Business context and reporting period
Tenaris S.A. filed this Form 20-F for the fiscal year ended December 31, 2023. It is an annual report, not a standalone fourth-quarter filing; the supplied text does not provide a clear set of Q4-only financial results. Tenaris manufactures and supplies steel pipe products and related services, principally to the oil and gas industry. Financial statements are prepared under IFRS.
Financial performance and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $14.869 billion | $11.763 billion |
| Gross profit / margin | $6.200 billion / 41.7% | $4.675 billion / 39.7% |
| Operating income / margin | $4.316 billion / 29.0% | $2.963 billion / 25.2% |
| Net income | $3.958 billion | $2.549 billion |
| Net income attributable to shareholders | $3.918 billion | $2.553 billion |
| Basic EPS | $3.32 | $2.16 |
| EBITDA | $4.9 billion, as stated in the Chairman’s letter | Not stated clearly in the supplied text |
| Operating cash flow | $4.395 billion | $1.167 billion |
| Capital expenditures | $619 million | $378 million |
| Cash and cash equivalents | $1.638 billion | $1.092 billion |
| Total borrowings | $583 million | $729 million |
| Net cash position | $3.422 billion | $921 million |
Sales rose 26%; Tubes segment sales increased 27%, reflecting 17% higher shipment volumes and 9% higher average selling prices. Tube operating income rose 46% to $4.183 billion. Gross and operating margins expanded as improved prices and volumes more than offset higher costs. Operating cash flow benefited substantially from working capital, which released $182 million in 2023 versus a $2.131 billion use of cash in 2022.
Material changes and notable items
- Net income included a $194 million net positive deferred tax effect. The company recognized $550 million of deferred tax assets tied mainly to tax losses at its Luxembourg subsidiary; recoverability depends on future taxable profits.
- Net financial results were a $221 million gain, versus a $6 million loss in 2022. They included $209 million of net foreign-exchange gains, partly offset by a $95 million loss on Argentine sovereign bonds distributed and disposed abroad, and $107 million of net interest gain on the net cash position.
- Equity earnings from non-consolidated companies fell to $95 million from $209 million. 2023 included a $25.5 million loss related to the increased Usiminas participation and gains from the step-acquisition of GPC.
- Tenaris acquired control of Saudi pipe maker GPC, a U.S. pipe-processing facility, an Italian coating business and Mattr’s global pipe-coating business. Acquisitions used $266 million of cash; Mattr’s business contributed $77 million of sales in 2023.
- Cash dividends paid were $637 million, and $214 million was spent on share buybacks during 2023. Management proposed a $0.60 annual dividend per share for shareholder approval, including the $0.20 interim dividend already paid.
Outlook, risks and contingencies
Management expected first-half 2024 sales to be in line with second-half 2023. It anticipated favorable Middle East and offshore demand, with tubular prices and margins in the Americas having returned from post-pandemic peaks to more sustainable levels. 2024 capital expenditures were expected to be about $700 million. These are forward-looking expectations, not guarantees.
- Customer credit: Delayed Pemex payments left Tenaris with exposure equal to approximately 20% of its overall credit exposure at year-end. Pemex was making partial payments, but the timing and extent of any exposure reduction were uncertain.
- Trade measures: U.S. antidumping duty deposits applied to OCTG imports from Argentina and Mexico at stated rates of 78.30% and 44.93%, respectively, subject to appeals and administrative reviews.
- Argentina: Peso devaluation, inflation, energy constraints and foreign-exchange controls create uncertainty around costs, imports, dividend transfers and financial results. Argentine subsidiaries generated approximately 22% of 2023 sales.
- Legal matters: Material proceedings include the CSN claim relating to Usiminas, Veracel litigation and Brazilian Petrobras-related civil claims. The filing says outcomes and potential losses are uncertain; it does not provide a clear aggregate exposure. The SEC matter was settled in 2022 for $78.1 million, and the DOJ closed its parallel inquiry without action.
- Other risks: Demand and margins are sensitive to oil and gas investment, competition, raw-material and energy costs, climate regulation, geopolitical events, supply-chain disruption and acquisition integration. The company reported three operational fatalities in 2023. It does not carry business-interruption or cybersecurity insurance.
- Auditor and controls: PwC gave unqualified opinions on the IFRS financial statements and internal control over financial reporting. The critical audit matter was recognition and recoverability of Luxembourg deferred tax assets. The acquired pipe-coating business was excluded from the 2023 internal-control assessment and audit of internal control.
Most important facts for investors to verify
- Review the audited statements and notes for the composition and sustainability of the $3.422 billion net cash position, cash-flow conversion and working-capital movements.
- Assess the assumptions supporting the $550 million Luxembourg deferred tax asset, including projected taxable profits and the possible effects of Pillar Two minimum-tax rules from 2024.
- Track Pemex collections, overdue receivables and any change in the stated 20% share of overall credit exposure.
- Follow appeals and reviews of U.S. OCTG duties, and the related effect on costs, sourcing and market access.
- Monitor the status and potential financial impact of the CSN, Veracel and Petrobras-related proceedings, as well as Argentine exchange restrictions and currency changes.
- Compare 2024 sales, margins, capital spending, acquisition integration and shareholder distributions with management’s stated expectations; the filing does not provide standalone Q4 results.