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Tenaris S.A. Q1 2017 Financial Summary

Business Context and Reporting Period

This Form 6-K filing presents the Consolidated Condensed Interim Financial Statements for Tenaris S.A. for the three-month period ended March 31, 2017. The company is a global leader in steel pipe manufacturing and distribution. The financial statements are prepared in accordance with IFRS and are unaudited. A significant event during the period was the completion of the sale of the Republic Conduit business (North American steel electric conduit) in January 2017, which is now reported as discontinued operations.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Net sales from continuing operations decreased by approximately 4.4% to $1.15 billion, driven by lower volumes and pricing in the oil and gas sector.
• Profit Surge: Total net income increased dramatically to $205.6 million from $28.0 million in Q1 2016. This is primarily due to a one-time after-tax gain of $89.7 million from the sale of the Republic Conduit business (Discontinued Operations).
• Continuing Operations Growth: Excluding discontinued operations, income from continuing operations rose to $114.0 million from $20.1 million, driven by improved gross margins and a significant increase in equity earnings from non-consolidated companies ($35.2 million vs. $11.7 million).
• Working Capital: Net cash provided by operating activities dropped significantly to $26.1 million from $309.1 million, largely due to a $104.9 million use of cash for changes in working capital and the non-recurring nature of the prior year's cash flows.
• Debt Reduction: Total borrowings decreased by approximately $132 million to $708.2 million, reflecting net repayments of $138.5 million in financing activities.

Outlook, Risks, and Contingencies

Dividends: The Board proposed an annual dividend of $0.41 per share ($0.82 per ADS), totaling approximately $484 million. A balance of $0.28 per share is expected to be paid on May 24, 2017, pending shareholder approval.

Capital Expenditures: Capex for the period was $138.6 million, primarily focused on the greenfield seamless facility in Bay City, Texas. As of March 31, 2017, approximately $1.44 billion had been invested in this project.

Key Risks and Contingencies:

• Venezuela Nationalization: Tenaris has won arbitration awards totaling approximately $309.8 million (including interest) against Venezuela for the nationalization of subsidiaries (Matesi, Tavsa, Comsigua). Enforcement is ongoing; Venezuela has requested annulment of the awards, with final decisions expected in 2018.
• Legal Proceedings: Significant ongoing litigation includes a tax assessment in Italy (Dalmine) regarding withholding taxes (approx. $239 million claim), a lawsuit by CSN regarding the Usiminas acquisition (dismissed at first and second instance, but appealable), and the Veracel Celulose accident litigation (approx. $38.6 million claim).
• Investigation: The company is cooperating with Italian, Swiss, and U.S. authorities regarding an investigation into potential payments related to Petrobras ("Operation Lava Jato"). The company cannot currently estimate the potential loss or impact.

Investor Verification Checklist

• Discontinued Operations Impact: Verify the sustainability of earnings by excluding the $89.7 million one-time gain from the Republic Conduit sale.
• Venezuela Recovery: Monitor the status of the ICSID annulment proceedings regarding the $309.8 million award against Venezuela to assess collectability.
• Working Capital Trends: Review the $104.9 million cash outflow for working capital changes to understand inventory and receivables management in a low-demand environment.
• Legal Exposure: Track the outcome of the Italian tax court appeal and the Veracel Celulose litigation, as these represent potential material liabilities.
• Capex Execution: Confirm progress and cost adherence for the Bay City, Texas seamless pipe mill expansion.