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Tenaris S.A. Form 6-K Summary: Half-Year 2010

Business Context and Reporting Period

This filing covers the unaudited consolidated condensed interim financial statements for the six-month period ended June 30, 2010. Tenaris S.A. is a leading global manufacturer of steel pipe products for the energy industry, organized into three segments: Tubes (seamless and welded tubular products), Projects (pipeline construction), and Others. The report was filed on August 9, 2010, and reviewed by PricewaterhouseCoopers.

Key Financial Metrics

Note: Total Financial Debt calculated as sum of Current Borrowings ($751.2M) and Non-current Borrowings ($461.5M). Net Cash Position is Cash and Cash Equivalents less Total Financial Debt.

Material Changes vs. Prior Period

• Revenue Decline: Net sales decreased 20% year-over-year, driven by an 18% drop in the Tubes segment and a 61% drop in the Projects segment. While volume increased 11% in Tubes, average selling prices fell 26%.
• Profitability Compression: Operating income margin declined from 25% to 20% of net sales. Gross margin decreased from 42.0% to 40.1% due to higher raw material costs and a less favorable product mix.
• Segment Performance:
  • Tubes: Sales down 18%; Operating income down 38% to $634.7M.
  • Projects: Sales down 61% to $187.2M due to lower deliveries in Brazil and Argentina; Operating income down 71% to $27.5M.
  • Others: Sales up 23% to $301.4M; Operating income surged to $52.4M from $1.6M, driven by electric conduits operations.
• Financial Position: The company maintained a net cash position, though it decreased by $107.0M during the period. Total financial debt decreased by $234.0M. Net interest expense dropped significantly to $30.5M from $50.8M in 2009.
• Discontinued Operations: No discontinued operations in 2010, compared to a $28.1M loss in 2009 related to the nationalization of Venezuelan subsidiaries.

Guidance, Outlook, and Risks

• Outlook: Management expects global drilling activity to continue recovering in the second half of 2010, albeit at a lower pace. Revenues are expected to increase driven by higher sales in North America and a recovery in Projects shipments in Q4. Operating margins are expected to be maintained as price increases offset higher costs.
• Corporate Reorganization: Tenaris is undergoing a reorganization to transition from a Luxembourg 1929 holding company regime (tax-exempt) to an ordinary public limited liability company effective January 1, 2011. The company expects its overall tax burden will not increase.
• Principal Risks:
  • Venezuela Nationalization: Ongoing dispute regarding the nationalization of subsidiaries Tavsa, Matesi, and Comsigua. The company reserves rights to seek fair compensation under international treaties but notes uncertainty regarding payment and convertibility.
  • FCPA Investigation: An ongoing internal investigation into potential violations of the U.S. Foreign Corrupt Practices Act regarding sales agency payments in Central Asia. The company has notified the SEC and DOJ; potential losses cannot be estimated.
  • Market Volatility: Demand is highly sensitive to oil and gas prices and global economic conditions.

Investor Verification Checklist

• Verify the status and potential compensation outcomes of the Venezuelan nationalization claims (Tavsa, Matesi, Comsigua).
• Monitor the progress and potential penalties of the FCPA investigation regarding Central Asia sales agency payments.
• Assess the impact of the Luxembourg tax regime change effective Jan 1, 2011, on future dividend distributions and effective tax rates.
• Review the Projects segment recovery in Q4 2010, specifically regarding pipeline deliveries in Brazil and Argentina.
• Confirm the sustainability of price increases in the Tubes segment to offset rising raw material and labor costs.