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Tenaris S.A. Form 6-K Summary: Nine Months Ended September 30, 2009

Business Context and Reporting Period

This Form 6-K reports the unaudited consolidated condensed interim financial statements for Tenaris S.A., a Luxembourg-based holding company for steel pipe manufacturing and distribution. The reporting period covers the nine months ended September 30, 2009. The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS).

Key Financial Metrics

Note: Total Borrowings calculated as sum of Current and Non-current Borrowings from the Statement of Financial Position. 2008 borrowing figures are not explicitly provided in the comparative balance sheet column for 2008, only 2009 vs Dec 31, 2008. The table above uses Dec 31, 2008 data for the 2008 column where 2008 YTD balance sheet data is absent.

Material Changes vs. Prior Period

• Revenue Decline: Net sales decreased by approximately 28% year-over-year (from $8.78 billion to $6.30 billion) for the nine-month period, driven by lower volumes and pricing in the global steel market.
• Profitability Compression: Operating income fell by roughly 40% to $1.48 billion. Gross margin declined from 42.9% in 2008 to 41.2% in 2009.
• Discontinued Operations: The 2008 period included a significant one-time gain of $394.3 million from the sale of the pressure control business. In 2009, discontinued operations resulted in a loss of $28.1 million, primarily due to the nationalization of Venezuelan subsidiaries.
• Cash Flow Improvement: Despite lower earnings, net cash provided by operating activities increased significantly to $2.65 billion (from $1.09 billion in 2008), largely due to a $1.53 billion positive change in working capital.
• Debt Reduction: Total borrowings decreased from $2.98 billion (Dec 31, 2008) to $1.71 billion (Sep 30, 2009), reflecting aggressive debt repayment of approximately $1.7 billion during the period.

Outlook, Risks, and Contingencies

• Venezuela Nationalization: The Venezuelan government nationalized Tenaris subsidiaries (Tavsa, Matesi, Comsigua) in May 2009. These operations are now classified as discontinued. Tenaris has ceased consolidation and reserved rights to seek compensation via international arbitration (ICSID). Receivables of $25.4 million remain outstanding.
• Legal Proceedings:
  • Maverick Litigation: An appeal regarding the 2004 Convertible Senior Subordinated Notes is pending. Tenaris estimates a potential recovery of $50 million if the plaintiff prevails, though Tenaris believes the claims are without merit.
  • Asbestos Litigation: Subsidiary Dalmine faces 45 pending claims. Estimated potential liability for unsettled claims is approximately $19.1 million.
  • Customer Claim: A lawsuit regarding defective well casing was settled for $15 million; a provision of $12.7 million was recorded.
• FCPA Investigation: Tenaris voluntarily notified the SEC and DOJ regarding an ongoing investigation into sales agency payments in Central Asia that may have violated the U.S. Foreign Corrupt Practices Act. The outcome and potential loss are currently indeterminable.
• Dividends: The Board approved an interim dividend of $0.13 per share ($0.26 per ADS), payable November 26, 2009.

Investor Verification Checklist

• Verify the status and potential compensation timeline regarding the nationalization of Venezuelan assets (Tavsa, Matesi, Comsigua).
• Monitor the outcome of the FCPA investigation regarding Central Asia sales agency payments.
• Review the progress of the Maverick litigation appeal scheduled for oral argument in November 2009.
• Assess the sustainability of the working capital release that drove the 2009 operating cash flow surge.
• Confirm the impact of global steel price volatility on future gross margins and sales volumes.