Tenaris S.A. 2011 Annual and Q4 2011 Results Summary
Business Context and Reporting Period
This Form 6-K filing, dated February 24, 2012, presents Tenaris S.A.'s audited consolidated financial results for the fourth quarter and full year ended December 31, 2012, prepared in accordance with IFRS. Tenaris is a global manufacturer of tubular products for the oil and gas industry, with operations in North America, South America, Europe, the Middle East, Africa, and the Far East.
Key Financial Metrics
| Metric (US$ Million) | Q4 2011 | Q4 2010 | FY 2011 | FY 2010 |
|---|---|---|---|---|
| Net Sales | 2,750.6 | 2,063.9 | 9,972.5 | 7,711.6 |
| Operating Income | 555.7 | 453.8 | 1,894.8 | 1,573.5 |
| Net Income | 426.3 | 321.2 | 1,420.7 | 1,141.0 |
| Shareholders' Net Income | 399.6 | 320.9 | 1,331.2 | 1,127.4 |
| EBITDA | 709.6 | 515.5 | 2,449.1 | 2,013.2 |
| EBITDA Margin | 26% | 25% | 25% | 26% |
| Earnings per ADS | $0.68 | $0.54 | $2.26 | $1.91 |
Liquidity and Debt: As of December 31, 2011, total financial debt was $930.9 million, down from $1,244.5 million in 2010. The net cash position (cash and investments less borrowings) stood at $323.6 million. Operating cash flow for the full year was $1,283.3 million.
Material Changes vs. Prior Period
- Revenue Growth: Full-year 2011 net sales increased 29% year-over-year, driven by an 18% increase in shipment volumes and a 7% increase in average selling prices. Q4 2011 sales rose 33% compared to Q4 2010.
- Profitability: Operating income grew 20% annually and 22% in Q4. Margins recovered in the second half of 2011 after being pressured by higher raw material costs in the first half.
- Segment Performance: The Tubes segment saw sales rise 27% annually, with strong growth in North America and the Far East. The Projects segment sales surged 69% annually, primarily due to pipeline projects in South America.
- One-Time Items: Q4 2010 results included a $67.3 million impairment reversal at Canadian welded operations, which inflated prior-year comparables for operating income.
Guidance, Outlook, and Risks
Outlook: Management expects sales and operating income to grow in 2012 compared to 2011, driven by increased drilling activity in North America and global demand for premium tubular products. However, sequential growth is not expected in Q1 2012 due to seasonal maintenance stoppages and lower shipments in the Projects segment.
Dividends: The Board proposes an annual dividend of $0.38 per share ($0.76 per ADS), totaling approximately $449 million. This includes an interim dividend of $0.13 per share paid in November 2011. The remaining balance is proposed for payment in May 2012.
Risks: Forward-looking statements are subject to risks including uncertainties in future oil and gas prices, geopolitical instability (notably in North Africa and the Middle East), and currency fluctuations affecting financial results.
Investor Verification Checklist
- Verify the impact of the $67.3 million impairment reversal in Q4 2010 on year-over-year operating income comparisons.
- Confirm the sustainability of the 29% revenue growth given the cyclical nature of oil and gas drilling activity.
- Monitor the execution of the new rolling mill in Mexico and its contribution to future capacity.
- Assess the exposure to credit issues in Venezuela, which partially offset sales growth in South America.
- Review the proposed dividend payout ratio relative to free cash flow to ensure capital allocation sustainability.