SOURCE:
Tenaris S.A.
2008-08-06 15:13:00
Tenaris Announces 2008 Second Quarter Results
LUXEMBOURG–(EMWNews – August 6, 2008) – Tenaris S.A. (“Tenaris”) (
(
semester ended June 30, 2008 with comparison to its results for the quarter
and semester ended June 30, 2007.
Summary of 2008 Second Quarter Results
(Comparison with first quarter of 2008 and second quarter of 2007)
Q2 2008 Q1 2008 Q2 2007
------- ------------- -------------
Net sales (US$ million) 3,148.4 2,626.2 20% 2,555.0 23%
Operating income (US$ million) 823.7 710.9 16% 771.2 7%
Net income (US$ million) 1,030.0 500.0 106% 534.5 93%
Shareholders' net income
(US$ million) 987.5 473.0 109% 496.0 99%
Earnings per ADS (US$) 1.67 0.80 109% 0.84 99%
Earnings per share (US$) 0.84 0.40 109% 0.42 99%
EBITDA (US$ million) 958.1 845.4 13% 895.8 7%
EBITDA margin (% of net sales) 30% 32% 35%
Our results in the second quarter reflect an improving market environment
particularly in North America. Earnings per share, excluding income from
discontinued operations, were up 21% year on year and 30% sequentially at
$0.50 ($1.00 per ADS). Net sales were boosted by record shipments of
seamless and welded pipe products. Net financial debt (total financial debt
less cash and other current investments) declined in the quarter by
US$1,056.5 million to US$1,444.7 million as of June 30, 2008 following the
sale of the Hydril Pressure Control business.
Market Background and Outlook
In the first half of 2008, global oil prices rose sharply before coming off
their highs in the past few weeks, reflecting steady global demand and
concerns about supply. North American gas prices also rose sharply,
reflecting increased demand and lower levels of imports, but have fallen
sharply in the past month as markets show increased volatility.
Oil and gas drilling activity, as measured by the Baker Hughes count of
active rigs, has increased worldwide with the total world rig count up 5%
in the first half of 2008, compared to the corresponding period of 2007. In
North America, there has been increased activity in U.S. oil drilling and
the development of U.S. gas shale reserves. Additionally, there are signs
that the sharp decline in Canadian gas drilling activity seen in 2007 has
bottomed out with expectations for an increase in activity in the second
half. In the rest of the world, drilling activity has continued to increase
in most regions with the international count of active rigs, as published
by Baker Hughes, showing an average increase of 7% in the first half of
2008 compared to the same period of 2007.
Demand for OCTG and other pipe products from the oil and gas industry has
increased this year, particularly in the USA, reflecting increased drilling
activity worldwide. Distributor inventory levels in the USA remain at low
levels following last year’s destocking activity. However, apparent demand
in the Middle East is being affected by inventory adjustments after the
build-up of stocks in the past two years.
Demand for our large diameter pipes for pipeline projects in South America
in 2008 remains good as we make deliveries to gas and mineral pipeline
projects in Brazil and Argentina and orders for additional projects in
Brazil and Colombia have been received. We expect our sales in this segment
will remain strong in the second half of the year but segment margins may
decline as we make shipments to projects with higher logistics costs in
Colombia.
Steelmaking raw material costs for our seamless pipe products and steel
costs for our welded pipe products have risen steeply in the year to date.
Energy and labor costs have also increased. Pipe prices are adjusting to
the cost increases and a stronger demand environment, though not at the
same pace across all markets. We expect that net sales will continue to
grow strongly in the second half, particularly in the fourth quarter, but
that the impact of cost increases will continue to affect margins during
the third quarter.
Analysis of 2008 Second Quarter Results
Increase/
Sales volume (metric tons) Q2 2008 Q2 2007 (Decrease)
--------- --------- ----------
Tubes - Seamless 784,000 750,000 5%
Tubes - Welded 270,000 215,000 26%
Tubes - Total 1,054,000 965,000 9%
Projects - Welded 170,000 115,000 48%
Total 1,224,000 1,080,000 13%
Tubes Increase/
(Net sales - $ million) Q2 2008 Q2 2007 (Decrease)
--------- --------- ----------
North America 986.5 693.8 42%
South America 334.2 326.5 2%
Europe 480.8 421.6 14%
Middle East & Africa 565.6 547.3 3%
Far East & Oceania 187.1 203.2 (8%)
Total net sales ($ million) 2,554.2 2,192.3 17%
Cost of sales (% of sales) 56% 50%
Operating income ($ million) 707.1 719.5 (2%)
Operating income (% of sales) 28% 33%
Net sales of tubular products and services rose 17% to US$2,554.2 million
in the second quarter of 2008, compared to US$2,192.3 million in the second
quarter of 2007, due to higher volumes and higher average selling prices.
In North America, sales rose strongly as oil and gas drilling activity
increased in the USA and Mexico and selling prices began to reflect higher
raw material costs. In the Middle East and Africa, increased sales of
high-end OCTG products offset lower volumes of API and line pipe products.
In Europe, sales increased primarily due to an increase in average selling
prices reflecting, in part, higher sales of OCTG products and lower sales
to industrial customers.
Increase/
Projects Q2 2008 Q2 2007 (Decrease)
--------- --------- ----------
Net sales ($ million) 368.1 200.8 83%
Cost of sales (% of sales) 71% 72%
Operating income ($ million) 77.6 38.3 103%
Operating income (% of sales) 21% 19%
Net sales of pipes for pipeline projects increased 83% to US$368.1 million
in the second quarter of 2008, compared to US$200.8 million in the second
quarter of 2007, reflecting a quarterly record level of shipments in this
segment as deliveries were made to various projects in Brazil, including
Petrobras’ Plangas and a mineral slurry pipeline, and to the loops
extension project in Argentina.
Increase/
Others Q2 2008 Q2 2007 (Decrease)
--------- --------- ----------
Net sales ($ million) 226.1 161.8 40%
Cost of sales (% of sales) 69% 79%
Operating income ($ million) 39.0 13.4 191%
Operating income (% of sales) 17% 8%
Net sales of other products and services rose 40% to US$226.1 million in
the second quarter of 2008, compared to US$161.8 million in the second
quarter of 2007, reflecting higher sales of industrial equipment in Brazil
and of welded pipes for electric conduits in the USA. In addition to higher
sales, the increase in operating income reflects a solid recovery in the
electric conduit business, higher plant utilization in the industrial
equipment business and higher margins on sales of surplus raw materials.
Selling, general and administrative expenses, or SG&A, decreased as a
percentage of net sales to 15.2% in the quarter ended June 30, 2008,
compared to 15.6% in the corresponding quarter of 2007.
Net interest expenses decreased to US$18.7 million in the second quarter of
2008 compared to US$47.8 million in the same period of 2007 reflecting a
lower net debt position and lower interest rates.
Other financial results recorded a gain of US$1.1 million during the second
quarter of 2008, compared to a gain of US$15.2 million during the second
quarter of 2007.
Equity in earnings of associated companies generated a gain of US$48.1
million in the second quarter of 2008, compared to a gain of US$29.4
million in the second quarter of 2007. These gains were derived mainly from
our equity investment in Ternium.
Income tax charges totalled US$218.6 million in the second quarter of 2008,
equivalent to 27% of income before equity in earnings of associated
companies and income tax, compared to US$240.7 million in the second
quarter of 2007, equivalent to 33% of income before equity in earnings of
associated companies and income tax. The result in the second quarter of
2008 benefited from a tax reduction equivalent to US$28.3 million incurred
on the reversal of deferred taxes in Italy due to the anticipated payment
of taxes at a reduced rate.
Income from discontinued operations amounted to US$394.3 million in the
second quarter of 2008. This income corresponds to the result of the sale
of Hydril’s pressure control business, completed on April 1, 2008.
Income attributable to minority interest amounted to US$42.6 million in the
second quarter of 2008, compared to US$38.5 million in the corresponding
quarter of 2007. Although net results at our Confab subsidiary were higher
during the period, they were lower at our NKKTubes subsidiary.
Cash Flow and Liquidity
Net cash provided by operations during the second quarter of 2008 was
US$274.0 million (US$842.9 million in the first half), compared to US$211.1
million in the second quarter of 2007 (US$899.4 million in the first half).
Working capital increased by US$326.9 million during the second quarter.
Trade receivables and trade payables rose US$372.7 million and US$225.4
million respectively during the second quarter as quarterly net sales
increased. Inventories rose U$243.2 million during the second quarter,
primarily due to increases in raw material and production costs.
Capital expenditures amounted to US$116.9 million in the second quarter of
2008 ($205.4 million in the first half), compared to US$109.2 million in
the second quarter of 2007 (US$229.1 million in the first half).
During the first half of 2008, total financial debt decreased by US$885.8
million to US$3,134.5 million at June 30, 2008 from US$4,020.2 million at
December 31, 2007. Net financial debt during the first half of 2008
decreased by US$1,525.5 million to US$1,444.7 million at June 30, 2008
following the receipt of proceeds from the sale of Hydril’s pressure
control business and the payment of the balance of the annual dividend,
amounting to approximately US$295 million in June 2008.
Analysis of 2008 First Half Results
Net income attributable to equity holders in the company during the first
semester of 2008 was US$1,460.5 million, or US$1.24 per share (US$2.47 per
ADS), which compares with net income attributable to equity holders in the
company during the first semester of 2007 of US$976.3 million, or US$0.83
per share (US$1.65 per ADS). Operating income was US$1,534.6 million, or
27% of net sales, compared to US$1,528.8 million, or 31% of net sales.
Operating income plus depreciation and amortization for this semester was
US$1,803.5 million, or 31% of net sales, compared to US$1,753.9 million, or
35% of net sales during the first semester of 2007.
Increase/
Sales volume (metric tons) H1 2008 H1 2007 (Decrease)
--------- --------- ----------
Tubes - Seamless 1,475,000 1,497,000 (1%)
Tubes - Welded 552,000 466,000 18%
Tubes - Total 2,027,000 1,963,000 3%
Projects - Welded 302,000 190,000 59%
Total 2,329,000 2,153,000 8%
Tubes Increase/
(Net sales - $ million) H1 2008 H1 2007 (Decrease)
--------- --------- ----------
North America 1,819.1 1,421.6 28%
South America 572.4 587.1 (3%)
Europe 928.4 840.3 10%
Middle East & Africa 1,041.3 1,127.2 (8%)
Far East & Oceania 363.7 360.9 1%
Total net sales ($ million) 4,724.8 4,337.1 9%
Cost of sales (% of sales) 55% 50%
Operating income ($ million) 1,344.6 1,441.5 (7%)
Operating income (% of sales) 28% 33%
Net sales of tubular products and services rose 9% to US$4,724.8 million in
the first half of 2008, compared to US$4,337.1 million in the first half of
2007, due to higher average selling prices, reflecting in part higher sales
of specialized high-end products, and an increase in welded pipe sales
volumes.
Increase/
Projects H1 2008 H1 2007 (Decrease)
--------- --------- ----------
Net sales ($ million) 639.8 325.3 97%
Cost of sales (% of sales) 71% 70%
Operating income ($ million) 128.9 64.6 99%
Operating income (% of sales) 20% 20%
Net sales of pipes for pipeline projects increased 97% to US$639.8 million
in the first half of 2008, compared to US$325.3 million in the first half
of 2007, reflecting higher deliveries in Brazil and Argentina to gas and
other pipeline projects.
Increase/
Others H1 2008 H1 2007 (Decrease)
--------- --------- ----------
Net sales ($ million) 409.9 318.0 29%
Cost of sales (% of sales) 71% 80%
Operating income ($ million) 61.2 22.6 170%
Operating income (% of sales) 15% 7%
Net sales of other products and services rose 29% to US$409.9 million in
the first half of 2008, compared to US$318.0 million in the first half of
2007, reflecting higher sales of electric conduit pipes and industrial
equipment.
Selling, general and administrative expenses, or SG&A, remained stable as a
percentage of net sales at 15.4% in the semester ended June 30, 2008
compared to 15.5% in the corresponding semester of 2007.
Net interest expenses decreased to US$73.5 million in the first half of
2008 compared to US$83.3 million in the same period of 2007 reflecting a
lower net debt position and lower interest rates.
Other financial results recorded a loss of US$13.2 million during the first
half of 2008, compared to a gain of US$2.1 million during the first half of
2007.
Equity in earnings of associated companies generated a gain of US$98.1
million in the first half of 2008, compared to a gain of US$55.3 million in
the first half of 2007. These gains were derived mainly from our equity
investment in Ternium.
Income tax charges totalled US$427.2 million in the first half of 2008,
equivalent to 30% of income before equity in earnings of associated
companies and income tax, compared to US$466.2 million in the first half of
2007, equivalent to 32% of income before equity in earnings of associated
companies and income tax.
Income from discontinued operations amounted to US$411.1 million in the
first half of 2008. This included the result of the sale of Hydril’s
pressure control business, completed on April 1, 2008, amounting to
US$394.3 million.
Income attributable to minority interest amounted to US$69.5 million in the
first half of 2008, compared to US$67.6 million in the corresponding
semester of 2007. Although net results at our Confab subsidiary were higher
during the period, they were lower at our NKKTubes subsidiary.
Some of the statements contained in this press release are “forward-looking
statements.” Forward-looking statements are based on management’s current
views and assumptions and involve known and unknown risks that could cause
actual results, performance or events to differ materially from those
expressed or implied by those statements. These risks include but are not
limited to risks arising from uncertainties as to future oil and gas prices
and their impact on investment programs by oil and gas companies.
The financial and operational information contained in this press release
is based on unaudited consolidated condensed interim financial statements
presented in U.S. dollars (US$) and prepared in accordance with
International Financial Reporting Standards (IFRS), as issued by the
International Accounting Standard Board (IASB) and adopted by the European
Union.
Consolidated Condensed Interim Income Statement
(all amounts in thousands
of U.S. dollars, unless Three-month period Six-month period ended
otherwise stated) ended June 30, June 30,
====================== ======================
2008 2007 2008 2007
========== ========== ========== ==========
Continuing operations (Unaudited) (Unaudited)
Net sales 3,148,385 2,554,968 5,774,572 4,980,267
Cost of sales (1,842,911) (1,374,318) (3,343,600) (2,665,816)
========== ========== ========== ==========
Gross profit 1,305,474 1,180,650 2,430,972 2,314,451
Selling, general and
administrative expenses (478,076) (399,009) (891,670) (773,276)
Other operating income
(expense), net (3,676) (10,415) (4,667) (12,352)
---------- ---------- ---------- ----------
Operating income 823,722 771,226 1,534,635 1,528,823
Interest income 16,510 20,191 28,779 42,382
Interest expense (35,178) (67,982) (102,270) (125,709)
Other financial results 1,146 15,169 (13,156) 2,126
---------- ---------- ---------- ----------
Income before equity in
earnings of associated
companies and income tax 806,200 738,604 1,447,988 1,447,622
Equity in earnings of
associated companies 48,102 29,398 98,096 55,305
---------- ---------- ---------- ----------
Income before income tax 854,302 768,002 1,546,084 1,502,927
Income tax (218,590) (240,683) (427,196) (466,214)
---------- ---------- ---------- ----------
Income for continuing
operations 635,712 527,319 1,118,888 1,036,713
Discontinued operations
Income for discontinued
operations 394,323 7,167 411,110 7,167
---------- ---------- ---------- ----------
Income for the period 1,030,035 534,486 1,529,998 1,043,880
Attributable to:
Equity holders of the
Company 987,471 495,950 1,460,514 976,254
Minority interest 42,564 38,536 69,484 67,626
---------- ---------- ---------- ----------
1,030,035 534,486 1,529,998 1,043,880
---------- ---------- ---------- ----------
Consolidated Condensed Interim Balance Sheet
(all amounts in thousands of
U.S. dollars) At June 30, 2008 At December 31, 2007
===================== =====================
(Unaudited)
ASSETS
Non-current assets
Property, plant and equipment,
net 3,423,072 3,269,007
Intangible assets, net 4,427,486 4,542,352
Investments in associated
companies 614,006 509,354
Other investments 36,215 35,503
Deferred tax assets 323,094 310,590
Receivables 65,841 8,889,714 63,738 8,730,544
========== ========== ========== ==========
Current assets
Inventories 2,991,850 2,598,856
Receivables and prepayments 227,667 222,410
Current tax assets 188,553 242,757
Trade receivables 2,182,535 1,748,833
Other investments 351,931 87,530
Cash and cash equivalents 1,337,838 7,280,374 962,497 5,862,883
========== ========== ========== ==========
Current and non current assets
held for sale - 651,160
========== ==========
7,280,374 6,514,043
Total assets 16,170,088 15,244,587
EQUITY
Capital and reserves
attributable to the CompanyÂ’s
equity holders 8,324,767 7,006,277
Minority interest 577,061 523,573
---------- ----------
Total equity 8,901,828 7,529,850
LIABILITIES
Non-current liabilities
Borrowings 1,589,712 2,869,466
Deferred tax liabilities 1,150,807 1,233,836
Other tax liabilities 8,566 -
Other liabilities 198,498 185,410
Provisions 100,674 97,912
Trade payables 800 3,049,057 47 4,386,671
---------- ---------- ---------- ----------
Current liabilities
Borrowings 1,544,755 1,150,779
Current tax liabilities 813,402 341,028
Other liabilities 315,647 252,204
Provisions 31,823 19,342
Customer advances 418,361 449,829
Trade payables 1,095,215 4,219,203 847,842 3,061,024
---------- ---------- ---------- ----------
Liabilities associated with
current and non-current
assets held for sale - 267,042
---------- ----------
4,219,203 3,328,066
Total liabilities 7,268,260 7,714,737
Total equity and liabilities 16,170,088 15,244,587
Consolidated Condensed Interim Cash Flow Statement
Three-month period Six-month period ended
ended June 30, June 30,
(all amounts in thousands
of U.S. dollars) 2008 2007 2008 2007
========== ========== ========== ==========
(Unaudited) (Unaudited)
Cash flows from operating
activities
Income for the period 1,030,035 534,486 1,529,998 1,043,880
Adjustments for:
Depreciation and
amortization 134,390 130,284 268,873 230,771
Income tax accruals less
payments (17,791) (375,170) 89,747 (249,793)
Equity in earnings of
associated companies (48,102) (29,398) (98,096) (55,305)
Income from the sale of the
pressure control business (394,323) - (394,323) -
Interest accruals less
payments, net (62,202) (40,564) (7,894) 4,865
Changes in provisions 7,747 3,750 15,243 (3,480)
Changes in working capital (326,894) (34,846) (545,614) (125,365)
Other, including currency
translation adjustment (48,874) 22,560 (15,017) 53,803
========== ========== ========== ==========
Net cash provided by
operating activities 273,986 211,102 842,917 899,376
========== ========== ========== ==========
Cash flows from investing
activities
Capital expenditures (116,911) (109,237) (205,366) (229,149)
Acquisitions of
subsidiaries and minority
interest (839) (1,925,432) (1,865) (1,927,182)
Other disbursements
relating to the
acquisition of Hydril - (71,580) - (71,580)
Proceeds from the sale of
the pressure control
business 1,113,805 - 1,113,805 -
Decrease in subsidiaries - - - (1,195)
Proceeds from disposal of
property, plant and
equipment and intangible
assets 3,819 1,903 8,826 4,596
Dividends received 13,636 11,496 13,636 11,496
Investments in short term
securities (216,483) 19,277 (264,401) 14,193
Other - - (3,428) -
========== ========== ========== ==========
Net cash provided by /
(used in) investing
activities 797,027 (2,073,573) 661,207 (2,198,821)
---------- ---------- ---------- ----------
Cash flows from financing
activities
Dividends paid (295,134) (354,161) (295,134) (354,161)
Dividends paid to minority
interest in subsidiaries (55,136) (36,563) (55,136) (39,922)
Proceeds from borrowings 299,701 2,159,852 430,088 2,208,026
Repayments of borrowings (842,478) (657,814) (1,332,755) (1,018,713)
---------- ---------- ---------- ----------
Net cash (used in) /
provided by financing
activities (893,047) 1,111,314 (1,252,937) 795,230
---------- ---------- ---------- ----------
Increase / (decrease) in
cash and cash equivalents 177,966 (751,157) 251,187 (504,215)
Movement in cash and cash
equivalents
At the beginning of the
period 1,072,985 1,614,686 954,303 1,365,008
Effect of exchange rate
changes 68,098 19,513 113,559 22,249
Increase / (decrease) in
cash and cash equivalents 177,966 (751,157) 251,187 (504,215)
At June 30, 1,319,049 883,042 1,319,049 883,042
Cash and cash equivalents At June 30, At June 30,
2008 2007 2008 2007
Cash and bank deposits 1,337,838 891,159 1,337,838 891,159
Bank overdrafts (18,789) (8,096) (18,789) (8,096)
Restricted bank deposits - (21) - (21)
1,319,049 883,042 1,319,049 883,042
Non-cash financing activity
Conversion of debt to
equity in subsidiaries - 35,140 - 35,140
| Contact: Nigel Worsnop Tenaris 1-888-300-5432 www.tenaris.com |
|
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