Tenaris Announces 2023 First Quarter Results


The financial and operational information contained in this press release is based on unaudited consolidated condensed interim financial statements presented in U.S. dollars and prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standard Board and adopted by the European Union, or IFRS. Additionally, this press release includes non-IFRS alternative performance measures i.e., EBITDA, Net cash / debt, Free Cash Flow and Operating working capital days. See exhibit I for more details on these alternative performance measures.

LUXEMBOURG, April 26, 2023 (GLOBE NEWSWIRE) -- Tenaris S.A. (NYSE and Mexico: TS and EXM Italy: TEN) (“Tenaris”) today announced its results for the quarter ended March 31, 2023 in comparison with its results for the quarter ended March 31, 2022.

Summary of 2023 First Quarter Results

(Comparison with fourth and first quarter of 2022)

 1Q 20234Q 20221Q 2022
Net sales ($ million)4,141 3,620 14%2,367 75%
Operating income ($ million)1,351 1,013 33%484 179%
Net income ($ million)1,129 803 41%503 124%
Shareholders’ net income ($ million)1,129 807 40%503 124%
Earnings per ADS ($)1.91 1.37 40%0.85 124%
Earnings per share ($)0.96 0.68 40%0.43 124%
EBITDA ($ million)1,477 1,269 16%627 135%
EBITDA margin (% of net sales)35.7%35.1%  26.5%  
           

Our sales in the first quarter reached a record level with a 75% increase year on year. Shipments reached the highest level in 15 years. Compared to the fourth quarter, we had increases in sales of OCTG and line pipe for offshore projects around the world and a peak of shipments to a large pipeline project in Argentina, while sales for shale operations in North America and Argentina remained stable. Our EBITDA and net income also exceeded previous levels.

Our free cash flow rose strongly to $804 million as we stabilized our inventories and reduced our operating working capital days to 124, compared to the 141 days we had in the first quarter of 2022. We ended the quarter with a net cash position of $1,736 million.

Market Background and Outlook

Oil prices declined in the first quarter on concerns about a recovery in demand amid a slowing global economy, before recovering above $80 per barrel when OPEC announced production cuts. Natural gas prices have also fallen on relatively low consumption reflecting a benign Northern Hemisphere winter and a reduction in industrial demand in Europe. While internationally traded LNG prices remain robust, North American gas prices have fallen to low levels.

In North America, oil and gas drilling activity has declined slightly in the United States and may decline further in natural gas focused plays but should be supported by current oil price levels. In South America, offshore drilling projects move forward in Brazil and Guyana but onshore drilling in Colombia and Ecuador has been affected by political and security concerns. In the Eastern Hemisphere, drilling activity continues to increase particularly in the Middle East and offshore regions.

Following our record results in the first quarter, we expect that our sales and margins will remain at good levels but show gradual, sequential declines in the rest of the year. While sales in the Eastern Hemisphere are expected to consolidate above Q1 levels, sales in the Americas will be affected by lower prices and the marginal reduction in US drilling activity. In addition, further investment in pipeline projects in Argentina will be subject to high levels of uncertainty reflecting the current economic and political situation. On the other hand, cash flow from operations should continue to increase during the year.

Analysis of 2023 First Quarter Results

Tubes Sales volume (thousand metric tons)1Q 2023
4Q 2022
1Q 2022
Seamless840 809 4%772 9%
Welded283 156 81%50 460%
Total1,123 965 16%822 37%


Tubes1Q 20234Q 20221Q 2022
(Net sales - $ million)          
North America2,229 2,105 6%1,347 65%
South America975 802 22%348 180%
Europe252 185 36%232 8%
Asia Pacific, Middle East and Africa519 373 39%276 88%
Total net sales ($ million)3,975 3,466 15%2,203 80%
Operating income ($ million)1,312 980 34%471 179%
Operating margin (% of sales)33.0%28.3%  21.4%  
           

Net sales of tubular products and services increased 15% sequentially and 80% year on year. Volumes increased 16% sequentially and 37% year on year while average selling prices decreased 2% sequentially but increased 32% year on year. In North America sales increased 6% sequentially, thanks to higher offshore sales in the Gulf of Mexico and of line pipe in the United States. In South America sales increased 22% sequentially, due to higher sales for pipelines in Argentina and higher offshore OCTG sales in Brazil. In Europe sales increased 36% due to higher sales of line pipe and OCTG for offshore projects in the North Sea. In Asia Pacific, Middle East and Africa, sales increased 39% thanks to higher sales of offshore line pipe and higher sales of OCTG in Saudi Arabia.

Operating income from tubular products and services amounted to $1,312 million in the first quarter of 2023, compared to $980 million in the previous quarter and $471 million in the first quarter of 2022. In the previous quarter, Tubes operating income included a $63 million impairment charge. Despite the decline in average selling prices, margins increased following a decline in prices of raw materials and energy, a decline in depreciations and a positive volume effect with a better absorption of fixed costs.

Others1Q 20234Q 20221Q 2022
Net sales ($ million)167 154 8%164 2%
Operating income ($ million)40 33 20%13 202%
Operating margin (% of sales)23.8%21.4% 8.0% 
         

Net sales of other products and services increased 8% sequentially and 2% year on year. The sequential increase in sales is mainly related to higher sales of: sucker rods, pipes for civil and industrial installations in Europe, oilfield services in Argentina and coiled tubing, partially offset by lower sales of excess raw materials and energy.

Selling, general and administrative expenses, or SG&A, amounted to $487 million, or 11.8% of net sales, in the first quarter of 2023, compared to $455 million, 12.6% in the previous quarter and $365 million, 15.4% in the first quarter of 2022. Sequentially, our SG&A expenses increased mainly due to higher selling expenses associated with higher sales and higher labor costs, however, they decreased as a percentage of sales due to the better absorption of the fixed and semi-fixed components of SG&A expenses on higher sales.

Other operating results amounted to a gain of $5 million in the first quarter of 2023, compared to a loss of $12 million in the previous quarter and a gain of $4 million in the first quarter of 2022.

Financial results amounted to a gain of $21 million in the first quarter of 2023, compared to a gain of $36 million in the previous quarter and a loss of $1 million in the first quarter of 2022. The sequential decline was mainly due to lower net foreign exchange gains.

Equity in earnings of non-consolidated companies generated a gain of $53 million in the first quarter of 2023, compared to a gain of $13 million in the previous quarter and a gain of $88 million in the first quarter of 2022. Results from non-consolidated companies are mainly derived from our participation in Ternium (NYSE:TX).

Income tax charge amounted to $296 million in the first quarter of 2023, compared to $258 million in the previous quarter and $67 million in the first quarter of 2022. Taxes increased during the quarter due to the better results at several subsidiaries.

Cash Flow and Liquidity

Net cash provided by operations during the first quarter of 2023 was $921 million, compared with net cash provided by operations of $524 million in the previous quarter and net cash used in operation of $27 million in the first quarter of 2022. Working capital increased by $461 million during the quarter, mainly reflecting higher trade receivables, following the increase in sales.

Capital expenditures amounted to $117 million for the first quarter of 2023, compared to $108 million in the previous quarter and $67 million in the first quarter of 2022.

During the quarter we had a positive free cash flow of $804 million, compared to $416 million in the previous quarter and negative free cash flow of $94 million in the first quarter of 2022.

Our positive net cash position increased to $1.7 billion at March 31, 2023, compared to $0.9 billion at December 31, 2022.

Conference call

Tenaris will hold a conference call to discuss the above reported results, on April 27, 2023, at 09:00 a.m. (Eastern Time). Following a brief summary, the conference call will be opened to questions.

To listen to the conference please join through one of the following options:
ir.tenaris.com/events-and-presentations or
https://edge.media-server.com/mmc/p/vevoju38

If you wish to participate in the Q&A session please register at the following link:
https://register.vevent.com/register/BIfaa0709b82724e6b87e2634c1546ac49

Please connect 10 minutes before the scheduled start time.
A replay of the conference call will also be available on our webpage at:
ir.tenaris.com/events-and-presentations

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
 
(all amounts in thousands of U.S. dollars)Three-month period ended March 31,
 20232022
 Unaudited
Net sales4,141,181 2,367,041 
Cost of sales(2,307,779)(1,521,942)
Gross profit1,833,402 845,099 
Selling, general and administrative expenses(487,347)(364,922)
Other operating income (expense), net5,299 4,077 
Operating income1,351,354 484,254 
Finance Income47,887 8,825 
Finance Cost(31,545)(1,835)
Other financial results4,477 (8,108)
Income before equity in earnings of non-consolidated companies and income tax1,372,173 483,136 
Equity in earnings of non-consolidated companies53,006 87,604 
Income before income tax1,425,179 570,740 
Income tax(295,972)(67,307)
Income for the period1,129,207 503,433 
   
Attributable to:  
Shareholders' equity1,128,627 502,774 
Non-controlling interests580 659 
 1,129,207 503,433 


Consolidated Condensed Interim Statement of Financial Position
 
(all amounts in thousands of U.S. dollars)At March 31, 2023 At December 31, 2022
 Unaudited  
ASSETS     
Non-current assets     
Property, plant and equipment, net5,558,141  5,556,263 
Intangible assets, net1,331,221  1,332,508 
Right-of-use assets, net112,363  111,741 
Investments in non-consolidated companies1,597,442  1,540,646 
Other investments381,994  119,902 
Deferred tax assets228,501  208,870 
Receivables, net231,4589,441,120 211,7209,081,650
Current assets     
Inventories, net3,991,501  3,986,929 
Receivables and prepayments, net174,846  183,811 
Current tax assets224,397  243,136 
Trade receivables, net2,834,369  2,493,940 
Derivative financial instruments30,433  30,805 
Other investments1,081,141  438,448 
Cash and cash equivalents861,4949,198,181 1,091,5278,468,596
Total assets 18,639,301   17,550,246
EQUITY     
Shareholders' equity 15,065,074  13,905,709
Non-controlling interests 129,454  128,728
Total equity 15,194,528   14,034,437
LIABILITIES     
Non-current liabilities     
Borrowings56,739  46,433 
Lease liabilities82,118  83,616 
Deferred tax liabilities329,861  269,069 
Other liabilities233,499  230,142 
Provisions103,215805,432 98,126727,386
Current liabilities     
Borrowings536,907  682,329 
Lease liabilities32,481  28,561 
Derivative financial instruments6,831  7,127 
Current tax liabilities509,460  376,240 
Other liabilities335,835  260,614 
Provisions14,053  11,185 
Customer advances136,172  242,910 
Trade payables1,067,6022,639,341 1,179,4572,788,423
Total liabilities 3,444,773   3,515,809
Total equity and liabilities 18,639,301   17,550,246


Consolidated Condensed Interim Statement of Cash Flows
 
(all amounts in thousands of U.S. dollars) Three-month period ended March 31,
  20232022
   Unaudited
Cash flows from operating activities   
Income for the period 1,129,207 503,433 
Adjustments for:   
Depreciation and amortization 125,453 143,076 
Income tax accruals less payments 188,856 6,915 
Equity in earnings of non-consolidated companies (53,006)(87,604)
Interest accruals less payments, net (3,700)(1,300)
Changes in provisions 7,957 6,888 
Changes in working capital (460,557)(591,821)
Currency translation adjustment and others (13,440)(6,191)
Net cash provided by (used in) operating activities 920,770 (26,604)
    
Cash flows from investing activities   
Capital expenditures (117,088)(66,934)
Changes in advance to suppliers of property, plant and equipment 33 (18,565)
Proceeds from disposal of property, plant and equipment and intangible assets 4,796 4,819 
Changes in investments in securities (890,636)109,236 
Net cash (used in) provided by investing activities  (1,002,895)28,556 
    
Cash flows from financing activities   
Payments of lease liabilities (10,758)(15,678)
Proceeds from borrowings 559,274 268,143 
Repayments of borrowings (679,892)(256,144)
Net cash used in financing activities (131,376)(3,679)
    
Decrease in cash and cash equivalents (213,501)(1,727)
    
Movement in cash and cash equivalents   
At the beginning of the period 1,091,433 318,067 
Effect of exchange rate changes (16,518)(2,021)
Decrease in cash and cash equivalents (213,501)(1,727)
  861,414 314,319 
      

Exhibit I – Alternative performance measures

Alternative performance measures should be considered in addition to, not as substitute for or superior to, other measures of financial performance prepared in accordance with IFRS.

EBITDA, Earnings before interest, tax, depreciation and amortization.

EBITDA provides an analysis of the operating results excluding depreciation and amortization and impairments, as they are recurring non-cash variables which can vary substantially from company to company depending on accounting policies and the accounting value of the assets. EBITDA is an approximation to pre-tax operating cash flow and reflects cash generation before working capital variation. EBITDA is widely used by investors when evaluating businesses (multiples valuation), as well as by rating agencies and creditors to evaluate the level of debt, comparing EBITDA with net debt.

EBITDA is calculated in the following manner:

EBITDA = Net income for the period + Income tax charges +/- Equity in Earnings (losses) of non-consolidated companies +/- Financial results + Depreciation and amortization +/- Impairment charges/(reversals)

EBITDA is a non-IFRS alternative performance measure.

(all amounts in thousands of U.S. dollars)Three-month period ended March 31,
 20232022
Income for the period1,129,207 503,433 
Income tax charge295,972 67,307 
Equity in earnings of non-consolidated companies(53,006)(87,604)
Financial Results(20,819)1,118 
Depreciation and amortization125,453 143,076 
EBITDA1,476,807 627,330 
     

Free Cash Flow

Free cash flow is a measure of financial performance, calculated as operating cash flow less capital expenditures. FCF represents the cash that a company is able to generate after spending the money required to maintain or expand its asset base.

Free cash flow is calculated in the following manner:

Free cash flow = Net cash (used in) provided by operating activities - Capital expenditures.

Free cash flow is a non-IFRS alternative performance measure.

(all amounts in thousands of U.S. dollars)Three-month period ended March 31,
 20232022
Net cash provided by operating activities920,770 (26,604)
Capital expenditures(117,088)(66,934)
Free cash flow803,682 (93,538)
     

Net Cash / (Debt)

This is the net balance of cash and cash equivalents, other current investments and fixed income investments held to maturity less total borrowings. It provides a summary of the financial solvency and liquidity of the company. Net cash / (debt) is widely used by investors and rating agencies and creditors to assess the company’s leverage, financial strength, flexibility and risks.

Net cash/ debt is calculated in the following manner:

Net cash = Cash and cash equivalents + Other investments (Current and Non-Current)+/- Derivatives hedging borrowings and investments - Borrowings (Current and Non-Current).

Net cash/debt is a non-IFRS alternative performance measure.

(all amounts in thousands of U.S. dollars)At March 31,
 20232022
Cash and cash equivalents861,494 315,399 
Other current investments1,081,141 354,104 
Non-current investments375,677 233,988 
Derivatives hedging borrowings and investments11,680 6,662 
Current borrowings(536,907)(340,121)
Non-current borrowings(56,739)(7,905)
Net cash / (debt)1,736,346 562,127 
     

Operating working capital days

Operating working capital is the difference between the main operating components of current assets and current liabilities. Operating working capital is a measure of a company’s operational efficiency, and short-term financial health.

Operating working capital days is calculated in the following manner:

Operating working capital days = [(Inventories + Trade receivables – Trade payables – Customer advances) / Annualized quarterly sales ] x 365

Operating working capital days is a non-IFRS alternative performance measure.

(all amounts in thousands of U.S. dollars)At March 31,
 20232022
Inventories3,991,501 3,032,127 
Trade receivables2,834,369 1,718,058 
Customer advances(136,172)(96,905)
Trade payables(1,067,602)(1,006,132)
Operating working capital5,622,096 3,647,148 
Annualized quarterly sales16,564,724 9,468,164 
Operating working capital days124 141 
     

Giovanni Sardagna        
Tenaris
1-888-300-5432
www.tenaris.com