LUXEMBOURG — (Marketwire) — 04/26/12 — Tenaris S.A. (NYSE: TS) (BAE: TS) (BVM: TS) (MILAN: TEN) (“Tenaris”) today announced its results for the quarter ended March 31, 2012 in comparison with its results for the quarter ended March 31, 2011.
(Comparison with fourth and first quarters of 2011)
(1) Effective January 1, 2012, we recorded the Mexican employee statutory profit sharing provision (US$14.1 million in IQ 2012), under labor costs instead of recording it in the income tax line. Comparative amounts have been reclassified to conform to changes in presentation in the current period (lower operating income offset by lower income tax amounting to US$17.7 million in IVQ 2011 and US$12.9 million in IQ2011).
Our first quarter sales decreased 5% sequentially as sales were impacted by lower line pipe shipments for HPI and pipeline projects and we had lower OCTG shipments in Colombia and Saudi Arabia. However, our EBITDA and operating margins continued to improve reflecting lower raw material costs and plant allocation efficiencies. Operating income rose 5% sequentially and earnings per share rose 11% sequentially and 39% year on year.
Cash provided by operating activities reached US$605 million during the quarter and, after investing US$505 million in Usiminas and US$196 million in capital expenditures, our net cash position (cash and other current investments less total borrowings) decreased by US$65 million ending the quarter at US$259 million.
Starting January 1, 2012, the Company changed the functional currency of its Mexican, Canadian and Japanese subsidiaries, from their respective local currencies to the U.S. dollar. From that date forward, the results of these subsidiaries have been and will be measured in U.S. dollars.
Global demand for energy, in spite of the difficult economic situation in Europe and unusually warm winter in the USA, continues to rise and energy companies are increasing their investments in exploration and production activity. Demand for tubular products for complex applications is growing at a faster pace than that for standard applications as investments are taking place in more difficult operating environments.
Drilling activity is expected to remain stable this year in North America, as higher oil drilling offsets lower gas drilling. In the rest of the world, it is expected to increase supported by current oil and gas prices and led by growth in the development of deepwater and unconventional reserves as well as complex conventional gas drilling.
Sales to oil and gas customers, particularly of premium products, are expected to increase during the year but sales to HPI, power generation and industrial customers in Europe will continue to be affected by weak economic activity.
Average selling prices may increase due to product mix improvements but operating margins are expected to remain close to current levels during the rest of 2012.
Sales and operating income are expected to continue to show strong year on year growth during the remainder of the year.
Net sales of tubular products and services decreased 3% sequentially but increased 16% year on year. In North America, sales rose sequentially in Canada and the United States. In South America, sales decreased sequentially due principally to lower OCTG shipments in Colombia where activity has been affected by rig movements and contract discussions. In Europe, sales remained flat as demand from distributors for industrial and line pipe products continues to be weak due to low economic activity. In the Middle East & Africa, sales decreased sequentially mainly due to lower OCTG sales to Saudi Arabia and lower sales to HPI projects. In the Far East & Oceania sales decreased sequentially mainly due to lower line pipe shipments and lower OCTG sales to China.
Operating income from tubular products and services increased 6% sequentially, despite the decrease in sales, as the operating margin increased 2 percentage points, reflecting lower raw material costs and plant allocation efficiencies.
Projects net sales amounted to US$140.1 million in the first quarter of 2012, compared to US$186.0 million in the previous quarter and US$175.0 million in the first quarter of 2011. Sequentially, the 25% decrease in revenues reflected a 40% decrease in shipments, due to lower shipments to pipeline projects in Brazil, Argentina and Peru, partially offset by a 25% increase in average selling prices due to a better product mix, which was also reflected in the improvement in the operating margin.
Net sales of other products and services amounted to US$188.6 million in the first quarter of 2012, 5% lower sequentially and 4% higher relative to the first quarter of 2011. The sequential decrease in sales and operating income was mainly due to lower sales of industrial equipment in Brazil, partially offset by higher sales of sucker rods and of pipes for electric conduits.
, or SG&A, amounted to 17.0% of net sales in the first quarter of 2012, compared to 17.3% in the previous quarter and 19.4% in the first quarter of 2011. In absolute terms, SG&A also decreased, amounting to US$444.1 million in the first quarter of 2012, compared to US$474.8 million in the previous quarter and US$451.3 million in the first quarter of 2011. The sequential decrease was due to lower amortization of intangible assets, lower selling expenses (due to a decrease in volumes and a recovery of previously provisioned doubtful accounts), partially offset by higher labor costs.
amounted to US$0.3 million in the first quarter of 2012, compared to US$2.0 million in the previous quarter and US$5.4 million in the first quarter of 2011.
generated a gain of US$13.1 million during the first quarter of 2012, compared to a loss of US$5.4 million in the previous quarter and a gain of US$1.1 million during the first 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. 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. During the first quarter of 2012, these gains were mainly derived from the strengthening of the Brazilian real (+2.9%) on a U.S. dollar denominated debt position in Brazil.
generated a gain of US$19.2 million in the first quarter of 2012, compared to a gain of US$13.0 million in the previous quarter and a gain of US$24.3 million in the first quarter of 2011. These results were derived mainly from our equity investment in Ternium (NYSE: TX).
totaled US$144.7 million in the first quarter of 2012, equivalent to 25% of income before equity in earnings of associated companies and income tax, compared to 21% in the previous quarter and 28% in the first quarter of 2011.
amounted to US$9.6 million in the first quarter of 2012, compared to US$26.8 million in the previous quarter and US$4.8 million in the first quarter of 2011. The sequential decrease is mainly due to losses at our Japanese subsidiary during the quarter.
Net cash provided by operations during the first quarter of 2012 was US$604.7 million, compared to US$456.2 million in the previous quarter and US$165.7 million in the first quarter of 2011.
Capital expenditures amounted to US$196.4 million for the first quarter of 2012, compared to US$188.7 million in the previous quarter and US$210.6 million in the first quarter of 2011. In addition, during the quarter we invested US$504.6 million in Usiminas.
At the end of the quarter, our net cash position (cash and other current investments less total borrowings) amounted to US$258.6 million.
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.
Giovanni Sardagna
Tenaris
1-888-300-5432