Tenaris S.A. 2012 Annual and Q4 2012 Results Summary
Business Context and Reporting Period
This Form 6-K filing, dated February 26, 2013, reports the audited consolidated financial results for Tenaris S.A. for the fourth quarter and full year ended December 31, 2012. Tenaris is a global manufacturer of tubular products and services for the oil and gas industry. The financial statements are prepared in U.S. dollars in accordance with IFRS.
Key Financial Metrics
| Metric | Q4 2012 | Q4 2011 | FY 2012 | FY 2011 |
|---|---|---|---|---|
| Net Sales ($ million) | 2,758.1 | 2,750.6 | 10,834.0 | 9,972.5 |
| Operating Income ($ million) | 586.0 | 538.0 | 2,356.6 | 1,844.9 |
| Net Income ($ million) | 350.3 | 426.3 | 1,701.4 | 1,420.7 |
| Shareholders' Net Income ($ million) | 357.7 | 399.6 | 1,699.1 | 1,331.2 |
| Earnings per ADS ($) | 0.61 | 0.68 | 2.88 | 2.26 |
| EBITDA ($ million) | 733.0 | 691.9 | 2,875.1 | 2,399.2 |
| EBITDA Margin | 27% | 25% | 27% | 24% |
| Net Cash from Operations ($ million) | 346.6 | 456.2 | 1,860.4 | 1,283.3 |
| Net Debt Position ($ million) | 271.3 | (323.6)* | 271.3 | (323.6)* |
*Negative value indicates a net cash position.
Material Changes vs. Prior Period
- Revenue Growth: Full-year 2012 net sales increased 9% to $10.8 billion, driven by a 10% increase in tubular products sales. Q4 sales were flat year-over-year but rose 4% sequentially.
- Profitability: Operating income for the full year rose 28% to $2.4 billion, with margins improving to 22% for tubular products due to better product mix and lower raw material costs. However, Q4 net income declined 18% year-over-year.
- Impairment Charges: Q4 results were significantly impacted by a $73.7 million impairment charge on the investment in Usiminas (Brazil), reflecting changes in the Brazilian operating environment. This charge also indirectly impacted the investment in Ternium.
- Liquidity Shift: The company moved from a net cash position of $323.6 million in 2011 to a net debt position of $271.3 million in 2012. This shift was driven by $1.3 billion in investments in Brazil (including the acquisition of non-controlling interests in Confab) and dividend payments.
- Regional Performance: North American sales grew 22% annually, while sales in the Far East & Oceania declined 19% and Middle East & Africa declined 6% for the full year.
Guidance, Outlook, and Risks
- 2013 Outlook: Management expects moderate overall sales growth. Higher demand in Eastern Hemisphere markets (Middle East, sub-Saharan Africa) is expected to offset lower sales in North America and European industrial markets.
- Drilling Activity: North American drilling activity is expected to recover gradually in 2013 but remain slightly below 2012 levels. Global drilling activity is expected to increase, led by deepwater and unconventional reserves.
- Margins: EBITDA margins are expected to remain around current levels, supported by product mix and efficiency improvements.
- Dividends: The Board proposes an annual dividend of $0.43 per share ($0.86 per ADS), totaling approximately $507.6 million. This includes the interim dividend paid in November 2012.
- Risks: Forward-looking statements are subject to risks including uncertainties in future oil and gas prices and their impact on exploration and production investment programs.
Key Facts for Investor Verification
- Usiminas Impairment: Verify the specific operational changes at Usiminas that triggered the $73.7 million impairment charge and its potential impact on future earnings from associated companies.
- Net Debt Increase: Confirm the sustainability of the shift from net cash to net debt ($271.3 million) given the $1.3 billion investment in Brazil and ongoing capital expenditure requirements.
- North American Exposure: Assess the risk of lower-than-expected drilling activity recovery in North America, which is a primary growth driver for the company.
- Working Capital: Note the $247.3 million increase in working capital in Q4 2012, primarily due to trade receivables from December shipments, and monitor collection trends in Q1 2013.
- Non-Recurring Items: Distinguish between recurring operational performance and the $49.2 million non-recurring tax-related gain recorded in Q3 2012 (excluded from Q4 EBITDA comparison) when analyzing margin trends.