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