SOURCE: Tenaris S.A.

May 05, 2011 16:21 ET

Tenaris Announces 2011 First Quarter Results

The Financial and Operational Information Contained in This Press Release Is Based on Audited Consolidated 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

LUXEMBOURG--(Marketwire - May 5, 2011) - Tenaris S.A. (NYSE: TS) (BAE: TS) (MXSE: TS) (MILAN: TEN) ("Tenaris") today announced its results for the quarter ended March 31, 2011 with comparison to its results for the quarter ended March 31, 2010.

Summary of 2011 First Quarter Results

(Comparison with fourth and first quarters of 2010)

                                       Q1 2011     Q4 2010       Q1 2010
Net sales (US$ million)                2,324.0  2,063.9  13%   1,638.7  42%
Operating income (US$ million)           441.4    453.8  (3%)    309.3  43%
Net income (US$ million)                 324.2    321.2   1%     222.2  46%
Shareholders' net income (US$ million)   319.4    320.9  (0%)    219.5  45%
Earnings per ADS (US$)                    0.54     0.54  (0%)     0.37  45%
Earnings per share (US$)                  0.27     0.27  (0%)     0.19  45%
EBITDA* (US$ million)                    570.8    515.5  11%     435.4  31%
EBITDA margin (% of net sales)              25%      25%            27%

*EBITDA is defined as operating income plus depreciation, amortization and
 impairment charges/(reversals)

Our first quarter results reflect improving levels of demand for our products and services in all of our operating segments. Net sales in our Tubes operating segment and shipments of seamless pipe products each rose 12% sequentially. Operating income was 43% higher year on year but declined 3% sequentially, as operating income in the fourth quarter of 2010 included a gain from impairment reversal of $67.3 million at our Canadian welded operations.

At the end of the quarter, our net cash position (cash and other current investments less total financial debt) amounted to US$230.5 million, following an increase in working capital of US$392.9 million, which reflects a higher level of sales during the quarter and a higher cost of inventories. Capital expenditures amounted to US$210.6 million.

Market Background and Outlook

Oil prices have risen and shown increased volatility since political unrest in North Africa cut off Libyan oil exports and a tragic earthquake and tsunami which damaged nuclear energy facilities in Japan. Global drilling activity continues to rise in almost every region and we expect that drilling activity will continue to rise, excluding the effect of seasonal variations, through the year. Activity in the Middle East is expected to receive an additional boost from Saudi Arabia's response to the current market conditions.

We expect that sales in our Tubes operating segment will continue to grow throughout 2011. Sales in our Projects and Others operating segments are also expected to show sustained growth compared to 2010. Average selling prices are expected to benefit from improving prices and a good product mix, though these increases are likely to be partially offset by increases in raw material and other costs. Accordingly, our sales and operating income should continue to increase throughout 2011.

Annual General Meeting of Shareholders

The annual general meeting of shareholders of the Company will take place at 11:00 am on June 1, 2011 in Luxembourg. The notice and agenda for the meeting, the shareholder meeting brochure and proxy statement together with the Company's 2010 annual report can be downloaded from our website at www.tenaris.com/investors and may be obtained on request by calling (352) 26-47-89-78 (within Luxembourg), 1-800-555-2470 (within the USA) or + 1-267-468-0786 (within any other jurisdiction).

Analysis of 2011 First Quarter Results

     Sales volume (metric tons)      Q1 2011      Q4 2010         Q1 2010
Tubes - Seamless                     621,000  555,000    12%  467,000   33%
Tubes - Welded                       233,000  221,000     5%  139,000   68%
Tubes - Total                        854,000  776,000    10%  606,000   41%
Projects - Welded                     75,000   65,000    15%   34,000  121%
Total                                929,000  841,000    10%  640,000   45%

                Tubes                Q1 2011      Q4 2010         Q1 2010
(Net sales - $ million)
North America                          978.5    860.2    14%    676.4   45%
South America                          318.2    271.2    17%    203.0   57%
Europe                                 243.8    206.3    18%    199.3   22%
Middle East & Africa                   297.8    299.6    (1%)   249.3   19%
Far East & Oceania                     129.0    121.8     6%     82.4   57%
Total net sales ($ million)          1,967.3  1,759.1    12%  1,410.4   39%
Cost of sales (% of sales)                61%      60%             59%
Operating income* ($ million)          372.1    401.0    (7%)   279.1   33%
Operating income (% of sales)             19%      23%             20%

*Operating income in Q4 2010 includes a gain of US$67.3 million for
 impairment reversals

Net sales of tubular products and services increased 12% sequentially and 39% year on year, mainly driven by an increase in shipments volumes. In North America, sales rose sequentially as a strong increase in shipments in Canada and a steady growth in the United States offset a decline in Mexico's shipments. In South America, sales rose sequentially due to an increase in OCTG shipments in the region. In Europe, sales increased sequentially due primarily to higher demand for mechanical pipe. In the Middle East & Africa, higher sales of line pipe products due to the realization of the previous quarter delayed shipments were offset by lower OCTG shipments.


               Projects                Q1 2011      Q4 2010       Q1 2010
Net sales ($ million)                   175.0      146.2  20%    93.2   88%
Cost of sales (% of sales)                 69%        69%          68%
Operating income ($ million)             31.8       23.6  35%     8.5  274%
Operating income (% of sales)              18%        16%           9%

Projects net sales amounted to US$175.0 million, an increase of 20% sequentially and 88% relative to the first quarter of 2010. Sequentially, revenues and operating income increased mainly due to higher shipments to gas pipeline projects in Argentina.

                Others                 Q1 2011      Q4 2010       Q1 2010
Net sales ($ million)                   181.7      158.6  15%   135.1   35%
Cost of sales (% of sales)                 68%        72%          73%
Operating income ($ million)             37.5       29.3  28%    21.7   73%
Operating income (% of sales)              21%        18%          16%

Net sales of other products and services amounted to US$181.7 million in the first quarter of 2011, 15% higher sequentially and 35% higher relative to the first quarter of 2010. The sequential increase in sales and operating income was due to higher sales of pipes for electric conduits in the United States, industrial equipment in Brazil and sucker rods.

Selling, general and administrative expenses, or SG&A, amounted to 19.4% of net sales in the first quarter of 2011, compared to 19.7% in the previous quarter and 21.2% in the first quarter of 2010. During the first quarter of 2011, SG&A was negatively affected by provisions for receivables and contingencies in Libya of US$15.1 million and for a new tax in Colombia on net equity of US$9.3 million.

Net interest expenses amounted to US$5.4 million in the first quarter of 2011, compared to US$4.8 million in the previous quarter and US$12.9 million in the first quarter of 2010. Interest expenses in the first 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 gain of US$1.1 million during the first quarter of 2011, compared to a loss of US$5.4 million in the previous quarter and a gain of US$7.7 million during the first 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$24.3 million in the first quarter of 2011, compared to a gain of US$11.7 million in the previous quarter and a gain of US$23.5 million in the first quarter of 2010. These results were derived mainly from our equity investment in Ternium (NYSE: TX).

Income tax charges totaled US$137.2 million in the first quarter of 2011, equivalent to 31% of income before equity in earnings of associated companies and income tax, compared to 30% in the previous quarter and 35% in the first quarter of 2010.

Income attributable to non-controlling interests amounted to US$4.8 million in the first quarter of 2011, compared to US$0.3 million in the previous quarter and US$2.7 million in the first quarter of 2010.

Cash Flow and Liquidity

Net cash provided by operations during the first quarter of 2011 was US$165.7 million, compared to US$253.8 million in the previous quarter and US$436.3 million in the first quarter of 2010. Working capital increased by US$392.9 million during the first quarter of 2011 (mainly due to an increase in trade receivables and in inventories), compared to an increase of US$152.7 million in the previous quarter and a decrease of US$124.2 million in the first quarter of 2010.

Capital expenditures amounted to US$210.6 million for the first quarter of 2011, compared to US$286.1 million in the previous quarter and US$158.0 million in the first quarter of 2010.

At the end of the quarter, our net cash position (cash and other current investments less total financial debt) amounted to US$230.5 million.

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

                                                      Three-month period
(all amounts in thousands of U.S. dollars)              ended March 31,
                                                       2011        2010
                                                    ----------  ----------
Continuing operations                                     (Unaudited)
Net sales                                            2,323,965   1,638,721
Cost of sales                                       (1,434,362)   (987,043)
                                                    ----------  ----------
Gross profit                                           889,603     651,678
Selling, general and administrative expenses          (449,774)   (347,387)
Other operating income (expense), net                    1,621       5,049
                                                    ----------  ----------
Operating income                                       441,450     309,340
Interest income                                          7,687       7,148
Interest expense                                       (13,041)    (20,069)
Other financial results                                  1,058       7,691
                                                    ----------  ----------
Income before equity in earnings of associated
 companies and income tax                              437,154     304,110
Equity in earnings of associated companies              24,285      23,526
                                                    ----------  ----------
Income before income tax                               461,439     327,636
Income tax                                            (137,242)   (105,426)
                                                    ----------  ----------
Income for the period                                  324,197     222,210
                                                    ==========  ==========

Attributable to:
Equity holders of the Company                          319,374     219,549
Non-controlling interests                                4,823       2,661
                                                    ----------  ----------
                                                       324,197     222,210
                                                    ==========  ==========



Consolidated Condensed Interim Statement of Financial Position


(all amounts in thousands of U.S.
 dollars)                          At March 31, 2011   At December 31, 2010
                                  -------------------- --------------------
                                      (Unaudited)
ASSETS
Non-current assets
  Property, plant and equipment,
   net                            4,016,127            3,780,580
  Intangible assets, net          3,548,306            3,581,816
  Investments in associated
   companies                        698,910              671,855
  Other investments                  43,897               43,592
  Deferred tax assets               207,783              210,523
  Receivables                       121,559  8,636,582   120,429  8,408,795
                                  ---------            ---------

Current assets
  Inventories                     2,578,666            2,460,384
  Receivables and prepayments       303,868              282,536
  Current tax assets                231,880              249,317
  Trade receivables               1,686,810            1,421,642
  Available for sale assets          21,572               21,572
  Other investments                 665,272              676,224
  Cash and cash equivalents         903,814  6,391,882   843,861  5,955,536
                                  --------- ---------- --------- ----------
Total assets                                15,028,464           14,364,331
                                            ==========           ==========

EQUITY
Capital and reserves attributable
 to the Company's equity holders            10,377,206            9,902,359
Non-controlling interests                      656,544              648,221
                                            ----------           ----------
Total equity                                11,033,750           10,550,580
                                            ==========           ==========

LIABILITIES
Non-current liabilities
  Borrowings                        214,569              220,570
  Deferred tax liabilities          931,752              934,226
  Other liabilities                 213,428              193,209
  Provisions                         88,620               83,922
  Trade payables                      2,844  1,451,213     3,278  1,435,205
                                  ---------            ---------

Current liabilities
  Borrowings                      1,124,061            1,023,926
  Current tax liabilities           234,872              207,652
  Other liabilities                 263,368              233,590
  Provisions                         38,420               25,101
  Customer advances                  86,283               70,051
  Trade payables                    796,497  2,543,501   818,226  2,378,546
                                  --------- ---------- --------- ----------
Total liabilities                            3,994,714            3,813,751
                                            ==========           ==========
Total equity and liabilities                15,028,464           14,364,331
                                            ==========           ==========




Consolidated Condensed Interim Statement of Cash Flows


                                                       Three-month period
                                                        ended March 31,
                                                      --------------------
(all amounts in thousands of U.S. dollars)              2011       2010
                                                      ---------  ---------
                                                          (Unaudited)
Cash flows from operating activities
Income for the period                                   324,197    222,210
Adjustments for:
Depreciation and amortization                           129,384    126,028
Income tax accruals less payments                        44,632    (28,258)
Equity in earnings of associated companies              (24,285)   (23,526)
Interest accruals less payments, net                    (14,038)     9,047
Changes in provisions                                    18,017      5,424
Changes in working capital                             (392,862)   124,247
Other, including currency translation adjustment         80,610      1,100
                                                      ---------  ---------
Net cash provided by operating activities               165,655    436,272
                                                      =========  =========

Cash flows from investing activities
Capital expenditures                                   (210,620)  (157,962)
Proceeds from disposal of property, plant and
 equipment and intangible assets                          1,255      2,910
Dividends and distributions received from associated
 companies                                                    -      1,472
Investments in short terms securities                    10,952    (66,105)
                                                      ---------  ---------
Net cash used in investing activities                  (198,413)  (219,685)
                                                      =========  =========

Cash flows from financing activities
Acquisitions of non-controlling interests                (5,050)       (27)
Proceeds from borrowings                                309,280    198,323
Repayments of borrowings                               (231,530)  (307,045)
                                                      ---------  ---------
Net cash provided by (used in) financing activities      72,700   (108,749)
                                                      =========  =========
Increase in cash and cash equivalents                    39,942    107,838
                                                      =========  =========

Movement in cash and cash equivalents
At the beginning of the period                          820,165  1,528,707
Effect of exchange rate changes                           5,121    (11,636)
Increase in cash and cash equivalents                    39,942    107,838
                                                      ---------  ---------
At March 31,                                            865,228  1,624,909
                                                      =========  =========


                                                           At March 31,
                                                      --------------------
Cash and cash equivalents                                2011       2010
                                                      ---------  ---------
Cash and bank deposits                                  903,814  1,631,919
Bank overdrafts                                         (38,586)    (7,010)
                                                      ---------  ---------
                                                        865,228  1,624,909
                                                      =========  =========

Contact Information