SOURCE: Tenaris S.A.

Tenaris S.A.

May 01, 2014 18:00 ET

Tenaris Announces 2014 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, 2014) - Tenaris S.A. (NYSE: TS) (BAE: TS) (BMV: TS) (MILAN: TEN) ("Tenaris") today announced its results for the quarter ended March 31, 2014 in comparison with its results for the quarter ended March 31, 2013.

 
Summary of 2014 First Quarter Results
 
(Comparison with fourth and first quarters of 2013)
 
    Q1 2014   Q4 2013   Q1 2013
Net sales ($ million)   2,580   2,674   (4%)   2,678   (4%)
Operating income ($ million)   566   589   (4%)   554   2%
Net income ($ million)   428   408   5%   423   1%
Shareholders' net income ($ million)   423   409   3%   425   (1%)
Earnings per ADS ($)   0.72   0.69   3%   0.72   (1%)
Earnings per share ($)   0.36   0.35   3%   0.36   (1%)
EBITDA* ($ million)   718   745   (4%)   699   3%
EBITDA margin (% of net sales)   27.8%   27.8%       26.1%    
*EBITDA is defined as operating income plus depreciation, amortization and impairment charges/(reversals)
 

In the first quarter, although we benefited from improving trends in the U.S. market and the usual seasonal effect in Canada, our sales declined 4% sequentially, due primarily to lower sales in the Middle East, following the exceptional level of sales we had in the fourth quarter of 2013, as well as in Mexico, Colombia and Venezuela. We maintained our EBITDA and operating margins at a high level reflecting operating efficiencies and a continuing good mix of products.

Cash provided by operating activities reached $612 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 $1.3 billion.

Market Background and Outlook

In the United States, drilling activity is picking up, particularly in the Permian basin, but during the first quarter drilling efficiencies were affected by the cold weather. Looking into the second half of the year, the final determination in the anti-dumping trade case will have an impact on our sales. In Canada, drilling activity in the first quarter was in line with the previous year and we expect that to continue through the year in accordance with the usual seasonal variations.

In Mexico, Pemex is concentrating on its most productive regions and reorganizing as the reform of the energy sector moves forward. We expect a recovery in sales in the second half as additional rigs are being contracted. 

In South America, shale drilling activity is increasing in Argentina while, in Brazil, projects continue to be delayed and our sales of line pipe and OCTG products in Brazil will be affected throughout the year.

In the Eastern Hemisphere, drilling activity has been increasing led by the Middle East and deepwater drilling in sub-Saharan Africa. However, purchases of OCTG in the Middle East in the last few quarters have been at an exceptionally high level and we expect an inventory adjustment in the coming quarters, which should be partially compensated by higher sales in sub-Saharan Africa and other countries of the region.

Considering these various factors, we expect our overall results for 2014 to be in line with those for 2013. 

 
Analysis of 2014 First Quarter Results
 
Tubes Sales volume
(thousand metric tons)
  Q1 2014   Q4 2013   Q1 2013
Seamless   669   665   1%   657   2%
Welded   241   249   (3%)   289   (17%)
Total   910   914   (1%)   946   (4%)
                     
                     
Tubes   Q1 2014   Q4 2013   Q1 2013
(Net sales - $ million)                    
North America   1,085   1,019   6%   1,143   (5%)
South America   440   516   (15%)   595   (26%)
Europe   256   205   25%   268   (4%)
Middle East & Africa   536   628   (15%)   400   34%
Far East & Oceania   101   112   (10%)   82   23%
Total net sales ($ million)   2,418   2,480   (3%)   2,488   (3%)
Operating income ($ million)   561   585   (4%)   526   6%
Operating income (% of sales)   23.2%   23.6%       21.1%    
                     

Net sales of tubular products and services decreased 3% sequentially and 3% year on year. In North America, sales increased reflecting higher seasonal sales in Canada and higher onshore drilling activity from our customers in the Permian, partially offset by lower activity in Mexico. In South America, sales decreased due to lower OCTG sales in Colombia and Venezuela. In Europe, sales increased due to higher OCTG and line pipe offshore sales in the North Sea. In the Middle East and Africa, sales remained strong but declined from the exceptional level of the previous quarter, when we had a record level of sales to Saudi Arabia. In the Far East and Oceania, the decline in sales reflected lower sales of line pipe in the region and lower sales for Australian offshore developments.

Operating income from tubular products and services decreased 4% sequentially, mainly reflecting a reduction in sales, but increased 6% year on year. The year on year increase in operating income is mainly due to a richer mix of products sold together with improved operational efficiencies.

             
Others   Q1 2014   Q4 2013   Q1 2013
Net sales ($ million)   162   194   (16%)   190   (15%)
Operating income ($ million)   4   5   (20%)   28   (79%)
Operating income (% of sales)   2.8%   2.4%       14.5%    
                     

Net sales of other products and services decreased 16% sequentially and 15% year on year. The sequential decline in sales was mainly due to lower sales at our industrial equipment business in Brazil and of sucker rods, while the decline in operating income was mainly due to lower margins at our industrial equipment business in Brazil.

Selling, general and administrative expenses, or SG&A, amounted to $489 million, or 18.9% of net sales, in the first quarter of 2014, compared to $497 million, 18.6% in the previous quarter and $476 million, 17.8% in the first quarter of 2013.

Financial results amounted to a gain of $42 million in the first quarter of 2014, compared to a gain of $8 million in the previous quarter and a loss of $9 million in the same period of 2013. During the quarter we had a $51 million gain on foreign exchange results, mainly resulting from the Argentine peso devaluation (22.3%) on our short operative and financial position in Argentine pesos.

Equity in earnings of associated companies generated a gain of $19 million in the first quarter of 2014, compared to a gain of $12 million in the previous quarter and in the first quarter of 2013. These results are mainly derived from our equity investment in Ternium (NYSE: TX) and Usiminas (BSP: USIM).

Income tax charges totaled $199 million in the first quarter of 2014, 32.7% of income before equity in earnings of associated companies and income tax, compared to $202 million, or 33.8% in the previous quarter and $134 million or 24.6% in the first quarter of 2013. As in the previous quarter, our tax rate was negatively affected primarily by the effect of the Argentine peso devaluation on the tax base used to calculate deffered tax at our Argentine subsidiaries which have the U.S. dollar as their functional currency.

Results attributable to non-controlling interests amounted to gains of $6 million in the first quarter of 2014, compared to losses of $1 million in the previous quarter and of $2 million in the first quarter of 2013. These results are mainly attributable to NKKTubes, our Japanese subsidiary.

Cash Flow and Liquidity

Net cash provided by operations during the first quarter of 2014 was $612 million, compared to $427 million in the previous quarter and $556 million in the first quarter of 2013.

Capital expenditures amounted to $189 million for the first quarter of 2014, compared to $184 million in the previous quarter and in the first quarter of 2013.

At the end of the quarter, our net cash position (cash and other current investments less total borrowings) amounted to $1.3 billion.

Conference call

Tenaris will hold a conference call to discuss the above reported results, on May 2, 2014, 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 +1 877 474.9502 within North America or +1 857 244.7555 Internationally. The access number is "64180052". 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 2:00 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 "11333713" 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,
    2014   2013
Continuing operations   Unaudited
Net sales   2,579,944   2,678,305
Cost of sales   (1,527,034)   (1,645,432)
Gross profit   1,052,910   1,032,873
Selling, general and administrative expenses   (488,860)   (475,565)
Other operating income (expense) net   1,720   (3,723)
Operating income   565,770   553,585
Interest income   9,062   6,081
Interest expense   (13,003)   (13,909)
Other financial results   46,434   (1,381)
Income before equity in earnings of associated companies and income tax   608,263   544,376
Equity in earnings of associated companies   18,821   12,197
Income before income tax   627,084   556,573
Income tax   (199,065)   (133,856)
Income for the period   428,019   422,717
         
         
Attributable to:        
Owners of the parent   422,505   424,777
Non-controlling interests   5,514   (2,060)
    428,019   422,717
         
         
         
Consolidated Condensed Interim Statement of Financial Position
 
(all amounts in thousands of U.S. dollars)   At March 31, 2014   At December 31, 2013
    Unaudited    
ASSETS                
Non-current assets                
  Property, plant and equipment, net   4,754,390       4,673,767    
  Intangible assets, net   3,027,964       3,067,236    
  Investments in associated companies   932,822       912,758    
  Other investments   1,816       2,498    
  Deferred tax assets   201,401       197,159    
  Receivables   209,129   9,127,522   152,080   9,005,498
                 
Current assets                
  Inventories   2,705,667       2,702,647    
  Receivables and prepayments   199,777       220,224    
  Current tax assets   134,675       156,191    
  Trade receivables   2,064,390       1,982,979    
  Available for sale assets   21,572       21,572    
  Other investments   1,531,776       1,227,330    
  Cash and cash equivalents   659,765   7,317,622   614,529   6,925,472
Total assets       16,445,144       15,930,970
                 
EQUITY                
Capital and reserves attributable to owners of the parent       12,724,313       12,290,420
Non-controlling interests       136,992       179,446
Total equity       12,861,305       12,469,866
                 
LIABILITIES                
Non-current liabilities                
  Borrowings   175,894       246,218    
  Deferred tax liabilities   744,204       751,105    
  Other liabilities   281,510       277,257    
  Provisions   70,925   1,272,533   66,795   1,341,375
                 
                 
Current liabilities                
  Borrowings   736,213       684,717    
  Current tax liabilities   320,600       266,760    
  Other liabilities   305,367       250,997    
  Provisions   26,509       25,715    
  Customer advances   102,592       56,911    
  Trade payables   820,025   2,311,306   834,629   2,119,729
Total liabilities       3,583,839       3,461,104
Total equity and liabilities       16,445,144       15,930,970
                 
                 
                 
Consolidated Condensed Interim Statement of Cash Flows
 
    Three-month period ended March 31,
(all amounts in thousands of U.S. dollars)   2014   2013
    Unaudited
Cash flows from operating activities        
Income for the period   428,019   422,717
Adjustments for:        
Depreciation and amortization   152,664   145,370
Income tax accruals less payments   70,790   15,213
Equity in earnings of associated companies   (18,821)   (12,197)
Interest accruals less payments, net   (8,099)   (30,725)
Changes in provisions   4,924   3,134
Changes in working capital   16,660   16,321
Other, including currency translation adjustment   (34,293)   (4,168)
Net cash provided by operating activities   611,844   555,665
         
Cash flows from investing activities        
Capital expenditures   (189,045)   (183,885)
Advance to suppliers of property, plant and equipment   (28,651)   7,746
Investment in associated companies   (1,380)   -
Loan to associated companies   (18,748)   -
Proceeds from disposal of property, plant and equipment and intangible assets   4,027   4,386
Dividends received from associated companies   -   1,196
Changes in investments in short terms securities   (304,446)   (158,582)
Net cash used in investing activities   (538,243)   (329,139)
         
         
Cash flows from financing activities        
Dividends paid to non-controlling interest in subsidiaries   (47,889)   (16,671)
Acquisitions of non-controlling interests   (90)   (538)
Proceeds from borrowings   494,407   625,732
Repayments of borrowings   (468,670)   (677,045)
Net cash used in financing activities   (22,242)   (68,522)
         
Increase in cash and cash equivalents   51,359   158,004
         
Movement in cash and cash equivalents        
At the beginning of the period   598,145   772,656
Effect of exchange rate changes   185   (5,106)
Increase in cash and cash equivalents   51,359   158,004
At March 31,   649,689   925,554
         
         
    At March 31,
    2014   2013
Cash and cash equivalents        
Cash and bank deposits   659,765   948,777
Bank overdrafts   (10,076)   (23,223)
    649,689   925,554
         

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