SOURCE: Tenaris S.A.

Tenaris S.A.

May 01, 2013 16:05 ET

Tenaris Announces 2013 First Quarter Results

The Financial and Operational Information Contained in This Press Release Is Based on Unaudited 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--(Marketwired - May 1, 2013) -  Tenaris S.A. (NYSE: TS) (BAE: TS) (BMV: TS) (MILAN: TEN) ("Tenaris") today announced its results for the quarter ended March 31, 2013 in comparison with its results for the quarter ended March 31, 2012.

Summary of 2013 First Quarter Results

(Comparison with fourth and first quarters of 2012)

    Q1 2013     Q4 2012     Q1 2012  
Net sales ($ million)   2,678     2,758     (3 %)   2,617     2 %
Operating income ($ million)   554     586     (5 %)   566     (2 %)
Net income ($ million)   423     350     21 %   448     (6 %)
Shareholders' net income ($ million)   425     358     19 %   439     (3 %)
Earnings per ADS ($)   0.72     0.61     19 %   0.74     (3 %)
Earnings per share ($)   0.36     0.30     19 %   0.37     (3 %)
EBITDA* ($ million)   699     733     (5 %)   704     (1 %)
EBITDA margin (% of net sales)   26.1 %   26.6 %         26.9 %      
                               

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

Our first quarter sales decreased 3% sequentially as higher sales of premium OCTG products in Saudi Arabia and Sub-Saharan Africa did not fully compensate for lower sales in South America and the impact of lower market prices for less differentiated products in North America. Our EBITDA and operating margins maintained a good level in a competitive market.

Cash provided by operating activities reached $563 million during the quarter and at the end of the quarter we had a net cash position (cash and other current investments less total borrowings) of $121 million.

Market Background and Outlook

Over the past three quarters, drilling activity in North America has slowed down and should start to pick up by the end of the year, while in the rest of the world it should continue to increase slowly, supported by current oil and gas prices.

In the second quarter, the Canadian break up will affect our sales in North America. Sales in the Middle East are expected to increase further from the level of the first quarter. In the second half, sales of line pipe in Brazil will be affected by delays in project execution. Industrial customers in Europe will continue to be affected by weak economic activity.

In this environment, sales and margins for the rest of the year are expected to remain close to current levels with product mix improvements helping to offset the impact of lower prices in less differentiated segments.

Analysis of 2013 First Quarter Results

Tubes Sales volume
 (thousand metric tons)
  Q1 2013   Q4 2012     Q1 2012  
Seamless   657   669   (2 %)   664   (1 %)
Welded   289   306   (6 %)   289   -  
Total   946   975   (3 %)   953   (1 %)
                         
                         
Tubes   Q1 2013     Q4 2012     Q1 2012  
(Net sales - $ million)                              
North America   1,143     1,155     (1 %)   1,269     (10 %)
South America   595     693     (14 %)   463     29 %
Europe   268     243     10 %   262     2 %
Middle East & Africa   400     378     6 %   281     42 %
Far East & Oceania   82     110     (25 %)   126     (35 %)
Total net sales ($ million)   2,488     2,578     (3 %)   2,400     4 %
Operating income ($ million)   526     572     (8 %)   529     (1 %)
Operating income (% of sales)   21.1 %   22.2 %         22.1 %      
                               

Net sales of tubular products and services decreased 3% sequentially but increased 4% year on year. Sales decreased sequentially as higher sales of premium in Saudi Arabia and Sub-Saharan Africa did not fully compensate for lower sales in South America and lower market prices in North America. In North America, higher sales in Canada largely offset the effect of lower market prices and less favorable product mix in the United States. In South America, sales decreased due to lower sales of line pipe in Argentina and of OCTG in Colombia. In Europe, sales increased due to higher sales of line pipe for offshore projects in Norway. In the Middle East and Africa, sales increased due to higher sales of premium products in Saudi Arabia and Sub-Saharan Africa. In the Far East and Oceania, sales decreased due to lower sales of line pipe and industrial products in the region.

Operating income from tubular products and services decreased 8% sequentially and 1% year on year, reflecting a decline in sales and in operating margin.

Others Q1 2013   Q4 2012   Q1 2012  
Net sales ($ million) 190   180   6 % 217   (12 %)
Operating income ($ million) 28   14   100 % 37   (24 %)
Operating income (% of sales) 14.5 % 7.6 %     17.0 %    
                     

Net sales of other products and services increased 6% sequentially but declined 12% year on year. The sequential increase in sales and operating income was mainly due to higher sales and operating income of our industrial equipment business in Brazil.

Selling, general and administrative expenses, or SG&A, amounted to $476 million, or 17.8% of net sales, in the first quarter of 2013, compared to $494 million, 17.9% in the previous quarter and $444 million, 17.0% in the first quarter of 2012.

Net interest expenses amounted to $8 million in the first quarter of 2013, compared to $6 million in the previous quarter and $0.3 million in the first quarter of 2012.

Other financial results generated a loss of $1 million during the first quarter of 2013, compared to a loss of $10 million in the previous quarter and a gain of $13 million during the first quarter of 2012. These results largely reflect gains and losses on net foreign exchange transactions and the fair value of derivative instruments.

Equity in earnings of associated companies generated a gain of $12 million in the first quarter of 2013, compared to a loss of $108 million in the previous quarter and a gain of $14 million in the first quarter of 2012. These results are mainly derived from our equity investment in Ternium (NYSE: TX) and Usiminas. In the previous quarter, these results were negatively affected by the impairment recorded on our investment in Usiminas.

Income tax charges totaled $134 million in the first quarter of 2013, equivalent to 24.6% of income before equity in earnings of associated companies and income tax, compared to $112 million, or19.6% in the previous quarter and $145 million or 25.0% in the first quarter of 2012.

Results attributable to non-controlling interests amounted to losses of $2 million in the first quarter of 2013, compared to losses of $7 million in the previous quarter and gains of $10 million in the first quarter of 2012.

Cash Flow and Liquidity

Net cash provided by operations during the first quarter of 2013 was $563 million, compared to $347 million in the previous quarter and $608 million in the first quarter of 2012.

Capital expenditures amounted to $184 million for the first quarter of 2013, compared to $202 million in the previous quarter and $196 million in the first quarter of 2012.

At the end of the quarter, our net cash position (cash and other current investments less total borrowings) amounted to $121 million.

Conference call

Tenaris will hold a conference call to discuss the above reported results, on May 2, 2013, 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 +1 866 318.8618 within North America or +1 617 399.5137 Internationally. The access number is "70135173." 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 on May 2 through 12:00 am on May 9. To access the replay by phone, please dial +1 888 286.8010 or +1 617 801.6888 and enter passcode "88385058" 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,  
    2013     2012  
Continuing operations   Unaudited  
Net sales   2,678,305     2,617,349  
Cost of sales   (1,645,432 )   (1,611,097 )
Gross profit   1,032,873     1,006,252  
Selling, general and administrative expenses   (475,565 )   (444,143 )
Other operating income (expense) net   (3,723 )   4,092  
Operating income   553,585     566,201  
Interest income   6,081     9,583  
Interest expense   (13,909 )   (9,925 )
Other financial results   (1,381 )   13,081  
Income before equity in earnings of associated companies and income tax   544,376     578,940  
Equity in earnings of associated companies   12,197     13,963  
Income before income tax   556,573     592,903  
Income tax   (133,856 )   (144,674 )
Income for the period   422,717     448,229  
             
             
Attributable to:            
Owners of the parent   424,777     438,641  
Non-controlling interests   (2,060 )   9,588  
    422,717     448,229  
             
             
             
Consolidated Condensed Interim Statement of Financial Position
 
(all amounts in thousands of U.S. dollars)   At March 31, 2013   At December 31, 2012
    Unaudited    
ASSETS                
Non-current assets                
  Property, plant and equipment, net   4,490,305       4,434,970    
  Intangible assets, net   3,161,011       3,199,916    
  Investments in associated companies   985,230       977,011    
  Other investments   2,532       2,603    
  Deferred tax assets   201,599       215,867    
  Receivables   128,921   8,969,598   142,060   8,972,427
                 
Current assets                
  Inventories   2,894,456       2,985,805    
  Receivables and prepayments   256,572       260,532    
  Current tax assets   141,359       175,562    
  Trade receivables   2,076,099       2,070,778    
  Available for sale assets   21,572       21,572    
  Other investments   802,991       644,409    
  Cash and cash equivalents   948,777   7,141,826   828,458   6,987,116
Total assets       16,111,424       15,959,543
                 
EQUITY                
Capital and reserves attributable to owners of the parent       11,735,821       11,328,031
Non-controlling interests       156,648       171,561
Total equity       11,892,469       11,499,592
                 
LIABILITIES                
Non-current liabilities                
  Borrowings   491,049       532,407    
  Deferred tax liabilities   696,401       728,541    
  Other liabilities   308,084       302,444    
  Provisions   72,555   1,568,089   67,185   1,630,577
                 
                 
Current liabilities                
  Borrowings   1,139,799       1,211,785    
  Current tax liabilities   242,836       254,603    
  Other liabilities   333,917       318,828    
  Provisions   24,889       26,958    
  Customer advances   92,409       134,010    
  Trade payables   817,016   2,650,866   883,190   2,829,374
Total liabilities       4,218,955       4,459,951
Total equity and liabilities       16,111,424       15,959,543
                 
                 
                 
Consolidated Condensed Interim Statement of Cash Flows  
   
    Three-month period ended March 31,  
(all amounts in thousands of U.S. dollars)   2013     2012  
    Unaudited  
Cash flows from operating activities            
Income for the period   422,717     448,229  
Adjustments for:            
Depreciation and amortization   145,370     138,159  
Income tax accruals less payments   15,213     49,495  
Equity in earnings of associated companies   (12,197 )   (13,963 )
Interest accruals less payments, net   (30,725 )   (18,293 )
Changes in provisions   3,134     (8,131 )
Changes in working capital   16,321     (1,796 )
Other, including currency translation adjustment   3,578     14,237  
Net cash provided by operating activities   563,411     607,937  
             
Cash flows from investing activities            
Capital expenditures   (183,885 )   (196,395 )
Acquisition of associated companies   -     (504,597 )
             
Proceeds from disposal of property, plant and equipment and intangible assets   4,386     1,532  
Dividends received from associated companies   1,196     -  
Changes in investments in short terms securities   (158,582 )   10,583  
Net cash used in investing activities   (336,885 )   (688,877 )
             
Cash flows from financing activities            
             
Dividends paid to non-controlling interest in subsidiaries   (16,671 )   (905 )
Acquisitions of non-controlling interests   (538 )   (12 )
Proceeds from borrowings   625,732     545,779  
Repayments of borrowings   (677,045 )   (237,103 )
Net cash used in financing activities   (68,522 )   307,759  
             
Increase in cash and cash equivalents   158,004     226,819  
             
Movement in cash and cash equivalents            
At the beginning of the period   772,656     815,032  
Effect of exchange rate changes   (5,106 )   18,708  
Increase in cash and cash equivalents   158,004     226,819  
At March 31,   925,554     1,060,559  
             
    At March 31,  
Cash and cash equivalents   2013     2012  
       
Cash and bank deposits   948,777     1,076,803  
Bank overdrafts   (23,223 )   (16,244 )
    925,554     1,060,559  

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