Tenaris S.A. (NYSE:TS) Q4 2022 Earnings Call Transcript
Tenaris S.A. (NYSE:TS) Q4 2022 Earnings Call Transcript February 17, 2023
Operator: Good day, and thank you for standing by. Welcome to the Q4 Tenaris S.A. earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. 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. Please go ahead.
Giovanni Sardagna: Thank you, Gigi, and welcome to Tenaris 2022 fourth quarter and annual results conference call. Before we start, I would like to remind you that we will be discussing forward-looking information in the call and that our actual results may vary from those expressed or implied during this call. With me on the call today are Paolo Rocca, our Chairman and CEO; Alicia Mondolo, our Chief Financial Officer; Guillermo Vogel, Vice Chairman and Member of our Board of Directors; Gabriel Podskubka, President of our Eastern Hemisphere Operations; and Luca Zanotti, President of our U.S. Operations. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results. During the fourth quarter of 2022, sales reached $3.6 billion, up 76% compared with those of the corresponding quarter of the previous year and 22% sequentially, mainly driven by further increases in shipments and realized prices.
Our EBITDA for the quarter was up 34% sequentially, close to $1.3 billion, reflecting higher volumes, better pricing and a good industrial performance with increased levels of activity and utilization of production capacity. Our EBITDA margin for the quarter rose above 35% despite higher raw material and energy costs. Average selling prices in our Tubes operating segment increased 50% compared to the corresponding quarter of 2021 and 9% sequentially. During the quarter, cash flow from operation was $524 million, our net cash position at the end of the year increased to $921 million, following the payment of an interim dividend of $201 million in November last year, and capital expenditures of $108 million during the quarter. Now I will ask Paolo to say a few words before we open the call to questions.
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Paolo Rocca: Thank you, Giovanni, and good morning to all of you. We closed 2022 with a quarterly record of net sales, EBITDA and net income to kept a year in which we were able to take advantage of the favorable market conditions, particularly in North America to generate strong increases in sales and margin through the year. Taking deal as a whole, our sales grew 80% to $11.8 billion. Our EBITDA rose to $3.6 billion, and our net income rose to an annual record of $2.5 billion or 22% of net sales. With a solid balance sheet and good prospect for an increasing cash flow in the year ahead, we are proposing to raise our dividend for the 2022 year by 24% to $0.51 per share. These results were made possible through the efficient deployment of our global industrial system, where we produced a record volume of over 3.1 million tons of seamless pipe worldwide, sustain an ongoing ramp-up of our facility in the U.S. Despite the use of longer and more complex production in logistic routes, we were able to maintain high standards for safety, quality, and consumption of materials.
During the year, we hired 6,500 new employees. And in our induction in training routines, we payed close attention to the importance of having a safety mindset with awareness and behavior suitable for the industrial environment of our shop floor. We empower all our employees to be proactive in taking preventive safety action at all times. With this action, we were able to reduce our lost time injury frequency rate for the year by 10% to 0.9 per million manhours work. We are grateful to our people working in the plant for their contribution to this result. As we increase production and sales, our logistics operation have reached a substantial magnitude. To give you an idea of the efforts involved between interment transportation and delivery to customer, we moved around 10 million tons of material over around the world.
We are strengthening the reliability of our supply chain through the digitalization of our material flows and made good progress over the year in this respect. We increased the deployment of our Rig Direct services. We are now serving close to 600 rigs worldwide. Our unique service platform allow us to integrate our operations more closely with our customers and provide digital and technical services that can further differentiate us from our competitors. 2022 marked a turning point in our deployment in the United States. The country accounted for more than 40% of our total sales, most of which are now produced locally. We brought the Bay City mill to full production capacity and ramped up production in the rest of our U.S. in data system, including the restart of production of weather pipes and of heat treatment and finishing at our Baytown in Koppel facilities.
We hired more than 1,500 new employees during the year in the U.S. and now employ 3,600 people in the cloud. With the $460 million, we will avoid spending on the Benteler acquisition. We will reorient our investment plan in the United States to achieve through organic growth, the objective of strengthening our local industrial and logistics system that we had planned with the acquisition. As we look ahead, we view the tightness in oil market and high demand for LNG will support oil and gas price cash flows and investment in the oil and gas sector. We expect that the number of oil and gas well drilled around the world in 2023 will increase, and this will drive global OCTG demand to exceed 16 million tons and reached its highest level since .
This environment will support further sales growth in 2023, when we expect an increase in sales for the offshore development in the Middle East and in the pipeline infrastructure buildup. Our achievement over the past year that will support this growth include our multiyear agreement with ExxonMobil to supply their offshore operation in Guyana, our agreement with Petrobras to supply their Pre-salt operation. The renewal of our long-term worldwide agreement with NAI, the renewal of our long-term agreement with Qatargas, the consolidation of our long-term agreement with Vietnam. We also extended our long-term agreement with YPF and with Pemex. Pipelines will drive a relevant increase in our sales of welded pipes. In Argentina, we are supplying a number of pipelines that will stimulate further investment in the Vaca Muerta shale by expanding capacity to transport the gas and liquid to domestic and export market.
We will deliver a major offshore pipeline for the North Field expansion in Qatar, and we are seeing increased demand for offshore pipelines to bring gas to Europe. Our cash flow in 2023 will benefit from the stabilization of our working capital requirement. Our CapEx will increase to around $650 million. A relevant part of this CapEx will be directed to project that will contribute to our 2030 target for reducing the carbon emission intensity of our operations. In addition to our wind farm in Argentina, we will make investments, which will contribute to improving energy efficiency in Italy and Argentina. Over the past year, Tenaris has made good progress on many fronts and produced record financial results. We have been able to achieve this only thanks to the confidence our customer has placed in us and the constant effort and the outstanding performance of our diverse and United team all around the world in a volatile and fast-moving environment.
We are now open for any questions you may have.
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