Tubos Reunidos Has Received Offers for Distribution Division

Tubos Reunidos SA (TRG), a Spanish maker of seamless steel pipes for customers including Exxon Mobil Corp. (XOM) and BASF SE, has received offers for the distribution unit it put up for sale in February, Chairman Pedro Abasolo said.

Tubos Reunidos “has already received industrial and financial offers” for the division, which sells products including industrial valves and heating and air-conditioning units, Abasolo said in a phone interview. “We expect to close the transaction in 2012.” He declined to provide a valuation of the unit.

The company is sharpening its focus on seamless steel tubes, as they deliver higher margins, while it divests assets it doesn’t consider strategic. Rising oil prices in the past year drove higher demand for tubes from energy companies, while the distribution unit, with its domestic focus, isn’t likely to see significant growth soon, Tubos said in February.

Tubos Reunidos, based in the Basque town of Amurrio, had a surge in foreign orders in the year’s first four months, paced by demand from Europe, the U.S., South Korea and India, the 66- year-old executive said.

“We’ve received more orders from clients and prices are even higher,” Abasolo said. “We cautiously believe that profit growth will continue for the rest of the year.”

Exports Recover

Spain is relying on exports to drive the recovery from its worst recession in six decades as austerity measures undermine domestic demand. Exports soared 27 percent from a year earlier in the first two months of the year, according to the Industry Ministry.

Tubos Reunidos’s first-quarter net income climbed to 7.2 million euros ($10.4 million) from about 100,000 euros a year earlier. The company may post full-year net income of 26 million euros, according to the average of three analyst estimates in a Bloomberg survey. That compares with a 14.2 million-euro loss last year, when it set aside a provision of 25.8 million euros in connection with the planned sale of the distribution business. Manuel Dias Coelho, an analyst at Banco BPI SA in Porto, Portugal, said he estimates the division’s enterprise value at about 13 million euros.

The company aims for revenue from seamless steel pipes to climb more than 70 percent through 2014, while earnings before interest, tax, depreciation and amortization will be higher than 20 percent of sales by then, Tubos said May 5.

“We see fundamental catalysts and internal improvements in the medium and long term” at Tubos, Robert Jackson, an analyst at Banesto Bolsa in Madrid, wrote in a May 5 report. “The recovery has just started.”

Dividend Plan

The company, whose competitors include Vallourec SA (VK), based near Paris, and Luxembourg-based Tenaris SA (TEN), will resume dividend payments this year, with a payout ratio of 30 percent of profit, after halting them in 2009, the executive said.

“We’re considering making two payments instead of the traditional four we used to do,” Abasolo said. “We may make the first one at the end of this year and the second one early next year.

The shares have gained 25 percent this year, valuing the company at 400 million euros, while Spain’s benchmark IBEX 35 Index climbed 6.6 percent. Tubos Reunidos shares fell 14 percent last year.

To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net

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