Tenaris beats revenue and earnings per share consensus estimates by U$S 40 M and U$S 0.05 respectively. Higher sales in Mexico and Asia compensate Canada’s seasonal decline. Shipments advance 3% QoQ while revenue grows 2% in the same period (U$S 1,918 M) reflecting a strong price mix. Operating income falls 9% on one-offs tariff recovery recorded in the first quarter and quarterly EBITDA decrease 5% QoQ to U$S 370 M (EBITDA margin 19.3% vs. 20.9% in 1Q19) below our estimate of U$S 400 M. Finally, net income ends flat at U$S 241 M (-1% QoQ) and amounted to 12.5% of sales.
For the next two-quarters, Tenaris expects revenue and shipments to move in two opposite sides, falling in 3Q19 and improving in the last quarter of this year. The company’s management estimates that in 2H19 volumes will be affected by lower drilling activity in North America and a flat drilling level in Latin America. Average prices will fall in 3Q19 but this drop should be offset by lower costs, according to Tenaris’ management. All in, this year should end with an EBITDA and an EBITDA margin at a similar level of FY18.
At first glance, this quarter ends our expectations of higher revenue and EBITDA for this year. These facts reduce our estimates expectations and should impact on our company’s target price for this year.
Delisting from BYMA: The General Shareholders meeting held 29th, July approved the delisting of TS’ shares from the Buenos Aires Stock Exchange (“BYMA”). Once the delisting is approved by local regulators the company will repurchase its shares at AR$ 566.55, a price that equals the average price of the ninety calendar-day period immediately preceding the General Shareholders Meeting. The company estimates that the shares to be repurchased represents approximately 1.4% of total capital stock (U$S 218.7 M).