Summary of 2009 First Quarter Results
(Comparison with fourth and first quarters of 2008)
Q1 2009 Q4 2008 Q1 2008
Net sales (US$ million) 2,449.5 3,238.8 (24%) 2,626.2 (7%)
Operating income (US$ million) 678.1 559.3 21% 710.9 (5%)
Net income (US$ million) 393.1 114.5 243% 500.0 (21%)
Shareholders’ net income (US$
million) 366.0 93.7 291% 473.0 (23%)
Earnings per ADS (US$) 0.62 0.16 291% 0.80 (23%)
Earnings per share (US$) 0.31 0.08 291% 0.40 (23%)
EBITDA (US$ million) 799.8 1,191.4 (33%) 845.4 (5%)
EBITDA margin (% of net sales) 33% 37% 32%
Our operating results in the first quarter partially reflect the change in
the market environment that has occurred since the third quarter of last
year. Shipments, particularly in the U.S. market, were sharply lower.
However, selling prices during the period still reflect the effect of price
increases set in different market conditions. Our operating income declined
5% year on year but our earnings per share declined further as in the first
quarter of 2008 we benefited from a strong result on our equity investment
in Ternium (
Analysis of 2009 First Quarter Results
Increase/
Sales volume (metric tons) Q1 2009 Q1 2008 (Decrease)
Tubes - Seamless 583,000 691,000 (16%)
Tubes - Welded 110,000 282,000 (61%)
Tubes - Total 693,000 973,000 (29%)
Projects - Welded 84,000 132,000 (36%)
Total 777,000 1,105,000 (30%)
Increase/
Tubes Q1 2009 Q1 2008 (Decrease)
(Net sales - $ million)
North America 1,015.8 832.6 22%
South America 264.5 238.2 11%
Europe 262.6 447.6 (41%)
Middle East & Africa 395.3 475.7 (17%)
Far East & Oceania 167.6 176.6 (5%)
Total net sales ($ million) 2,105.8 2,170.7 (3%)
Cost of sales (% of sales) 53% 54%
Operating income ($ million) 639.8 637.4 0%
Operating income (% of sales) 30% 29%
Net sales of tubular products and services decreased 3% to US$2,105.8
million in the first quarter of 2009, compared to US$2,170.7 million in the
first quarter of 2008, as a 29% decrease in sales volume was largely offset
by higher average selling prices. In North America, although shipments in
Mexico remained stable, in the USA and Canada they were affected by the
decline in drilling activity and the extraordinarily high levels of
inventories mainly driven by Chinese OCTG imports. Sales in South America
increased as higher average selling prices more than offset a decline in
volumes sold. In Europe, sales were affected by continuing imports from
China which are causing injury to the European pipe industry, a sharp
decline in industrial activity, lower demand from distributors serving the
process plant sector and lower sales of OCTG products. Sales in the Middle
East and Africa declined as sales of OCTG products were lower throughout
the region.
Increase/
Projects Q1 2009 Q1 2008 (Decrease)
Net sales ($ million) 222.2 271.7 (18%)
Cost of sales (% of sales) 70% 72%
Operating income ($ million) 49.0 51.3 (4%)
Operating income (% of sales) 22% 19%
Net sales of pipes for pipeline projects decreased 18% to US$222.2 million
in the first quarter of 2009, compared to US$271.7 million in the first
quarter of 2008, reflecting a lower level of shipments to gas and other
pipeline projects in Brazil and Argentina.
Increase/
Others Q1 2009 Q1 2008 (Decrease)
Net sales ($ million) 121.5 183.8 (34%)
Cost of sales (% of sales) 94% 73%
Operating income ($ million) (10.7) 22.2 (148%)
Operating income (% of sales) (9%) 12%
Operating income from other products and services resulted in a loss of
US$10.7 million in the first quarter of 2009, compared to a gain of US$22.2
million in the first quarter of 2008, as we recorded losses on our electric
conduits operations in the USA and our HBI operations in Venezuela.
Selling, general and administrative expenses, or SG&A, increased as a
percentage of net sales to 16.0% in the quarter ended March 31, 2009
compared to 15.7% in the corresponding quarter of 2008.
Net interest expense decreased to US$36.2 million in the first quarter of
2009 compared to a net interest expense of US$54.8 million in the same
period of 2008, mainly reflecting a lower level of net debt.
Other financial results generated a loss of US$37.2 million during the
first quarter of 2009, compared to a loss of US$14.3 million during the
first quarter of 2008. These results largely reflect gains and losses on
net foreign exchange transactions and the fair value of derivative
instruments and are partially offset by changes to our net equity position.
These gains and losses are mainly attributable to variations in the
exchange rates between our subsidiaries' functional currencies (other than
the US dollar) and the US dollar in accordance with IFRS.
Equity in earnings of associated companies generated a loss of US$8.5
million in the first quarter of 2009, compared to a gain of US$50.0 million
in the first quarter of 2008. These results were derived mainly from our
equity investment in Ternium (
Consolidated Condensed Interim Income Statement
(all amounts in thousands of U.S. dollars, unless Three-month period
otherwise stated) ended March 31,
----------------------
2009 2008
---------- ----------
Continuing operations (Unaudited)
Net sales 2,449,485 2,626,187
Cost of sales (1,380,415) (1,500,689)
---------- ----------
Gross profit 1,069,070 1,125,498
Selling, general and administrative expenses (392,355) (413,594)
Other operating income (expense), net 1,384 (991)
---------- ----------
Operating income 678,099 710,913
Interest income 4,613 12,269
Interest expense (40,827) (67,092)
Other financial results (37,233) (14,302)
---------- ----------
Income before equity in earnings of associated
companies and income tax 604,652 641,788
Equity in earnings of associated companies (8,459) 49,994
---------- ----------
Income before income tax 596,193 691,782
Income tax (203,098) (208,606)
---------- ----------
Income for continuing operations 393,095 483,176
Discontinued operations
Income (loss) for discontinued operations - 16,787
---------- ----------
Income for the period 393,095 499,963
Attributable to:
Equity holders of the Company 366,047 473,043
---------- ----------
Minority interest 27,048 26,920
---------- ----------
393,095 499,963
Consolidated Condensed Interim Statement of Financial Position
(all amounts in thousands of
U.S. dollars) At March 31, 2009 At December 31, 2008
--------------------- ---------------------
ASSETS
Non-current assets
Property, plant and
equipment, net 2,936,160 2,982,871
Intangible assets, net 3,760,964 3,826,987
Investments in associated
companies 501,745 527,007
Other investments 37,727 38,355
Deferred tax assets 370,633 390,323
Receivables 57,214 7,664,443 82,752 7,848,295
---------- ----------
Current assets
Inventories 2,563,726 3,091,401
Receivables and prepayments 226,631 251,481
Current tax assets 191,627 201,607
Trade receivables 2,035,348 2,123,296
Other investments 63,113 45,863
Cash and cash equivalents 1,980,586 7,061,031 1,538,769 7,252,417
---------- ----------
---------- ----------
Total assets 14,725,474 15,100,712
========== ==========
EQUITY
Capital and reserves
attributable to the Company’s
equity holders 8,399,259 8,176,571
Minority interest 531,681 525,316
---------- ----------
Total equity 8,930,940 8,701,887
========== ==========
LIABILITIES
Non-current liabilities
Borrowings 1,174,876 1,241,048
Deferred tax liabilities 1,037,656 1,053,838
Other liabilities 223,929 223,142
Provisions 73,120 89,526
Trade payables 1,216 2,510,797 1,254 2,608,808
---------- ----------
Current liabilities
Borrowings 1,650,483 1,735,967
Current tax liabilities 443,604 610,313
Other liabilities 250,667 242,620
Provisions 33,442 28,511
Customer advances 263,571 275,815
Trade payables 641,970 3,283,737 896,791 3,790,017
---------- ----------
Total liabilities 5,794,534 6,398,825
========== ==========
Total equity and liabilities 14,725,474 15,100,712
========== ==========
Consolidated Condensed Interim Statement of Cash Flows
Three-month period ended
March 31,
(all amounts in thousands of U.S. dollars) 2009 2008
------------ ------------
(Unaudited)
Cash flows from operating activities
Income for the period 393,095 499,963
Adjustments for:
Depreciation and amortization 121,741 134,483
Income tax accruals less payments (150,496) 107,538
Equity in earnings of associated companies 8,459 (49,994)
Interest accruals less payments, net 24,167 54,308
Changes in provisions (11,475) 7,496
Changes in working capital 387,945 (218,720)
Other, including currency translation
adjustment (9,989) 33,857
------------ ------------
Net cash provided by operating activities 763,447 568,931
============ ============
Cash flows from investing activities
Capital expenditures (119,829) (88,455)
Acquisitions of minority interest (5,942) (1,026)
Proceeds from disposal of property, plant and
equipment and intangible assets 2,579 5,007
Investments in short terms securities (17,250) (47,918)
Dividends and distributions received from
associated companies 940 -
Other - (3,428)
------------ ------------
Net cash (used in) investing activities (139,502) (135,820)
============ ============
Cash flows from financing activities
Proceeds from borrowings 194,745 130,387
Repayments of borrowings (340,683) (490,277)
------------ ------------
Net cash (used in) financing activities (145,938) (359,890)
============ ============
Increase in cash and cash equivalents 478,007 73,221
Movement in cash and cash equivalents
At the beginning of the period 1,525,022 954,303
Effect of exchange rate changes (34,322) 45,461
Increase in cash and cash equivalents 478,007 73,221
------------ ------------
At March 31, 1,968,707 1,072,985
============ ============
--------------------------
Cash and cash equivalents At March 31,
--------------------------
2009 2008
Cash and bank deposits 1,980,586 1,080,555
Bank overdrafts (11,879) (7,570)
------------ ------------
1,968,707 1,072,985
============ ============
Contact Information: Giovanni Sardagna Tenaris 1-888-300-5432 www.tenaris.com