Tenaris Announces 2009 Third Quarter Results

The Financial and Operational Information Contained in This Press Release Is Based on Unaudited Consolidated Condensed Interim Financial Statements Prepared in Accordance With International Financial Reporting Standards (IFRS) and Presented in U.S. Dollars

LUXEMBOURG, Nov 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 nine months ended September 30, 2009 with comparison to its results for the quarter and nine months ended September 30, 2008.

Summary of 2009 Third Quarter Results

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

                               Q3 2009      Q2 2009           Q3 2008
                               -------  ----------------- -----------------
Net sales (US$ million)        1,771.5  2,096.3     (15%) 3,074.0     (42%)
Operating income (US$ million)   360.6    436.8     (17%)   931.8     (61%)
Net income (US$ million)         237.3    336.4     (29%)   631.2     (62%)
Shareholders' net income (US$
 million)                        229.9    343.3     (33%)   570.6     (60%)
Earnings per ADS (US$)            0.39     0.58     (33%)    0.97     (60%)
Earnings per share (US$)          0.19     0.29     (33%)    0.48     (60%)
EBITDA (US$ million)             488.3    563.1     (13%) 1,064.6     (54%)
EBITDA margin (% of net sales)      28%      27%               35%

Our results in the third quarter reflect weak demand for our products and services from our customers in all regions though sales in the Middle East and Africa region registered a modest year on year increase. Shipments of tubular products fell 50% year on year and 16% sequentially. However, our EBITDA margin stabilized on a sequential basis as lower input costs offset lower prices. Earnings per share declined by 60% year on year reflecting the decline in sales and margins. However, cash flow from operations remained strong and we reduced our investment in working capital by a further US$359.5 million. Our net financial position (total financial debt less cash and other current investments) is now net cash positive with a balance of US$556.9 million at the end of the period.

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 26, 2009 (however, because such date is not a business day in the US, shareholders in all jurisdictions may receive their interim dividend on or after November 27, 2009, which is the first business day following the stated payment date), and the ex-dividend date will be November 23, 2009.

Market Background and Outlook

Global oil prices have risen during the first nine months of 2009 from their low of around US$30 per barrel at the beginning of the year and now stand around US$75-80 per barrel. The increase in oil prices is supported by expectations for a continuing recovery in the outlook for global growth led by the resilient performance of the Chinese economy and OPEC actions to curtail production. North American gas prices have recently rebounded from their lows below US$3.00 per million BTU but production has not yet fallen in line with demand and gas in storage is now at historically high levels.

The international count of active drilling rigs, as published by Baker Hughes, continued to decline during the third quarter. It averaged 969 during the third quarter of 2009, 1% lower than the second quarter of 2009 and 12% lower than the same quarter of the previous year. The corresponding rig count in the US, however, started to rebound in July driven mainly by an increase in oil drilling activity and lower rig rates. It averaged 973 during the third quarter, 4% higher than the second quarter of 2009 but 51% lower than the third quarter of 2008. In Canada, the corresponding rig count, which is affected by seasonal drilling patterns, averaged 187 during the quarter, a decrease of 57% compared to third quarter of 2008.

Whereas demand for our pipes this year has been severely 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, in the third quarter our level of incoming orders by volume is recovering. In addition, in the US and Canadian markets, inventory levels, although they remain high, have been coming down from the extraordinarily high levels they reached in the first quarter of this year. With activity levels now stabilizing, the oil price at an attractive level, and inventories closer to more reasonable levels, we can expect pipe shipments in our Tubes operating segment to begin showing a moderate increase in the fourth quarter.

During this quarter the order backlog for our large-diameter pipes for pipeline projects in South America has continued to decline and we therefore expect lower shipments going forward.

Our production costs should start to benefit from efficiencies associated with an increase in production levels, and from the effect of the actions underway to reduce our structural costs.

Our average selling prices in the coming quarters will reflect a gradual adjustment to the lower levels currently in the market and, consequently, any recovery in net sales and EBITDA will be more modest than that of our shipments.

Analysis of 2009 Third Quarter Results

                                                                  Increase/
Sales volume (metric tons)        Q3 2009         Q3 2008        (Decrease)
                                  -------         -------         --------
Tubes - Seamless                  407,000         669,000           (39%)
Tubes - Welded                     67,000         263,000           (75%)
Tubes - Total                     474,000         932,000           (49%)
Projects - Welded                  97,000         155,000           (37%)
Total                             571,000       1,087,000           (47%)
                                                                  Increase/
Tubes                             Q3 2009         Q3 2008        (Decrease)
                                  -------         -------         --------
(Net sales - $ million)
North America                       515.6         1,280.8           (60%)
South America                       225.9           368.3           (39%)
Europe                              176.9           408.1           (57%)
Middle East & Africa                360.4           344.2             5%
Far East & Oceania                   82.3           169.9           (52%)
Total net sales ($ million)       1,361.0         2,571.3           (47%)
Cost of sales (% of sales)             58%             53%
Operating income ($ million)        285.8           856.2           (67%)
Operating income (% of sales)          21%             33%

Net sales of tubular products and services decreased 47% to US$1,361.0 million in the third quarter of 2009, compared to US$2,571.3 million in the third quarter of 2008, in line with shipments as lower like for like prices were offset by a richer product mix. All regions were affected except for the Middle East and Africa which benefited from higher sales of deepwater line pipe products in West Africa. In North America, notwithstanding higher demand for OCTG products in Mexico, demand for OCTG products in the US and Canada declined precipitously due to the decline in drilling activity and inventory reductions. Sales in South America were affected by low levels of demand in Venezuela and Argentina. In Europe, sales were affected by lower demand from the industrial sector, lower demand from distributors serving the process and power plant sector and lower sales of OCTG principally in Romania. Sales in the Far East & Oceania were lower mainly in Japan and China.

                                                                  Increase/
Projects                          Q3 2009         Q3 2008        (Decrease)
                                  -------         -------         --------
Net sales ($ million)               288.7           319.1          (10%)
Cost of sales (% of sales)             71%             73%
Operating income ($ million)         59.5            44.3           34%
Operating income (% of sales)          21%             14%

Net sales of pipes for pipeline projects decreased 10% to US$288.7 million in the third quarter of 2009, compared to US$319.1 million in the third quarter of 2008, reflecting a lower level of shipments to gas and other pipeline projects in Brazil and Colombia.

                                                                  Increase/
Others                            Q3 2009         Q3 2008        (Decrease)
                                  -------         -------         --------
Net sales ($ million)               121.7           183.6           (34%)
Cost of sales (% of sales)             74%             68%
Operating income ($ million)         15.2            31.4           (52%)
Operating income (% of sales)          12%             17%

Net sales of other products and services decreased 34% to US$121.7 million in the third quarter of 2009, compared to US$183.6 million in the third quarter of 2008. Although demand for our Brazilian industrial equipment business remained firm, demand for our US electric conduit business was substantially lower and sales of sucker rods were affected by lower activity.

Selling, general and administrative expenses, or SG&A, increased as a percentage of net sales to 18.5% in the quarter ended September 30, 2009 compared to 14.7% 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$20.6 million in the third quarter of 2009 compared to US$21.5 million in the same period of 2008. Interest expenses in the third quarter of 2009, include US$11.1 million of losses on interest rate swaps entered into in order to minimize the volatility effect of floating rate debt assumed to finance the acquisitions of Maverick and Hydril.

Other financial results recorded a loss of US$15.4 million during the third quarter of 2009, compared to a loss of US$31.7 million during the third quarter of 2008. These results largely reflect gains and losses on net foreign exchange transactions and the changes in 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$10.3 million in the third quarter of 2009, compared to a gain of US$24.3 million in the third quarter of 2008. These gains mainly derived from our equity investment in Ternium.

Income tax charges totalled US$97.6 million in the third quarter of 2009, equivalent to 30% of income before equity in earnings of associated companies and income tax, compared to US$272.7 million in the third quarter of 2008, equivalent to 31% of income before equity in earnings of associated companies and income tax.

Income attributable to minority interest decreased to US$7.4 million in the third quarter of 2009, compared to US$60.5 million in the corresponding quarter of 2008 as we registered lower profits at our Confab subsidiary and losses at our NKKTubes subsidiary.

Cash Flow and Liquidity

Net cash provided by operations during the third quarter of 2009 was US$772.4 million (US$2,647.0 million in the first nine months), compared to US$242.8 million in the third quarter of 2008 (US$1,085.7 million in the first nine months). Working capital decreased by US$359.5 million during the third quarter, mainly due to inventories decrease of US$248.2 million and trade receivables decrease of US$241.6 million, partially offset by a decrease in customer advances of US$104.2 million.

Capital expenditures amounted to US$101.5 million in the third quarter of 2009 (US$327.8 million in the first nine months), compared to US$131.8 million in the third quarter of 2008 (US$337.1 million in the first nine months).

During the first nine months of 2009, total financial debt decreased by US$1,263.7 million to US$1,713.3 million at September 30, 2009 from US$2,977.0 million at December 31, 2008. Net financial debt during the first nine months of 2009 decreased by US$1,949.3 million to a positive net cash position of US$556.9 million at September 30, 2009.

Analysis of 2009 First Nine Months Results

Net income attributable to equity holders in the company during the first nine months of 2009 was US$939.2 million, or US$0.80 per share (US$1.59 per ADS), which compares with net income attributable to equity holders in the company during the first nine months of 2008 of US$2,031.1 million, or US$1.72 per share (US$3.44 per ADS). Net income for the first nine months of 2008 includes the result for the sale of Hydril's pressure control business of US$394.3 million, or US$0.33 per share (US$0.67 per ADS). Operating income was US$1,483.0 million, or 24% of net sales, compared to US$2,456.4 million, or 28% of net sales. Operating income plus depreciation and amortization was US$1,858.8 million, or 29% of net sales, compared to US$2,853.8 million, or 32% of net sales.

                                                                  Increase/
Sales volume (metric tons)        9M 2009         9M 2008        (Decrease)
                                  -------         -------         --------
Tubes - Seamless                1,483,000       2,126,000          (30%)
Tubes - Welded                    242,000         815,000          (70%)
Tubes - Total                   1,725,000       2,941,000          (41%)
Projects - Welded                 271,000         457,000          (41%)
Total                           1,996,000       3,398,000          (41%)
                                                                  Increase/
Tubes                             9M 2009         9M 2008        (Decrease)
                                  -------         -------         --------
(Net sales - $ million)
North America                     2,192.4         3,099.9           (29%)
South America                       720.2           897.1           (20%)
Europe                              661.8         1,336.5           (50%)
Middle East & Africa              1,208.4         1,385.5           (13%)
Far East & Oceania                  387.7           533.5           (27%)
Total net sales ($ million)       5,170.4         7,252.5           (29%)
Cost of sales (% of sales)             55%             54%
Operating income ($ million)      1,312.1         2,198.2           (40%)
Operating income (% of sales)          25%             30%

Net sales of tubular products and services decreased 29% to US$5,170.4 million in the first nine months of 2009, compared to US$7,252.5 million in the first nine months of 2008, due to a sharp reduction in volumes, which was partially offset by higher average selling prices, reflecting in part higher proportion of sales of specialized high-end products.

                                                                  Increase/
Projects                          9M 2009         9M 2008        (Decrease)
                                  -------         -------         --------
Net sales ($ million)               765.4           959.0           (20%)
Cost of sales (% of sales)             72%             72%
Operating income ($ million)        154.0           173.2           (11%)
Operating income (% of sales)          20%             18%

Net sales of pipes for pipeline projects decreased 20% to US$765.4 million in the first nine months of 2009, compared to US$959.0 million in the first nine months of 2008, reflecting lower deliveries in Brazil, Argentina and Colombia to gas and other pipeline projects.

                                                                  Increase/
Others                            9M 2009         9M 2008        (Decrease)
                                  -------         -------         --------
Net sales ($ million)               366.4           572.9           (36%)
Cost of sales (% of sales)             81%             71%
Operating income ($ million)         16.8            85.0           (80%)
Operating income (% of sales)           5%             15%

Net sales of other products and services decreased 36% to US$366.4 million in the first nine months of 2009, compared to US$572.9 million in the first nine months of 2008, reflecting lower sales of electric conduit pipes and sucker rods, partially offset by higher sales of industrial equipment.

Selling, general and administrative expenses, or SG&A, increased as a percentage of net sales to 17.6% in the nine months ended September 30, 2009 compared to 15.1% in the corresponding nine months of 2008, mainly due to the effect of fixed and semi-fixed expenses over lower revenues.

Net interest expenses decreased to US$71.4 million in the first nine months of 2009 compared to US$93.0 million in the same period of 2008 reflecting a lower net debt position and lower interest rates. Interest expenses in the first nine months of 2009, include US$ 14.1 million in losses on interest rate swaps entered into in order to minimize the volatility effect of floating rate debt.

Other financial results recorded a loss of US$67.6 million during the first nine months of 2009, compared to a loss of US$41.2 million during the first nine months of 2008. These results largely reflect gains and losses on net foreign exchange transactions and the changes in 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$68.2 million in the first nine months of 2009, compared to a gain of US$122.3 million in the first nine months of 2008. These gains were derived mainly from our equity investment in Ternium.

Income tax charges totalled US$417.2 million in the first nine months of 2009, equivalent to 31% of income before equity in earnings of associated companies and income tax, compared to US$701.1 million in the first nine months of 2008, equivalent to 30% of income before equity in earnings of associated companies and income tax.

Result for discontinued operations amounted to a loss of US$28.1 million in the first nine months of 2009, corresponding to our Venezuelan operations that are being nationalized, compared to a gain of US$417.8 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 decreased to US$27.7 million in the first nine months of 2009, compared to US$130.0 million in the corresponding nine months of 2008, mainly reflecting lower results at our Confab and NKKTubes 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     Three-month period      Nine-month period
 of U.S. dollars)             ended September 30,     ended September 30,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
Continuing operations             (Unaudited)             (Unaudited)
Net sales                    1,771,475   3,073,978   6,302,107   8,784,402
Cost of sales               (1,080,161) (1,712,417) (3,708,372) (5,015,248)
                            ----------  ----------  ----------  ----------
Gross profit                   691,314   1,361,561   2,593,735   3,769,154
Selling, general and
 administrative expenses      (327,234)   (450,453) (1,110,240) (1,328,491)
Other operating income
 (expense), net                 (3,528)     20,688        (504)     15,741
                            ----------  ----------  ----------  ----------
Operating income               360,552     931,796   1,482,991   2,456,404
Interest income                 10,435      16,910      23,172      45,591
Interest expense               (31,007)    (38,442)    (94,589)   (138,566)
Other financial results        (15,377)    (31,664)    (67,643)    (41,236)
                            ----------  ----------  ----------  ----------
Income before equity in
 earnings of associated
 companies and income tax      324,603     878,600   1,343,931   2,322,193
Equity in earnings of
 associated companies           10,294      24,290      68,229     122,253
                            ----------  ----------  ----------  ----------
Income before income tax       334,897     902,890   1,412,160   2,444,446
Income tax                     (97,583)   (272,668)   (417,175)   (701,132)
                            ----------  ----------  ----------  ----------
Income for continuing
 operations                    237,314     630,222     994,985   1,743,314
Discontinued operations
Result for discontinued
 operations                          -         935     (28,138)    417,841
                            ----------  ----------  ----------  ----------
Income for the period          237,314     631,157     966,847   2,161,155
Attributable to:
Equity holders of the
 Company                       229,873     570,635     939,188   2,031,149
Minority interest                7,441      60,522      27,659     130,006
                            ----------  ----------  ----------  ----------
                               237,314     631,157     966,847   2,161,155
                            ----------  ----------  ----------  ----------
Consolidated Condensed Interim Statement of Financial Position
(all amounts in thousands of
 U.S. dollars)                  At September 30, 2009 At December 31, 2008
                                --------------------- ---------------------
                                    (Unaudited)
ASSETS
Non-current assets
  Property, plant and
   equipment, net                3,193,279             2,982,871
  Intangible assets, net         3,707,914             3,826,987
  Investments in associated
   companies                       578,758               527,007
  Other investments                 31,835                38,355
  Deferred tax assets              195,778               390,323
  Receivables                       81,143  7,788,707     82,752  7,848,295
                                ----------            ----------
Current assets
  Inventories                    1,902,555             3,091,401
  Receivables and prepayments      225,905               251,481
  Current tax assets               234,587               201,607
  Trade receivables              1,295,386             2,123,296
  Available for sale assets         21,572                     -
  Other investments                528,861                45,863
  Cash and cash equivalents      1,741,352  5,950,218  1,538,769  7,252,417
                                ----------            ----------
                                           ----------            ----------
Total assets                               13,738,925            15,100,712
                                           ==========            ==========
EQUITY
Capital and reserves
 attributable to the Company's
 equity holders                             8,982,765             8,176,571
Minority interest                             618,746               525,316
                                           ----------            ----------
Total equity                                9,601,511             8,701,887
                                           ==========            ==========
LIABILITIES
Non-current liabilities
  Borrowings                       844,946             1,241,048
  Deferred tax liabilities         872,861             1,053,838
  Other liabilities                202,024               223,142
  Provisions                        84,695                89,526
  Trade payables                     3,018  2,007,544      1,254  2,608,808
                                ----------            ----------
Current liabilities
  Borrowings                       868,358             1,735,967
  Current tax liabilities          322,041               610,313
  Other liabilities                250,986               242,620
  Provisions                        35,986                28,511
  Customer advances                152,690               275,815
  Trade payables                   499,809  2,129,870    896,791  3,790,017
                                ----------            ----------
Total liabilities                           4,137,414             6,398,825
                                           ==========            ==========
Total equity and liabilities               13,738,925            15,100,712
                                           ==========            ==========
Consolidated Condensed Interim Statement of Cash Flows
                              Three-month period      Nine-month period
                              ended September 30,     ended September 30,
(all amounts in thousands   ----------------------  ----------------------
 of U.S. dollars)              2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
                                  (Unaudited)             (Unaudited)
Cash flows from operating
 activities
Income for the period          237,314     631,157     966,847   2,161,155
Adjustments for:
Depreciation and
 amortization                  127,789     134,885     375,850     403,758
Income tax accruals less
 payments                      (15,741)   (309,497)   (345,431)   (219,750)
Equity in earnings of
 associated companies          (10,294)    (24,290)    (67,367)   (122,386)
Income from the sale of
 pressure control business           -           -                (394,323)
Interest accruals less
 payments, net                   5,741      34,401     (17,957)     26,507
Changes in provisions          (10,174)     (4,404)      4,026      10,839
Changes in working capital     359,488    (257,464)  1,534,948    (803,078)
Other, including currency
 translation adjustment         78,278      37,986     196,070      22,969
                            ----------  ----------  ----------  ----------
Net cash provided by
 operating activities          772,401     242,774   2,646,986   1,085,691
                            ==========  ==========  ==========  ==========
Cash flows from investing
 activities
Capital expenditures          (101,460)   (131,772)   (327,795)   (337,138)
Acquisitions of
 subsidiaries and minority
 interest                          (29)     (8,003)    (73,564)     (9,868)
Proceeds from the sale of
 pressure control business                       -               1,113,805
Proceeds from disposal of
 property, plant and
 equipment and intangible
 assets                          1,676       3,340      12,004      12,166
Investments in short terms
 securities                   (255,411)    324,934    (482,998)     60,533
Dividends received               3,680           -       8,903      13,636
Other                                -           -           -      (3,428)
                            ----------  ----------  ----------  ----------
Net cash (used in) provided
 by investing activities      (351,544)    188,499    (863,450)    849,706
                            ==========  ==========  ==========  ==========
Cash flows from financing
 activities
Dividends paid                       -           -    (354,161)   (295,134)
Dividends paid to minority
 interest in subsidiaries       (5,522)     (4,981)    (32,698)    (60,117)
Proceeds from borrowings       245,961     301,117     509,802     731,205
Repayments of borrowings      (554,689)   (444,709) (1,704,173) (1,777,464)
                            ----------  ----------  ----------  ----------
Net cash used in financing
 activities                   (314,250)   (148,573) (1,581,230) (1,401,510)
                            ==========  ==========  ==========  ==========
Increase in cash and cash
 equivalents                   106,607     282,700     202,306     533,887
Movement in cash and cash
 equivalents
At the beginning of the
 period                      1,608,695   1,319,049   1,525,022     954,303
Effect of exchange rate
 changes                        18,118    (138,107)     15,788     (24,548)
Decrease due to
 deconsolidation                     -           -      (9,696)          -
Increase in cash and cash
 equivalents                   106,607     282,700     202,306     533,887
                            ----------  ----------  ----------  ----------
At September 30,             1,733,420   1,463,642   1,733,420   1,463,642
                            ==========  ==========  ==========  ==========
                            ----------------------  ----------------------
Cash and cash equivalents      At September 30,        At September 30,
                            ----------------------  ----------------------
                                  2009        2008        2009        2008
Cash and bank deposits       1,741,352   1,489,787   1,741,352   1,489,787
Bank overdrafts                 (7,932)    (26,145)     (7,932)    (26,145)
                            ----------  ----------  ----------  ----------
                             1,733,420   1,463,642   1,733,420   1,463,642
                            ----------  ----------  ----------  ----------

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


SOURCE: Tenaris S.A.

http://www.tenaris.com

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