Tenaris S.A. 2021 Fourth Quarter and Annual Results Summary
Business Context and Reporting Period
Tenaris S.A., a global manufacturer of tubular products and services, reported its audited consolidated financial results for the fourth quarter and full year ended December 31, 2021. The filing, submitted on February 16, 2022, highlights a strong recovery in drilling activity and oil and gas prices, particularly in North America, driving significant operational improvements compared to the pandemic-impacted 2020 period.
Key Financial Metrics
| Metric | 4Q 2021 | 4Q 2020 | 12M 2021 | 12M 2020 |
|---|---|---|---|---|
| Net Sales ($ million) | 2,057 | 1,131 | 6,521 | 5,147 |
| Operating Income ($ million) | 273 | 7 | 708 | (663) |
| Net Income ($ million) | 336 | 110 | 1,053 | (642) |
| Shareholders' Net Income ($ million) | 370 | 107 | 1,100 | (634) |
| EBITDA ($ million) | 483 | 192 | 1,359 | 638 |
| EBITDA Margin | 23.5% | 17.0% | 20.8% | 12.4% |
| Operating Cash Flow ($ million) | 46 | 139 | 119 | 1,520 |
| Free Cash Flow ($ million) | (23) | 101 | (120) | 1,327 |
| Net Cash Position ($ million) | 700 | 1,085 | 700 | 1,085 |
Material Changes vs. Prior Period
- Revenue Growth: Full-year 2021 net sales increased 27% year-over-year, driven by a 17% volume increase and 6% price increase. Fourth-quarter sales rose 82% compared to 4Q 2020.
- Profitability Turnaround: The company swung from a full-year operating loss of $663 million in 2020 to a profit of $708 million in 2021. This reversal was aided by the absence of the $622 million goodwill impairment recorded in 2020.
- Equity Earnings: A significant contributor to 2021 net income was a $513 million gain from equity in earnings of non-consolidated companies (primarily Ternium and Usiminas), compared to $109 million in 2020, reflecting record steel prices.
- Cash Flow Dynamics: Operating cash flow dropped significantly in 2021 ($119 million vs. $1.52 billion in 2020) due to a $1.0 billion working capital build-up to support ramping production. Consequently, Free Cash Flow turned negative for the year.
- Impairments: A $57 million impairment charge was recorded in 4Q 2021 related to the expected termination of the NKKTubes joint venture.
Guidance, Outlook, and Risks
- Market Outlook: Management anticipates further sales increases in the first half of 2022 due to higher prices in North America and offshore pipeline shipments in Europe. A significant sales recovery is expected in the Middle East and Africa in Q2 2022.
- Capital Discipline: While drilling activity is increasing, spending is unlikely to return to pre-pandemic levels as oil majors prioritize capital discipline.
- Dividend Proposal: The Board intends to propose an aggregate dividend of approximately $484 million for 2021, including the $153 million interim dividend paid in November. The proposed final dividend is $0.28 per share ($0.56 per ADS).
- Climate Initiatives: The company approved a $190 million investment to build a wind farm in Argentina, expected to be completed in 2023, to reduce Scope 2 emissions.
- Risks: Forward-looking statements are subject to risks regarding future oil and gas prices, investment programs by energy companies, and geopolitical conditions affecting drilling activity.
Key Facts for Investor Verification
- Working Capital Build: Verify the sustainability of the $1.0 billion working capital increase and its impact on future liquidity as production stabilizes.
- Equity Earnings Volatility: Assess the reliance on equity earnings from Ternium and Usiminas, which contributed significantly to net income but are subject to flat steel sector price fluctuations.
- NKKTubes Closure: Monitor the execution of the NKKTubes joint venture termination and the associated $57 million impairment impact on future operations.
- Free Cash Flow Recovery: Track the timeline for Free Cash Flow to return to positive levels given the negative $120 million result for 2021.
- Dividend Approval: Confirm shareholder approval of the proposed $484 million total dividend at the May 3, 2022, annual general meeting.