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 May 3, 2006
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 X
--- ---
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 2006 First Quarter Results.
Tenaris Announces 2006 First Quarter Results
LUXEMBOURG--(BUSINESS WIRE)--May 2, 2006--The financial and
operational information contained in this press release is based on
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 first quarter ended March 31, 2006
with comparison to its results for the first quarter ended March 31,
2005.
Summary of 2006 First Quarter Results
(Comparison with fourth quarter of 2005 and first quarter of 2005)
Q1 2006 Q4 2005 Q1 2005
Net sales (US$ million) 1,783.2 1,898.6 (6%) 1,452.9 23%
Operating income (US$ million) 600.9 576.9 4% 405.7 48%
Net income (US$ million)(1) 441.7 414.8 6% 280.0 58%
Shareholders' net income (US$
million) 419.7 381.0 10% 264.2 59%
Earnings per ADS (US$)(2) 0.71 0.65 10% 0.45 59%
Earnings per share (US$) 0.36 0.32 10% 0.22 59%
EBITDA (US$ million) 655.6 634.5 3% 457.7 43%
EBITDA margin (% of net sales) 37% 33% 31%
(1) 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.
(2) As of April 26, 2006, the ratio of ADSs to ordinary shares was
changed from 1:10 to 1:2. Earnings per ADS are stated using the
new ratio.
Earnings per share, operating income and margins continue to grow
due to the strength of global demand for our seamless OCTG products
from the oil and gas industry. Demand remains particularly strong in
the Middle East and Africa region, where drilling activity in Saudi
Arabia has been growing rapidly in response to increased investment in
exploration and production. Net sales during this first quarter were
affected, however, by lower sales of welded pipes for gas transmission
projects in Brazil, where important projects have been put on hold.
Free cash flow (net cash provided by operations less capital
expenditures) was US$474.6 million and the company became net cash
positive during the quarter.
Market Background and Outlook
Oil and gas companies are continuing to increase their exploration
and production spending in response to sustained high oil and gas
prices and projected increases in global demand for oil and gas. This
is resulting in increased drilling activity and demand for seamless
OCTG products. The international count of active drilling rigs, as
published by Baker Hughes excluding, for comparative purposes, the rig
count in Iran and Sudan, averaged 896 during the first quarter of
2006, an increase of 10% compared to the same quarter of the previous
year and an increase of 3% compared to the fourth quarter of 2005. The
corresponding percentage year on year quarterly rig count increases in
the Canadian and U.S. markets, which are more sensitive to natural gas
prices, were 28% and 19% respectively.
Favorable market conditions and the demand for high-end seamless
pipe products are helping us to register sales growth and improved
gross margins for our seamless pipe products. We expect that the
continuation of favorable market conditions and strong demand for our
high-end seamless pipe products will allow us to maintain our
operating margins at around the levels recorded this quarter.
Demand for our welded pipe products, however, is being affected by
delays to gas pipeline projects in Brazil and Argentina. We expect
that some of these projects will go ahead later this year and that we
will be able to increase exports but that sales and margins on welded
pipes will be lower in 2006 than in 2005.
Analysis of 2006 First Quarter Results
(metric tons)
Sales volume Q1 2006 Q1 2005 Increase/(Decrease)
North America 202,000 220,000 (8%)
Europe 184,000 179,000 3%
Middle East & Africa 149,000 101,000 48%
Far East & Oceania 82,000 101,000 (19%)
South America 98,000 101,000 (3%)
Total seamless pipes 714,000 703,000 2%
Welded pipes 65,000 109,000 (40%)
Total steel pipes 779,000 812,000 (4%)
Sales volume of seamless pipes increased by 2% to 714,000 tons in
the first quarter of 2006 from 703,000 tons in the same period of
2005. Sales volume increased significantly in the Middle East and
Africa region reflecting a substantial increase in oil and gas
drilling activity and investment in the development of new fields in
the region led by Saudi Arabia but extending through much of the
Middle East and North Africa. Sales volume declined significantly in
the Far East and Oceania, reflecting reduced sales to industrial
customers. Sales in North America declined reflecting lower drilling
activity in Mexico and lower sales to industrial customers.
Sales volumes of welded pipes decreased by 40% to 65,000 tons in
the first quarter of 2006 from 109,000 tons in the same period of
2005. The decrease in sales was due to substantially reduced demand
for welded pipes for gas pipeline projects in Brazil following the
implementation of several projects in 2005 and delays in the
implementation of projects originally projected for this year.
(US$ million)
Net sales Q1 2006 Q1 2005 Increase/(Decrease)
Seamless pipes 1,441.0 1,105.3 30%
Welded pipes 114.6 160.4 (29%)
Energy 161.6 144.0 12%
Others 66.0 43.3 52%
Total 1,783.2 1,452.9 23%
Net sales in the quarter ended March 31, 2006 increased 23% to
US$1,783.2 million, compared to US$1,452.9 million in the
corresponding quarter of 2005. Net sales of seamless pipes rose by
30%, due primarily to significantly higher sales of high-end products
and higher selling prices for all of our products. Net sales of welded
pipes, which included US$11 million in sales of metal structures made
by our Brazilian welded pipe subsidiary in the first quarter of 2006
and US$17 million of such sales in the first quarter of 2005, fell by
29% due primarily to the decline in sales volume. Net sales of energy
rose by 12% due to higher Italian gas and electric energy prices. Net
sales of other goods and services increased 52% due to higher sales of
pre-reduced hot briquetted iron from our plant in Venezuela.
(percentage of net sales)
Cost of sales Q1 2006 Q1 2005
Seamless pipes 48% 54%
Welded pipes 66% 63%
Energy 97% 95%
Others 71% 57%
Total 55% 60%
Cost of sales, expressed as a percentage of net sales, decreased
to 55% in the first quarter of 2006, compared to 60% in the same
period of 2005 reflecting higher gross margins on our sales of
seamless pipe products and a higher proportion of seamless pipe sales
in total sales. Cost of sales for seamless pipe products, expressed as
a percentage of net sales, decreased to 48% in the first quarter of
2006 compared to 54% in the same period of 2005 principally reflecting
a higher proportion of higher-margin, high-end products in the product
mix.
Selling, general and administrative expenses, or SG&A, declined as
a percentage of net sales to 12.2% in the quarter ended March 31, 2006
compared to 12.7% in the corresponding quarter of 2005.
Net financial income was US$10.6 million in the first quarter of
2006, compared to a net financial expense of US$41.8 million in the
same period of 2005. Interest income exceeded interest expenses by
US$0.6 million in the first quarter of 2006 compared to a net interest
expense of US$9.5 million in the same period of 2005, reflecting
changes in the net debt position. A gain of US$8.8 million on net
foreign exchange transactions and the fair value of derivative
instruments was recorded in the first quarter of 2006, compared to a
loss of US$33.9 million during the first quarter of 2005. These gains
and losses on net foreign exchange transactions and the fair value of
derivative instruments are to a large extent offset by changes to our
net equity position and arise due to the fact that most of our
subsidiaries prepare their financial statements in currencies other
than the US dollar in accordance with IFRS.
Equity in earnings of associated companies generated a gain of
US$21.5 million in the first quarter of 2006, compared to a gain of
US$30.2 million in the first quarter of 2005. The gain in the first
quarter of 2006 was derived mainly from our 11.5% equity shareholding
in Ternium and the gain in the first quarter of 2005 was derived
mainly from our prior investment in Sidor.
Income tax charges totalled US$191.3 million in the first quarter
of 2006, equivalent to 31% of income before equity in earnings of
associated companies and income tax.
Income attributable to minority interest rose to US$22.0 million
in the first quarter of 2006, compared to US$15.7 million in the
corresponding quarter of 2005 reflecting an improvement in operating
and financial results at our NKKTubes subsidiary, which was partially
offset by weaker operating and financial results at our Confab
subsidiary.
Cash Flow and Liquidity
Net cash provided by operations during the first quarter of 2006
was US$544.1 million. Working capital increased by US$24.3 million
during the first quarter as a US$115.5 million increase in inventories
was largely offset by a reduction in trade receivables (US$34.4
million) and an increase in trade payables (US$58.0 million).
Capital expenditures increased to US$69.5 million for the first
quarter of 2006 compared to US$47.3 million in the first quarter of
2005. Capital expenditures in the remaining quarters of the year are
expected to be higher as we implement our investment program to
increase capacity for high-end products.
During the first quarter of 2006, Tenaris became net cash positive
with a net cash position (cash and cash equivalents and other current
investments less borrowings) of US$239.7 million at March 31, 2006
compared to net debt of US$183.0 million at December 31, 2005. Total
financial debt decreased by US$41.5 million to US$968.8 million at
March 31, 2006 from US$1,010.3 million at December 31, 2005.
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 condensed interim income statement
Three-month period ended
March 31,
(all amounts in thousands of U.S. dollars) 2006 2005
(Unaudited)
Net sales 1,783,152 1,452,927
Cost of sales (972,492) (865,128)
----------- ----------
Gross profit 810,660 587,799
Selling, general and administrative
expenses (217,884) (185,083)
Other operating income (expenses), net 8,130 2,967
----------- ----------
Operating income 600,906 405,683
Financial income (expenses), net 10,596 (41,807)
----------- ----------
Income before equity in earnings of
associated companies and income tax 611,502 363,876
Equity in earnings of associated companies 21,521 30,163
----------- ----------
Income before income tax 633,023 394,039
Income tax (191,333) (114,069)
----------- ----------
Income for the period 441,690 279,970
----------- ----------
Attributable to:
Equity holders of the Company 419,688 264,234
Minority interest 22,002 15,736
----------- ----------
441,690 279,970
----------- ----------
Consolidated condensed interim balance sheet
At March 31, 2006 At December 31, 2005
(all amounts in thousands (Unaudited)
of U.S. dollars)
ASSETS
Non-current assets
Property, plant and
equipment, net 2,275,130 2,230,038
Intangible assets, net 159,747 159,099
Investments in
associated companies 341,446 257,234
Other investments 25,579 25,647
Deferred tax assets 212,087 194,874
Receivables 32,276 3,046,265 65,852 2,932,744
---------- ----------
Current assets
Inventories 1,491,632 1,376,113
Receivables and
prepayments 155,661 143,282
Current tax assets 121,138 102,455
Trade receivables 1,289,780 1,324,171
Other investments 297,557 119,907
Cash and cash
equivalents 910,991 4,266,759 707,356 3,773,284
---------- ---------- ---------- ----------
Total assets 7,313,024 6,706,028
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
Currency translation
adjustments (54,818) (59,743)
Other reserves 30,801 2,718
Retained earnings 2,076,191 3,960,498 1,656,503 3,507,802
---------- ----------
Minority interest 295,470 268,071
---------- ----------
Total equity 4,255,968 3,775,873
---------- ----------
LIABILITIES
Non-current liabilities
Borrowings 639,129 678,112
Deferred tax liabilities 359,371 353,395
Other liabilities 157,492 154,378
Provisions 45,074 43,964
Trade payables 707 1,201,773 1,205 1,231,054
-------- --------
Current liabilities
Borrowings 329,703 332,180
Current tax liabilities 517,216 452,534
Other liabilities 159,190 138,875
Provisions 36,566 36,945
Customers advances 129,291 113,243
Trade payables 683,317 1,855,283 625,324 1,699,101
-------- ---------- -------- ----------
Total liabilities 3,057,056 2,930,155
Total equity and liabilities 7,313,024 6,706,028
Consolidated condensed interim cash flow statement
Three-month period
ended March 31,
(Unaudited)
(all amounts in thousands of U.S. dollars) 2006 2005
Cash flows from operating activities
Income for the period 441,690 279,970
Adjustments for:
Depreciation and amortization 54,675 51,977
Income tax accruals less payments 83,458 37,478
Equity in earnings of associated companies (21,521) (30,163)
Interest accruals less payments, net 5,292 2,344
Income from disposal of investment (6,933) -
Changes in provisions 731 (4,285)
Proceeding from Fintecna arbitration award net
of BHP settlement - 66,594
Changes in working capital (24,257) (209,878)
Currency translation adjustment and others 10,947 (11,344)
--------- ---------
Net cash provided by operating activities 544,082 182,693
--------- ---------
Cash flows from investing activities
Capital expenditures (69,529) (47,316)
Acquisitions of subsidiaries (29,809) (38)
Proceeds from disposal of property, plant and
equipment and intangible assets 1,820 1,442
Dividends and distributions received from
associated companies - 19,520
Changes in restricted bank deposits 648 (27,680)
Reimbursement from trust funds - 119,666
Investments in short terms securities (177,650) -
--------- ---------
Net cash (used in) provided by investing
activities (274,520) 65,594
Cash flows from financing activities
Dividends paid to minority interest in
subsidiaries (7,581) -
Proceeds from borrowings 101,085 398,269
Repayments of borrowings (146,447) (516,422)
--------- ---------
Net cash (used in) provided by financing
activities (52,943) (118,153)
--------- ---------
Increase in cash and cash equivalents 216,619 130,134
Movement in cash and cash equivalents
At the beginning of the period 672,437 293,824
Effect of exchange rate changes (1,834) (298)
Increase in cash and cash equivalents 216,619 130,134
At March 31, 887,222 423,660
At March 31,
Cash and cash equivalents 2006 2005
Cash and bank deposits 910,991 477,106
Bank overdrafts (22,369) (12,266)
Restricted bank deposits (1,400) (41,180)
887,222 423,660
CONTACT: Tenaris
Nigel Worsnop, 1-888-300-5432
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: May 3, 2006
Tenaris, S.A.
By: /s/ Cecilia Bilesio
-----------------------
Cecilia Bilesio
Corporate Secretary