Renta 4: Negative / Neutral. Tubos Reunidos published its 1H24 results, which showed a weak but expected performance, justified by: 1) a decrease in the number of active rigs (drilling platforms) of approximately 15% versus the previous year, 2) lower demand due to excess inventories and uncertainty before the US elections, 3) downward pressure on prices due to high inventories, 4) higher Asian imports due to weak demand in China, and 5) comparative versus a record 1H23 in the company.
Positive, but known. A sharp decline in net debt to €220.3 million versus €282.4 million in 2023, mainly due to the debt buyback that generated a reduction in debt by €66.5 million. From the results we highlight: 1) Sharp decline in revenues of -63.6% to €172.7m, as a consequence of the negative impact of the decline in apparent demand for the reasons mentioned above. 2) EBITDA declined to €5.3m (€62.6m H1 23), which is positive despite the sharp drop in revenues. All this is thanks to the cost containment carried out by the group to adapt them to the current demand situation. 3) Net profit stands at €40.4 million, thanks to the financial income of €66.5 million from the cancellation of debt.
Guidance 2H24: The company comments that the 2H24 will follow a similar trend to that recorded in 1H24 with three clear points of attention: 1) evolution of the Chinese economy, 2) US elections and the impact they may have on tariffs, and 3) uncertainty about a possible recession.
Guidance 2025: Tubos Reunidos expects a progressive recovery in volumes and prices supported by: 1) inventory balance, 2) acceleration of energy projects, 3) momentum in decarbonisation projects, and 4) positive impact of lower interest rates on the reactivation of Europe.
Conclusion: weak but expected results that we believe will have a negative impact on the share price. OVERWEIGHT (target price €0.83/share).
