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Tenaris S.A. 2009 Fourth Quarter and Annual Results Summary

Business Context and Reporting Period

This Form 6-K filing, dated March 3, 2010, reports Tenaris S.A.'s audited consolidated financial results for the fourth quarter and full year ended December 31, 2009, prepared in accordance with IFRS. Tenaris is a global manufacturer of tubular products and services for the oil and gas industry. The reporting period reflects the company's response to the global economic crisis, characterized by a sharp contraction in demand for oil and gas drilling products.

Key Financial Metrics

Note: Net Cash Position is defined as total financial debt less cash and other current investments. A positive value indicates a net cash position.

Material Changes vs. Prior Period

• Revenue Decline: Full-year 2009 net sales decreased 32% to $8.1 billion, driven by a 40% drop in shipment volumes due to reduced global drilling activity and inventory adjustments. Q4 2009 sales fell 42% year-over-year.
• Profitability: Despite lower sales, Q4 2009 net income increased 110% compared to Q4 2008. This improvement is largely attributable to significant impairment charges of $394.3 million recorded in Q4 2008 (primarily in North American operations) which were not present in 2009.
• Balance Sheet Transformation: The company shifted from a net debt position of $1.39 billion in 2008 to a net cash position of $675.7 million in 2009. This was achieved through strong operating cash flows ($3.06 billion for the year) and a reduction in working capital of $1.74 billion, primarily due to inventory reductions.
• Segment Performance: The Tubes segment saw a 33% drop in annual sales, while the Projects segment declined 22%. The "Others" segment sales fell 30%.

Guidance, Outlook, and Risks

• Market Outlook: Management expects a recovery in shipments for the Tubes segment in 2010 as drilling activity resumes and inventory levels normalize. However, the Projects segment is expected to see lower shipments due to a declining order backlog for large-diameter pipes in South America.
• Margin Expectations: Operating margins for 2010 are expected to be similar to 2009 levels. Q1 2010 results may be impacted by a low mix of high-end products.
• Dividend Proposal: The Board proposes an annual dividend of $0.34 per share ($0.68 per ADS), totaling approximately $401 million. This includes an interim dividend of $0.13 per share already paid in November 2009. The remaining $0.21 per share is proposed for payment in June 2010.
• Capital Expenditures: CapEx is expected to increase in 2010 to complete the construction of a new rolling mill in Mexico.
• Risks and Contingencies:
  • Discontinued Operations: The Venezuelan government nationalized Tenaris's subsidiaries Tavsa and Matesi in 2009, resulting in a $28.1 million loss for discontinued operations.
  • Commodity Prices: Future results remain sensitive to fluctuations in global oil and gas prices and the resulting investment programs of oil and gas companies.

Key Facts for Investor Verification

• Net Cash Position: Verify the $675.7 million net cash position at year-end, a significant improvement from the prior year's net debt.
• Impairment Charges: Confirm that the Q4 2008 results included $394.3 million in impairment charges, which distorts year-over-year profitability comparisons.
• Discontinued Operations: Review the status and potential recovery of assets related to the nationalization of Tavsa and Matesi in Venezuela.
• Dividend Approval: Note that the proposed annual dividend is subject to shareholder approval at the meeting on June 2, 2010.
• Working Capital: Validate the $1.74 billion reduction in working capital, driven largely by inventory drawdowns, as a key driver of 2009 cash flow.