LUXEMBOURG — (Marketwire) — 08/04/11 — Tenaris S.A. (NYSE: TS) (BAE: TS) (MXSE: TS) and
(MILAN: TEN) (“Tenaris”) today announced its results for the quarter and
semester ended June 30, 2011 with comparison to its results for the quarter
and semester ended June 30, 2010.
Summary of 2011 Second Quarter Results
Sales increased sequentially in each of our operating segments but sales
growth in our Tubes operating segment was held back by lower sales in
Canada and lower shipments to deepwater line pipe projects. Operating
income and margins were affected, however, as cost increases exceeded
increases in average selling prices.
Cash flow from operations amounted to US$325.1 million for the quarter and
our net cash position (cash and other current investments less total
borrowings) remained positive at US$64.9 million, after the payment of
US$247.9 million in dividends and an increase in capital expenditure to
US$251.2 million.
Market Background and Outlook
Global drilling activity is rising in most regions, though in this second
quarter it was affected by the Canadian season. We expect this trend to
continue and that OCTG demand in the second half will be boosted by higher
activity in the Middle East and a sustained high level of activity in North
America. This activity is increasingly directed towards more demanding
applications and we expect this to stimulate demand for specialized,
high-end products.
Sales in our Tubes operating segment, particularly of OCTG products, are
expected to be higher in the second half and a richer mix of products
should be reflected in a gradual improvement in average selling prices.
Overall, we expect to see higher sales and operating income in the second
half of 2011 compared to the first.
Analysis of 2011 Second Quarter Results
Net sales of tubular products and services increased 2% sequentially and
16% year on year. In North America, sales decreased 3% on a sequential
basis, as seasonally weaker activity in Canada offset further growth in
demand in the United States. In Europe, we had higher sales of OCTG
products, as well as higher sales of line pipe and mechanical products to
distributors whose selling prices are largely denominated in Euros. In the
Middle East & Africa, a sequential increase in OCTG sales offset lower
sales of line pipe, while in the Far East and Oceania, higher shipments of
OCTG products in China and Indonesia offset lower shipments of line pipe
products.
Projects net sales amounted to US$212.4 million in the second quarter of
2011, an increase of 21% sequentially and 126% relative to the second
quarter of 2010. Sequentially, revenues and operating income improved with
sales concentrated in Brazil and a good mix of products, which offset a 9%
decrease in volumes.
Net sales of other products and services amounted to US$192.9 million in
the second quarter of 2011, an increase of 6% sequentially and 16% relative
to the second quarter of 2010. The sequential increase in sales and
operating income was mainly due to higher sales of industrial equipment in
Brazil.
Selling, general and administrative expenses, or SG&A, amounted to 19.5% of
net sales in the second quarter of 2011, similar to the previous quarter
and to the second quarter of 2010.
Net interest expenses amounted to US$5.7 million in the second quarter of
2011, compared to US$5.4 million in the previous quarter and US$17.5
million in the second quarter of 2010. Interest expenses in the second
quarter of 2010 were negatively affected by higher interest rates, which
were partially offset by foreign exchange gains recorded under other
financial results.
Other financial results generated a loss of US$12.4 million during the
second quarter of 2011, compared to a gain of US$1.1 million in the
previous quarter and a loss of US$7.4 million during the second quarter of
2010. 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$22.7
million in the second quarter of 2011, compared to a gain of US$24.3
million in the previous quarter and a gain of US$19.3 million in the second
quarter of 2010. These gains were derived mainly from our equity investment
in Ternium.
Income tax charges totalled US$112.2 million in the second quarter of 2011,
equivalent to 28% of income before equity in earnings of associated
companies and income tax, compared to 31% in the previous quarter and the
same percentage as in the second quarter of 2010.
Income attributable to non-controlling interests amounted to US$17.5
million in the second quarter of 2011, compared to US$4.8 million in the
previous quarter and US$12.9 million in the second quarter of 2010.
Sequentially, the increase is due to the better results of our Brazilian
operations.
Cash Flow and Liquidity of 2011 Second Quarter
Net cash provided by operations during the second quarter of 2011 was
US$325.1 million, compared to US$165.7 million in the previous quarter and
US$58.6 million in the second quarter of 2010. Working capital increased by
US$95.1 million during the second quarter of 2011 (mainly due to an
increase in inventories), compared to an increase of US$392.9 million in
the previous quarter and US$187.7 million in the second quarter of 2010.
Capital expenditures amounted to US$251.2 million in the second quarter of
2011, compared to US$210.6 million in the previous quarter and US$190.4
million in the second quarter of 2010.
At the end of the quarter, our net cash position (cash and other current
investments less total borrowings) amounted to US$64.9 million, following a
dividend payment of US$247.9 million in June.
Analysis of 2011 First Half Results
Net income attributable to equity holders in the Company during the first
semester of 2011 was US$606.6 million, or US$0.51 per share (US$1.03 per
ADS), which compares with net income attributable to equity holders in the
Company during the first semester of 2010 of US$501.6 million, or US$0.42
per share (US$0.85 per ADS). Operating income was US$853.8 million, or 18%
of net sales during the first semester of 2011, compared to US$714.6
million, or 20% of net sales during the first semester of 2010. Operating
income plus depreciation and amortization for the first semester of 2011,
was US$1,119.2 million, or 24% of net sales, compared to US$966.6 million,
or 27% of net sales during the first semester of 2010.
Net Sales, Cost of Sales and Operating Income by segment
The following table shows our net sales by business segment for the periods
indicated below:
The following table indicates our sales volume of seamless and welded pipes
by business segment for the periods indicated below:
Tubes
The following table indicates, for our Tubes business segment, net sales by
geographic region, cost of sales as a percentage of net sales, operating
income and operating income as a percentage of net sales for the periods
indicated below:
Net sales of tubular products and services increased 27% to US$3,965.1
million in the first half of 2011, compared to US$3,131.8 million in the
first half of 2010, reflecting a 21% increase in volumes and a 4% increase
in average selling prices.
Cost of sales of tubular products and services, expressed as a percentage
of net sales, rose from 58% in the first half of 2010, to 62% in the first
half of 2011.
Operating income from tubular products and services increased 9% to
US$694.1 million in the first half of 2011, from US$634.7 million in the
first half of 2010, as a 27% increase in sales was mostly offset by a
reduction in the operating margin. Operating income expressed as a
percentage of net sales decreased to 18% in the first half of 2011,
compared to 20% in the first half of 2010. The lower operating margin in
the first half of 2011 reflects an increase in raw materials and other
costs, which was just partially offset by an increase in average selling
prices.
Projects
The following table indicates, for our Projects business segment, net
sales, cost of sales as a percentage of net sales, operating income and
operating income as a percentage of net sales for the periods indicated
below:
Net sales of pipes for pipeline projects increased 107% to US$387.3 million
in the first half of 2011, compared to US$187.2 million in the first half
of 2010, reflecting a 117% increase in volumes, partially offset by a 5%
decrease in average selling prices.
Operating income from pipes for pipeline projects increased 203% to US$83.3
million in the first half of 2011, from US$27.5 million in the first half
of 2010, reflecting an increase in sales and higher operating margins.
Others
The following table indicates, for our Others business segment, net sales,
cost of sales as a percentage of net sales, operating income and operating
income as a percentage of net sales for the periods indicated below:
Net sales of other products and services increased 24% to US$374.6 million
in the first half of 2011, compared to US$301.4 million in the first half
of 2010, as all the main business activities included in the segment
increased their revenues.
Operating income from other products and services increased to US$76.4
million in the first half of 2011, compared to US$52.4 million during the
first half of 2010, mainly due to the improved results of, our electric
conduits operations in the United States, our industrial equipment business
in Brazil and from higher sales of sucker rods.
Selling, general and administrative expenses, or SG&A, decreased as a
percentage of net sales to 19.4% in the semester ended June 30, 2011
compared to 20.4% in the corresponding semester of 2010, mainly due to the
effect of fixed and semi-fixed expenses over higher revenues.
Net interest expenses decreased to US$11.1 million in the first half of
2011 compared to US$30.5 million in the same period of 2010. Interest
expenses in the first half of 2010 were negatively affected by higher
interest rates, which were partially offset by foreign exchange gains
recorded under other financial results.
Other financial results recorded a loss of US$11.4 million during the first
half of 2011, compared to a gain of US$0.3 million during the first half of
2010. 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 currency (other than the US dollar) and the US
dollar, in accordance with IFRS.
Equity in earnings of associated companies generated a gain of US$47.0
million in the first half of 2011, compared to a gain of US$42.8 million in
the first half of 2010. These gains were derived mainly from our equity
investment in Ternium.
Income tax charges totalled US$249.5 million in the first half of 2011,
equivalent to 30% of income before equity in earnings of associated
companies and income tax, compared to US$210.1 million in the first half of
2010, equivalent to 31% of income before equity in earnings of associated
companies and income tax.
Income attributable to non-controlling interests amounted to US$22.3
million in the first half of 2011, compared to US$15.5 million in the
corresponding semester of 2010, mainly due to a better performance at our
Brazilian operations.
Cash Flow and Liquidity of 2011 First Half
Net cash provided by operations during the first half of 2011 was US$490.8
million, compared to US$494.9 million in the first half of 2010, as higher
result in the first half of 2011 were offset by an increased investment in
working capital compared with the first half of 2010. Working capital
increased by US$488.0 million during the first half of 2011, while in the
first half of 2010 it increased by US$63.5 million (primarily as a result
of a strong increase in trade receivables, reflecting the increase in
sales).
Capital expenditures amounted to $461.8 million in the first half of 2011,
compared to US$348.4 million in the first half of 2010. The increase in the
capital expenditures is mainly attributable to the continued investment at
the new small diameter rolling mill at our Veracruz facility in Mexico.
Our net cash position (cash and other current investments less total
borrowings) at June 30, 2011, amounted to US$64.9 million, following a
dividend payment of US$247.9 million in June.
Tenaris Files Half-Year Report
Tenaris S.A. announces that it has filed its half-year report for the
six-month period ended June 30, 2011 with the Luxembourg Stock Exchange.
The half-year report can be downloaded from the Luxembourg Stock Exchange–s
website at and from Tenaris–s website at
.
Holders of Tenaris–s shares and ADSs, and any other interested parties, may
request a hard copy of the half-year report, free of charge, at
1-888-300-5432 (toll free from the United States) or 52-55-5282-9929 (from
outside the United States).
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 .
Consolidated Condensed Interim Income Statement
Consolidated Condensed Interim Statement of Financial Position
Consolidated Condensed Interim Statement of Cash Flow
Giovanni Sardagna
Tenaris
1-888-300-5432