Tenaris S.A. (NYSE and Mexico: TS and EXM Italy: TEN) (“Tenaris”)
today announced its results for the quarter ended March 31, 2022 in
comparison with its results for the quarter ended March 31, 2021.
Summary of 2022 First Quarter Results
(Comparison with fourth and first quarter of 2021)
|
1Q 2022 |
4Q 2021 |
1Q 2021 |
Net sales ($ million) |
2,367 |
2,057 |
15% |
1,182 |
100% |
Operating income ($ million) |
484 |
273 |
77% |
52 |
839% |
Net income ($ million) |
503 |
336 |
50% |
101 |
400% |
Shareholders’ net income ($ million) |
503 |
370 |
36% |
106 |
373% |
Earnings per ADS ($) |
0.85 |
0.63 |
36% |
0.18 |
373% |
Earnings per share ($) |
0.43 |
0.31 |
36% |
0.09 |
373% |
EBITDA* ($ million) |
627 |
483 |
30% |
196 |
220% |
EBITDA margin (% of net sales) |
26.5% |
23.5% |
|
16.6% |
|
*EBITDA is defined as operating income (loss)
plus depreciation, amortization and impairment charges /
(reversals). EBITDA includes severance charges of $12 million in 1Q
2022 (related to the discontinuation of our industrial equipment
business in Brazil and the closure of NKKTubes), $8 million in 4Q
2021 and $5 million in 1Q 2021. If these charges were not included
EBITDA would have been $639 million (27.0%) in 1Q 2022, $491
million (23.9%) in 4Q 2021 and $201 million (17.0%) in 1Q 2021.
Our sales in the first quarter increased a
further 15% sequentially, driven by higher prices for OCTG in the
Americas and higher shipments of line pipe in Europe and South
America. Our EBITDA rose 30% sequentially with the margin exceeding
26%, as higher prices more than compensated increases in energy and
raw material costs. We decided to discontinue our industrial
equipments business in Brazil which recorded an EBITDA loss of $14
million, including severance provisions, during the quarter, and we
fully impaired the value of our 49% share in the joint venture with
Severstal in Russia, recording a charge of $15 million.
Working capital increased by $609 million in the
quarter, with higher receivables, reflecting an increase in sales,
and higher inventories which were affected by higher costs for raw
material and energy. Operating working capital days amounted to
141, which compares with 165 in the first quarter of 2021 and 135
in the fourth quarter of 2021. Free cash flow was negative at $94
million and we ended the quarter with a net cash position of $562
million.
Market Background and Outlook
The Russian invasion of Ukraine and the
sanctions that have been imposed on Russian individuals, companies
and institutions has changed the outlook for energy worldwide. Oil
and gas prices are higher than they were before the invasion as
alternative sources to Russian exports of oil and gas are sought in
Europe and other markets. In addition, current oil and gas
production levels are not keeping pace with global demand and
inventories are at low levels.
Inflationary pressures and high commodity prices
intensified by the Russian invasion are inducing a monetary
response by central banks and a slow down in global growth as well
as increased uncertainty, which is further heightened by the
ongoing COVID outbreak and governmental response in China.
Drilling activity is increasing around the world
led by North America and the Middle East. Offshore drilling
activity is also increasing, led by Latin America. Pipeline project
activity is also increasing in the Middle East, South America and
the Mediterranean and Black Seas.
The outlook for steelmaking raw materials has
also changed. Russia and Ukraine have both been major suppliers of
pig iron, ferroalloys and semi-finished steel to European and
American markets and the costs of these materials have risen
sharply since the invasion.
OCTG prices are also increasing on higher
consumption while inventories have declined to low levels in key
regions such as North America and the Middle East.
In the second quarter, we anticipate further
growth in sales, with higher volumes in the Middle East and South
America, and stable margins with higher prices compensating the
increase in costs. We also anticipate that free cash flow will be
positive. In the second half, we anticipate further growth in
sales, and margins should remain around the same level as the first
half.
Analysis of 2022 First Quarter Results
Tubes Sales volume (thousand metric tons) |
1Q 2022 |
4Q 2021 |
1Q 2021 |
Seamless |
772 |
731 |
6% |
496 |
56% |
Welded |
50 |
68 |
(26%) |
71 |
(29%) |
Total |
822 |
799 |
3% |
568 |
45% |
Tubes |
1Q 2022 |
4Q 2021 |
1Q 2021 |
(Net sales - $ million) |
|
|
|
|
|
North America |
1,347 |
1,118 |
20% |
514 |
162% |
South America |
348 |
341 |
2% |
166 |
109% |
Europe |
232 |
167 |
39% |
143 |
62% |
Middle East & Africa |
182 |
209 |
(13%) |
196 |
(7%) |
Asia Pacific |
94 |
75 |
26% |
60 |
57% |
Total net sales ($ million) |
2,203 |
1,910 |
15% |
1,080 |
104% |
Operating income ($ million) |
471 |
245 |
92% |
38 |
1,140% |
Operating margin (% of sales) |
21.4% |
12.8% |
|
3.5% |
|
Net sales of tubular products and services
increased 15% sequentially and 104% year on year. Volumes increased
3% sequentially and 45% year on year while average selling prices
increased 12% sequentially and 41% year on year. In North America
sales increased 20% sequentially, thanks to higher prices
throughout the region reflecting higher drilling activity and
declining market inventory levels with seasonally higher volumes of
OCTG in Canada. In South America sales increased 2% sequentially,
due to higher OCTG prices across the region but lower volumes of
line pipe and industrial products in Brazil and Argentina. In
Europe sales increased 39% due to sales of offshore line pipe to
Sakarya project in Turkey and higher prices on mechanical pipe
sales to distributors. In the Middle East and Africa sales
decreased 13% and remain at low levels, particularly in Kuwait,
where the transition to a new contract is still pending, and with
minimal sales of offshore line pipe in Africa and OCTG to Qatar. In
Asia Pacific sales increased 26% mainly due to higher sales in
Oceania.
Operating result from tubular products and
services amounted to a gain of $471 million in the first quarter of
2022, compared to a gain of $245 million in the previous quarter
and $38 million in the first quarter of 2021. In the previous
quarter, Tubes operating income included a $57 million impairment
charge on NKKTubes fixed assets. During the quarter Tubes operating
margin increased to 21.4%, following a 12% increase in average
selling prices which more than offset the increase in energy and
raw material costs.
Others |
1Q 2022 |
4Q 2021 |
1Q 2021 |
Net sales ($ million) |
164 |
147 |
11% |
102 |
60% |
Operating income ($ million) |
13 |
29 |
(54%) |
13 |
(1%) |
Operating margin (% of sales) |
8.0% |
19.4% |
|
13.0% |
|
Net sales of other products and services
increased 11% sequentially and 60% year on year. The sequential
increase in sales is mainly related to higher sales of excess raw
materials and sucker rods, partially offset by lower sales of
energy, industrial equipment in Brazil, which is being
discontinued, and no sales from the Geneva structural pipe business
in the United States, which was sold in the previous quarter.
Operating income of the Others segment, in the quarter, includes a
$5 million severance charge related to the discontinuation of the
industrial equipment business in Brazil.
Selling, general and administrative
expenses, or SG&A, amounted to $365 million, or 15.4%
of net sales, in the first quarter of 2022, compared to $338
million, 16.4% in the previous quarter and $255 million, 21.6% in
the first quarter of 2021. SG&A expenses during the quarter
included $5 million of leaving indemnities, mainly related to the
discontinuation of our industrial equipment business in Brazil and
the closure of NKKTubes (an additional $7 million charge for the
same concepts is included in the cost of sales). Sequentially, our
SG&A expenses increased mainly due to higher selling expenses
associated with higher sales and higher labor costs, however, they
decreased as a percentage of sales due to the better absorption of
the fixed and semi-fixed components of SG&A expenses on higher
sales.
Other operating results
amounted to a gain of $4 million in the first quarter of 2022,
compared to $12 million in the previous quarter and $8 million in
the first quarter of 2021. The result of the quarter is mainly
related to land sales in the United States.
Financial results amounted to a
loss of $1 million in the first quarter of 2022, compared to a gain
of $2 million in the previous quarter and a gain of $12 million in
the first quarter of 2021. During the quarter, a net interest gain
of $7 million was offset by a net $8 million foreign exchange loss,
mainly related to the appreciation of the Brazilian Real against
the U.S. dollar.
Equity in earnings of non-consolidated
companies generated a gain of $88 million in the first
quarter of 2022, compared to a gain of $133 million in the previous
quarter and a gain of $79 million in the first quarter of 2021. The
result of the quarter is net of an impairment charge on the value
of our joint venture in Russia, amounting to $15 million. Results
from non-consolidated companies are mainly derived from our
participation in Ternium (NYSE:TX) and reflect the good dynamics at
the flat steel sector derived from high steel prices.
Income tax charge amounted to
$67 million in the first quarter of 2022, compared to $72 million
in the previous quarter and $42 million in the first quarter of
2021. Despite the sequential increase in income before income tax,
the tax charge of the quarter is lower as it includes a $44 million
positive adjustment from inflation adjustments net of foreign
exchange, mainly in Argentina.
Cash Flow and Liquidity
Net cash used in operations during the first
quarter of 2022 was $27 million, compared with net cash provided by
operations of $46 million in the previous quarter and $70 million
in the first quarter of 2021. Working capital increased by $609
million during the quarter, mainly reflecting higher trade
receivables, following the increase in sales, and higher
inventories partially offset by an increase in trade payables.
Capital expenditures amounted to $67 million for
the first quarter of 2022, compared to $69 million in the previous
quarter and $45 million in the first quarter of 2021.
During the quarter we had negative free cash
flow of $94 million, compared to negative $23 million in the
previous quarter and positive $25 million in the first quarter of
2021.
At March 31, 2022 we maintained a positive net
cash position of $562 million, compared to $700 million at December
31, 2021.
Conference call
Tenaris will hold a conference call to discuss
the above reported results, on April 28, 2022, at 09:00 a.m.
(Eastern Time). Following a brief summary, the conference call will
be opened to questions. To access the conference call dial in +1
866 789 1656 within North America or +1 630 489 1502
Internationally. The access number is “ 5464727”. Please dial in 10
minutes before the scheduled start time. The conference call will
be also available by webcast at
http://ir.tenaris.com/events-and-presentations.
A replay of the conference call will be
available on our webpage
http://ir.tenaris.com/events-and-presentations or by phone from
12:00 pm ET on April 28, through 12:00 pm on May 6, 2022. To access
the replay by phone, please dial +1 855 859 2056 or +1 404 537 3406
and enter passcode “5464727” when prompted.
Some of the statements contained in this press
release are “forward-looking statements”. Forward-looking
statements are based on management’s current views and assumptions
and involve known and unknown risks that could cause actual
results, performance or events to differ materially from those
expressed or implied by those statements. These risks include but
are not limited to risks arising from uncertainties as to future
oil and gas prices and their impact on investment programs by oil
and gas companies.Consolidated Condensed Interim Income
Statement
(all amounts in thousands of U.S. dollars) |
Three-month period ended March 31, |
|
2022 |
2021 |
|
Unaudited |
Net sales |
2,367,041 |
1,181,789 |
Cost of sales |
(1,521,942) |
(882,999) |
Gross profit |
845,099 |
298,790 |
Selling, general and administrative expenses |
(364,922) |
(255,026) |
Other operating income (expense), net |
4,077 |
7,827 |
Operating income |
484,254 |
51,591 |
Finance Income |
8,825 |
5,698 |
Finance Cost |
(1,835) |
(4,675) |
Other financial results |
(8,108) |
10,754 |
Income before equity in earnings of non-consolidated
companies and income tax |
483,136 |
63,368 |
Equity in earnings of non-consolidated companies |
87,604 |
79,141 |
Income before income tax |
570,740 |
142,509 |
Income tax |
(67,307) |
(41,744) |
Income for the period |
503,433 |
100,765 |
|
|
|
Attributable to: |
|
|
Shareholders' equity |
502,774 |
106,346 |
Non-controlling interests |
659 |
(5,581) |
|
503,433 |
100,765 |
Consolidated Condensed Interim Statement of Financial
Position
(all amounts in thousands of
U.S. dollars) |
At March 31, 2022 |
|
At December 31, 2021 |
|
Unaudited |
|
|
ASSETS |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Property, plant and equipment, net |
5,771,759 |
|
|
5,824,801 |
|
Intangible assets, net |
1,365,335 |
|
|
1,372,176 |
|
Right-of-use assets, net |
119,655 |
|
|
108,738 |
|
Investments in non-consolidated companies |
1,500,637 |
|
|
1,383,774 |
|
Other investments |
241,294 |
|
|
320,254 |
|
Derivative financial instruments |
5,755 |
|
|
7,080 |
|
Deferred tax assets |
259,709 |
|
|
245,547 |
|
Receivables, net |
232,833 |
9,496,977 |
|
205,888 |
9,468,258 |
Current assets |
|
|
|
|
|
Inventories, net |
3,032,127 |
|
|
2,672,593 |
|
Receivables and prepayments, net |
125,643 |
|
|
96,276 |
|
Current tax assets |
219,702 |
|
|
193,021 |
|
Trade receivables, net |
1,718,058 |
|
|
1,299,072 |
|
Derivative financial instruments |
12,088 |
|
|
4,235 |
|
Other investments |
354,104 |
|
|
397,849 |
|
Cash and cash equivalents |
315,399 |
5,777,121 |
|
318,127 |
4,981,173 |
Total assets |
|
15,274,098 |
|
|
14,449,431 |
EQUITY |
|
|
|
|
|
Shareholders' equity |
|
12,508,121 |
|
|
11,960,578 |
Non-controlling interests |
|
145,795 |
|
|
145,124 |
Total equity |
|
12,653,916 |
|
|
12,105,702 |
LIABILITIES |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Borrowings |
7,905 |
|
|
111,432 |
|
Lease liabilities |
88,991 |
|
|
82,694 |
|
Deferred tax liabilities |
261,310 |
|
|
274,721 |
|
Other liabilities |
227,806 |
|
|
231,681 |
|
Provisions |
91,254 |
677,266 |
|
83,556 |
784,084 |
Current liabilities |
|
|
|
|
|
Borrowings |
340,121 |
|
|
219,501 |
|
Lease liabilities |
34,885 |
|
|
34,591 |
|
Derivative financial instruments |
18,520 |
|
|
11,328 |
|
Current tax liabilities |
171,425 |
|
|
143,486 |
|
Other liabilities |
266,416 |
|
|
203,725 |
|
Provisions |
8,512 |
|
|
9,322 |
|
Customer advances |
96,905 |
|
|
92,436 |
|
Trade payables |
1,006,132 |
1,942,916 |
|
845,256 |
1,559,645 |
Total liabilities |
|
2,620,182 |
|
|
2,343,729 |
Total equity and liabilities |
|
15,274,098 |
|
|
14,449,431 |
Consolidated Condensed Interim Statement of Cash
Flows
(all amounts in thousands of U.S. dollars) |
Three-month period ended March 31, |
|
2022 |
2021 |
|
Unaudited |
Cash flows from operating activities |
|
|
Income for the period |
503,433 |
100,765 |
Adjustments for: |
|
|
Depreciation and amortization |
143,076 |
144,469 |
Income tax accruals less payments |
6,915 |
12,091 |
Equity in earnings of non-consolidated companies |
(87,604) |
(79,141) |
Interest accruals less payments, net |
(1,300) |
(46) |
Changes in provisions |
6,888 |
4,036 |
Changes in working capital |
(608,628) |
(83,326) |
Currency translation adjustment and others |
10,616 |
(28,354) |
Net cash (used in) provided by operating
activities |
(26,604) |
70,494 |
|
|
|
Cash flows from investing activities |
|
|
Capital expenditures |
(66,934) |
(45,291) |
Changes in advance to suppliers of property, plant and
equipment |
(18,565) |
(3,104) |
Proceeds from disposal of property, plant and equipment and
intangible assets |
4,819 |
4,923 |
Changes in investments in securities |
109,236 |
176,932 |
Net cash provided by investing activities |
28,556 |
133,460 |
|
|
|
Cash flows from financing activities |
|
|
Payments of lease liabilities |
(15,678) |
(15,900) |
Proceeds from borrowings |
268,143 |
94,605 |
Repayments of borrowings |
(256,144) |
(168,271) |
Net cash (used in) financing activities |
(3,679) |
(89,566) |
|
|
|
(Decrease) Increase in cash and cash
equivalents |
(1,727) |
114,388 |
Movement in cash and cash equivalents |
|
|
At the beginning of the period |
318,067 |
584,583 |
Effect of exchange rate changes |
(2,021) |
(3,844) |
(Decrease) Increase in cash and cash equivalents |
(1,727) |
114,388 |
|
314,319 |
695,127 |
Exhibit I – Alternative performance
measures
EBITDA, Earnings before interest, tax, depreciation and
amortization.
EBITDA provides an analysis of the operating
results excluding depreciation and amortization and impairments, as
they are non-cash variables which can vary substantially from
company to company depending on accounting policies and the
accounting value of the assets. EBITDA is an approximation to
pre-tax operating cash flow and reflects cash generation before
working capital variation. EBITDA is widely used by investors when
evaluating businesses (multiples valuation), as well as by rating
agencies and creditors to evaluate the level of debt, comparing
EBITDA with net debt.
EBITDA is calculated in the following manner:
EBITDA= Operating results + Depreciation and amortization +
Impairment charges/(reversals).
(all amounts in thousands of U.S. dollars) |
Three-month period ended March 31, |
|
2022 |
2021 |
Operating income |
484,254 |
51,591 |
Depreciation and amortization |
143,076 |
144,469 |
EBITDA |
627,330 |
196,060 |
Net Cash / (Debt)
This is the net balance of cash and cash
equivalents, other current investments and non-current investments
less total borrowings. It provides a summary of the financial
solvency and liquidity of the company. Net cash / (debt) is widely
used by investors and rating agencies and creditors to assess the
company’s leverage, financial strength, flexibility and risks.
Net cash/ debt is calculated in the following manner:
Net cash= Cash and cash equivalents + Other investments (Current
and Non-Current) +/- Derivatives hedging borrowings and investments
– Borrowings (Current and Non-Current)
(all amounts in thousands of U.S. dollars) |
At March 31, |
|
2022 |
2021 |
Cash and cash equivalents |
315,399 |
695,245 |
Other current investments |
354,104 |
649,878 |
Non-current investments |
233,988 |
274,542 |
Derivatives hedging borrowings and investments |
6,662 |
5,281 |
Current borrowings |
(340,121) |
(246,440) |
Non-current borrowings |
(7,905) |
(294,649) |
Net cash / (debt) |
562,127 |
1,083,857 |
Free Cash Flow
Free cash flow is a measure of financial performance, calculated
as operating cash flow less capital expenditures. FCF represents
the cash that a company is able to generate after spending the
money required to maintain or expand its asset base.
Free cash flow is calculated in the following manner:
Free cash flow= Net cash (used in) provided by operating
activities – Capital expenditures.
(all amounts in thousands of U.S. dollars) |
Three-month period ended March 31, |
|
2022 |
2021 |
Net cash (used in) provided by operating activities |
(26,604) |
70,494 |
Capital expenditures |
(66,934) |
(45,291) |
Free cash flow |
(93,538) |
25,203 |
Operating working capital days
Operating working capital is the difference between the main
operating components of current assets and current liabilities.
Operating working capital is a measure of a company’s operational
efficiency, and short-term financial health.
Operating working capital days is calculated in the following
manner:
Operating working capital days= [(Inventories + Trade
receivables – Trade payables – Customer advances) / Annualized
quarterly sales ]x 365
(all amounts in thousands of U.S. dollars) |
At March 31, |
|
2022 |
2021 |
Inventories |
3,032,127 |
1,910,293 |
Trade receivables |
1,718,058 |
907,738 |
Customer advances |
(96,905) |
(52,569) |
Trade payables |
(1,006,132) |
(634,648) |
Operating working capital |
3,647,148 |
2,130,814 |
Annualized quarterly sales |
9,468,164 |
4,727,156 |
Operating working capital days |
141 |
165 |
Giovanni
Sardagna Tenaris
1-888-300-5432www.tenaris.com
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