Tenaris SA Earnings - Q1 2026 Analysis & Highlights
Tenaris SA reported Q1 2026 results marked by resilience amid Middle East geopolitical disruption, with management highlighting strong offshore and North American growth prospects, while addressing near-term headwinds from logistics costs and regional supply chain challenges.
Key Financial Results
Q1 2026 sales reached $3.1 billion, up 6% year-over-year and 4% sequentially.
EBITDA rose 3% sequentially to $735 million, while net income increased 22% to $564 million due to better results below the operating line.
EBITDA margin remained at 24% as higher costs for maintenance shutdowns were offset by lower tariff costs.
Operating cash flow of $618 million and capital expenditure of $114 million resulted in free cash flow for the quarter of $503 million.
Average selling prices in the Tubes operating segment increased 5% compared to the corresponding quarter of 2025 and 1% sequentially.
Business Segment Results
Sales benefited from seasonally higher activity in Canada, a limited recovery of activity in Mexico, higher offshore sales in Brazil, some stock building in North Africa, and an advance of shipment in Saudi Arabia.
Offshore backlog is building with anticipation of some backlog being shifted from first half into second half of 2026, with expectations of 10% revenue increase for offshore in the second half of 2026 versus the first half.
North American business is performing very well with expectations for both volume and pricing growth, with activity by the end of the year in terms of rig count expected to increase around 50 rigs, or approximately 10% of activity.
Pipe Logix has increased 4% in the last two months, driven by increase of raw material and logistic costs, as well as expectation of the increase of demand.
Capital Allocation
Share buybacks of $90 million were executed during the quarter.
Net cash position at the end of the quarter increased to $3.8 billion following the buyback activity.
Capital expenditure of $114 million was recorded in Q1 2026.
Shareholder meeting on May 12 will consider the renewal of the authorization of repurchase of shares, with the board to decide on implementation thereafter.
Macroeconomic Environment
The conflict in the Middle East has led to the closure of Hormuz through which 20% of the world's oil and LNG normally passes.
Expected sales impact in the region of around $140 million in the second quarter, with $40 million of that anticipated in the first quarter and the balance due to difficulties to get into the region probably going into the third quarter.
Higher logistic costs are being experienced as the company seeks alternative routes to the region and from the global increase in fuel prices.
Approximately $32 million of higher logistic cost expected in the second quarter, comprising around $8 million of estimated additional cost related to waiting times and alternative routing through Hormuz, and around $24 million of higher freight costs related to the increasing fuel in different parts of the world.
Tariff impact on first quarter results of $110 million to $120 million, with management believing this represents steady state levels expected towards the end of the year.
USMCA discussions are starting but will take probably all the second semester, with no variations expected in the short term for further tariff mitigation.
Canadian anti-dumping measures announced early last month, with 80% of Canadian OCTG sales coming from domestic manufacturing, and expected 7% of supply in Canada to be sourced from Tamsa going forward.
European CBAM has started at the beginning of this year and new safeguard in Europe will be implemented July 1, with quotas reduced by half and volumes in excess paying tariff of 50% instead of 25%.
Industry Trends and Dynamics
Oil and gas companies and consuming countries are looking at diversifying supply as an immediate consequence of the supply disruption in the Middle East.
Investment in short-cycle shale plays in the Americas are likely to benefit, with Rig Direct customers in the United States and Argentina already confirming that they are adding rigs.
The fleet of high-spec rigs operating in Vaca Muerta is expected to increase by 15% by the year-end as new rigs and hydraulic fracturing sets are brought into the country.
Tenaris will start to operate the third set of hydraulic fracturing equipment towards the end of the year.
Canada industry and government are working to increase LNG pipeline takeaway capacity, which will allow activity growth in the years ahead.
The outlook for deepwater drilling, offshore pipeline construction and further exploration activity in the next three years is promising, with significant number of deepwater projects in Africa, Asia and the Mediterranean nearing final investment decisions.
In the United States, Brazil and the Guyana, Surinam Basin, developments are also moving forward.
Customers in Kuwait, Qatar and Iraq have had to shut in most of their operations due to the Middle East conflict, while customers in Saudi Arabia and the UAE have continued their operations.
Competitive Landscape
Tenaris competes on being the best in bringing best value proposition to customers in different parts of the world, catering to segments and countries where differentiation can be found through technology, service, and global capacity.
Steel pipe manufacturing from China has been a common threat, generating the majority of the international markets unfairly traded imports, which the company has confronted with technology, services and in certain areas with anti-dumping and protective measures.
ADNOC Offshore recognized Tenaris's reliable service and HSE performance with a Supplier of the Year award.
In Kuwait, Tenaris has been awarded a five-year contract for the supply of casing products and accessories to be used in the development of a complex new field.
Recent acquisition of specialized torque technology and knowhow now forms part of the company's well integrity service and will add further value to customers.
Growth Opportunities and Strategies
Tenaris is strengthening rig direct service through the integration of torques, hardware and software for torque turn monitoring operations.
Operators are looking to shorten time from discovery to first production, and Tenaris is supporting them by fast tracking the integrated supply of OCTG, line pipe, coating and accessories.
Potential for additional pipeline capacity in Saudi and UAE is viewed as something that would look very rational today and a big business opportunity, though this will probably take a year or two to build.
GPC large diameter facility in Jubail, Saudi Arabia would be ideally positioned if pipeline projects go ahead, with capacity of around 450,000 tons and ability to debottleneck with limited investment to take capacity even higher.
Venezuela presents a favorable outlook with licenses granted to companies and major operators making announcements of additional areas.
Tenaris will start Rig Direct services in Venezuela in the Orinoco area starting in July, positioning the company as a first mover and front runner.
Expected Venezuela business of around $50 million for 2026, with expectation to increase substantially from this level into 2027.
Financial Guidance and Outlook
Second quarter expected to see lower revenues in the mid to high single digits range due to the Middle East conflict situation.
EBITDA margin expected to contract up a couple of points in the second quarter, with one third related to logistic cost and two thirds related to lower absorption of fixed and semi-fixed costs.
Volumes expected to recover in the third and fourth quarters, with fourth quarter expected to be higher than third quarter, and reasonable to assume getting very close to first quarter levels during the second half.
Pricing trajectory expected to offset cost increases, with better North America and better offshore in the second half supporting an increase in pricing and returning to EBITDA margin levels close to the first quarter.
Additional Pipe Logix increases needed beyond the 4% seen through April to offset cost increases, with expectation that Pipe Logix will increase at least to allow offsetting those cost increases.
International pricing expected to grow over time, offsetting increasing costs, with majority of international work in contracts that have formulas in place with a legacy of two to three quarters for these to be seen in invoicing or pricing.
Second half 2026 EBITDA expected to be close to first quarter levels of approximately $735 million, based on assumption of relatively short term resolution of the conflict and positive dynamics on volume in offshore and North America and pricing trajectory.
Geopolitical Risk and Regional Operations
First priority has been the safety of 1,000 employees in the Middle East region during the conflict.
ADNOC Offshore and other customers in Saudi Arabia and UAE have continued operations with Tenaris providing support through local manufacturing, local service centers, and bringing material into these countries to replenish inventories.
Zero rig stoppages achieved in Saudi Arabia and UAE despite challenging conditions in March and April.
Majority of big delays have been in the northern part of the Gulf, with alternative routes being found because material is really needed and rigs are working.
