Tenaris S.A. (NYSE:TS) Q1 2024 Earnings Call Transcript

Tenaris S.A. (NYSE:TS) Q1 2024 Earnings Call Transcript April 26, 2024

Tenaris S.A.  isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and thank you for standing by. Welcome to Q1 2024 Tenaris S.A. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] 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 2024 first quarter 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 Móndolo, our Chief Financial Officer; Gabriel Podskubka, our Chief Operating Officer; and Luca Zanotti, our 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. Our first quarter sales reached $3.4 billion, down 17% year-on-year and flat sequentially, as an increasing volume and the full consolidation of the coating business acquired in the previous quarter offset the impact of lower selling prices in the Americas.

Average selling prices in our tubes operating segment decreased 15% compared to the corresponding quarter of 2023 and 6% sequentially. Our EBITDA for the quarter was up 1% sequentially to $987 million. Our EBITDA margin remained flat at around 29% as the reduction in average selling prices was offset by a strong operating performance, a positive contribution for our newly acquired coating business, and a $25 million gain from legal claim’s resolution in Mexico and Brazil. With operating cash flow of $887 million and capital expenditures of $172 million, our free cash flow for the quarter was $715 million. Following share buybacks of $311 million during the quarter, our net cash position increased to $3.9 billion, up from $3.4 billion at the end of last year.

Now, I will ask Paolo to say a few words before we move the call to question.

Paolo Rocca: Thank you, Giovanni, and good morning to all of you. We have had a good start to the year, maintaining our sales and EBITDA at the same level as in the fourth quarter of last year, despite the unfavorable pricing environment that is affecting our sales in the Americas. This reflect the strength of our global positioning as well as the solid performance across our business lines. In the coming quarters, however, our results will be affected by a soft U.S. rig count, affected by low natural gas prices, by an increase in the OCTG imports, and an extended decline in prices. Our free cash flow will remain solid. During the quarter, our newly acquired TenarisShawcor pipe coating operation, where we successfully completed an exceptionally large project with concrete weighted coating for a pipeline in Mexico, made positive contribution to our sales and EBITDA.

TenarisShawcor was also awarded a $108 million project to supply wet insulation and anti-corrosion coating, or the offshore pipeline for the ExxonMobil Whiptail development in Guyana. This project will be supplied during 2025. Around the world, offshore projects are moving forward, and with our extended reach, we are providing a wide range of integral solutions for this complex development. The Middle East is another area which has seen growing inactivity. In Saudi Arabia, we are benefiting from the increasing demand for their gas development program and the consolidation of our GPC large diameter welded pipe operation. In the United Arab Emirates, with our new premium threading facility in full operation, we have been awarded a 2-year extension of our Rig Direct contract.

By our long-term agreement with QatarEnergy LNG has also been extended for 3 years to cover the drilling in the northwest field to supply the latest expansion program. In Canada, we have been successfully repositioning our variation and extending our Rig Direct program following the Canadian government decision to impose normal value on Chinese OCTG imports and the investment we made in our Sault Ste. Marie mill. As the LNG Canada and other LNG projects move forward, operators are increasing their operation in the Montney shale, and we recently awarded a long-term Rig Direct contract to supply a major operator there. We participated in the several week conference last month, where we were able to serve you on the energy transition and the prospect of the oil and gas market over the long-term.

What came out from the discussion? With the sense that more pragmatic approach to the complexities of the transition is required. We should focus on reducing emission using all means available across the energy industry and its value chain. At the same time, due to the enormous cost and complexity of the transition, oil and gas will continue to be required for many years to support the growing demand for secure, affordable energy, particularly from developing countries and to support technological development such as artificial intelligence. This year, in the third quarter, when we have a seasonal slowdown in demand, we will implement a major investment and maintenance program that has been postponed over the last 2 years of intensive operation.

This really will involve stoppages in our five steel shops and our main seamless rolling mills. In Argentina, we will install an electric arc furnace that will be fed by a Consteel scrap reheating furnace by our DRI plant. Once we complete our second wind farm in 2025, the new furnace will use 100% renewable energy to produce steel with a minimal level of carbon emission. In the U.S., we will upgrade our Koppel steel shop, installing a new backhaul system to reduce missions. In several of our facilities, we are enhancing our capabilities to produce high alloy chrome products as demand for these high value products is growing. In Mexico, we will have the first major maintenance of our Tamsa medium diameter rolling mill in 4 years. In addition to a maintenance shutdown at overseas [ph] steel shop.

This investment will be executed within our previous CapEx guidance, but they will limit to some extent our capacity during the second half. We are now ready for any question you may have.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Arun Jayaram from J.P. Morgan Securities LLC.

Arun Jayaram: Good morning, Paolo and team. Gentlemen, I wanted to get your thoughts on trends in U.S. pricing. We received the latest Pipe Logix number, which did suggest continued declines in the 3%, 3.5% range. And so maybe I was wondering if you could give us a sense of your average selling price in 1Q trended where leading edge prices is per the Pipe Logix Index, and how does this impact your thoughts on 2Q in the back half of the year?

Paolo Rocca: Well, thank you, Arun, for your question. You are right in looking at the decline in the Pipe Logix is a relevant factor. This is mainly due to increased import in the United States. Some soft view on the recount and the volume, and this to some extent has been affecting. But I would ask Luca to give us the view on the perspective for the next quarter and for the second half of 2024.

Luca Zanotti: Okay. Yes, thank you, Paolo. Good morning, everyone. Yes, just picking up what Paolo was saying before. I believe that in this Q1 – first of all, looking at the spot price in one-single-month like April, it really is not representative. We see Pipe Logix rating that were better maybe in the past, and so I believe that we need a more long-term approach to these ratings. But getting back to what Paolo was saying, here in the first quarter, what we saw is an industry that was expecting a little bit higher activity getting into the first quarter, second quarter of 2024. And as a consequence, domestic and especially imports increased. So what happened is the distributors went out, started buying mainly from Korea that had the reset of quotas Taiwan, also in Thailand.

So the combination of a slightly softer expectations on demand and higher imports led to this pressure on prices. And this will delay the stabilization of the Pipe Logix. When it gets to our pricing you always have to remember that we have a one quarter delay between the Pipe Logix’s rating and the way it gets into our profit and loss. So you’re going to see this even going forward.

Arun Jayaram: Thank you, Luca. Great. And I wanted to see, Paolo, if you could comment on some of the maintenance activities that you plan for the second half. Could you help us think about what kind of impact this could have to volumes? I mean, we’ve generally been thinking that the company could ship 4 million tons of product this year, but give us a sense of what kind of impact that could happen in the second half?

Paolo Rocca: Well, as I mentioned in the opening remark, we’ve been working at full capacity for almost 2 years, and then we will take advantage of this slight reduction that we see in the rig count and in the demand for concentrating some key intervention on our industrial system, part of this is maintenance. But also we are focusing on some major investment from our point of view, which is the change in the furnace in Argentina and also investment in the other steel shop in the finishing line of our mill in different parts of the world. We think that we can take advantage of this time for changing our profile in terms of emission, increased automation, and productivity, and also cost reduction over time by this cycle of investment.

As I mentioned in the opening remark, this will be in line with our focus for CapEx in the age of $730 million during 2024, so there is no change with this. Our volume will be impacted only in seamless to some extent, but I would call it not something substantial but it will be impacted in our seamless component. So the welded will remain at the level of last year, the third quarter is seasonally below. Overall, the volume will not be very different from last year volume, but with a participation of welded higher than the participation we had of welded last year.

Arun Jayaram: Great. Thanks a lot.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Alessandro Pozzi from Mediobanca.

Alessandro Pozzi: Good afternoon. Thank you for taking my questions. The first one is on the outlook for the rest of the year. In the Q4 conference call, you mentioned average EBITDA margin of 25% for the first half of 2024. And given that you have printed 29% in Q1, it looks like potentially you are going to have higher margins in Q2. But then, I was wondering given that you have the stoppages in Q3, what should we assume for EBITDA margins in the second half of the year, based on what you see, obviously, at the moment? And also, my second question is on the DUCs. So we’ve seen those DUCs halving since they’ve reached the peak. And I was wondering, is that going to be potentially a trigger for having a higher rig count at some point down the line this year?

Paolo Rocca: Well, thank you, Alessandro. What we expect is that our margin in the first half of 2024, as you are saying, will be slightly higher than we anticipated, because we had margins slightly higher. If you look at the adjusted EBITDA, it is in the range of 28 point or something. We think that in the second Q, we will have lower EBITDA than 25%. But as a whole, on average, we will be slightly higher than 25%. When we look at the second half of 2024, there is not so much visibility on price. But for what we are seeing in the evolution of the Pipe Logix, we should be prepared to an EBITDA margin between 20% and 25%. We don’t know, let’s say, yet how far the price reduction will go and also our reaction in terms of cost reduction that will accompany the pressure that we are feeling.

There are many pieces moving here. One of the important pieces is also Argentina recovery in its oil and gas sector. There are also, let’s say, some uncertainties about the evolution of the rig count. So when we speak about the second half of 2024, we are considering a range. It is very difficult to have, let’s say, a number for a semester in which we will have a different factor affecting our sale and our profitability.

Alessandro Pozzi: Yeah. So just in Q3, given the loss of volumes from seamless, should we assume EBITDA margins more towards the 20% just for that quarter in Q3?

Paolo Rocca: We will have, as I was saying, still the prices for the third Q are not being entirely defined yet. But if the reduction in the Pipe Logix is going on and imports maintain this level in the U.S., we will be slightly higher than what you are saying, but still close to the number you are saying. Now, talking about the DUC and the possible influence on drilling, I will ask Luca to give us a view of the possible impact of this.

Luca Zanotti: Yes, Paolo. Thank you. Hi, Alessandro. On the DUCs? Yes. You are right. In March 2024, according to the Energy Information Administration, we had a number of DUCs that was the lowest over the last 10 years. For example, if you just go back 5, 4 years, and in Permian we had 3,200 DUCs, and in March we had slightly less than 900. So you might think that here there is a potential upside, and you may be right. This upside is not in our focus, and we may have it. On the other hand, I do believe that the business model by which E&Ps were building large inventory of DUCs given the capital discipline is no longer on the table. But you are right. There are two aspects that may play on the upside, which is the number of blocks [ph], one, and also the fact that with these lower rate activities, the U.S. is maintaining crude production above the 13 million barrel per day, which is pretty significant.

Alessandro Pozzi: Okay. Thank you very much.

Operator: Thank you. One moment for our next question. Our next question comes from the line from Marc Bianchi from TD Cowen.

Marc Bianchi: Hi. Thank you. I’d like to just first clarify, Paolo, if we could, the progression you outlaid on the margins. I think I heard that second quarter could be below 25%. The second half would be between 20% to 25% with the third quarter approaching 20%. Did that capture it?

Paolo Rocca: Yes. In the first half we will be slightly higher than 25%, because we had a good first quarter. In the second half as you are saying for the visibility that we have we will be in this range, and in the third quarter because of the reduction of seamless we will probably be above 20%, but let’s say slightly above 20%, 25%, let’s say, what we can be such today.

Marc Bianchi: Okay. That’s helpful. Thank you. The press release talked about the TenarisShawcor project that contributed to first quarter. Could you maybe discuss how much of a contribution that was and help us think about what maybe normalized contribution from that business should be as we progress?

Paolo Rocca: Thank you, Marc. The Shawcor business has ups and downs depending from large projects, it’s a business that depends on the relevant contract for relevant projects around. But I would ask Gabriel to give you the view on how we see the perspective of Shawcor for the foreseeable future.

Gabriel Podskubka: Yeah, thank you, Paolo. Yeah, good morning, Marc. Yes, indeed Shawcor has contributed importantly to the results of the first quarter given the last stage the tail of a large concrete weight coating project in Mexico in the Altamira region. So this had a contribution of about $80 million in revenue specifically in the first quarter for this project that we will not carry further down in the year. But we are very pleased with the Shawcor acquisition. The brand of Shawcor is very well-recognized as a global leader, a global footprint of facilities and at the centers to track record and product knowledge that complements and strengthens very well the position of the Tenaris in the offshore segment. As a matter of fact, Paolo announced in the opening remarks the recent order related to the insulation coating in Guyana development, more than $100 million in insulation coating with the good margins and contributions.

So we expect the Shawcor business to continue supporting revenues on our position in the offshore segment. I would normalize annual revenues in Shawcor after this Altamira project in the range of $250 million to $300 million annually. This would be a running rate where we see Shawcor contribution going forward.

Paolo Rocca: Thank you, Gabriel.

Marc Bianchi: Wonderful. Thank you very much. I’ll turn it back.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Dave Anderson from Barclays.

David Anderson: Hi, good morning. I wanted to ask a bit about the Middle East and how that’s going to impact your volumes kind of thinking about kind of 25 and beyond. You just noted a 2-year extension on the UAE Rig Direct, but I believe that contract has actually been – the volumes have been fairly slow, because they’ve been working down a lot of the inventories. So I’m curious if you can start to see that spike and start to pick up over the next couple of years. And secondarily, you also mentioned unconventional in Saudi. And that looks like a massive opportunity there. And I’d love to understand a little bit from your perspective on how you see that changing thing. Did your foreign wells, I believe, are quite a bit more OCTG-intensive than even the U.S. onshore conventional? If you could talk about those two markets, please? Thank you.

Paolo Rocca: Yeah. Thank you, Dave. Also on this question, I will ask Gabriel, an overview for Middle East in general and unconventional in Saudi, which also we share, the view that is a very relevant development for Saudi, it’s important for us.

Gabriel Podskubka: Yeah. Thank you, Paolo. Good morning, Dave. Yes, what we see in the Middle East is that the daily activity remains strong. We see continued investment in expansion of capacity, both in oil and in gas, with a very positive momentum. Saudi clearly remains the brightest spot during the last quarter. The Kingdom announced the revised upwards the target of gas production increase for 2030. Now, we are targeting an increase of 60%, previously target was 50%. So we see that the drilling in gas, onshore gas, related also to the unconventional that you’re mentioning, Dave, will more than offset the decrease in the offshore rigs related to oil that were also announced during the last quarter. So, overall, the Saudi strong level of activity, also the CapEx guidance for 2024 for the year of Saudi was given a range that is importantly higher than 2023.

So we believe that with the backlog that we have, with the position that we have in the country for OCTG and pipelines, Tenaris’ well-positioned to remain delivering strong shipments into the Kingdom. The Emirates is also expanding. Paolo mentioned the extension of our long-term agreement with ADNOC. We extend it for another 2 years. We had the chance to incorporate other coating services, digital services, and also expanded our jobs [ph] range in the Emirates, where we have our facility up and running. So, overall, we also see strength coming from the Emirates in the Middle East. And last but not least, Qatar, also during the quarter made an announcement about an expansion, a further development expansion of their LNG project. This is a Northwest field project.

This will require drilling of approximately 50 production and injection wells in Qatar. Also our long-term agreement with QatarEnergy LNG was extended for another 3 years. So this is a demand that we intend to cover with this year. So with all this backlog, plus the network of contracts that we have. We have a very good visibility into 2024 and even 2025, that revenues in the Middle East, in the whole region, will keep the core in high levels going forward.

Paolo Rocca: Thank you, Gabriel. We are doing good inroads in the region, is also a region in which there is competition. And to some extent, some area also, I mean, the prices are also perceiving, let’s say, the competitiveness in our business. Okay.

David Anderson: Thank you, Paolo. If I could just follow-up on that question. You have some capacity in Saudi itself, and I believe you have a seamless mill. I’m just curious, talk about a competitive advantage, you have a certainly competitive advantage of having production in country. Would you expect to maybe build out that capacity? Do you expect to maybe expand the capacity of that facility in Saudi in order to improve your competitive position?

Paolo Rocca: We are developing in plans for expansion. On this sense, even the SSP is listed in the local market, and the expectations are very high also from the investor. But Gabriel, you can give us some indication on how we can grow the position we have and the activity that we have in Saudi, which are extensive?

Gabriel Podskubka: Yes. Of course, we monitor capacity level with the demand expectations. So far, with the finishing premium capacity that we have in Kingdom, we feel comfortable to accommodate this demand, and this is something that we continue to monitor. The same on the well, the ERW capabilities. And on the GPC, the new recently acquired facility, we are expanding, we are at this point commissioning our second line, which roughly will double the capacity for pipelines and conductors in the Kingdom to accompany the trunk lines and expansion of oil and gas transmission in the Kingdom. So we are certainly willing and capable of expanding capacity in the Kingdom as we see need for it.

Paolo Rocca: Yeah, we are preparing for expansion of the gas master plan that should go on in Saudi, but hopefully, I mean the new line also will, let’s say, increase capacity, but this will be for probably later on at the beginning of 2025 or so. Okay.

David Anderson: Great. Thank you very much, gentlemen. Have a good day.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Luke Lemoine from Piper Sandler.

Luke Lemoine: Hey, good morning. Luca, you’ve given us various pieces’ kind of like U.S. land, but could you just talk about your activity outlook and what you think maybe the rig count will do for the balance of the year and what conversations with customers you like on activity levels?

Luca Zanotti: Sorry, I didn’t understand the first part. Can you repeat, please, to be clear on that?

Luke Lemoine: Yeah, sure. Just asking about, you talked about DUCs imports in the U.S., but if you could just talk about general activity and how you see that unfolding through the balance of the year within U.S. land?

Paolo Rocca: Yes, I understand on U.S. land. Here also, Luca, which is your view on basic level of activity that we may expect in the U.S. from your view?

Luca Zanotti: Yes, thank you, Paolo. Good morning, Luke. As we look forward, what we see is certainly some weakness on the dry gas side with these gas prices. We don’t see this increasing. Actually we see this probably going down a bit from where we are today. But the importance of the share of the gas drilling in the U.S. is limited. So what we expect is some weakness over there that is going to be offset from one upside – some upsides on the oil side. In general, we see a flattish drilling activity going through 2024. But this is what we see today, we don’t know how this will progress in the second half. There are many factors at play in this case. And we need to go a little bit ahead in the year to give a more firm view on the second half of the year.

Paolo Rocca: Thank you, Luca. Frankly, from my point of view, with this price of oil in the WTI, the level of uncertainty and volatility in the market, maybe a further reduction in the interest rate in the states. This is also an important factor in this. I think that’s in oil, there should be – if the interest rate is going down in the second part of the year, there should be a pickup or stabilization first, but also maybe a pickup of the level of drilling in oil. But we will see, as Luca is saying, a little early today in an electoral year to have an evaluation of what will happen in the second half of 2024. Thank you, Luke.

Luke Lemoine: Okay. Thanks very much.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Joseph Charuy from Bank of America.

Joseph Charuy: Hi, gentlemen, and congrats for a solid set of results. Two questions from me. The net cash now sits at $3.9 billion. If free cash flows to remain solid across the year, is it safe to assume that the buyback program needs to continue post-November? And if so, could we even see a step up in the run rate above your current $300 million a quarter? Secondly, again, talking about U.S. onshore, as we see some consolidation via M&A, how has your market share evolved and how much extra tonnage does this represent?

Paolo Rocca: Yeah, thank you, Joseph. Well, on the first part, we enter into our buyback program. This is not a decision. It is a decision that will have to be taken by the board in due time. We have a larger cash position and, as I was saying, a very solid free cash flow, even considering the investment and the commitment we have. This will be kept into consideration. Also, we will, as we say in the past, always look at the option. But I would say that if there are no major changes, it is likely that this program may proceed. The second point, which is we don’t give information about market share usually, but Luca, you may elaborate a little on our positioning in this environment.

Luca Zanotti: Yes. Good morning. On the consolidation, obviously, we don’t provide sensitive information, but what I can say, Joseph, is that our presence with our redirect model in the large operators is very strong. So we have been benefiting from the consolidation, and if further consolidation is going to happen, we’re going to be continue benefiting from this consolidation on this segment. Now, bear in mind that in some cases, we are already on both sides of the transaction in terms of supply, so you wouldn’t need to take this face value, because this would be misleading. But certainly, consolidation has benefited us, and if further consolidation would happen on this side of the market, this will continue benefiting us.

Paolo Rocca: Yeah. Thank you, Luca. To some extent, the consolidation may be one of the reasons why the rig count is stable in spite of relatively high level of price on oil. I’m not saying gas, in which is more understandable. But in my view here, the companies are taking the time, because also these consolidations are announced, but are not really executed in some cases, because still they need authorization. So let’s take time, and we will see. Logical thing will be for us, the Pipe Logix rig count, over time to reflect deployment of this consolidation in a more active level of activity, especially as I was saying before, interest rates go down to some extent.

Joseph Charuy: Okay. Thank you. Well understood.

Operator: Thank you. [Operator Instructions] Our next question comes from the line of Luigi De Bellis from Equita SIM.

Luigi De Bellis: Good morning. Thank you for taking my question. The first one is on the South America. So you mentioned the political and economic volatility affecting the activity. So can you elaborate on the expected trend for the coming two quarters in Argentina and Mexico, even in terms of rig count expectations? And the second question on the pricing. So what is your pricing evolution, your margins outlook for the coming quarters? And when do you expect the bottoming out of the Pipe Logix prices? And you performed very, very well in terms of cost in Q1, how much room do you have to improve the cost structure in the coming quarters? Thank you.

Paolo Rocca: Thank you, Luigi. The first point on South America. Well, Argentina, after the change in the government, the stabilization plan underway is successful in terms of reducing inflation, reducing the country risk substantially, almost halving the country risk. Now, the government is in the process of asking for approval of very relevant set of laws in the Congress. If they succeed in this, this set of law includes specific treatment for large projects and in hydrocarbon law that, in my view, will stimulate investment in the sector. We are in a kind of standstill, while everybody is waiting for understanding if the government is able to get approval for transformation law like the one they are proposing today in the Congress.

Once this is done, and I think it will be done, I think that the company will move on. It will take time, I would expect, in a positive environment starting in the beginning of 2025, we will see actual action, because today the rig count is probably slightly lower than last year. There are marginal rigs that are not operating, but there are new equipment coming in into Argentina, moved from the U.S., so in preparation of a rising level of activity, but we will see this in my view full during 2025. At the same time, there are activities for the evacuation of oil and transportation of gas, these are projects that in the case the law for a large project is approved, will also be put in motion. Now, to put in motion the project, find the financing, private financing, organizing all of this, will take time.

So, again, I think this we will see, let’s say, real activity and acquisition of key inputs in the beginning of 2025, so not so much during in the coming quarter. Brazil is growing, Brazil is moving on, has a program for developing resources. Resources are rich, so I see this is more predictable with gradually moving on in developing deep water reserves and increasing the level of rigs. Venezuela is what it is, only Chevron will be allowed to continue the operation, and we are serving, in fact, Chevron in Venezuela, but it is relatively limited set of operation. Colombia is going down, because of the policy adopted by Vitro, still the number of rigs must be 10% below the level of rig last year, and may be reduced even further. For Mexico, the level of rigs operation in Mexico is basically going down slightly, in waiting for the change in the government.

The new government will have to define the policy for Pemex, probably refinancing, the restructuring, the depth of Pemex and deciding after the construction of the refineries that is being almost completed in those workers will decide which will be the next stage of development for Pemex. Also this, I expect in 2025 we will see a stable or increasing activity in 2025. It would be very logical with this price of oil and the need of oil and gas development in Mexico. The new government will assume in December of 2024. This is the overview for Latin America. The second question is the bottoming up of the Pipe Logix. It basically depends on the import. Import some of this in unfair trading conditions has been getting in this quarter. I don’t know if going on, we will see similar volumes of import, but I would expect the Pipe Logix to level up, to level, let’s say, by the middle of the year, because if there is, let’s say, a slight reduction in import, the level of inventory could go down slowly, and this will allow the level of the Pipe Logix to level up.

In terms of cost, you are right that we had a positive quarter. In cost, we are considering the reduction in Pipe Logix, we are launching specific action all around our system to contain a variable direct and indirect cost. We expect that this will help us to contain the reduction in the Pipe Logix and to defend our margin, especially in the second part of 2024.

Luigi De Bellis: Thank you, Paolo.

Operator: Thank you. At this time, I would now like to turn the conference back over to Giovanni Sardagna for closing remarks.

Giovanni Sardagna: Well, thank you, Gigi, and thank you all for joining us at our conference call, and see you soon. Thanks.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.