Tenaris Announces 2013 Second Quarter Results

The Financial and Operational Information Contained in This Press Release Is Based on Unaudited Consolidated Financial Statements Presented in U.S. Dollars and Prepared in Accordance With International Financial Reporting Standards as Issued by the International Accounting Standard Board and Adopted by the European Union, or IFRS

Marketwired

LUXEMBOURG--(Marketwired - Aug 1, 2013) -  Tenaris S.A. (NYSE: TS) (BAE: TS) (BMV: TS) (MILAN: TEN) ("Tenaris") today announced its results for the quarter ended June 30, 2013 in comparison with its results for the quarter ended June 30, 2012.

 
Summary of 2013 Second Quarter Results
 
(Comparison with first quarter of 2013 and second quarter of 2012)
    Q2 2013   Q1 2013   Q2 2012
Net sales ($ million)   2,829   2,678   6%   2,801   1%
Operating income ($ million)   578   554   4%   621   (7%)
Net income ($ million)   430   423   2%   455   (6%)
Shareholders' net income ($ million)   418   425   (2%)   456   (8%)
Earnings per ADS ($)   0.71   0.72   (2%)   0.77   (8%)
Earnings per share ($)   0.35   0.36   (2%)   0.39   (8%)
EBITDA* ($ million)   730   699   4%   759   (4%)
EBITDA margin (% of net sales)   25.8%   26.1%       27.1%    
                     
*EBITDA is defined as operating income plus depreciation, amortization and impairment charges/(reversals)
 

Our second quarter sales increased 6% sequentially driven by higher sales of premium OCTG products in the Middle East and Far East, which offset a strong seasonal effect in Canada and lower sales of line pipe products in Europe. Our EBITDA and operating margins continue to maintain a good level in a competitive market.

Cash flow from operations reached $611 million during the second quarter of 2013. Following a dividend payment of $354 million in May 2013, our financial position at June 30, 2013, amounted to a net cash position (cash and other current investments less total borrowings) of $214 million, compared with $121 million at March 31, 2013.

Market Background and Outlook

Drilling activity in North America, after stabilizing in the U.S. during the second quarter following an unusually wet spring in Canada, is expected to pick up gradually during the rest of the year supported by the current level of oil prices. In the rest of the world, current oil and gas price levels should continue to support the ongoing expansion in drilling activity in the Middle East and offshore regions.

In the second half, our sales in the Middle East and Africa will continue to show strong year on year growth while our sales in South America will be affected by lower shipments of line pipe in Brazil, reflecting project delays. In the third quarter, our sales will additionally be affected by seasonal effects and a weak industrial sector in Europe while we do not expect to see a pick up in North American sales before the fourth quarter. 

Our margins in the third quarter will be affected by a lower level of sales and a less favorable product mix but are expected to recover to current levels in the fourth quarter.

 
Analysis of 2013 Second Quarter Results
 
Tubes Sales volume
 (thousand metric tons)
  Q2 2013   Q1 2013   Q2 2012
Seamless   677   657   3%   701   (3%)
Welded   286   289   (1%)   287   (0%)
Total   963   946   2%   988   (2%)
                     
             
Tubes   Q2 2013   Q1 2013   Q2 2012
(Net sales - $ million)                    
North America   986   1,143   (14%)   1,270   (22%)
South America   652   595   9%   536   21%
Europe   218   268   (19%)   286   (24%)
Middle East & Africa   626   400   57%   352   78%
Far East & Oceania   137   82   67%   130   5%
Total net sales ($ million)   2,619   2,488   5%   2,575   2%
Operating income ($ million)   553   526   5%   589   (6%)
Operating income (% of sales)   21.1%   21.1%       22.9%    
                     

Net sales of tubular products and services increased 5% sequentially and 2% year on year. Sales increased sequentially driven by higher sales of premium OCTG products in the Middle East and Far East, which offset a strong seasonal effect in Canada and lower sales of line pipe products in Europe. In North America sales declined due to the seasonal spring break up in Canada and lower activity in the north of Mexico. In South America, sales increased due to higher sales of OCTG in Venezuela and OCTG and line pipe in Argentina. In Europe, sales declined due to the non repetition of line pipe sales for offshore projects in Norway and lower sales to hydrocarbon process industry projects. In the Middle East and Africa sales increased due to higher sales of premium products in Saudi Arabia, UAE and Iraq as well as higher sales of coating services in Nigeria. In the Far East and Oceania, sales increased due to higher sales of premium products in Australia and Indonesia.

Operating income from tubular products and services increased 5% sequentially but declined 6% year on year. Sequentially, the increase in operating income was driven by the increase in sales while operating margin remained flat, as an improvement in the gross margin was offset by higher SG&A expenses mainly due to the lower share of shipments to our local markets.

             
Others   Q2 2013   Q1 2013   Q2 2012
Net sales ($ million)   210   190   10%   226   (7%)
Operating income ($ million)   26   28   (7%)   32   (19%)
Operating income (% of sales)   12.2%   14.5%       14.2%    
                     

Net sales of other products and services increased 10% sequentially due to higher sales of sucker rods, but declined 7% year on year. Sequentially, despite the increase in revenues, operating income declined 7% mainly due to a lower operating margin.

Selling, general and administrative expenses, or SG&A, amounted to $529 million, or 18.7% of net sales, in the second quarter of 2013, compared to $476 million, 17.8% in the previous quarter and $487 million, 17.4% in the second quarter of 2012. Sequentially, the increase in SG&A expenses was mainly due to the lower share of shipments to our local markets.

Financial results amounted to $11 million loss in the second quarter 2013, compared to a $9 million loss in the previous quarter and a $23 million loss in the second quarter of 2012.

Equity in earnings of associated companies generated a gain of $12 million in the second quarter of 2013, in line with the result of the previous quarter and compared with a $6 million gain in the second quarter of last year. These results are mainly derived from our equity investment in Ternium (NYSE: TX) and Usiminas.

Income tax charges totaled $150 million in the second quarter of 2013, equivalent to 26.4% of income before equity in earnings of associated companies and income tax, compared to $134 million, or 24.6% in the previous quarter and $148 million or 24.8% in the second quarter of 2012.

Results attributable to non-controlling interests amounted to gains of $12 million in the second quarter of 2013, compared to losses of $2 million in the previous quarter and losses of $1 million in the second quarter of 2012. The sequential increase in results attributable to non-controlling interests are due to higher results at our Nigerian coating services subsidiary, Pipe Coaters Nigeria, and at our Japanese subsidiary NKKTubes.

Cash Flow and Liquidity of 2013 Second Quarter

Net cash provided by operations during the second quarter of 2013 was $611 million, compared to $563 million in the previous quarter and $414 million in the second quarter of 2012.

Capital expenditures amounted to $180 million for the second quarter of 2013, compared to $184 million in the previous quarter and $205 million in the second quarter of 2012.

Following a dividend payment of $354 million in May 2013, our financial position at June 30, 2013, amounted to a net cash position (cash and other current investments less total borrowings) of $214 million, compared with $121 million at March 31, 2013.

 
Analysis of 2013 First Half Results
 
    H1 2013   H1 2012   Increase/(Decrease)
Net sales ($ million)   5,508   5,419   2%
Operating income ($ million)   1,132   1,187   (5%)
Net income ($ million)   852   904   (6%)
Shareholders' net income ($ million)   843   895   (6%)
Earnings per ADS ($)   1.43   1.52   (6%)
Earnings per share ($)   0.71   0.76   (6%)
EBITDA ($ million)   1,429   1,463   (2%)
EBITDA margin (% of net sales)   25.9%   27.0%    
             

Net income attributable to owners of the parent during the first half of 2013 was $843 million, or $0.71 per share ($1.43 per ADS), which compares with $895 million, or $0.76 per share ($1.52 per ADS), in the first half of 2012. Operating income was $1,132 million, or 20.5% of net sales during the first half of 2013, compared to $1.187 million, or 21.9% of net sales during the first half of 2012. Operating income plus depreciation and amortization for the first half of 2013, was $1,429 million, or 25.9% of net sales, compared to $1,463 million, or 27.0% of net sales during the first half of 2012.

The following table shows our net sales by business segment for the periods indicated below:

             
Net sales ($ million)   H1 2013   H1 2012   Increase/(Decrease)
Tubes   5,107   93%   4,975   92%   3%
Others   400   7%   444   8%   (10%)
Total   5,508   100%   5,419   100%   2%
                     

Tubes

The following table indicates, for our Tubes business segment, sales volumes of seamless and welded pipes for the periods indicated below:

             
Sales volume
(thousand metric tons)
  H1 2013   H1 2012   Increase/(Decrease)
Seamless   1,334   1,365   (2%)
Welded   575   576   (0%)
Total   1,909   1,941   (2%)
             

The following table indicates, for our Tubes business segment, net sales by geographic region, operating income and operating income as a percentage of net sales for the periods indicated below:

             
Tubes   H1 2013   H1 2012   Increase/(Decrease)
(Net sales - $ million)            
North America   2,129   2,539   (16%)
South America   1,247   999   25%
Europe   486   548   (11%)
Middle East & Africa   1,026   633   62%
Far East & Oceania   219   256   (14%)
Total net sales ($ million)   5,107   4,975   3%
Operating income ($ million)   1,079   1,118   (4%)
Operating income (% of sales)   21.1%   22.5%    
             

Net sales of tubular products and services increased 3% to $5,107 million in the first half of 2013, compared to $4,975 million in the first half of 2012, reflecting a 4% increase in average selling prices due to a richer mix of products sold, partially offset by a 2% decrease in volumes.

Operating income from tubular products and services decreased 4% to $1,079 million in the first half of 2013, from $1,118 million in the first half of 2012. Despite a 3% increase in net sales, operating income and operating margin decreased because of an increase in selling, general and administrative expenses.

Others

The following table indicates, for our Others business segment, net sales, operating income and operating income as a percentage of net sales for the periods indicated below:

             
             
Others   H1 2013   H1 2012   Increase/(Decrease)
Net sales ($ million)   400   444   (10%)
Operating income ($ million)   53   69   (23%)
Operating income (% of sales)   13.3%   15.5%    
             
             

Net sales of other products and services decreased 10% to $400 million in the first half of 2013, compared to $444 million in the first half of 2012, mainly due to lower sales of industrial equipment in Brazil.

Operating income from other products and services decreased 23%, to $53 million in the first half of 2013, compared to $69 million during the first half of 2012, due to a 10% decline in sales and a lower operating margin.

Selling, general and administrative expenses, or SG&A, increased as a percentage of net sales to 18.2% in the first half of 2013 compared to 17.2% in the first half of 2012, mainly due to an increase in provisions for contingencies and doubtful accounts in addition to higher selling expenses associated with lower share of shipments to our local markets.

Financial results were a loss of $20 million in the first half of 2013 compared to a loss of $11 million in the same period of 2012. The increase in the financial loss is mainly due to higher interest expenses associated with a higher average debt during the first half of 2013 in comparison with the first half of 2012.

Equity in earnings of associated companies generated a gain of $24 million in the first half of 2013, compared to a gain of $20 million in the first half of 2012. These gains were derived mainly from our equity investment in Ternium and Usiminas. Following the conclusion of the investment in Usiminas's purchase price allocation, results from equity in earnings of associated companies for the first half of 2012 were reduced by $10 million.

Income tax charges amounted to $284 million in the first half of 2013, equivalent to 25.5% of income before equity in earnings of associated companies and income tax, compared to $293 million in the first half of 2012, equivalent to 24.9% of income before equity in earnings of associated companies and income tax.

Income attributable to non-controlling interests amounted to $10 million in the first half of 2013, compared to $9 million in the first half of 2012. Despite the full acquisition of the minorities in Confab in May 2012, income attributable to non-controlling interests remained stable mainly due to improved results at our Japanese subsidiary NKKTubes and at our Nigerian coating services subsidiary, Pipe Coaters Nigeria.

Cash Flow and Liquidity of 2013 First Half

Net cash provided by operations during the first half of 2013 rose to $1,174 million, compared to $1,022 million in the first half of 2012.

Capital expenditures amounted to $364 million in the first half of 2013, compared to $401 million in the first half of 2012.

Following a dividend payment of $354 million in May 2013, our financial position at June 30, 2013, amounted to a net cash position (cash and other current investments less total borrowings) of $214 million, compared with a net debt position of $271 million at December 31, 2012.

Tenaris Files Half-Year Report

Tenaris S.A. announces that it has filed its half-year report for the six-month period ended June 30, 2013 with the Luxembourg Stock Exchange. The half-year report can be downloaded from the Luxembourg Stock Exchange's website at www.bourse.lu and from Tenaris's website at www.tenaris.com/investors.

Holders of Tenaris's shares and ADSs, and any other interested parties, may request a hard copy of the half-year report, free of charge, at 1-888-300-5432 (toll free from the United States) or 52-229-989-1940 (from outside the United States).

Conference call

Tenaris will hold a conference call to discuss the above reported results, on August 2, 2013, at 10:00 a.m. (Eastern Time). Following a brief summary, the conference call will be opened to questions. To access the conference call dial in +1 800 706.7745 within North America or +1 617 614.3472 Internationally. The access number is "51895039". 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 12:00 pm on August 2 through 12:00 am on August 9. To access the replay by phone, please dial +1 888 286.8010 or +1 617 801.6888 and enter passcode "10370748" 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 June 30,     Six-month period ended June 30,  
    2013     2012     2013     2012  
Continuing operations   Unaudited     Unaudited  
Net sales   2,829,270     2,801,492     5,507,575     5,418,841  
Cost of sales   (1,714,443 )   (1,694,712 )   (3,359,875 )   (3,305,809 )
Gross profit   1,114,827     1,106,780     2,147,700     2,113,032  
Selling, general and administrative expenses   (529,329 )   (486,655 )   (1,004,894 )   (930,798 )
Other operating income (expense) net   (7,302 )   761     (11,025 )   4,853  
Operating income   578,196     620,886     1,131,781     1,187,087  
Interest income   6,870     5,706     12,951     15,289  
Interest expense   (16,620 )   (12,688 )   (30,529 )   (22,613 )
Other financial results   (955 )   (16,476 )   (2,336 )   (3,395 )
Income before equity in earnings of associated companies and income tax   567,491     597,428     1,111,867     1,176,368  
Equity in earnings of associated companies   11,869     6,168     24,066     20,131  
Income before income tax   579,360     603,596     1,135,933     1,196,499  
Income tax   (149,795 )   (148,325 )   (283,651 )   (292,999 )
Income for the period   429,565     455,271     852,282     903,500  
                         
                         
Attributable to:                        
Owners of the parent   417,828     456,201     842,605     894,842  
Non-controlling interests   11,737     (930 )   9,677     8,658  
    429,565     455,271     852,282     903,500  
                         
 
 
Consolidated Condensed Interim Statement of Financial Position
(all amounts in thousands of U.S. dollars)   At June 30, 2013   At December 31, 2012
    Unaudited    
ASSETS                
Non-current assets                
  Property, plant and equipment, net   4,536,995       4,434,970    
  Intangible assets, net   3,131,767       3,199,916    
  Investments in associated companies   929,251       977,011    
  Other investments   2,552       2,603    
  Deferred tax assets   192,433       215,867    
  Receivables   121,765   8,914,763   142,060   8,972,427
                 
Current assets                
  Inventories   2,697,932       2,985,805    
  Receivables and prepayments   246,710       260,532    
  Current tax assets   152,066       175,562    
  Trade receivables   2,179,089       2,070,778    
  Available for sale assets   21,572       21,572    
  Other investments   1,113,065       644,409    
  Cash and cash equivalents   618,435   7,028,869   828,458   6,987,116
Total assets       15,943,632       15,959,543
                 
EQUITY                
Capital and reserves attributable to owners of the parent       11,724,417       11,328,031
Non-controlling interests       165,436       171,561
Total equity       11,889,853       11,499,592
                 
LIABILITIES                
Non-current liabilities                
  Borrowings   423,442       532,407    
  Deferred tax liabilities   672,918       728,541    
  Other liabilities   292,715       302,444    
  Provisions   73,379   1,462,454   67,185   1,630,577
                 
Current liabilities                
  Borrowings   1,093,810       1,211,785    
  Current tax liabilities   253,805       254,603    
  Other liabilities   369,299       318,828    
  Provisions   20,014       26,958    
  Customer advances   34,342       134,010    
  Trade payables   820,055   2,591,325   883,190   2,829,374
Total liabilities       4,053,779       4,459,951
Total equity and liabilities       15,943,632       15,959,543
                 
   
   
Consolidated Condensed Interim Statement of Cash Flows
 
    Three-month period ended June 30,     Six-month period ended June 30,  
(all amounts in thousands of U.S. dollars)   2013     2012     2013     2012  
    Unaudited     Unaudited  
Cash flows from operating activities                        
Income for the period   429,565     455,271     852,282     903,500  
Adjustments for:                        
Depreciation and amortization   151,602     137,725     296,972     275,884  
Income tax accruals less payments   9,808     (155,274 )   25,021     (105,779 )
Equity in earnings of associated companies   (11,869 )   (6,168 )   (24,066 )   (20,131 )
Interest accruals less payments, net   (4,296 )   37     (35,021 )   (18,256 )
Changes in provisions   (4,051 )   (8,426 )   (917 )   (16,557 )
Changes in working capital   56,136     53,139     72,457     51,343  
Other, including currency translation adjustment   (15,841 )   (61,804 )   (12,263 )   (47,567 )
Net cash provided by operating activities   611,054     414,500     1,174,465     1,022,437  
Cash flows from investing activities                        
Capital expenditures   (179,674 )   (204,531 )   (363,559 )   (400,926 )
Acquisition of associated company   -     -     -     (504,597 )
Proceeds from disposal of property, plant and equipment and intangible assets   2,360     1,383     6,746     2,915  
Dividends received from associated companies   14,931     18,702     16,127     18,702  
Changes in investments in short terms securities   (310,074 )   784     (468,656 )   11,367  
Net cash used in investing activities   (472,457 )   (183,662 )   (809,342 )   (872,539 )
                         
Cash flows from financing activities                        
Dividends paid   (354,161 )   (295,134 )   (354,161 )   (295,134 )
Dividends paid to non-controlling interest in subsidiaries   (1,858 )   -     (18,529 )   (905 )
Acquisitions of non-controlling interests   (7,230 )   (758,527 )   (7,768 )   (758,539 )
Proceeds from borrowings   594,658     668,455     1,220,390     1,214,234  
Repayments of borrowings   (677,727 )   (202,013 )   (1,354,772 )   (439,116 )
Net cash used in financing activities   (446,318 )   (587,219 )   (514,840 )   (279,460 )
                         
Decrease in cash and cash equivalents   (307,721 )   (356,381 )   (149,717 )   (129,562 )
Movement in cash and cash equivalents                        
At the beginning of the period   925,554     1,060,559     772,656     815,032  
Effect of exchange rate changes   (11,807 )   (10,466 )   (16,913 )   8,242  
Decrease in cash and cash equivalents   (307,721 )   (356,381 )   (149,717 )   (129,562 )
At June 30,   606,026     693,712     606,026     693,712  
             
    At June 30,     At June 30,  
Cash and cash equivalents   2013     2012     2013     2012  
Cash and bank deposits   618,435     742,618     618,435     742,618  
Bank overdrafts   (12,409 )   (48,906 )   (12,409 )   (48,906 )
    606,026     693,712     606,026     693,712  
                         
Contact:
Giovanni Sardagna
Tenaris
1-888-300-5432
www.tenaris.com
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