Tenaris: Hormuz Shut-In Tests Resilience, Dividend Doubles as Q4 Inflection Looms

Middle East disruption hits Q2, but record Qatar backlog, strong cash flow, and an upcoming volume surge set up a promising back half.

TEN.MI · Earnings Call · 2026-08-06

A Quarter of Contrasts

Tenaris's Q2 2026 results were shaped by two opposing forces: the effective closure of the Strait of Hormuz and the resilience of its global franchise. Sales reached $3 billion, down 4% year-on-year and sequentially, with EBITDA of $649 million. The company explicitly called out the Strait of Hormuz as the culprit, postponing $130 million of shipments to Iraq, Kuwait, and Qatar. Yet even in this environment, management's tone was confident, underpinned by a robust balance sheet and a clear cadence for recovery. Gabriel Podskubka, CEO, framed the quarter as a stress test that the company passed: "These results clearly reflect the impact of the Middle East conflict and disruption in the Strait of Hormuz... Even so, they also demonstrate the resilience of our performance based on the strength of our global positioning and the efficiency of our industrial operations."“Our quarterly EBITDA decreased 12% sequentially to $649 million, while our net income decreased 13% to $492 million, mainly due to lower absorption of fixed costs in addition to higher raw material and logistic costs.” — Gabriel Podskubka, Executive (likely CEO or CFO) · 2026-08-06 The impact was not uniform. In Saudi Arabia and the UAE, Aramco and ADNOC maintained drilling, while in Iraq, Kuwait, and Qatar, customers were forced to reduce operations. The company's strategic drilling operation in unconventional plays in the US, Canada, and Argentina continued to expand, with Bay City mill at record levels and a new high-torque wedge connection for longer laterals.

Dividend Doubling and Capital Discipline

The most striking strategic move was the Board's decision to double the interim dividend to approximately $600 million, reflecting "the strong balance sheet and sustained cash generation" of the company. As CFO Carlos Gomez Alzaga explained, "We have changed the premise... that the opening of the Strait of Hormuz in the short term will be an upside to our scenario."“Yes, Marc. This is exactly. It's not my decision. It's a Board decision. But based on past practice, this 1/3, 2/3 has been a bit the track record of the company also. This is what I was implying.” — Gabriel Podskubka, Executive (likely CEO or CFO) · 2026-08-06 This dividend hike, alongside a capital return program that continues to prioritize buybacks in prior periods, signals comfort in the company's liquidity despite the geopolitical noise. Management emphasized "financial flexibility" and the ability to maintain shareholder returns "broadly in line with the past levels."

Q4 Inflection and the Deepwater Opportunity

The market's attention is now turning to the fourth quarter. Gabriel projected a "volume that is going to be north of 1 million tons" and the start of a positive effect from price increases: "In the fourth quarter, we should see this positive effect in our sales and margins."“If you are anticipating an uptick and an interesting jump in the fourth quarter that it will reflect all the other things that are happening in the world because the higher price of oil that is driven by the Hormuz disruption is creating the conditions in the U.S., in Canada, in Argentina and also the strength of the offshore market to start showing...” — Gabriel Podskubka, Executive (likely CEO or CFO) · 2026-08-06 The deepwater project cycle is a key structural driver. The company cited recent FIDs such as the Cronos project off Cyprus and the GranMorgu development in Suriname, where it just inaugurated a new service center. With an expanding offshore backlog, management expects sales to pick up from Q4 into 2027.

We have even enlarged this backlog. Today, this figure would be $130 million. And this is the material that we have for that part of the Middle East that today is out of our forecast. If at any point in time, the conflict gets resolved or navigability in the Strait is restored, it will take us 70 to 90 days to ship this material from our mills and invoice it in the upper part of the Gulf. This is an upside that we will have when and if this happens...
Gabriel Podskubka, Executive (likely CEO or CFO) · 2026-08-06

In North America, the picture is also constructive. Rig counts are up nearly 10% since the Iran conflict began, and Pipe Logix has risen around 9%, with expectations of further increases. The company is investing $230 million to expand capacity in Canada and adding shifts in the US, positioning itself to capture the incremental demand from energy security and supply diversification.

Priorities and Risks

Investors should note the sharp move to prioritize dividends over buybacks, a change from the prior messaging that emphasized buybacks as a core return mechanism. In the February 2026 call, Paolo Rocca had described a $1.2 billion buyback split into two tranches, but the current decision to double the interim dividend may signal a more conservative stance on share repurchases, or simply a shift in preference given valuation levels and the desire to preserve liquidity in an uncertain environment. Risk remains around the timing of Hormuz reopening. If the strait stays closed, Q3 will likely resemble Q2, with lower absorption of fixed costs and elevated logistics cost. But the company's ability to adapt — rerouting to Saudi, UAE, and other markets, and building a pipeline of high-margin offshore work — gives credence to the view that this is a speed bump, not a derailment. The global tape has shown strong momentum in energy-related themes like "High oil" and "Iran conflict," and Tenaris is well-positioned to ride that wave. Overall, Tenaris's Q2 report is a reminder that even in a quarter of disruption, a financially strong global leader can turn a crisis into an opportunity for strategic consolidation and forward investment.