antidumping and countervailing duty proceedings or other import restrictions.
• Increases in the cost of raw materials and energy may hurt profitability.
• Adverse economic or political conditions in countries where Tenaris operates may decrease sales or disrupt manufacturing operations.
• Armed conflicts, such as the Russia-Ukraine war, may adversely affect operations.
• Failure to successfully implement business strategy may affect growth, competitive position, sales, and profitability.
• Future acquisitions, strategic partnerships, and capital investments may not perform in accordance with expectations or may disrupt operations and hurt profits.
• Disruptions to manufacturing processes could adversely impact operations, affect customer service levels or reputation, or expose Tenaris to liability.
• Significant charge to earnings may be required if goodwill or other assets are reassessed.
• Movements in exchange rates could adversely affect financial results.
• Changes in applicable tax regulations and resolutions of tax disputes could negatively affect financial results.
• Failure to comply with anti-corruption laws could result in governmental investigations, fines, penalties, or private lawsuits.
• The cost of complying with environmental regulations and potential environmental and product liabilities may increase operating costs and negatively impact business.
• Limitations on the ability to protect intellectual property rights could cause a loss in revenue and any competitive advantage held.
• Cyberattacks could have a material adverse impact on business and results of operations.

Future Outlook

Tenaris expects sales and EBITDA in Q1 2025 to be in line with Q4 2024, with a moderate rise in Q2 2025, but notes uncertainty due to potential changes in US tariffs.

Management Comments

• The accident occurred in the heavy equipment maintenance shop of our main plant in Argentina. This is a major setback for Tenaris, which has an absolute commitment to safety with its employees and its communities.
• We deeply regret the loss of life and are reinforcing all our action on preventive activities with a focus on critical risks.
• Tenaris, with its unique positioning, both globally and in North America, competitive differentiation and financial strength is well placed to navigate the uncertainties and opportunities ahead.
• I would like to thank our CFO, Alicia Mndolo, for her contribution to Tenaris and the Techint Group over more than 40 years.
• I would also like to thank all our employees for their constant commitment and engagement, without which the results and achievements of the past year would not have been possible, as well as our customers, suppliers and communities for their ongoing support.

Industry Context

The document highlights consolidation in the oil and gas industry, the impact of climate change legislation, and the increasing competitiveness of renewable energy sources, all of which affect Tenaris's business environment.

Comparison to Industry Standards

• Tenaris is establishing a leading position for 20K projects in the US deepwater, competing with companies like Vallourec in providing specialized product grades.
• The company's GPC facility in Saudi Arabia was distinguished with a special quality award by Aramco, indicating a high standard compared to other suppliers.
• Tenaris is consolidating its position in the Guyana-Suriname basin, competing with other suppliers for projects like Totals GranMorgu development.
• The company's average CO2 emissions intensity for its steel making sites is 0.9 ton CO2 / ton crude steel, which is less than 50% of the 1.9 ton CO2 / ton steel for the average global steel industry, according to worldsteel.

Management Changes

Legal Proceedings

• Confab is subject to civil claims from Petrobras and the Brazilian public prosecutors and to administrative responsibility proceedings before Brazils General Controllers Office.
• Tenaris is required to pay antidumping duty deposits on OCTG imports from Argentina and Mexico.
• The Company resolved the investigation by the SEC and the DOJ informed that it had closed its parallel inquiry without taking action.

Related Party Transactions

• Purchases of raw materials from Ternium and Usiminas.
• Sales of raw materials and steel pipes to Ternium and Tecpetrol.
• Procurement services from Exiros.
• Supply of electric energy from Techgen.
• Supply of natural gas from Tecpetrol.
• Provision of engineering and labor services from companies controlled by San Faustin.

Stakeholder Impact

• Shareholders will benefit from the proposed dividend increase and share buybacks.
• Employees are affected by the fatal accident and the company's commitment to safety.
• Customers will benefit from the company's focus on quality, service, and innovation.
• Communities will benefit from the company's investments in education and social programs.
• Suppliers are expected to adhere to the company's sustainable sourcing policy and code of conduct.

Next Steps

• The annual general shareholders meeting is scheduled for May 6, 2025, to approve the annual accounts and dividend proposal.
• An extraordinary general meeting of shareholders is scheduled for May 6, 2025, to decide on the cancellation of treasury shares and the renewal of the authorization for the board of directors to issue shares.
• The company will continue to monitor the evolution of the energy transition and adapt its business strategy accordingly.
• The company will continue to implement its decarbonization strategy and invest in renewable energy projects.
• The company will continue to monitor the situation in Mexico and adjust its operations as needed.
• The company will continue to monitor the situation in the United States and adjust its operations as needed.

Key Dates

Keywords

Tenaris, financial results, EBITDA, net income, dividends, share buybacks, oil and gas, steel pipe, carbon emissions, sustainability, Rig Direct, Pemex, Vaca Muerta, wind farm, energy transition