Tenaris SA (TS) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2008 Tenaris Earnings Conference Call.

My name is Marisol, and I'll be your operator for today.

(Operator Instructions).

As a reminder, today's conference is being recorded.

I would now like to turn the presentation over to Mr.

Giovanni Sardagna, Director Investor Relations.

Please proceed, sir.

Thank you, Marisol, and welcome to Tenaris 2008 fourth quarter and annuals results conference call.

Before starting, I will remind you, as usual, that we will be discussing forward-looking information in the call and that our actual results may vary from those expressed or implied therein.

Factors that could affect those results include those mentioned in the Company's 20-F and other documents filed with the SEC.

With me on the call today are Paolo Rocca, our Chairman and CEO; Guillermo Vogel, Vice President of Finance and member of our board; Ricardo Soler, our CFO; German Cura, the Managing Director of our North American operations; and Alejandro Lammertyn, our Commercial Director.

I would like to start by mentioning that we will host our investor day in New York on March 19, and we look forward to seeing many of you there.

Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our results.

In 2008, our net sales increased 21% to $12.1 billion compared to $10 billion recorded in 2007.

Our EBITDA, which we measure before impairment charges, rose 18% and reached $4.1 billion for the year setting a new record.

EBITDA margin at 33%, 36% in our tube segment, remained broadly in line with that of last year.

If we look at our quarterly figures, results are even better, with our EBITDA margin at 37%, 40% in our tube segments.

Considering the deteriorated operating environment for the natural gas drilling in North America, we decided to record an impairment of $503 million.

We now believe that our assets are fairly valued considering the foreseen operating environment.

After accounting for these asset write-downs, we recorded for the year an increase of 2% in our operating income and an increase of 10% in our earnings per share.

Seamless sales volumes were broadly in line with those of last year, while welded volumes were 10% higher as we consolidated our integrated product and service offerings in an expanding North American market, where we are continuing with our effort to deploy our alliance business model.

And we have recently signed an alliance agreement with XTO Energy.

Higher average selling prices, which were up 16% over last year and 7% sequentially, reflect the implementation of pricing increases and the continuous improvement in our sales mix.

Our sales of high-end seamless products increased 5% year on year by volume, rising from 42% of our seamless volumes in 2007 to 44% in 2008.

Our solid financial position has been improved by good generation of operating cash flow.

During the year, we reduced our net debt level by $1.6 billion to $1.4 billion at year end.

On the back of these strong results, the board of directors has proposed for approval of the annual general shareholders meeting to be held at the beginning of June the payment of an annual dividend of $0.43 per share, or $0.86 per ADS, which includes the interim dividend that we have announced at the end of November, which was $0.13 per share, or $0.26 per ADS.

This will represent an increase of 13% over the annual dividend that we have paid for the 2007 fiscal year.

Now I will ask Paolo to say a few words about how we're seeing current conditions and our positioning in a more difficult operating environment.

Thank you, Giovanni.

A warm welcome to all of you.

Let me tell you that 2008 has been another extraordinary year for Tenaris.

We reached important targets and strengthened our competitive positioning in many areas.

The sales rose 20% to $12 billion, and our EBITDA exceeded $4 billion.

We recovered the drop in our operating margins over the year as a whole, in spite of the sharp increase in raw material and energy costs that we saw in the first half of the year.

We grew strongly in the North American market, building a solid customer base with our integrated product and service offering.

We consolidated our unique global position in the rest of the world, providing solutions to our customers with our integrated TenarisHydril line of premium connections, our technical sales team, and our product capabilities in deepwater linepipe and other complex products.

But it makes us better positioned to confront the completely different environment that we see today.

Last time, in the last conference call, I mentioned that we were looking and considering two scenarios for our planning purposes in the first half of 2009.

Both the scenarios have been overtaken by the sheer speed of events and the deterioration of the overall world economy.

Today, with oil at less than $40 per barrel and the North American gas close to $4, we are, I would say, on a Plan C.

We are considering for our planning scenario the C scenario.

We hope we do not have in the near future to use other letter in our alphabet.

The cash flows of our customers are being severely affected by these lower commodity prices and conditions in the credit market.

Many have already announced sharp falls in their exploration and production budgets.

This is particularly so in the US and Canada, where smaller, independent companies are more prominent.

US rigs are falling sharply and may fall below 1,000.

This is what we would call the C scenario.

And we will see how things develop in the near future.

In other regions, activity is more resilient with the national oil companies and the major oil companies continuing with the projects already committed; in some cases, with some delays.

Costs in our industry are adjusting to the new operating reality.

As I mentioned last time, I believe that Tenaris, with its rich diversification in term of product, customer geographical presence, flexible industrial system, and solid financial position is better positioned than its competitors in this environment.

It is not possible at this moment to predict the full length and the depth of the global economic crisis.

Much will depend on the action of government around the world in reestablishing confidence in consumer and financial markets.

Today, there is limited visibility on the effect of government action.

However, we do know that there will be a recovery at some point.

But our sector, the energy sector, will be among the first to recover in that it will recover strongly due to the reduction in investments that are taking place right now.

What steps are we taking to face this situation?

We are adjusting our production to lower level of demand, and we are reducing our inventories.

This adjustment is most pronounced in our North America welded pipe operations, where we are operating at very low levels.

But this is affecting all our industrial systems.

With the reduction in production, we have reduced our headcount.

As far as possible, we are preserving employment through assigning valuable employees to training courses and long-term projects.

We are managing our working capital requirement and reducing our net debt position.

With the cash flow we expect to generate in the first half of 2009, we expect that our net debt, before considering the proposed dividend and the acquisition we announced yesterday, should go down to a level close to zero by midyear.

We have revised our capital expenditure plan to focus on long-term projects involving safety, quality, technology, and product development.

Projects which were aimed at increasing capacity over the short term have been postponed.

We are also proceeding with our rolling mill project in Mexico, considering the particular needs of that market, but we'll implement it in phases.

The investment we are making in Indonesia is aimed at consolidating our position for the long term in a market where the majors are big players and there is a high demand for premium products associated with the LNG developments.

We are taking action in a number of markets to limit unfair competition from Chinese imports.

The current buildup in OCTG inventories in the US market, where Chinese imports represented close to 50% of apparent demand in the fourth quarter, is clearly unsustainable.

Chinese imports have also risen sharply in the European mechanical market.

For instance, in the case of Italy, they have reached 27% market share in 2008.

Also this is unsustainable.

In all our markets, we are working closely with our customers, adjusting our operations to the level of demand, and ensuring that we are ready to respond rapidly to meet their requirements.

Thank you.

We can take any questions now.

(Operator Instructions).

Ole Slorer, Morgan Stanley.

It's Paulo Loureiro, actually, for Ole Slorer.

Great quarter, guys.

If I may, I have three questions.

The first one would be - Could you comment, please, on your EBITDA margin outlook for this year?

And it seems to me that, because of potential favorable mix here, which is less welded and probably more seamless this year, you could actually expand margins in '09 versus last year.

And my second question is regarding your distributors in the US.

To what extent do you guys rely on distributors?

In other words, what is the percentage of sales made through distributors, and what percentage of sales do you make directly to oil and gas operators?

That will be it, actually - two questions.

The first question, if I understand it right, is concerning the EBITDA of 2008.

No.

This year, 2009.

Your question is about 2009.

Well, what you see here is a very high EBITDA ratio.

I think this is coming also from the mix of our sales, including the fact that you mentioned - the fact that we are selling slightly higher volume of seamless.

And we are perceiving, let's say, the difficulties in the American market, as well, as far as welded is concerned.

We expect this to continue during 2009 because, to some extent, the seamless-- Some of the projects in which we're selling our seamless complex products, are the projects that are more resilient worldwide and the projects that have a long lead time that are continuing over time.

So it's the area that is more resilient in our business.

So you can expect this to proceed and to characterize also 2009.

As far as the second point is concerned, which is in relation with distribution and oil companies, I will ask German to give us his view about this.

As we have indicated, in the United States, we tend to sell, by and large, around 80% through what we call long-term alliances or existing programs, where, by and large, we negotiate that actually with the end users.

And, in some instances, we still use some of the distribution logistics services.

Only about 20% of our OCTG sales were sold to the spot market through the distribution network.

Okay.

So you guys should be less impacted by the high levels of inventories of the distribution network that-- I mean, one of your largest competitors today or yesterday announced that the inventory level stands at about seven months of consumption.

Yes.

Let me tell you that our position in North America is very much based on alliances and programs.

And, probably, the inventories in our supply chain going to our clients are lower than the inventory in the supply chain of our competitors.

Also, the products that we are selling to our clients on a consistent, long-term basis in the US are not the products that China is shipping into or, better, that China has shipped into the States in the last two quarters of 2009.

But, German, any additional point on this?

Yes.

What I would add, Paolo, is that as a result of very high, unseen level of Chinese imports into the US and particularly concentrated in the last quarter, we have seen-- and, naturally, also as a result of the rig count reduction that we see, we at the end of the year saw inventories of about eight months worth of consumption.

Now, what is, I think, important to highlight, though, is that, in our case, our alliances and programs are confronting an overhang - an inventory overhang situation, which is substantially less.

For competitive reasons, I wouldn't really like to get into the specifics.

But I think that the important message is that it's substantially less.

Okay.

Thank you very much.

Michael LaMotte, JPMorgan.

If I could follow up on just the inventory line of questioning momentarily, it was unclear to me from the press release-- It's been cleared up with some of your comments this morning.

But a bit unclear in terms of whether the size of the inventory overhang is really disproportionate in the US or if there are other markets outside of North America, including Canada, where we are seeing inventories swell - perhaps in Europe.

Could you expand upon those other markets?

Well, in general terms, I think that the question of inventory overhang is very relevant for the US market.

Then, there are, let's say, situations like Saudi Arabia, in which probably, with the reduction in the rigs, there is also a slightly high level of inventory.

But these are isolated points, I would say.

Then, the overall situation in Europe is not comparable to the situation in the US, from my point of view.

Europe, there has been a sharp slowdown of the industrial activity, and this has caused some inventory to build up in the system.

But there has not been the very massive imports to the same extent to which we have-- that we have seen in the US.

So the US case is very particular, I would say.

In the rest of the world, you have spot areas in which inventory is above the normal level.

But this may come to normal terms in a much shorter time than the United States.

But, German, some comment on Canada, and, let's say, if there is something you could add or you would add on this.

No.

Canada in generic terms, as we all know, was coming out of a fairly tight drilling season, and, consequently, the inventory buildup was not as such.

Then, as Paolo indicated, Canada-- The US buildup was pretty much the result of this extensive China presence - something that was, to some extent, managed in the Canadian market.

Overall, Canada, we could say, operates with inventory.

But, at the end of the year, the overall position was substantially less-- substantially less than what we find in the States.

Okay.

Thank you.

With respect to North America, specifically, and the imports from China, I want to follow up on something, German, that you said, sort of intimating that perhaps the product's not right for the market.

If I look at the historical relationship between months of inventory on the ground and OCTG pricing, two things jump out at me.

One, the degradation in price has not been as fast as I would have expected, given how quickly inventories have swollen, which suggests to me that perhaps there is a mismatch in terms of actual product on the ground.

And, two, it may be a function of the fact that the distributor costs - what they actually paid for the pipe - is still higher, and so they loathe to discount and see that price come down.

First of all, are those two points valid?

Are there other things that could actually slow down the rate of change in distributor pricing as we move through '09?

Well, I think both points are good points, because, on one side, there is a mismatch between what the market is demanding today.

Now, but the extent of the reduction-- When we thought about the C scenario-- Last conference call we said A; it could be B.

Let's say that Scenario B was assuming a level of rigs in the range of 1,300 or something of this kind.

Now we think that this will go down to 1,000 or below 1,000 rigs.

When in the market in four months you go down from 2,000 rigs to 1,000 rigs or within a period of five months, there is a clear, huge inventory overhang.

But the rigs that are still operating may not be the rigs that are really-- that were using this very low-end, non-heat-treated material that the Chinese were shipping into the market in the last two quarters.

So there is a mismatch.

And there is also a clear-- on the side of the distributor-- willingness of defend their business and the price and the value of their assets - staying there and waiting for demand to rebound at the moment instead of really reducing price in a market in which there is almost no demand.

This is how we see the situation in North America at the moment.

That's great color.

Thank you.

If I could ask about the trade case as well - the ITC trade case against Chinese OCTG.

Is there an update that you can provide us on that?

Well, yes.

As we have indicated, 50% of Chinese market share in the US is unseen.

And, naturally, together with the rest of the industry, we're evaluating alternatives.

I wouldn't probably go beyond that at this point.

But we have filed a dumping case of welded line pipe last year that turned out to be favorable by a vote determination at the end of last year.

And, together with the rest of the industry, we're, as we speak, working on a potential OCTG case.

Okay.

And two more quick ones, if I may.

The CapEx guidance - down, clearly, with the short-term projects being delayed.

Do we have a hard number that you can provide for us on '09 CapEx?

You are mentioning our CapEx in--?

Yes.

A reduction-- The size of the reduction in our CapEx.

Yes, the CapEx plan for '09.

First of all, which are the criteria we're applying to the reduction?

We are preserving all of the investment focus on technology, quality, and safety in our plans, because, really, we consider that we have to look at the long run and how we can come out very strong from this crisis, whatever the length of it.

So we are preserving investments (inaudible).

As far as the capacity increase is concerned, we are preserving our investment, and we are proceeding in our investment in Mexico, even if we scaled down the project.

We postponed the component concerning the steelmaking because we think that we have steel capacity in the system, and so we can feed the mill for the beginning of-- the starting period we see.

We're also preserving investments in the United States, even if at this moment our plants are running at a very low level of utilization in the welded area.

Still, we are preserving investment in some of the key improvements that we designed for this year.

We consider it very important to do this.

In terms of, let's say, overall investment, we think we should reduce our CapEx investment in 2009 to around $600 million during the year.

You can consider that we are reducing by almost 40% to 50% investment during this year.

This is, let's say, the value of our plan.

Okay.

Thank you.

And the last one from me.

If I look at the valuation differentials between Tenaris and other oilfield services companies and consider the fact that you have in the past taken steps in rationalizing the ADRs into a single currency, for example-- Has there been any discussion or thought on doing an ordinary listing in the US as opposed to an ADR in order to increase the number of potential owners of your stock in this market to reflect more the mix in your balance of revenue and earnings?

For the time being, we have no plan to change or to move in this direction.

But this is something that we will always consider.

If we come to the conclusion that this could be beneficial for our shareholders, we will consider this.

Very good.

Thank you.

Frank McGann, Merrill Lynch.

I was just wondering if you could perhaps give a little bit more color on your expected production cuts and where you think those are more likely, where you have the most efficient production, or where you would try to bring the overall level of production inventories in line with what you're seeing from a demand standpoint.

And then maybe just a little bit more color globally.

Which markets do you see perhaps being a little bit stronger and weaker?

Obviously, the US you've highlighted and we know is very, very weak.

But in the other markets, any signs of interesting activity anywhere?

Yes.

As far as the production system, this is very important for us because it's an added-- It's a very complex and global production system.

This is not one plant in one country or in two different countries.

This is a system that is producing in many different countries.

Now, our cost structure has changed very much in the last six months because of the devaluation of the currency.

If you consider Mexico or Argentina or Brazil or Romania - I mean, we are seeing a strong change in our cost base.

At the same time, also, raw material and the metallics have changed.

The scrap, iron ore have moved downwards.

And this has allowed us to plan and to organize our production in a way that really takes advantage of this flexible and complex system.

So, in fact, we are reducing production in the areas in which we have higher costs.

We are trying to take advantage of this.

But we are not really shutting down production capacity in any part of the world because we are preserving the capability and the knowledge embedded in the people that are manning facilities in the various areas of the world.

Still, we are very much concentrated on the cost reductions.

We are also reducing our overall costs and our headcount in some of the regions to adapt to a level of operation that is well below the level of operation of last year.

This is affecting more our welded operations than our seamless operations.

The rate of utilization is higher in seamless and is lower in welded operations, at least today.

And it could be so for the coming months.

Then, on the question of which parts of the market could be more resilient, I will ask Alejandro to comment from an international point of view and share the area or the clients in which we see resilience.

I would go back to Paolo's comment, dividing what is the US independent world from the majors and from the national oil companies.

Where it stands on the major side-- Companies like Exxon Mobil today are looking at exploration as an opportunity - lower cost and a long-term view gives a conclusion that maybe today is the day to do more exploration rather than to cut exploration.

In terms of national oil companies, let me go to Middle East.

We have been discussing Middle East and the activity in Saudi Arabia, where we were saying that there were some projects, the last conference call, that were cut.

And we know that they are reducing, also, rigs, from 130 to 100 rigs in the oil sector because of the OPEC cuts.

But, still, they remain solid in their gas operation in the Karan Field because they need the gas for the industrial development.

And this is the country where we are seeing that we are reacting first to production cuts.

For the rest of the Middle East, we see UAE very active, maintaining their 18 rigs and even with plans to increase the quantity of rigs.

We see Kuwait-- They are still maintaining the 4 million barrels per day planned for 2020, and they are increasing their rigs in the same direction.

And what is very important is that we see Iraq back, and we have been successfully in the first big international case in tender.

And we are supplying and we are establishing the base to give the full supply at domestic market in Iraq, as we do in other areas.

If we look on the Caspian Sea, still the main projects, KCO and KPO, are going ahead.

KCO we are supplying now coming Exxon Mobil being the operating company.

We are still supplying.

On KPO, Karachaganak, we are supplying also the second phase.

In terms of if we move to Australia, for example, there, Chevron is still moving ahead with Gorgon, although we know that some other incipient projects for LNG are in a standby mode.

Yes.

Now, if I may add some comments about Mexico.

Probably the area in which we see most resilient are Mexico and, to some extent, also Brazil.

The national oil countries in Latin America are maintaining their programs.

In the case of Mexico, I would say Mexico is also expanding to some extent its program.

The major oil company-- The national oil companies are the channels through which this country also is supporting their economy.

The rig count in Mexico should go higher, and we expect this to be in 2009 in the range of 150 rigs, considering the rigs of Pemex and the contractor are underway.

But, also, Brazil-- This is also true for Ecuador to some extent.

Colombia is also an area that is active in going ahead.

Some of the projects, for instance, in Colombia are in the exploration phase.

So the companies are moving ahead with a long-term horizon.

Thank you very much.

Alberto Brioschi, Cassa Lombarda.

You mentioned in your press release that prices are going down in the seamless business.

To what extent we could expect a fall for 2009?

And a second question in terms of expectations for 2009 in terms of volumes for both the welded and seamless businesses.

Thanks.

Well, let's start from the prices.

As you know, the reference that we have today is the Pipe Logix, the index of prices of products in the United States.

Pipe Logix went down by 28% since October.

We think that this is not entirely representative of what is happening outside the US.

On the outside of the United States, prices are going down less than this.

And, even within the States, this price reduction applies to the material-- to the API material but not to the premium or to the special products that went down less than this.

Now, if we look forward, we have to take into consideration negotiation for iron ore and coal.

That is the integrated mill we have.

This will also be a factor in determining how the prices will move in the medium run.

I would estimate that this could be a further reduction, but quite limited, because today when there are orders for medium-term projects, what we are seeing, outside the United States, is a reduction to a lesser extent than the decrease in the Pipe Logix.

Now, with this will go-- It will also depend on how the situation evolves.

And, as I was saying, from negotiation on raw materials-- everybody in the industry will have in the coming months.

As far as volume is concerned, it's difficult to estimate.

What we may say is that when the production will depend very much by the evolution of demand in North America and in Canada and how the inventory will be consumed - obviously, since there is a mismatch-- how the inventory will behave in this market.

In this moment, our plants are running at a very low level of utilization.

But I don't think we will maintain the present level of utilization, between 30% and 40%, in the welded area until late in 2009.

I think that this should-- The second part of 2009 could change.

So you may expect a reduction comparing to the peak that is in the range of 40% to 50% in welded products.

In seamless, our plants are running in the range of utilization between 60% and 70%.

And also in this case, probably this may increase in the second part of the year - even in Scenario C, a scenario in which the price of oil doesn't move so much from what it is today.

This will mean that we can expect a reduction in the range of 15% or something in this range for sales in seamless.

And concerning the projects in Latin America, may we have some color, because you mentioned that some of them have been delayed.

In Latin America, really what we see is PEMEX preserving its plans and even considering increasing the investment in the oil segment.

As far as Brazil is concerned-- Brazil is also doing what they can to preserve the level of investment in Petrobras.

And we expect some delay.

But the major projects upstream and downstream in Brazil, in our view, will go ahead.

There could be some delay due to financial constraints.

But, in the end, it is very important for Brazil from a strategic point of view to develop on a continuous path.

Let's say it's oil and gas reserves and the downstream capability.

So the line pipe project should go ahead, maybe with some delay.

But we do not expect substantial delay.

And for the large-diameter pipes?

This is what I was mentioning.

The big line pipe project-- We see line pipe projects in Colombia and Brazil.

They should be concerned.

And we don't see major delay in the plans of Petrobras and PEMEX, as I was saying.

In the case of Petrobras in Peru and Colombia and Ecuador, some of these projects involve large-diameter line pipe.

Thanks a lot.

Alessandro Abate, Credit Suisse.

I just have a couple of quick questions.

Just going back to the US market, your sales are split between 80% directly to end users and 20% to distributors.

Would it be possible to understand a bit the quality of the material you're selling to end users and what actually is the risk of substitution of this material by Chinese product?

The second question is basically if you can give us a little bit more color about the split between melting shop and rolling mill in the Veracruz plant.

Thank you.

Let me just say that the structure of our alliances and programs, by and large, are on a multiproduct schemes.

And, there, we supply, typically, everything from less-demanding pipe applications which are used on shallow wells, all the way up to premium-connection, seamless products, which are used, for instance, deepwater Gulf of Mexico.

So there is not in fact, I would say, the possibility of substitution.

In the end, you're looking at a multiproduct, multiyear working scheme, where the ability to supply all the products becomes a key ingredient-- I think a fundamental ingredient of our ability to stablish the alliances as the ones we have.

Now, with respect to Mexico, I think--

In the case of Mexico, our budget was originally involving the building of a direct reduction plant and new steel shop in our plant in Veracruz and a new rolling mill of seven inches in Veracruz also, with all the finishing lines.

What we see today is that we can proceed with the investment in the rolling mill.

This is very important because it is serving the Mexican market in the range of product that is very much demand by Chicontepec and by Burgos development for gas and for oil.

What we are doing is we are postponing the direct reduction and steelmaking facility investment because we think that we have enough capacity of steel in our system.

And we're preserving the investment in the rolling mill.

This is a strategy, let's say, of producing locally with a global view but being able to have capacity of producing or finishing locally in many markets.

We think that's one of the consequences of this crisis - that the countries, the companies, and our clients require us to be very close to them and produce the pipe and all that they need very close to them.

This is the logic we apply.

It's the logic that supports the investment in Mexico.

It's the logic that supports the investment also in Indonesia.

And that has guided our investment in the different parts of the world, from Romania to Nigeria and in all of the areas in which we are very close to our clients and very locally rooted in these countries.

If I may, just one little, follow-up question on the relationship you have with your clients in North America.

Out of these 80% of materials you sell-- Out of the total, how much is heat treated, if I may know it, out of the total you supply to your clients?

And what's the average duration of the contracts you have with your clients?

Let me brief on the last part.

Naturally, for competitive reasons, I'd rather not get into the specifics of the type of product that we sell.

And, by generic terms, the multiyear alliances are usually established for three years.

This varies, but, on average, I think it's the right guidance.

Programs are usually established for the duration of a building program.

Typically, it takes a year or a year and a half.

And they are very often evergreen.

Okay.

Thank you very much.

Rochus Brauneiser, Kepler Capital Markets.

Maybe a few follow-up questions, if I may.

You were talking about the load in the seamless business and probably representing current shipment levels.

Can you make any comment how the order intake looks like in the seamless business year to date compared to the previous year?

And then, maybe coming back to this Scenario C, how does your expectation change if the oil price is not picking up, let's say, by the summer or end of the year?

Is this still the scenario C you see, or would this be, then, a Scenario D if things are staying depressed for too long?

And, maybe coming back to your comments on the inventory cycle, to get back to more normal levels, is this more a question of three to six months or even longer?

And what is your expectations regarding the inputs in Europe and in the US?

Let me comment on the question of load.

It is clear today that our sales are higher than our level of production and that our level of production is slightly higher or in line with our order intake.

This is a moment in which most of our clients are waiting to take some decisions-- It is a moment in which they are waiting for-- let's say, understanding the impact of the plans in different parts of the world.

And they are looking carefully at what is happening and which are the movements on the part of OPEC, the dynamics of economics in China, the effect of the stimulus packages, I guess.

This is clear.

When we say that the projects are resilient, we say, well, we are close to our clients, and we have the understanding that they're committed to the project.

Now this doesn't mean that they're sending the order in this moment.

So this is a moment in which our order intake is clearly particularly low.

We expect this to normalize further in the year.

At that time, something will be a little visibility will be higher, and the client will decide and will define the scheduling of the project.

So this generic commitment will turn into a schedule for realization of it.

So, as I was telling you, in this moment, the order intake is low.

Hopefully, it will increase later in the year.

There is a scenario D.

Well, my feeling is that, even under today's Scenario C, the industry is postponing some investments, and this will have an effect, even in the United States, for instance.

The postponement, the reduction in the rigs will have an effect on production of gas.

In the end, the gas supply in any given year has a very important component produced by the wells drilled the previous year.

And this is the range of 30%.

So, if we give up drilling this year, we will see the consequence next year.

I don't think that the reduction in consumption of gas and oil will be so substantial.

And so, in the end, over time, I think the industry will start looking and considering the medium term and not only the short term.

Also, we expect the financial constraints for the companies to relax a little later in the year.

Some of our clients, independents, are not getting the financing they need.

Probably, one of the effects of the stimulus package and the stabilization of the financial system in the US will allow them to find credit on reasonable terms by October or November of this year.

This is our comment for seamless.

And on the point on the scenario D, the scenario D would be, from our point of view, the oil in the range of $20 or $25 and the rigs below 700 rigs and the gas below $3.5 or between $3 and $3.5.

Hopefully, we won't reach that level of the alphabet.

Now, German, a last point?

Inventory absorption, as we call it.

When you look at the US, we've naturally seen various things, at least three, moving at the same time.

Rig count and they way it evolve, given the considerations we just talked about - absent credit or credit restrictions, the value of gas, in particular, and so on.

The second moving part is level of imports - particularly China-- or principally China - and the potential effects of a trade case against China and the way it may affect the level of inventories.

Finance ease is [way short] in the domestic industry.

Paolo was referring to the way a domestic production decrease.

And these are all moving parts.

Our estimate is that it will take a substantial part of the year to, in the end, absorb the inventory buildup that we have noticed at the end of '08 and, in particular, the end of January as well.

In January, again, we saw Chinese imports in the range of 280,000 tons.

So, in short, I think it's a lot more of a second-semester phenomenon-- particularly, the last-quarter-of-the-year phenomenon than prior to that.

Is this differing in any way from the European situation, or do you think, because of less input pressure, Europe could be sorted out earlier than that?

The situation in Europe, from our point of view, is driven by the strong reduction in the industrial production.

The production of automotive, appliances, and so is down substantially.

And so at this moment, our order intakes-- Using the same approach, our order intake in this case in these months is very low.

But I think this will bounce back not very far from now.

The level of inventory is not enormous, and the level of real consumption in the market today is higher than our level of production.

We cut because we want to reduce our working capital and our inventories.

And this is the approach we are taking all around the world.

We cut production, and we wait for the inventory to go down.

In Europe I think we can expect that the demand will bounce back in the second part of the year, at least-- not at the level of 2008 but at a level that reflects the level of consumption.

And we will have to see industrial products and production of cars or production of earth-moving equipment - Caterpillar and so on-- These are the drivers of (inaudible) industrial demand that we see in Europe.

All right.

That was very helpful.

Thank you.

Christian Audi, Santander.

A couple of different questions.

The first one-- With respect to these impairment charges, should we--?

This clearly was focused on your acquisition of Maverick.

Should we expect anything related to the acquisitions of Hydril or Ternium to come up in the coming quarters?

We look into the-- We do the impairment exercise, and the impairment mainly applies to the welded part of Maverick.

We have no impairment for the Hydril assets.

On the contrary, we really are considering that we got very good assets.

The technology and the production assets are very, very important today for Tenaris.

Remember, we sell the BOP business in the beginning of last year.

So, in the end, when we do the exercise, the Hydril assets are really reflecting in our balance sheet the value that we see in that.

Okay.

The second question.

Mr.

Rocca, how much conviction do you have on this point that you make in the press release of you have, if you will, a more defensive position, given the high-end exposure of your business.

How much conviction do you have that these more complex projects with majors or national oil companies will really be maintained and not be cut or postponed, given the very difficult market conditions and very low oil prices that we're seeing globally?

I'm very convinced that we have very strong diversification in terms of local presence, customer relation, technical sales support, and also product capability.

The combination of this-- the ability to produce and to finish (inaudible), the ability to service and-- to give service and to give technical sales to the client and the difference in the product are, as a whole, a package that is really differentiating ourselves and is defending us very much for the long run.

It is differentiating us and is giving us, let's say, a very different position.

This does not mean that we can stay there and not touch the price and say we have to go on.

This is-- We can, let's say, not negotiate with our clients and discuss with them how to support their project and their effort in an environment that is less favorable or, in some cases, very aggressive for them.

We have to support our clients, and we do it reducing price when it's needed and when this is important for confirming and proceeding in the projects.

So as a response I will say I'm very confident about the diversity and the strength of our position, but we also know that we have to accompany what is happening in the industry.

And you do this in to the company - to the client-- reducing prices when it's needed.

At the same time, as I was telling before, our Company is really capable of reducing costs and, so, containing the loss of margin that we may have, even in an environment in which volume could be lower.

And, along those lines, Mr.

Rocca, how concerned are you about the price rationality that we've seen in the high end markets of the seamless market over the past years changing now that the situation has become so difficult, in other words.

The three really major players-- They have seen great profitability over the past five years.

Now with that rationality somewhat changing, how concerned are you of that?

Or are you seeing that in any regions of the world?

As I tell you, it depends case by case.

The situation is very different in different regions and different situations.

But, as I said in the last conference, we are assuming a 15% reduction, and this could go from 15% to 20%.

In some cases, our clients are expecting something more.

In some cases, this is something that is compatible with the projects that are carried on.

Thanks.

And I'll ask a question on the topic of backlog.

Can you give us a little color on what you're seeing the next six months?

I would expect that first quarter should show similar (inaudible) such as this one, in terms of pricing still being strong, costs being down, and margins maybe not being as strong as this quarter but strong nevertheless.

Can you help us a little bit in terms of what you're seeing in the second quarter, given the contract negotiations you've had up to now?

I look at it what we say-- At least we expect the EBITDA over the next quarter to be below what we see today.

This was an extraordinary quarter, and we have to take into consideration that there will be a reduction in volume and the effects that we were discussing on price.

So the quality of your backlog as you look at the second quarter of '09, going forward, you've seen a deterioration vis-a-vis the first quarter?

We never comment because, in the end, we never get deep into the question of backlog because it's so different.

In some cases, we have long-term agreements.

We have maybe a two-year commitment.

In some other, we are depending from the (inaudible).

So we never mention this.

Okay.

And the last question-- Maybe this is more for German.

German, when you look at the speed and the magnitude at which Pipe Logix prices have come down, we see now, for the fifth month running, a drop but a slowdown in this drop in February versus January.

Is that, in your view, significant of a slowdown in these price reductions, or it's nothing more than just the--?

We can't make a trend out of the February numbers yet.

I wouldn't get to a trend definition.

I think, as we have commented, the Pipe Logix has evolved vis-a-vis reduced level of activities and reduced demand.

Naturally, as inventory levels build to confront an operation of reality of 2,000 rigs as we saw back in October at prices that we saw back in October.

I wouldn't, then again, conclude that this is a trend.

But there are very few incentives from a demand side for the price to in fact-- or the price reduction to in fact accelerate faster than what we've seen in the past months.

Okay.

Thank you very much.

I think that we are running out of time, so I would like to conclude the call.

I would like to thank all of you that joined us.

And we hope to see you all in New York in less than a month.

Thank you.

Thank you for your participation in today's conference call.

This concludes the presentation.

You may now disconnect, and have a great day.