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FORM 6 - K

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a - 16 or 15d - 16 of

the Securities Exchange Act of 1934

 

 

As of May 2, 2019

 

TENARIS, S.A.

(Translation of Registrant's name into English)

 

TENARIS, S.A.

29, Avenue de la Porte-Neuve 3rd floor

L-2227 Luxembourg

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or 40-F.

 

Form 20-F _Ö_ Form 40-F ___

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12G3-2(b) under the Securities Exchange Act of 1934.

 

Yes ___ No _Ö_

 

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-__.

 

 

The attached material is being furnished to the Securities and Exchange Commission pursuant to Rule 13a-16 and Form 6-K under the Securities Exchange Act of 1934, as amended. This report contains Tenaris’s Press Release announcing 2019 First Quarter Results.

 

 

 

 

 

SIGNATURE

 

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

Date: May 2, 2019.

 

 

 

Tenaris, S.A.

 

 

 

 

By: /s/ Cecilia Bilesio

Cecilia Bilesio

Corporate Secretary

 

 

 

 

 

 

Giovanni Sardagna

Tenaris

1-888-300-5432

www.tenaris.com

 

 

Tenaris Announces 2019 First 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 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. Additionally, this press release includes non-IFRS alternative performance measures i.e., EBITDA, Net cash / debt and Free Cash Flow. See exhibit I for more details on these alternative performance measures.

 

 

Luxembourg, May 2, 2019. - Tenaris S.A. (NYSE, Buenos Aires and Mexico: TS and MTA Italy: TEN) (“Tenaris”) today announced its results for the quarter ended March 31, 2019 in comparison with its results for the quarter ended March 31, 2018.

 

 

Summary of 2019 First Quarter Results

 

(Comparison with fourth and first quarter of 2018)

 

   1Q 2019   4Q 2018   1Q 2018 
Net sales ($ million)   1,872    2,105    (11%)   1,866    0%
Operating income ($ million)   259    179    45%   212    22%
Net income ($ million)   243    225    8%   235    3%
Shareholders’ net income ($ million)   243    226    8%   235    3%
Earnings per ADS ($)   0.41    0.38    8%   0.40    3%
Earnings per share ($)   0.21    0.19    8%   0.20    3%
EBITDA* ($ million)   390    426    (8%)   354    10%
EBITDA margin (% of net sales)   20.9%   20.2%        19.0%     

 

 

In the first quarter of 2019, sales declined 11% quarter-on-quarter, reflecting no deliveries of offshore line pipe for East Mediterranean gas projects concluded in the previous quarter and the slowdown in the US and Canadian markets. Operating income, which benefited from a $15 million recovery of tariffs paid on the import of steel bars into the United States to feed our Bay City mill, was 22% higher year-on-year on similar revenues, while net income for the quarter amounted to 13% of sales.

 

 

During the quarter, our working capital declined by $199 million, reflecting mostly a reduction in receivables and inventories. With operating cash flow of $548 million and capital expenditures of $86 million, our free cash flow amounted to $462 million (25% of revenues) and after paying $141 million for our investment in Saudi Steel Pipe (SSP), consolidating $74 million of SSP’s net debt and collecting $40 million from Techgen´s credits, our net cash position increased by $281 million to reach $766 million at the end of the quarter.

 

 

Market Background and Outlook

 

In the USA, there has been a limited slowdown in drilling activity in the year to date following the oil price downturn in the fourth quarter of last year and a more disciplined approach to capital expenditure by shale operators. In Canada, the slowdown has been more pronounced with a lack of pipeline takeaway capacity and government-mandated production cuts. Although oil prices have recovered in the year to date, capital discipline by shale operators is likely to persist through the year, which may limit any increase in drilling activity.

 

In Latin America, the recovery in drilling activity in Mexico may be tempered by financial constraints, while, in the rest of the region, drilling activity is expected to remain relatively stable, with shale drilling activity in Argentina switching from gas to oil.

 

In the eastern Hemisphere, drilling activity is expected to continue its gradual recovery with a focus on gas developments.

 

Following a solid performance in the first quarter, we expect to consolidate our sales around this level in the next quarter and hold margins at a similar level to last year. With a stable level of sales, and limited capital investment requirements, we should continue to generate a strong free cash flow during the year.

 

 

 

 

 

Analysis of 2019 First Quarter Results

 

Tubes Sales volume (thousand metric tons)  1Q 2019   4Q 2018   1Q 2018 
Seamless   640    700    (9%)   651    (2%)
Welded   184    247    (26%)   285    (35%)
Total   824    947    (13%)   936    (12%)

 

Tubes  1Q 2019   4Q 2018   1Q 2018 
(Net sales - $ million)                         
North America   893    967    (8%)   807    11%
South America   330    356    (7%)   285    16%
Europe   158    148    7%   153    4%
Middle East & Africa   301    436    (31%)   456    (34%)
Asia Pacific   81    77    5%   66    23%
Total net sales ($ million)   1,763    1,984    (11%)   1,766    0%
Operating income ($ million)   238    154    55%   194    23%
Operating margin (% of sales)   13.5%   7.7%        11.0%     

 

 

Net sales of tubular products and services decreased 11% sequentially and were flat year on year. Sequentially a 13% decrease in volumes was partially offset by a 2% increase in average selling price resulting from a better product mix (higher proportion of seamless pipes). In North America sales decreased 8% sequentially, due to lower sales in the US onshore, reflecting activity reductions by our Rig Direct® customers. In South America sales declined 7% sequentially, reflecting lower sales of OCTG in Argentina. In Europe sales increased 7% thanks to higher sales of offshore line pipe products. In the Middle East and Africa sales decreased 31% sequentially, after the end of deliveries of line pipe products for the Zohr project in the East Mediterranean, while they were partially offset by $40 million sales from SSP. In Asia Pacific sales increased 5% thanks to an increase in sales of OCTG products to LNG projects in Australia.

 

Operating income from tubular products and services amounted to $238 million in the first quarter of 2019, compared to $154 million in the previous quarter and $194 million in the first quarter of 2018. In the previous quarter operating income was negatively affected by $109 million charge to amortization of customer relationships. Still after correcting for the one off effect in the previous quarter, the operating margin improved based on a better product mix(reflecting a mix of products with higher participation of seamless products) and a reduction in selling expenses.

 

Others  1Q 2019   4Q 2018   1Q 2018 
Net sales ($ million)   109    121    (10%)   100    9%
Operating income ($ million)   21    25    (17%)   19    11%
Operating income (% of sales)   19.1%   20.7%        18.7%     

 

Net sales of other products and services decreased 10% sequentially but increased 9% year on year. The sequential decrease in sales is mainly related to lower sales of sucker rods and coiled tubing.

 

Selling, general and administrative expenses, or SG&A, amounted to $345 million, or 18.5% of net sales, in the first quarter of 2019, compared to $487 million, 23.1% in the previous quarter and $350 million, 18.7% in the first quarter of 2018. In the previous quarter SG&A was negatively affected by $109 million charge to amortization of customer relationships. In addition to the one off charge, selling expenses declined reflecting lower volumes.

 

 

 

Financial results amounted to a gain of $24 million in the first quarter of 2019, compared to a loss of $6 million in the previous quarter and a loss of $8 million in the first quarter of 2018. The gain of the quarter corresponds mainly to an FX gain of $26 million, $21 million related to the Argentine peso devaluation on a net short position in local currency at Argentine subsidiaries which functional currency is the U.S. dollar.

 

Equity in earnings of non-consolidated companies generated a gain of $29 million in the first quarter of 2019, compared to a gain of $51 million in the previous quarter and a gain of $46 million in the first quarter of 2018. These results are mainly derived from our equity investment in Ternium (NYSE:TX) and Usiminas (BSP:USIM).

 

Income tax charge amounted to $70 million in the first quarter of 2019 or 22% of income before income tax, including $8 million net charges, related to foreign exchange variations, mainly in Argentina and Mexico.

 

 

Cash Flow and Liquidity

 

Net cash provided by operations during the first quarter of 2019 was $548 million, compared with $239 million in the previous quarter and a use of cash of $30 million in the first quarter of 2018. Working capital decreased by $199 million, reflecting, in part, the reduction in sales as well as a decrease in inventories.

 

Capital expenditures amounted to $86 million for the first quarter of 2019, compared to $76 million in the previous quarter and $92 million in the first quarter of 2018.

 

Free cash flow of the quarter amounted to $462 million (25% of revenues), compared to $163 million in the previous quarter and a negative free cash flow of $122 million in the first quarter of 2018.

 

After paying $141 million for our investment in SSP, consolidating $74 million of SSP’s net debt at the end of the quarter and collecting $40 million from Techgen´s credits, our net cash position amounted to $766 million, compared to $485 million at the beginning of the year.

 

Conference call

 

Tenaris will hold a conference call to discuss the above reported results, on May 3, 2019, at 09:00 a.m. (Eastern Time). Following a brief summary, the conference call will be opened to questions. To access the conference call dial in +1 866 789 1656 within North America or +1 630 489.1502 Internationally. The access number is “1691768”. Please dial in 10 minutes before the scheduled start time. The conference call will be also available by webcast at www.tenaris.com/investors.

 

A replay of the conference call will be available on our webpage http://ir.tenaris.com/ or by phone from 12.00 pm ET on May 3, through 11.59 pm on May 11, 2019. To access the replay by phone, please dial 855 859 2056 or 404 537 3406 and enter passcode “1691768” when prompted.

 

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.

 

 

 

Consolidated Condensed Interim Income Statement

 

(all amounts in thousands of U.S. dollars)  Three-month period ended March 31,
   2019  2018
Continuing operations  Unaudited
Net sales   1,871,759    1,866,235 
Cost of sales   (1,271,799)   (1,305,506)
Gross profit   599,960    560,729 
Selling, general and administrative expenses   (345,366)   (349,634)
Other operating income (expense), net   4,422    1,102 
Operating income   259,016    212,197 
Finance Income   10,461    9,373 
Finance Cost   (6,982)   (10,174)
Other financial results   20,915    (7,066)
Income before equity in earnings of non-consolidated companies and income tax   283,410    204,330 
Equity in earnings of non-consolidated companies   29,135    46,026 
Income before income tax   312,545    250,356 
Income tax   (69,956)   (15,122)
Income for the period   242,589    235,234 
           
Attributable to:          
Owners of the parent   242,879    234,983 
Non-controlling interests   (290)   251 
    242,589    235,234 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Interim Statement of Financial Position

(all amounts in thousands of U.S. dollars)  At March 31, 2019  At December 31, 2018
   Unaudited   
ASSETS            
Non-current assets                    
  Property, plant and equipment, net   6,197,512         6,063,908      
  Intangible assets, net   1,576,436         1,465,965      
  Right-of-use assets, net   233,899         -      
  Investments in non-consolidated companies   851,442         805,568      
  Other investments   111,119         118,155      
  Deferred tax assets   163,231         181,606      
  Receivables, net   156,954    9,290,593    151,905    8,787,107 
Current assets                    
  Inventories, net   2,462,762         2,524,341      
  Receivables and prepayments, net   141,985         155,885      
  Current tax assets   117,958         121,332      
  Trade receivables, net   1,528,467         1,737,366      
  Derivative financial instruments   11,614         9,173      
  Other investments   432,604         487,734      
  Cash and cash equivalents   897,767    5,593,157    428,361    5,464,192 
Total assets        14,883,750         14,251,299 
EQUITY                    
Capital and reserves attributable to owners of the parent        12,005,132         11,782,882 
Non-controlling interests        211,041         92,610 
Total equity        12,216,173         11,875,492 
LIABILITIES                    
Non-current liabilities                    
  Borrowings   56,980         29,187      
  Lease liabilities   193,745         -      
  Deferred tax liabilities   364,938         379,039      
  Other liabilities   228,306         213,129      
  Provisions   37,511    881,480    36,089    657,444 
Current liabilities                    
  Borrowings   622,735         509,820      
  Lease liabilities   35,959         -      
  Derivative financial instruments   3,462         11,978      
  Current tax liabilities   238,622         250,233      
  Other liabilities   202,057         165,693      
  Provisions   29,496         24,283      
  Customer advances   57,234         62,683      
  Trade payables   596,532    1,786,097    693,673    1,718,363 
Total liabilities        2,667,577         2,375,807 
Total equity and liabilities        14,883,750         14,251,299 

 

 

 

 

Consolidated Condensed Interim Statement of Cash Flows

   Three-month period ended March 31,
(all amounts in thousands of U.S. dollars)  2019  2018
Cash flows from operating activities  Unaudited
       
Income for the period   242,589    235,234 
Adjustments for:          
Depreciation and amortization   131,335    141,802 
Income tax accruals less payments   9,951    (24,816)
Equity in earnings of non-consolidated companies   (29,135)   (46,026)
Interest accruals less payments, net   560    620 
Changes in provisions   (1,870)   1,527 
Changes in working capital   199,489    (363,552)
Currency translation adjustment and others   (5,303)   25,644 
Net cash provided by (used in) operating activities   547,616    (29,567)
           
Cash flows from investing activities          
Capital expenditures   (85,686)   (91,938)
Changes in advance to suppliers of property, plant and equipment   501    (414)
Acquisition of subsidiaries, net of cash acquired   (132,845)   - 
Loan to non-consolidated companies   -    (2,200)
Repayment of loan by non-consolidated companies   40,470    1,950 
Proceeds from disposal of property, plant and equipment and intangible assets   262    1,484 
Changes in investments in securities   66,777    84,616 
Net cash (used in) investing activities   (110,521)   (6,502)
           
Cash flows from financing activities          
Changes in non-controlling interests   1    - 
Payments of lease liabilities   (10,171)   - 
Proceeds from borrowings   184,396    277,711 
Repayments of borrowings   (139,052)   (248,041)
Net cash provided by financing activities   35,174    29,670 
           
Increase (decrease) in cash and cash equivalents   472,269    (6,399)
Movement in cash and cash equivalents          
At the beginning of the period   426,717    330,090 
Effect of exchange rate changes   (1,484)   1,050 
Increase (decrease) in cash and cash equivalents   472,269    (6,399)
At March 31,   897,502    324,741 

 

 

 

 

Exhibit I – Alternative performance measures

 

EBITDA, Earnings before interest, tax, depreciation and amortization.

 

EBITDA provides an analysis of the operating results excluding depreciation and amortization and impairments, as they are non-cash variables which can vary substantially from company to company depending on accounting policies and the accounting value of the assets. EBITDA is an approximation to pre-tax operating cash flow and reflects cash generation before working capital variation. EBITDA is widely used by investors when evaluating businesses (multiples valuation), as well as by rating agencies and creditors to evaluate the level of debt, comparing EBITDA with net debt.

 

EBITDA is calculated in the following manner:

 

EBITDA= Operating results + Depreciation and amortization + Impairment charges/(reversals).

 

(all amounts in thousands of U.S. dollars)  Three-month period ended March 31,
   2019  2018
Operating income   259,016    212,197 
Depreciation and amortization   131,335    141,802 
EBITDA   390,351    353,999 

 

 

Net Cash / (Debt)

 

This is the net balance of cash and cash equivalents, other current investments and non-current investments less total borrowings. It provides a summary of the financial solvency and liquidity of the company. Net cash / (debt) is widely used by investors and rating agencies and creditors to assess the company’s leverage, financial strength, flexibility and risks.

 

Net cash/ debt is calculated in the following manner:

 

Net cash= Cash and cash equivalents + Other investments (Currentand Non-Current) +/- Derivatives hedging borrowings and investments – Borrowings (Current and Non-Current)

 

(all amounts in thousands of U.S. dollars)  At March 31,
   2019  2018
Cash and cash equivalents   897,767    328,675 
Other current investments   432,604    999,576 
Non-current Investments   106,945    234,739 
Derivatives hedging borrowings and investments   8,184    (6,063)
Borrowings – current and non-current   (679,715)   (1,005,595)
Net cash / (debt)   765,785    551,332 

 

 

 

 

 

 

Free Cash Flow

 

Free cash flow is a measure of financial performance, calculated as operating cash flow less capital expenditures. FCF represents the cash that a company is able to generate after spending the money required to maintain or expand its asset base.

 

Free cash flow is calculated in the following manner:

 

Free cash flow= Net cash (used in) provided by operating activities – Capital expenditures.

 

(all amounts in thousands of U.S. dollars)  Three-month period ended March 31,
   2019  2018
Net cash provided by (used in) operating activities   547,616    (29,567)
Capital expenditures   (85,686)   (91,938)
Free cash flow   461,930    (121,505)