Tenaris Announces 2012 Third Quarter Results

Tenaris Announces 2012 Third Quarter Results 
The Financial Information Contained in This Press Release Is Based on
Unaudited Consolidated Condensed Interim Financial Statements
Presented in U.S. Dollars (US$) and Prepared in Accordance With
International Financial Reporting Standards as Issued by the
International Accounting Standard Board and Adopted by the European
Union, or IFRS 
LUXEMBOURG -- (Marketwire) -- 11/07/12 --  Tenaris S.A. (NYSE: TS)
(BAE: TS) (BVM: TS) (MILAN: TEN) ("Tenaris") today announced its
results for the quarter and nine months ended September 30, 2012 with
comparison to its results for the quarter and nine months ended
September 30, 2011. 


 
                                                                            
Summary of 2012 Third Quarter Results                                       
                                                                            
(Comparison with second quarter of 2012 and third quarter of 2011)          
                                                                            
                                     Q3 2012     Q2 2012         Q3 2011    
Net sales (US$ million)              2,657.1   2,801.5   (5%)  2,494.8    7%
Operating income (US$ million)         583.6     620.9   (6%)    468.6   25%
Net income (US$ million)               437.5     460.2   (5%)    365.5   20%
Shareholders' net income (US$                                               
 million)                              436.4     461.1   (5%)    325.0   34%
Earnings per ADS (US$)                  0.74      0.78   (5%)     0.55   34%
Earnings per share (US$)                0.37      0.39   (5%)     0.28   34%
EBITDA* (US$ million)                  679.0     758.6  (10%)    603.6   12%
EBITDA margin (% of net sales)            26%       27%             24%     
                                                                            
*EBITDA is defined as operating income plus depreciation, amortization and  
 impairment charges/(reversals) and in Q3 2012 excludes a non-recurring     
 gain of $49 million, recorded in Other operating income corresponding to a 
 tax related lawsuit collected in Brazil.                                   

 
Sales increased year on year led by higher demand in North and South
America, but, sequentially, they were affected by lower shipments to
the Middle East and lower demand for industrial products in Europe,
in addition to seasonal factors.  
EBITDA, excluding extraordinary items, declined 10% sequentially with
margins being affected by product mix (a lower proportion of seamless
products in the sales mix) and efficiency losses related to
operational issues at the Tamsa steel shop and plant maintenance
shutdowns. 
Cash flow from operations remains strong and amounted to US$491.4
million for the quarter. Our net debt (total borrowings less cash and
other current investments) decreased to US$265.8 million, at the end
of the third quarter of 2012, from US$540.5 million at the end of the
previous quarter. 
Interim Dividend Payment 
Our board of directors approved the payment of an interim dividend of
US$0.13 per share (US$0.26 per ADS), or approximately US$153 million.
The payment date will be November 22, 2012 (however, because such
date is not a business day in the U.S., shareholders in all
jurisdictions may receive their interim dividend on or after November
23, 2012, which is the first business day following the stated
payment date), and the ex-dividend date will be November 19, 2012.  
Changes in Segment Reporting 
Following the acquisition of the non-controlling interests in Confab
Industrial S.A. (Confab) and its further delisting, we have changed
our internal organization and therefore combined the Tubes and
Projects segments.  
Therefore, starting with the financial statements for the period
ended September 30, 2012, we will report under segments: Tubes
(tubular products and services) and Others (other products and
services). 
Additionally, the coiled tubing operations, which were previously
included in the Tubes segment and which accounted for 1% of total
sales in 2011, have been reclassified to Others. 
Market Background and Outlook 
In spite of the weak economic recovery, demand for energy has
remained stable and oil prices are at levels which should continue to
support investment in exploration and production activity worldwide
during 2013.  
North American natural gas prices have risen above their early year
lows as demand shows strong year on year growth. In 2013, we expect
drilling activity for gas to recover gradually. 
In the fourth quarter of 2012, however, our sales in North America
will be affected by the current market uncertainty that is driving a
reduction in OCTG inventories. 
In the rest of the world, drilling activity should increase gradually
led by the growth in the exploration and development of deepwater and
unconventional reserves. In the coming quarters, sales to oil and gas
customers in the Middle East are expected to recover from the low
level of the third quarter.  
Sales to industrial markets, particularly in Europe, are expected to
remain at low levels.  
EBITDA margins are expected to remain at the level of this third
quarter, as the impact of lower prices in less differentiated
segments is likely to offset product mix and industrial efficiency
improvements.  


 
                                                                            
Analysis of 2012 Third Quarter Results                                      
                                                                            
Tubes Sales volume                                                          
 (metric tons)                    Q3 2012      Q2 2012          Q3 2011     
Seamless                           642,000    701,000  (8%)    650,000  (1%)
Welded                             305,000    287,000   6%     266,000  15% 
Total                              947,000    988,000  (4%)    916,000   3% 
                                                                            
                                                                            
              Tubes              Q3 2012       Q2 2012          Q3 2011     
(Net sales - $ million)                                                     
North America                     1,260.0    1,270.1   (1%)   1,014.4   24% 
South America                       610.3      537.4   14%      490.3   24% 
Europe                              252.9      285.1  (11%)     273.2   (7%)
Middle East & Africa                235.9      352.5  (33%)     355.2  (34%)
Far East & Oceania                  109.4      130.4  (16%)     142.2  (23%)
Total net sales ($ million)       2,468.5    2,575.4   (4%)   2,275.2    8% 
Operating income ($ million)        559.8      589.3   (5%)     440.8   27% 
Operating margin (% of sales)          23%        23%              19%      

 
Net sales of tubular products and services increased 8% year on year
but decreased 4% sequentially as sales were mainly affected by lower
shipments to the Middle East and lower demand for industrial products
in Europe. In North America, sequentially lower sales of deepwater
line pipe in the Gulf of Mexico were largely offset by higher sales
in Mexico. Sales increased in South America, mainly in Argentina and
Colombia. In Europe, lower demand from the industrial sector and
sea
sonally lower sales to distributors were the main causes of the
sequential decrease. In the Middle East and Africa sales decreased
sequentially due to lower shipments relating to the timing of orders.
In the Far East and Oceania sales decreased sequentially due to lower
sales of OCTG and structural products. 
Operating income from tubular products and services, which, in the
third quarter of 2012, included a non-recurring gain of US$49.2
million, increased 27% year on year but decreased 5% sequentially.
The sequential decline in operating income reflects a lower
proportion of seamless pipes in the sales mix and efficiency losses
related to operational issues at the Tamsa steel shop and plant
maintenance shutdowns.  


 
                                                                            
              Others                Q3 2012     Q2 2012         Q3 2011     
Net sales ($ million)                 188.5     226.6  (17%)    219.6  (14%)
Operating income ($ million)           23.8      31.5  (24%)     27.7  (14%)
Operating margin (% of sales)            13%       14%             13%      

 
Net sales of other products and services decreased 14% year on year
and 17% sequentially, reflecting lower sales of industrial equipment
in Brazil, which also impacted operating income and margins.  
Selling, general and administrative expenses, or SG&A, amounted to
17.3% of net sales in the third quarter of 2012, compared to 17.4% in
the previous quarter and 18.5% in the third quarter of 2011. 
Other operating income, net, amounted to US$44.2 million in the third
quarter of 2012, compared to US$0.8 million in the previous quarter
and US$1.6 million in the third quarter of 2011. In August, 2012,
Confab, our Brazilian subsidiary, collected US$49 million from the
Brazilian government, in interest and monetary adjustment over a tax
benefit received in 1991. 
Net interest expenses amounted to US$8.8 million in the third quarter
of 2012, compared to US$7.0 million in the previous quarter and
US$8.5 million in the third quarter of 2011.  
Other financial results generated a loss of US$15.2 million during
the third quarter of 2012, compared to a loss of US$16.5 million in
the previous quarter and a gain of US$28.0 million during the third
quarter of 2011. These results largely reflect gains and losses on
net foreign exchange transactions and the fair value of derivative
instruments and are partially offset by changes to our net equity
position. During the third quarter of 2011, these gains were mainly
attributable to the revaluation of the US dollar against the
Brazilian real (+18.6%), as our Brazilian subsidiaries held a
positive net financial position in US dollar in the quarter. 
Equity in earnings of associated companies generated a gain of
US$14.4 million in the third quarter of 2012, compared to a gain of
US$11.1 million in the previous quarter and a gain of US$1.5 million
in the third quarter of 2011. These gains were derived mainly from
our equity investment in Ternium and reflected higher results at
Ternium.  
Income tax charges totaled US$136.5 million in the third quarter of
2012, equivalent to 24% of income before equity in earnings of
associated companies and income tax, compared to 25% in the previous
quarter and in the third quarter of 2011. 
Results attributable to non-controlling interests amounted to gains
of US$1.1 million in the third quarter of 2012, compared to losses of
US$0.9 million in the previous quarter and to gains of US$40.5
million in the third quarter of 2011. Year on year, the reduction in
gains attributable to non-controlling interests is due to the
acquisition of all the non-controlling interests in Confab in the
second quarter of 2012. 
Cash Flow and Liquidity of 2012 Third Quarter 
Net cash provided by operations during the third quarter of 2012 was
US$491.4 million, compared to US$414.5 million in the previous
quarter and US$336.3 million in the third quarter of 2011. Working
capital increased by US$107.1 million during the third quarter of
2012, compared to a decrease of US$53.1 million in the previous
quarter and a negligible increase in the third quarter of 2011. The
increase in working capital in the third quarter of 2012, was mainly
due to a decrease in trade payables, following the conclusion of
several plant maintenance shutdowns. 
Capital expenditures amounted to US$187.0 million in the third
quarter of 2012, compared to US$204.5 million in the previous quarter
and US$212.1 million in the third quarter of 2011.  
Our net debt (total borrowings less cash and other current
investments) decreased to US$265.8 million, at the end of the third
quarter of 2012, from US$540.5 million at the end of the previous
quarter. 


 
                                                                            
Analysis of 2012 First Nine Months Results                                  
                                                                            
                                                                  Increase/ 
                                           9M 2012     9M 2011   (Decrease) 
Net sales (US$ million)                     8,075.9     7,221.9          12%
Operating income (US$ million)              1,770.6     1,306.9          35%
Net income (US$ million)                    1,351.1       994.4          36%
Shareholders' net income (US$ million)      1,341.4       931.6          44%
Earnings per ADS (US$)                         2.27        1.58          44%
Earnings per share (US$)                       1.14        0.79          44%
EBITDA* (US$ million)                       2,142.0     1,707.4          25%
EBITDA margin (% of net sales)                   27%         24%            
                                                                            
*EBITDA is defined as operating income plus depreciation, amortization and  
 impairment charges/(reversals) and in 9M 2012 excludes a non-recurring     
 gain of $49 million, recorded in Other operating income corresponding to a 
 tax related lawsuit collected in Brazil.                                   
                                                                            
                                                                            
                                                                 Increase/  
    Tubes Sales volume (metric tons)      9M 2012     9M 2011    (Decrease) 
Seamless                                  2,007,000   1,904,000           5%
Welded                                      882,000     833,000           7%
Total                                     2,889,000   2,737,000           6%
                                                                            
                                                                            
                                                                 Increase/  
                 Tubes                    9M 2012     9M 2011   (Decrease)  
(Net sales - $ million)                                                     
North America                              3,798.6     2,906.4          31% 
South America                              1,612.3     1,531.5           5% 
Europe                                       799.6       791.7           1% 
Middle East & Africa            
             869.1       946.0          (8%)
Far East & Oceania                           365.5       410.5         (11%)
Total net sales ($ million)                7,445.2     6,586.1          13% 
Operating income ($ million)               1,679.6     1,200.5          40% 
Operating margin (% of sales)                   23%         18%             

 
Net sales of tubular products and services increased 13% to US$7,445.2
million in the first nine months of 2012, compared to US$6,586.1
million in the first nine months of 2011, reflecting a 6% increase in
volumes and a 4% increase in average selling prices.  
Operating income from tubular products and services increased 40% to
US$1,679.6 million in the first nine months of 2012, from US$1,200.5
million in the first nine months of 2011, reflecting a 13% increase
in sales and an improvement in the operating margin, mainly
reflecting a better absorption of fixed and semi-fixed expenses on
higher sales. 


 
                                                                            
                                                                 Increase/  
                 Others                   9M 2012     9M 2011   (Decrease)  
Net sales ($ million)                        630.7       635.8          (1%)
Operating income ($ million)                  91.0       106.5         (14%)
Operating margin (% of sales)                   14%         17%             

 
Net sales of other products and services decreased 1% to US$630.7
million in the first nine months of 2012, compared to US$635.8
million in the first nine months of 2011, mainly due to lower sales
of industrial equipment in Brazil and coiled tubing, almost offset by
higher sales of sucker rods. 
Operating income from other products and services decreased 14% to
US$91.0 million in the first nine months of 2012, compared to
US$106.5 million during the first nine months of 2011, reflecting
lower sales and operating margins.  
SG&A amounted to 17.2% of net sales during the first nine months of
2012, compared to 19.2% in the same period of 2011. 
Net interest expenses amounted to US$16.2 million in the first nine
months of 2012 compared to US$19.6 million in the same period of
2011.  
Other financial results amounted to a loss of US$18.5 million during
the first nine months of 2012, compared to a gain of US$16.7 million
during the first nine months of 2011. These results largely reflect
gains and losses on net foreign exchange transactions and the fair
value of derivative instruments and are partially offset by changes
to our net equity position. These gains and losses are mainly
attributable to variations in the exchange rates between our
subsidiaries' functional currencies (other than the US dollar) and
the US dollar, in accordance with IFRS. 
Equity in earnings of associated companies generated a gain of
US$44.6 million in the first nine months of 2012, compared to a gain
of US$48.5 million in the first nine months of 2011. These gains were
derived mainly from our equity investment in Ternium.  
Income tax charges totaled US$429.5 million in the first nine months
of 2012, equivalent to 25% of income before equity in earnings of
associated companies and income tax, compared to US$358.1 million in
the first nine months of 2011, equivalent to 27% of income before
equity in earnings of associated companies and income tax.  
Income attributable to non-controlling interests declined to US$9.7
million in the first nine months of 2012, compared to US$62.8 million
in the first nine months of 2011, as in the second quarter of 2012,
we acquired all the non-controlling interests in Confab. 
Cash Flow and Liquidity of 2012 First Nine Months 
During the first nine months of 2012, net cash provided by operations
was US$1,513.8 million, compared to US$827.1 million in the same
period of 2011. Working capital increased by US$55.7 million in the
first nine months of 2012, compared with an increase of US$492.6
million in the first nine months of 2011.  
Capital expenditures amounted to US$587.9 million in the first nine
months of 2012, compared with US$673.9 million in the same period of
2011.  
Following our investments in Brazil during the first half of the
year, amounting to US$1.3 billion (US$504.6 million in Usiminas and
US$758.5 million in Confab) and the payment of a dividend of US$295.1
million, our financial position at September 30, 2012, amounted to a
net debt position (total borrowings less cash and other current
investments) of US$265.8 million, compared with a net cash position
of US$323.6 million at December 31, 2011.  
Some of the statements contained in this press release are
"forward-looking statements." Forward-looking statements are based on
management's current views and assumptions and involve known and
unknown risks that could cause actual results, performance or events
to differ materially from those expressed or implied by those
statements. These risks include but are not limited to risks arising
from uncertainties as to future oil and gas prices and their impact
on investment programs by oil and gas companies. 
Press releases and financial statements can be downloaded from
Tenaris's website at www.tenaris.com/investors. 


 
                                                                            
Consolidated Condensed Interim Income Statement                             
                                                                            
                               Three-month period       Nine-month period   
(all amounts in thousands of          ended                   ended         
 U.S. dollars)                    September 30,           September 30,     
                             ----------------------  ---------------------- 
                                2012        2011        2012        2011    
                             ----------  ----------  ----------  ---------- 
Continuing operations               Unaudited              (Unaudited)      
                                                                            
Net sales                     2,657,069   2,494,840   8,075,910   7,221,927 
Cost of sales                (1,658,967) (1,563,520) (4,964,776) (4,534,895)
                             ----------  ----------  ----------  ---------- 
Gross profit                    998,102     931,320   3,111,134   2,687,032 
Selling, general and                                                        
 administrative expenses       (458,716)   (464,419) (1,389,514) (1,384,396)
Other operating income                                                      
 (expenses) net                  44,174       1,654      49,027       4,303 
                             ----------  ----------  ----------  ---------- 
Operating income                583,560     468,555   1,770,647   1,306,939 
Interest income                   9,413       5,547      24,702      19,747 
Interest expense                (18,247)    (14,073)    (40,860)    (39,362)
Other financial results         (15,154)     28,019     (18,549)     16,669 
                             ----------  ----------  ----------  ---------- 
Income before equity in                                                     
 earnings of associated                                                     
 companies and income tax       559,572     488,048   1,735,940   1,303,993 
Equity in earnings of                                                       
 associated companies            14,406       1,514      44,624      48,519 
                             ----------  ----------  ----------  ---------- 
Income before income tax        573,978     489,562   1,780,564   1,352,512 
Income tax                     (136,491)   (124,074)   (429,490)   (358,124)
                             ----------  ----------  ----------  ---------- 
Income for the period           437,487  
   365,488   1,351,074     994,388 
                                                                            
Attributableto:                                                             
Equity holders of the                                                       
 Company                        436,431     324,991   1,341,360     931,583 
Non-controlling interests         1,056      40,497       9,714      62,805 
                             ----------  ----------  ----------  ---------- 
                                437,487     365,488   1,351,074     994,388 
                             ----------  ----------  ----------  ---------- 
                                                                            
                                                                            
                                                                            
Consolidated Condensed Interim Statement of Financial Position              
                                                                            
(all amounts in thousands of                                                
 U.S. dollars)                At September 30, 2012    At December 31, 2011 
                             ----------------------- -----------------------
                                   (Unaudited)                              
ASSETS                                                                      
Non-current assets                                                          
    Property, plant and                                                     
     equipment, net            4,327,490               4,053,653            
    Intangible assets, net     3,242,640               3,375,930            
    Investments in                                                          
     associated companies      1,104,436                 670,248            
    Other investments              2,567                   2,543            
    Deferred tax assets          222,758                 234,760            
    Receivables                  129,903   9,029,794     133,280   8,470,414
                             -----------             -----------            
                                                                            
Current assets                                                              
    Inventories                2,988,690               2,806,409            
    Receivables and                                                         
     prepayments                 278,126                 241,801            
    Current tax assets           182,832                 168,329            
    Trade receivables          1,919,482               1,900,591            
    Available for sale                                                      
     assets                       21,572                  21,572            
    Other investments            888,760                 430,776            
    Cash and cash                                                           
     equivalents                 787,540   7,067,002     823,743   6,393,221
                             ----------- ----------- ----------- -----------
Total assets                              16,096,796              14,863,635
                                         ===========             ===========
                                                                            
EQUITY                                                                      
Capital and reserves                                                        
 attributable to the                                                        
 Company's equity holders                 11,172,365              10,506,227
Non-controlling interests                    179,541                 666,716
                                         -----------             -----------
Totalequity                               11,351,906              11,172,943
                                         ===========             ===========
                                                                            
LIABILITIES                                                                 
Non-current liabilities                                                     
    Borrowings                   599,053                 149,775            
    Deferred tax liabilities     781,588                 828,545            
    Other liabilities            206,340                 233,653            
  Provisions                      67,499                  72,975            
    Trade payables                 1,222   1,655,702       2,045   1,286,993
                             -----------             -----------            
                                                                            
Current liabilities                                                         
    Borrowings                 1,343,059                 781,101            
    Current tax liabilities      256,893                 326,480            
    Other liabilities            385,860                 305,214            
  Provisions                      20,899                  33,605            
    Customer advances            160,188                  55,564            
    Trade payables               922,289   3,089,188     901,735   2,403,699
                             ----------- ----------- ----------- -----------
Total liabilities                          4,744,890               3,690,692
                                         ===========             ===========
Total equity and liabilities              16,096,796              14,863,635
                                         ===========             ===========
                                                                            
                                                                            
                                                                            
Consolidated Condensed Interim Statement of Cash Flow                       
                                                                            
                               Three-month period       Nine-month period   
                                      ended                   ended         
                                  September 30,           September 30,     
                             ----------------------  ---------------------- 
(all amounts in thousands of                                                
U.S. dollars)                   2012        2011        2012        2011    
                             ----------  ----------  ----------  ---------- 
                                   (Unaudited)             (Unaudited)      
Cash flows from operating                                                   
 activities                                                                 
Income for the period           437,487     365,488   1,351,074     994,388 
Adjustments for:                                                            
Depreciation and                                                            
 amortization                   144,713     135,064     420,597     400,465 
Income tax accruals less                                                    
 payments                       (20,417)     62,698    (126,196)    109,933 
Equity in earnings of                                                       
 associated companies           (14,406)     (1,514)    (44,624)    (48,519)
Interest accruals less                                                      
 payments, net                   (6,126)       (635)    (24,382)    (28,455)
Changes in provisions            (1,625)     (9,597)    (18,182)     10,319 
Changes in working capital     (107,051)      5,946     (55,708)   (492,611)
Other, including currency                                                   
 translation adjustment          58,804    (221,176)     11,237    (118,460)
                             ----------  ----------  ----------  ---------- 
Net cash provided by                       
                                 
 operating activities           491,379     336,274   1,513,816     827,060 
Cash flows from investing                                                   
 activities                                                                 
Capital expenditures           (186,964)   (212,139)   (587,890)   (673,930)
Acquisitions of subsidiaries                                                
 and associated companies        (6,228)          -    (510,825)          - 
Proceeds from disposal of                                                   
 property, plant and                                                        
 equipment and intangible                                                   
 assets                             883       1,372       3,798       3,339 
Dividends and distributions                                                 
 received from associated                                                   
 companies                            6           -      18,708      17,229 
Changes in investments in                                                   
 short term securities         (469,351)    236,668    (457,984)     41,986 
                             ----------  ----------  ----------  ---------- 
Net cash used in investing                                                  
 activities                    (661,654)     25,901  (1,534,193)   (611,376)
Cash flows from financing                                                   
 activities                                                                 
Dividends paid                        -           -    (295,134)   (247,913)
Dividends paid to non-                                                      
 controlling interest in                                                    
 subsidiaries                         -      (5,964)       (905)    (11,699)
Acquisitions of non-                                                        
 controlling interests              (38)        (90)   (758,577)    (16,579)
Proceeds from borrowings        491,143     223,723   1,705,377     713,518 
Repayments of borrowings       (243,114)   (174,150)   (682,230)   (715,262)
                             ----------  ----------  ----------  ---------- 
Net cash used in financing                                                  
 activities                     247,991      43,519     (31,469)   (277,935)
                             ----------  ----------  ----------  ---------- 
                                                                            
                             ----------  ----------  ----------  ---------- 
Decrease in cash and cash                                                   
 equivalents                     77,716     405,694     (51,846)    (62,251)
                             ----------  ----------  ----------  ---------- 
                                                                            
Movement in cash and cash                                                   
 equivalents                                                                
At the beginning of the                                                     
 period                         693,712     362,043     815,032     820,165 
Effect of exchange rate                                                     
 changes                          3,567     (13,621)     11,809      (3,798)
Decrease in cash and cash                                                   
 equivalents                     77,716     405,694     (51,846)    (62,251)
                             ----------  ----------  ----------  ---------- 
At September 30,                774,995     754,116     774,995     754,116 
                                                                            
                                At September 30,        At September 30,    
Cash and cash equivalents       2012        2011        2012        2011    
                             ----------  ----------  ----------  ---------- 
Cash at banks, liquidity                                                    
 funds and short-term                                                       
 investments                    787,540     764,787     787,540     764,787 
Bank overdrafts                 (12,545)    (10,671)    (12,545)    (10,671)
                             ----------  ----------  ----------  ---------- 
                                774,995     754,116     774,995     754,116 

  
Giovanni Sardagna
Tenaris
1-888-300-5432
www.tenaris.com 
 
 
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