The Financial and Operational Information Contained in This Press
Release Is Based on Unaudited Consolidated Condensed Interim
Financial Statements Prepared in Accordance With International
Financial Reporting Standards (IFRS) and Presented in U.S. Dollars
LUXEMBOURG--(Marketwire - November 06, 2008) - Tenaris S.A. (NYSE:
TS) (BAE: TS) (MXSE: TS) (MILAN: TEN) ("Tenaris") today announced its
results for the quarter and nine months ended September 30, 2008 with
comparison to its results for the quarter and nine months ended
September 30, 2007.
Summary of 2008 Third Quarter Results
(Comparison with second quarter of 2008 and third quarter of 2007)
Q3 2008 Q2 2008 Q3 2007
------- ------------- -------------
Net sales (US$ million) 3,118.5 3,148.4 (1%) 2,433.8 28%
Operating income (US$ million) 933.9 823.7 13% 671.7 39%
Net income (US$ million) 631.2 1,030.0 (39%) 436.4 45%
Shareholders' net income (US$
million) 570.6 987.5 (42%) 401.0 42%
Earnings per ADS (US$) 0.97 1.67 (42%) 0.68 42%
Earnings per share (US$) 0.48 0.84 (42%) 0.34 42%
EBITDA (US$ million) 1,068.8 958.1 12% 804.5 33%
EBITDA margin (% of net sales) 34% 30% 33%
Our operating results in the third quarter reached a quarterly high
with operating income up 39% year on year and 13% sequentially. Sales
rose strongly in North America where the market environment remained
favourable and we continue to advance our alliance business model.
Operating margins, after falling in the first half of the year as
costs increased rapidly, recovered to the levels recorded in 2007.
Our net financial debt (total financial debt less cash and other
current investments) amounted to US$1,488 million, broadly in line
with the previous quarter as our cash flow generation has been
negatively affected by the timing of tax payments and by an increase
in working capital mainly due to the increase in inventories.
Payment of Interim Dividend
Tenaris's board of directors approved the payment of an interim
dividend of US$0.13 per share (US$0.26 per ADS), or approximately
US$153 million, on November 27, 2008 (or, only in those jurisdictions
where such date is not a business day, on November 28, 2008), with an
ex-dividend date of November 24.
Market Background and Outlook
Since September the world economy has undergone a major financial
crisis whose consequences are spreading to the real economy
throughout the world. Business conditions have changed so rapidly
that at this point it is not clear how deep and long the impact on
the real economy, and consequently on the demand for energy, will be.
We are expecting a gradual reduction in exploration and production
budgets and consequently, drilling activity and demand for OCTG and
other pipe products in 2009 and 2010, both in North America and
globally. However, we believe that the energy sector will be impacted
less than most other sectors of the economy mainly due to the
constraints on the supply base which is characterized by ever
increasing depletion rates, difficulties in replacing reserves and
the long lead times to develop new reserves.
Global oil prices, after peaking in July in excess of US$140 per
barrel, have retreated rapidly to the current level of US$60-70 per
barrel in the expectation of reduced global demand in the current
recessionary environment. North American gas prices also rose rapidly
during the first half of this year and have fallen even more sharply
since then to their current levels of US$6-7 per million BTU as
increased investment in US gas production resulted in significantly
higher production levels for the first time in many years..
During the third quarter, the international count of active drilling
rigs, as published by Baker Hughes, continued to rise and averaged
1,096, an increase of 1% over the previous quarter and one of 7%
compared to the same quarter of the previous year. The U.S. rig count
increased 6% compared to the second quarter of 2008 and was up 11%
compared to the third quarter of 2007. In Canada, activity has risen
from last year's low levels, with the rig count registering a 24%
increase in the third quarter of 2008 compared to the same quarter of
2007, and is now up 9% for the first nine months of 2008 compared to
the same period of 2007.
Demand for OCTG and other pipe products from the oil and gas industry
has increased so far this year, particularly in North America,
following last year's distributor destocking activities and increased
drilling activity. In the rest of the world, however, apparent demand
for OCTG products has lagged operative consumption due to inventory
adjustment activity in the larger Middle East markets. Demand for
high-end pipe products has also increased in the year to date
reflecting the increasing complexity of drilling activity in most
regions worldwide.
Steelmaking raw material costs for our seamless pipe products and
steel costs for our welded pipe products rose steeply in the first
half of the year but, more recently, have fallen as the global
financial crisis and the recessionary environment has had an almost
immediate impact on global steelmaking activity. Pipe prices, which
had been adjusting to the rising cost environment at different paces
across markets, have been showing resilience as demand remains firm
but are likely to come under pressure if demand weakens. We expect to
maintain a good level of net sales and operating income for our
tubular products going into 2009.
Analysis of 2008 Third Quarter Results
Increase/
Sales volume (metric tons) Q3 2008 Q3 2007 (Decrease)
---------- ---------- ----------
Tubes - Seamless 682,000 659,000 3%
Tubes - Welded 263,000 240,000 10%
Tubes - Total 945,000 899,000 5%
Projects - Welded 155,000 127,000 22%
Total 1,100,000 1,026,000 7%
Increase/
Tubes Q3 2008 Q3 2007 (Decrease)
---------- ---------- ----------
(Net sales - $ million)
North America 1,280.8 744.1 72%
South America 398.4 310.6 28%
Europe 408.1 360.3 13%
Middle East & Africa 344.2 471.7 (27%)
Far East & Oceania 169.9 175.9 (3%)
Total net sales ($ million) 2,601.4 2,062.6 26%
Cost of sales (% of sales) 53% 54%
Operating income ($ million) 859.5 615.5
Operating income (% of sales) 33% 30%
Net sales of tubular products and services rose 26% to US$2,601.4
million in the third quarter of 2008, compared to US$2,062.6 million
in the third quarter of 2007 due to higher volumes and higher average
selling prices. Sales in North America were up by 72% as market
conditions reflected a surge in oil and gas drilling activity and
comparatively low levels of OCTG inventories. In South America sales
increased 28% reflecting a good level of demand in the Andean
countries. In the Middle East and Africa, our sales continue to be
affected by inventory adjustments and lower demand for our API
products in the region.
Increase/
Projects Q3 2008 Q3 2007 (Decrease)
---------- ---------- ----------
Net sales ($ million) 319.1 235.6 35%
Cost of sales (% of sales) 73% 72%
Operating income ($ million) 44.3 42.0 5%
Operating income (% of sales) 14% 18%
Net sales of pipes for pipeline projects increased 35% to US$319.1
million in the third quarter of 2008, compared to US$235.6 million in
the third quarter of 2007, reflecting a high level of shipments to
gas and other pipeline projects in Brazil and Colombia.
Increase/
Others Q3 2008 Q3 2007 (Decrease)
---------- ---------- ----------
Net sales ($ million) 198.0 135.6 46%
Cost of sales (% of sales) 69% 73%
Operating income ($ million) 30.1 14.2 112%
Operating income (% of sales) 15% 10%
Net sales of other products and services rose 46% to US$198.0 million
in the third quarter of 2008, compared to US$135.6 million in the
third quarter of 2007, mainly reflecting higher sales of excess raw
materials, welded pipes for electric conduits in the USA and sucker
rods.
Selling, general and administrative expenses, or SG&A, decreased as a
percentage of net sales to 14.7% in the quarter ended September 30,
2008 compared to 15.9% in the corresponding quarter of 2007.
Other operating income totaled US$19.6 million mainly due to a
reimbursement from insurance in Italy and earnings from the disposal
of assets.
Net interest expenses decreased to US$23.3 million in the third
quarter of 2008 compared to US$57.1 million in the same period of
2007 reflecting a lower net debt position and lower interest rates.
Other financial results recorded a loss of US$32.0 million during the
third quarter of 2008, compared to a loss of US$12.9 million during
the third quarter of 2007. 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. They arise due to the fact that most of our
subsidiaries prepare their financial statements in currencies other
than the US dollar in accordance with IFRS.
Equity in earnings of associated companies generated a gain of
US$24.3 million in the third quarter of 2008, compared to a gain of
US$18.3 million in the third quarter of 2007. These gains mainly
derived from our equity investment in Ternium.
Income tax charges totalled US$271.7 million in the third quarter of
2008, equivalent to 31% of income before equity in earnings of
associated companies and income tax, compared to US$195.9 million in
the third quarter of 2007, equivalent to 33% of income before equity
in earnings of associated companies and income tax.
Income attributable to minority interest rose to US$60.5 million in
the third quarter of 2008, compared to US$35.4 million in the
corresponding quarter of 2007. Although net results at our Confab
subsidiary were higher during the period, they were partially offset
by lower net results at our NKKTubes subsidiary.
Cash Flow and Liquidity
Net cash provided by operations during the third quarter of 2008 was
US$242.8 million (US$1,085.7 million in the first nine months),
compared to US$889.8 million in the third quarter of 2007 (US$1,789.1
million in the first nine months). Cash flow in the third quarter was
affected by the tax payment on earnings from the sale of Hydril
pressure control business and the postponement from the second to the
third quarter of tax payments in Italy. Working capital increased by
US$257.5 million during the third quarter driven primarily by an
increase in inventories which rose US$342.2 million.
Capital expenditures amounted to US$131.8 million in the third
quarter of 2008 ($337.1 million in the first nine months), compared
to US$105.4 million in the third quarter of 2007 (US$334.6 million in
the first nine months).
During the first nine months of 2008, total financial debt decreased
by US$1,015.3 million to US$3,004.9 million at September 30, 2008
from US$4,020.2 million at December 31, 2007. Net financial debt
during the first nine months of 2008 decreased by US$1,482.0 million
to US$1,488.2 million at September 30, 2008 following the collection
of Hydril's pressure control business sale for US$1,114 million and
the payment of the balance of the annual dividend, amounting to
approximately US$295 million in June 2008. As of September 30, we had
US$1.5 billion of liquidity in cash and cash equivalents.
Analysis of 2008 First Nine Months Results
Net income attributable to equity holders in the company during the
first nine months of 2008 was US$2,031.1 million, or US$1.72 per
share (US$3.44 per ADS), which compares with net income attributable
to equity holders in the company during the first nine months of 2007
of US$1,377.2 million, or US$1.17 per share (US$2.33 per ADS). Net
income for the first nine months of 2008 includes the result for the
sale of Hydril's pressure control business of US$394.3 million, or
US$0.33 per share (US$0.67 per ADS). Operating income was US$2,468.6
million, or 28% of net sales, compared to US$2,200.5 million, or 30%
of net sales. Operating income plus depreciation and amortization was
US$2,872.3 million, or 32% of net sales, compared to US$2,558.4
million, or 35% of net sales.
Increase/
Sales volume (metric tons) 9M 2008 9M 2007 (Decrease)
---------- ---------- ----------
Tubes - Seamless 2,157,000 2,156,000 0%
Tubes - Welded 815,000 706,000 15%
Tubes - Total 2,972,000 2,862,000 4%
Projects - Welded 457,000 317,000 44%
Total 3,429,000 3,179,000 8%
Increase/
Tubes 9M 2008 9M 2007 (Decrease)
---------- ---------- ----------
(Net sales - $ million)
North America 3,099.9 2,165.7 43%
South America 970.8 897.7 8%
Europe 1,336.5 1,200.6 11%
Middle East & Africa 1,385.5 1,598.9 (13%)
Far East & Oceania 533.5 536.8 (1%)
Total net sales ($ million) 7,326.2 6,399.7 14%
Cost of sales (% of sales) 54% 51%
Operating income ($ million) 2,204.1 2,057.0 7%
Operating income (% of sales) 30% 32%
Net sales of tubular products and services rose 14% to US$7,326.2
million in the first nine months of 2008, compared to US$6,399.7
million in the first nine months of 2007. The improvement was mainly
driven by our North American operations as the market strongly
recovered from last year level both in terms of volumes and prices.
In Middle East and Africa the market continues to be affected by
inventory reductions.
Increase/
Projects 9M 2008 9M 2007 (Decrease)
---------- ---------- ----------
Net sales ($ million) 959.0 560.9 71%
Cost of sales (% of sales) 72% 71%
Operating income ($ million) 173.2 106.7 62%
Operating income (% of sales) 18% 19%
Net sales of pipes for pipeline projects increased 71% to US$959.0
million in the first nine months of 2008, compared to US$560.9
million in the first nine months of 2007, reflecting higher
deliveries in Brazil, Argentina and Colombia to gas and other
pipeline projects.
Increase/
Others 9M 2008 9M 2007 (Decrease)
---------- ---------- ----------
Net sales ($ million) 607.9 453.5 34%
Cost of sales (% of sales) 70% 78%
Operating income ($ million) 91.3 36.8 148%
Operating income (% of sales) 15% 8%
Net sales of other products and services rose 34% to US$607.9 million
in the first nine months of 2008, compared to US$453.5 million in the
first nine months of 2007, reflecting higher sales of electric
conduit pipes, sucker rods and industrial equipment.
Selling, general and administrative expenses, or SG&A, decreased as a
percentage of net sales to 15.2% in the nine months ended September
30, 2008 compared to 15.7% in the corresponding nine months of 2007.
Net interest expenses decreased to US$96.8 million in the first nine
months of 2008 compared to US$140.4 million in the same period of
2007 reflecting a lower net debt position and lower interest rates.
Other financial results recorded a loss of US$45.2 million during the
first nine months of 2008, compared to a loss of US$10.7 million
during the first nine months of 2007. 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. They arise due to the fact that most of
our subsidiaries prepare their financial statements in currencies
other than the US dollar in accordance with IFRS.
Equity in earnings of associated companies generated a gain of
US$122.4 million in the first nine months of 2008, compared to a gain
of US$73.6 million in the first nine months of 2007. These gains were
derived mainly from our equity investment in Ternium.
Income tax charges totalled US$698.9 million in the first nine months
of 2008, equivalent to 30% of income before equity in earnings of
associated companies and income tax, compared to US$662.1 million in
the first nine months of 2007, equivalent to 32% of income before
equity in earnings of associated companies and income tax.
Income from discontinued operations amounted to US$411.1 million in
the first nine months of 2008. This included the result of the sale
of Hydril's pressure control business, completed on April 1, 2008,
amounting to US$394.3 million.
Income attributable to minority interest rose to US$130.0 million in
the first nine months of 2008, compared to US$103.0 million in the
corresponding nine months of 2007. [Although net results at our
Confab subsidiary were higher during the period, they were lower at
our NKKTubes subsidiary.]
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.
As required by the articles 36 and 39 of Consob Regolamento Mercati
n. 16191 dated October 29, 2007, Tenaris states as follows: Tenaris
has received from its subsidiaries copies of their by-laws, articles
of incorporation or other organizational documents (as applicable in
their respective jurisdictions of organization), together with
information regarding the composition and powers of their governing
bodies. In addition, Tenaris has taken appropriate action to ensure
that its subsidiaries (i) provide to the external auditors any
information as may be necessary to conduct the audit of Tenaris's
annual and interim accounts and (ii) have adequate accounting systems
enabling them regularly to provide both to Tenaris's management and
its external auditors any economic, financial or other data as may be
required for the preparation or audit, as the case may be, of
Tenaris's consolidated accounts.
Consolidated Income Statement
(all amounts in
thousands of U.S.
dollars, unless Three-month period ended Nine-month period ended
otherwise stated) September 30, September 30,
------------------------ ------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Continuing operations (Unaudited) (Unaudited)
Net sales 3,118,512 2,433,773 8,893,084 7,414,040
Cost of sales (1,745,064) (1,375,736) (5,088,664) (4,041,552)
----------- ----------- ----------- -----------
Gross profit 1,373,448 1,058,037 3,804,420 3,372,488
Selling, general and
administrative
expenses (459,165) (387,632) (1,350,835) (1,160,908)
Other operating income
(expense), net 19,633 1,277 14,966 (11,075)
Operating income 933,916 671,682 2,468,551 2,200,505
----------- ----------- ----------- -----------
Interest income 16,881 22,635 45,660 65,017
Interest expense (40,184) (79,728) (142,454) (205,437)
Other financial results (32,032) (12,851) (45,188) (10,725)
Income before equity in
earnings of associated
companies and income
tax 878,581 601,738 2,326,569 2,049,360
----------- ----------- ----------- -----------
Equity in earnings of
associated companies 24,290 18,280 122,386 73,585
Income before income
tax 902,871 620,018 2,448,955 2,122,945
----------- ----------- ----------- -----------
Income tax (271,714) (195,856) (698,910) (662,070)
Income for continuing
operations 631,157 424,162 1,750,045 1,460,875
----------- ----------- ----------- -----------
Discontinued operations
Income for discontinued
operations - 12,202 411,110 19,369
Income for the period 631,157 436,364 2,161,155 1,480,244
----------- ----------- ----------- -----------
Attributable to:
Equity holders of the
Company 570,635 400,952 2,031,149 1,377,206
Minority interest 60,522 35,412 130,006 103,038
----------- ----------- ----------- -----------
631,157 436,364 2,161,155 1,480,244
----------- ----------- ----------- -----------
Consolidated Balance Sheet
(all amounts in thousands of
U.S. dollars) At September 30, 2008 At December 31, 2007
(Unaudited)
--------------------- ---------------------
ASSETS
Non-current assets
Property, plant and
equipment, net 3,307,590 3,269,007
Intangible assets, net 4,347,873 4,542,352
Investments in associated
companies 630,426 509,354
Other investments 38,099 35,503
Deferred tax assets 356,333 310,590
Receivables 50,857 8,731,178 63,738 8,730,544
---------- ----------
Current assets
Inventories 3,334,040 2,598,856
Receivables and prepayments 248,805 222,410
Current tax assets 143,251 242,757
Trade receivables 2,027,081 1,748,833
Other investments 26,997 87,530
Cash and cash equivalents 1,489,787 7,269,961 962,497 5,862,883
---------- ----------
Current and non current
assets held for sale - 651,160
---------- ----------
7,269,961 6,514,043
---------- ----------
Total assets 16,001,139 15,244,587
EQUITY
Capital and reserves
attributable to the Company's
equity holders 8,686,199 7,006,277
Minority interest 572,234 523,573
---------- ----------
Total equity 9,258,433 7,529,850
LIABILITIES
Non-current liabilities
Borrowings 1,600,884 2,869,466
Deferred tax liabilities 1,111,196 1,233,836
Other tax liabilities 7,772 -
Other liabilities 181,872 185,410
Provisions 100,292 97,912
Trade payables 1,155 3,003,171 47 4,386,671
---------- ----------
Current liabilities
Borrowings 1,404,051 1,150,779
Current tax liabilities 560,430 341,028
Other liabilities 296,819 252,204
Provisions 27,801 19,342
Customer advances 360,093 449,829
Trade payables 1,090,341 3,739,535 847,842 3,061,024
---------- ----------
Liabilities associated with
current and non-current
assets held for sale - 267,042
---------- ----------
3,739,535 3,328,066
---------- ----------
Total liabilities 6,742,706 7,714,737
Total equity and liabilities 16,001,139 15,244,587
Consolidated Cash Flow Statement
Three-month period Nine-month period
ended September 30, ended September 30,
---------------------- ----------------------
(all amounts in thousands
of U.S. dollars) 2008 2007 2008 2007
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
Cash flows from operating
activities
Income for the period 631,157 436,364 2,161,155 1,480,244
Adjustments for: - -
Depreciation and
amortization 134,885 140,876 403,758 371,647
Income tax accruals less
payments (309,497) 29,211 (219,750) (220,582)
Equity in earnings of
associated companies (24,290) (18,280) (122,386) (73,585)
Income from the sale of
pressure control business - - (394,323) -
Interest accruals less
payments, net 34,401 58,654 26,507 63,519
Changes in provisions (4,404) (799) 10,839 (4,279)
Changes in working capital (257,464) 220,034 (803,078) 94,669
Other, including currency
translation adjustment 37,986 23,695 22,969 77,498
---------- ---------- ---------- ----------
Net cash provided by
operating activities 242,774 889,755 1,085,691 1,789,131
---------- ---------- ---------- ----------
Cash flows from investing
activities
Capital expenditures (131,772) (105,419) (337,138) (334,568)
Acquisitions of
subsidiaries and minority
interest (8,003) (45) (9,868) (1,927,227)
Other disbursements
relating to the
acquisition of Hydril - - - (71,580)
Proceeds from the sale of
pressure control business - - 1,113,805 -
Decrease in subsidiaries - - - (1,195)
Proceeds from disposal of
property, plant and
equipment and intangible
assets 3,340 2,327 12,166 6,923
Dividends received - - 13,636 11,496
Investments in short terms
securities 324,934 (45,035) 60,533 (30,842)
Other - - (3,428) -
---------- ---------- ---------- ----------
Net cash provided by /
(used in) investing
activities 188,499 (148,172) 849,706 (2,346,993)
---------- ---------- ---------- ----------
Cash flows from financing
activities
Dividends paid - - (295,134) (354,161)
Dividends paid to minority
interest in subsidiaries (4,981) (5,393) (60,117) (45,315)
Proceeds from borrowings 301,117 243,937 731,205 2,451,963
Repayments of borrowings (444,709) (228,611) (1,777,464) (1,247,324)
---------- ---------- ---------- ----------
Net cash (used in) /
provided by financing
activities (148,573) 9,933 (1,401,510) 805,163
---------- ---------- ---------- ----------
Increase in cash and cash
equivalents 282,700 751,516 533,887 247,301
Movement in cash and cash
equivalents
At the beginning of the
period 1,319,049 883,042 954,303 1,365,008
Effect of exchange rate
changes (138,107) 13,996 (24,548) 36,245
Increase in cash and cash
equivalents 282,700 751,516 533,887 247,301
At September 30, 1,463,642 1,648,554 1,463,642 1,648,554
Cash and cash equivalents At September 30, At September 30,
2008 2007 2008 2007
Cash and bank deposits 1,489,787 1,651,780 1,489,787 1,651,780
Bank overdrafts (26,145) (3,205) (26,145) (3,205)
Restricted bank deposits - (21) - (21)
1,463,642 1,648,554 1,463,642 1,648,554
Non-cash financing activity
Conversion of debt to
equity in subsidiaries - - - 35,140
Contact:
Giovanni Sardagna
Tenaris
1-888-300-5432
www.tenaris.com
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.