Tenaris Q3 2025: Tariff Uncertainties, Argentina Election Impact, and Mexico's Drilling Outlook

Date of Call: October 30, 2025

Financials Results

• Revenue: $3.0B, up 2% YOY, down 3% sequentially
• Operating Margin: EBITDA margin 25% for Q3 (includes $34M antidumping deposit gain); adjusted EBITDA $719M or 24% of sales; EBITDA up 3% sequentially

Guidance:

• Q4 sales expected close to Q3 levels.
• Adjusted EBITDA expected to be down low single digits sequentially, with an incremental ~$40M tariff hit entering cost of sales.
• Margins expected in a ~20%–25% range, slightly below Q3.
• U.S. inventories should decline and prices recover as 50% tariff effects reduce imports, particularly in H1 2026.
• Argentina: election outcome expected to improve financing and drive gradual rig and investment recovery into 2026–2027.
• Middle East and offshore order backlog should support deliveries into 2026.

Business Commentary:

* Revenue and Sales Performance: - Tenaris S.A. reported sales of $3 billion for Q3 2025, up 2% year-on-year but down 3% sequentially. - The sequential decline was mainly due to lower sales to the North Sea and reduced shipments for offshore line pipe projects in the Middle East.

• EBITDA and Profitability:
• Tenaris's EBITDA for the quarter increased by 3% sequentially to $753 million, with an EBITDA margin of 25%.

• This increase partly reflects a $34 million gain recorded for the return of U.S. antidumping deposits paid on OCTG imports from Argentina.

• Operating Cash Flow and Shareholder Returns:

• Tenaris reported free cash flow of $133 million for the quarter, with a net cash position of $3.5 billion.
• The company announced an interim dividend of $0.29 per share, up 7% compared to the previous year.

• The strong cash returns reflect the company's resilience in a volatile environment.

• Fantasy Metals Tariff Impact:

• Tenaris is experiencing additional tariff costs due to the recent increase in tariffs on steel products, impacting its U.S. operations.
• The company is planning to mitigate this by increasing domestic production of steel and pipe, with anticipated reductions in import levels.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted resilience: "sales reached $3 billion, up 2% year-on-year"; operational strength with U.S. mills at record production; interim dividend up 7%; "we are positive on Argentina" and a growing offshore backlog (e.g., Sakarya), while acknowledging near-term tariff headwinds lowering EBITDA.

Q&A:

• Question from Arun Jayaram (JPMorgan Chase & Co, Research Division): Paolo, can you elaborate on the implications to Tenaris from the Argentinian elections and outlook for Q4/2026 in Argentina as you deploy an incremental new-build frac fleet?
  Response: Election viewed as a turning point improving investor confidence and access to financing; expect gradual increase in investment and rigs, with rig activity rising in early 2026 and broader improvements through 2026–2027.

• Question from Arun Jayaram (JPMorgan Chase & Co, Research Division): Thoughts on margins trending in Q4 given recent Pipe Logix readings and relatively flat sequential sales?
  Response: High inventories and prior stock accumulation are pressuring prices now, but tariffs should progressively rebalance the market; inventories (~7 months) expected to fall and prices to gain, particularly in H1 2026.

• Question from Matthew Smith (BofA Securities, Research Division): Q3 showed strong sales and welded sales up—drivers and how mix may change in Q4?
  Response: Welded increase driven by U.S. OCTG substitution and large pipeline deliveries (VMOS); expect Q4 mix to revert closer to prior levels (pipeline deliveries not repeating) though welded OCTG share may remain higher.

• Question from Matthew Smith (BofA Securities, Research Division): With a 7% interim DPS increase and strong cash, how should the market view the sustainability of the $1.2B buyback program?
  Response: Company will execute the second tranche of the buyback and the Board will decide on further actions after completion; dividend absolute amount similar to prior year but higher per share due to buybacks.

• Question from Marc Bianchi (TD Cowen, Research Division): Is it correct to model a tariff-related EBITDA progression (previously suggested ~$70M) from 3Q to 4Q, or are there offsets from mix?
  Response: Expect adjusted EBITDA to decline low single digits sequentially; management estimates roughly a $40M incremental cost flowing into 4Q COGS from tariffs, partially offset by mix and other factors.

• Question from Marc Bianchi (TD Cowen, Research Division): When referencing EBITDA guidance, are you talking about the $753M including the $34M antidumping gain or adjusted?
  Response: Guidance refers to adjusted EBITDA excluding the $34M antidumping recovery.

• Question from Marc Bianchi (TD Cowen, Research Division): How is the pipe-in-transit/import issue evolving and when will that inventory be absorbed?
  Response: Imports have begun to decline since Q3; full effect of the increased tariffs expected in 4Q with further reductions in subsequent quarters as in‑transit volumes land and inventories normalize.

• Question from Alessandro Pozzi (Mediobanca - Banca di credito finanziario S.p.A., Research Division): Can you comment further on Q1/2026 drivers, Middle East tenders/deepwater 2026, and why Q3 sales rose despite a lower U.S. rig count?
  Response: Tariffs are the main short-term uncertainty (~$150M quarterly exposure); Tenaris is increasing local U.S. production to reduce imports; Middle East is stable with pipeline and offshore work carrying into 2026; Q3 sales strength owes to resilient large operators and productivity gains, supporting sustainable market-share gains.

• Question from Alessandro Pozzi (Mediobanca - Banca di credito finanziario S.p.A., Research Division): Update on OCTG consumption intensity versus a year ago?
  Response: OCTG consumption intensity is ~2%–3% higher year-over-year, partially offsetting rig-count declines due to longer laterals and productivity improvements.

• Question from Sebastian Erskine (Rothschild & Co Redburn, Research Division): How material is Mexico for volumes in 2026 (e.g., Trion) and PEMEX payment/contract dynamics?
  Response: Private-project activity (e.g., Trion) and recent PEMEX refinancing improve the outlook; payments are normalizing and we expect gradual recovery in activity and receivables through 2026, though no large immediate change.

• Question from Sebastian Erskine (Rothschild & Co Redburn, Research Division): What do you expect for input (hot‑rolled coil) costs into Q4 ex‑tariffs?
  Response: Expect a small increase into next quarter, then flat to declining; tariffs—not raw coil—will be the dominant near-term cost pressure on COGS.

• Question from John Anderson (Barclays Bank PLC, Research Division): How big an opportunity is Middle East unconventional (Jafurah, UAE) and importance to Tenaris?
  Response: Unconventional in the Middle East is an important growth opportunity; Tenaris has strong market share in seamless and OCTG and expects to participate and grow with rising drilling activity.

• Question from John Anderson (Barclays Bank PLC, Research Division): Where do you source seamless/OCTG for these projects given limited Middle East seamless production?
  Response: Pipeline SAW volumes are largely domestic (Jubail); OCTG in region is a mix—ERW welded from local coils and seamless sourced from Argentina/Mexico with finishing in local facilities (e.g., Abu Dhabi).

• Question from Kevin Roger (Kepler Cheuvreux, Research Division): Can you color profitability U.S. vs international and explain the EUR 300M working capital increase in Q3?
  Response: Profitability is driven more by product mix (offshore coated line pipe higher margin vs onshore welded lower) than region; working-cap increase driven mainly by delayed PEMEX payments and higher inventory valuation due to tariffs—expected to improve in 4Q.

• Question from Paul Redman (BNP Paribas, Research Division): Where will U.S. import declines show up (seamless vs welded) and any change in largest shareholder joining buybacks?
  Response: Import and on‑ground inventory increases have been larger in ERW (welded) than seamless; both should decline; controlling shareholder indicated it may sell some shares (not below a threshold) and will disclose movements per regulatory rules.

• Question from Rodrigo Reis de Almeida (Santander Investment Securities Inc., Research Division): Update on Argentina oilfield services evolution and South America (Petrobras) outlook offsetting Raia pipeline completion?
  Response: Argentina services should see increased fracking and rig activity as financing improves, boosting sales over coming quarters; Brazil shows rising deepwater activity with long‑term Petrobras agreements and coated line‑pipe and OCTG work helping offset the end of the Raia pipeline project.

Contradiction Point 1

Tariff Impact on Sales and Profitability

It involves differing expectations regarding the impact of tariffs on sales and profitability, which are crucial for financial forecasting and investor confidence.

How will margins trend in Q4, given recent PipeLogic index data? - Arun Jayaram (JPMorgan Chase & Co)

2025Q3: In a market with 40% material share subject to U.S. tariffs, pressure on prices is expected due to accumulated inventory and declining rig count. However, tariffs will eventually impact prices. Production increases and potential tariff reductions could aid recovery. - Paolo Rocca(CEO)

What is your outlook for the second half of 2025? With tariff impacts and slowing activity, how will volume and margin trends evolve? - Arun Jayaram (JPMorgan Chase & Co)

2025Q2: We expect lower sales, especially in the third quarter, in the range of high single digits for invoicing. In the fourth quarter, tariff impacts are uncertain, but prices may increase due to reduced imports. - Paolo Rocca(CEO)

Contradiction Point 2

Argentina's Election Impact on Energy Investment

The differing perspectives on the impact of Argentina's elections on energy investment may affect expectations regarding future growth prospects for Tenaris in Argentina.

What are the implications of the Argentinian elections and weak frac/coiled tubing services for Tenaris in 2026? - Arun Jayaram (JPMorgan Chase & Co)

2025Q3: Argentina election results indicate a turning point, with a clear victory for the party of President Milei, enhancing the sustainability of the transformation plan. - Paolo Rocca(CEO)

What are Tenaris's potential growth prospects in Argentina for OCTG, long-haul pipes, and services such as coiled tubing and pressure pumping? - Arun Jayaram (JPMorgan Securities LLC)

2024Q4: We are positive about growth in Argentina, especially in Vaca Muerta. The pipeline 'Vamos' is under construction, leading to increased rigs expected to rise to 42 or more by year-end. - Paolo Rocca(CEO)

Contradiction Point 3

Impact of Tariffs on U.S. Pricing and Trade

The differing viewpoints on the impact of tariffs on U.S. pricing and trade may affect investor expectations regarding Tenaris' financial performance and strategic positioning.

How will margins trend in Q4, given recent PipeLogic index readings? - Arun Jayaram (JPMorgan Chase & Co)

2025Q3: In a market with 40% material share subject to U.S. tariffs, pressure on prices is expected due to accumulated inventory and declining rig count. - Paolo Rocca(CEO)

If the US imposes 25% tariffs on imported steel tubulars, will Section 232 quotas remain in place? - Arun Jayaram (JPMorgan Securities LLC)

2024Q4: A 25% tariff under Section 232 is expected to increase U.S. prices, as imports have a significant share of the market. - Paolo Rocca(CEO)

Contradiction Point 4

Impact of Tariffs on Inventory Levels

It involves the impact of tariffs on inventory levels, which can affect the company's operational efficiency and financial performance.

What's the outlook for the 7% interim DPS increase and buyback sustainability? - Matthew Smith (BofA Securities)

2025Q3: We expect that further tariff adjustments will be seen during Q4, and we expect further reductions in the following quarters, although we are prepared to potentially couple back if this trend was to be reversed. - Guillermo Moreno(President of U.S.A)

How are US steel tariffs affecting or expected to affect your operating results? Are US imports changing due to Section 232 quotas? - Arun Jayaram (JPMorgan Securities LLC)

2025Q1: Import levels rose in Q1 due to anticipation of tariffs but are expected to decrease in subsequent quarters. - Guillermo Moreno(President, US Operations)

Contradiction Point 5

Mexico's Drilling Activity and Recovery

The differing outlooks on Mexico's drilling activity and recovery may impact expectations regarding Tenaris' operations and growth prospects in Mexico.

Why is market share increasing in North America despite a lower rig count? - Alessandro Pozzi (Mediobanca)

2025Q3: Mexico's activity is expected to increase gradually in 2026, driven by improved PEMEX financial conditions and new contracts. - Paolo Rocca(CEO)

How is activity recovery in Mexico impacting the first half outlook? - Marc Bianchi (TD Cowen)

2024Q4: Mexico is experiencing an unprecedented reduction in drilling activity. Pemex's financial constraints are affecting its production. - Paolo Rocca(CEO)