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 9, 2006
TENARIS, S.A.
(Translation of Registrant's name into English)
TENARIS, S.A.
46a, Avenue John F. Kennedy
L-1855 Luxembourg
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or 40-F.
Form 20-F [X] Form 40-F []
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12G3-2(b) under the Securities Exchange Act of
1934.
Yes [] No [X]
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-__.
The attached material is being furnished to the Securities and Exchange
Commission pursuant to Rule 13a-16 and Form 6-K under the Securities Exchange
Act of 1934, as amended. This report contains Tenaris's press release announcing
its 2006 third quarter results.
Tenaris Announces 2006 Third Quarter Results
The financial and operational information contained in this press
release is based on consolidated condensed interim financial
statements prepared in accordance with International Financial
Reporting Standards (IFRS) and presented in U.S. dollars.
Business Editors
LUXEMBOURG--(BUSINESS WIRE)--Nov. 8, 2006--Tenaris S.A. (NYSE:TS)
(BCBA:TS) (BMV:TS) (BI:TEN) ("Tenaris") today announced its results
for the third quarter ended September 30, 2006 with comparison to its
results for the third quarter ended September 30, 2005.
Summary of 2006 Third Quarter Results
(Comparison with second quarter of 2006 and third quarter of 2005)
Q3 2006 Q2 2006 Q3 2005
Net sales (US$ million) 1,922.5 1,962.3 (2%) 1,640.4 17%
Operating income (US$ million) 695.8 692.8 0% 475.2 46%
Net income (US$ million)(1) 510.0 495.8 3% 350.9 45%
Shareholders' net income (US$
million) 479.1 471.8 2% 318.9 50%
Earnings per ADS (US$)(2) 0.81 0.80 2% 0.54 50%
Earnings per share (US$) 0.41 0.40 2% 0.27 50%
EBITDA (US$ million) 752.0 747.9 1% 528.1 42%
EBITDA margin (% of net sales) 39% 38% 32%
(1) As required by IAS 1 (revised) as from January 1, 2005 the income
for the period disclosed in the income statement does not show
minority interest. Earnings per share continue to be calculated on
the net income attributable solely to the equity holders of Tenaris.
(2) As of April 26, 2006, the ratio of ADSs to ordinary shares was
changed from 1:10 to 1:2. Earnings per ADS are stated using the new
ratio.
Global demand from the oil and gas industry for our OCTG and line
pipe products remained strong throughout the quarter led by growing
demand for TenarisBlue(R) products in the Middle East and Africa. Oil
and gas drilling activity and demand for our products and services
continue to expand in this region which holds the majority of the
world's known reserves. Earnings per share rose 50% year on year and
matched that of the second quarter notwithstanding annual maintenance
shutdowns in Europe and Canada coinciding with the holiday season.
Free cash flow (net cash provided by operations less capital
expenditures) was US$465.1 million and our net cash position increased
to US$554.5 million at September 30 just prior to the payment of the
Maverick acquisition.
Market Background and Outlook
Oil and gas companies continue to increase their exploration and
production spending in response to sustained high oil and gas prices,
declining production at mature fields and projected increases in
global demand for oil and gas. This is resulting in increased drilling
activity and demand for our seamless OCTG products in most markets
worldwide. The Canadian and US markets are more sensitive than other
markets to natural gas prices and in Canada there was a slowdown in
natural gas drilling activity, particularly in less productive shallow
wells, during the latter half of the quarter following declines in
North American natural gas prices.
The international count of active drilling rigs, as published by
Baker Hughes excluding, for comparative purposes, the rig count in
Iran and Sudan, averaged 941 during the third quarter of 2006, an
increase of 10% compared to the same quarter of the previous year and
an increase of 3% compared to the second quarter of 2006. The
corresponding percentage year on year quarterly rig count in the
Canadian markets showed a decline of 1% and that of the US market
showed an increase of 20%.
Favorable market conditions for our products and relatively stable
raw material and energy costs have allowed us to record year on year
sales growth and improvements in gross margins for our seamless pipe
products in the year to date. Raw material and energy costs rose
slightly during the third quarter and are expected to rise again in
the fourth quarter but we expect to maintain a similar level of gross
margin on our seamless pipe products during the fourth quarter.
Demand for our welded pipe products, which has been weak during
the past three quarters following gas pipeline project delays in
Brazil and Argentina, is expected to recover in the fourth quarter and
rebound strongly in 2007 following the receipt of orders for the 1,000
km GASCAV phase of the GASENE project in Brazil and the 1,100 km loops
expansion project for the TGN and TGS pipeline networks in Argentina.
Deliveries for these two projects will take place throughout 2007.
Acquisition of Maverick
On October 5, 2006, we acquired Maverick Tube Corporation, a
leading North American producer of welded OCTG, line pipe and coiled
tubing for use in oil and natural gas wells with pipe manufacturing
facilities in the United States, Canada and Colombia. The value of the
transaction was US$3,185 million including Maverick's net debt. Prior
to our acquisition, Maverick, for the first six months of 2006,
reported shipments of 735,000 short tons, net revenues of US$1,027.0
million and net income of US$124.6 million under US GAAP. Tenaris will
consolidate Maverick's balance sheet and results of operations in its
consolidated financial statements beginning on the fourth quarter of
2006.
Analysis of 2006 Third Quarter Results
(metric tons)
Sales volume Q3 2006 Q3 2005 Increase/(Decrease)
North America 163,000 198,000 (18%)
Europe 159,000 140,000 14%
Middle East & Africa 202,000 149,000 36%
Far East & Oceania 80,000 92,000 (13%)
South America 105,000 104,000 1%
Total seamless pipes 709,000 682,000 4%
Welded pipes 69,000 124,000 (44%)
Total steel pipes 778,000 806,000 (3%)
Sales volume of seamless pipes increased by 4% to 709,000 tons in
the third quarter of 2006 from 682,000 tons in the same period of
2005. We recorded a substantial increase in sales volume in the Middle
East and Africa reflecting higher oil and gas drilling activity and
strong demand for our OCTG products in the Middle East and North
Africa. Sales in North America were affected primarily by lower
drilling activity in Mexico and lower sales of line pipe for Gulf of
Mexico deepwater and process and power plant customers in the USA.
Sales in Europe increased due to higher sales of line pipe products to
process and power plant customers.
Sales volumes of welded pipes decreased by 44% to 69,000 tons in
the third quarter of 2006 from 124,000 tons in the same period of
2005. The decrease in sales was due to substantially reduced demand
for welded pipes for gas pipeline projects in Brazil and Argentina.
(US$ million)
Net sales Q3 2006 Q3 2005 Increase/(Decrease)
Seamless pipes 1,579.6 1,253.9 26%
Welded pipes(a) 117.6 221.0 (47%)
Energy 119.9 106.4 13%
Others 105.4 59.1 78%
Total 1,922.5 1,640.4 17%
(a) Includes other metallic products produced by Confab, our
Brazilian welded pipe subsidiary
Net sales in the quarter ended September 30, 2006 increased 17% to
US$1,922.5 million, compared to US$1,640.4 million in the
corresponding quarter of 2005. Net sales of seamless pipes rose by 26%
as the average selling price for our seamless pipe products rose 21%
compared to the corresponding quarter of 2005, reflecting increased
sales of premium OCTG products and higher selling prices for most of
our products. Net sales of welded pipes, which included US$23 million
in sales of other metallic products in the third quarter of 2006 and
US$18 million of such sales in the third quarter of 2005, fell by 47%
due primarily to the decline in sales volume. Net sales of energy rose
by 13% due to higher Italian gas and electric energy prices and the
revaluation of the euro against the US dollar. Net sales of other
goods and services increased 78% due primarily to higher sales of
pre-reduced hot briquetted iron from our plant in Venezuela.
(percentage of net sales)
Cost of sales Q3 2006 Q3 2005
Seamless pipes 45% 53%
Welded pipes 75% 69%
Energy 98% 100%
Others 65% 63%
Total 51% 59%
Cost of sales, expressed as a percentage of net sales, decreased
to 51% in the third quarter of 2006, compared to 59% in the same
period of 2005 reflecting higher gross margins on our sales of
seamless pipe products and a higher proportion of seamless pipe sales
in total sales. Cost of sales for seamless pipe products, expressed as
a percentage of net sales, decreased to 45% in the third quarter of
2006 compared to 53% in the same period of 2005 reflecting product
repositioning efforts towards higher margin products and increased
selling prices for our products. Cost of sales for welded pipe
products, expressed as a percentage of net sales, increased to 75% in
the third quarter of 2006 compared to 69% in the same period of 2005
reflecting the impact of an increased proportion of lower-margin
export sales in the sales mix.
Selling, general and administrative expenses, or SG&A, increased
slightly as a percentage of net sales to 12.8% in the quarter ended
September 30, 2006 compared to 12.6% in the corresponding quarter of
2005 due primarily to higher labor costs and higher commissions,
freight and other selling expenses reflecting higher export sales of
welded pipes.
Net financial expense was US$3.7 million in the third quarter of
2006, compared to US$5.1 million in the same period of 2005. A loss of
US$5.7 million on net foreign exchange transactions and changes in
fair value of derivative instruments was partially offset by net
interest income of US$2.2 million.
Equity in earnings of associated companies generated a gain of
US$29.7 million in the third quarter of 2006, compared to a gain of
US$26.5 million in the third quarter of 2005. The gain in the third
quarter of 2006 was derived mainly from our 11.5% equity shareholding
in Ternium and the gain in the third quarter of 2005 was derived
mainly from our prior investment in Sidor.
Income tax charges totalled US$211.7 million in the third quarter
of 2006, equivalent to 31% of income before equity in earnings of
associated companies and income tax and included the benefit of a
favorable tax judgment in Mexico in the amount of US$5.6 million.
Income attributable to minority interest amounted to US$30.9
million in the third quarter of 2006, compared to US$32.0 million in
the corresponding quarter of 2005 as an improvement in operating and
financial results at our NKKTubes and Matesi subsidiaries largely
offset weaker operating and financial results at our Confab
subsidiary.
Cash Flow and Liquidity
Net cash provided by operating activities during the third quarter
of 2006 was US$598.1 million. Working capital increased by US$31.1
million during the third quarter mainly due to an increase in
inventories which was partially compensated by an increase in customer
advances. Inventories increased by US$118.0 million primarily
reflecting raw material cost increases and an increase in inventories
of finished goods at the end of the period. Customer advances
increased by US$83.6 million primarily reflecting the increase in our
welded pipe backlog.
Capital expenditures increased to US$133.0 million for the third
quarter of 2006 compared to US$62.8 million in the third quarter of
2005 reflecting the ongoing implementation of our program to increase
capacity for high-end products.
Our net cash position (cash and cash equivalents and other current
investments less borrowings) increased by US$472.3 million during the
third quarter and amounted to US$554.5 million at September 30, 2006
compared to net debt of US$183.0 million at December 31, 2005. Total
financial debt was US$875.3 million at September 30, 2006 compared to
US$1,010.3 million at December 31, 2005. On October 5, 2006 we
borrowed an additional US$2.68 billion in connection with our Maverick
acquisition.
Analysis of 2006 Nine Months Results
Net income attributable to equity holders of the Company during
the first nine months of 2006 was US$1,370.6 million, or US$1.16 per
share (US$2.32 per ADS), or 24% of net sales, which compares with net
income attributable to equity holders of the Company during the first
nine months of 2005 of US$896.6 million, or US$0.76 per share (US$1.52
per ADS), or 19% of net sales. Operating income was US$1,989.5
million, or 35% of net sales, compared to US$1,371.5 million, or 28%
of net sales. Operating income plus depreciation and amortization was
US$2,155.5 million, or 38% of net sales, compared to US$1,528.2
million, or 32% of net sales.
(metric tons)
Sales volume 9M 2006 9M 2005 Increase/(Decrease)
North America 549,000 651,000 (16%)
Europe 531,000 484,000 10%
Middle East & Africa 561,000 378,000 48%
Far East & Oceania 242,000 292,000 (17%)
South America 305,000 328,000 (7%)
Total seamless pipes 2,188,000 2,132,000 3%
Welded pipes 217,000 392,000 (45%)
Total steel pipes 2,405,000 2,523,000 (5%)
(US$ million)
Net sales 9M 2006 9M 2005 Increase/(Decrease)
Seamless pipes 4,657.5 3,667.0 27%
Welded pipes(b) 362.5 636.8 (43%)
Energy 403.7 362.6 11%
Others 244.2 171.1 43%
Total 5,667.9 4,837.6 17%
(b) Includes other metallic products produced by Confab, our
Brazilian welded pipe subsidiary
Net sales in the nine months ended September 30, 2006 increased
17% to US$5,667.9 million, compared to US$4,837.6 million in the
corresponding nine months of 2005. Net sales of seamless pipes rose by
27%, due primarily to higher sales of high-end products and higher
selling prices for all products. Net sales of welded pipes, which
included US$47 million of other metallic products in the first nine
months of 2006 and US$47 million of such sales in the first nine
months of 2005, fell by 43% due to the decline in sales for gas
pipeline projects in Brazil and Argentina. Net sales of energy rose by
11% due to higher Italian gas and electric energy prices. Net sales of
other goods and services increased 43% due to higher sales of
pre-reduced hot briquetted iron from our plant in Venezuela.
(percentage of net sales)
Cost of sales 9M 2006 9M 2005
Seamless pipes 46% 54%
Welded pipes 72% 67%
Energy 97% 98%
Others 69% 61%
Total 52% 59%
Cost of sales, expressed as a percentage of net sales, decreased
to 52% in the first nine months of 2006, compared to 59% in the same
period of 2005 reflecting higher gross margins on our sales of
seamless pipe products and a higher proportion of seamless pipe sales
in total sales. Cost of sales for seamless pipe products, expressed as
a percentage of net sales, decreased to 46% in the first nine months
of 2006 compared to 54% in the same period of 2005 reflecting a higher
proportion of higher-margin, high-end products in the product mix and
higher selling prices for our products. Cost of sales for welded pipe
products, expressed as a percentage of net sales, increased to 72% in
the first nine months of 2006 compared to 67% in the same period of
2005 reflecting the impact of an increased proportion of lower-margin
export sales in the sales mix.
Selling, general and administrative expenses, or SG&A, remained
stable as a percentage of net sales at 12.6% in the nine months ended
September 30, 2006 compared to 12.5% in the corresponding nine months
of 2005.
Net financial income was US$10.9 million in the first nine months
of 2006, compared to a net financial expense of US$89.6 million in the
same period of 2005. Net interest income was US$1.5 million in the
first nine months of 2006 compared to a net interest expense of
US$24.7 million in the same period of 2005, primarily reflecting
changes in the net debt position. A gain of US$9.3 million on net
foreign exchange transactions and changes in fair value of derivative
instruments was recorded in the first nine months of 2006, compared to
a loss of US$70.2 million during the first nine months of 2005. These
gains and losses on net foreign exchange transactions and changes in
fair value of derivative instruments are to a large extent offset by
changes to our net equity position and arise due to the fact that many
of our subsidiaries prepare their financial statements in currencies
other than the US dollar in accordance with IFRS.
Equity in earnings of associated companies generated a gain of
US$76.7 million in the first nine months of 2006, compared to a gain
of US$94.9 million in the first nine months of 2005. The gain in the
first nine months of 2006 was derived mainly from our 11.5% equity
shareholding in Ternium and the gain in the first nine months of 2005
was derived mainly from our prior investment in Sidor.
Income tax charges totalled US$629.7 million in the first nine
months of 2006, equivalent to 31% of income before equity in earnings
of associated companies and income tax.
Income attributable to minority interest was US$76.8 million in
the first nine months of 2006, compared to US$75.9 million in the
first nine months of 2005 as better operating and financial results at
our NKKTubes subsidiary were largely offset by weaker operating and
financial results at our Confab subsidiary.
Some of the statements contained in this press release are
"forward-looking statements". Forward-looking statements are based on
management's current views and assumptions and involve known and
unknown risks that could cause actual results, performance or events
to differ materially from those expressed or implied by those
statements. These risks include but are not limited to risks arising
from uncertainties as to future oil and gas prices and their impact on
investment programs by oil and gas companies.
Consolidated condensed interim income statement
Three-month period Nine-month period
ended September 30, ended September 30,
------------------------------------------
(all amounts in thousands
of U.S. dollars) 2006 2005 2006 2005
------------------------------------------
(Unaudited)
Net sales 1,922,491 1,640,385 5,667,908 4,837,623
Cost of sales (982,487) (962,929)(2,974,015)(2,871,831)
------------------------------------------
Gross profit 940,004 677,456 2,693,893 1,965,792
Selling, general and
administrative expenses (246,506) (205,937) (712,882) (603,530)
Other operating income, net 2,274 3,696 8,465 9,265
------------------------------------------
Operating income 695,772 475,215 1,989,476 1,371,527
Financial income
(expenses), net (3,743) (5,141) 10,918 (89,591)
------------------------------------------
Income before equity in
earnings of associated
companies and income tax 692,029 470,074 2,000,394 1,281,936
Equity in earnings of
associated companies 29,653 26,502 76,725 94,944
------------------------------------------
Income before income tax 721,682 496,576 2,077,119 1,376,880
Income tax (211,726) (145,678) (629,709) (404,392)
------------------------------------------
Income for the period 509,956 350,898 1,447,410 972,488
Attributable to:
Equity holders of the
Company 479,105 318,897 1,370,564 896,587
Minority interest 30,851 32,001 76,846 75,901
------------------------------------------
509,956 350,898 1,447,410 972,488
------------------------------------------
Consolidated condensed interim balance sheet
(all amounts in thousands
of U.S. dollars) At September 30, 2006 At December 31, 2005
--------------------- ---------------------
(Unaudited)
ASSETS
Non-current assets
Property, plant and
equipment, net 2,403,926 2,230,038
Intangible assets, net 165,673 159,099
Investments in
associated companies 392,011 257,234
Other investments 27,473 25,647
Deferred tax assets 248,032 194,874
Receivables 39,310 3,276,425 65,852 2,932,744
---------- ----------
Current assets
Inventories 1,668,723 1,376,113
Receivables and
prepayments 192,433 143,282
Current tax assets 144,307 102,455
Trade receivables 1,438,470 1,324,171
Other investments 134,651 119,907
Cash and cash
equivalents 1,295,184 4,873,768 707,356 3,773,284
---------- ---------- ---------- ----------
Total assets 8,150,193 6,706,028
EQUITY
Capital and reserves
attributable to the
Company's equity holders
Share capital 1,180,537 1,180,537
Legal reserves 118,054 118,054
Share premium 609,733 609,733
Currency translation
adjustments (29,371) (59,743)
Other reserves 28,835 2,718
Retained earnings 2,822,834 4,730,622 1,656,503 3,507,802
---------- ----------
Minority interest 328,255 268,071
---------- ----------
Total equity 5,058,877 3,775,873
---------- ----------
LIABILITIES
Non-current liabilities
Borrowings 554,094 678,112
Deferred tax liabilities 361,974 353,395
Other liabilities 163,582 154,378
Provisions 80,079 43,964
Trade payables 521 1,160,250 1,205 1,231,054
---------- ----------
Current liabilities
Borrowings 321,217 332,180
Current tax liabilities 463,448 452,534
Other liabilities 187,524 138,875
Provisions 9,037 36,945
Customer advances 180,381 113,243
Trade payables 769,459 1,931,066 625,324 1,699,101
---------- ---------- ---------- ----------
Total liabilities 3,091,316 2,930,155
---------- ----------
Total equity and
liabilities 8,150,193 6,706,028
Consolidated condensed interim cash flow statement
Three-month period Nine-month period
ended September ended September
30, 30,
------------------ -------------------
(all amounts in thousands of
U.S. dollars) 2006 2005 2006 2005
------------------ -------------------
(Unaudited)
Cash flows from operating
activities
Income for the period 509,956 350,898 1,447,410 972,488
Adjustments for:
Depreciation and amortization 56,218 52,911 166,008 156,654
Income tax accruals less
payments 92,107 68,669 1,947 104,425
Equity in earnings of associated
companies (29,653) (26,502) (76,725) (94,944)
Interest accruals less payments,
net 2,920 (3,204) 1,456 3,006
Income from disposal of
investment - - (6,933) -
Changes in provisions 2,676 2,213 8,207 (423)
Proceeds from Fintecna
arbitration award net of BHP
settlement - - - 66,594
Changes in working capital (31,113) 32,730 (250,654)(301,376)
Other, including currency
translation adjustment (5,025) 8,570 21,447 25,549
------------------ -------------------
Net cash provided by operating
activities 598,086 486,285 1,312,163 931,973
------------------ -------------------
Cash flows from investing
activities
Capital expenditures (132,976) (62,794) (302,077)(194,428)
Acquisitions of subsidiaries (718) (72) (39,828) (48,002)
Convertible loan to associated
companies - (39,944) - (39,944)
Proceeds from disposal of
property, plant and equipment
and intangible assets 13,180 2,523 16,568 5,413
Dividends and distributions
received from associated
companies - 18,009 - 59,127
Changes in restricted bank
deposits 1,400 426 2,027 10,060
Reimbursement from trust funds - - - 119,666
Investments in short terms
securities 161,786 (144,659) (14,744)(144,659)
------------------ -------------------
Net cash (used in) provided by
investing activities 42,672 (226,511) (338,054)(232,767)
------------------ -------------------
Cash flows from financing activities
Dividends paid - - (204,233) (199,511)
Dividends paid to minority
interest in subsidiaries (3,620) (5,194) (19,621) (7,924)
Proceeds from borrowings 59,282 130,167 293,845 775,930
Repayments of borrowings (173,169) (284,759) (443,328) (1,019,006)
---------- --------- ---------- -----------
Net cash used in financing
activities (117,507) (159,786) (373,337) (450,511)
---------- --------- ---------- -----------
Increase in cash and cash
equivalents 523,251 99,988 600,772 248,695
Movement in cash and cash
equivalents
At beginning of the period 752,259 430,284 680,591 293,824
Effect of exchange rate
changes 902 1,190 (4,951) (11,057)
Increase in cash and cash
equivalents 523,251 99,988 600,772 248,695
At September 30, 1,276,412 531,462 1,276,412 531,462
Cash and cash equivalents At September 30,
2006 2005 2006 2005
Cash and bank deposits 1,295,184 567,773 1,295,184 567,773
Bank overdrafts (18,751) (32,871) (18,751) (32,871)
Restricted bank deposits (21) (3,440) (21) (3,440)
1,276,412 531,462 1,276,412 531,462
CONTACT: Tenaris
Nigel Worsnop, 1-888-300-5432
www.tenaris.com
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 9, 2006
Tenaris, S.A.
By: /s/ Cecilia Bilesio
-----------------------
Cecilia Bilesio
Corporate Secretary