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 6, 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 _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' consolidated consolidated
condensed interim financial statements for the period ended June 30, 2004.
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 6, 2004
Tenaris, S.A.
By: /s/ Cecilia Bilesio
-----------------------
Cecilia Bilesio
Corporate Secretary
TENARIS S.A.
CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2004
Rue Beaumont 13
L - 1219 Luxembourg
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2004
---------------------------------------------------------------------------------------------------------------------------
Consolidated condensed interim income statement
(all amounts in USD thousands, Three-month period ended Six-month period ended
unless otherwise stated) June 30, June 30,
------------------------------------------------
Notes 2004 2003 2004 2003
(Unaudited)
Net sales 1 996,849 868,892 1,856,195 1,658,471
Cost of sales 2 (677,655) (604,122) (1,298,112) (1,162,656)
------------------------------------------------
Gross profit 319,194 264,770 558,083 495,815
Selling, general and administrative
expenses 3 (167,547) (146,238) (307,365) (279,236)
Other operating income and
expenses 2,065 (6,078) 5,565 (5,557)
------------------------------------------------
Operating income 153,712 112,454 256,283 211,022
Financial income (expenses), net 4 (3,885) (10,892) (19,323) (33,583)
------------------------------------------------
Income before equity in earnings of
associated companies, income tax
and minority interest 149,827 101,562 236,960 177,439
Equity in earnings of associated
companies (Note 10 (ii)) 40,130 14,677 39,669 5,643
------------------------------------------------
Income before income tax and
minority interest 189,957 116,239 276,629 183,082
Income tax 5 (60,911) (18,694) (99,980) (36,621)
------------------------------------------------
Net income before minority interest 129,046 97,545 176,649 146,461
Minority interest (1,732) (7,870) (967) (11,274)
------------------------------------------------
Net income for the period 127,314 89,675 175,682 135,187
================================================
Weighted average number of
ordinary shares in issue (thousands) 1,180,537 1,160,701 1,180,477 1,160,701
Basic and diluted earnings per share
(USD per share) 0.11 0.08 0.15 0.12
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. The limited review report of the independent
auditor on these consolidated condensed interim financial statements is issued
as a separate document.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2004
-----------------------------------------------------------------------------------------------------------------------
Consolidated condensed interim balance sheet
(all amounts in USD thousands) At June 30, 2004 At December 31, 2003
------------------------- ------------------------
Notes (Unaudited)
ASSETS
Non-current assets
Property, plant and equipment, net 6 1,889,604 1,960,314
Intangible assets, net 6 57,619 54,037
Investments in associated companies 68,941 45,814
Other investments 23,240 23,155
Deferred tax assets 129,788 130,812
Receivables 57,687 2,226,879 59,521 2,273,653
----------- -----------
Current assets
Inventories 916,653 831,879
Receivables and prepayments 178,058 165,134
Trade receivables 7 871,183 652,782
Other investments 139,051 138,266
Cash and cash equivalents 268,969 2,373,914 247,834 2,035,895
----------- -----------
----------- -----------
Total assets 4,600,793 4,309,548
=========== ===========
EQUITY AND LIABILITIES
Shareholders' Equity 1,859,365 1,841,280
Minority interest 114,334 119,984
Non-current liabilities
Borrowings 8 397,440 374,779
Deferred tax liabilities 396,804 418,333
Other liabilities 200,468 191,540
Provisions 29,879 23,333
Trade payables 11,265 1,035,856 11,622 1,019,607
----------- -----------
Current liabilities
Borrowings 8 710,957 458,872
Current tax liabilities 120,192 108,071
Other liabilities 162,037 207,594
Provisions 32,116 39,624
Customers advances 77,747 54,721
Trade payables 488,189 1,591,238 459,795 1,328,677
----------- -----------
----------- -----------
Total liabilities 2,627,094 2,348,284
----------- -----------
Total equity and liabilities 4,600,793 4,309,548
=========== ===========
Contingencies, commitments and restrictions to the distribution of profits (Note 10)
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. The limited review report of the independent
auditor on these consolidated condensed interim financial statements is issued
as a separate document.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2004
---------------------------------------------------------------------------------------------------------------------------------
Consolidated condensed interim statement of changes in shareholders' equity
(all amounts in USD thousands)
Statutory balances according to Luxembourg Law Total at June 30,
----------------------------------------------------------- ----------- -------------------- ----------=------------
Other Currency
Share Legal Share Distributable Retained Adjustments translation Retained
Capital Reserves Premium Reserve Earnings Total to IFRS adjustments Earnings 2004 2003
--------- -------- ------- ------------- -------- --------- ----------- ----------- -------- ----------- -----------
(Unaudited)
Balance at
January 1, 1,180,288 118,029 609,269 96,555 201,480 2,205,621 (634,759) (34,194) 304,612 1,841,280 1,694,054
Currency
translation
differences - - - - - - - (23,364) - (23,364) 20,843
Capital
Increase
(Note 11) 249 25 464 82 - 820 - - - 820 -
Dividends
paid in
cash - - - (96,555) (38,498) (135,053) - - - (135,053) (115,002)
Net income - - - - 243,750 243,750 (243,750) - 175,682 175,682 135,187
---------------------------------------------------------------------------------------------------------------------
Balance at
June 30, 1,180,537 118,054 609,733 82 406,732 2,315,138 (878,509) (57,558) 480,294 1,859,365 1,735,082
=====================================================================================================================
For additional disclosure related to the Distributable Reserve and the Retained Earnings calculated under Luxembourg Law see
Note 10 (vi).
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. The limited review report of the independent
auditor on these consolidated condensed interim financial statements is issued
as a separate document.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2004
---------------------------------------------------------------------------------------------------------------------
Consolidated condensed interim cash flow statement
(all amounts in USD thousands)
Six-month period ended June 30,
-------------------------------
2004 2003
(Unaudited)
Net income for the period 175,682 135,187
Depreciation and amortization 101,829 98,487
Tax accruals less payments 8,110 (84,080)
Equity in earnings of associated companies (39,669) (5,643)
Interest accruals less payments (2,993) (362)
Net provisions (962) 7,354
Minority interest 967 11,274
Change in working capital (311,021) (73,931)
Currency translation adjustment and others (14,843) 10,677
-------------------------------
Net cash (used in) provided by operations (82,900) 98,963
-------------------------------
Capital expenditure (82,783) (88,633)
Cash advanced for the Dalmine tender offer - (21,382)
Acquisitions of subsidiaries and associates (188) (42,546)
Proceeds from disposition of property, plant and equipment 8,969 1,564
Proceeds from associated companies - 106
Convertible loan to associated companies - (31,128)
Dividends received 16,802 -
-------------------------------
Net cash used in investment activities (57,200) (182,019)
-------------------------------
Dividends paid (135,053) (115,002)
Dividends paid to minority interest in subsidiaries (23) (3,499)
Proceeds from borrowings 370,763 227,638
Repayments of borrowings (77,152) (183,669)
-------------------------------
Net cash provided by (used in) financing activities 158,535 (74,532)
-------------------------------
Increase (decrease) in cash and cash equivalents 18,435 (157,588)
===============================
Cash and cash equivalents at January 1, 247,834 304,536
Effect of exchange rate changes on cash
and cash equivalents 2,700 2,015
Increase (decrease) in cash and cash equivalents 18,435 (157,588)
-------------------------------
Cash and cash equivalents at June 30, 268,969 148,963
===============================
Non-cash financing activity:
Fair value adjustment of minority interest acquired - 925
===============================
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. The limited review report of the independent
auditor on these consolidated condensed interim financial statements is issued
as a separate document.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2004
-------------------------------------------------------------------------------------------------------------
Accounting policies
Index to accounting policies
A Business of the Company and basis of presentation
B Translation of financial statements and transactions in currencies other than the
measurement currency
C Use of estimates
D Summary of accounting policies regarding specific asset and liability categories
E Revenue recognition
F Earnings per share
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
Accounting policies
The consolidated condensed interim financial statements have been prepared in
accordance with International Financial Reporting Standards ("IFRS") adopted by
the International Accounting Standards Board ("IASB") and interpretations issued
by the International Financial Reporting Interpretations Committee ("IFRIC") of
the IASB.
These consolidated condensed interim financial statements have been prepared in
accordance with IAS 34, "Interim Financial Reporting". The accounting policies
used in the preparation of the consolidated condensed interim financial
statements are consistent with those used in the consolidated financial
statements for the year ended December 31, 2003, unless specified. Further
reference regarding the accounting policies applied is included in the notes to
the Company's consolidated financial statements for the year ended December 31,
2003.
The following is a summary of the principal accounting policies followed in the
preparation of these consolidated condensed interim financial statements. This
summary has been included for the convenience of the reader and should not be
regarded as a complete explanation of the accounting policies used by the
Company.
A Business of the Company and basis of presentation
Tenaris S.A. (the "Company" or "Tenaris"), a Luxembourg corporation, was
incorporated on December 17, 2001, to hold investments in steel pipe
manufacturing and distributing companies. The Company holds, either directly or
indirectly, controlling interests in certain subsidiary companies. A detail of
the principal holdings is included in Note 15.
These consolidated condensed interim financial statements consolidate the
financial information of Tenaris with those of its subsidiaries at June 30, 2004
and 2003 and for the six-month periods then ended. Subsidiary companies are
entities in which Tenaris has an interest of more than 50% of the voting rights
or otherwise has the power to exercise control over their operations.
Certain comparative amounts have been reclassified to conform to changes in
presentation in the current period. Elimination of all material intercompany
transactions and balances among the Company and its consolidated subsidiaries
has been made.
These consolidated condensed interim financial statements were approved by
Tenaris's Board of Directors on August 5, 2004.
B Translation of financial statements and transactions in currencies other
than the measurement currency
The measurement currency of Tenaris is the U.S. dollar. Although the Company is
located in Luxembourg, Tenaris operates in several countries with different
currencies. The U.S. dollar is the currency that best reflects the economic
substance of the underlying events and circumstances relevant to Tenaris as a
whole. Generally, the measurement currency of the main companies in these
financial statements is the respective local currency. As further explained in
the Company's consolidated financial statements for the year ended December 31,
2003, the measurement currency for Siderca and its Argentine subsidiaries is the
U.S. dollar, because:
o Siderca is located in Argentina and its local currency has been
affected by recurring severe economic crises;
o Sales are denominated and settled in U.S. dollars or, if in a currency
other than the U.S. dollar, the price is sensitive to movements in the
exchange rate with the U.S. dollar;
o Purchases of critical raw materials are financed in U.S. dollars
generated by financing or operating activities;
o Most of the net financial assets and liabilities are mainly obtained
and retained in U.S. dollars.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
Income statements of subsidiary companies stated in currencies other than the
U.S. dollar are translated into U.S. dollars at the average exchange rates for
the quarter, while balance sheets are translated at the exchange rates at period
end. Translation differences are recognized in shareholders' equity. Should any
such subsidiary be sold or otherwise disposed of, any accumulated translation
difference would be recognized in the income statement as part of the gain or
loss on sale.
Transactions in currencies other than the measurement currency are accounted for
at the exchange rates prevailing at the date of the transactions. Gains and
losses resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in currencies other
than the measurement currency are recognized in the income statement. Further
reference regarding the accounting policies applied for the translation of
financial statements and transactions subject to the consolidation process is
included in the notes to the Company's consolidated financial statements for the
year ended December 31, 2003.
C Use of estimates
The preparation of financial statements requires management to make estimates
and assumptions that might affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the balance sheet
dates, and the reported amounts of revenues and expenses during the reporting
periods. Actual results may differ from these estimates.
D Summary of accounting policies regarding specific asset and liability
categories
An overview of relevant accounting policies applied in the recognition and
valuation of assets and liabilities is described below. A more detailed
description is included in the notes to the Company's consolidated financial
statements for the year ended December 31, 2003.
(1) Property, plant and equipment and Intangible assets
Property, plant and equipment are recognized at historical acquisition or
construction cost less depreciation, calculated using the straight line method
to amortize the cost of each asset over its estimated useful life. In the case
of business acquisitions proper consideration to the fair value of the assets
has been given as explained in the notes to the consolidated financial
statements for the year ended December 31, 2003. Major overhaul and rebuilding
expenditures are capitalized as property, plant and equipment only when the
investment enhances the condition of an asset beyond its original condition.
Intangible assets including goodwill; certain costs directly related to the
development, acquisition and implementation of information systems; and
expenditures on acquired patents, trademarks, technology transfer and licenses
are capitalized and amortized using the straight line method over their useful
lives; the useful lives of Tenaris's intangible assets average 5 years. Research
and development expenditure is recognized as expenses as incurred. Negative
goodwill is recognized as income on a systematic basis over the remaining
weighted average useful life of the identifiable acquired depreciable assets.
(2) Impairment
Circumstances affecting the recoverability of tangible and intangible assets and
investments in other companies may change. If this happens, the recoverable
amount of the relevant assets is estimated. The recoverable amount is determined
as the higher of the asset's net selling price -when available- and the present
value of the estimated future cash flows. If the recoverable amount of the asset
has dropped below its carrying amount the asset is written down immediately to
its recoverable amount.
No impairment provisions are recorded, other than the investment in Amazonia, as
discussed in the Company's consolidated financial statements at December 31,
2003 and in Note 10 (ii) to these consolidated financial statements.
(3) Cash and cash equivalents, Other investments and Derivative Financial
Instruments
Cash and cash equivalents and highly liquid short-term securities are carried at
fair market value.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
Under IAS 39 "Financial Instruments: Recognition and Measurement", investments
have to be classified into the following categories: held-for-trading,
held-to-maturity, originated loans and available-for-sale, depending on the
purpose for which the investments were made. Investments that do not fulfill the
specific requirements of IAS 39 for held-for-trading, held-to-maturity or
originated loan categories have to be included in the residual
"available-for-sale" category. All of Tenaris's investments, which include
primarily deposits in trust funds and insurance companies, are currently
classified as available-for-sale as defined by IFRS, despite the fact that they
are not technically available for disposition according to the terms of the
underlying contracts.
Trust funds comprise mainly financial resources placed by Argentine and
Brazilian subsidiaries within trusts, the objective of which is exclusively to
ensure that the financial needs for normal development of their operations are
met. At June 30, 2004 the trustee has informed us that it had allocated USD95.0
million of such funds to create guarantees within the scope of the trust
agreement.
All purchases and sales of investments are recognized on the trade date, not
significantly different from the settlement date, which is the date that Tenaris
commits to purchase or sell the investment.
Subsequent to their acquisition, available-for-sale investments are carried at
fair value. Realized and unrealized gains and losses arising from changes in the
fair value in those investments are included in the income statement for the
period in which they arise.
Derivative financial instruments are initially recognized in the balance sheet
at cost and subsequently remeasured at fair value. Changes in the fair value of
any derivative instruments are recognized immediately in the income statements
as financial results.
(4) Inventories
Inventories are stated at the lower of cost and net realizable value as a whole.
The cost of finished goods and work in progress comprises raw materials, direct
labor, other direct costs and related production overhead costs. Net realizable
value is estimated collectively for inventories as the selling price in the
ordinary course of business, less the costs of completion and selling expenses.
Goods in transit at period end are valued at supplier invoice cost. An allowance
for obsolescence or slow-moving inventory is made in relation to supplies and
spare parts and based on the management's analysis of their aging, the capacity
of such materials to be used based on their levels of preservation and
maintenance and the potential obsolescence due to technological changes. An
allowance for slow-moving inventory is made in relation to finished goods based
on management's analysis of their aging.
(5) Trade receivables
Trade receivables are carried at original invoice amount less an estimate made
for doubtful accounts. The Company analyzes its trade accounts receivable on a
regular basis and, when aware of a certain client's difficulty to meet its
commitments to Tenaris, it impairs the amounts due by means of a charge to the
provision for doubtful accounts. This provision is adjusted periodically based
on management's analysis of their aging.
(6) Borrowings
Borrowings are recognized initially for an amount equal to the proceeds received
net of transaction costs. In subsequent periods, borrowings are stated at
amortized cost; any difference between proceeds and the redemption value is
recognized in the income statement over the period of the borrowings.
(7) Income Taxes - Current and deferred
Under present Luxembourg law, so long as the Company maintains its status as a
holding billionaire company, no income tax, withholding tax (including with
respect to dividends), or capital gain tax is payable in Luxembourg by the
Company. The current income tax charge is calculated on the basis of the tax
laws in force in the countries where Tenaris's subsidiaries operate. Deferred
income taxes are calculated using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements. A more detailed description of temporary
differences can be found in the Company's consolidated financial statements for
the year ended December 31, 2003.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
(8) Employee-related liabilities
(a) Employees' statutory profit sharing
Under Mexican law, Tenaris's Mexican subsidiary companies are required to pay
their employees an annual benefit calculated using a similar basis to the one
used for the calculation of the income tax. Employees' statutory profit sharing
is provided under the liability method. This provision amounts to USD58.0
million at June 30, 2004 and USD51.1 million at December 31, 2003. Temporary
differences arise between the "statutory" bases of assets and liabilities used
in the determination of the profit sharing and their carrying amounts in the
financial statements.
(b) Employees' severance indemnity
This provision comprises the liability accrued on behalf of employees at
Tenaris's Italian and Mexican subsidiaries at the balance sheet date in
accordance with current legislation and the labor contracts in effect in the
respective countries.
Employees' severance indemnity costs are assessed annually using the projected
unit credit method: the cost of providing this obligation is charged to the
income statement over the service lives of employees in accordance with the
advice of the actuaries. This provision is measured at the present value of the
estimated future cash outflows using applicable interest rates. This provision
amounts to USD62.5 million and USD66.4 million at June 30, 2004 and December 31,
2003, respectively.
(c) Pension obligations
Certain Tenaris officers are covered by a defined benefit employee retirement
plan designed to provide retirement, termination and other benefits to those
officers.
Tenaris is accumulating assets for the ultimate payment of those benefits in the
form of investments that carry time limitation for their redemption. The
investments are neither part of a particular plan nor segregated from Tenaris's
other assets. Due to these conditions, the plan is classified as "unfunded"
under the IFRS definition.
Retirement costs are assessed using the projected unit credit method: the cost
of providing retirement benefits is charged to the income statement over the
service lives of employees based on actuarial calculations. This provision is
measured at the present value of the estimated future cash outflows using
applicable interest rates and amounts to USD9.3 million and USD8.6 million at
June 30, 2004 and December 31, 2003, respectively. Actuarial gains and losses
are recognized over the average remaining service lives of employees.
Benefits provided by the plan are in U.S. dollars, and are calculated based on a
three-year or seven-year salary average (whichever is more favorable to the
beneficiary) for those executives who have retired or were terminated before
December 31, 2003. After this date, the benefits of the plan are calculated on a
seven-year salary average.
(9) Provisions and Other liabilities
Provisions are accrued to reflect estimates of amounts due relating to expenses
as they are incurred based on information available as of the date of
preparation of the financial statements. Furthermore, Tenaris accrues
liabilities when it is probable that future cost could be incurred and that cost
can be reasonably estimated in relation to a contingent liability or potential
claim, resulting from lawsuits and other proceedings.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
E Revenue recognition
Sales are recognized as revenues when earned and realized or realizable. This
includes satisfying the following criteria: the arrangement with the customer is
evident, usually through the receipt of a purchase order; the sales price is
fixed or determinable; delivery -as defined by the risk transfer provisions of
the sales contracts- has occurred, which may include delivery to the customer
storage facility at one of the Company's subsidiaries; and collectability is
reasonably assured. Interest income is recognized on an effective yield basis.
F Earnings per share
Earnings per share are calculated by dividing the net income attributable to
shareholders by the daily weighted average number of ordinary shares issued
during the period.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
Notes to the consolidated condensed interim financial statements
Index to the notes to the consolidated condensed interim financial statements
1 Segment information
2 Cost of sales
3 Selling, general and administrative expenses
4 Financial income (expenses), net
5 Tax charge
6 Property, plant and equipment and Intangible assets, net
7 Trade receivables
8 Borrowings
9 Derivative financial instruments
10 Contingencies, commitments and restrictions to the distribution of profits
11 2002 exchange offer and other events with impact on minority interest
12 Business and other acquisitions
13 Subsequent events
14 Related party transactions
15 Principal subsidiaries
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2004
-------------------------------------------------------------------------------------------------------------
Notes to the consolidated condensed interim financial statements
(In the notes all amounts are shown in USD thousands, unless otherwise stated)
1 Segment information
Primary reporting format: business segments
----------------------------------------------------------------------------
Welded &
Other
Metallic
Seamless Products Energy Other Total
----------------------------------------------------------------------------
Six-month period ended (Unaudited)
June 30, 2004
Net sales 1,471,735 156,224 196,727 31,509 1,856,195
Cost of sales (970,402) (116,220) (190,461) (21,029) (1,298,112)
Gross profit 501,333 40,004 6,266 10,480 558,083
Depreciation and
amortization 91,440 6,056 1,949 2,384 101,829
Six-month period ended
June 30, 2003
Net sales 1,203,017 216,395 154,504 84,555 1,658,471
Cost of sales (784,412) (158,738) (149,874) (69,632) (1,162,656)
Gross profit 418,605 57,657 4,630 14,923 495,815
Depreciation and
amortization 89,522 4,281 2,157 2,527 98,487
Tenaris's main business segment is the manufacture of seamless steel pipes.
Secondary reporting format: geographical segments
---------------------------------------------------------------------------
Middle Far East
South North East & &
America Europe America Africa Oceania Total
---------------------------------------------------------------------------
Six-month period ended (Unaudited)
June 30, 2004
Net sales 362,789 593,340 479,133 230,083 190,850 1,856,195
Depreciation and
amortization 47,916 31,225 19,425 16 3,247 101,829
Six-month period ended
June 30, 2003
Net sales 404,070 486,025 371,177 209,590 187,609 1,658,471
Depreciation and
amortization 57,480 24,969 13,141 6 2,891 98,487
Allocation of net sales is based on the customers' location. Allocation of
depreciation and amortization is based on the related assets' location.
Although Tenaris's business is managed on a worldwide basis, the companies
forming part of Tenaris operate in the five main geographical areas detailed
above.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
2 Cost of sales
Six-month period ended
June 30,
--------------------------
2004 2003
--------------------------
(Unaudited)
Raw materials, energy and consumables used and
change in inventories 852,021 725,854
Services and fees 122,564 151,207
Labor cost 174,686 144,407
Depreciation of property, plant and equipment 86,712 87,722
Amortization of intangible assets 5,132 2,653
Maintenance expenses 37,749 24,321
Allowance for contingencies 155 2,164
Allowance for obsolescence 10,517 6,349
Taxes 1,194 2,181
Others 7,382 15,798
--------------------------
1,298,112 1,162,656
==========================
3 Selling, general and administrative expenses
Six-month period ended
June 30,
--------------------------
2004 2003
--------------------------
(Unaudited)
Commissions, freights and other selling expenses 115,327 95,754
Labor cost 70,486 65,759
Services and fees 55,832 65,824
Taxes 26,301 20,795
Depreciation of property, plant and equipment 4,918 1,887
Amortization of intangible assets 5,067 6,225
Provisions for contingencies 4,571 2,351
Allowance for doubtful accounts 4,796 1,243
Others 20,067 19,398
--------------------------
307,365 279,236
==========================
4 Financial income (expenses), net
Six-month period ended
June 30,
--------------------------
2004 2003
--------------------------
(Unaudited)
Interest expense (19,224) (15,428)
Interest income 6,883 6,112
Net foreign exchange transaction losses (12,746) (26,164)
Others 5,764 1,897
--------------------------
(19,323) (33,583)
==========================
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
5 Tax charge
Income tax
Six-month period ended
June 30,
--------------------------
2004 2003
--------------------------
(Unaudited)
Current tax (a) 110,798 77,817
Deferred tax (2,941) (18,675)
Effect of currency translation on tax base (b) (7,877) (22,521)
--------------------------
99,980 36,621
==========================
(a) Current tax amounts recorded in the first semester of 2004 include
adjustments made to the preliminary provisions recorded at December 31,
2003, corresponding to Income Tax Filings for the year 2003.
(b) Tenaris, using the liability method, recognizes a deferred income tax
charge on temporary differences between the tax bases of its assets and
their carrying amounts in the financial statements. By application of this
method, Tenaris recognized gains and losses on deferred income tax due to
the effect of the change in the value of the Argentine peso on the tax
bases of the fixed assets of its Argentine subsidiaries.
6 Property, plant and equipment and Intangible assets, net
Net
Property,
Plant and Net Intangible
Equipment Assets
------------- --------------
(Unaudited) (Unaudited)
Six-month period ended June 30, 2004
Opening net book amount 1,960,314 54,037
Translation differences (40,699) 1,586
Additions 70,660 12,123
Disposals (8,794) (175)
Transfers (247) 247
Depreciation/ Amortization charge (91,630) (10,199)
------------- --------------
At June 30, 2004 1,889,604 57,619
============= ==============
7 Trade receivables
At June 30, At December
2004 31, 2003
------------------------------
(Unaudited)
Current accounts 829,177 605,119
Notes receivables 69,666 71,666
------------------------------
898,843 676,785
Allowance for doubtful accounts (27,660) (24,003)
------------------------------
871,183 652,782
==============================
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
8 Borrowings
At June 30, At December 31,
2004 2003
------------------------------
(Unaudited)
Non-current
Bank borrowings 389,412 299,965
Debentures - 65,375
Finance lease liabilities 8,028 9,439
------------------------------
397,440 374,779
------------------------------
Current
Bank borrowings 467,386 273,607
Bank overdrafts 13,664 9,804
Debentures and other loans 226,344 171,062
Finance lease liabilities 3,732 5,266
Costs for issue of debt (169) (867)
------------------------------
710,957 458,872
------------------------------
Total borrowings 1,108,397 833,651
==============================
9 Derivative financial instruments
The net fair values of derivative financial instruments at the balance sheet
date, in accordance with IAS 39, were:
Net fair value of derivative financial At June 30, At December 31,
instruments 2004 2003
------------------------------
(Unaudited)
Contracts with positive fair values:
Forward foreign exchange contracts 903 2,947
Commodities contracts 1,856 1,197
Contracts with negative fair values:
Interest rate swaps contracts (3,408) (3,505)
Forward foreign exchange contracts (4,970) (2,937)
Commodities contracts (2,311) (1,592)
10 Contingencies, commitments and restrictions to the distribution of profits
Tenaris is involved in litigation arising from time to time in the ordinary
course of business (exception made of the litigation with the consortium led by
BHP -see (i) below-). Based on management's assessment and the advice of legal
counsel, it is not anticipated that the ultimate resolution of existing
litigation will result in amounts in excess of recorded provisions that would be
material to Tenaris's consolidated financial position or income statement.
(i) Claim against Dalmine
On December 30, 2003, Dalmine and a consortium led by BHP Billiton ("BHP")
reached a full and final settlement to put an end to a litigation commenced in
1998. According to the terms of the settlement, a total of GBP108.0 million was
agreed as compensation to the consortium, inclusive of expenses. The final
settlement set forth a three-year instalments payment scheme for the balance
amount agreed net of advances previously made . The three yearly installments of
GBP30.3 million, GBP30.4 million and GBP30.4 million, are due in January 2004,
December 2004 and December 2005, respectively. A Libor + 1% interest rate
applies to the outstanding amounts. During January 2004 the first such
installment was paid.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
The pipe that has been the subject of the litigation with BHP was manufactured
and sold, and the tort alleged by BHP took place, prior to the privatization of
Dalmine. Techint Investments Netherlands BV ("Tenet") -the Tenaris subsidiary
party to the contract pursuant to which Dalmine was privatized-has commenced
arbitration proceedings against Fintecna S.p.A.-which controlled Dalmine prior
to its privatization- to compel it to indemnify Dalmine for any amounts Dalmine
paid or payable to BHP. Fintecna has denied that it has any contractual
obligation to indemnify, asserting that the indemnification claim is time-barred
under the terms of the privatization contract and, in any event, subject to a
cap of EUR13 million. Tenet disputes this assertion. No assurances can be given
as to when the arbitration proceedings currently in progress will conclude or
that Finctecna will be required to reimburse any amounts paid or payable to BHP.
For additional information regarding the litigation with BHP, refer to the
Company's consolidated financial statements at December 31, 2003.
(ii) Consorcio Siderurgia Amazonia, Ltd.
The financial restructuring of Siderurgica del Orinoco CA ("Sidor") and
Consorcio Siderurgia Amazonia, Ltd. ("Amazonia") concluded during 2003 ("2003
Restructuring") entailed the termination of certain guarantees and commitments
to further finance Amazonia and Sidor that Tenaris had entered into as a result
of the privatization of Sidor and previous restructuring agreements. The
restructuring agreements contemplate, however, certain continuing obligations
and restrictions to protect the claims held by the financial creditors of Sidor.
These obligations and restrictions include pledges over all of Amazonia's
existing shares and shares of Sidor held in its possession, that mature in the
third quarter of 2005.
During 2003, as part of the 2003 Restructuring, Tenaris obtained a 24.4% equity
stake in Ylopa Servicos de Consultadoria Lda ("Ylopa"), a special purpose
vehicle incorporated in Madeira, created to support Sidor and Amazonia -an
associated company of Tenaris- in their financial restructuring. The acquisition
was made by means of an aggregate cash contribution of USD32.9 million,
primarily in the form of subordinated convertible debt. As a result of the
consummation of the 2003 Restructuring, Ylopa (a) received new debt instruments
of Amazonia, convertible into 67.4% of the common stock of Amazonia at Ylopa's
choice, and (b) became Sidor's creditor (in a "Participation Account Agreement")
of a non interest bearing loan, payable if and when Sidor reaches certain
financial goals defined as "Excess Cash".
The 2003 Restructuring set forth a mechanism for Sidor to repay its debts under
the "Participation Account Agreement" whereby Ylopa is entitled to receive its
percentage on the participation of Sidor's Excess Cash (determined in accordance
with a specific formula). Sidor has been distributing Excess Cash to Ylopa on a
semiannual basis starting October 2003.
Tenaris participation in Ylopa's result as well as the adjustment of Amazonia's
impairment provision are included in the income statement under "Equity in
earnings of associated companies".
(iii) Tax claims
Siderca
On December 18, 2000, the Argentine tax authorities notified Siderca of an
income tax assessment related to the conversion of tax loss carry-forwards into
Debt Consolidation Bonds under Argentine Law No. 24,073. The adjustments
proposed by the tax authorities represent an estimated contingency of ARP56.6
million (approximately USD19.2 million) at June 30, 2004 in taxes and penalties.
Based on the views of Siderca's tax advisors, Tenaris believes that the ultimate
resolution of the matter will not result in a material obligation. Accordingly,
no provision was recorded in the financial statements.
Argentine subsidiaries
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
In their respective calculations of income tax liabilities for the year ended
December 31, 2002, Siderca and Siat, two subsidiaries of Tenaris domiciled in
Argentina used the inflation adjustment procedure set forth in Title VI of the
Argentine Income Tax Law. The application of such procedure, however, has been
suspended since March 1992, pursuant to article 39 of Law 24.073, which was
passed in the context of price stability prompted by the introduction of the
convertibility regime that pegged the peso to the United States dollar at a
fixed rate of ARP1=USD1.
Both subsidiaries have started legal proceedings objecting to the constitutional
grounds for the above mentioned suspension, on the ground that compliance with
it would render artificial gains arising from the impact of inflation on
monetary positions during 2002 fully taxable. Moreover and in order to protect
themselves from potential legal actions from the tax authority aimed at
collection of the resulting differences, the subsidiaries have obtained an
injunction that prevents the tax authorities from obtaining summary judgment
while resolution of the proceedings is pending. The injunction has been appealed
by the Argentine Tax Authority before the Federal Court of Appeals. Irrespective
of the final result of the legal proceedings under way, the Company maintains a
reserve for the full potential tax liability on the alleged artificial gains
plus statutory interest, but excluding fines or any other potential punitive
charges. At June 30, 2004 the referred contingent reserve totaled ARP74.9
million (approximately USD25.4 million).
(iv) Other proceedings
Dalmine is currently subject to six civil proceedings and a consolidated
criminal proceeding before the Court of Bergamo, Italy, for work-related
injuries arising from the use of asbestos in its manufacturing processes from
1960 to 1980. Of the 21 cases originally involved in the consolidated criminal
proceeding, 20 have been settled.
In addition to the civil and criminal cases, another 24 asbestos related
out-of-court claims have been forwarded to Dalmine.
Dalmine estimates that its potential liability in connection with the claims not
yet settled or covered by insurance is approximately EUR8.8 million (USD10.7
million).
(v) Commitments
The following are the main off-balance sheet commitments:
(a) Tenaris entered into an off-take contract with Complejo Siderurgico de
Guayana C.A. ("Comsigua") to purchase on a take-or-pay basis 75,000 tons of
hot briquetted iron, or HBI, annually for twenty years beginning in April
1998 with an option to terminate the contract at any time after the tenth
year upon one year's notice. Pursuant to this off-take contract, Tenaris
would be required to purchase the HBI at a formula price reflecting
Comsigua's production costs during the first eight contract years;
thereafter, it would purchase the HBI at a slight discount to market price.
The agreements among the parties provide that, if during the eight-year
period the average market price is lower than the formula price paid during
such period, Tenaris would be entitled to a reimbursement of the difference
plus interest, payable after the project financing and other specific
credits are repaid. In addition, under the shareholders' agreements,
Tenaris has the option to purchase on an annual basis up to a further
80,000 tons of HBI produced by Comsigua at market prices. Under its
off-take contract with Comsigua, as a result of weak market prices for HBI,
Tenaris paid -on average- higher-than-market prices for its HBI and
according to the original contract accumulated a credit. During the first
half of 2004, Tenaris paid lower-than-market prices for its HBI purchases,
which resulted in a decrease to the previously recorded amount. At June 30,
2004, Tenaris credit with the off-taker amounted to approximately USD10.9
million, which were completely offset by a provision.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
In connection with Tenaris's original 6.9% equity interest in Comsigua,
Tenaris paid USD8.0 million and agreed to cover its share of Comsigua's
cash operating and debt service shortfalls. In addition, Tenaris pledged
its shares in Comsigua and provided a proportional guarantee of USD11.7
million (USD4.0 million outstanding as of June 30, 2004) in support of the
USD156 million (USD54.3 million outstanding as of June 30, 2004) project
financing loan made by the International Finance Corporation, or IFC, to
Comsigua. Tenaris has been also required to pay an aggregate of USD1.5
million, representing its share of a shortfall of USD14.7 million payable
by Comsigua under the IFC loan and additional operating shortfalls of
USD5.3 million. Comsigua's financial condition was adversely affected by
the consistently weak international market conditions for HBI since its
start-up in 1998. Market conditions improved during 2003 and therefore,
Tenaris has no longer been required to pay additional amounts as a sponsor
in Comsigua. If current conditions prevail at similar levels, Tenaris would
not be required to make additional proportional payments in respect of its
participation in Comsigua and its purchases of HBI under the off-take
contract would be paid in lower-than-market prices.
(b) In August 2001, Dalmine Energie S.p.A. signed a ten year agreement with Eni
S.p.A. Gas & Power Division for the purchase of natural gas with certain
take or pay conditions until October 1st, 2011. In August 2003 Dalmine
Energie S.p.A. received confirmation from Snam Rete Gas, the transportation
company, of the yearly allocation of the necessary capacity on the
international connection infrastructure until October 1st 2010. The
outstanding value of the contract at June 30, 2004 is approximately
EUR573.0 million (USD696.5 million) taking into consideration prices
prevailing as of the time of the confirmation. In due course, Dalmine
Energie S.p.A will be requesting Snam Rete Gas, the necessary capacity for
the last year of purchase contract. Such capacity is allocated following
regulations enacted by the Italian energy regulatory authority taking into
consideration all allocation capacity requests.
(c) Under a lease agreement between Gade Srl (Italy) and Dalmine, executed in
2001, relating to a building site in Sabbio Bergamasco used by Dalmine's
former subsidiary Tad Commerciale, Dalmine is obligated to bid in the
auction for the purchase of a building from Gade for a minimum amount of
EUR8.3 million (USD10.1 million). The notice of the auction, according to
the contract, was not to take place before January 1, 2003. Up to the date
of these financial statements, the auction was not yet announced.
(d) On October 24, 2003 Tenaris subsidiaries Siderca and Generadora del Parana
S.A. ("Generadora"), together with Siderar, a related party to Tenaris,
entered into a joint gas purchase agreement with Repsol-YPF. Under the
agreement, which incorporates certain take-or-pay conditions, Tenaris
commited to purchase up to 800 million cubic meters of gas during the life
of the four-year contract, expiring at the end of 2006 at a price to be
negotiated by the parties on a yearly basis. In December 2003, Generadora
transferred all of its assets and the rights originated in the purchase
agreement with YPF to Siderca. Considering its Campana facility and the
facilities received from Generadora, Siderca has an annual estimated gas
consumption of 800 million cubic meters. At June 30, 2004, the parties to
the joint agreement had fulfilled the purchase commitments originated
therein, as a result of which all outstanding obligations resulting from
the take-or-pay provisions ceased to exist.
(e) On April 27, 2004 Tenaris Financial Services S.A., a subsidiary of the
Company, made a deposit of USD10 million at Bank San Paolo IMI S,p.A. as a
collateral for a financial transaction between the mentioned bank and
another Tenaris subsidiary.
(vi) Restrictions to the distribution of profits
Under Luxembourg law, at least 5% of the net income per year calculated in
accordance with Luxembourg law and regulations must be allocated to the creation
of a reserve until such reserve has reached to an amount equal to 10% of the
share capital. At June 30, 2004 the Company has created this reserve in full.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
Shareholders' equity at June 30, 2004 under Luxembourg law and regulations
comprises the following captions:
-------------
Thousands of
USD
-------------
Share capital 1,180,537
Legal reserve 118,054
Share premium 609,733
Other distributable reserve 82
Retained earnings including net income for the six month
period ended June 30, 2004 406,732
-------------
Total shareholders equity according to Luxembourg law 2,315,138
=============
Dividends may be paid by Tenaris to the extent distributable retained earnings
and distributable reserve calculated in accordance with Luxembourg law and
regulations exist.
At June 30, 2004, the distributable reserve and retained earnings of Tenaris
under Luxembourg law totalled USD406.8 million - as detailed below- and were
lower than the consolidated retained earnings of the Company, calculated under
IFRS.
-------------
Thousands of
USD
-------------
Distributable reserve and retained earnings at December 31, 298,035
2003 under Luxembourg law
Dividends received 242,348
Other income and expenses for the six-month period ended
June 30, 2004 1,402
Increase in reserve due to capital increase
(see Note 11 (b)) 82
Dividends paid (135,053)
-------------
Distributable reserve and retained earnings at
June 30, 2004 under Luxembourg law 406,814
=============
11 2002 exchange offer and other events with impact on minority interest
(a) 2002 exchange offer
On October 18, 2002, Sidertubes -at that time the controlling shareholder-
contributed all of its assets to Tenaris in exchange for shares of its common
stock. The assets that Sidertubes contributed included the shares and voting
rights that it held directly in Siderca S.A.I.C. ("Siderca"), Tubos de Acero de
Mexico S.A. ("Tamsa"), Dalmine S.pA. ("Dalmine"), Tenaris Global Services S.A.
and Invertub S.A. Siderca held additional participations in Tamsa, Dalmine,
Metalmecanica S.A and Metalcentro S.A.
During 2002, Tenaris successfully completed an offer to exchange shares and ADSs
of its common stock for all outstanding Class A ordinary shares and ADSs of
Siderca, all outstanding common shares and ADSs of Tamsa and all outstanding
ordinary shares of Dalmine ("the 2002 Exchange Offer"). These acquisitions were
accounted for under the purchase method and the acquisition costs, which
totalled USD811.3 million gave rise to a net negative goodwill of USD5.2
million.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
(b) Subsequent acquisitions and residual offers
Acquisition of Remaining Minority Interest in Tamsa and Capital Increase
On September 15, 2003 Tenaris concluded an exchange offer in the United States
for shares and ADSs of Tamsa. As per the commitment assumed by Tenaris at the
time of the 2002 Exchange Offer, the exchange ratio used was equal to that of
the 2002 Exchange Offer. Thus, in exchange for the Tamsa shares received,
Tenaris issued 19,586,870 new shares of its common stock for USD51,611 thousand
The acquisition cost was determined on the bases of the price of Tenaris's
shares on September 12, 2003.
For the 356,392 shares of Tamsa's common stock outstanding in the Mexican
market, Tenaris and Sidertubes, the company formerly controlling Tenaris,
established a fiduciary account with Banamex, in which Sidertubes deposited the
necessary number of Tenaris's shares to provide for the exchange of the
remaining interests in Tamsa. According to the terms of the fiduciary account,
holders of Tamsa's common stock were able to exchange their shares under the
escrow arrangement during a six-month period. At the end of the six-month
exchange offer period, investors had exchanged 235,512 shares of Tamsa for
249,166 shares of Tenaris. As a result, Tenaris was indebted to Sidertubes for
249,166 shares with a market value of USD0.8 million.
On February 13, 2004, Tenaris increased its capital by issuing 249,166 new
common shares, which were transferred to Sidertubes to pay off its outstanding
loan. The capital increase was allocated USD0.249 million to share capital,
USD0.025 million to legal reserve, USD0.464 million to a share premium and
USD0.082 million to other distributable reserve, in accordance with Luxemburg
law.
As of June 30, 2004, Tenaris held, directly or indirectly, more than 99.9% of
the common stock of Tamsa.
Subsequent acquisitions of Dalmine Shareholding
Pursuant to purchases made in the open market up to March 10, 2003, Tenaris
held, directly or indirectly, 90.0003% of Dalmine's common stock. On July 11,
2003, Tenaris concluded a cash offer for the remaining minority interest in
Dalmine and announced that it held directly or indirectly, 96.8% of the shares
of Dalmine. At June 30, 2004, as a result of shares accepted and effectively
paid during the tender offer as well as shares purchased in subsequent
transactions, Tenaris held directly or indirectly 99.1% of the shares of
Dalmine.
Acquisition of Remaining Minority Interest in Siderca
On April 3, 2003 the Argentine securities regulator approved Tenaris's proposal
to acquire the remaining minority interest in Siderca, which amounted to 0.89%
of the shares of such company. As a result of Tenaris's gaining beneficial
control of 100% of the common stock of Siderca this company was effectively
delisted and its ADR program terminated.
12 Business and other acquisitions
As explained in Note 11 (b), during the six-month period ended June 30, 2004
Tenaris acquired 0.03 % of Tamsa and 0.31% of Dalmine, for considerations of
USD0.3 million -in kind as noted in Note 11 (b)- and USD0.5 million,
respectively.
On January 23, 2004 Tenaris Investments Limited was incorporated in Ireland to
assist the financial activities of the Company and its other subsidiaries; on
that date, Tenaris underwrote all of the common shares of the new company and in
March 2004, increased its capital to USD10,000.
Additionally, on February 2, 2004, Tenaris completed the purchase of the land
and manufacturing facilities that were previously leased by its Canadian
operating subsidiary. The assets were acquired from Algoma Steel Inc. for the
price of approximately USD9.6 million, plus transaction costs.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
In June 2004, Materiales Siderurgicos Masisa S.A. ("Masisa") was incorporated in
Venezuela to acquire an industrial facility for the production of pre-reduced
hot briquetted iron. At June 30, 2004 Tenaris held 55% of Masisa.
13 Subsequent events
On July 8, 2004 the Court of First Instance of the European Communities has
upheld the decision made by the European Commission on December 8, 1999 to fine
eight international steel pipe manufacturers, including Tenaris's Italian
subsidiary Dalmine S.p.A., for violation of European competition laws. According
to the Court's decision, Dalmine is required to pay a fine of EUR 10.1 million.
Since the infringements for which the fine was imposed took place prior to the
acquisition of Dalmine by Tenaris in 1996, Dalmine's former owner, who may
instruct Dalmine to appeal, is required and has acknowledged its responsibility
to pay 84.1% of the fine. The remaining 15.9% of the fine will be paid out of
the provision that Dalmine established in 1999 for such proceeding.
On July 9, 2004 Tenaris and Siderurgica del Orinoco, Sidor CA acquired from
Posven, through the jointly owned company Materiales Siderurgicos Masisa S.A.,
its industrial facility for the production of pre-reduced hot briquetted iron,
or HBI, located in Ciudad Guayana, Venezuela, for the price of USD120 million.
Tenaris reduced the percentage of ownership, and now it holds 50.2% of Masisa,
while Sidor ownes the remaining 49.8%.
On July 26, 2004 Tenaris acquired all of the shares of Tubman International
Ltd., a company incorporated under the laws of Gibraltar, which owns 84.86% of
S. C. Silcotub S.A. and controlling interests in two minor subsidiaries, and all
of the shares of Intermetal Com S.r.l., all of them incorporated in Romania. The
shares of Tubman Intenational Ltd. and Intermetal Com S.r.l. where purchased for
a price of USD42 million. S. C. Silcotub S.A. is the leading Romanian producer
of small diameter seamless pipes for OCTG and other applications that has an
annual production capacity of 180,000 tons of seamless pipes. Its facilities
include a continuous mandrel mill, finishing facilities and a cold-drawing
plant. S. C. Silcotub S.A. is listed in the Bucharest Stock Exchange, while two
of the other subsidiaries are listed in the Romanian Electronic Exchange RASDAQ.
14 Related party transactions
The Company is controlled by I.I.I. Industrial Investments Inc. B.V.I. which at
June 30, 2004, owned 60.2% of Tenaris' shares and voting rights. At that date
the remaining 39.8% was publicly traded.
The following transactions were carried out with related parties:
Six-month period ended June,
-----------------------------
2004 2003
-----------------------------
(Unaudited)
(i) Transactions
(a) Sales of goods and services
Sales of goods 24,334 32,421
Sales of services 8,308 4,791
-----------------------------
32,642 37,212
=============================
(b) Purchases of goods and services
Purchases of goods 26,807 45,745
Purchases of services 22,589 41,155
-----------------------------
49,396 86,900
=============================
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
------------------------------------------------------------------------
six-month period ended June 30, 2004
------------------------------------
At June 30, At December 31,
2004 2003
-----------------------------
(Unaudited)
(ii) Period-end balances
(a) Arising from sales/purchases of
goods/services
Receivables from related parties 39,031 42,116
Payables to related parties (21,048) (37,219)
-----------------------------
17,983 4,897
=============================
(b) Cash and cash equivalents
Time deposits 90 420
=============================
(c) Other balances
Trust fund 118,759 118,087
Loan to Ylopa 36,070 33,508
-----------------------------
154,829 151,595
=============================
(d) Financial debt
Borrowings and overdrafts (5,396) (5,716)
Borrowings from trust fund (1,789) (1,789)
-----------------------------
(7,185) (7,505)
=============================
15 Principal subsidiaries
The following is a list of Tenaris's subsidiaries and its direct or indirect
percentage of ownership of each company at June 30, 2004 and 2003 is disclosed.
---------------------------------------------------------------------------------------------------------------
Company Country of Main activity Percentage of
Organization ownership at
June 30,
--------------
2004 2003
---------------------------------------------------------------------------------------------------------------
Algoma Tubes Inc. Canada Manufacturing of seamless steel 100% 98%
pipes
---------------------------------------------------------------------------------------------------------------
Confab Industrial S.A. and subsidiaries (a) Brazil Manufacturing of welded steel 39% 39%
pipes and capital goods
---------------------------------------------------------------------------------------------------------------
Dalmine Holding B.V. and subsidiaries Netherlands Holding company 99% 91%
---------------------------------------------------------------------------------------------------------------
Dalmine S.p.A. Italy Manufacturing of seamless steel 99% 91%
pipes
---------------------------------------------------------------------------------------------------------------
Empresas Riga S.A. de C.V. Mexico Manufacturing of welded fittings 100% 94%
for seamless steel pipes
---------------------------------------------------------------------------------------------------------------
Exiros S.A. (b) Uruguay Procurement services for 100% 100%
industrial companies
---------------------------------------------------------------------------------------------------------------
Information Systems and Technologies N.V. Netherlands Software development and 75% 71%
and subsidiaries maintenance
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Inmobiliaria Tamsa S.A. de C.V. Mexico Leasing of real estate 100% 94%
---------------------------------------------------------------------------------------------------------------
Insirger S.A. and subsidiaries (c) Argentina Electric power generation 100% 100%
---------------------------------------------------------------------------------------------------------------
Invertub S.A. and subsidiaries Argentina Holding of investments 100% 100%
---------------------------------------------------------------------------------------------------------------
Lomond Holdings B.V. and subsidiaries Netherlands Procurement services for 100% 96%
industrial companies
---------------------------------------------------------------------------------------------------------------
Materiales Siderurgicos Masisa S.A. (d) Venezuela Manufacturing of steel products 55% -
---------------------------------------------------------------------------------------------------------------
Metalcentro S.A. Argentina Manufacturing of pipe-end 100% 100%
protectors and lateral impact
tubes
---------------------------------------------------------------------------------------------------------------
Metalmecanica S.A. Argentina Manufacturing of steel products 100% 100%
for oil extraction
---------------------------------------------------------------------------------------------------------------
NKKTubes K.K. Japan Manufacturing of seamless steel 51% 51%
pipes
---------------------------------------------------------------------------------------------------------------
Scrapservice S.A. Argentina Processing of scrap 75% 75%
---------------------------------------------------------------------------------------------------------------
Siat S.A. Argentina Manufacturing of welded steel 82% 82%
pipes
---------------------------------------------------------------------------------------------------------------
Siderca International A.p.S. Denmark Holding company 100% 100%
---------------------------------------------------------------------------------------------------------------
Siderca S.A.I.C. Argentina Manufacturing of seamless steel 100% 100%
pipes
---------------------------------------------------------------------------------------------------------------
Sidtam Limited B.V.I. Holding company 100% 97%
---------------------------------------------------------------------------------------------------------------
SO.PAR.FI Dalmine Holding S.A. Luxembourg Holding company 99% 91%
---------------------------------------------------------------------------------------------------------------
Sociedad Industrial Puntana S.A. (c) Argentina Manufacturing of steel products 100% -
---------------------------------------------------------------------------------------------------------------
Socominter S.A. Venezuela Marketing of steel products 100% 100%
---------------------------------------------------------------------------------------------------------------
Socominter Ltda. Chile Marketing of steel products 100% 100%
---------------------------------------------------------------------------------------------------------------
Talta - Trading e Marketing Lda. (d) Madeira Holding Company 100% -
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services (Panama) S.A. Panama Marketing of steel products 100% 100%
---------------------------------------------------------------------------------------------------------------
Tamsider S.A. de C.V. and subsidiaries Mexico Promotion and organization of 100% 94%
steel-related companies
---------------------------------------------------------------------------------------------------------------
Tamtrade S.A.de C.V. Mexico Marketing of steel products 100% 94%
---------------------------------------------------------------------------------------------------------------
Techint Investment Netherlands B.V. Netherlands Holding company 100% 100%
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services Norway AS Norway Marketing of steel products 100% 100%
---------------------------------------------------------------------------------------------------------------
Tenaris Autopartes S.A. de C.V. (b) Mexico Manufacturing of supplies for 100% -
the automotive industry
---------------------------------------------------------------------------------------------------------------
Tenaris Connections A.G. and subsidiaries Liechtenstein Ownership and licensing of steel 100% 95%
technology
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Tenaris Financial Services S.A. Uruguay Financial Services 100% 100%
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services S.A. Uruguay Holding of investments and 100% 100%
marketing of steel products
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services (Canada) Inc. Canada Marketing of steel products 100% 100%
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services (U.S.A.) Corporation U.S.A. Marketing of steel products 100% 100%
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services (UK) Ltd United Kingdom Marketing of steel products 100% 100%
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services (Japan) K.K. Japan Marketing of steel products 100% 100%
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services B.V. Netherlands Sales agent of steel products 100% 100%
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services de Bolivia S.R.L. Bolivia Marketing of steel products 100% 100%
(previously Socominter de Bolivia S.R.L.)
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services Far East Pte. Ltd. Singapore Marketing of steel products 100% 100%
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services Korea (b) Korea Marketing of steel products 100% -
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services LLC U.S.A. Sales agent of steel products 100% 100%
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services (B.V.I.) Ltd. B.V.I. Holding company 100% 100%
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services Nigeria Ltd. Nigeria Marketing of steel products 100% 100%
(Previously Tubular DST Nigeria Ltd.)
---------------------------------------------------------------------------------------------------------------
Tenaris West Africa Ltd. United Kingdom Finishing of steel pipes 100% 99%
---------------------------------------------------------------------------------------------------------------
Texas Pipe Threaders Co. U.S.A. Finishing and marketing of steel 100% 100%
pipes
---------------------------------------------------------------------------------------------------------------
Tubos de Acero de Mexico S.A. Mexico Manufacturing of seamless steel 100% 94%
pipes
---------------------------------------------------------------------------------------------------------------
Tubos de Acero de Venezuela S.A. Venezuela Manufacturing of seamless steel 70% 66%
pipes
---------------------------------------------------------------------------------------------------------------
Tenaris Global Services Ecuador S.A. (b) Ecuador Marketing of steel products 100% -
---------------------------------------------------------------------------------------------------------------
Tenaris Investments Ltd. (d) Ireland Holding company 100% -
---------------------------------------------------------------------------------------------------------------
(a) Tenaris holds 99% of the voting shares of Confab Industrial S.A. and has,
directly or indirectly, the majority of voting rights in all of its
subsidiaries.
(b) Incorporated during 2003
(c) Acquired during 2003
(d) Incorporated during 2004
Carlos Condorelli
Chief Financial Officer