The Financial and Operational Information Contained in This Press
Release Is Based on Unaudited Consolidated Condensed Interim
Financial Statements Presented in U.S. Dollars (US$) and Prepared in
Accordance With International Financial Reporting Standards (IFRS),
as Issued by the International Accounting Standard Board (IASB) and
Adopted by the European Union
LUXEMBOURG -- (MARKET WIRE) -- 08/05/09 -- Tenaris S.A. (NYSE: TS)
(BAE: TS) (MXSE: TS) (MILAN: TEN) ("Tenaris") today announced its
results for the quarter and semester ended June 30, 2009 with
comparison to its results for the quarter and semester ended June 30,
2008.
Summary of 2009 Second Quarter Results
(Comparison with first quarter of 2009 and second quarter of 2008)
Q2 2009 Q1 2009 Q2 2008
------- ------- -------
Net sales (US$ million) 2,096.3 2,434.3 (14%) 3,110.1 (33%)
Operating income (US$ million) 436.8 685.6 (36%) 816.0 (46%)
Net income (US$ million) 336.4 393.1 (14%) 1,030.0 (67%)
Shareholders' net income (US$
million) 343.3 366.0 (6%) 987.5 (65%)
Earnings per ADS (US$) 0.58 0.62 (6%) 1.67 (65%)
Earnings per share (US$) 0.29 0.31 (6%) 0.84 (65%)
EBITDA (US$ million) 563.1 807.4 (30%) 948.3 (41%)
EBITDA margin (% of net sales) 27% 33% 30%
Our results in the second quarter reflect significantly lower demand
for our products and services in the light of the evolving global
economic crisis and its impact on the activities of our customers.
Shipments of tubular products fell 47% year on year and 19%
sequentially, with the US and European markets being particularly
affected. Our operating margins, particularly in our North American
welded pipe operations, are being affected by very low production
levels and our decision to maintain our industrial system and human
resources prepared for the future recovery in demand. Our net income
decreased 67% compared to the second quarter of 2008, however a
significant part of this decrease is related to one-off gains
recorded on the sale of subsidiaries in the second quarter of last
year. Our net income for continuing operations, declined 44% compared
to the second quarter of 2008. However, our cash flow from operations
was strong as we reduced our investment in working capital by
US$787.5 million. Consequently our net financial debt (total
financial debt less cash and other current investments) decreased by
US$659.8 million to US$121.9 million during the quarter after paying
a dividend of US$354.2 million in June.
During the quarter, we re-presented the results of our Venezuelan
operations that are in the process of being nationalized as
discontinued operations.
Market Background and Outlook
Following their collapse in the second half of 2008 to a low of
around US$30 per barrel at the end of the year, global oil prices
have risen during the first half of 2009 and have reached the level
of US$60-70 per barrel. This reflects increased optimism for a
recovery in global economic growth led by China together with an
expected decline in non-OPEC production and ongoing OPEC actions to
cut production. North American gas prices, however, have fallen
during the first half of 2009 to current levels of around US$3.50 per
million BTU as the carry over of 2008 US production increases
combined with reduced demand has resulted in high levels of gas in
storage.
The international count of active drilling rigs, as published by
Baker Hughes, continued to decline during the second quarter. It
averaged 982 during the second quarter of 2009, 4% lower than the
first quarter of 2009 and 9% lower than the same quarter of the
previous year. The corresponding rig count in USA, which is more
sensitive to North American gas prices, fell sharply in the first
half and is now down 56% from its high in September 2008 but has
shown signs of stabilizing in recent weeks. It averaged 936 during
the second quarter, 29% lower than the first quarter of 2009 and 50%
lower than the second quarter of 2008. In Canada, the corresponding
rig count, which is affected by seasonal drilling patterns, averaged
90 during the quarter, a decrease of 47% compared to second quarter
of 2008 and its lowest level since 1993.
Demand for our pipes from the global energy industry has been
affected by the decline in oil and gas drilling activity and the
actions taken by customers to adjust to reduced cash flows and a less
favorable market outlook, including procurement delays and
cancellations and the postponement of new project activity. Demand in
the US and Canada has been further affected by extraordinarily high
levels of OCTG inventories. Demand for pipes from the industrial and
power generation segments remain at low levels.
We expect shipments for our large-diameter pipes for pipeline
projects in South America, in the second half of the year, to remain
close to the levels shown during the first half, however the order
backlog continues to decline as new projects are postponed.
Steel and steelmaking raw material costs have stabilized and in
recent weeks have shown some increase. However our costs,
particularly at our North American welded pipe operations, will
continue to be adversely affected by low production levels and the
high cost of raw material inventories procured under different market
conditions, partially offset by the actions taken to reduce our
structural costs.
With low levels of demand likely to persist until the end of the year
and prices adjusting downwards we expect that our sales and operating
income will be lower in the second half of the year than the first.
We expect that there will be a recovery in our shipments going into
2010 but that our revenues may not recover to the same extent
considering the lagged effect of price declines in our results.
Analysis of 2009 Second Quarter Results
Sales volume (metric tons) Q2 2009 Q2 2008 Increase/(Decrease)
------------------------- ------- --------- ------------------
Tubes - Seamless 497,000 771,000 (36%)
Tubes - Welded 65,000 270,000 (76%)
Tubes - Total 562,000 1,041,000 (46%)
Projects - Welded 90,000 170,000 (47%)
Total 652,000 1,211,000 (46%)
Tubes Q2 2009 Q2 2008 Increase/(Decrease)
----- ------- ------- ------------------
(Net sales - $ million)
North America 661.0 986.5 (33%)
South America 244.9 304.1 (19%)
Europe 222.3 480.8 (54%)
Middle East & Africa 452.7 565.6 (20%)
Far East & Oceania 137.8 187.1 (26%)
Total net sales ($ million) 1,718.7 2,524.1 (32%)
Cost of sales (% of sales) 57% 56%
Operating income ($ million) 385.0 706.2 (45%)
Operating income (% of sales) 22% 28%
Net sales of tubular products and services decreased 32% to
US$1,718.7 million in the second quarter of 2009, compared to
US$2,524.1 million in the second quarter of 2008, as a 46% decrease
in volumes was partially offset by higher average selling prices. In
North America, although demand remained firm in Mexico, it declined
precipitously in the USA as it was affected by the decline in
drilling activity and by the extraordinary high level of OCTG
inventories following the previous surge in imports from China. Sales
in South America were affected by lower demand in Venezuela and
Argentina. In Europe, sales were affected by lower demand from the
industrial sector, lower demand from distributors serving the process
plant sector and lower sales of OCTG in Romania. Sales in the Middle
East and Africa were affected by lower sales of OCTG products in
North Africa and the Caspian region. Sales in the Far East & Oceania
were lower throughout the region.
Projects Q2 2009 Q2 2008 Increase/(Decrease)
-------- ------- ------- ------------------
Net sales ($ million) 254.4 368.1 (31%)
Cost of sales (% of sales) 75% 71%
Operating income ($ million) 45.5 77.6 (41%)
Operating income (% of sales) 18% 21%
Net sales of pipes for pipeline projects decreased 31% to US$254.4
million in the second quarter of 2009, compared to US$368.1 million
in the second quarter of 2008, reflecting a decrease in shipments to
gas and other pipeline projects in Brazil and Argentina, partially
offset by higher average selling prices.
Others Q2 2009 Q2 2008 Increase/(Decrease)
------ ------- ------- ------------------
Net sales ($ million) 123.2 218.0 (43%)
Cost of sales (% of sales) 78% 72%
Operating income ($ million) 6.3 32.5 (81%)
Operating income (% of sales) 5% 15%
Net sales of other products and services decreased 43% to US$123.2
million in the second quarter of 2009, compared to US$218.0 million
in the second quarter of 2008. Although demand for our Brazilian
industrial equipment business remained firm, demand for our U.S.
electric conduit business was substantially lower and sales of sucker
rods were affected by lower activity. Our Venezuelan HBI operation
was re-presented as discontinued operation.
Selling, general and administrative expenses, or SG&A, increased as a
percentage of net sales to 18.9% in the quarter ended June 30, 2009,
compared to 15.1% in the corresponding quarter of 2008, mainly due to
the effect of fixed and semi-fixed expenses over lower revenues.
Net interest expenses decreased to US$16.3 million in the second
quarter of 2009 compared to US$17.5 million in the same period of
2008, as we reduced our net debt.
Other financial results generated a loss of US$15.9 million during
the second quarter of 2009, compared to a gain of US$4.2 million
during the second quarter of 2008. 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$66.5 million in the second quarter of 2009, compared to a gain of
US$48.1 million in the second quarter of 2008. These gains were
derived mainly from our equity investment in Ternium.
Income tax charges totalled US$114.5 million in the second quarter of
2009, equivalent to 28% of income before equity in earnings of
associated companies and income tax, compared to US$219.3 million in
the second quarter of 2008, equivalent to 27% of income before equity
in earnings of associated companies and income tax. Our tax rate for
the quarter was lower than the one posted in the first quarter, as we
incurred losses in subsidiaries located in countries with higher than
average tax rates. The result in the second quarter of 2008 benefited
from a tax reduction equivalent to US$28.3 million incurred on the
reversal of deferred taxes in Italy due to the anticipated payment of
taxes at a reduced rate.
Results for discontinued operations generated a loss of US$20.2
million in the second quarter of 2009, related to our businesses in
Venezuela that are in the process of being nationalized. In the
second quarter of 2008, we registered a gain of US$398.5 million, out
of which US$394.3 million were from the sale of Hydril's pressure
control business.
Results attributable to minority interest amounted to a loss of
US$6.8 million in the second quarter of 2009, as losses were incurred
at our NKKTubes subsidiary and at our Venezuelan subsidiaries,
partially offset by the results at our Confab subsidiary. Second
quarter 2008 minority interest amounted to US$42.6 mainly reflecting
positive results at Confab and NKKTubes.
Cash Flow and Liquidity
Net cash provided by operations during the second quarter of 2009 was
US$1.1 billion (US$1.9 billion in the first half), compared to
US$274.0 million in the second quarter of 2008 (US$842.9 million in
the first half). Working capital decreased by US$787.5 million during
the second quarter, as we reduced our trade receivables by US$498.4
million and our inventories by US$412.9 million, which was partially
offset by a decrease in trade payables and customer advances
amounting to US$117.0 million.
Capital expenditures amounted to US$106.5 million in the second
quarter of 2009 ($226.3 million in the first half), compared to
US$116.9 million in the second quarter of 2008 (US$205.4 million in
the first half).
During the first half of 2009, total financial debt decreased by
US$1.0 billion to US$2.0 billion at June 30, 2009 from US$3.0 billion
at December 31, 2008. Net financial debt during the first half of
2009 decreased by US$1.3 billion to US$121.9 million at June 30,
2009.
Analysis of 2009 First Half Results
Net income attributable to equity holders in the company during the
first semester of 2009 was US$709.3 million, or US$0.60 per share
(US$1.20 per ADS), which compares with net income attributable to
equity holders in the company during the first semester of 2008 of
US$1,460.5 million, or US$1.24 per share (US$2.47 per ADS). Operating
income was US$1,122.4 million, or 25% of net sales during the first
semester of 2009, compared to US$1,524.6 million, or 27% of net sales
during the fist semester of 2008. Operating income plus depreciation
and amortization for this semester was US$1,370.5 million, or 30% of
net sales, compared to US$1,789.3 million, or 31% of net sales during
the first semester of 2008.
Sales volume (metric tons) H1 2009 H1 2008 Increase/(Decrease)
------------------------- --------- --------- ------------------
Tubes - Seamless 1,076,000 1,457,000 (26%)
Tubes - Welded 175,000 552,000 (68%)
Tubes - Total 1,251,000 2,009,000 (38%)
Projects - Welded 174,000 302,000 (42%)
Total 1,424,000 2,311,000 (38%)
Tubes H1 2009 H1 2008 Increase/(Decrease)
----- ------- ------- ------------------
(Net sales - $ million)
North America 1,676.8 1,819.1 (8%)
South America 494.3 528.8 (7%)
Europe 484.9 928.4 (48%)
Middle East & Africa 848.0 1,041.3 (19%)
Far East & Oceania 305.4 363.7 (16%)
Total net sales ($ million) 3,809.4 4,681.2 (19%)
Cost of sales (% of sales) 55% 55%
Operating income ($ million) 1,026.3 1,342.0 (24%)
Operating income (% of sales) 27% 29%
Net sales of tubular products and services decreased 19% to
US$3,809.4 million in the first half of 2009, compared to US$4,681.2
million in the first half of 2008, due to a sharp reduction in
volumes, which was partially offset by higher average selling prices,
reflecting in part a higher proportion of sales of specialized
high-end products.
Projects H1 2009 H1 2008 Increase/(Decrease)
-------- ------- ------- ------------------
Net sales ($ million) 476.6 639.8 (26%)
Cost of sales (% of sales) 72% 71%
Operating income ($ million) 94.5 128.9 (27%)
Operating income (% of sales) 20% 20%
Net sales of pipes for pipeline projects decreased 26% to US$476.6
million in the first half of 2009, compared to US$639.8 million in
the first half of 2008, reflecting lower deliveries in Brazil and
Argentina to gas and other pipeline projects.
Others H1 2009 H1 2008 Increase/(Decrease)
------ ------- ------- ------------------
Net sales ($ million) 244.7 389.4 (37%)
Cost of sales (% of sales) 84% 72%
Operating income ($ million) 1.6 53.7 (97%)
Operating income (% of sales) 1% 14%
Net sales of other products and services decreased 37% to US$244.7
million in the first half of 2009, compared to US$389.4 million in
the first half of 2008, mainly reflecting lower sales of welded pipes
for electric conduits in the USA and sucker rods.
Selling, general and administrative expenses, or SG&A, increased as a
percentage of net sales to 17.3% in the semester ended June 30, 2009
compared to 15.4% in the corresponding semester of 2008, mainly due
to the effect of fixed and semi-fixed expenses over lower revenues.
Net interest expenses decreased to US$50.8 million in the first half
of 2009 compared to US$71.4 million in the same period of 2008
reflecting a lower net debt position and lower interest rates.
Other financial results recorded a loss of US$52.3 million during the
first half of 2009, compared to a loss of US$9.6 million during the
first half of 2008. 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$57.9 million in the first half of 2009, compared to a gain of
US$98.0 million in the first half of 2008. These gains were derived
mainly from our equity investment in Ternium.
Income tax charges totalled US$319.6 million in the first half of
2009, equivalent to 31% of income before equity in earnings of
associated companies and income tax, compared to US$428.5 million in
the first half of 2008, equivalent to 30% of income before equity in
earnings of associated companies and income tax.
Income from discontinued operations amounted to a loss of US$28.1
million in the first half of 2009 corresponding to our Venezuelan
operations that are being nationalized, compared to a gain of
US$416.9 million in the corresponding period of 2008, of which
US$394.3 million corresponded to the result of the sale of Hydril's
pressure control business.
Income attributable to minority interest amounted to US$20.2 million
in the first half of 2009, compared to US$69.5 million in the
corresponding semester of 2008, mainly reflecting lower results at
NKKTubes and at our Venezuelan subsidiaries.
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
of U.S. dollars, unless Three-month period Six-month period
otherwise stated) ended June 30, ended June 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Continuing operations (Unaudited) (Unaudited)
Net sales 2,096,344 3,110,103 4,530,632 5,710,424
Cost of sales (1,264,899) (1,820,717) (2,628,211) (3,302,831)
---------- ---------- ---------- ----------
Gross profit 831,445 1,289,386 1,902,421 2,407,593
Selling, general and
administrative expenses (395,926) (469,669) (783,006) (878,038)
Other operating income
(expense), net 1,278 (3,708) 3,024 (4,947)
---------- ---------- ---------- ----------
Operating income 436,797 816,009 1,122,439 1,524,608
Interest income 8,163 16,493 12,737 28,681
Interest expense (24,435) (33,962) (63,582) (100,124)
Other financial results (15,907) 4,235 (52,266) (9,572)
---------- ---------- ---------- ----------
Income before equity in
earnings of associated
companies and income tax 404,618 802,775 1,019,328 1,443,593
Equity in earnings of
associated companies 66,514 48,102 57,935 97,963
---------- ---------- ---------- ----------
Income before income tax 471,132 850,877 1,077,263 1,541,556
Income tax (114,518) (219,339) (319,592) (428,464)
---------- ---------- ---------- ----------
Income for continuing
operations 356,614 631,538 757,671 1,113,092
Discontinued operations
Result for discontinued
operations (20,176) 398,497 (28,138) 416,906
---------- ---------- ---------- ----------
Income for the period 336,438 1,030,035 729,533 1,529,998
Attributable to:
Equity holders of the
Company 343,268 987,471 709,315 1,460,514
Minority interest (6,830) 42,564 20,218 69,484
---------- ---------- ---------- ----------
336,438 1,030,035 729,533 1,529,998
---------- ---------- ---------- ----------
Consolidated Condensed Interim Statement of Financial Position
(all amounts in thousands
of U.S. dollars) At June 30, 2009 At December 31, 2008
----------------------- ----------------------
(Unaudited)
ASSETS
Non-current assets
Property, plant and
equipment, net 3,122,122 2,982,871
Intangible assets, net 3,736,821 3,826,987
Investments in associated
companies 575,628 527,007
Other investments 29,488 38,355
Deferred tax assets 217,686 390,323
Receivables 84,595 7,766,340 82,752 7,848,295
----------- -----------
Current assets
Inventories 2,150,785 3,091,401
Receivables and
prepayments 228,791 251,481
Current tax assets 203,244 201,607
Trade receivables 1,536,984 2,123,296
Available for sale assets 21,572 -
Other investments 273,450 45,863
Cash and cash equivalents 1,622,908 6,037,734 1,538,769 7,252,417
----------- -----------
----------- -----------
Total assets 13,804,074 15,100,712
EQUITY
Capital and reserves
attributable to the
Company's equity holders 8,637,036 8,176,571
Minority interest 569,535 525,316
----------- -----------
Total equity 9,206,571 8,701,887
LIABILITIES
Non-current liabilities
Borrowings 998,251 1,241,048
Deferred tax liabilities 867,000 1,053,838
Other liabilities 209,365 223,142
Provisions 79,470 89,526
Trade payables 2,418 2,156,504 1,254 2,608,808
----------- -----------
Current liabilities
Borrowings 1,019,972 1,735,967
Current tax liabilities 333,638 610,313
Other liabilities 247,478 242,620
Provisions 51,385 28,511
Customer advances 256,922 275,815
Trade payables 531,604 2,440,999 896,791 3,790,017
----------- -----------
Total liabilities 4,597,503 6,398,825
Total equity and
liabilities 13,804,074 15,100,712
Consolidated Condensed Interim Cash Flow Statement (Unaudited)
Three-month period ended Six-month period ended
(all amounts in June 30, June 30,
thousands of U.S. ------------------------ ------------------------
dollars) 2009 2008 2009 2008
----------- ----------- ----------- -----------
Cash flows from
operating activities
Income for the period 336,438 1,030,035 729,533 1,529,998
Adjustments for:
Depreciation and
amortization 126,320 134,390 248,061 268,873
Income tax accruals
less payments (179,194) (17,791) (329,690) 89,747
Equity in earnings of
associated companies (65,532) (48,102) (57,073) (98,096)
Income from the sale of
pressure control
business - (394,323) (394,323)
Interest accruals less
payments, net (47,865) (62,202) (23,698) (7,894)
Changes in provisions 25,675 7,747 14,200 15,243
Changes in working
capital 787,515 (326,894) 1,175,460 (545,614)
Other, including
currency translation
adjustment 127,781 (48,874) 117,792 (15,017)
----------- ----------- ----------- -----------
Net cash provided by
operating activities 1,111,138 273,986 1,874,585 842,917
----------- ----------- ----------- -----------
Cash flows from
investing activities
Capital expenditures (106,506) (116,911) (226,335) (205,366)
Acquisitions of
subsidiaries and
minority interest (67,593) (839) (73,535) (1,865)
Proceeds from the sale
of pressure control
business 1,113,805 1,113,805
Proceeds from disposal
of property, plant and
equipment and
intangible assets 7,749 3,819 10,328 8,826
Investments in short
terms securities (210,337) (216,483) (227,587) (264,401)
Dividends received 4,283 13,636 5,223 13,636
Other - - - (3,428)
----------- ----------- ----------- -----------
Net cash (used in)
provided by investing
activities (372,404) 797,027 (511,906) 661,207
----------- ----------- ----------- -----------
Cash flows from
financing activities
Dividends paid (354,161) (295,134) (354,161) (295,134)
Dividends paid to
minority interest in
subsidiaries (27,176) (55,136) (27,176) (55,136)
Proceeds from
borrowings 69,096 299,701 263,841 430,088
Repayments of
borrowings (808,801) (842,478) (1,149,484) (1,332,755)
----------- ----------- ----------- -----------
Net cash used in
financing activities (1,121,042) (893,047) (1,266,980) (1,252,937)
----------- ----------- ----------- -----------
(Decrease) Increase in
cash and cash
equivalents (382,308) 177,966 95,699 251,187
Movement in cash and
cash equivalents
At the beginning of the
period 1,968,707 1,072,985 1,525,022 954,303
Effect of exchange rate
changes 31,992 68,098 (2,330) 113,559
Decrease due to
deconsolidation (9,696) - (9,696) -
Increase in cash and
cash equivalents (382,308) 177,966 95,699 251,187
At June 30, 1,608,695 1,319,049 1,608,695 1,319,049
Cash and cash
equivalents At June 30, At June 30,
------------------------ ------------------------
2009 2008 2009 2008
Cash and bank deposits 1,622,908 1,337,838 1,622,908 1,337,838
Bank overdrafts (14,213) (18,789) (14,213) (18,789)
1,608,695 1,319,049 1,608,695 1,319,049
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.