LUXEMBOURG--(Marketwire - Aug 4, 2011) - Tenaris S.A. (
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
--------- --------- --------- ---------
Contact Information:
Giovanni Sardagna
Tenaris
1-888-300-5432
www.tenaris.com