Tenaris Announces 2009 Second Quarter Results

The Financial and Operational 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 (IFRS), as Issued by the International Accounting Standard Board (IASB) and Adopted by the European Union

LUXEMBOURG, Aug 05, 2009 (MARKETWIRE via COMTEX News Network) -- Tenaris S.A. (NYSE: TS) (BAE: TS) (MXSE: TS) (MILAN: TEN) ("Tenaris") today announced its results for the quarter and semester ended June 30, 2009 with comparison to its results for the quarter and semester ended June 30, 2008.

Summary of 2009 Second Quarter Results

(Comparison with first quarter of 2009 and second quarter of 2008)

                                 Q2 2009       Q1 2009          Q2 2008
                                 -------       -------          -------
Net sales (US$ million)          2,096.3   2,434.3   (14%)  3,110.1   (33%)
Operating income (US$ million)     436.8     685.6   (36%)    816.0   (46%)
Net income (US$ million)           336.4     393.1   (14%)  1,030.0   (67%)
Shareholders' net income (US$
 million)                          343.3     366.0    (6%)    987.5   (65%)
Earnings per ADS (US$)              0.58      0.62    (6%)     1.67   (65%)
Earnings per share (US$)            0.29      0.31    (6%)     0.84   (65%)
EBITDA (US$ million)               563.1     807.4   (30%)    948.3   (41%)
EBITDA margin (% of net sales)        27%       33%              30%

Our results in the second quarter reflect significantly lower demand for our products and services in the light of the evolving global economic crisis and its impact on the activities of our customers. Shipments of tubular products fell 47% year on year and 19% sequentially, with the US and European markets being particularly affected. Our operating margins, particularly in our North American welded pipe operations, are being affected by very low production levels and our decision to maintain our industrial system and human resources prepared for the future recovery in demand. Our net income decreased 67% compared to the second quarter of 2008, however a significant part of this decrease is related to one-off gains recorded on the sale of subsidiaries in the second quarter of last year. Our net income for continuing operations, declined 44% compared to the second quarter of 2008. However, our cash flow from operations was strong as we reduced our investment in working capital by US$787.5 million. Consequently our net financial debt (total financial debt less cash and other current investments) decreased by US$659.8 million to US$121.9 million during the quarter after paying a dividend of US$354.2 million in June.

During the quarter, we re-presented the results of our Venezuelan operations that are in the process of being nationalized as discontinued operations.

Market Background and Outlook

Following their collapse in the second half of 2008 to a low of around US$30 per barrel at the end of the year, global oil prices have risen during the first half of 2009 and have reached the level of US$60-70 per barrel. This reflects increased optimism for a recovery in global economic growth led by China together with an expected decline in non-OPEC production and ongoing OPEC actions to cut production. North American gas prices, however, have fallen during the first half of 2009 to current levels of around US$3.50 per million BTU as the carry over of 2008 US production increases combined with reduced demand has resulted in high levels of gas in storage.

The international count of active drilling rigs, as published by Baker Hughes, continued to decline during the second quarter. It averaged 982 during the second quarter of 2009, 4% lower than the first quarter of 2009 and 9% lower than the same quarter of the previous year. The corresponding rig count in USA, which is more sensitive to North American gas prices, fell sharply in the first half and is now down 56% from its high in September 2008 but has shown signs of stabilizing in recent weeks. It averaged 936 during the second quarter, 29% lower than the first quarter of 2009 and 50% lower than the second quarter of 2008. In Canada, the corresponding rig count, which is affected by seasonal drilling patterns, averaged 90 during the quarter, a decrease of 47% compared to second quarter of 2008 and its lowest level since 1993.

Demand for our pipes from the global energy industry has been affected by the decline in oil and gas drilling activity and the actions taken by customers to adjust to reduced cash flows and a less favorable market outlook, including procurement delays and cancellations and the postponement of new project activity. Demand in the US and Canada has been further affected by extraordinarily high levels of OCTG inventories. Demand for pipes from the industrial and power generation segments remain at low levels.

We expect shipments for our large-diameter pipes for pipeline projects in South America, in the second half of the year, to remain close to the levels shown during the first half, however the order backlog continues to decline as new projects are postponed.

Steel and steelmaking raw material costs have stabilized and in recent weeks have shown some increase. However our costs, particularly at our North American welded pipe operations, will continue to be adversely affected by low production levels and the high cost of raw material inventories procured under different market conditions, partially offset by the actions taken to reduce our structural costs.

With low levels of demand likely to persist until the end of the year and prices adjusting downwards we expect that our sales and operating income will be lower in the second half of the year than the first. We expect that there will be a recovery in our shipments going into 2010 but that our revenues may not recover to the same extent considering the lagged effect of price declines in our results.

Analysis of 2009 Second Quarter Results

Sales volume (metric tons)        Q2 2009    Q2 2008    Increase/(Decrease)
-------------------------         -------   ---------   ------------------
Tubes - Seamless                  497,000     771,000         (36%)
Tubes - Welded                     65,000     270,000         (76%)
Tubes - Total                     562,000   1,041,000         (46%)
Projects - Welded                  90,000     170,000         (47%)
Total                             652,000   1,211,000         (46%)
Tubes                             Q2 2009     Q2 2008   Increase/(Decrease)
-----                             -------     -------   ------------------
(Net sales - $ million)
North America                       661.0       986.5         (33%)
South America                       244.9       304.1         (19%)
Europe                              222.3       480.8         (54%)
Middle East & Africa                452.7       565.6         (20%)
Far East & Oceania                  137.8       187.1         (26%)
Total net sales ($ million)       1,718.7     2,524.1         (32%)
Cost of sales (% of sales)             57%         56%
Operating income ($ million)        385.0       706.2         (45%)
Operating income (% of sales)          22%         28%

Net sales of tubular products and services decreased 32% to US$1,718.7 million in the second quarter of 2009, compared to US$2,524.1 million in the second quarter of 2008, as a 46% decrease in volumes was partially offset by higher average selling prices. In North America, although demand remained firm in Mexico, it declined precipitously in the USA as it was affected by the decline in drilling activity and by the extraordinary high level of OCTG inventories following the previous surge in imports from China. Sales in South America were affected by lower demand in Venezuela and Argentina. In Europe, sales were affected by lower demand from the industrial sector, lower demand from distributors serving the process plant sector and lower sales of OCTG in Romania. Sales in the Middle East and Africa were affected by lower sales of OCTG products in North Africa and the Caspian region. Sales in the Far East & Oceania were lower throughout the region.

Projects                            Q2 2009   Q2 2008   Increase/(Decrease)
--------                            -------   -------   ------------------
Net sales ($ million)                 254.4     368.1         (31%)
Cost of sales (% of sales)               75%       71%
Operating income ($ million)           45.5      77.6         (41%)
Operating income (% of sales)            18%       21%

Net sales of pipes for pipeline projects decreased 31% to US$254.4 million in the second quarter of 2009, compared to US$368.1 million in the second quarter of 2008, reflecting a decrease in shipments to gas and other pipeline projects in Brazil and Argentina, partially offset by higher average selling prices.

Others                              Q2 2009   Q2 2008   Increase/(Decrease)
------                              -------   -------   ------------------
Net sales ($ million)                 123.2     218.0         (43%)
Cost of sales (% of sales)               78%       72%
Operating income ($ million)            6.3      32.5         (81%)
Operating income (% of sales)             5%       15%

Net sales of other products and services decreased 43% to US$123.2 million in the second quarter of 2009, compared to US$218.0 million in the second quarter of 2008. Although demand for our Brazilian industrial equipment business remained firm, demand for our U.S. electric conduit business was substantially lower and sales of sucker rods were affected by lower activity. Our Venezuelan HBI operation was re-presented as discontinued operation.

Selling, general and administrative expenses, or SG&A, increased as a percentage of net sales to 18.9% in the quarter ended June 30, 2009, compared to 15.1% in the corresponding quarter of 2008, mainly due to the effect of fixed and semi-fixed expenses over lower revenues.

Net interest expenses decreased to US$16.3 million in the second quarter of 2009 compared to US$17.5 million in the same period of 2008, as we reduced our net debt.

Other financial results generated a loss of US$15.9 million during the second quarter of 2009, compared to a gain of US$4.2 million during the second quarter of 2008. 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$66.5 million in the second quarter of 2009, compared to a gain of US$48.1 million in the second quarter of 2008. These gains were derived mainly from our equity investment in Ternium.

Income tax charges totalled US$114.5 million in the second quarter of 2009, equivalent to 28% of income before equity in earnings of associated companies and income tax, compared to US$219.3 million in the second quarter of 2008, equivalent to 27% of income before equity in earnings of associated companies and income tax. Our tax rate for the quarter was lower than the one posted in the first quarter, as we incurred losses in subsidiaries located in countries with higher than average tax rates. The result in the second quarter of 2008 benefited from a tax reduction equivalent to US$28.3 million incurred on the reversal of deferred taxes in Italy due to the anticipated payment of taxes at a reduced rate.

Results for discontinued operations generated a loss of US$20.2 million in the second quarter of 2009, related to our businesses in Venezuela that are in the process of being nationalized. In the second quarter of 2008, we registered a gain of US$398.5 million, out of which US$394.3 million were from the sale of Hydril's pressure control business.

Results attributable to minority interest amounted to a loss of US$6.8 million in the second quarter of 2009, as losses were incurred at our NKKTubes subsidiary and at our Venezuelan subsidiaries, partially offset by the results at our Confab subsidiary. Second quarter 2008 minority interest amounted to US$42.6 mainly reflecting positive results at Confab and NKKTubes.

Cash Flow and Liquidity

Net cash provided by operations during the second quarter of 2009 was US$1.1 billion (US$1.9 billion in the first half), compared to US$274.0 million in the second quarter of 2008 (US$842.9 million in the first half). Working capital decreased by US$787.5 million during the second quarter, as we reduced our trade receivables by US$498.4 million and our inventories by US$412.9 million, which was partially offset by a decrease in trade payables and customer advances amounting to US$117.0 million.

Capital expenditures amounted to US$106.5 million in the second quarter of 2009 ($226.3 million in the first half), compared to US$116.9 million in the second quarter of 2008 (US$205.4 million in the first half).

During the first half of 2009, total financial debt decreased by US$1.0 billion to US$2.0 billion at June 30, 2009 from US$3.0 billion at December 31, 2008. Net financial debt during the first half of 2009 decreased by US$1.3 billion to US$121.9 million at June 30, 2009.

Analysis of 2009 First Half Results

Net income attributable to equity holders in the company during the first semester of 2009 was US$709.3 million, or US$0.60 per share (US$1.20 per ADS), which compares with net income attributable to equity holders in the company during the first semester of 2008 of US$1,460.5 million, or US$1.24 per share (US$2.47 per ADS). Operating income was US$1,122.4 million, or 25% of net sales during the first semester of 2009, compared to US$1,524.6 million, or 27% of net sales during the fist semester of 2008. Operating income plus depreciation and amortization for this semester was US$1,370.5 million, or 30% of net sales, compared to US$1,789.3 million, or 31% of net sales during the first semester of 2008.

Sales volume (metric tons)       H1 2009     H1 2008    Increase/(Decrease)
-------------------------       ---------   ---------   ------------------
Tubes - Seamless                1,076,000   1,457,000         (26%)
Tubes - Welded                    175,000     552,000         (68%)
Tubes - Total                   1,251,000   2,009,000         (38%)
Projects - Welded                 174,000     302,000         (42%)
Total                           1,424,000   2,311,000         (38%)
Tubes                               H1 2009   H1 2008   Increase/(Decrease)
-----                               -------   -------   ------------------
(Net sales - $ million)
North America                       1,676.8   1,819.1          (8%)
South America                         494.3     528.8          (7%)
Europe                                484.9     928.4         (48%)
Middle East & Africa                  848.0   1,041.3         (19%)
Far East & Oceania                    305.4     363.7         (16%)
Total net sales ($ million)         3,809.4   4,681.2         (19%)
Cost of sales (% of sales)               55%       55%
Operating income ($ million)        1,026.3   1,342.0         (24%)
Operating income (% of sales)            27%       29%

Net sales of tubular products and services decreased 19% to US$3,809.4 million in the first half of 2009, compared to US$4,681.2 million in the first half of 2008, due to a sharp reduction in volumes, which was partially offset by higher average selling prices, reflecting in part a higher proportion of sales of specialized high-end products.

Projects                              H1 2009  H1 2008  Increase/(Decrease)
--------                              -------  -------  ------------------
Net sales ($ million)                   476.6    639.8        (26%)
Cost of sales (% of sales)                 72%      71%
Operating income ($ million)             94.5    128.9        (27%)
Operating income (% of sales)              20%      20%

Net sales of pipes for pipeline projects decreased 26% to US$476.6 million in the first half of 2009, compared to US$639.8 million in the first half of 2008, reflecting lower deliveries in Brazil and Argentina to gas and other pipeline projects.

Others                                H1 2009  H1 2008  Increase/(Decrease)
------                                -------  -------  ------------------
Net sales ($ million)                   244.7    389.4        (37%)
Cost of sales (% of sales)                 84%      72%
Operating income ($ million)              1.6     53.7        (97%)
Operating income (% of sales)               1%      14%

Net sales of other products and services decreased 37% to US$244.7 million in the first half of 2009, compared to US$389.4 million in the first half of 2008, mainly reflecting lower sales of welded pipes for electric conduits in the USA and sucker rods.

Selling, general and administrative expenses, or SG&A, increased as a percentage of net sales to 17.3% in the semester ended June 30, 2009 compared to 15.4% in the corresponding semester of 2008, mainly due to the effect of fixed and semi-fixed expenses over lower revenues.

Net interest expenses decreased to US$50.8 million in the first half of 2009 compared to US$71.4 million in the same period of 2008 reflecting a lower net debt position and lower interest rates.

Other financial results recorded a loss of US$52.3 million during the first half of 2009, compared to a loss of US$9.6 million during the first half of 2008. 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$57.9 million in the first half of 2009, compared to a gain of US$98.0 million in the first half of 2008. These gains were derived mainly from our equity investment in Ternium.

Income tax charges totalled US$319.6 million in the first half of 2009, equivalent to 31% of income before equity in earnings of associated companies and income tax, compared to US$428.5 million in the first half of 2008, equivalent to 30% of income before equity in earnings of associated companies and income tax.

Income from discontinued operations amounted to a loss of US$28.1 million in the first half of 2009 corresponding to our Venezuelan operations that are being nationalized, compared to a gain of US$416.9 million in the corresponding period of 2008, of which US$394.3 million corresponded to the result of the sale of Hydril's pressure control business.

Income attributable to minority interest amounted to US$20.2 million in the first half of 2009, compared to US$69.5 million in the corresponding semester of 2008, mainly reflecting lower results at NKKTubes and at our Venezuelan subsidiaries.

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
(all amounts in thousands
 of U.S. dollars, unless      Three-month period       Six-month period
 otherwise stated)              ended June 30,          ended June 30,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
Continuing operations             (Unaudited)             (Unaudited)
Net sales                    2,096,344   3,110,103   4,530,632   5,710,424
Cost of sales               (1,264,899) (1,820,717) (2,628,211) (3,302,831)
                            ----------  ----------  ----------  ----------
Gross profit                   831,445   1,289,386   1,902,421   2,407,593
Selling, general and
 administrative expenses      (395,926)   (469,669)   (783,006)   (878,038)
Other operating income
 (expense), net                  1,278      (3,708)      3,024      (4,947)
                            ----------  ----------  ----------  ----------
Operating income               436,797     816,009   1,122,439   1,524,608
Interest income                  8,163      16,493      12,737      28,681
Interest expense               (24,435)    (33,962)    (63,582)   (100,124)
Other financial results        (15,907)      4,235     (52,266)     (9,572)
                            ----------  ----------  ----------  ----------
Income before equity in
 earnings of associated
 companies and income tax      404,618     802,775   1,019,328   1,443,593
Equity in earnings of
 associated companies           66,514      48,102      57,935      97,963
                            ----------  ----------  ----------  ----------
Income before income tax       471,132     850,877   1,077,263   1,541,556
Income tax                    (114,518)   (219,339)   (319,592)   (428,464)
                            ----------  ----------  ----------  ----------
Income for continuing
 operations                    356,614     631,538     757,671   1,113,092
Discontinued operations
Result for discontinued
 operations                    (20,176)    398,497     (28,138)    416,906
                            ----------  ----------  ----------  ----------
Income for the period          336,438   1,030,035     729,533   1,529,998
Attributable to:
Equity holders of the
 Company                       343,268     987,471     709,315   1,460,514
Minority interest               (6,830)     42,564      20,218      69,484
                            ----------  ----------  ----------  ----------
                               336,438   1,030,035     729,533   1,529,998
                            ----------  ----------  ----------  ----------
Consolidated Condensed Interim Statement of Financial Position
(all amounts in thousands
 of U.S. dollars)               At June 30, 2009      At December 31, 2008
                            -----------------------  ----------------------
                                  (Unaudited)
ASSETS
Non-current assets
  Property, plant and
   equipment, net             3,122,122               2,982,871
  Intangible assets, net      3,736,821               3,826,987
  Investments in associated
   companies                    575,628                 527,007
  Other investments              29,488                  38,355
  Deferred tax assets           217,686                 390,323
  Receivables                    84,595   7,766,340      82,752   7,848,295
                            -----------             -----------
Current assets
  Inventories                 2,150,785               3,091,401
  Receivables and
   prepayments                  228,791                 251,481
  Current tax assets            203,244                 201,607
  Trade receivables           1,536,984               2,123,296
  Available for sale assets      21,572                       -
  Other investments             273,450                  45,863
  Cash and cash equivalents   1,622,908   6,037,734   1,538,769   7,252,417
                            -----------             -----------
                                        -----------             -----------
Total assets                             13,804,074              15,100,712
EQUITY
Capital and reserves
 attributable to the
 Company's equity holders                 8,637,036               8,176,571
Minority interest                           569,535                 525,316
                                        -----------             -----------
Total equity                              9,206,571               8,701,887
LIABILITIES
Non-current liabilities
  Borrowings                    998,251               1,241,048
  Deferred tax liabilities      867,000               1,053,838
  Other liabilities             209,365                 223,142
  Provisions                     79,470                  89,526
  Trade payables                  2,418   2,156,504       1,254   2,608,808
                            -----------             -----------
Current liabilities
  Borrowings                  1,019,972               1,735,967
  Current tax liabilities       333,638                 610,313
  Other liabilities             247,478                 242,620
  Provisions                     51,385                  28,511
  Customer advances             256,922                 275,815
  Trade payables                531,604   2,440,999     896,791   3,790,017
                            -----------             -----------
Total liabilities                         4,597,503               6,398,825
Total equity and
 liabilities                             13,804,074              15,100,712
Consolidated Condensed Interim Cash Flow Statement (Unaudited)
                        Three-month period ended   Six-month period ended
(all amounts in                 June 30,                  June 30,
 thousands of U.S.      ------------------------  ------------------------
 dollars)                   2009         2008         2009         2008
                        -----------  -----------  -----------  -----------
Cash flows from
 operating activities
Income for the period       336,438    1,030,035      729,533    1,529,998
Adjustments for:
Depreciation and
 amortization               126,320      134,390      248,061      268,873
Income tax accruals
 less payments             (179,194)     (17,791)    (329,690)      89,747
Equity in earnings of
 associated companies       (65,532)     (48,102)     (57,073)     (98,096)
Income from the sale of
 pressure control
 business                         -     (394,323)                 (394,323)
Interest accruals less
 payments, net              (47,865)     (62,202)     (23,698)      (7,894)
Changes in provisions        25,675        7,747       14,200       15,243
Changes in working
 capital                    787,515     (326,894)   1,175,460     (545,614)
Other, including
 currency translation
 adjustment                 127,781      (48,874)     117,792      (15,017)
                        -----------  -----------  -----------  -----------
Net cash provided by
 operating activities     1,111,138      273,986    1,874,585      842,917
                        -----------  -----------  -----------  -----------
Cash flows from
 investing activities
Capital expenditures       (106,506)    (116,911)    (226,335)    (205,366)
Acquisitions of
 subsidiaries and
 minority interest          (67,593)        (839)     (73,535)      (1,865)
Proceeds from the sale
 of pressure control
 business                              1,113,805                 1,113,805
Proceeds from disposal
 of property, plant and
 equipment and
 intangible assets            7,749        3,819       10,328        8,826
Investments in short
 terms securities          (210,337)    (216,483)    (227,587)    (264,401)
Dividends received            4,283       13,636        5,223       13,636
Other                             -            -            -       (3,428)
                        -----------  -----------  -----------  -----------
Net cash (used in)
 provided by investing
 activities                (372,404)     797,027     (511,906)     661,207
                        -----------  -----------  -----------  -----------
Cash flows from
 financing activities
Dividends paid             (354,161)    (295,134)    (354,161)    (295,134)
Dividends paid to
 minority interest in
 subsidiaries               (27,176)     (55,136)     (27,176)     (55,136)
Proceeds from
 borrowings                  69,096      299,701      263,841      430,088
Repayments of
 borrowings                (808,801)    (842,478)  (1,149,484)  (1,332,755)
                        -----------  -----------  -----------  -----------
Net cash used in
 financing activities    (1,121,042)    (893,047)  (1,266,980)  (1,252,937)
                        -----------  -----------  -----------  -----------
(Decrease) Increase in
 cash and cash
 equivalents               (382,308)     177,966       95,699      251,187
Movement in cash and
 cash equivalents
At the beginning of the
 period                   1,968,707    1,072,985    1,525,022      954,303
Effect of exchange rate
 changes                     31,992       68,098       (2,330)     113,559
Decrease due to
 deconsolidation             (9,696)           -       (9,696)           -
Increase in cash and
 cash equivalents          (382,308)     177,966       95,699      251,187
At June 30,               1,608,695    1,319,049    1,608,695    1,319,049
Cash and cash
 equivalents                     At June 30,               At June 30,
                        ------------------------  ------------------------
                               2009         2008         2009         2008
Cash and bank deposits    1,622,908    1,337,838    1,622,908    1,337,838
Bank overdrafts             (14,213)     (18,789)     (14,213)     (18,789)
                          1,608,695    1,319,049    1,608,695    1,319,049

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


SOURCE: Tenaris S.A.

http://www.tenaris.com

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