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 October 30, 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 Third 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: October 30, 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 Third 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, Free cash flow and Net cash / debt. See exhibit I for more details on these alternative performance measures.

 

Luxembourg, October 30, 2019 - Tenaris S.A. (NYSE and Mexico: TS and MTA Italy: TEN) (“Tenaris”) today announced its results for the quarter and nine months ended September 30, 2019 with comparison to its results for the quarter and nine months ended September 30, 2018.

 

 

Summary of 2019 Third Quarter Results

 

(Comparison with second quarter of 2019 and third quarter of 2018)

		3Q 2019				2Q 2019								3Q 2018
Net sales ($ million)			1,764				1,918				(8	%)			1,899				(7	%)
Operating income ($ million)			187				234				(20	%)			258				(28	%)
Net income ($ million)			101				240				(58	%)			247				(59	%)
Shareholders’ net income ($ million)			107				241				(56	%)			247				(57	%)
Earnings per ADS ($)			0.18				0.41				(56	%)			0.42				(57	%)
Earnings per share ($)			0.09				0.20				(56	%)			0.21				(57	%)
EBITDA ($ million)			322				370				(13	%)			394				(18	%)
EBITDA margin (% of net sales)			18.2	%			19.3	%							20.7	%

 

Our third quarter sales fell 8% sequentially and 7% year on year, despite gains in the Middle East and Mexico, reflecting ongoing activity reductions in the US and Argentine shales, which is affecting prices throughout the Americas, and a downturn in our European industrial sales. Our EBITDA margin was affected by a decline in average selling prices and the impact of major maintenance stoppages in the northern hemisphere, principally in Mexico. Net income for the quarter was further affected by the impact of currency devaluations on our income tax charge in Argentina and Mexico and by a lower contribution from our equity investment in Ternium.

 

Despite the decline in net income, we generated a free cash flow of $287 million, or 16% of revenues, which included a further decline in working capital of $157 million, and we ended the quarter with a net cash position of $964 million.

 

Interim Dividend Payment

 

Our board of directors approved the payment of an interim dividend of $0.13 per share ($0.26 per ADS), or approximately $153 million. The payment date will be November 20, 2019 , with an ex-dividend date on November 18, 2019 and record date on November 19, 2019.

 

Market Background and Outlook

 

During the third quarter, drilling activity in the US shales fell further, as operators chose to prioritize investor returns over production growth and maintain spending within budget limits announced at the beginning of the year. We do not expect a recovery in US shale drilling activity going into 2020. In Canada, the situation is similar with drilling activity well down on last year and no recovery expected over last year in the upcoming winter drilling season.

 

In Latin America, drilling activity in Argentina is declining as operators put on hold their investment plans for Vaca Muerta pending more clarity on the policy measures that will be adopted by the incoming government. In Mexico, offshore drilling activity has been increasing.

 

In the Eastern Hemisphere, drilling activity continues to improve, led by gas developments in the Middle East, and a gradual recovery in offshore basins.

 

Price levels for steel pipe products in North America have been affected by the decline in demand, the increased competitiveness of domestic welded pipe products reflecting lower costs of hot rolled coils, and continuing high import levels, despite the application of US Section 232 tariffs and quotas.

 

In the fourth quarter, our sales will be affected by lower average selling prices and the activity slowdowns in the USA and Argentina. We expect to mitigate much of the impact of lower average selling prices with lower costs and maintain our EBITDA margin in line with that of this third quarter. Going into 2020, we expect a recovery in sales, particularly for offshore and gas drilling activity, as well as in margins and cash flow as we work on reducing costs and working capital.

 

Analysis of 2019 Third Quarter Results

 

Tubes Sales volume (thousand metric tons)		3Q 2019				2Q 2019								3Q 2018
Seamless			645				674				(4	%)			654				(1	%)
Welded			150				173				(13	%)			199				(25	%)
Total			796				846				(6	%)			853				(7	%)

 

 

Tubes		3Q 2019				2Q 2019								3Q 2018
(Net sales - $ million)
North America			772				863				(11	%)			887				(13	%)
South America			308				337				(9	%)			334				(8	%)
Europe			136				194				(30	%)			148				(8	%)
Middle East & Africa			369				315				17	%			350				5	%
Asia Pacific			77				105				(27	%)			77				(1	%)
Total net sales ($ million)			1,661				1,814				(8	%)			1,797				(8	%)
Operating income ($ million)			163				216				(25	%)			233				(30	%)
Operating margin (% of sales)			9.8	%			11.9	%							13.0	%

 

Net sales of tubular products and services decreased 8% sequentially and year on year. The sequential decrease reflects a 6% decrease in volumes and a 3% decrease in average selling prices. In North America our sales declined affected by a general decline in prices for all products and lower volumes of line pipe products. In South America, sales of OCTG products in Argentina started to decline in September, and we had lower sales of conductor casing in Brazil. In Europe sales declined reflecting seasonally lower sales of mechanical and line pipe products and lower sales of premium OCTG in the North Sea. In the Middle East and Africa sales increased mainly due to large orders sold in India. In Asia Pacific we had lower sales throughout the region.

 

Operating income from tubular products and services, amounted to $163 million in the third quarter of 2019, compared to $216 million in the previous quarter and $233 million in the third quarter of 2018. Sequentially, operating income was affected by lower sales and a decrease of 210 basis points in the operating margin. The 3% decline in prices was only partially offset by lower costs as a decline in direct costs was offset by a worse industrial performance related to the plant maintenance stoppages in the northern hemisphere, mainly in Mexico.

  

Others		3Q 2019				2Q 2019								3Q 2018
Net sales ($ million)			102				104				(1	%)			102				0	%
Operating income ($ million)			24				18				32	%			26				(6	%)
Operating income (% of sales)			23.6	%			17.7	%							25.2	%

  

Net sales of other products and services declined 1% sequentially and remained flat year on year. The improvement in operating income is mainly related to our industrial equipment business in Brazil.

 

Selling, general and administrative expenses, or SG&A, amounted to $333 million, or 18.9% of net sales in the third quarter of 2019, compared to $339 million, 17.7% in the previous quarter and $336 million, 17.7% in the third quarter of 2018. Sequentially, a reduction in logistic and general expenses was partially offset by higher allowances for doubtful accounts.

 

Financial results amounted to a gain of $8 million in the third quarter of 2019, compared to a loss of $6 million in the previous quarter and a gain of $13 million in the third quarter of 2018. The gain of the quarter corresponds mainly to an FX gain of $14 million related to the Argentine peso devaluation (36%) on trade, social and financial payables at Argentine subsidiaries which functional currency is the U.S. dollar, partially offset by a $5 million loss due to the devaluation of the Brazilian Real (9%) on U.S. dollar denominated intercompany liabilities at our Brazilian subsidiaries which functional currency is the Brazilian Real, largely compensated by an increase in currency translation adjustment reserve from the Brazilian subsidiaries.

 

Equity in earnings of non-consolidated companies generated a gain of $13 million in the third quarter of 2019, compared to $26 million in the previous quarter and $56 million in the third quarter of 2018. These results are mainly derived from our equity investment in Ternium (NYSE:TX) and Usiminas.

 

Income tax charge amounted to $108 million in the third quarter of 2019, compared to $15 million in the previous quarter and $80 million in the third quarter of 2018. This quarter’s income tax includes a charge of approximately $76 million mainly related to the devaluation of the Argentine and Mexican Peso affecting the tax base of our subsidiaries in these two countries. Such effect impacted current income tax charge for $35 million and deferred income tax for $41 million.

  

Cash Flow and Liquidity of 2019 Third Quarter

 

Net cash provided by operating activities during the third quarter of 2019 was $374 million, compared to $342 million in the previous quarter and $50 million in the third quarter of last year. During the third quarter of 2019 the operating cash flow includes $157 million from the reduction in working capital.

 

After capital expenditure of $87 million we generated free cash flow of $287 million (16% of revenues) and ended the quarter with a net cash position of $964 million.

  

Analysis of 2019 First Nine Months Results

 

		9M 2019				9M 2018				Increase/(Decrease)
Net sales ($ million)			5,554				5,554				0	%
Operating income (loss) ($ million)			681				693				(2	%)
Net income ($ million)			583				649				(10	%)
Shareholders’ net income ($ million)			591				650				(9	%)
Earnings per ADS ($)			1.00				1.10				(9	%)
Earnings per share ($)			0.50				0.55				(9	%)
EBITDA ($ million)			1,082				1,110				(3	%)
EBITDA margin (% of net sales)			19.5	%			20.0	%

 

 

Tubes Sales volume (thousand metric tons)		9M 2019				9M 2018				Increase/(Decrease)
Seamless			1,959				1,994				(2	%)
Welded			507				630				(20	%)
Total			2,467				2,624				(6	%)

 

 

Tubes		9M 2019				9M 2018				Increase/(Decrease)
(Net sales - $ million)
North America			2,529				2,521				0	%
South America			975				929				5	%
Europe			488				480				2	%
Middle East & Africa			985				1,105				(11	%)
Asia Pacific			263				215				23	%
Total net sales ($ million)			5,239				5,249				0	%
Operating income ($ million)			618				623				(1	%)
Operating income (% of sales)			11.8	%			11.9	%

 

Net sales of tubular products and services remained flat, amounting to $5,239 million in the first nine months of 2019, compared to $5,249 million in the first nine months of 2018, reflecting a 6% decrease in volumes offset by a 6% increase in average selling prices.

 

Operating income from tubular products and services amounted to $618 million in the first nine months of 2019 compared to $623 million in the first nine months of 2018. Results remained relatively flat reflecting stable revenues and margins.

 

Others		9M 2019				9M 2018				Increase/(Decrease)
Net sales ($ million)			315				305				3	%
Operating income ($ million)			63				70				(9	%)
Operating margin (% of sales)			20.1	%			22.8	%

 

Net sales of other products and services increased 3% to $315 million in the first nine months of 2019, compared to $305 million in the first nine months of 2018, however operating income declined due to a reduction in margins.

 

SG&A remained flat, amounting to $1,017 million, or 18.3% of net sales during the first nine months of 2019, compared to $1,023 million, or 18.4% in the same period of 2018.

  

Financial results amounted to a gain of $26 million in the first nine months of 2019 compared to a gain of $44 million in the same period of 2018. While in both periods the gains are mainly related to the Argentine peso devaluation, the nine-month period of 2018 also benefited from the Euro depreciation. In the first nine months of 2019 we had an FX gain of $28 million; $34 million gain related to the Argentine peso devaluation (53%) on Peso denominated liabilities at Argentine subsidiaries which functional currency is the U.S. dollar, partially offset by a $6 million loss due to the devaluation of the Brazilian Real (7%) on U.S. dollar denominated intercompany liabilities at our Brazilian subsidiaries which functional currency is the Brazilian Real.

 

Equity in earnings of non-consolidated companies generated a gain of $69 million in the first nine months of 2019, compared to a gain of $143 million in the first nine months of 2018. These results are mainly derived from our equity investment in Ternium (NYSE:TX) and Usiminas.

 

Income tax amounted to a charge of $193 million in the first nine months of 2019, compared to $231 million in the first nine months of 2018. Both periods charges were affected by the Argentine and Mexican peso devaluation on the tax base at our Argentine and Mexican subsidiaries which have the U.S. dollar as their functional currency.

 

Cash Flow and Liquidity of 2019 First Nine Months

 

During the first nine months of 2019, net cash provided by operations was $1,264 million, compared to $372 million in the same period of 2018. While in the first nine months of 2019 our working capital decreased by $503 million in the same period of 2018 it increased by $659 million.

 

Capital expenditures amounted to $270 million in the first nine months of 2019, similar to $274 million in the same period of 2018.

 

Free cash flow amounted to $994 million (18% of revenues) in the first nine months of 2019, compared to $98 million (2%) in the same period of 2018.

 

We reached a net cash position of $964 million at September 30, 2019.

  

Conference call

 

Tenaris will hold a conference call to discuss the above reported results, on October 31, 2019, at 10:00 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 “5688609”. 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 1.00 pm ET on October 31 through 11:59 pm ET on November 8, 2019. To access the replay by phone, please dial 855 859 2056 or 404 537 3406 and enter passcode “5688609” 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.

 

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)		Three-month period ended September 30,								Nine-month period ended September 30,
		2019				2018				2019				2018
Continuing operations		Unaudited								Unaudited
Net sales			1,763,783				1,898,892				5,553,507				5,553,611
Cost of sales			(1,248,691	)			(1,305,232	)			(3,863,309	)			(3,837,295	)
Gross profit			515,092				593,660				1,690,198				1,716,316
Selling, general and administrative expenses			(333,111	)			(335,714	)			(1,017,085	)			(1,022,922	)
Other operating income (expense), net			5,139				551				7,511				(264	)
Operating income			187,120				258,497				680,624				693,130
Finance Income			13,015				10,804				36,212				29,786
Finance Cost			(13,454	)			(8,586	)			(31,723	)			(29,182	)
Other financial results			8,340				10,839				21,670				43,156
Income before equity in earnings of non-consolidated companies and income tax			195,021				271,554				706,783				736,890
Equity in earnings of non-consolidated companies			13,235				55,930				68,659				142,876
Income before income tax			208,256				327,484				775,442				879,766
Income tax			(107,741	)			(80,355	)			(192,639	)			(230,931	)
Income for the period			100,515				247,129				582,803				648,835
Attributable to:
Owners of the parent			106,548				246,927				590,913				650,238
Non-controlling interests			(6,033	)			202				(8,110	)			(1,403	)
			100,515				247,129				582,803				648,835

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Interim Statement of Financial Position

 

(all amounts in thousands of U.S. dollars)		At September 30, 2019								At December 31, 2018
		Unaudited
ASSETS
Non-current assets
Property, plant and equipment, net			6,111,975								6,063,908
Intangible assets, net			1,565,891								1,465,965
Right-of-use assets, net			240,182								-
Investments in non-consolidated companies			856,524								805,568
Other investments			42,605								118,155
Deferred tax assets			217,608								181,606
Receivables, net			154,718				9,189,503				151,905				8,787,107
Current assets
Inventories, net			2,387,367								2,524,341
Receivables and prepayments, net			111,673								155,885
Current tax assets			157,056								121,332
Trade receivables, net			1,310,213								1,737,366
Derivative financial instruments			4,697								9,173
Other investments			322,763								487,734
Cash and cash equivalents			1,537,005				5,830,774				428,361				5,464,192
Total assets							15,020,277								14,251,299
EQUITY
Capital and reserves attributable to owners of the parent							11,955,266								11,782,882
Non-controlling interests							200,939								92,610
Total equity							12,156,205								11,875,492
LIABILITIES
Non-current liabilities
Borrowings			49,050								29,187
Lease liabilities			201,693								-
Deferred tax liabilities			380,809								379,039
Other liabilities			239,921								213,129
Provisions			38,748				910,221				36,089				657,444
Current liabilities
Borrowings			873,822								509,820
Lease liabilities			37,781								-
Derivative financial instruments			18,088								11,978
Current tax liabilities			130,961								250,233
Other liabilities			233,838								165,693
Provisions			27,921								24,283
Customer advances			79,581								62,683
Trade payables			551,859				1,953,851				693,673				1,718,363
Total liabilities							2,864,072								2,375,807
Total equity and liabilities							15,020,277								14,251,299

 

Consolidated Condensed Interim Statement of Cash Flow

		Three-month period ended September 30,								Nine-month period ended September 30,
(all amounts in thousands of U.S. dollars)		2019				2018				2019				2018
Cash flows from operating activities		Unaudited								Unaudited
Income for the period			100,515				247,129				582,803				648,835
Adjustments for:
Depreciation and amortization			134,624				135,044				401,179				417,247
Income tax accruals less payments			9,015				36,987				(145,404	)			104,838
Equity in earnings of non-consolidated companies			(13,235	)			(55,930	)			(68,659	)			(142,876	)
Interest accruals less payments, net			(3,411	)			(811	)			(3,706	)			5,964
Changes in provisions			(3,182	)			(5,194	)			(2,208	)			(10,815	)
Changes in working capital			157,313				(301,306	)			503,358				(658,961	)
Currency translation adjustment and others			(7,889	)			(6,074	)			(3,696	)			7,288
Net cash provided by operating activities			373,750				49,845				1,263,667				371,520
Cash flows from investing activities
Capital expenditures			(86,643	)			(77,938	)			(269,707	)			(273,669	)
Changes in advance to suppliers of property, plant and equipment			1,149				719				3,185				4,937
Acquisition of subsidiaries, net of cash acquired			-				-				(132,845	)			-
Additions to associated companies			(9,800	)			-				(9,800	)			-
Loan to non-consolidated companies			-				(11,220	)			-				(14,740	)
Repayment of loan by non-consolidated companies			-				3,900				40,470				9,370
Proceeds from disposal of property, plant and equipment and intangible assets			437				1,491				1,173				4,199
Dividends received from non-consolidated companies			-				-				28,974				25,722
Changes in investments in securities			24,463				(47,655	)			254,369				348,423
Net cash (used in) provided by investing activities			(70,394	)			(130,703	)			(84,181	)			104,242
Cash flows from financing activities
Dividends paid			-				-				(330,550	)			(330,550	)
Dividends paid to non-controlling interest in subsidiaries			(1,200	)			(590	)			(1,872	)			(1,698	)
Changes in non-controlling interests			-				5				1				4
Payments of lease liabilities			(9,388	)			-				(28,835	)			-
Proceeds from borrowings			387,000				147,296				1,031,716				723,303
Repayments of borrowings			(320,743	)			(251,584	)			(733,837	)			(948,436	)
Net cash (used in) provided by financing activities			55,669				(104,873	)			(63,377	)			(557,377	)
Increase (decrease) in cash and cash equivalents			359,025				(185,731	)			1,116,109				(81,615	)
Movement in cash and cash equivalents
At the beginning of the period			1,183,017				427,256				426,717				330,090
Effect of exchange rate changes			(6,513	)			(5,495	)			(7,297	)			(12,445	)
Increase (decrease) in cash and cash equivalents			359,025				(185,731	)			1,116,109				(81,615	)
At September 30,			1,535,529				236,030				1,535,529				236,030

 

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).

 

		Three-month period ended September 30,								Nine-month period ended September 30,
		2019				2018				2019				2018
Operating income			187,120				258,497				680,624				693,130
Depreciation and amortization			134,624				135,044				401,179				417,247
EBITDA			321,744				393,541				1,081,803				1,110,377

 

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 September 30,								Nine-month period ended September 30,
		2019				2018				2019				2018
Net cash provided by operating activities			373,750				49,845				1,263,667				371,520
Capital expenditures			(86,643	)			(77,938	)			(269,707	)			(273,669	)
Free cash flow			287,107				(28,093	)			993,960				97,851

  

Net Cash / (Debt)

  

This is the net balance of cash and cash equivalents, other current investments and fixed income investments held to maturity 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 (Current and Non-Current)+/- Derivatives hedging borrowings and investments– Borrowings (Current and Non-Current).

 

 

(all amounts in thousands of U.S. dollars)		At September 30,
		2019				2018
Cash and cash equivalents			1,537,005				236,303
Other current investments			322,763				794,330
Non-current Investments			38,678				176,178
Derivatives hedging borrowings and investments			(11,492	)			(64,525	)
Borrowings – current and non-current			(922,872	)			(734,130	)
Net cash / (debt)			964,082				408,156