LUXEMBOURG -- (Marketwire) -- 04/26/12 -- Tenaris S.A. (NYSE: TS) (BAE: TS) (BVM: TS) (MILAN: TEN) ("Tenaris") today announced its results for the quarter ended March 31, 2012 in comparison with its results for the quarter ended March 31, 2011.
Summary of 2012 First Quarter Results
(Comparison with fourth and first quarters of 2011)
Q1 2012 Q4 2011 Q1 2011
Net sales (US$ million) 2,617.3 2,750.6 (5%) 2,324.0 13%
Operating income (1) (US$ million) 566.2 538.0 5% 428.6 32%
Net income (US$ million) 453.4 426.3 6% 324.2 40%
Shareholders' net income (US$ million) 443.8 399.6 11% 319.4 39%
Earnings per ADS (US$) 0.75 0.68 11% 0.54 39%
Earnings per share (US$) 0.38 0.34 11% 0.27 39%
EBITDA (1) (US$ million) 704.4 691.9 2% 558.0 26%
EBITDA margin (% of net sales) 27% 25% 24%
(1) Effective January 1, 2012, we recorded the Mexican employee statutory profit sharing provision (US$14.1 million in IQ 2012), under labor costs instead of recording it in the income tax line. Comparative amounts have been reclassified to conform to changes in presentation in the current period (lower operating income offset by lower income tax amounting to US$17.7 million in IVQ 2011 and US$12.9 million in IQ2011).
Our first quarter sales decreased 5% sequentially as sales were impacted by lower line pipe shipments for HPI and pipeline projects and we had lower OCTG shipments in Colombia and Saudi Arabia. However, our EBITDA and operating margins continued to improve reflecting lower raw material costs and plant allocation efficiencies. Operating income rose 5% sequentially and earnings per share rose 11% sequentially and 39% year on year.
Cash provided by operating activities reached US$605 million during the quarter and, after investing US$505 million in Usiminas and US$196 million in capital expenditures, our net cash position (cash and other current investments less total borrowings) decreased by US$65 million ending the quarter at US$259 million.
Change in Functional Currency of Mexican, Canadian and Japanese Subsidiaries
Starting January 1, 2012, the Company changed the functional currency of its Mexican, Canadian and Japanese subsidiaries, from their respective local currencies to the U.S. dollar. From that date forward, the results of these subsidiaries have been and will be measured in U.S. dollars.
Market Background and Outlook
Global demand for energy, in spite of the difficult economic situation in Europe and unusually warm winter in the USA, continues to rise and energy companies are increasing their investments in exploration and production activity. Demand for tubular products for complex applications is growing at a faster pace than that for standard applications as investments are taking place in more difficult operating environments.
Drilling activity is expected to remain stable this year in North America, as higher oil drilling offsets lower gas drilling. In the rest of the world, it is expected to increase supported by current oil and gas prices and led by growth in the development of deepwater and unconventional reserves as well as complex conventional gas drilling.
Sales to oil and gas customers, particularly of premium products, are expected to increase during the year but sales to HPI, power generation and industrial customers in Europe will continue to be affected by weak economic activity.
Average selling prices may increase due to product mix improvements but operating margins are expected to remain close to current levels during the rest of 2012.
Sales and operating income are expected to continue to show strong year on year growth during the remainder of the year.
Analysis of 2012 First Quarter Results
Sales volume (metric tons) Q1 2012 Q4 2011 Q1 2011
Tubes - Seamless 664,000 709,000 (6%) 621,000 7%
Tubes - Welded 251,000 234,000 7% 233,000 8%
Tubes - Total 915,000 943,000 (3%) 854,000 7%
Projects - Welded 43,000 71,000 (39%) 75,000 (43%)
Total 958,000 1,014,000 (6%) 929,000 3%
Tubes Q1 2012 Q4 2011 Q1 2011
(Net sales - $ million)
North America 1,289.2 1,174.0 10% 978.5 32%
South America 323.2 360.1 (10%) 318.2 2%
Europe 263.1 268.0 (2%) 243.8 8%
Middle East & Africa 284.8 389.1 (27%) 297.8 (4%)
Far East & Oceania 128.5 174.7 (26%) 129.0 (0%)
Total net sales ($ million) 2,288.7 2,365.9 (3%) 1,967.3 16%
Cost of sales (% of sales) 60% 62% 61%
Operating income ($ million) 508.6 477.8 6% 359.2 42%
Operating income (% of sales) 22% 20% 18%
Net sales of tubular products and services decreased 3% sequentially but increased 16% year on year. In North America, sales rose sequentially in Canada and the United States. In South America, sales decreased sequentially due principally to lower OCTG shipments in Colombia where activity has been affected by rig movements and contract discussions. In Europe, sales remained flat as demand from distributors for industrial and line pipe products continues to be weak due to low economic activity. In the Middle East & Africa, sales decreased sequentially mainly due to lower OCTG sales to Saudi Arabia and lower sales to HPI projects.