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 4, 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 Second Quarter Results.
Tenaris Announces 2006 Second Quarter Results
LUXEMBOURG--(BUSINESS WIRE)--Aug. 3, 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 second quarter ended June 30, 2006
with comparison to its results for the second quarter ended June 30,
2005.
Summary of 2006 Second Quarter Results
(Comparison with first quarter of 2006 and second quarter of 2005)
Q2 2006 Q1 2006 Q2 2005
Net sales (US$ million) 1,962.3 1,783.2 10% 1,744.3 12%
Operating income (US$ million) 692.8 600.9 15% 490.6 41%
Net income (US$ million)(1) 495.8 441.7 12% 341.6 45%
Shareholders' net income (US$
million) 471.8 419.7 12% 313.5 51%
Earnings per ADS (US$)(2) 0.80 0.71 12% 0.53 51%
Earnings per share (US$) 0.40 0.36 12% 0.27 51%
EBITDA (US$ million) 747.9 655.6 14% 542.4 38%
EBITDA margin (% of net sales) 38% 37% 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.
Our results continue to benefit from strong global demand from the
energy industry for our OCTG and other seamless pipe products.
Seamless pipe shipments and production were at record highs and
reflected incremental improvements in our industrial and supply chain
management performance. Higher sales to the Middle East and Africa,
which represented 27% of our total seamless pipe sales by volume
during the quarter, compensated for lower sales in North America and
reflected our strong global positioning as well as the strength of oil
and gas investment activity in the region. Net sales, operating income
and EBITDA all increased to record levels. Net cash provided by
operations, following the payment of income taxes and an increase in
working capital associated with higher net sales, was US$170.0 million
and our net cash position declined following the payment of a dividend
and an increase in capital expenditure.
Market Background and Outlook
Oil and gas companies continue to increase their exploration and
production spending in response to sustained high oil and gas prices,
declining production at mature fields and projected increases in
global demand for oil and gas. This is resulting in increased drilling
activity and demand for our 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
913 during the second quarter of 2006, an increase of 6% compared to
the same quarter of the previous year and an increase of 2% compared
to the first quarter. 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 17% and 22%
respectively.
Favorable market conditions, including relatively stable prices
for our raw materials, and strong demand for our high-end seamless
pipe products are helping us to record year on year sales growth and
improvements in gross margins for our seamless pipe products. We
expect these favorable market conditions to continue throughout the
remainder of the year.
Demand for our welded pipe products, however, is being affected by
delays to gas pipeline projects in Brazil and Argentina. During the
second quarter we increased sales to export projects but we expect
that demand for our welded pipe products in Brazil and Argentina will
continue to be affected by delays to major gas pipeline projects.
Agreement to Acquire Maverick
On June 12, 2006, we entered into a merger agreement pursuant to
which we will acquire Maverick Tube Corporation, a leading North
American producer of welded OCTG, line pipe and coiled tubing for use
in oil and natural gas wells. Maverick has manufacturing facilities in
the United States, Canada and Colombia and, in 2005, shipped
approximately 1.3 million short tons of welded pipes. The transaction
is valued at US$3,185 million, including Maverick's net debt, based on
the assumption that the holders of Maverick's convertible notes elect
to exercise their conversion rights pursuant to their applicable terms
and conditions. We expect to finance the Maverick acquisition mainly
through debt and have secured commitments to borrow up to US$2.7
billion.
The transaction has recently received clearances from the Canadian
and U.S. competition authorities. Closing, however, remains subject to
certain other regulatory approvals, majority approval of Maverick's
shareholders and other customary conditions and is expected to occur
around the beginning of the fourth quarter.
Analysis of 2006 Second Quarter Results
(metric tons)
Sales volume Q2 2006 Q2 2005 Increase/(Decrease)
North America 184,000 233,000 (21%)
Europe 188,000 165,000 14%
Middle East & Africa 210,000 127,000 65%
Far East & Oceania 80,000 99,000 (19%)
South America 103,000 124,000 (17%)
Total seamless pipes 765,000 747,000 2%
Welded pipes 82,000 158,000 (48%)
Total steel pipes 847,000 905,000 (6%)
Sales volume of seamless pipes increased by 2% to 765,000 tons in
the second quarter of 2006 from 747,000 tons in the same period of
2005. We recorded a substantial increase in sales volume in the Middle
East and Africa reflecting high demand for our OCTG products, as well
as increased sales of our line pipe products for flowlines and oil and
gas processing plants, in the region. Sales in North America were
affected primarily by lower drilling activity in Mexico and lower
sales of line pipe in the USA and Canada. Sales in Europe increased
due to higher sales of line pipe products to process and power plant
customers.
Sales volumes of welded pipes decreased by 48% to 82,000 tons in
the second quarter of 2006 from 158,000 tons in the same period of
2005. The decrease in sales was due to substantially reduced demand
for welded pipes for gas pipeline projects in Brazil and Argentina.
(US$ million)
Net sales Q2 2006 Q2 2005 Increase/(Decrease)
Seamless pipes 1,636.9 1,307.9 25%
Welded pipes(a) 130.3 255.4 (49%)
Energy 122.2 112.2 9%
Others 72.9 68.8 6%
Total 1,962.3 1,744.3 12%
(a) Includes other metallic products produced by Confab, our Brazilian
welded pipe subsidiary
Net sales in the quarter ended June 30, 2006 increased 12% to
US$1,962.3 million, compared to US$1,744.3 million in the
corresponding quarter of 2005. Net sales of seamless pipes rose by
25%, due primarily to higher sales of high-end products and higher
selling prices for most of our products. Net sales of welded pipes,
which included US$13 million in sales of other metallic products in
the second quarter of 2006 and US$12 million of such sales in the
second quarter of 2005, fell by 49% due primarily to the decline in
sales volume. Net sales of energy rose by 9% due to higher Italian gas
and electric energy prices.
(percentage of net sales)
Cost of sales Q2 2006 Q2 2005
Seamless pipes 46% 55%
Welded pipes 76% 67%
Energy 96% 99%
Others 74% 61%
Total 52% 60%
Cost of sales, expressed as a percentage of net sales, decreased
to 52% in the second 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 46% in the second quarter of
2006 compared to 55% in the same period of 2005 reflecting a higher
proportion of higher-margin, high-end products in the product mix and
higher selling prices for most of our products.
Selling, general and administrative expenses, or SG&A, increased
as a percentage of net sales to 12.7% in the quarter ended June 30,
2006 compared to 12.2% in the corresponding quarter of 2005 due
primarily to higher commissions, freight and other selling expenses
reflecting higher export sales of welded pipes and higher labor costs.
Net financial income was US$4.1 million in the second quarter of
2006, compared to a net financial expense of US$42.6 million in the
same period of 2005. Net interest expense was US$1.2 million in the
second quarter of 2006 compared to US$11.5 million in the same period
of 2005, primarily reflecting changes in our net debt position. A gain
of US$6.2 million on net foreign exchange transactions and the changes
in fair value of derivative instruments was recorded in the second
quarter of 2006, compared to a loss of US$32.7 million during the
second quarter of 2005. These gains and losses on net foreign exchange
transactions and the changes in 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 many 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$25.6 million in the second quarter of 2006, compared to a gain of
US$38.3 million in the second quarter of 2005. The gain in the second
quarter of 2006 was derived mainly from our 11.5% equity shareholding
in Ternium and the gain in the second quarter of 2005 was derived
mainly from our prior investment in Sidor.
Income tax charges totalled US$226.7 million in the second quarter
of 2006, equivalent to 33% of income before equity in earnings of
associated companies and income tax.
Income attributable to minority interest decreased to US$24.0
million in the second quarter of 2006, compared to US$28.2 million in
the corresponding quarter of 2005 reflecting weaker operating and
financial results at our Confab subsidiary, which was partially offset
by an improvement in operating and financial results at our NKKTubes
subsidiary.
Cash Flow and Liquidity
Net cash provided by operations during the second quarter of 2006
was US$170.0 million. Income tax payments during the quarter exceeded
accruals by US$173.6 million as we paid a substantial proportion of
our annual income taxes during the quarter. Working capital increased
by US$195.3 million during the second quarter. Trade receivables
increased by US$168.5 million and trade payables by US$78.0 million as
quarterly net sales increased. Inventories increased by US$59.1
million and customer advances declined by US$32.5 million.
Capital expenditures increased to US$99.6 million for the second
quarter of 2006 compared to US$84.3 million in the second quarter of
2005 and are expected to remain higher than last year's levels in the
second half as we implement our program to increase capacity for
high-end products.
Tenaris became net cash positive during the first quarter of 2006
but this net cash position was reduced during the second quarter as
net cash provided by operations was used to fund capital expenditures
and pay an end of year dividend. Our net cash position (cash and cash
equivalents and other current investments less borrowings) was US$82.2
million at June 30, 2006 compared to net debt of US$183.0 million at
December 31, 2005. Total financial debt was US$990.4 million at June
30, 2006, a slight decrease from US$1,010.3 million at December 31,
2005.
Analysis of 2006 First Half Results
Net income attributable to equity holders in the company during
the first half of 2006 was US$891.5 million, or US$0.76 per share
(US$1.51 per ADS), or 24% of net sales, which compares with net income
attributable to equity holders in the company during the first half of
2005 of US$577.7 million, or US$0.49 per share (US$0.98 per ADS), or
18% of net sales. Operating income was US$1,293.7 million, or 35% of
net sales, compared to US$896.3 million, or 28% of net sales.
Operating income plus depreciation and amortization was US$1,403.5
million, or 37% of net sales, compared to US$1,000.0 million, or 31%
of net sales.
(metric tons)
Sales volume H1 2006 H1 2005 Increase/(Decrease)
North America 385,000 453,000 (15%)
Europe 373,000 344,000 8%
Middle East & Africa 359,000 228,000 57%
Far East & Oceania 162,000 200,000 (19%)
South America 201,000 225,000 (11%)
Total seamless pipes 1,480,000 1,449,000 2%
Welded pipes 147,000 267,000 (45%)
Total steel pipes 1,627,000 1,717,000 (5%)
(US$ million)
Net sales H1 2006 H1 2005 Increase/(Decrease)
Seamless pipes 3,077.9 2,413.1 28%
Welded pipes(a) 244.9 415.9 (41%)
Energy 283.8 256.2 11%
Others 138.8 112.1 24%
Total 3,745.4 3,197.2 17%
(a) Includes other metallic products produced by Confab, our Brazilian
welded pipe subsidiary
Net sales in the six months ended June 30, 2006 increased 17% to
US$3,745.4 million, compared to US$3,197.2 million in the
corresponding six months of 2005. Net sales of seamless pipes rose by
28%, due primarily to higher sales of high-end products and higher
selling prices for all products. Net sales of welded pipes, which
included US$24 million of other metallic products in the first half of
2006 and US$29 million of such sales in the first half of 2005, fell
by 41% due to the decline in sales for gas pipeline projects in Brazil
and Argentina. Net sales of energy rose by 11% due to higher Italian
gas and electric energy prices.
(percentage of net sales)
Cost of sales H1 2006 H1 2005
Seamless pipes 47% 55%
Welded pipes 71% 66%
Energy 96% 97%
Others 73% 59%
Total 53% 60%
Cost of sales, expressed as a percentage of net sales, decreased
to 53% in the first half 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 47% in the first half of 2006
compared to 55% in the same period of 2005 reflecting a higher
proportion of higher-margin, high-end products in the product mix and
higher selling prices for our products.
Selling, general and administrative expenses, or SG&A, remained
stable as a percentage of net sales at 12.5% in the six months ended
June 30, 2006 compared to 12.4% in the corresponding six months of
2005.
Net financial income was US$14.7 million in the first half of
2006, compared to a net financial expense of US$84.5 million in the
same period of 2005. Net interest expense was US$0.6 million in the
first half of 2006 compared to US$21.0 million in the same period of
2005, primarily reflecting changes in the net debt position. A gain of
US$15.0 million on net foreign exchange transactions and the changes
in fair value of derivative instruments was recorded in the first half
of 2006, compared to a loss of US$66.6 million during the first half
of 2005. These gains and losses on net foreign exchange transactions
and the changes in 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 many 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$47.1 million in the first half of 2006, compared to a gain of
US$68.4 million in the first half of 2005. The gain in the first half
of 2006 was derived mainly from our 11.5% equity shareholding in
Ternium and the gain in the first half of 2005 was derived mainly from
our prior investment in Sidor.
Income tax charges totalled US$418.0 million in the first half of
2006, equivalent to 32% of income before equity in earnings of
associated companies and income tax.
Income attributable to minority interest was US$46.0 million in
the first half of 2006, compared to US$43.9 million in the first half
of 2005 as better operating and financial results at our NKKTubes
subsidiary were largely offset by weaker operating and financial
results at our Confab 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.
Consolidated condensed interim income statement
Three-month period Six-month period
ended June 30, ended June 30,
----------------------- -----------------------
(all amounts in
thousands of U.S.
dollars) 2006 2005 2006 2005
----------- ----------- ----------- -----------
(Unaudited)
Net sales 1,962,265 1,744,311 3,745,417 3,197,238
Cost of sales (1,019,036) (1,043,774) (1,991,528) (1,908,902)
----------- ----------- ----------- -----------
Gross profit 943,229 700,537 1,753,889 1,288,336
Selling, general and
administrative
expenses (248,492) (212,510) (466,376) (397,593)
Other operating
income (expenses),
net (1,939) 2,602 6,191 5,569
----------- ----------- ----------- -----------
Operating income 692,798 490,629 1,293,704 896,312
Financial income
(expenses), net 4,065 (42,643) 14,661 (84,450)
----------- ----------- ----------- -----------
Income before equity
in earnings of
associated companies
and income tax 696,863 447,986 1,308,365 811,862
Equity in earnings of
associated companies 25,551 38,279 47,072 68,442
----------- ----------- ----------- -----------
Income before income
tax 722,414 486,265 1,355,437 880,304
Income tax (226,650) (144,645) (417,983) (258,714)
----------- ----------- ----------- -----------
Income for the period 495,764 341,620 937,454 621,590
Attributable to:
Equity holders of the
Company 471,771 313,456 891,459 577,690
Minority interest 23,993 28,164 45,995 43,900
----------- ----------- ----------- -----------
495,764 341,620 937,454 621,590
----------- ----------- ----------- -----------
Consolidated condensed interim balance sheet
(all amounts in
thousands of U.S.
dollars) At June 30, 2006 At December 31, 2005
--------------------- ---------------------
(Unaudited)
ASSETS
Non-current assets
Property, plant and
equipment, net 2,319,381 2,230,038
Intangible assets,
net 164,993 159,099
Investments in
associated companies 355,652 257,234
Other investments 25,711 25,647
Deferred tax assets 213,715 194,874
Receivables 27,706 3,107,158 65,852 2,932,744
---------- ----------
Current assets
Inventories 1,550,704 1,376,113
Receivables and
prepayments 182,332 143,282
Current tax assets 127,163 102,455
Trade receivables 1,458,265 1,324,171
Other investments 296,437 119,907
Cash and cash
equivalents 776,146 4,391,047 707,356 3,773,284
---------- ---------- ---------- ----------
Total assets 7,498,205 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 (62,218) (59,743)
Other reserves 29,331 2,718
Retained earnings 2,343,729 4,219,166 1,656,503 3,507,802
---------- ----------
Minority interest 304,525 268,071
---------- ----------
Total equity 4,523,691 3,775,873
---------- ----------
LIABILITIES
Non-current liabilities
Borrowings 584,962 678,112
Deferred tax
liabilities 354,716 353,395
Other liabilities 159,661 154,378
Provisions 48,464 43,964
Trade payables 703 1,148,506 1,205 1,231,054
---------- ----------
Current liabilities
Borrowings 405,389 332,180
Current tax
liabilities 345,605 452,534
Other liabilities 178,955 138,875
Provisions 37,976 36,945
Customer advances 96,753 113,243
Trade payables 761,330 1,826,008 625,324 1,699,101
---------- ---------- ---------- ----------
Total liabilities 2,974,514 2,930,155
---------- ----------
Total equity and
liabilities 7,498,205 6,706,028
Consolidated condensed interim cash flow statement
Three-month period Six-month period
ended June 30, ended June 30,
------------------- -------------------
(all amounts in thousands of
U.S. dollars) 2006 2005 2006 2005
--------- --------- --------- ---------
(Unaudited)
Cash flows from operating
activities
Income for the period 495,764 341,620 937,454 621,590
Adjustments for:
Depreciation and amortization 55,115 51,766 109,790 103,743
Income tax accruals less
payments (173,618) (1,722) (90,160) 35,756
Equity in earnings of
associated companies (25,551) (38,279) (47,072) (68,442)
Interest accruals less
payments, net (6,756) 3,866 (1,464) 6,210
Income from disposal of
Investment - - (6,933) -
Changes in provisions 4,800 1,649 5,531 (2,636)
Proceeds from Fintecna
arbitration award net of BHP
settlement - - - 66,594
Changes in working capital (195,284) (124,228) (219,541) (334,106)
Other, including currency
translation adjustment 15,525 28,323 26,472 16,979
--------- --------- --------- ---------
Net cash provided by
operating activities 169,995 262,995 714,077 445,688
--------- --------- --------- ---------
Cash flows from investing
activities
Capital expenditures (99,572) (84,318) (169,101) (131,634)
Acquisitions of subsidiaries (9,301) (47,892) (39,110) (47,930)
Proceeds from disposal of
property, plant and
equipment and intangible
assets 1,568 1,448 3,388 2,890
Dividends and distributions
received from associated
companies - 21,598 - 41,118
Changes in restricted bank
deposits (21) 37,314 627 9,634
Reimbursement from trust
funds - - - 119,666
Investments in short terms
securities 1,120 - (176,530) -
--------- --------- --------- ---------
Net cash used in investing
activities (106,206) (71,850) (380,726) (6,256)
--------- --------- --------- ---------
Cash flows from financing
activities
Dividends paid (204,233) (199,511) (204,233) (199,511)
Dividends paid to minority
interest in subsidiaries (8,420) (2,730) (16,001) (2,730)
Proceeds from borrowings 133,478 247,494 234,563 645,763
Repayments of borrowings (115,558) (217,825) (270,159) (734,247)
--------- --------- --------- ---------
Net cash used in financing
activities (194,733) (172,572) (255,830) (290,725)
--------- --------- --------- ---------
(Decrease) / Increase in cash
and cash equivalents (130,944) 18,573 77,521 148,707
Movement in cash and cash
equivalents
At beginning of the period 887,222 423,660 680,591 293,824
Effect of exchange rate
changes (4,019) (11,949) (5,853) (12,247)
(Decrease) / Increase in cash
and cash equivalents (130,944) 18,573 77,521 148,707
At June 30, 752,259 430,284 752,259 430,284
Cash and cash equivalents At June 30,
-------------------------------------
2006 2005 2006 2005
Cash and bank deposits 776,146 450,586 776,146 450,586
Bank overdrafts (22,466) (16,436) (22,466) (16,436)
Restricted bank deposits (1,421) (3,866) (1,421) (3,866)
752,259 430,284 752,259 430,284
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: August 4, 2006
Tenaris, S.A.
By: /s/ Cecilia Bilesio
------------------------
Cecilia Bilesio
Corporate Secretary