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 12, 2004
TENARIS, S.A.
(Translation of Registrant's name into English)
TENARIS, S.A.
13, rue Beaumont
L-1219 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 2004.
Tenaris Announces Third Quarter 2004 Results
LUXEMBOURG--(BUSINESS WIRE)--Nov. 9, 2004--Tenaris S.A. (NYSE:TS)
(Buenos Aires:TS) (BMV:TS) (MTA Italy:TEN)
-- 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. ("Tenaris") today announces its results for the
quarter and nine months ended September 30, 2004 with comparison to
its results for the quarter and nine months ended September 30, 2003.
Third Quarter Summary
-- Net sales of US$1,007.2 million, up 33% from US$759.6 million
-- Operating income of US$201.9 million, up 85% from US$109.2
million
-- Net income of US$141.6 million, up 130% from US$61.4 million
-- Net earnings per share of US$0.12 (US$1.20 per ADS), up 126%
from US$0.053 per share
Operating income plus depreciation and amortization increased 60%
to US$250.3 million, or 25% of net sales, compared to US$156.7
million, or 21% of net sales in the third quarter of 2003. Net income
was equal to 14% of net sales compared to 8% of net sales in the third
quarter of 2003.
These results reflect the strong market demand for our seamless
pipe products, resulting in higher prices and sales volumes as well as
a recovery in margins previously affected by raw material cost
increases. In addition, the quarter saw higher sales volumes and
margins for our welded pipe business, following higher sales (quarter
on quarter) in the local Brazilian market, and a further strong
contribution from our indirect investments in Sidor. Net sales of
seamless pipes, compared to the third quarter of 2003, rose 37%, with
sales volumes, including a first contribution from our recent
acquisition of Silcotub, up by 16% and average selling prices up by
18%.
Market Background and Outlook
Demand for our seamless pipe products and services, particularly
from our energy industry customers, has strengthened during the year
and is expected to remain at good levels going into 2005. The high
level of oil prices, which recently rose above $50 a barrel before
falling back, reflects limited spare production capacity and
instability in several major oil-producing countries at a time of
strong global economic growth and higher demand growth for oil and
gas. Global oil and gas drilling activity, as measured by the number
of active rigs, has increased over the past year. The increase has
been strongest in North and South America, including our local markets
of Mexico, Argentina, Canada and Venezuela. Elsewhere, the increase
has been more limited but it has helped to sustain growth in demand
for seamless OCTG.
Steelmaking raw material costs, which rose substantially during
2003, surged in the first quarter of 2004. After falling back in the
second quarter, they increased during the third quarter. This, due to
FIFO accounting, is expected to result in higher production costs in
the fourth quarter.
Demand for our welded pipes, which had been affected in the first
half by delays in implementing projects in the local Brazilian market
as well as a lack of projects in other South American markets, had a
stronger quarter (than the previous two quarters) due principally to
the completion of previously-postponed deliveries to a pipeline
project in Brazil and deliveries to particular projects in Africa and
North America. (Demand in the next few quarters is likely to be mixed
with a gradual increase in demand for pipeline infrastructure projects
in Brazil and an eventual increase in demand in Argentina from
investments to expand the capacity of the existing pipeline
infrastructure being offset by lower sales in export markets.)
Significant Developments
On September 16, our board of directors approved an investment to
construct a gas-fired 120 MW heat and power plant in Dalmine, Italy
with an estimated cost of EUR109 million (US$130 million). This
investment is intended to improve the competitiveness of our Italian
seamless pipe operations by reducing energy costs and securing a
reliable source of power. Construction of the plant is expected to
begin following receipt of final regulatory approvals and be completed
over a period of 24 months.
In October, we detected technical problems at our electric power
generating plant in San Nicolas, Argentina. We are currently analyzing
with the supplier of the equipment different alternatives to resolve
the situation as well as the recovery of the ensuing costs and losses.
On October 19, the hot briquetted iron, or HBI, plant located in
Ciudad Guayana, Venezuela, which we acquired together with Sidor from
Posven in July, began operations. The plant, which was idled in 2001
shortly after starting up and has a rated annual design capacity of
1.5 million tons, is owned and operated by MATESI, Materiales
Siderurgicos S.A., a company in which Tenaris has a 50.2%
shareholding.
Further to our acquisition of an 85% shareholding in S.C. Silcotub
S.A., a Romanian seamless pipe producer with an annual capacity of
180,000 tons, we began consolidating its results during this third
quarter.
As a condition of the acquisition of the controlling interest in
Silcotub, we also acquired a controlling shareholding in S.C.
Laminorul S.A., a small Romanian manufacturer of steel sections and
angles. On November 1, 2004, in settlement of a litigation brought by
AVAS, the Romanian privatization agency, against Laminorul's former
controlling entity, we transferred 70% of the shares of Laminorul to
AVAS, and now hold 16%, with no associated liabilities.
Analysis of 2004 Third Quarter Results
(metric tons)
Sales volume Q3 2004 Q3 2003 Increase/(Decrease)
----------------------- -------- -------- -------------------
North America 179,000 157,000 14%
Europe 154,000 140,000 10%
Middle East & Africa 113,000 99,000 14%
Far East & Oceania 98,000 67,000 46%
South America 93,000 88,000 6%
Total seamless pipes 638,000 551,000 16%
Welded pipes 112,000 78,000 44%
Total steel pipes 750,000 629,000 19%
Sales volume of seamless pipes increased by 16% to 638,000 tons in
the third quarter of 2004 from 551,000 tons in the same period of
2003, which includes 23,000 tons sold by Silcotub mostly in Europe.
This increase reflects stronger demand across most of our markets.
Sales volumes of welded pipes increased by 44% to 112,000 tons in
the third quarter of 2004 from 78,000 tons in the same period of 2003,
reflecting higher deliveries to export markets.
(US$ million)
Net sales Q3 2004 Q3 2003 Increase/(Decrease)
---------------------- --------- -------- -------------------
Seamless pipes 794.3 579.7 37%
Welded pipes 114.2 83.4 37%
Energy 80.6 79.5 1%
Others 18.1 17.1 6%
Total 1,007.2 759.6 33%
Net sales in the quarter ended September 30, 2004 increased 33% to
US$1,007.2 million, compared to US$759.6 million in the corresponding
quarter of 2003. Net sales of seamless pipes rose by 37%, due to
higher average selling prices and higher sales volumes. Average
selling prices were up by 18% over the same quarter of 2003 and 7%
over the second quarter of 2004. 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 2004 and
US$16 million of such sales in the third quarter of 2003, also rose
37% due to a higher sales volume of welded pipes. Net sales of other
goods and services increased 6% due to higher sales of sucker rods
used in oil production.
(percentage of net sales)
Cost of sales Q3 2004 Q3 2003
------------------------------- --------- ---------
Seamless pipes 60% 60%
Welded pipes 67% 87%
Energy 97% 94%
Others 67% 67%
Total 64% 67%
Cost of sales, expressed as a percentage of net sales, decreased 3
percentage points to 64% in the third quarter of 2004, compared to 67%
in the same period of 2003. This decrease resulted from higher gross
margins on the sales of welded pipes and the non-recurrence of losses
made on the sale of metal structures included within the welded pipes
segment during the third quarter of 2003. Cost of sales for seamless
pipe products, expressed as a percentage of net sales, remained stable
at 60% in the third quarter of 2004 compared to the same period of
2003 but decreased 4 percentage points from 64% quarter on quarter as
higher average selling prices helped to offset increased raw material
costs.
Selling, general and administrative expenses, or SG&A, declined as
a percentage of net sales to 16.8% in the quarter ended September 30,
2004 compared to 18.4% in the corresponding quarter of 2003 but rose
in absolute terms to US$168.9 million compared to US$139.8 million.
Selling expenses, on a per ton basis, rose marginally due to higher
freight costs and administrative expenses decreased when expressed as
a percentage of net sales.
Net financial expenses totalled US$3.1 million in the third
quarter of 2004, compared to net financial expenses of US$3.0 million
in the same period of 2003. Net interest expenses increased to US$9.7
million, compared to US$3.5 million in the third quarter of 2003,
reflecting a higher net debt position and higher interest rates. Net
financial expenses for the third quarter of 2004 included net foreign
exchange translation gains of US$6.3 million.
Equity in earnings of associated companies generated a gain of
US$17.3 million in the third quarter of 2004, compared to a gain of
US$10.6 million in the third quarter of 2003. This gain for the
quarter reflects the result of our 14.5% equity interest in Amazonia,
which has a 59.7% equity interest in Sidor. The results of Sidor
benefited from a recovery in domestic demand and strong global demand
and prices for steel products.
Income tax provisions for the quarter ended September 30, 2004
equalled US$67.2 million equivalent to a tax charge of 34% of income
before equity in earnings of associated companies, income tax and
minority interest.
Nine Months Results
Results for the nine months period ended September 30, 2004 with
comparison to the results for the corresponding period of 2003.
Net income during the first nine months of 2004 was US$317.3
million, or US$0.269 per share (US$2.69 per ADS), or 11% of net sales,
which compares with net income during the first nine months of 2003 of
US$196.6 million, or US$0.169 per share (US$1.69 per ADS), or 8% of
net sales. Operating income was US$458.1 million, or 16% of net sales,
compared to US$320.3 million, or 13% of net sales. Operating income
plus depreciation and amortization was US$608.5 million, or 21% of net
sales, compared to US$466.2 million, or 19% of net sales.
(metric tons)
Sales volume 9M 2004 9M 2003 Increase/(Decrease)
--------------------- ---------- ---------- -------------------
North America 531,000 444,000 20%
Europe 493,000 472,000 4%
Middle East & Africa 320,000 300,000 7%
Far East & Oceania 315,000 286,000 10%
South America 281,000 231,000 22%
Total seamless pipes 1,940,000 1,731,000 12%
Welded pipes 267,000 316,000 (16%)
Total steel pipes 2,207,000 2,048,000 8%
Sales volume of seamless pipes increased by 12% to 1,940,000 tons
in the first nine months of 2004 from 1,731,000 tons in the same
period of 2003. The increase in sales volumes reflects increased
demand in most of our markets and particularly in our local markets in
North and South America.
Sales volume of welded pipes decreased by 16% to 267,000 tons in
the first nine months of 2004 from 316,000 tons in the same period of
2003. This decrease was due principally to delays in implementing
pipeline projects in the Brazilian market in the first half, whereas
in the first half of 2003 demand for welded pipes for pipeline
projects in the Brazilian market had been strong.
(US$ million)
Net sales 9M 2004 9M 2003 Increase/(Decrease)
------------------------ -------- -------- -------------------
Seamless pipes 2,266.0 1,782.7 27%
Welded pipes 270.4 299.7 (10%)
Energy 277.3 234.0 19%
Others 49.6 101.7 (51%)
Total 2,863.3 2,418.1 18%
Net sales in the nine months ended September 30, 2004 increased
18% to US$2,863.3 million, compared to US$2,418.1 million in the
corresponding period of 2003. Net sales of seamless pipes rose by 27%,
due to higher average selling prices and higher sales volume. Net
sales of welded pipes, which included US$51 million in sales of metal
structures made by our Brazilian welded pipe subsidiary in the first
nine months of 2004 and US$46 million of such sales in the first nine
months of 2003, decreased 10% reflecting the reduction in sales volume
of welded pipes. Net sales of electricity and natural gas by Dalmine
Energie increased by 19% reflecting the increase in the value of the
Euro against the U.S. dollar and higher sales volumes. Net sales of
other goods and services decreased 51% following the discontinuation
of sales of non-pipe steel products produced by third parties, which
amounted to US$49 million in the first nine months of 2003.
(percentage of net sales)
Cost of sales 9M 2004 9M 2003
------------------------ ------------- -----------
Seamless pipes 64% 64%
Welded pipes 71% 77%
Energy 97% 96%
Others 67% 80%
Total 68% 69%
Cost of sales, expressed as a percentage of net sales, decreased
to 68% in the first nine months of 2004, compared to 69% in the same
period of 2003. This decrease resulted from higher gross margins on
the sales of welded pipes and the non-recurrence of losses made on the
sale of metal structures included within the welded pipes segment.
Cost of sales for seamless pipe products, expressed as a percentage of
net sales, remained stable as higher prices and volume-related
efficiencies offset increases in raw material costs. Cost of sales for
other products, expressed as a percentage of net sales, decreased due
primarily to the termination of sales of low-margin other steel
products.
Selling, general and administrative expenses, or SG&A, declined,
as a percentage of net sales, to 16.6% in the nine months ended
September 30, 2004, compared to 17.3% of net sales during the
corresponding period of 2003, but rose in absolute terms to US$476.3
million from US$419.1 million. Selling expenses, on a per ton basis,
rose marginally due to higher freight costs and administrative
expenses decreased, when expressed as a percentage of net sales.
Net financial expenses totalled US$22.5 million in the first nine
months of 2004, compared to net financial expenses of US$36.6 million
in the same period of 2003. Net interest expenses increased to US$22.0
million compared to US$12.9 million, principally reflecting a higher
net debt position, and foreign exchange translation losses decreased
to US$6.4 million from US$26.2 million.
Equity in earnings of associated companies generated a gain of
US$57.0 million in the first nine months of 2004, compared to a gain
of US$16.3 million in the first nine months of 2003. This reflected
the performance of our indirect investments in Sidor, whose results
have benefited from strong global demand and prices for steel
products.
Income tax provisions of US$167.2 million were recorded during the
first months of 2004, equivalent to a tax charge of 38% of income
before equity in earnings of associated companies, income tax and
minority interest.
Cash Flow and Liquidity
Cash and cash equivalents, excluding investments of US$139.6
million in trust funds to support our Argentine and Brazilian
operations, increased by US$39.6 million to US$287.4 million during
the nine months ended September 30, 2004 and total financial debt
increased by US$369.0 million to US$1,202.6 million from US$833.7
million at December 31, 2003.
Net cash provided by operations during the nine months ended
September 30, 2004 was US$56.6 million. Cash flow from operations was
affected by a substantial increase in working capital of US$411.9
million, reflecting an increase in inventories of US$232.5 million, a
net increase in trade receivables less customer advances and trade
payables of US$90.6 million, and the payment of the first instalment
of the liability towards the consortium led by BHP Billiton Petroleum
Ltd. (US$55.1 million). The increase in inventories reflects higher
costs of production and higher volumes, including of raw materials,
and the increase in trade receivables (US$202.7 million) reflects
higher net sales. Net cash used in investment activities was US$179.4
million which included US$122.5 million in capital expenditure and
US$97.6 million in acquisitions as well as a cash return of US40.6
million on our indirect investments in Sidor.
Some of the statements contained in this press release are
"forward-looking statements." Forward-looking statements are based on
management's current views and assumptions and involve known and
unknown risks that could cause actual results, performance or events
to differ materially from those expressed or implied by those
statements. These risks include but are not limited to risks arising
from uncertainties as to future oil prices and their impact on
investment programs by oil companies.
Consolidated Condensed Interim Income Statement
Three-month period ended Nine-month period ended
September 30, 2004 September 30, 2003
(All amounts in US$
thousands)
Net sales 1,007,157 759,615 2,863,352 2,418,086
Cost of sales (641,293) (508,814) (1,939,405) (1,671,470)
------------ ----------- ----------- -----------
Gross profit 365,864 250,801 923,947 746,616
Selling, general and
administrative
expenses (168,922) (139,841) (476,287) (419,077)
Other operating
income and expenses 4,917 (1,724) 10,482 (7,281)
------------ ----------- ----------- -----------
Operating income 201,859 109,236 458,142 320,258
Financial income
(expenses), net (3,132) (3,020) (22,455) (36,603)
------------ ----------- ----------- -----------
Income before income
tax, equity in
earnings of
associated
companies and
minority interest 198,727 106,216 435,687 283,655
Equity in earnings
of associated
companies 17,300 10,630 56,969 16,273
------------ ----------- ----------- -----------
Income before income
tax and minority
interest 216,027 116,846 492,656 299,928
Income tax (67,204) (53,427) (167,184) (90,048)
------------ ----------- ----------- -----------
Net income before
minority interest 148,823 63,419 325,472 209,880
Minority interest (7,224) (1,981) (8,191) (13,255)
------------ ----------- ----------- -----------
Net income 141,599 61,438 317,281 196,625
Consolidated Condensed Interim Balance Sheet
September 30, 2004 December 31, 2003
--------------------- ---------------------
(All amounts in US$
thousands)
Assets
Non-current assets
Property, plant and
equipment, net 2,096,917 1,960,314
Intangible assets, net 55,421 54,037
Investments in
associated companies 62,612 45,814
Other investments 24,002 23,155
Deferred tax assets 148,046 130,812
Receivables 57,836 2,444,834 59,521 2,273,653
Current assets
Inventories 1,064,336 831,879
Receivables and
prepayments 229,237 165,134
Trade receivables 855,530 652,782
Other investments 139,591 138,266
Cash and cash
equivalents 287,424 2,576,118 247,834 2,035,895
Total assets 5,020,952 4,309,548
Equity and Liabilities
Shareholders' equity 2,007,473 1,841,280
Minority interest 147,650 119,984
Non-current liabilities
Borrowings 463,785 374,779
Deferred tax liabilities 413,963 418,333
Other liabilities 210,758 191,540
Provisions 36,005 23,333
Trade payables 7,907 1,132,418 11,622 1,019,607
Current liabilities
Borrowings 738,821 458,872
Current tax liabilities 157,798 108,071
Other liabilities 176,203 207,594
Provisions 33,962 39,624
Customers advances 87,896 54,721
Trade payables 538,731 1,733,411 459,795 1,328,677
Total liabilities 2,865,829 2,348,284
Total equity and
liabilities 5,020,952 4,309,548
Consolidated Condensed Interim Cash Flow Statement
Three-month period Nine-month period
ended September 30, ended September 30,
(All amounts in US$
thousands) 2004 2003 2004 2003
---- ---- ---- ----
(Unaudited) (Unaudited)
Net income for the period 141,599 61,438 317,281 196,625
Depreciation and
amortization 48,540 47,450 150,369 145,937
Tax accruals less payments 27,826 18,262 35,936 (65,818)
Equity in earnings of
associated companies (17,300) (10,630) (56,969) (16,273)
Interest accruals less
payments 10,123 (191) 7,130 (553)
Cost of disposition of
property, plant and
equipment 1,323 1,617 10,292 3,181
Net provisions 7,972 (4,587) 7,010 2,767
Minority interest 7,224 1,981 8,191 13,255
Change in working capital (100,907) 77,327 (411,928) 3,396
Currency translation
adjustment and others 4,107 (37,211) (10,736) (26,534)
---------- --------- ----------- ---------
Net cash provided by (used
in) operations 130,507 155,456 56,576 255,983
---------- --------- ----------- ---------
Capital expenditure (39,695) (34,827) (122,478) (123,460)
Acquisitions of
subsidiaries and
associates net of cash (97,367) (19,110) (97,555) (61,656)
Proceeds from associated
companies - - - 106
Convertible loan to
associated companies - - - (31,128)
Cash advanced for the
Dalmine tender offer - 21,382 - -
Dividends and
distributions received
from associated companies 23,793 - 40,595 -
---------- --------- ----------- ---------
Net cash used in
investment activities (113,269) (32,555) (179,438) (216,138)
---------- --------- ----------- ---------
Dividends paid - - (135,053) (115,002)
Dividends paid to minority
interest in subsidiaries - (2,477) (23) (5,976)
Proceeds from borrowings 125,940 143,660 496,703 371,298
Repayments of borrowings (125,007) (205,067) (202,159) (388,736)
---------- --------- ----------- ---------
Net cash provided by (used
in) financing activities 933 (63,884) 159,468 (138,416)
---------- --------- ----------- ---------
Increase (decrease) in
cash and cash equivalents 18,171 59,017 36,606 (98,571)
---------- --------- ----------- ---------
Cash and cash equivalents
at the beginning of the
period, 268,969 148,963 247,834 304,536
Effect of exchange rate
changes on cash and cash
equivalents 284 612 2,984 2,627
Increase (decrease) in
cash and cash equivalents 18,171 59,017 36,606 (98,571)
Cash at the end of the
period 287,424 208,592 287,424 208,592
CONTACT: Tenaris
Nigel Worsnop, 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 12, 2004
Tenaris, S.A.
By: /s/ Cecilia Bilesio
-----------------------
Cecilia Bilesio
Corporate Secretary