Tenaris Announces 2010 First Quarter Results
LUXEMBOURG, May 05, 2010 (MARKETWIRE via COMTEX News Network) -- Tenaris S.A. (NYSE: TS) (BAE: TS) (MXSE: TS) (MILAN: TEN) ("Tenaris") today announced its results for the quarter ended March 31, 2010 with comparison to its results for the quarter ended March 31, 2009.
Summary of 2010 First Quarter Results
(Comparison with fourth and first quarters of 2009)
Q1 2010 Q4 2009 Q1 2009
Net sales (US$ million) 1,638.7 1,847.2 (11%) 2,434.3 (33%)
Operating income (US$ million) 309.3 330.6 (6%) 685.6 (55%)
Net income (US$ million) 222.2 240.8 (8%) 393.1 (43%)
Shareholders' net income (US$
million) 219.5 222.4 (1%) 366.0 (40%)
Earnings per ADS (US$) 0.37 0.38 (1%) 0.62 (40%)
Earnings per share (US$) 0.19 0.19 (1%) 0.31 (40%)
EBITDA (US$ million) 435.4 459.6 (5%) 807.4 (46%)
EBITDA margin (% of net sales) 27% 25% 33%
Our first quarter results were affected by a significant decline in the results of our Projects operating segment, where quarterly sales were lower than at any time in the last three years. In our principal Tubes operating segment, operating income increased sequentially as lower costs resulting from operating efficiencies offset a decline in average selling prices. Sales continued to recover strongly in North America and sales in the Middle East and Africa should recover from this quarter's low in the following quarters.
Cash flow from operations remained positive and we reduced our investment in working capital by a further US$124.2 million. Our net cash position (total financial debt less cash and other current investments) reached US$947.4 million at March 31, 2010.
Market Background and Outlook
During the first quarter of 2010, global oil prices remained stable with an upwards tendency supporting investment activity in most regions. North American gas prices, however, have continued to fluctuate at relatively low levels and declined towards the end of the quarter reflecting prolific levels of production in shale gas fields.
Drilling activity, as measured by the count of active drilling rigs published by Baker Hughes, has increased both in international markets and in North America. The international rig count in the first quarter increased 5% over that of the fourth quarter of 2009 and the US and Canadian rig counts for the first quarter were 21% and 69% higher respectively than the corresponding rig counts for the fourth quarter of 2009.
With activity levels recovering and inventories at more reasonable levels, we expect sales in our Tubes operating segment in the coming quarters to increase in most regions, particularly in North America and the Middle East and Africa. Sales in our Projects segment, however, will continue to be affected by low shipment levels in the following two quarters but should recover in the fourth quarter.
Steelmaking raw material and steel costs have risen significantly in the year to date. Iron ore prices have risen particularly strongly. Major steelmakers have accepted quarterly pricing of iron ore in accordance with spot market prices putting an end to 40 years of annual contract pricing. This is likely to lead to increased volatility in raw material prices. Pipe prices are also increasing but so far not at the same rate as raw material increases. Nevertheless, we expect that pipe prices will continue to increase and that we will be able to maintain our operating margins throughout the year.
Annual General Meeting of Shareholders
The annual general meeting of shareholders of the Company will take place at 11:00 am on June 2, 2010 in Luxembourg. The notice and agenda for the meeting, the shareholder meeting brochure and proxy statement together with the Company's 2009 annual report can be downloaded from our website at www.tenaris.com/investors and may be obtained on request by calling (352) 26-47-89-78 (within Luxembourg), 1-800-555-2470 (within the USA) or + 1-267-468-0786 (within any other jurisdiction).
Analysis of 2010 First Quarter Results
Increase/
Sales volume (metric tons) Q1 2010 Q1 2009 (Decrease)
Tubes - Seamless 467,000 579,000 (19%)
Tubes - Welded 139,000 110,000 26%
Tubes - Total 606,000 689,000 (12%)
Projects - Welded 34,000 84,000 (60%)
Total 640,000 773,000 (17%)
Increase/
Tubes Q1 2010 Q1 2009 (Decrease)
Net sales ($ million)
North America 676.4 1,015.8 (33%)
South America 203.0 249.3 (19%)
Europe 199.3 262.6 (24%)
Middle East & Africa 249.3 395.3 (37%)
Far East & Oceania 82.4 167.6 (51%)
Total net sales 1,410.4 2,090.6 (33%)
Cost of sales (% of sales) 59% 53%
Operating income ($ million) 279.1 641.3 (56%)
Operating income (% of sales) 20% 31%
Net sales of tubular products and services decreased 33% to US$1,410.4 million in the first quarter of 2010, compared to US$2,090.6 million in the first quarter of 2009, reflecting a 12% reduction in sales volumes and a 23% reduction in average selling prices. In North America, sales declined in spite of higher demand for OCTG products due to lower selling prices and reduced demand for line pipe and mechanical products. Sales in South America were affected by lower demand in Venezuela and lower prices throughout the region. In Europe, although demand for mechanical tubes increased, sales were affected by lower prices and lower demand from energy related sectors. Sales in the Middle East and Africa were affected by lower shipments of OCTG and line pipe products. Sales in the Far East & Oceania were affected by lower shipments and lower prices throughout the region.
Increase/
Projects Q1 2010 Q1 2009 (Decrease)
Net sales ($ million) 93.2 222.2 (58%)
Cost of sales (% of sales) 68% 70%
Operating income ($ million) 8.5 49.0 (83%)
Operating income (% of sales) 9% 22%
Net sales of pipes for pipeline projects decreased 58% to US$93.2 million in the first quarter of 2010, compared to US$222.2 million in the first quarter of 2009, reflecting a lower level of shipments to gas and other pipeline projects in Brazil and Argentina. The decline in operating margin reflected the very low level of shipments during the quarter.
Increase/
Others Q1 2010 Q1 2009 (Decrease)
Net sales ($ million) 135.1 121.5 11%
Cost of sales (% of sales) 73% 90%
Operating income ($ million) 21.7 (4.7) 562%
Operating income (% of sales) 16% (4%)
Net sales of other products and services increased 11% to US$135.1 million in the first quarter of 2010, compared to US$121.5 million in the first quarter of 2009. Operating margins recovered as sales increased and our electric conduit business in the USA returned to profit.
Selling, general and administrative expenses, or SG&A, increased as a percentage of net sales to 21.2% in the quarter ended March 31, 2010 compared to 15.9% in the corresponding quarter of 2009, mainly due to the effect of fixed expenses on lower revenues.
Net interest expenses decreased to US$12.9 million in the first quarter of 2010 compared to US$34.6 million in the same period of 2009.
Other financial results generated a gain of US$7.7 million during the first quarter of 2010, compared to a loss of US$36.4 million during the first quarter of 2009. 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$23.5 million in the first quarter of 2010, compared to a loss of US$8.6 million in the first quarter of 2009. These results were derived mainly from our equity investment in Ternium (NYSE: TX).
Income tax charges totaled US$105.4 million in the first quarter of 2010, equivalent to 35% of income from continuing operations before equity in earnings of associated companies and income tax, compared to US$205.1 million, or 33% of income before equity in earnings of associated companies and income tax, in the first quarter of 2009. The income tax rate for our Mexican operations has increased during 2010 and this is likely to be reflected in a higher overall tax rate for the Company.
Income attributable to minority interest was US$2.7 million in the first quarter of 2010, compared to US$27.0 million in the corresponding quarter of 2009.
Cash Flow and Liquidity
Net cash provided by operations during the first quarter of 2010 was US$436.3 million, compared to US$763.4 million in the first quarter of 2009. Working capital decreased by US$124.2 million during the quarter.
Capital expenditures amounted to US$158.0 million for the first quarter of 2010, compared to US$119.8 million in the first quarter of 2009. Our capital expenditures are likely to continue to increase during the year reflecting the progress of our new rolling mill in Mexico, and increased investments throughout our industrial system.
During the first quarter of 2010, our net cash position (total financial debt less cash and other current investments) increased by US$271.6 million to reach US$947.4 million at March 31, 2010.
Registered Major Holders
On May 5, 2010, Aberdeen Asset Management PLC's Fund Management Operating Subsidiaries informed Tenaris, pursuant to the Luxembourg Transparency Law, that as of April 30, 2010, it is deemed to be the beneficial owner of 59,077,316 ordinary shares of Tenaris, par value U.S.$ 1.00 per share, representing 5.0% of Tenaris's issued and outstanding capital and votes.
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, unless Three-month period
otherwise stated) ended March 31,
2010 2009
---------- ----------
Continuing operations (Unaudited)
Net sales 1,638,721 2,434,288
Cost of sales (987,043) (1,363,312)
---------- ----------
Gross profit 651,678 1,070,976
Selling, general and administrative expenses (347,387) (387,080)
Other operating income (expense), net 5,049 1,746
---------- ----------
Operating income 309,340 685,642
Interest income 7,148 4,574
Interest expense (20,069) (39,147)
Other financial results 7,691 (36,359)
---------- ----------
Income before equity in earnings of associated
companies and income tax 304,110 614,710
Equity in earnings (losses) of associated companies 23,526 (8,579)
---------- ----------
Income before income tax 327,636 606,131
Income tax (105,426) (205,074)
---------- ----------
Income for continuing operations 222,210 401,057
Discontinued operations
Result for discontinued operations - (7,962)
---------- ----------
Income for the period 222,210 393,095
Attributable to:
Equity holders of the Company 219,549 366,047
Minority interest 2,661 27,048
---------- ----------
222,210 393,095
Consolidated Condensed Interim Statement of Financial Position
(all amounts in thousands of
U.S. dollars) At March 31, 2010 At December 31, 2009
(Unaudited)
ASSETS
Non-current assets
Property, plant and equipment,
net 3,323,522 3,254,587
Intangible assets, net 3,635,435 3,670,920
Investments in associated
companies 631,410 602,572
Other investments 33,299 34,167
Deferred tax assets 203,426 197,603
Receivables 102,205 7,929,297 101,618 7,861,467
---------- ----------
Current assets
Inventories 1,820,265 1,687,059
Receivables and prepayments 225,421 220,124
Current tax assets 194,079 260,280
Trade receivables 1,170,072 1,310,302
Available for sale assets 21,572 21,572
Other investments 645,780 579,675
Cash and cash equivalents 1,631,919 5,709,108 1,542,829 5,621,841
---------- ----------
---------- ----------
Total assets 13,638,405 13,483,308
EQUITY
Capital and reserves
attributable to the Company's
equity holders 9,322,599 9,092,164
Minority interest 619,934 628,672
---------- ----------
Total equity 9,942,533 9,720,836
LIABILITIES
Non-current liabilities
Borrowings 653,770 655,181
Deferred tax liabilities 839,869 860,787
Other liabilities 196,845 192,467
Provisions 84,669 80,755
Trade payables 3,228 1,778,381 2,812 1,792,002
---------- ----------
Current liabilities
Borrowings 676,572 791,583
Current tax liabilities 286,498 306,539
Other liabilities 221,326 192,190
Provisions 30,142 28,632
Customer advances 66,684 95,107
Trade payables 636,269 1,917,491 556,419 1,970,470
---------- ----------
Total liabilities 3,695,872 3,762,472
Total equity and liabilities 13,638,405 13,483,308
Consolidated Condensed Interim Statement of Cash Flows
Three-month period ended
March 31,
(all amounts in thousands of U.S. dollars) 2010 2009
------------ ------------
(Unaudited)
Cash flows from operating activities
Income for the period 222,210 393,095
Adjustments for:
Depreciation and amortization 126,028 121,741
Income tax accruals less payments (28,258) (150,496)
Equity in (earnings) losses of associated
companies (23,526) 8,459
Interest accruals less payments, net 9,047 24,167
Changes in provisions 5,424 (11,475)
Changes in working capital 124,247 387,945
Other, including currency translation
adjustment 1,100 (9,989)
------------ ------------
Net cash provided by operating activities 436,272 763,447
------------ ------------
Cash flows from investing activities
Capital expenditures (157,962) (119,829)
Acquisitions and decrease of minority interest (27) (5,942)
Proceeds from disposal of property, plant and
equipment and intangible assets 2,910 2,579
Dividends and distributions received from
associated companies 1,472 940
Investments in short terms securities (66,105) (17,250)
------------ ------------
Net cash used in investing activities (219,712) (139,502)
------------ ------------
Cash flows from financing activities
Proceeds from borrowings 198,323 194,745
Repayments of borrowings (307,045) (340,683)
------------ ------------
Net cash used in financing activities (108,722) (145,938)
------------ ------------
Increase in cash and cash equivalents 107,838 478,007
Movement in cash and cash equivalents
At the beginning of the period 1,528,707 1,525,022
Effect of exchange rate changes (11,636) (34,322)
Increase in cash and cash equivalents 107,838 478,007
At March 31, 1,624,909 1,968,707
Cash and cash equivalents At March 31,
2010 2009
Cash and bank deposits 1,631,919 1,980,586
Bank overdrafts (7,010) (11,879)
1,624,909 1,968,707
Giovanni Sardagna Tenaris 1-888-300-5432 www.tenaris.com
SOURCE: Tenaris S.A.
http://www.tenaris.com
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