LUXEMBOURG--(Marketwired - Apr 30, 2015) - Tenaris S.A. (
Summary of 2015 First Quarter Results
| (Comparison with fourth and first quarters of 2014) |
| Q1 2015 | Q4 2014 | Q1 2014 | ||||||||
| Net sales ($ million) | 2,254 | 2,677 | (16%) | 2,580 | (13%) | |||||
| Operating income ($ million) | 379 | 350 | 8% | 566 | (33%) | |||||
| Net income ($ million) | 221 | 195 | 14% | 428 | (48%) | |||||
| Shareholders' net income ($ million) | 222 | 195 | 14% | 423 | (47%) | |||||
| Earnings per ADS ($) | 0.38 | 0.33 | 14% | 0.72 | (47%) | |||||
| Earnings per share ($) | 0.19 | 0.17 | 14% | 0.36 | (47%) | |||||
| EBITDA* ($ million) | 527 | 712 | (26%) | 718 | (27%) | |||||
| EBITDA margin (% of net sales) | 23.4% | 26.6% | 27.8% | |||||||
*EBITDA is defined as operating income plus depreciation, amortization and impairment charges/(reversals). In the fourth quarter of 2014, operating income includes an impairment charge of $206 million on our welded pipe operations in Colombia and Canada and our net income includes an additional impairment charge of $49 million on our investment in Usiminas which is recorded in the equity in earnings of non-consolidated companies line. In the first quarter of 2015 we recorded an additional impairment of $17 million on our investment in Usiminas.
Net sales in the first quarter declined 16% sequentially, affected by the rapid decline in drilling activity in North America and the reductions in exploration and production spending that are taking place around the world. Outside North America, sales declined significantly in Iraq, Ecuador and Australia while sales in South America were supported by shipments for pipeline projects in Argentina and Brazil. EBITDA declined 26% sequentially to $527 million with margins affected by inefficiencies associated with low utilization of production capacity.
Cash provided by operating activities reached $878 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 $1.9 billion.
Market Background and Outlook
The speed and the extent of the adjustment in oil and gas drilling activity in North America in response to the collapse in oil and gas prices is reflected in the fall in the number of drilling rigs in operation. In the United States, the rig count has already fallen more than 50% from last year's November peak and, in Canada, the rig count in the first quarter was down 40% year on year. In most other areas of the world, oil and gas drilling activity is declining, albeit at a more gradual pace, as companies have reduced exploration activity and are delaying projects seeking to reduce costs.
The impact of the decline in drilling activity on demand for OCTG is being amplified by the inventory adjustments that are taking place in the Middle East and sub-Saharan Africa and which are expected to take place in the United States, where high levels of imports and rapidly reducing consumption have pushed inventory levels to around ten months' future consumption.
After holding up well in the first quarter, we expect our sales to show further declines in the next two quarters before beginning a gradual recovery by the end of the year. Our margins over the next two quarters will be further affected by inefficiencies associated with low utilization of production capacity and other non-recurring restructuring costs but should return to a more balanced level by the end of the year once we see the full impact of lower raw material costs.
While we are confident that the fundamentals for the oil and gas sector remain positive in the long-term, in the current difficult market conditions we are adjusting our operations and our costs and remain focused on strengthening our market position and enhancing our service deployment in key regions.
Analysis of 2015 First Quarter Results
| Tubes Sales volume (thousand metric tons) |
Q1 2015 | Q4 2014 | Q1 2014 | |||||||
| Seamless | 655 | 745 | (12%) | 669 | (2%) | |||||
| Welded | 160 | 239 | (33%) | 241 | (34%) | |||||
| Total | 815 | 984 | (17%) | 910 | (10%) | |||||
| Tubes | Q1 2015 | Q4 2014 | Q1 2014 | |||||||
| (Net sales - $ million) | ||||||||||
| North America | 961 | 1,294 | (26%) | 1,085 | (11%) | |||||
| South America | 487 | 483 | 1% | 440 | 11% | |||||
| Europe | 236 | 213 | 11% | 256 | (8%) | |||||
| Middle East & Africa | 314 | 392 | (20%) | 536 | (41%) | |||||
| Far East & Oceania | 78 | 115 | (32%) | 101 | (23%) | |||||
| Total net sales ($ million) | 2,077 | 2,497 | (17%) | 2,418 | (14%) | |||||
| Operating income ($ million) | 370 | 350 | 6% | 561 | (34%) | |||||
| Operating income (% of sales) | 17.8% | 14.0% | 23.2% | |||||||
Operating income in the fourth quarter of 2014 includes an impairment charge of $206 million on our welded pipe operations in Colombia and Canada.
Net sales of tubular products and services decreased 17% sequentially and 14% year on year. In North America there was a strong reduction in onshore drilling activity in the United States and Canada and in Mexico activity declined in the Burgos and Marina regions. In South America sales were stable as higher shipments of line pipe products in Brazil and Argentina were offset by lower OCTG sales in Ecuador. In Europe sales increased sequentially due to a good level of shipments in the North Sea and Russia. In the Middle East & Africa our sales declined due to a reduction in activity in deepwater projects in Sub-Saharan Africa and lower sales in Iraq. In the Far East and Oceania, the decline in sales reflected lower sales of premium products in Indonesia and Australia.
Operating income from tubular products and services increased 6% sequentially, as results in the previous quarter were affected by an impairment charge of $206 million. Excluding the effect of the impairment, our operating income declined mainly reflecting lower shipments and inefficiencies resulting from lower capacity utilization.
| Others | Q1 2015 | Q4 2014 | Q1 2014 | |||||||
| Net sales ($ million) | 177 | 180 | (2%) | 162 | 9% | |||||
| Operating income ($ million) | 9 | 1 | 1,422% | 4 | 102% | |||||
| Operating income (% of sales) | 5.1% | 0.3% | 2.8% | |||||||
Net sales of other products and services decreased 2% sequentially but increased 9% year on year. The sequential decline in sales was mainly due to lower sales at our industrial equipment business in Brazil, offset by higher sales of sucker rods and coiled tubing. The operating margin increased following an improvement in the results of our industrial equipment business in Brazil.
Selling, general and administrative expenses, or SG&A, amounted to $436 million, or 19.4% of net sales, in the first quarter of 2015, compared to $477 million, 17.8% in the previous quarter and $489 million, 18.9% in the first quarter of 2014. Despite a $41 million (9%) reduction in SG&A sequentially, it increased as a percentage of net sales due to the higher weight of fixed and semi-fixed expenses on lower sales.
Financial results amounted to a loss of $1 million in the first quarter of 2015, compared to a loss of $6 million in the previous quarter and a gain of $42 million in the same period of 2014. The loss in the first quarter of 2015 was due to foreign exchange losses, mainly attributed to the effect of the Brazilian Real devaluation (20.8%) on a short position in dollars at our Brazilian subsidiary. During the first quarter of 2014, 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 non-consolidated companies generated a loss of $25 million in the first quarter of 2015, compared to a loss of $23 million in the previous quarter and a gain of $19 million the first quarter of 2014. These results are mainly derived from our equity investment in Ternium (
Income tax charges totaled $132 million in the first quarter of 2015, 34.9% of income before equity in earnings of non-consolidated companies and income tax, compared to $126 million, or 36.7% in the previous quarter and $199 million or 32.7% in the first quarter of 2014. During the first quarter of 2015, our tax rate was negatively affected by the effect of certain currencies devaluation against the U.S. dollar, on the tax base used to calculate deferred taxes at subsidiaries which have the U.S. dollar as their functional currency.
Cash Flow and Liquidity
Net cash provided by operations during the first quarter of 2015 was $878 million, compared to $206 million in the previous quarter and $612 million in the first quarter of 2014.
Capital expenditures amounted to $261 million for the first quarter of 2015, compared to $375 million in the previous quarter and $189 million in the first quarter of 2014.
At the end of the quarter, our net cash position (cash and other current investments less total borrowings) amounted to $1.9 billion, compared to $1.3 billion at the end of the year.
Filing of Annual report on Form 20-F
As a result of an ongoing discussion with the U.S. SEC staff, regarding the carrying value of the Usiminas investment, Tenaris could be required to restate its financial statements for 2014 and for the first quarter of 2015. Therefore, Tenaris has sought an extension for the filing of its Annual Report on Form 20-F for the year ended December 31, 2014.
The value of Tenaris's investment in Usiminas, which was determined by the application of IFRS and tested for impairment using the value in use calculation as per IAS 36, amounted to $284 million as of September 30, 2014, $209 million as of December 31, 2014 and $153 million as of March 31, 2015, representing 1.2% of Tenaris's net worth.
For more information on the carrying value of the Usiminas investment, see note 12 to Tenaris's consolidated financial statements as of March 31, 2015.
Conference call
Tenaris will hold a conference call to discuss the above reported results, on May 1, 2015, 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 +1 877 280.4957 within North America or +1 857 244.7314 Internationally. The access number is " 11449917". 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 1:00 pm on May 1 through 11:59 pm on May 8. To access the replay by phone, please dial +1 888 286.8010 or +1 617 801.6888 and enter passcode " 29639998" 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, | |||||
| 2015 | 2014 | |||||
| Continuing operations | Unaudited | |||||
| Net sales | 2,253,555 | 2,579,944 | ||||
| Cost of sales | (1,440,692 | ) | (1,527,034 | ) | ||
| Gross profit | 812,863 | 1,052,910 | ||||
| Selling, general and administrative expenses | (436,107 | ) | (488,860 | ) | ||
| Other operating income (expense), net | 2,617 | 1,720 | ||||
| Operating income | 379,373 | 565,770 | ||||
| Finance Income | 12,107 | 11,465 | ||||
| Finance Cost | (6,257 | ) | (13,003 | ) | ||
| Other financial results | (7,270 | ) | 44,031 | |||
| Income before equity in earnings of non-consolidated companies and income tax | 377,953 | 608,263 | ||||
| Equity in earnings of non-consolidated companies | (24,950 | ) | 18,821 | |||
| Income before income tax | 353,003 | 627,084 | ||||
| Income tax | (131,925 | ) | (199,065 | ) | ||
| Income for the period | 221,078 | 428,019 | ||||
| Attributable to: | ||||||
| Owners of the parent | 222,217 | 422,505 | ||||
| Non-controlling interests | (1,139 | ) | 5,514 | |||
| 221,078 | 428,019 | |||||
| Consolidated Condensed Interim Statement of Financial Position |
|||||||||
| (all amounts in thousands of U.S. dollars) | At March 31, 2015 | At December 31, 2014 | |||||||
| Unaudited | |||||||||
| ASSETS | |||||||||
| Non-current assets | |||||||||
| Property, plant and equipment, net | 5,192,692 | 5,159,557 | |||||||
| Intangible assets, net | 2,709,467 | 2,757,630 | |||||||
| Investments in non-consolidated companies | 718,979 | 808,663 | |||||||
| Available for sale assets | 21,572 | 21,572 | |||||||
| Other investments | 1,559 | 1,539 | |||||||
| Deferred tax assets | 230,338 | 268,252 | |||||||
| Receivables | 257,814 | 9,132,421 | 262,176 | 9,279,389 | |||||
| Current assets | |||||||||
| Inventories | 2,438,252 | 2,779,869 | |||||||
| Receivables and prepayments | 249,283 | 267,631 | |||||||
| Current tax assets | 129,657 | 129,404 | |||||||
| Trade receivables | 1,675,941 | 1,963,394 | |||||||
| Other investments | 2,375,110 | 1,838,379 | |||||||
| Cash and cash equivalents | 675,619 | 7,543,862 | 417,645 | 7,396,322 | |||||
| Total assets | 16,676,283 | 16,675,711 | |||||||
| EQUITY | |||||||||
| Capital and reserves attributable to owners of the parent | 12,795,750 | 12,819,147 | |||||||
| Non-controlling interests | 150,817 | 152,200 | |||||||
| Total equity | 12,946,567 | 12,971,347 | |||||||
| LIABILITIES | |||||||||
| Non-current liabilities | |||||||||
| Borrowings | 27,494 | 30,833 | |||||||
| Deferred tax liabilities | 721,893 | 714,123 | |||||||
| Other liabilities | 284,201 | 285,865 | |||||||
| Provisions | 62,366 | 1,095,954 | 70,714 | 1,101,535 | |||||
| Current liabilities | |||||||||
| Borrowings | 1,154,642 | 968,407 | |||||||
| Current tax liabilities | 297,750 | 352,353 | |||||||
| Other liabilities | 321,970 | 296,277 | |||||||
| Provisions | 18,142 | 20,380 | |||||||
| Customer advances | 188,704 | 133,609 | |||||||
| Trade payables | 652,554 | 2,633,762 | 831,803 | 2,602,829 | |||||
| Total liabilities | 3,729,716 | 3,704,364 | |||||||
| Total equity and liabilities | 16,676,283 | 16,675,711 | |||||||
| Consolidated Condensed Interim Statement of Cash Flows |
||||||
| Three-month period ended March 31, | ||||||
| (all amounts in thousands of U.S. dollars) | 2015 | 2014 | ||||
| Cash flows from operating activities | Unaudited | |||||
| Income for the period | 221,078 | 428,019 | ||||
| Adjustments for: | ||||||
| Depreciation and amortization | 147,737 | 152,664 | ||||
| Income tax accruals less payments | 14,137 | 70,790 | ||||
| Equity in earnings of non-consolidated companies | 24,950 | (18,821 | ) | |||
| Interest accruals less payments, net | (4,451 | ) | (8,099 | ) | ||
| Changes in provisions | (10,586 | ) | 4,924 | |||
| Changes in working capital | 515,636 | 16,660 | ||||
| Other, including currency translation adjustment | (30,608 | ) | (34,293 | ) | ||
| Net cash provided by operating activities | 877,893 | 611,844 | ||||
| Cash flows from investing activities | ||||||
| Capital expenditures | (261,259 | ) | (189,045 | ) | ||
| Advance to suppliers of property, plant and equipment | 2,294 | (28,651 | ) | |||
| Investment in non-consolidated companies | - | (1,380 | ) | |||
| Net loan to non-consolidated companies | (6,288 | ) | (18,748 | ) | ||
| Proceeds from disposal of property, plant and equipment and intangible assets | 554 | 4,027 | ||||
| Changes in investments in short terms securities | (536,731 | ) | (304,446 | ) | ||
| Net cash used in investing activities | (801,430 | ) | (538,243 | ) | ||
| Cash flows from financing activities | ||||||
| Dividends paid to non-controlling interest in subsidiaries | - | (47,889 | ) | |||
| Acquisitions of non-controlling interests | - | (90 | ) | |||
| Proceeds from borrowings | 607,310 | 494,407 | ||||
| Repayments of borrowings | (418,195 | ) | (468,670 | ) | ||
| Net cash provided (used) in financing activities | 189,115 | (22,242 | ) | |||
| Increase in cash and cash equivalents | 265,578 | 51,359 | ||||
| Movement in cash and cash equivalents | ||||||
| At the beginning of the period | 416,445 | 598,145 | ||||
| Effect of exchange rate changes | (10,206 | ) | 185 | |||
| Increase in cash and cash equivalents | 265,578 | 51,359 | ||||
| At March 31, | 671,817 | 649,689 | ||||
| At March 31, | ||||||
| Cash and cash equivalents | 2015 | 2014 | ||||
| Cash and bank deposits | 675,619 | 659,765 | ||||
| Bank overdrafts | (3,802 | ) | (10,076 | ) | ||
| 671,817 | 649,689 | |||||
Contact Information:
Giovanni Sardagna
Tenaris
1-888-300-5432
www.tenaris.com