LUXEMBOURG--(Marketwired - July 30, 2014) - Tenaris S.A. TS TS TS TEN ("Tenaris") today announced its results for the quarter ended June 30, 2014 in comparison with its results for the quarter ended June 30, 2013.
Summary of 2014 Second Quarter Results
(Comparison with first quarter of 2014 and second quarter of 2013)
Q2 2014 Q1 2014 Q2 2013
Net sales ($ million) 2,661 2,580 3% 2,829 (6%)
Operating income ($ million) 549 566 (3%) 578 (5%)
Net income ($ million) 420 428 (2%) 430 (2%)
Shareholders' net income ($ million) 408 423 (3%) 418 (2%)
Earnings per ADS ($) 0.69 0.72 (3%) 0.71 (2%)
Earnings per share ($) 0.35 0.36 (3%) 0.35 (2%)
EBITDA- ($ million) 702 718 (2%) 730 (4%)
EBITDA margin (% of net sales) 26.4% 27.8% 25.8%
-EBITDA is defined as operating income plus depreciation, amortization and impairment charges/(reversals)
Our second quarter sales increased 3% sequentially and included a record level of sales in Sub-Saharan Africa which offset the usual seasonal effect in Canada. Our EBITDA and operating margins continued to benefit from a favorable product mix.
Cash flow from operations amounted to $566 million during the second quarter of 2014. Following a dividend payment of $354 million in May 2014, and capital expenditures of $223 million during the quarter, we maintained a net cash position (cash and other current investments less total borrowings) of $1.3 billion at the end of the quarter.
Market Background and Outlook
In the United States, drilling activity has gradually increased in the first half. Higher oil production is boosting operator cash flows which is expected to drive further expansion. The duties on OCTG imports from nine countries, including South Korea, determined by the U.S. Department of Commerce, if confirmed by the U.S. International Trade Commission in its injury ruling expected in August, should provide some relief to domestic OCTG manufacturers and result in increased sales and a more favorable pricing environment. Elsewhere in North America, we expect drilling activity and sales in Mexico to recover slowly in the second half while drilling activity and sales in Canada should be above last year's levels.
In the rest of the world, drilling activity continues to show a gradual increase in many regions, led by gas drilling in the Middle East and deepwater drilling in sub-Saharan Africa. However, our sales and product mix in the second half will be affected by inventory adjustments in Saudi Arabia and a continuing low level of sales in Brazil. Sales in the third quarter will be additionally affected by lower shipments to sub-Saharan Africa following the record level of this quarter.
Considering these effects, we confirm our expectation that our overall results for 2014 will be in line with those for 2013, with a decline in the third quarter followed by a recovery in the fourth.
Analysis of 2014 Second Quarter Results
Tubes Sales volume
(thousand metric tons) Q2 2014 Q1 2014 Q2 2013
Seamless 703 669 5% 677 4%
Welded 199 241 (17%) 286 (30%)
Total 902 910 (1%) 963 (6%)
Tubes Q2 2014 Q1 2014 Q2 2013
(Net sales - $ million)
North America 1,069 1,085 (1%) 986 8%
South America 454 440 3% 652 (30%)
Europe 263 256 3% 218 21%
Middle East & Africa 560 536 4% 626 (11%)
Far East & Oceania 101 101 - 137 (26%)
Total net sales ($ million) 2,447 2,418 1% 2,619 (7%)
Operating income ($ million) 538 561 (4%) 553 (3%)
Operating income (% of sales) 22.0% 23.2% 21.1%
Net sales of tubular products and services increased 1% sequentially but declined 7% year on year. Sales increased sequentially driven by record sales in Sub-Saharan Africa, which offset the spring breakup effect in Canada. In North America sales declined due to the seasonal spring break up in Canada, partially offset by increased sales in Mexico. In South America, sales increased due to higher sales of OCTG in Argentina. In Europe, higher sales of OCTG more than offset lower sales of line pipe products. In the Middle East and Africa sales increased due to record level of shipments to Sub-Saharan Africa deepwater projects, partially offset by lower sales in the Middle East. In the Far East and Oceania, sales remained stable. The 7% year on year decline in sales was mostly due to lower shipments in Brazil.
Operating income from tubular products and services decreased 4% sequentially and 3% year on year. Sequentially, the decrease in operating income was mainly due to higher SG&A expenses.
Others Q2 2014 Q1 2014 Q2 2013
Net sales ($ million) 214 162 32% 210 2%
Operating income ($ million) 12 4 200% 26 (54%)
Operating income (% of sales) 5.6% 2.8% 12.2%
Net sales of other products and services increased 32% sequentially, mainly due to higher sales of sucker rods, industrial equipment in Brazil and pipes for electric conduit in the USA. Sequentially, the operating margin increased following the increase in sales and a recovery in operating margins.
Selling, general and administrative expenses, or SG&A, amounted to $518 million, or 19.5% of net sales, in the second quarter of 2014, compared to $489 million, 18.9% in the previous quarter and $529 million, 18.7% in the second quarter of 2013. The sequential increase was mainly due to higher service and logistics costs.
Financial results in the second quarter of 2014 amounted to zero, compared to a gain of $42 million in the previous quarter and a loss of $11 million in the second quarter of 2013. The gain in the previous quarter was mainly related to a 22.3% Argentine peso devaluation in the first quarter of 2014.
Equity in earnings of associated companies generated a gain of $14 million in the second quarter of 2014, compared to a gain of $19 million in the previous quarter and a gain of $12 million in the second quarter of last year. These results are mainly derived from our equity investment in Ternium TX.
Income tax charges totaled $144 million in the second quarter of 2014, equivalent to 26.2% of income before equity in earnings of associated companies and income tax, compared to $199 million, or 32.7% in the previous quarter and $150 million or 26.4% in the second quarter of 2013.
Results attributable to non-controlling interests amounted to gains of $12 million in the second quarter of 2014, compared to $6 million in the previous quarter and $12 million in the second quarter of 2013. These results are mainly attributable to NKKTubes, our Japanese subsidiary.
Cash Flow and Liquidity of 2014 Second Quarter
Net cash provided by operations during the second quarter of 2014 was $566 million, compared to $612 million in the previous quarter and $607 million in the second quarter of 2013.
Capital expenditures amounted to $223 million for the second quarter of 2014, compared to $189 million in the previous quarter and $180 million in the second quarter of 2013. The increase has to do with the progress in the construction of the greenfield seamless facility in Bay City, Texas.
Following a dividend payment of $354 million in May 2014, our financial position at June 30, 2014, amounted to a net cash position (cash and other current investments less total borrowings) of $1.3 billion, a similar level to that of the previous quarter.
Analysis of 2014 First Half Results
H1 2014 H1 2013 Increase/(Decrease)
Net sales ($ million) 5,241 5,508 (5%)
Operating income ($ million) 1,115 1,132 (1%)
Net income ($ million) 848 852 (1%)
Shareholders' net income ($ million) 830 843 (1%)
Earnings per ADS ($) 1.41 1.43 (1%)
Earnings per share ($) 0.70 0.71 (1%)
EBITDA ($ million) 1,421 1,429 (1%)
EBITDA margin (% of net sales) 27.1% 25.9%
Our sales in the first half of 2014 declined 5% compared to the first half of 2013, mainly due to lower shipments of welded pipes in Brazil. EBITDA declined 1% to $1,421 million in the first half of 2014 compared to $1,429 million in the first half of the previous year, as an improvement in margins, driven by a better mix of products sold, partially offset the decline in sales.
Cash flow from operations amounted to $1,178 million during the first half of 2014. Following a dividend payment of $354 million in May 2014, and capital expenditures of $412 million during the first half of 2014, we reached a net cash position (cash and other current investments less total borrowings) of $1.3 billion at the end of June 2014.
The following table shows our net sales by business segment for the periods indicated below:
Net sales ($ million) H1 2014 H1 2013 Increase/(Decrease)
Tubes 4,865 93% 5,107 93% (5%)
Others 376 7% 400 7% (6%)
Total 5,241 100% 5,508 100% (5%)
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 2014 H1 2013 Increase/(Decrease)
Seamless 1,372 1,334 3%
Welded 440 576 (24%)
Total 1,812 1,910 (5%)
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 2014 H1 2013 Increase/(Decrease)
(Net sales - $ million)
North America 2,154 2,129 1%
South America 894 1,247 (28%)
Europe 519 486 7%
Middle East & Africa 1,096 1,026 7%
Far East & Oceania 202 219 (8%)
Total net sales ($ million) 4,865 5,107 (5%)
Operating income ($ million) 1,099 1,079 2%
Operating income (% of sales) 22.6% 21.1%
Net sales of tubular products and services decreased 5% to $4,865 million in the first half of 2014, compared to $5,107 million in the first half of 2013, as a result of flat average selling prices and lower shipments of welded pipes in Brazil.
Operating income from tubular products and services increased 2% to $1,099 million in the first half of 2014, from $1,079 million in the first half of 2013. Despite a 5% decrease in net sales, operating income increased due to an improvement in the operating margin, mainly due to a better mix of products sold.
Others
The following table indicates, for our Others business segment, net sales, operating income and operating income as a percentage of net sales for the periods indicated below:
Others H1 2014 H1 2013 Increase/(Decrease)
Net sales ($ million) 376 400 (6%)
Operating income ($ million) 16 53 (70%)
Operating income (% of sales) 4.3% 13.3%
Net sales of other products and services decreased 6% to $376 million in the first half of 2014, compared to $400 million in the first half of 2013, mainly due to lower sales of industrial equipment in Brazil.
Operating income from other products and services decreased 70%, to $16 million in the first half of 2014, compared to $53 million during the first half of 2013, due to a 6% decline in sales and a lower operating margin.
Selling, general and administrative expenses, or SG&A, amounted to $1,007 million in the first half of 2014 and $1,005 million in the first half of 2013, however, it increased as a percentage of net sales to 19.2% in the first half of 2014 compared to 18.2% in the first half of 2013 mainly due to the effect of fixed and semi fixed expenses on lower sales.
Financial results amounted to a gain of $43 million in the first half of 2014, compared to a loss of $20 million in the first half of 2013. Net interest expenses amounted to $5 million in the first half of 2014, compared to $18 million in the first half of 2013. The decrease in interest expenses was due to an increase in our net cash position. In addition, in the first half of 2014 we had positive other financial results amounting to $48 million, mainly due to the positive impact from the Argentine peso devaluation against the U.S. dollar on our Argentine peso-denominated borrowings and liabilities.
Equity in earnings of associated companies generated a gain of $33 million in the first half of 2014, compared to a gain of $24 million in the first half of 2013. These results are mainly derived from our equity investment in Ternium TX and Usiminas USIM.
Income tax charges amounted to $343 million in the first half of 2014, equivalent to 29.6% of income before equity in earnings of associated companies and income tax, compared to $284 million in the first half of 2013, or 25.5% of income before equity in earnings of associated companies and income tax. During the first half of 2014, the tax rate was negatively affected by the effect of the Argentine peso devaluation on the tax base used to calculate deferred taxes.
Income attributable to non-controlling interests amounted to $18 million in the first half of 2014, compared to $10 million in the first half of 2013. These results are mainly attributable to NKKTubes, our Japanese subsidiary.
Cash Flow and Liquidity of 2014 First Half
Net cash provided by operations during the first half of 2014 amounted to $1,178 million, compared to $1,163 million in the first half of 2013.
Capital expenditures amounted to $412 million in the first half of 2014, compared to $364 million in the first half of 2013. The increase has to do mainly with the progress in the construction of the greenfield seamless facility in Bay City, Texas.
Following a dividend payment of $354 million in May 2014, our financial position at June 30, 2014, amounted to a net cash position (i.e., cash and other current investments less total borrowings) of $1.3 billion, compared with a net cash position of $214 million at June 30, 2013.
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, 2014 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 July 31, 2014, at 9:00 a.m. (Eastern Time). Following a brief summary, the conference call will be opened to questions. To access the conference call dial in +1 866 383.8009 within North America or +1 617 597.5342 Internationally. The access number is "62522706". 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 1:00 pm on July 31 through 12:00 am on August 7. To access the replay by phone, please dial +1 888 286.8010 or +1 617 801.6888 and enter passcode "86199147" 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 Three-month period Six-month period ended
U.S. dollars) ended June 30, June 30,
---------------------- ----------------------
2014 2013 2014 2013
---------- ---------- ---------- ----------
Continuing operations Unaudited Unaudited
Net sales 2,660,882 2,829,270 5,240,826 5,507,575
Cost of sales (1,590,888) (1,714,443) (3,117,922) (3,359,875)
---------- ---------- ---------- ----------
Gross profit 1,069,994 1,114,827 2,122,904 2,147,700
Selling, general and
administrative expenses (518,237) (529,329) (1,007,097) (1,004,894)
Other operating income
(expense) net (2,475) (7,302) (755) (11,025)
---------- ---------- ---------- ----------
Operating income 549,282 578,196 1,115,052 1,131,781
Interest income 9,944 6,870 19,006 12,951
Interest expense (10,618) (16,620) (23,621) (30,529)
Other financial results 1,144 (955) 47,578 (2,336)
---------- ---------- ---------- ----------
Income before equity in
earnings of associated
companies and income tax 549,752 567,491 1,158,015 1,111,867
Equity in earnings of
associated companies 14,367 11,869 33,188 24,066
---------- ---------- ---------- ----------
Income before income tax 564,119 579,360 1,191,203 1,135,933
Income tax (144,219) (149,795) (343,284) (283,651)
---------- ---------- ---------- ----------
Income for the period 419,900 429,565 847,919 852,282
---------- ---------- ---------- ----------
Attributable to:
Owners of the parent 407,885 417,828 830,390 842,605
Non-controlling interests 12,015 11,737 17,529 9,677
---------- ---------- ---------- ----------
419,900 429,565 847,919 852,282
---------- ---------- ---------- ----------
Consolidated Condensed Interim Statement of Financial Position
(all amounts in thousands of
U.S. dollars) At June 30, 2014 At December 31, 2013
--------------------- ---------------------
Unaudited
ASSETS
Non-current assets
Property, plant and equipment,
net 4,856,796 4,673,767
Intangible assets, net 2,993,696 3,067,236
Investments in associated
companies 941,501 912,758
Other investments 1,813 2,498
Deferred tax assets 219,560 197,159
Receivables 219,824 9,233,190 152,080 9,005,498
---------- ----------
Current assets
Inventories 2,774,035 2,702,647
Receivables and prepayments 232,688 220,224
Current tax assets 163,340 156,191
Trade receivables 1,962,412 1,982,979
Available for sale assets 21,572 21,572
Other investments 1,727,405 1,227,330
Cash and cash equivalents 642,382 7,523,834 614,529 6,925,472
---------- ---------- ---------- ----------
Total assets 16,757,024 15,930,970
---------- ----------
EQUITY
Capital and reserves
attributable to owners of the
parent 12,793,540 12,290,420
Non-controlling interests 148,483 179,446
---------- ----------
Total equity 12,942,023 12,469,866
---------- ----------
LIABILITIES
Non-current liabilities
Borrowings 173,083 246,218
Deferred tax liabilities 710,151 751,105
Other liabilities 284,168 277,257
Provisions 72,653 1,240,055 66,795 1,341,375
---------- ----------
Current liabilities
Borrowings 913,125 684,717
Current tax liabilities 318,334 266,760
Other liabilities 342,022 250,997
Provisions 28,835 25,715
Customer advances 92,041 56,911
Trade payables 880,589 2,574,946 834,629 2,119,729
---------- ---------- ---------- ----------
Total liabilities 3,815,001 3,461,104
---------- ----------
Total equity and liabilities 16,757,024 15,930,970
---------- ----------
Consolidated Condensed Interim Statement of Cash Flows
Three-month period Six-month period ended
ended June 30, June 30,
---------------------- ----------------------
(all amounts in thousands of
U.S. dollars) 2014 2013 2014 2013
---------- ---------- ---------- ----------
Unaudited Unaudited
Cash flows from operating
activities
Income for the period 419,900 429,565 847,919 852,282
Adjustments for:
Depreciation and
amortization 153,079 151,602 305,743 296,972
Income tax accruals less
payments (12,379) 9,808 58,411 25,021
Equity in earnings of
associated companies (14,367) (11,869) (33,188) (24,066)
Interest accruals less
payments, net (9,957) (4,296) (18,056) (35,021)
Changes in provisions 4,054 (4,051) 8,978 (917)
Changes in working capital 16,702 56,136 33,362 72,457
Other, including currency
translation adjustment 9,454 (19,853) (24,839) (24,021)
---------- ---------- ---------- ----------
Net cash provided by
operating activities 566,486 607,042 1,178,330 1,162,707
---------- ---------- ---------- ----------
Cash flows from investing
activities
Capital expenditures (223,177) (179,674) (412,222) (363,559)
Advance to suppliers of
property, plant and
equipment 3,802 4,012 (24,849) 11,758
Investment in associated
companies - - (1,380) -
Loan to associated companies (9,900) - (28,648) -
Proceeds from disposal of
property, plant and
equipment and intangible
assets 2,579 2,360 6,606 6,746
Dividends received from
associated companies 17,429 14,931 17,429 16,127
Changes in investments in
short terms securities (195,629) (310,074) (500,075) (468,656)
---------- ---------- ---------- ----------
Net cash used in investing
activities (404,896) (468,445) (943,139) (797,584)
---------- ---------- ---------- ----------
Cash flows from financing
activities
Dividends paid (354,161) (354,161) (354,161) (354,161)
Dividends paid to non-
controlling interest in
subsidiaries (400) (1,858) (48,289) (18,529)
Acquisitions of non-
controlling interests (50) (7,230) (140) (7,768)
Proceeds from borrowings 712,807 594,658 1,207,214 1,220,390
Repayments of borrowings (531,530) (677,727) (1,000,200) (1,354,772)
---------- ---------- ---------- ----------
Net cash used in financing
activities (173,334) (446,318) (195,576) (514,840)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
(Decrease) Increase in cash
and cash equivalents (11,744) (307,721) 39,615 (149,717)
---------- ---------- ---------- ----------
Movement in cash and cash
equivalents
At the beginning of the
period 649,689 925,554 598,145 772,656
Effect of exchange rate
changes 1,879 (11,807) 2,064 (16,913)
(Decrease) Increase in cash
and cash equivalents (11,744) (307,721) 39,615 (149,717)
---------- ---------- ---------- ----------
At June 30, 639,824 606,026 639,824 606,026
---------- ---------- ---------- ----------
At June 30, At June 30,
---------------------- ----------------------
2014 2013 2014 2013
---------- ---------- ---------- ----------
Cash and cash equivalents
Cash and bank deposits 642,382 618,435 642,382 618,435
Bank overdrafts (2,558) (12,409) (2,558) (12,409)
---------- ---------- ---------- ----------
639,824 606,026 639,824 606,026
---------- ---------- ---------- ----------
FOR FURTHER INFORMATION PLEASE CONTACT:
Giovanni Sardagna
Tenaris
1-888-300-5432
www.tenaris.com
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