Tenaris Announces 2011 Second Quarter Results

The Financial 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 as Issued by the International Accounting Standard Board and Adopted by the European Union, or IFRS

LUXEMBOURG -- (MARKET WIRE) -- 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


(Comparison with first quarter of 2011 and second quarter of 2010)



                               Q2 2011       Q1 2011           Q2 2010

Net sales (US$ million)        2,403.1  2,324.0      3%   1,981.8      21%

Operating income (US$ million)   412.4    441.4     (7%)    405.3       2%

Net income (US$ million)         304.7    324.2     (6%)    295.0       3%

Shareholders' net income (US$

 million)                        287.2    319.4    (10%)    282.1       2%

Earnings per ADS (US$)            0.49     0.54    (10%)     0.48       2%

Earnings per share (US$)          0.24     0.27    (10%)     0.24       2%

EBITDA (US$ million)             548.4    570.8     (4%)    531.2       3%

EBITDA margin (% of net sales)      23%      25%               27%

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




Sales volume (metric tons)       Q2 2011       Q1 2011          Q2 2010

Tubes - Seamless                  633,000   621,000   2%     603,000     5%

Tubes - Welded                    198,000   233,000 (15%)    179,000    11%

Tubes - Total                     831,000   854,000  (3%)    782,000     6%

Projects - Welded                  68,000    75,000  (9%)     32,000   113%

Total                             899,000   929,000  (3%)    814,000    10%



        Tubes                    Q2 2011       Q1 2011          Q2 2010

(Net sales - $ million)

North America                      946.0     978.5    (3%)    736.4    28%

South America                      327.9     318.2     3%     315.3     4%

Europe                             279.0     243.8    14%     179.4    56%

Middle East & Africa               303.7     297.8     2%     376.0   (19%)

Far East & Oceania                 141.2     129.0     9%     114.2    24%

Total net sales ($ million)      1,997.8   1,967.3     2%   1,721.4    16%

Cost of sales (% of sales)            63%       61%              58%

Operating income ($ million)       322.0     372.1   (13%)    355.6    (9%)

Operating income (% of sales)         16%       19%              21%

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                         Q2 2011     Q1 2011      Q2 2010

Net sales ($ million)                      212.4   175.0   21%   94.0  126%

Cost of sales (% of sales)                    65%     69%          63%

Operating income ($ million)                51.5    31.8   62%   19.0  171%

Operating income (% of sales)                 24%     18%          20%


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.


        Others                            Q2 2011      Q1 2011     Q2 2010

Net sales ($ million)                      192.9   181.7   6%  166.3   16%

Cost of sales (% of sales)                    68%     68%         72%

Operating income ($ million)                38.9    37.5   4%   30.7   27%

Operating income (% of sales)                 20%     21%         18%


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


                                                                 Increase/

                                              H1 2011  H1 2010   (Decrease)

Net sales (US$ million)                       4,727.1  3,620.5          31%

Operating income (US$ million)                  853.8    714.6          19%

Net income (US$ million)                        628.9    517.2          22%

Shareholders' net income (US$ million)          606.6    501.6          21%

Earnings per ADS (US$)                           1.03     0.85          21%

Earnings per share (US$)                         0.51     0.42          21%

EBITDA* (US$ million)                         1,119.2    966.6          16%

EBITDA margin (% of net sales)                     24%      27%


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:


                                                                  Increase/

Net sales ($ million)                  H1 2011       H1 2010     (Decrease)

Tubes                                3,965.1  84%  3,131.8  87%         27%

Projects                               387.3   8%    187.2   5%        107%

Others                                 374.6   8%    301.4   8%         24%

Total                                4,727.1 100%  3,620.5 100%         31%


The following table indicates our sales volume of seamless and welded pipes by business segment for the periods indicated below:


                                                                  Increase/

    Sales volume (metric tons)        H1 2011       H1 2010      (Decrease)

Tubes - Seamless                      1,254,000     1,070,000           17%

Tubes - Welded                          431,000       318,000           36%

Tubes - Total                         1,685,000     1,388,000           21%

Projects - Welded                       143,000        66,000          117%

Total                                 1,828,000     1,454,000           26%


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:


                                                                 Increase

         Tubes                       H1 2011       H1 2010      (Decrease)

(Net sales - $ million)

North America                          1,924.5       1,412.8           36%

South America                            646.1         518.3           25%

Europe                                   522.8         378.8           38%

Middle East & Africa                     601.5         625.3           (4%)

Far East & Oceania                       270.2         196.6           37%

Total net sales ($ million)            3,965.1       3,131.8           27%

Cost of sales (% of sales)                  62%           58%

Operating income ($ million)             694.1         634.7            9%

Operating income (% of sales)               18%           20%


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:


                                                                 Increase/

       Projects                      H1 2011       H1 2010      (Decrease)

Net sales ($ million)                 387.3         187.2           107%

Cost of sales (% of sales)               66%           65%

Operating income ($ million)           83.3          27.5           203%

Operating income (% of sales)            21%           15%


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:


                                                                 Increase/

         Others                      H1 2011       H1 2010      (Decrease)

Net sales ($ million)                 374.6         301.4            24%

Cost of sales (% of sales)               68%           72%

Operating income ($ million)           76.4          52.4            46%

Operating income (% of sales)            20%           17%


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 www.bourse.lu and from Tenaris's website at www.tenaris.com/investors.

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 www.tenaris.com/investors.


Consolidated Condensed Interim Income Statement


 (all amounts in thousands     Three-month period       Six-month period

 of U.S. dollars)               ended June 30,           ended June 30,

                            ----------------------  ----------------------

                               2011        2010        2011        2010

                            ----------  ----------  ----------  ----------

Continuing operations             (Unaudited)             (Unaudited)

Net sales                    2,403,122   1,981,762   4,727,087   3,620,483

Cost of sales               (1,523,448) (1,183,429) (2,957,810) (2,170,472)

                            ----------  ----------  ----------  ----------

Gross profit                   879,674     798,333   1,769,277   1,450,011

Selling, general and

 administrative expenses      (468,341)   (391,144)   (918,115)   (738,531)

Other operating income

 (expense), net                  1,028      (1,886)      2,649       3,163

                            ----------  ----------  ----------  ----------

Operating income               412,361     405,303     853,811     714,643

Interest income                  6,513       4,352      14,200      11,500

Interest expense               (12,248)    (21,889)    (25,289)    (41,958)

Other financial results        (12,408)     (7,368)    (11,350)        323

                            ----------  ----------  ----------  ----------

Income before equity in

 earnings of associated

 companies and income tax      394,218     380,398     831,372     684,508

Equity in earnings of

 associated companies           22,720      19,288      47,005      42,814

                            ----------  ----------  ----------  ----------

Income before income tax       416,938     399,686     878,377     727,322

Income tax                    (112,235)   (104,716)   (249,477)   (210,142)

                            ----------  ----------  ----------  ----------

Income for the period          304,703     294,970     628,900     517,180



Attributable to:

Equity holders of the

 Company                       287,218     282,098     606,592     501,647

Non-controlling interests       17,485      12,872      22,308      15,533

                            ----------  ----------  ----------  ----------

                               304,703     294,970     628,900     517,180

                            ----------  ----------  ----------  ----------




Consolidated Condensed Interim Statement of Financial Position


(all amounts in thousands of

 U.S. dollars)                    At June 30, 2011    At December 31, 2010

                                --------------------- ---------------------

                                    (Unaudited)

ASSETS

Non-current assets

  Property, plant and

   equipment, net                4,212,424             3,780,580

  Intangible assets, net         3,509,504             3,581,816

  Investments in associated

   companies                       704,764               671,855

  Other investments                 45,616                43,592

  Deferred tax assets              227,591               210,523

  Receivables                      137,980  8,837,879    120,429  8,408,795

                                ----------            ----------



Current assets

  Inventories                    2,765,885             2,460,384

  Receivables and prepayments      268,912               282,536

  Current tax assets               227,666               249,317

  Trade receivables              1,723,037             1,421,642

  Available for sale assets         21,572                21,572

  Other investments                870,906               676,224

  Cash and cash equivalents        424,287  6,302,265    843,861  5,955,536

                                ---------- ---------- ---------- ----------

Total assets                               15,140,144            14,364,331



EQUITY

Capital and reserves

 attributable to the

 Company's equity holders                  10,469,669             9,902,359

Non-controlling interests                     682,426               648,221

                                           ----------            ----------

Total equity                               11,152,095            10,550,580



LIABILITIES

Non-current liabilities

  Borrowings                       160,636               220,570

  Deferred tax liabilities         929,052               934,226

  Other liabilities                214,345               193,209

  Provisions                        91,736                83,922

  Trade payables                     2,611  1,398,380      3,278  1,435,205

                                ----------            ----------



Current liabilities

  Borrowings                     1,069,673             1,023,926

  Current tax liabilities          213,144               207,652

  Other liabilities                313,359               233,590

  Provisions                        37,203                25,101

  Customer advances                 66,223                70,051

  Trade payables                   890,067  2,589,669    818,226  2,378,546

                                ---------- ---------- ---------- ----------

Total liabilities                           3,988,049             3,813,751



Total equity and liabilities               15,140,144            14,364,331




Consolidated Condensed Interim Statement of Cash Flow


                                 Three-month period     Six-month period

                                   ended June 30,        ended June 30,

                                --------------------  --------------------

(all amounts in thousands of

 U.S. dollars)                    2011       2010       2011       2010

                                ---------  ---------  ---------  ---------

                                    (Unaudited)           (Unaudited)

Cash flows from operating

 activities

Income for the period             304,703    294,970    628,900    517,180

Adjustments for:

Depreciation and amortization     136,017    125,888    265,401    251,916

Income tax accruals less

 payments                          (8,003)   (87,690)    36,629   (115,948)

Equity in earnings of

 associated companies             (22,720)   (19,784)   (47,005)   (43,310)

Interest accruals less

 payments, net                    (13,782)    10,449    (27,820)    19,496

Changes in provisions               1,899     (3,740)    19,916      1,684

Changes in working capital        (95,089)  (187,740)  (487,951)   (63,493)

Other, including currency

 translation adjustment            22,106    (73,732)   102,716    (72,632)

                                ---------  ---------  ---------  ---------

Net cash provided by operating

 activities                       325,131     58,621    490,786    494,893

                                ---------  ---------  ---------  ---------



Cash flows from investing

 activities

Capital expenditures             (251,171)  (190,431)  (461,791)  (348,393)

Proceeds from disposal of

 property, plant and equipment

 and intangible assets                712      2,836      1,967      5,746

Dividends and distributions

 received from associated

 companies                         17,229     11,486     17,229     12,958

Investments in short terms

 securities                      (205,634)   141,157   (194,682)    75,052

                                ---------  ---------  ---------  ---------

Net cash used in investing

 activities                      (438,864)   (34,952)  (637,277)  (254,637)

                                ---------  ---------  ---------  ---------



Cash flows from financing

 activities

Dividends paid                   (247,913)  (247,913)  (247,913)  (247,913)

Dividends paid to

 non-controlling interests in

 subsidiaries                      (5,735)   (14,577)    (5,735)   (14,577)

Acquisitions of non-controlling

 interests                        (11,439)    (3,329)   (16,489)    (3,356)

Proceeds from borrowings          180,515    151,533    489,795    349,856

Repayments of borrowings         (309,582)  (281,709)  (541,112)  (588,754)

                                ---------  ---------  ---------  ---------

Net cash used in financing

 activities                      (394,154)  (395,995)  (321,454)  (504,744)

                                ---------  ---------  ---------  ---------



Decrease in cash and cash

 equivalents                     (507,887)  (372,326)  (467,945)  (264,488)



Movement in cash and cash

 equivalents

At the beginning of the period    865,228  1,624,909    820,165  1,528,707

Effect of exchange rate changes     4,702     (8,182)     9,823    (19,818)

Decrease in cash and cash

 equivalents                     (507,887)  (372,326)  (467,945)  (264,488)

                                ---------  ---------  ---------  ---------

At June 30,                       362,043  1,244,401    362,043  1,244,401

                                ---------  ---------  ---------  ---------



                                --------------------  --------------------

                                     At June 30,           At June 30,

                                --------------------  --------------------

Cash and cash equivalents          2011       2010       2011       2010

                                ---------  ---------  ---------  ---------

Cash and bank deposits            424,287  1,276,814    424,287  1,276,814

Bank overdrafts                   (62,244)   (32,413)   (62,244)   (32,413)

                                ---------  ---------  ---------  ---------

                                  362,043  1,244,401    362,043  1,244,401

                                ---------  ---------  ---------  ---------

Giovanni Sardagna

Tenaris

1-888-300-5432

www.tenaris.com



Source: Tenaris S.A.

News Provided by Acquire Media

Back to top