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 November 9, 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 third quarter of 2005 and interim dividend.
Tenaris Announces 2005 Third Quarter Results and Interim Dividend
LUXEMBOURG--(BUSINESS WIRE)--Nov. 8, 2005--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 September 30, 2005
with comparison to its results for the quarter ended September 30,
2004.
Summary of 2005 Third Quarter Results
Increase/
Q3 2005 Q3 2004 (Decrease)
--------- --------- ----------
Net sales (US$ million) 1,640.4 1,007.2 63%
Operating income (US$ million) 475.2 201.9 135%
Net income (US$ million)(a) 350.9 148.8 136%
Shareholders' net income (US$ million) 318.9 141.6 125%
Earnings per ADS (US$) 2.70 1.20 125%
Earnings per share (US$) 0.270 0.120 125%
Av. number of shares (million) 1,180.5 1,180.5
EBITDA(b) (US$ million) 528.1 250.4 111%
EBITDA margin (% of net sales) 32% 25%
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 third quarter results reflect the continuing strength in
demand for our tubular products from the global oil and gas industry.
Notwithstanding seasonally lower seamless pipe sales volumes, earnings
per share showed a sequential increase over that recorded in the
second quarter of 2005 and a 125% increase over the same period of
2004. Higher sales volumes in the Middle East and Africa region
reflect the increase in exploration and production activity and our
leading position in the region. Our consolidated EBITDA and operating
margins and our seamless pipe gross margin all increased moderately
over the level of the first two quarters as increases in seamless pipe
selling prices offset the impact of cost increases. Free cash flow
(net cash provided by operations less capital expenditures) was
US$423.5 million and net debt decreased to US$314.0 million.
Payment of Interim Dividend
Tenaris's board of directors approved the payment of an interim
dividend of US$0.127 per share (US$1.27 per ADS), or approximately
US$150 million, on November 16, 2005, with an ex-dividend date of
November 11.
Market Background and Outlook
Global demand for seamless pipes remains strong led by higher
drilling activity in the oil and gas industry. The international count
of active drilling rigs, as published by Baker Hughes, averaged 911
during the third quarter of 2005, an increase of 8% compared to the
same quarter of the previous year. The corresponding percentage rig
count increases in the Canadian and U.S. markets, which are more
sensitive to natural gas prices, were 53% and 16% respectively.
Strong demand for our seamless pipe products from the energy
sector, particularly for the high-end pipes in which we increasingly
specialize, resulted in significant increases in the average selling
price for our seamless pipe products in the first two quarters of the
year and a further increase in this third quarter. This has enabled us
to record strong sales growth and improved operating margins in the
year to date as selling price increases have more than offset the
impact of higher raw material, energy and labor costs. We expect
market conditions, particularly demand for our products and services
from oil and gas customers, to remain favorable in the fourth quarter
and through the first half of 2006, and that any further cost
increases will be offset by higher selling prices.
Demand for our welded pipe products has been benefiting from gas
pipeline projects in Brazil, where there are a number of gas pipeline
projects under development 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. Sales
and operating margins on welded pipes may be affected in the coming
quarters by a slowdown in the implementation of these projects.
Ternium Exchange
On September 9, Tenaris exchanged its 12.6% indirect equity
interest in Sidor and its participation in Ylopa for an equity
interest in Ternium S.A. Ternium is a Luxembourg-registered company,
which was formed to consolidate the Techint Group's holdings in flat
and long steel producers Hylsamex (Mexico), Siderar (Argentina) and
Sidor (Venezuela). On October 27, Usiminas, a Brazilian steel
producer, exchanged its equity interests in Siderar and Sidor for an
equity interest in Ternium. Following this transaction, the equity
interest of Tenaris in Ternium stands at 15.0% and Ternium owns (i)
together with Siderar 99.7% of Hylsamex, (ii) 56% of Siderar and (iii)
together with Hylsamex and Siderar 58.5% of Sidor. In addition,
Tenaris has the right to receive additional shares in Ternium to the
value of US$39.9 million in the event of Ternium making an initial
public offering and certain other events, which amount corresponds to
Tenaris's share of Sidor's excess cash distribution during the second
and third quarters of 2005 and is recorded as a convertible loan.
Tenaris has recorded the value of its equity investment in Ternium at
the carrying value of its prior equity investment in Sidor (US$229.7
million).
Analysis of 2005 Third Quarter Results
(metric tons) Increase/
Sales volume Q3 2005 Q3 2004 (Decrease)
-------------------------------------- --------- --------- ----------
North America 198,000 179,000 11%
Europe 140,000 154,000 (9%)
Middle East & Africa 149,000 113,000 32%
Far East & Oceania 92,000 98,000 (6%)
South America 104,000 93,000 12%
Total seamless pipes 682,000 638,000 7%
Welded pipes 124,000 112,000 11%
Total steel pipes 806,000 750,000 7%
Sales volume of seamless pipes increased by 7% to 682,000 tons in
the third quarter of 2005 from 638,000 tons in the same period of
2004. Sales volume increased significantly in the Middle East and
Africa region where there has been a significant increase in oil and
gas exploration and production activity. Sales volume also increased
in the North and South American regions reflecting higher demand from
oil and gas customers particularly in Canada and Venezuela. Sales
volume decreased in Europe and Far East and Oceania reflecting a
decline in sales to industrial sector customers.
Sales volumes of welded pipes increased by 11% to 124,000 tons in
the third quarter of 2005 from 112,000 tons in the same period of
2004. The increase in sales was due to higher demand for welded pipes
for gas pipeline projects in Brazil.
(US$ million) Increase/
Net sales Q3 2005 Q3 2004 (Decrease)
-------------------------------------- --------- --------- ----------
Seamless pipes 1,253.9 794.3 58%
Welded pipes 221.0 114.2 94%
Energy 106.4 80.6 32%
Others 59.1 18.1 227%
Total 1,640.4 1,007.2 63%
Net sales in the quarter ended September 30, 2005 increased 63% to
US$1,640.4 million, compared to US$1,007.2 million in the
corresponding quarter of 2004. Net sales of seamless pipes rose by
58%, due to higher average selling prices and higher sales volumes.
Net sales of welded pipes, which included US$18 million in sales of
metal structures made by our Brazilian welded pipe subsidiary in the
third quarter of 2005 and US$18 million of such sales in the third
quarter of 2004, rose by 94% due to higher selling prices and sales
volume. Net sales of energy rose by 32% due to higher sales of natural
gas. Net sales of other goods and services increased 227% due to sales
of pre-reduced hot briquetted iron from our plant in Venezuela, which
we acquired in July 2004 and was not in operation during the third
quarter of 2004, and higher sales of sucker rods used in oil
extraction.
(percentage of net sales)
Cost of sales Q3 2005 Q3 2004
------------------------------------------------- --------- ---------
Seamless pipes 53% 60%
Welded pipes 69% 67%
Energy 100% 97%
Others 63% 59%
Total 59% 64%
Cost of sales, expressed as a percentage of net sales, decreased
to 59% in the third quarter of 2005, compared to 64% in the same
period of 2004 reflecting 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 53% in the third
quarter of 2005 compared to 60% in the same period of 2004 as higher
average selling prices offset increased raw material, energy and labor
costs.
Selling, general and administrative expenses, or SG&A, declined as
a percentage of net sales to 12.6% in the quarter ended September 30,
2005 compared to 16.8% in the corresponding quarter of 2004 but rose
in absolute terms to US$205.9 million compared to US$168.9 million.
Net financial expenses rose to US$5.1 million in the third quarter
of 2005, compared to net financial expenses of US$3.1 million in the
same period of 2004. Net interest expenses decreased to US$3.7 million
compared to US$9.7 million, reflecting a lower net debt position.
Equity in earnings of associated companies generated a gain of
US$26.5 million in the third quarter of 2005, compared to a gain of
US$17.3 million in the third quarter of 2004. These gains were derived
mainly from our equity investment in Sidor. On September 9, we
exchanged our equity investment in Sidor for an equity investment in
Ternium. In these third quarter results, we recognized gains derived
from our investment in Sidor as if that investment had been held for
the entire period. Going forward, we will recognize the proportion of
gains or losses corresponding to our equity interest in Ternium.
Income tax charges rose to US$145.7 million in the third quarter
of 2005, equivalent to 31% of income before equity in earnings of
associated companies and income tax, compared to US$67.2 million, or
34% 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$32.0 million
in the third quarter of 2005, compared to US$7.2 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 third quarter of 2005
was US$486.3 million (US$932.0 million during the nine months).
Working capital decreased by US$32.7 million during the third quarter
but has increased by US$301.4 million in the year to date.
Net cash used in capital expenditures during the third quarter was
US$62.8 million.
In the year to date, total financial debt has decreased by
US$232.9 million to US$1,026.4 million at September 30, 2005 from
US$1,259.3 million at December 31, 2004. Net financial debt decreased
by US$514.1 million to US$314.0 million at September 30, 2005 during
the same period.
Analysis of Nine Month Results
Results for the nine months period ended September 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 nine months of 2005 was US$896.6 million, or US$0.760 per
share (US$7.60 per ADS), or 19% of net sales, which compares with net
income attributable to equity holders in the company during the first
nine months of 2004 of US$317.3 million, or US$0.269 per share
(US$2.69 per ADS), or 11% of net sales. Operating income was
US$1,371.5 million, or 28% of net sales, compared to US$458.1 million,
or 16% of net sales. Operating income plus depreciation and
amortization was US$1,528.2 million, or 32% of net sales, compared to
US$608.5 million, or 21% of net sales.
(metric tons) Increase/
Sales volume 9M 2005 9M 2004 (Decrease)
---------------------------------- ----------- ----------- ----------
North America 651,000 531,000 23%
Europe 484,000 493,000 (2%)
Middle East & Africa 378,000 320,000 18%
Far East & Oceania 292,000 315,000 (7%)
South America 328,000 281,000 17%
Total seamless pipes 2,132,000 1,940,000 10%
Welded pipes 392,000 267,000 47%
Total steel pipes 2,523,000 2,206,000 14%
(US$ million) Increase/
Net sales 9M 2005 9M 2004 (Decrease)
-------------------------------------- --------- --------- ----------
Seamless pipes 3,667.0 2,267.1 62%
Welded pipes 636.8 270.4 136%
Energy 362.6 277.3 31%
Others 171.1 48.6 252%
Total 4,837.6 2,863.4 69%
Net sales in the nine months ended September 30, 2005 increased
69% to US$4,837.6 million, compared to US$2,863.4 million in the
corresponding period of 2004. Net sales of seamless pipes rose by 62%
due to higher average selling prices and higher sales volume
reflecting strong market demand. Net sales of welded pipes, which
included US$47 million in sales of metal structures made by our
Brazilian welded pipe subsidiary in the first nine months of 2005 and
US$51 million of such sales in the first nine months of 2004,
increased 136% 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 31% reflecting higher sales of natural gas and
the higher average value of the Euro against the US dollar. Net sales
of other goods and services increased 252% 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 9M 2005 9M 2004
------------------------------------------------- --------- ---------
Seamless pipes 54% 64%
Welded pipes 67% 71%
Energy 98% 97%
Others 61% 59%
Total 59% 68%
Cost of sales, expressed as a percentage of net sales, decreased
to 59% in the first nine months of 2005, compared to 68% 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 54% in the first
nine months of 2005 compared to 64% in the same period of 2004 as
higher average selling prices offset increased raw material, energy
and labor costs. Cost of sales for welded pipe products, expressed as
a percentage of net sales, decreased to 67% in the first nine months
of 2005, compared to 71% 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 12.5% in the nine months ended September
30, 2005 compared to 16.6% in the corresponding period of 2004 but
rose in absolute terms to US$603.5 million compared to US$476.3
million.
Net financial expenses totalled US$89.6 million in the first nine
months of 2005, compared to net financial expenses of US$22.5 million
in the same period of 2004. Net interest expenses increased to US$24.7
million compared to US$22.0 million, reflecting increases in interest
rates. Tenaris recorded a loss of US$70.2 million on net foreign
exchange transactions and the fair value of derivative instruments in
the first nine months of 2005, compared to a loss of US$6.4 million in
the first nine months of 2004.
Equity in earnings of associated companies generated a gain of
US$94.9 million in the first nine months of 2005, compared to a gain
of US$57.0 million in the first nine months of 2004. These gains were
derived mainly from our equity investment in Sidor. During the third
quarter we exchanged our equity investment in Sidor for an equity
investment in Ternium.
Income tax charges of US$404.4 million were recorded during the
first nine months of 2005, equivalent to 32% of income before equity
in earnings of associated companies and income tax, compared to income
tax charges of US$167.2 million, equivalent to 38% 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$75.9 million
in the first nine months of 2005, compared to US$8.2 million in the
first nine months 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 condensed interim income statement
(all amounts in
thousands of U.S.
dollars, unless Three-month period Nine-month period
otherwise stated) ended September 30, ended September 30,
--------------------- -----------------------
2005 2004 2005 2004
---------- ---------- ----------- -----------
(Unaudited)
Net sales 1,640,385 1,007,157 4,837,623 2,863,352
Cost of sales (962,929) (641,293) (2,871,831) (1,939,405)
---------- ---------- ----------- -----------
Gross profit 677,456 365,864 1,965,792 923,947
Selling, general and
administrative
expenses (205,937) (168,922) (603,530) (476,287)
Other operating income
(expense), net 3,696 4,917 9,265 10,482
---------- ---------- ----------- -----------
Operating income 475,215 201,859 1,371,527 458,142
Financial income
(expense), net (5,141) (3,132) (89,591) (22,455)
---------- ---------- ----------- -----------
Income before equity in
earnings (losses) of
associated companies
and income tax 470,074 198,727 1,281,936 435,687
Equity in earnings of
associated companies 26,502 17,300 94,944 56,969
---------- ---------- ----------- -----------
Income before
income tax 496,576 216,027 1,376,880 492,656
Income tax (145,678) (67,204) (404,392) (167,184)
---------- ---------- ----------- -----------
Income for the
period(a) 350,898 148,823 972,488 325,472
========== ========== =========== ===========
Attributable to(a):
Equity holders
of the Company 318,897 141,599 896,587 317,281
Minority interest 32,001 7,224 75,901 8,191
---------- ---------- ----------- -----------
350,898 148,823 972,488 325,472
========== ========== =========== ===========
(1) 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 condensed interim balance sheet
(all amounts in thousands
of U.S. dollars) At September 30, 2005 At December 31, 2004
--------------------- ---------------------
(Unaudited)
ASSETS
Non-current assets
Property, plant and
equipment, net 2,222,228 2,164,601
Intangible assets, net 160,036 49,211
Investments in
associated companies 233,177 99,451
Other investments 25,251 24,395
Deferred tax assets 169,560 161,173
Receivables 75,766 2,886,018 151,365 2,650,196
---------- ----------
Current assets
Inventories 1,445,100 1,269,470
Receivables and
prepayments 160,961 279,450
Current tax assets 112,188 94,996
Trade receivables 1,163,876 936,931
Other investments 144,659 119,666
Cash and cash
equivalents 567,773 3,594,557 311,579 3,012,092
---------- ---------- ---------- ----------
Total assets 6,480,575 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 (47,477) (30,020)
Retained earnings 1,425,471 3,286,318 617,538 2,495,924
---------- ----------
Minority interest 252,354 165,271
---------- ----------
Total equity 3,538,672 2,661,195
---------- ----------
LIABILITIES
Non-current liabilities
Borrowings 642,434 420,751
Deferred tax
liabilities 350,474 371,975
Other liabilities 160,454 172,442
Provisions 45,042 31,776
Trade payables 3,874 1,202,278 4,303 1,001,247
---------- ----------
(all amounts in thousands
of U.S. dollars) At September 30, At December 31,
2005 2004
---------------- ----------------
Current liabilities
Borrowings 383,971 838,591
Current tax liabilities 357,279 222,735
Other liabilities 183,736 194,945
Provisions 28,947 42,636
Customers advances 171,039 108,847
Trade payables 614,653 1,739,625 592,092 1,999,846
---------- ---------- ---------- ----------
Total liabilities 2,941,903 3,001,093
Total equity and
liabilities 6,480,575 5,662,288
Consolidated condensed interim cash flow statement
Three-month period Nine-month period
ended September 30, ended September 30,
--------------------- ----------------------
(all amounts in
thousands of U.S.
dollars) 2005 2004 2005 2004
--------------------------------------------
(Unaudited) (Unaudited)
Cash flows from
operating activities
Income for the period 350,898 148,823 972,488 325,472
Adjustments for:
Depreciation and
amortization 52,911 48,540 156,654 150,369
Income tax accruals
less payments 68,669 27,826 104,425 35,936
Equity in earnings of
associated companies (26,502) (17,300) (94,944) (56,969)
Interest accruals less
payments, net (3,204) 4,137 3,006 7,130
Changes in provisions 2,213 7,972 (423) 7,010
Proceeds from Fintecna
arbitration award net
of BHP settlement -- -- 66,594 --
Changes in working
capital 32,730 (100,907) (301,376) (411,928)
Other, including
currency translation
adjustment 8,570 10,093 25,549 (10,736)
--------- --------- ----------- ---------
Net cash provided by
operating activities 486,285 129,184 931,973 46,284
--------- --------- ----------- ---------
Cash flows from
investing activities
Capital expenditures (62,794) (39,695) (194,428) (122,478)
Capital increase and
acquisitions of
subsidiaries and
associated companies (72) (97,367) (48,002) (97,555)
Convertible loan to
associated companies (39,944) -- (39,944) --
Cost of disposition of
property, plant and
equipment and
intangible assets 2,523 1,323 5,413 10,292
Dividends and
distributions received
from associated
companies 18,009 23,793 59,127 40,595
Changes in restricted
bank deposits 426 -- 10,060 --
Investments in short
term securities (144,659) -- (144,659) --
Reimbursement from trust
funds -- -- 119,666 --
--------- --------- ----------- ---------
Net cash used in
investing activities (226,511) (111,946) (232,767) (169,146)
--------- --------- ----------- ---------
Cash flows from
financing activities
Dividends paid -- -- (199,511) (135,053)
Dividends paid to
minority interest in
subsidiaries (5,194) -- (7,924) (23)
Proceeds from borrowings 130,167 114,721 775,930 456,192
Repayments of borrowings (284,759) (111,343) (1,019,006) (163,063)
--------- --------- ----------- ---------
Net cash (used in)
provided by financing
activities (159,786) 3,378 (450,511) 158,053
--------- ---------- ----------- ---------
Increase in cash and
cash equivalents 99,988 20,616 248,695 35,191
Movement in cash and
cash equivalents
At beginning
of the period 430,284 255,305 293,824 238,030
Effect of exchange
rate changes 1,190 284 (11,057) 2,984
Increase in cash and
cash equivalents 99,988 20,616 248,695 35,191
At September 30, 531,462 276,205 531,462 276,205
Cash and cash equivalents At September, 30 At September, 30
--------------------------------- ----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Cash and bank deposits 567,773 287,424 567,773 287,424
Bank overdrafts (32,871) (11,219) (32,871) (11,219)
Restricted bank deposits (3,440) -- (3,440) --
531,462 276,205 531,462 276,205
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: November 9, 2005
Tenaris, S.A.
By: /s/ Cecilia Bilesio
-----------------------
Cecilia Bilesio
Corporate Secretary