LUXEMBOURG--(Marketwired - November 06, 2013) - Tenaris S.A. TS TS TS TEN ("Tenaris") today announced its results for the quarter and nine months ended September 30, 2013 with comparison to its results for the quarter and nine months ended September 30, 2012.
Summary of 2013 Third Quarter Results
(Comparison with second quarter of 2013 and third quarter of 2012)
Q3 2013 Q2 2013 Q3 2012
Net sales ($ million) 2,415 2,829 (15%) 2,657 (9%)
Operating income ($ million) 464 578 (20%) 584 (21%)
Net income ($ million) 314 430 (27%) 434 (28%)
Shareholders' net income ($ million) 300 418 (28%) 433 (31%)
Earnings per ADS ($) 0.51 0.71 (28%) 0.73 (31%)
Earnings per share ($) 0.25 0.35 (28%) 0.37 (31%)
EBITDA- ($ million) 622 730 (15%) 679 (8%)
EBITDA margin (% of net sales) 25.7% 25.8% 25.6%
-EBITDA is defined as operating income plus depreciation, amortization and impairment charges/(reversals) and in Q3 2012 excludes a non-recurring gain of $49 million, recorded in Other operating income corresponding to a tax related lawsuit collected in Brazil.
Sales and operating income decreased with sequential sales affected principally by the impact of project delays on line pipe shipments in Brazil and a less favorable mix of OCTG products with lower sales in the Middle East and Africa, in addition to the seasonal impact of Northern Hemisphere plant stoppages. Net income was negatively affected by a $45 million deferred income tax provision, following the enactment of a new 10% withholding tax in Argentina.
Cash flow from operations amounted to $753 million for the quarter including a strong reduction in working capital. Our net cash position (cash and other current investments less total borrowings) increased to $785 million.
Interim Dividend Payment
Our board of directors approved the payment of an interim dividend of $0.13 per share ($0.26 per ADS), or approximately $153 million. The payment date will be November 21, 2013, and the ex-dividend date will be November 18, 2013.
Market Background and Outlook
Drilling activity in North America in the year to date has consolidated, supported by improving operator cash flows on higher oil prices and drilling efficiencies. Going into next year, it is expected that operator cash flows will support an increase in drilling activity if oil and gas prices remain close to current levels. In the rest of the world, oil and gas prices close to current levels should continue to support the ongoing expansion in drilling activity in the Middle East and offshore regions and onshore activity in other regions should remain stable.
In this environment, in the fourth quarter and going into 2014, we expect a strong level of sales in the Middle East and Africa and a rising level of sales in North America. In South America, although sales of OCTG products are expected to increase led by higher shale activity in Argentina, sales and shipments of line pipe products will continue to be affected by project delays in Brazil.
EBITDA margins are expected to remain stable while the overall EBITDA level should increase in line with sales.
Analysis of 2013 Third Quarter Results
Tubes Sales volume
(thousand metric tons) Q3 2013 Q2 2013 Q3 2012
Seamless 614 677 (9%) 642 (4%)
Welded 224 286 (22%) 305 (27%)
Total 838 963 (13%) 947 (12%)
Tubes Q3 2013 Q2 2013 Q3 2012
(Net sales - $ million)
North America 928 986 (6%) 1,260 (26%)
South America 474 652 (27%) 610 (22%)
Europe 199 218 (9%) 253 (21%)
Middle East & Africa 468 626 (25%) 236 98%
Far East & Oceania 156 137 14% 109 43%
Total net sales ($ million) 2,225 2,619 (15%) 2,469 (10%)
Operating income ($ million) 434 553 (22%) 560 (23%)
Operating margin (% of sales) 19.5% 21.1% 22.7%
Net sales of tubular products and services decreased 10% year on year and 15% sequentially. Sequentially, sales were mainly affected by lower shipments of offshore line pipe in Brazil and lower sales to the Middle East and Africa. Sequentially, North American sales declined principally due to lower sales of line pipe reflecting a more competitive situation for less differentiated products. In South America, sales declined due to lack of line pipe shipments in Brazil reflecting project implementation delays and premium OCTG stock adjustments in Argentina pursuant to the implementation of our alliance with YPF where we took over the management of their existing inventories. In the Middle East and Africa sales decreased compared to a record prior quarter due to the timing of shipments.
Operating income from tubular products and services, decreased 22% sequentially and 23% compared to the previous year. Sequentially, the decline in operating income was mainly due to the decline in sales and a lower operating margin due to the negative effect of lower sales on the absorption of fixed costs (i.e., depreciation and amortization).
Others Q3 2013 Q2 2013 Q3 2012
Net sales ($ million) 190 210 (10%) 188 1%
Operating income ($ million) 30 26 18% 24 27%
Operating margin (% of sales) 15.8% 12.2% 12.6%
Net sales of other products and services decreased 10% sequentially and increased 1%year on year. The sequential decline in sales was mainly due to lower sales of industrial equipment in Brazil. Despite the sequential decline in sales, operating income increased 18% mainly due to better performance of our sucker rods and electric conduit businesses.
Selling, general and administrative expenses, or SG&A, amounted to $439 million, or 18.2% of net sales in the third quarter of 2013, compared to $529 million, 18.7% in the previous quarter and $459 million, 17.3% in the third quarter of 2012. The sequential decline in SG&A expenses was mainly due to lower selling expenses associated with lower shipment volumes and a reduction in the allowance for doubtful accounts following the collection of overdue accounts receivable.
Other operating results, amounted to an expense of $4 million in the third quarter of 2013, compared to an expense of $7 million in the previous quarter and an income of $44 million in the third quarter of 2012. The income in the third quarter of 2012, was related to a $49 million payment from the Brazilian government, in interest and monetary adjustment over a tax benefit received in 1991.
Financial results amounted to a loss of $17 million in the third quarter of 2013, compared to a loss of $11 million in the previous quarter and a loss of $24 million in the third quarter of 2012.
Equity in earnings of associated companies generated a gain of $10 million in the third quarter of 2013, compared to a gain of $12 million in the previous quarter and a gain of $11 million in the third quarter of 2012. These results were mainly derived from our equity investment in Ternium TX.
Income tax charges totaled $142 million in the third quarter of 2013, equivalent to 31.9% of income before equity in earnings of associated companies and income tax, compared to 26.4% in the previous quarter and 24.4% in the third quarter of 2012. In September 2013, Argentina enacted a law that amends its Income tax law. The law includes a new 10% withholding tax on dividend distributions made by Argentine companies to foreign beneficiaries. Accordingly, as of September 30, 2013, we recorded an income tax provision of $45 million, for the deferred tax liability on reserves for future dividends at our Argentine subsidiaries.
Results attributable to non-controlling interests amounted to gains of $14 million in the third quarter of 2013, compared to gains of $12 million in the previous quarter and gains of $1 million in the third quarter of 2012. In the third quarter of 2013, these results were mainly attributable to minority interests at our Japanese subsidiary NKKTubes.
Cash Flow and Liquidity of 2013 Third Quarter
Net cash provided by operations during the third quarter of 2013 was $753 million, compared to $611 million in the previous quarter and $491 million in the third quarter of 2012. Working capital decreased by $239 million during the third quarter of 2013, compared to a decrease of $56 million in the previous quarter and an increase of $107 million in the third quarter of 2012. The decrease in working capital in the third quarter of 2013, was mainly due to a decrease in trade receivables following lower sales.
Capital expenditures amounted to $206 million in the third quarter of 2013, compared to $180 million in the previous quarter and $187 million in the third quarter of 2012.
Our net cash (cash and other current investments less total borrowings) increased to $785 million, at the end of the third quarter of 2013, from $214 million at the end of the previous quarter.
Analysis of 2013 First Nine Months Results
Increase/
9M 2013 9M 2012 (Decrease)
Net sales ($ million) 7,923 8,076 (2%)
Operating income ($ million) 1,595 1,771 (10%)
Net income ($ million) 1,167 1,338 (13%)
Shareholders' net income ($ million) 1,143 1,328 (14%)
Earnings per ADS ($) 1.94 2.25 (14%)
Earnings per share ($) 0.97 1.12 (14%)
EBITDA- ($ million) 2,050 2,142 (4%)
EBITDA margin (% of net sales) 25.9% 26.5%
-EBITDA is defined as operating income plus depreciation, amortization and impairment charges/(reversals) and in 9M 2012 excludes a non-recurring gain of $49 million, recorded in Other operating income corresponding to a tax related lawsuit collected in Brazil.
Tubes Sales volume Increase/
(thousand metric tons) 9M 2013 9M 2012 (Decrease)
Seamless 1,948 2,007 (3%)
Welded 799 882 (9%)
Total 2,747 2,889 (5%)
Increase/
Tubes 9M 2013 9M 2012 (Decrease)
(Net sales - $ million)
North America 3,057 3,799 (20%)
South America 1,721 1,612 7%
Europe 686 800 (14%)
Middle East & Africa 1,494 869 72%
Far East & Oceania 375 365 3%
Total net sales ($ million) 7,333 7,445 (2%)
Operating income ($ million) 1,512 1,680 (10%)
Operating margin (% of sales) 20.6% 22.6%
Net sales of tubular products and services decreased 2% to $7,333 million in the first nine months of 2013, compared to $7,445 million in the first nine months of 2012, reflecting a 5% decrease in volumes and a 4% increase in average selling prices.
Operating income from tubular products and services decreased 10% to $1,512 million in the first nine months of 2013, from $1,680 million in the first nine months of 2012, reflecting a 2% decrease in sales and a reduction of 200 basis points in the operating margin.
Increase/
Others 9M 2013 9M 2012 (Decrease)
Net sales ($ million) 590 631 (6%)
Operating income ($ million) 83 91 (9%)
Operating margin (% of sales) 14.1% 14.4%
Net sales of other products and services decreased 6% to $590 million in the first nine months of 2013, compared to $631 million in the first nine months of 2012, mainly due to lower sales of industrial equipment in Brazil, coiled tubing and tubes for electric conduit, partially offset by higher sales of sucker rods.
Operating income from other products and services decreased 9% to $83 million in the first nine months of 2013, compared to $91 million during the first nine months of 2012, reflecting lower sales and stable margins.
SG&A amounted to $1,444 million, or 18.2% of net sales during the first nine months of 2013, compared to $1,390 million, or 17.2% in the same period of 2012. The increase in SG&A expenses was mainly due to higher selling expenses associated with higher shipments to the Middle East and Africa and an increase in provisions for contingencies and doubtful accounts.
Financial results were a loss of $37 million in the first nine months of 2013 compared to loss of $35 million in the same period of 2012.
Equity in earnings of associated companies generated a gain of $34 million in the first nine months of 2013, compared to a gain of $31 million in the first nine months of 2012. These gains were derived mainly from our equity investment in Ternium.
Income tax charges totaled $426 million in the first nine months of 2013, equivalent to 27.3% of income before equity in earnings of associated companies and income tax, compared to $429 million in the first nine months of 2012, equivalent to 24.7% of income before equity in earnings of associated companies and income tax. In September 2013, Argentina enacted a law that amends its Income tax law. The law includes a new 10% withholding tax on dividend distributions made by Argentine companies to foreign beneficiaries. Accordingly, as of September 30, 2013, we recorded an income tax provision of $45 million, for the deferred tax liability on reserves for future dividends at our Argentine subsidiaries.
Income attributable to non-controlling interests amounted to $24 million in the first nine months of 2013, compared to $10 million in the first nine months of 2012, mainly due to improved results at our Japanese subsidiary NKKTubes.
Cash Flow and Liquidity of 2013 First Nine Months
During the first nine months of 2013, net cash provided by operations was $1,928 million, compared to $1,514 million in the same period of 2012. Working capital decreased by $312 million in the first nine months of 2013, compared with an increase of $56 million in the first nine months of 2012.
Capital expenditures amounted to $570 million in the first nine months of 2013, compared with $588 million in the same period of 2012.
Our financial position changed from net debt of $271 million at the beginning of the year to net cash of $785 million at September 30, 2013.
Conference call
Tenaris will hold a conference call to discuss the above reported results, on November 7, 2013, at 09:00 a.m. (Eastern Time). Following a brief summary, the conference call will be opened to questions. To access the conference call dial in +1 866 515.2908 within North America or +1 617 399.5122 Internationally. The access number is "98924335". 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 01:00 pm on November 7 through 12:00 am on November 14. To access the replay by phone, please dial +1 888 286.8010 or +1 617 801.6888 and enter passcode "48749346" 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.
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 Three-month period Nine-month period
U.S. dollars) ended September 30, ended September 30,
---------------------- ----------------------
2013 2012 2013 2012
---------- ---------- ---------- ----------
Continuing operations Unaudited Unaudited
Net sales 2,415,061 2,657,069 7,922,636 8,075,910
Cost of sales (1,507,706) (1,658,967) (4,867,581) (4,964,776)
---------- ---------- ---------- ----------
Gross profit 907,355 998,102 3,055,055 3,111,134
Selling, general and
administrative expenses (439,191) (458,716) (1,444,085) (1,389,514)
Other operating income
(expense) net (4,484) 44,174 (15,509) 49,027
---------- ---------- ---------- ----------
Operating income 463,680 583,560 1,595,461 1,770,647
Interest income 9,188 9,413 22,139 24,702
Interest expense (18,845) (18,247) (49,374) (40,860)
Other financial results (7,215) (15,154) (9,551) (18,549)
---------- ---------- ---------- ----------
Income before equity in
earnings of associated
companies and income tax 446,808 559,572 1,558,675 1,735,940
Equity in earnings of
associated companies 9,884 11,012 33,950 31,143
---------- ---------- ---------- ----------
Income before income tax 456,692 570,584 1,592,625 1,767,083
Income tax (142,404) (136,491) (426,055) (429,490)
---------- ---------- ---------- ----------
Income for the period 314,288 434,093 1,166,570 1,337,593
========== ========== ========== ==========
Attributable to:
Owners of the parent 300,159 433,037 1,142,764 1,327,879
Non-controlling interests 14,129 1,056 23,806 9,714
---------- ---------- ---------- ----------
314,288 434,093 1,166,570 1,337,593
========== ========== ========== ==========
Consolidated Condensed Interim Statement of Financial Position
(all amounts in thousands of
U.S. dollars) At September 30, 2013 At December 31, 2012
----------------------- -----------------------
Unaudited
ASSETS
Non-current assets
Property, plant and
equipment, net 4,631,933 4,434,970
Intangible assets, net 3,095,411 3,199,916
Investments in associated
companies 931,012 977,011
Other investments 2,477 2,603
Deferred tax assets 212,787 215,867
Receivables 120,639 8,994,259 142,060 8,972,427
----------- -----------
Current assets
Inventories 2,674,532 2,985,805
Receivables and
prepayments 230,239 260,532
Current tax assets 149,798 175,562
Trade receivables 1,926,419 2,070,778
Available for sale assets 21,572 21,572
Other investments 1,439,417 644,409
Cash and cash equivalents 603,141 7,045,118 828,458 6,987,116
----------- ----------- ----------- -----------
Total assets 16,039,377 15,959,543
=========== ===========
EQUITY
Capital and reserves
attributable to owners of
the parent 12,048,287 11,328,031
Non-controlling interests 179,666 171,561
----------- -----------
Total equity 12,227,953 11,499,592
=========== ===========
LIABILITIES
Non-current liabilities
Borrowings 319,501 532,407
Deferred tax liabilities 717,706 728,541
Other liabilities 307,392 302,444
Provisions 72,028 1,416,627 67,185 1,630,577
----------- -----------
Current liabilities
Borrowings 937,575 1,211,785
Current tax liabilities 240,168 254,603
Other liabilities 366,067 318,828
Provisions 19,878 26,958
Customer advances 26,837 134,010
Trade payables 804,272 2,394,797 883,190 2,829,374
----------- ----------- ----------- -----------
Total liabilities 3,811,424 4,459,951
=========== ===========
Total equity and liabilities 16,039,377 15,959,543
=========== ===========
Consolidated Condensed Interim Statement of Cash Flow
Three-month period Nine-month period
ended ended
September 30, September 30,
---------------------- ----------------------
(all amounts in thousands of
U.S. dollars) 2013 2012 2013 2012
---------- ---------- ---------- ----------
Unaudited Unaudited
Cash flows from operating
activities
Income for the period 314,288 434,093 1,166,570 1,337,593
Adjustments for:
Depreciation and
amortization 157,931 144,713 454,903 420,597
Income tax accruals less
payments 39,591 (20,417) 64,612 (126,196)
Equity in earnings of
associated companies (9,884) (11,012) (33,950) (31,143)
Interest accruals less
payments, net 5,119 (6,126) (29,902) (24,382)
Changes in provisions (1,487) (1,625) (2,404) (18,182)
Changes in working capital 239,248 (107,051) 311,705 (55,708)
Other, including currency
translation adjustment 8,363 58,804 (3,900) 11,237
---------- ---------- ---------- ----------
Net cash provided by
operating activities 753,169 491,379 1,927,634 1,513,816
========== ========== ========== ==========
Cash flows from investing
activities
Capital expenditures (206,282) (186,964) (569,841) (587,890)
Acquisition of subsidiaries
and associated companies - (6,228) - (510,825)
Proceeds from disposal of
property, plant and
equipment and intangible
assets 12,637 883 19,383 3,798
Dividends received from
associated companies - 6 16,127 18,708
Changes in investments in
short terms securities (326,352) (469,351) (795,008) (457,984)
---------- ---------- ---------- ----------
Net cash used in investing
activities (519,997) (661,654) (1,329,339) (1,534,193)
========== ========== ========== ==========
Cash flows from financing
activities
Dividends paid - - (354,161) (295,134)
Dividends paid to non-
controlling interest in
subsidiaries (113) - (18,642) (905)
Acquisitions of non-
controlling interests - (38) (7,768) (758,577)
Proceeds from borrowings 537,301 491,143 1,757,691 1,705,377
Repayments of borrowings (787,227) (243,114) (2,141,999) (682,230)
---------- ---------- ---------- ----------
Net cash (used in)
providedby financing
activities (250,039) 247,991 (764,879) (31,469)
========== ========== ========== ==========
========== ========== ========== ==========
(Decrease) Increase in cash
andcash equivalents (16,867) 77,716 (166,584) (51,846)
========== ========== ========== ==========
Movement in cash and cash
equivalents
At the beginning of the
period 606,026 693,712 772,656 815,032
Effect of exchange rate
changes (3,006) 3,567 (19,919) 11,809
(Decrease) Increase in cash
and cash equivalents (16,867) 77,716 (166,584) (51,846)
---------- ---------- ---------- ----------
At September 30, 586,153 774,995 586,153 774,995
========== ========== ========== ==========
At September 30, At September 30,
---------------------- ----------------------
2013 2012 2013 2012
---------- ---------- ---------- ----------
Cash and cash equivalents
Cash and bank deposits 603,141 787,540 603,141 787,540
Bank overdrafts (16,988) (12,545) (16,988) (12,545)
---------- ---------- ---------- ----------
586,153 774,995 586,153 774,995
========== ========== ========== ==========
FOR FURTHER INFORMATION PLEASE CONTACT:
Giovanni Sardagna
Tenaris
1-888-300-5432
www.tenaris.com
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