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Tenaris Announces 2012 First Quarter Results

LUXEMBOURG -- (Marketwire) -- 04/26/12 -- Tenaris S.A. (NYSE: TS) (BAE: TS) (BVM: TS) (MILAN: TEN) ("Tenaris") today announced its results for the quarter ended March 31, 2012 in comparison with its results for the quarter ended March 31, 2011.

Summary of 2012 First Quarter Results

(Comparison with fourth and first quarters of 2011)


                                        Q1 2012     Q4 2011       Q1 2011
Net sales (US$ million)                 2,617.3  2,750.6  (5%)  2,324.0  13%
Operating income (1) (US$ million)       566.2    538.0    5%    428.6   32%
Net income (US$ million)                 453.4    426.3    6%    324.2   40%
Shareholders' net income (US$ million)   443.8    399.6   11%    319.4   39%
Earnings per ADS (US$)                   0.75     0.68    11%    0.54    39%
Earnings per share (US$)                 0.38     0.34    11%    0.27    39%
EBITDA (1) (US$ million)                 704.4    691.9    2%    558.0   26%
EBITDA margin (% of net sales)            27%      25%            24%

(1) Effective January 1, 2012, we recorded the Mexican employee statutory profit sharing provision (US$14.1 million in IQ 2012), under labor costs instead of recording it in the income tax line. Comparative amounts have been reclassified to conform to changes in presentation in the current period (lower operating income offset by lower income tax amounting to US$17.7 million in IVQ 2011 and US$12.9 million in IQ2011).

Our first quarter sales decreased 5% sequentially as sales were impacted by lower line pipe shipments for HPI and pipeline projects and we had lower OCTG shipments in Colombia and Saudi Arabia. However, our EBITDA and operating margins continued to improve reflecting lower raw material costs and plant allocation efficiencies. Operating income rose 5% sequentially and earnings per share rose 11% sequentially and 39% year on year.

Cash provided by operating activities reached US$605 million during the quarter and, after investing US$505 million in Usiminas and US$196 million in capital expenditures, our net cash position (cash and other current investments less total borrowings) decreased by US$65 million ending the quarter at US$259 million.

Change in Functional Currency of Mexican, Canadian and Japanese Subsidiaries

Starting January 1, 2012, the Company changed the functional currency of its Mexican, Canadian and Japanese subsidiaries, from their respective local currencies to the U.S. dollar. From that date forward, the results of these subsidiaries have been and will be measured in U.S. dollars.

Market Background and Outlook

Global demand for energy, in spite of the difficult economic situation in Europe and unusually warm winter in the USA, continues to rise and energy companies are increasing their investments in exploration and production activity. Demand for tubular products for complex applications is growing at a faster pace than that for standard applications as investments are taking place in more difficult operating environments.

Drilling activity is expected to remain stable this year in North America, as higher oil drilling offsets lower gas drilling. In the rest of the world, it is expected to increase supported by current oil and gas prices and led by growth in the development of deepwater and unconventional reserves as well as complex conventional gas drilling.

Sales to oil and gas customers, particularly of premium products, are expected to increase during the year but sales to HPI, power generation and industrial customers in Europe will continue to be affected by weak economic activity.

Average selling prices may increase due to product mix improvements but operating margins are expected to remain close to current levels during the rest of 2012.

Sales and operating income are expected to continue to show strong year on year growth during the remainder of the year.

Analysis of 2012 First Quarter Results



Sales volume (metric tons)    Q1 2012        Q4 2011            Q1 2011
Tubes - Seamless              664,000     709,000    (6%)    621,000     7%
Tubes - Welded                251,000     234,000     7%     233,000     8%
Tubes - Total                 915,000     943,000    (3%)    854,000     7%
Projects - Welded             43,000      71,000    (39%)    75,000    (43%)
Total                         958,000    1,014,000   (6%)    929,000     3%



            Tubes                Q1 2012        Q4 2011          Q1 2011
(Net sales - $ million)
North America                    1,289.2    1,174.0    10%     978.5     32%
South America                     323.2      360.1    (10%)    318.2     2%
Europe                            263.1      268.0     (2%)    243.8     8%
Middle East & Africa              284.8      389.1    (27%)    297.8    (4%)
Far East & Oceania                128.5      174.7    (26%)    129.0    (0%)
Total net sales ($ million)      2,288.7    2,365.9    (3%)   1,967.3    16%
Cost of sales (% of sales)         60%        62%               61%
Operating income ($ million)      508.6      477.8      6%     359.2     42%
Operating income (% of sales)      22%        20%               18%

Net sales of tubular products and services decreased 3% sequentially but increased 16% year on year. In North America, sales rose sequentially in Canada and the United States. In South America, sales decreased sequentially due principally to lower OCTG shipments in Colombia where activity has been affected by rig movements and contract discussions. In Europe, sales remained flat as demand from distributors for industrial and line pipe products continues to be weak due to low economic activity. In the Middle East & Africa, sales decreased sequentially mainly due to lower OCTG sales to Saudi Arabia and lower sales to HPI projects. In the Far East & Oceania sales decreased sequentially mainly due to lower line pipe shipments and lower OCTG sales to China.

Operating income from tubular products and services increased 6% sequentially, despite the decrease in sales, as the operating margin increased 2 percentage points, reflecting lower raw material costs and plant allocation efficiencies.


            Projects             Q1 2012       Q4 2011           Q1 2011
Net sales ($ million)             140.1    186.0    (25%)    175.0    (20%)
Cost of sales (% of sales)         67%      71%               69%
Operating income ($ million)       26.1     28.3     (8%)     31.8    (18%)
Operating income (% of sales)      19%      15%               18%

Projects net sales amounted to US$140.1 million in the first quarter of 2012, compared to US$186.0 million in the previous quarter and US$175.0 million in the first quarter of 2011. Sequentially, the 25% decrease in revenues reflected a 40% decrease in shipments, due to lower shipments to pipeline projects in Brazil, Argentina and Peru, partially offset by a 25% increase in average selling prices due to a better product mix, which was also reflected in the improvement in the operating margin.


               Others                Q1 2012     Q4 2011         Q1 2011
Net sales ($ million)                 188.6    198.6   (5%)    181.7    4%
Cost of sales (% of sales)             71%      72%             68%
Operating income ($ million)          31.5     32.0    (2%)    37.5    (16%)
Operating income (% of sales)          17%      16%             21%

Net sales of other products and services amounted to US$188.6 million in the first quarter of 2012, 5% lower sequentially and 4% higher relative to the first quarter of 2011. The sequential decrease in sales and operating income was mainly due to lower sales of industrial equipment in Brazil, partially offset by higher sales of sucker rods and of pipes for electric conduits.

Selling, general and administrative expenses, or SG&A, amounted to 17.0% of net sales in the first quarter of 2012, compared to 17.3% in the previous quarter and 19.4% in the first quarter of 2011. In absolute terms, SG&A also decreased, amounting to US$444.1 million in the first quarter of 2012, compared to US$474.8 million in the previous quarter and US$451.3 million in the first quarter of 2011. The sequential decrease was due to lower amortization of intangible assets, lower selling expenses (due to a decrease in volumes and a recovery of previously provisioned doubtful accounts), partially offset by higher labor costs.

Net interest expenses amounted to US$0.3 million in the first quarter of 2012, compared to US$2.0 million in the previous quarter and US$5.4 million in the first quarter of 2011.

Other financial results generated a gain of US$13.1 million during the first quarter of 2012, compared to a loss of US$5.4 million in the previous quarter and a gain of US$1.1 million during the first quarter of 2011. 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. During the first quarter of 2012, these gains were mainly derived from the strengthening of the Brazilian real (+2.9%) on a U.S. dollar denominated debt position in Brazil.

Equity in earnings of associated companies generated a gain of US$19.2 million in the first quarter of 2012, compared to a gain of US$13.0 million in the previous quarter and a gain of US$24.3 million in the first quarter of 2011. These results were derived mainly from our equity investment in Ternium (NYSE: TX).

Income tax charges totaled US$144.7 million in the first quarter of 2012, equivalent to 25% of income before equity in earnings of associated companies and income tax, compared to 21% in the previous quarter and 28% in the first quarter of 2011.

Income attributable to non-controlling interests amounted to US$9.6 million in the first quarter of 2012, compared to US$26.8 million in the previous quarter and US$4.8 million in the first quarter of 2011. The sequential decrease is mainly due to losses at our Japanese subsidiary during the quarter.

Cash Flow and Liquidity

Net cash provided by operations during the first quarter of 2012 was US$604.7 million, compared to US$456.2 million in the previous quarter and US$165.7 million in the first quarter of 2011.

Capital expenditures amounted to US$196.4 million for the first quarter of 2012, compared to US$188.7 million in the previous quarter and US$210.6 million in the first quarter of 2011. In addition, during the quarter we invested US$504.6 million in Usiminas.

At the end of the quarter, our net cash position (cash and other current investments less total borrowings) amounted to US$258.6 million.

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

                                                    Three-month period
(all amounts in thousands of U.S. dollars)            ended March 31,
                                                    2012           2011
                                               -------------  -------------
Continuing operations                                    Unaudited
Net sales                                          2,617,349      2,323,965
Cost of sales                                     (1,611,097)    (1,445,679)
                                               -------------  -------------
Gross profit                                       1,006,252        878,286
Selling, general and administrative expenses        (444,143)      (451,329)
Other operating income (expenses) net                  4,092          1,621
                                               -------------  -------------
Operating income                                     566,201        428,578
Interest income                                        9,583          7,687
Interest expense                                      (9,925)       (13,041)
Other financial results                               13,081          1,058
                                               -------------  -------------
Income before equity in earnings of associated
 companies and income tax                            578,940        424,282
Equity in earnings of associated companies            19,162         24,285
                                               -------------  -------------
Income before income tax                             598,102        448,567
Income tax                                          (144,674)      (124,370)
                                               -------------  -------------
Income for the period / year                         453,428        324,197
                                               =============  =============

Attributable to:
Equity holders of the Company                        443,840        319,374
Non-controlling interests                              9,588          4,823
                                               -------------  -------------
                                                     453,428        324,197
                                               =============  =============



Consolidated Condensed Interim Statement of Financial Position

(all amounts in thousands of U.S. dollars)
                                   -------------------- --------------------
                                     At March 31, 2012  At December 31, 2011
                                   -------------------- --------------------
                                       Unaudited
ASSETS
Non-current assets
  Property, plant and equipment,
   net                             4,184,142            4,053,653
  Intangible assets, net           3,330,778            3,375,930
  Investments in associated
   companies                       1,179,985              670,248
  Other investments                    2,574                2,543
  Deferred tax assets                236,263              234,760
  Receivables                        137,042  9,070,784   133,280  8,470,414
                                   ---------            ---------

Current assets
  Inventories                      2,864,315            2,806,409
  Receivables and prepayments        273,638              241,801
  Current tax assets                 148,110              168,329
  Trade receivables                1,957,577            1,900,591
  Available for sale assets           21,572               21,572
  Other investments                  420,193              430,776
  Cash and cash equivalents        1,076,803  6,762,208   823,743  6,393,221
                                   --------- ---------- --------- ----------
Total assets                                 15,832,992           14,863,635
                                             ==========           ==========

EQUITY
Capital and reserves attributable
 to the Company's equity holders             10,985,560           10,506,227
Non-controlling interests                       689,110              666,716
                                             ----------           ----------
Total equity                                 11,674,670           11,172,943
                                             ==========           ==========

LIABILITIES
Non-current liabilities
  Borrowings                         425,139              149,775
  Deferred tax liabilities           797,324              828,545
  Other liabilities                  231,009              233,653
  Provisions                          74,353               72,975
  Trade payables                       1,727  1,529,552     2,045  1,286,993
                                   ---------            ---------

Current liabilities
  Borrowings                         813,255              781,101
  Current tax liabilities            386,261              326,480
  Other liabilities                  336,782              305,214
  Provisions                          24,096               33,605
  Customer advances                  156,888               55,564
  Trade payables                     911,488  2,628,770   901,735  2,403,699
                                   --------- ---------- --------- ----------
Total liabilities                             4,158,322            3,690,692
                                             ==========           ==========
Total equity and liabilities                 15,832,992           14,863,635
                                             ==========           ==========




Consolidated Condensed Interim Statement of Cash Flows

                                                 --------------------------
                                                     Three-month period
                                                       ended March 31,
                                                 --------------------------
(all amounts in thousands of U.S. dollars)           2012          2011
                                                 ------------  ------------
                                                          Unaudited
Cash flows from operating activities
Income for the period                                 453,428       324,197
Adjustments for:
Depreciation and amortization                         138,159       129,384
Income tax accruals less payments                      49,495        31,760
Equity in earnings of associated companies            (19,162)      (24,285)
Interest accruals less payments, net                  (18,293)      (14,038)
Changes in provisions                                  (8,131)       18,017
Changes in working capital                             (5,036)     (379,990)
Other, including currency translation adjustment       14,237        80,610
                                                 ------------  ------------
Net cash provided by operating activities             604,697       165,655
                                                 ============  ============

Cash flows from investing activities
Capital expenditures                                 (196,395)     (210,620)
Acquisitions of subsidiaries and associated
 companies                                           (504,597)            -
Proceeds from disposal of property, plant and
 equipment and intangible assets                        4,772         1,255
Changes in investments in short term securities        10,583        10,952
                                                 ------------  ------------
Net cash used in investing activities                (685,637)     (198,413)
                                                 ============  ============

Cash flows from financing activities

Dividends paid to non-controlling interest in
 subsidiaries                                            (905)            -
Acquisitions of non-controlling interests                 (12)       (5,050)
Proceeds from borrowings                              545,779       309,280
Repayments of borrowings                             (237,103)     (231,530)
                                                 ------------  ------------
Net cash provided by financing activities             307,759        72,700
                                                 ============  ============

------------------------------------------------ ============  ============
Increase in cash and cash equivalents                 226,819        39,942
------------------------------------------------ ============  ============

Movement in cash and cash equivalents
At the beginning of the period                        815,032       820,165
Effect of exchange rate changes                        18,708         5,121
Increase in cash and cash equivalents                 226,819        39,942
                                                 ------------  ------------
At March 31,                                        1,060,559       865,228
                                                 ============  ============

                                                        At March 31,
Cash and cash equivalents                            2012          2011
Cash and bank deposits                              1,076,803       903,814
Bank overdrafts                                       (16,244)      (38,586)
                                                 ------------  ------------
                                                    1,060,559       865,228
                                                 ============  ============

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