Tenaris Q2 Free Cash Flow Falls 36% on Hormuz Disruption, Rising Costs

Tenaris posted $396 million in free cash flow for the second quarter, down from $618 million in the first quarter and $673 million a year earlier. The pipeline and tube maker faced higher logistics costs tied to the closure of the Strait of Hormuz, along with rising raw material costs.

Operating income from the Tubes segment, Tenaris's main business, came in at $465 million. That compares with $545 million in the first quarter and $554 million in the second quarter of 2025. The company cited higher unitary logistics costs from the Hormuz disruption, lower absorption of fixed costs, and rising raw material costs for the sequential decline.

Net sales for the Tubes segment reached $2.5 billion, roughly flat from the first quarter and down from $2.6 billion in the same period last year. Seamless pipe volumes slipped to 755,000 tonnes from 789,000 tonnes sequentially. Welded pipe volumes rose to 17,000 tonnes from 14,000 tonnes.

Selling, general and administrative expenses rose to $484 million, or 16.3% of net sales, from $467 million, or 15.0%, in the first quarter. The increase came from higher services and fees as well as increased unitary logistics costs linked to the Hormuz disruption, the company said.

Financial results contributed a $32 million gain, down from $50 million in the first quarter. That included $41 million in net finance income from portfolio investments, offset by a $9 million loss from foreign exchange transactions and derivatives. Equity in earnings of non-consolidated companies, mainly from Ternium (NYSE:TX) and Usiminas, generated a $48 million gain.

Cash flow from operations reached $518 million, compared with $618 million in the first quarter and $673 million a year earlier. After capital expenditures of $121 million and a dividend payment of $606 million, Tenaris's net cash position stood at $3.6 billion at the end of June.

Oil and gas drilling activity is increasing in the USA, Canada, and Argentina. Customers are moving forward with offshore projects as the industry focuses on security of supply, Tenaris said. OCTG prices in the United States have been rising in response to higher demand and to offset higher raw material and logistics costs.

The Middle East conflict continues to disrupt shipping through the Strait of Hormuz. Drilling activity in Iraq, Kuwait, and Qatar has been severely affected. In Saudi Arabia and the UAE, activity has been largely maintained, the company said.

Tenaris expects sales and EBITDA in the second half to remain in line with the first half, despite lower shipments to the Middle East and higher raw material costs. The third quarter will be additionally affected by seasonality and product mix effects. The fourth quarter should benefit from higher prices and volumes in most regions. "There may be some upside if the shipping disruption at the strait of Hormuz ends before the end of the year," the company said.

Jaime Serra Puche resigned from the board and audit committee for personal reasons. German Curá stepped down as vice chair overseeing sustainability strategy but will continue to serve as a director. The board appointed Alicia Móndolo as a director and vice chair responsible for sustainability, risk management, and compliance. Maria Novales-Flamarique joined the audit committee.

The board now has ten members, including Paolo Rocca as chairman and Guillermo Vogel as vice chair overseeing financial reporting and investor relations. Monica Tiuba, Simon Ayat, Novales-Flamarique, and Molly Montgomery qualify as independent directors.

The company declared an interim dividend of $0.59 per share, or about $600 million.

Tenaris will hold a conference call on August 6 at 8 a.m. Eastern Time to discuss the results.