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Investing.com -- Steel pipe manufacturer Tenaris S.A. on Thursday reported a stronger-than-expected third quarter but said its profit margins would likely narrow in the next period due to higher tariff costs.
Revenue for the quarter reached $3 billion, down 3% from the previous quarter but above guidance and the $2.8 billion market consensus.
Kepler Cheuvreux said the “top line came at USD3bn, being down by just 3% sequentially and being above guidance and expectations.”
Earnings before interest, taxes, depreciation and amortization rose to $753 million, marking a 25.3% margin and beating expectations of $636 million.
The brokerage noted that “the EBITDA is also above expectations, at USD753m, representing a sound 25.3% EBITDA margin.”
The result included a $34 million gain “recorded for the return of U.S. antidumping deposits paid on OCTG imports from Argentina for which the duty rate had been revised downwards.”
Excluding that gain, adjusted EBITDA was $719 million, reflecting a 24% margin, “still in the high end of the guidance range.”
Operating income reached $597 million, while net income was $453 million. The tube business, which includes casing, tubing and line pipe for the energy sector, reported an operating margin of 20.5%.
Cash generation was weaker than anticipated. Operating cash flow totaled $318 million, below Kepler Cheuvreux’s expectations, after a $312 million negative movement in working capital “largely due to an increase in trade receivables.”
After $185 million in capital expenditures, free cash flow was $133 million. Following a $350 million share buyback, the company’s net cash position declined to $3.5 billion. The board declared a dividend of $0.29 per share, or about $300 million.
The Luxembourg-based company guided for flattish top line in Q4 but for a lower EBITDA margin, impacted by the increase in tariff costs.
Despite weaker free cash flow, the brokerage described the quarter as a “strong beat on EBITDA.”
According to the accompanying data, adjusted EBIT stood at $563 million with an 18.9% margin, while reported EBIT was $597 million. Both measures exceeded consensus expectations of $478 million.