# Dear Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-equipment-services/NYSE_TS_2019/NYSE_TS_2019.mmd` · pages 3-9_

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Dear Shareholders,

Since we published our 2019 annual results in February, the world has changed completely. The rapid spread of the COVID-19 virus and the measures adopted to contain it have precipitated a global crisis that is unprecedented in the speed and severity with which it has affected the economy and our everyday lives. The recovery from this crisis will take time and will hasten change in many fields.

The impact on the energy sector is particularly severe and there will be a lasting impact on trade, travel and the way we interact with each other. Never before we have seen demand for energy collapse so much and so fast, driving prices in the US down to levels unseen in the past.

Oil and gas companies will struggle to maintain financial sustainability through this unforeseen chain of events, and investment in exploration and production will be reduced to a level comparable only to that of the '99 crisis. It is difficult to foresee the timing of the recovery in the oil demand, and the extent of the structural change that the sector will go through.

Over the next two years, the sustainability of our operations will be tested like never before. Our sales and our level of operations will be deeply affected, while the competitive environment in which we operate will be transformed in a way that today is difficult to anticipate.

In the long term, the world will resume a growth path and the need for a reliable supply of energy will be essential for the recovery. While we need to be prepared for the future, we also need to act swiftly and resolutely in facing the challenges of today.

We are focusing on four main lines of action:

First, we are taking comprehensive measures to protect our people by assuring a safe working environment, that will allow a gradual return to production when conditions allow in the countries where we operate. We are testing the temperature of all persons who enter our facilities, providing appropriate protective gear, fully disinfecting common areas several times a day, ensuring that social distancing rules are respected and using home working where possible. Whenever someone is detected as having potential symptoms they are immediately isolated and sent home or for medical treatment.

Second, we are acting rapidly to ensure the financial stability of the company. We have closed industrial facilities and introduced furlough schemes to reduce operating costs. We are downsizing our fixed cost structure, reducing salaries at all levels, redoubling our focus on working capital management, and reducing or postponing all investments except those essential for the long-term sustainability and positioning of the company. In this context, we are also proposing to limit this year's dividend to the interim distribution we already made in November.

Third, as we have done in past crises, we are supporting our communities, where the everyday lives of families and neighbours have been deeply affected. We are using our global capabilities, including our regional offices in China, to strengthen local health providers with the supply of medical equipment, protective gear and infrastructure as well as providing critical support for affected persons. A $6 million fund has been established for this purpose.

Fourth, we are doing all we can, with the resilience and ingenuity of our people, to fulfil our commitments and strengthen our relationships with customers and suppliers. They will be essential for our future and they should feel that we are at their side during this period.

With the current reality in front of us, our achievements in 2019 may seem somewhat distant but they have contributed to providing a solid platform with which to confront this crisis and prepare for the market recovery ahead. I will, therefore, briefly resume the most relevant.

We have strengthened our positioning in two key markets for the future. The acquisition of IPSCO in the United States gives us more local production capabilities, including a steel mill, with a wider range of products and geographical reach. This will strengthen our Rig Direct \( ^{\circledR} \)  service strategy, reducing lead times and improving service efficiency.

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In the Middle East, we strengthened our position in Saudi Arabia through the integration of Saudi Steel Pipe Company ("SSPC"), while in Abu Dhabi, we successfully won a long-term contract valued at $1.9 billion to supply the majority of ADNOC's OCTG requirements over the next five years.

We are making investments in digital technologies to transform the efficiency of our operations and provide customers digital integration efficiencies under our Rig Direct \( ^{®} \)  program. These investments are contributing to lower industrial and supply chain costs and closer collaboration with key customers.

Our safety indicators have improved significantly over the past two years, with the lost time injury frequency rate halving to an annual average of 1.2 lost time accidents per million manhours worked. No fatal accident has been recorded this year. This reflects a constant management focus over years and the culture change we have been able to extend to our 45 facilities around the world.

As we look at the global climate agenda, we look forward to leading the steel industry's response to the challenge. Today, we have relatively low levels of CO \( _{2} \)  emissions compared to our competitors, but we recognize the immensity of the "net zero" challenge. This will require collaboration across our entire industry value chain and has become a key focus in our agenda.

Over the past year, we have invested in particulate emissions collection systems to improve air quality at our steel mills in Argentina and Mexico. In other parts of our industrial system, such as our Bay City mill, we already have industry-leading emission levels. Investments like these improve working conditions for our employees and minimize the environmental impact of our operations on our communities.

In December, seven years after the inauguration of our Roberto Rocca Technical School in Campana, the first group of 50 students graduated. In a moving ceremony, we reflected on the importance of raising educational standards and providing opportunities to the aspiring young. Our educational programs are designed to make a difference at all levels throughout our communities.

We worked hard through the year to maintain the strength of our balance sheet. On sales of $7.3 billion, our free cash flow margin was 16% as we reduced working capital by over $500 million. At year end, our net cash position had risen to $980 million. Even after the acquisition of IPSCO following the close of the year, we still have a positive net cash position at the end of the first quarter of 2020.

As we face this new crisis, which will change many aspects of our industry, we are taking the steps necessary to strengthen our position as a leader in the eventual recovery.

During these most difficult times, I would like to give special thanks to our employees, who are showing exemplary solidarity and resilience as well as a capacity to act fast throughout the world. I am proud of them. I would also like to thank our customers, suppliers and investors for their ongoing support.

April 29, 2020

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Paolo Rocca