FORM 6 - K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
As of August 5, 2005
TENARIS, S.A.
(Translation of Registrant's name into English)
TENARIS, S.A.
46a, Avenue John F. Kennedy
L-1855 Luxembourg
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or 40-F.
Form 20-F X Form 40-F
---- ----
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12G3-2(b) under the Securities Exchange Act of
1934.
Yes No
---- -----
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-__.
The attached material is being furnished to the Securities and Exchange
Commission pursuant to Rule 13a-16 and Form 6-K under the Securities Exchange
Act of 1934, as amended. This report contains Tenaris's press release announcing
its results for the second quarter of 2005.
Tenaris Announces 2005 Second Quarter Results
LUXEMBOURG--(BUSINESS WIRE)--Aug. 4, 2005--Tenaris S.A. (NYSE:TS)
(BCBA:TS) (BMV:TS) (BI:TEN)
-- The financial and operational information contained in this
press release is based on unaudited consolidated condensed
interim financial statements prepared in accordance with
International Financial Reporting Standards (IFRS) and
presented in U.S. dollars.
Tenaris S.A. (NYSE:TS) (BCBA:TS) (BMV:TS) (BI:TEN) ("Tenaris")
today announced its results for the quarter ended June 30, 2005 with
comparison to its results for the quarter ended June 30, 2004.
Summary of 2005 Second Quarter Results
Q2 2005 Q2 2004 Increase/(Decrease)
-------- -------- -------------------
Net sales (US$ million) 1,744.3 996.8 75%
Operating income (US$ million) 490.6 153.7 219%
Net income (US$ million)(a) 341.6 129.0 165%
Shareholders' net income
(US$ million) 313.5 127.3 146%
Earnings per ADS (US$) 2.65 1.08 146%
Earnings per share (US$) 0.265 0.108 146%
Avg. number of shares (million) 1,180.5 1,180.5
EBITDA(b) (US$ million) 542.4 201.7 169%
EBITDA margin (% of net sales) 31% 20%
(a) As required by IAS 1 (revised) as from January 1, 2005, the income
for the period disclosed in the income statement does not show
minority interest. Earnings per share continue to be calculated on
the net income attributable solely to the equity holders of
Tenaris.
(b) EBITDA equals operating income plus depreciation and amortization
charges.
These second quarter results reflect the strong positioning we
have established as the leading supplier of seamless pipe products to
the global energy industry and the current positive fundamentals for
investment in oil and gas exploration and production. Net sales
increased 20% sequentially over the result posted in the first
quarter, due to an 11% increase in average selling prices for our
seamless pipes and higher sales volumes of both seamless and welded
pipes. Consolidated EBITDA and operating margins were maintained at
the levels of the first quarter in spite of significant cost increases
in our seamless business. Free cash flow (net cash provided by
operations less capital expenditures) was a positive US$178.7 million
but net debt increased by US$65.2 million to US$713.9 million
following the payment of a dividend of US$199.5 million to
shareholders and the payment of approximately US$70 million (equity
plus debt) for the acquisition of a steel mill in Romania.
Market Background and Outlook
Global demand for seamless pipes continues to increase led by
higher drilling activity in the oil and gas industry. The
international count of active drilling rigs, as published by Baker
Hughes, averaged 916 during the second quarter of 2005, an increase of
9% compared to the same quarter of the previous year, with significant
increases shown in Venezuela and the Middle East. The increase over
the first quarter of 2005 was 5%.
Strong demand for our products, particularly the high-end pipes in
which we increasingly specialize, helped our average selling price for
seamless pipe products to record a further increase over the level
recorded in the first quarter of 2005. We expect overall market
conditions to remain favorable for the rest of the year.
After the substantial increases in most of our steelmaking raw
material costs in the second half of 2003 and in 2004, international
prices for scrap steel, DRI and pig iron declined over the past few
months though more recent increases suggest this downward trend may
have run its course. On the other hand, many of our other costs, such
as iron ore, energy and labor have been increasing. Lower
international scrap and pig iron costs, if sustained, should help to
offset any further increase in the costs of these other inputs during
the second half.
Demand for our welded pipe products is benefiting from gas
pipeline projects in Brazil, where there are a number of gas pipeline
projects under development as Petrobras seeks to build up the
country's gas pipeline infrastructure, and in Argentina, where there
are projects to increase capacity in and extend the existing gas
pipeline infrastructure in order to meet growing gas consumption. We
currently expect sales of our welded pipe products in the second half
of 2005 to remain near the level of the first half.
Assuming no major change in current conditions, we expect to
maintain our operating margins, while our seamless sales volumes could
be lower in the second half due to the effect of seasonal factors in
the third quarter.
Analysis of 2005 Second Quarter Results
(metric tons)
Sales volume Q2 2005 Q2 2004 Increase/(Decrease)
- -------------------- -------- -------- -------------------
North America 233,000 194,000 20%
Europe 165,000 170,000 (3%)
Middle East & Africa 127,000 125,000 2%
Far East & Oceania 99,000 103,000 (4%)
South America 124,000 92,000 35%
Total seamless pipes 747,000 683,000 9%
Welded pipes 158,000 85,000 86%
Total steel pipes 905,000 769,000 18%
Sales volume of seamless pipes increased by 9% to 747,000 tons in
the second quarter of 2005 from 683,000 tons in the same period of
2004. This includes 28,000 tons produced by Silcotub. Sales volumes
showed notable increases in North America, where there were higher
sales of OCTG produced at our Canadian mill, higher sales to process
and power plant customers in the USA and increased demand from Pemex
in Mexico, and in South America, where there was higher drilling
activity in Venezuela and higher sales in Argentina. Sales in Europe
declined reflecting industrial weakness in Italy and lower sales to
process and power plant customers and North Sea pipeline projects.
Sales volumes of welded pipes increased by 86% to 158,000 tons in
the second quarter of 2005 from 85,000 tons in the same period of
2004. The increase in sales was due to a strong recovery in demand for
welded pipes for gas pipeline projects in Brazil and Argentina.
(US$ million)
Net sales Q2 2005 Q2 2004 Increase/(Decrease)
- -------------- -------- ------- -------------------
Seamless pipes 1,307.9 797.9 64%
Welded pipes 255.4 89.8 184%
Energy 112.2 92.8 21%
Others 68.8 16.3 322%
Total 1,744.3 996.8 75%
Net sales in the quarter ended June 30, 2005 increased 75% to
US$1,744.3 million, compared to US$996.8 million in the corresponding
quarter of 2004. Net sales of seamless pipes rose by 64%, due to
higher average selling prices and higher sales volumes. Net sales of
welded pipes, which included US$12 million in sales of metal
structures made by our Brazilian welded pipe subsidiary in the second
quarter of 2005 and US$16 million of such sales in the second quarter
of 2004, rose by 184% due to higher sales volume and higher selling
prices. Net sales of energy rose by 21% due to higher sales of natural
gas and a higher average value of the Euro against the U.S. dollar.
Net sales of other goods and services increased 322% due to sales of
pre-reduced hot briquetted iron from the plant in Venezuela that we
acquired in July 2004 and higher sales of sucker rods used in oil
extraction.
(percentage of net sales)
Cost of sales Q2 2005 Q2 2004
- -------------- ------- -------
Seamless pipes 55% 65%
Welded pipes 67% 70%
Energy 99% 97%
Others 61% 54%
Total 60% 68%
Cost of sales, expressed as a percentage of net sales, decreased
to 60% in the second quarter of 2005, compared to 68% in the same
period of 2004 due to a higher gross margin on our sales of seamless
pipe products. Cost of sales for seamless pipe products, expressed as
a percentage of net sales, decreased to 55% in the second quarter of
2005 compared to 65% in the same period of 2004 as higher average
selling prices offset increased raw material costs. Cost of sales for
welded pipe products, expressed as a percentage of net sales,
decreased to 67% in the second quarter of 2005 compared to 70% in the
same quarter of 2004 as higher average selling prices and
volume-related efficiencies offset increased raw material prices.
Selling, general and administrative expenses, or SG&A, declined as
a percentage of net sales to 12.2% in the quarter ended June 30, 2005
compared to 16.8% in the corresponding quarter of 2004 but rose in
absolute terms to US$212.5 million compared to US$167.5 million.
Net financial expenses rose to US$42.6 million in the second
quarter of 2005, compared to net financial expenses of US$3.9 million
in the same period of 2004. Net interest expenses increased to US$11.5
million compared to US$6.7 million, reflecting increases in interest
rates and higher interest costs associated with a higher proportion of
long-term debt as a percentage of total debt. Tenaris recorded a loss
of US$32.7 million on net foreign exchange transactions and the fair
value of derivative instruments in the second quarter of 2005,
compared to a gain of US$2.5 million in the corresponding quarter of
2004. A net loss of US$18.4 million was recorded on the fair value of
derivatives due principally to the effect on the application of our
currency hedging policy of the depreciation of the Japanese Yen and
the Euro and appreciation of the Brazilian real against the U.S.
dollar. Net foreign exchange transaction losses totaled US$14.3
million primarily from intercompany transactions that are not
eliminated in consolidation in accordance with applicable IFRS and
which are partially offset by changes in our net equity position.
These included losses due to the effect of the appreciation of the
Mexican peso on a positive U.S. dollar position at our Mexican
subsidiaries, and to the effect of the depreciation of the Euro on a
negative U.S. dollar position at our Euro-zone subsidiaries.
Equity in earnings of associated companies generated a gain of
US$38.3 million in the second quarter of 2005, compared to a gain of
US$40.1 million in the second quarter of 2004. These gains were
incurred mainly in respect of our equity investment in Sidor.
Income tax charges rose to US$144.6 million in the second quarter
of 2005, equivalent to 32% of income before equity in earnings of
associated companies and income tax, compared to US$60.9 million, or
41% of income before equity in earnings of associated companies and
income tax, in the corresponding quarter of 2004.
Income attributable to minority interest rose to US$28.2 million
in the second quarter of 2005, compared to US$1.7 million in the
corresponding quarter of 2004 reflecting an improvement in operating
and financial results at our Confab and NKKTubes subsidiaries.
Cash Flow and Liquidity
Net cash provided by operations during the second quarter of 2005
was US$263.0 million (US$445.7 million during the first half). Working
capital increased by US$124.2 million (US$334.1 million during the
first half), due to a decrease in customer advances of US$80.5 million
and a net increase in trade receivables less trade payables of US$47.1
million. The decrease in customer advances reversed an increase of
similar magnitude in the first quarter and reflects activity in our
welded pipe business. The increase of US$120.2 million in inventories
recorded in the first half occurred mainly in the first quarter.
Net cash used in investment activities during the second quarter
was US$71.9 million. This includes US$84.3 million used for capital
expenditures, US$47.9 million used in acquisitions and US$21.6 million
provided by distributions on our investment in Sidor. A dividend of
US$199.5 million was paid to Tenaris shareholders and a further US$2.7
million was paid by Tenaris subsidiaries to minority interests.
In the year to date, total financial debt has decreased by US$94.8
million to US$1,164.5 million at June 30, 2005 from US$1,259.3 million
at December 31, 2004. Net financial debt decreased by US$114.2 million
to US$713.9 million at June 30, 2005.
Analysis of First Half Results
Results for the six months period ended June 30, 2005 with
comparison to the results for the corresponding period of 2004.
Net income attributable to equity holders in the company during
the first half of 2005 was US$577.7 million, or US$0.489 per share
(US$4.89 per ADS), or 18% of net sales, which compares with net income
attributable to equity holders in the company during the first half of
2004 of US$175.7 million, or US$0.149 per share (US$1.49 per ADS), or
9% of net sales. Operating income was US$896.3 million, or 28% of net
sales, compared to US$256.3 million, or 14% of net sales. Operating
income plus depreciation and amortization was US$1,000.0 million, or
31% of net sales, compared to US$358.1 million, or 19% of net sales.
(metric tons)
Sales volume 1H 2005 1H 2004 Increase/(Decrease)
- -------------------- ---------- ---------- -------------------
North America 453,000 351,000 29%
Europe 344,000 339,000 1%
Middle East & Africa 228,000 207,000 10%
Far East & Oceania 200,000 216,000 (7%)
South America 225,000 188,000 20%
Total seamless pipes 1,450,000 1,301,000 11%
Welded pipes 267,000 155,000 72%
Total steel pipes 1,717,000 1,456,000 18%
(US$ million)
Net sales 1H 2005 1H 2004 Increase/(Decrease)
- -------------- -------- -------- -------------------
Seamless pipes 2,413.1 1,472.5 64%
Welded pipes 415.9 156.2 166%
Energy 256.2 196.7 30%
Others 112.1 30.8 264%
Total 3,197.2 1,856.2 72%
Net sales in the six months ended June 30, 2005 increased 72% to
US$3,197.2 million, compared to US$1,856.2 million in the
corresponding period of 2004. Net sales of seamless pipes rose by 64%
due to higher average selling prices and higher sales volume
reflecting strong market demand. Net sales of welded pipes, which
included US$29 million in sales of metal structures made by our
Brazilian welded pipe subsidiary in the first half of 2005 and US$33
million of such sales in the first half of 2004, increased 166% due to
higher sales volumes reflecting increased demand from gas pipeline
projects in Brazil and Argentina and higher average selling prices.
Net sales of electricity and natural gas by Dalmine Energie increased
by 30% reflecting higher sales of natural gas and the higher average
value of the Euro against the U.S. dollar. Net sales of other goods
and services increased 264% due to sales of pre-reduced hot briquetted
iron from the plant that we acquired in July 2004 and higher sales of
sucker rods used in oil extraction.
(percentage of net sales)
Cost of sales 1H 2005 1H 2004
- -------------- ------- -------
Seamless pipes 55% 66%
Welded pipes 66% 74%
Energy 97% 97%
Others 59% 59%
Total 60% 70%
Cost of sales, expressed as a percentage of net sales, decreased
to 60% in the first half of 2005, compared to 70% in the same period
of 2004 due to higher gross margins on our sale of seamless and welded
pipe products. Cost of sales for seamless pipe products, expressed as
a percentage of net sales, decreased to 55% in the first half of 2005
compared to 66% in the same period of 2004 as higher average selling
prices and volume-related efficiencies offset increased raw material
costs. Cost of sales for welded pipe products, expressed as a
percentage of net sales, decreased to 66% in the first half of 2005,
compared to 74% in the same period of 2004, as higher average selling
prices and volume-related efficiencies offset increased raw material
prices.
Selling, general and administrative expenses, or SG&A, declined as
a percentage of net sales to 12.4 % in the six months ended June 30,
2005 compared to 16.6% in the corresponding period of 2004 but rose in
absolute terms to US$397.6 million compared to US$307.4 million.
Net financial expenses totalled US$84.5 million in the first half
of 2005, compared to net financial expenses of US$19.3 million in the
same period of 2004. Net interest expenses increased to US$21.0
million compared to US$12.3 million, reflecting increases in interest
rates and higher interest costs associated with a higher proportion of
long-term debt as a percentage of total debt. Tenaris recorded a loss
of US$66.6 million on net foreign exchange transactions and the fair
value of derivative instruments in the first half of 2005, compared to
a loss of US$12.7 million in the first half of 2004.
Equity in earnings of associated companies generated a gain of
US$68.4 million in the first half of 2005, compared to a gain of
US$39.7 million in the first half of 2004. These gains were incurred
mainly in respect of our equity investment in Sidor.
Income tax charges of US$258.7 million were recorded during the
first half of 2005, equivalent to 32% of income before equity in
earnings of associated companies and income tax, compared to income
tax provisions of US$100.0 million, equivalent to 42% of income before
equity in earnings of associated companies and income tax, during the
corresponding period of 2004.
Income attributable to minority interest rose to US$43.9 million
in the first half of 2005, compared to US$1.0 million in the first
half of 2004 reflecting an improvement in operating and financial
results at our Confab and NKKTubes subsidiaries.
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 prices and their impact on
investment programs by oil companies.
Consolidated Income Statement
(all amounts in
thousands of U.S.
dollars, unless Three-month period Six-month period
otherwise stated) ended June 30, ended June 30,
--------------------- -----------------------
2005 2004 2005 2004
----------- --------- ----------- -----------
(Unaudited)
Net sales 1,744,311 996,849 3,197,238 1,856,195
Cost of sales (1,043,774) (677,655) (1,908,902) (1,298,112)
----------- --------- ----------- -----------
Gross profit 700,537 319,194 1,288,336 558,083
Selling, general and
administrative
expenses (212,510) (167,547) (397,593) (307,365)
Other operating income
(expense), net 2,602 2,065 5,569 5,565
----------- --------- ----------- -----------
Operating income 490,629 153,712 896,312 256,283
Financial income
(expense), net (42,643) (3,885) (84,450) (19,323)
----------- --------- ----------- -----------
Income before equity in
earnings (losses) of
associated companies
and income tax 447,986 149,827 811,862 236,960
Equity in earnings
(losses) of associated
companies 38,279 40,130 68,442 39,669
----------- --------- ----------- -----------
Income before income
tax 486,265 189,957 880,304 276,629
Income tax (144,645) (60,911) (258,714) (99,980)
----------- --------- ----------- -----------
Income for the
period(c) 341,620 129,046 621,590 176,649
=========== ========= =========== ===========
Attributable to(c):
Equity holders of the
Company 313,456 127,314 577,690 175,682
Minority interest 28,164 1,732 43,900 967
----------- --------- ----------- -----------
341,620 129,046 621,590 176,649
=========== ========= =========== ===========
(c) Prior to December 31, 2004 minority interest was shown in the
income statement before net income, as required by International
Financial Reporting Standards in effect. For periods beginning on
or after January 1, 2005, IAS 1 (revised) requires that income for
the period as shown on the income statement not exclude minority
interest. Earnings per share, however, continue to be calculated
on the basis of net income attributable solely to the equity
holders of the Company.
Consolidated Balance Sheet
(all amounts in thousands
of U.S. dollars) At June 30, 2005 At December 31, 2004
---------------------- --------------------
(Unaudited)
ASSETS
Non-current assets
Property, plant and
equipment, net 2,209,065 2,164,601
Intangible assets, net 161,607 49,211
Investments in
associated companies 224,685 99,451
Other investments 25,225 24,395
Deferred tax assets 171,900 161,173
Receivables 35,317 2,827,799 151,365 2,650,196
---------- ----------
Current assets
Inventories 1,389,631 1,269,470
Receivables and
prepayments 167,647 279,450
Current tax assets 95,911 94,996
Trade receivables 1,258,981 936,931
Other investments 5,000 119,666
Cash and cash
equivalents 450,586 3,367,756 311,579 3,012,092
---------- --------- ---------- ---------
Total assets 6,195,555 5,662,288
EQUITY
Capital and reserves
attributable to the
Company's equity holders
Share capital 1,180,537 1,180,537
Legal reserves 118,054 118,054
Share premium 609,733 609,733
Other distributable
reserve -- 82
Currency translation
adjustments (51,622) (30,020)
Retained earnings 1,106,574 2,963,276 617,538 2,495,924
---------- ----------
Minority interest 217,880 165,271
--------- ---------
Total equity 3,181,156 2,661,195
--------- ---------
LIABILITIES
Non-current liabilities
Borrowings 682,551 420,751
Deferred tax liabilities 362,331 371,975
Other liabilities 164,599 172,442
Provisions 41,469 31,776
Trade payables 3,963 1,254,913 4,303 1,001,247
-------- --------
Current liabilities
Borrowings 481,972 838,591
Current tax liabilities 262,302 222,735
Other liabilities 180,867 194,945
Provisions 30,307 42,636
Customers advances 109,427 108,847
Trade payables 694,611 1,759,486 592,092 1,999,846
-------- --------- -------- ---------
Total liabilities 3,014,399 3,001,093
Total equity
and liabilities 6,195,555 5,662,288
Consolidated Cash Flow Statement
Three-month period Six-month period
ended June 30, ended June 30,
------------------- -------------------
(all amounts in thousands
of U.S. dollars) 2005 2004 2005 2004
--------- --------- --------- ---------
(Unaudited) (Unaudited)
Cash flows from operating
activities
Income for the period 341,620 129,046 621,590 176,649
Adjustments for:
Depreciation and
amortization 51,766 48,005 103,743 101,829
Income tax accruals less
payments (1,722) 18,430 35,756 8,110
Equity in (earnings) losses
of associated companies (38,279) (40,130) (68,442) (39,669)
Interest accruals less
payments, net 3,866 1,442 6,210 2,993
Changes in provisions 1,649 106 (2,636) (962)
Proceeds from Fintecna
arbitration award net
of BHP settlement -- 55,090 66,594 --
Changes in working capital (124,228) (191,130) (334,106) (311,021)
Currency translation
adjustment and others 28,323 (14,250) 16,979 (20,829)
========= ========= ========= =========
Net cash provided by (used
in) operating activities 262,995 6,609 445,688 (82,900)
========= ========= ========= =========
Cash flows from investing
activities
Capital expenditures (84,318) (42,871) (131,634) (82,783)
Capital increase and
acquisitions of subsidiaries
and associated companies (47,892) (379) (47,930) (188)
Cost of disposition of
property, plant and
equipment and intangible
assets 1,448 2,450 2,890 8,969
Dividends and distributions
received from associated
companies 21,598 16,802 41,118 16,802
Changes in restricted bank
deposits 37,314 -- 9,634 --
Reimbursement from trust
funds -- -- 119,666 --
========= ========= ========= =========
Net cash used in investing
activities (71,850) (23,998) (6,256) (57,200)
========= ========= ========= =========
Cash flows from financing
activities
Dividends paid (199,511) (135,053) (199,511) (135,053)
Dividends paid to minority
interest in subsidiaries (2,730) (23) (2,730) (23)
Proceeds from borrowings 247,494 209,405 645,763 341,471
Repayments of borrowings (217,825) (10,053) (734,247) (51,720)
========= ========= ========= =========
Net cash (used in) provided
by financing activities (172,572) 64,276 (290,725) 154,675
========= ========= ========= =========
Increase in cash and cash
equivalents 18,573 46,887 148,707 14,575
Movement in cash and cash
equivalents
At beginning of the period 423,660 205,340 293,824 238,030
Effect of exchange rate
changes (11,949) 3,078 (12,247) 2,700
Increase in cash and cash
equivalents 18,573 46,887 148,707 14,575
At June 30 430,284 255,305 430,284 255,305
Cash and cash equivalents At June 30 At June 30
- ------------------------- ----------------- -----------------
2005 2004 2005 2004
Cash and bank deposits 450,586 268,969 450,586 268,969
Bank overdrafts (16,436) (13,664) (16,436) (13,664)
Restricted bank deposits (3,866) -- (3,866) --
430,284 255,305 430,284 255,305
CONTACT: Tenaris S.A.
Nigel Worsnop, 888-300-5432
www.tenaris.com
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 5, 2005
Tenaris, S.A.
By: /s/ Cecilia Bilesio
- -----------------------
Cecilia Bilesio
Corporate Secretary