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Tenaris S.A. Q1 2012 Financial Summary

Business Context and Reporting Period

This Form 6-K filing reports the unaudited consolidated financial results for Tenaris S.A. for the quarter ended March 31, 2012. The company, a global leader in tubular products for the oil and gas industry, reported results in U.S. dollars under IFRS. Effective January 1, 2012, the functional currency for Mexican, Canadian, and Japanese subsidiaries was changed to the U.S. dollar.

Key Financial Metrics

Liquidity and Debt: Net cash position (cash and current investments less total borrowings) ended the quarter at $258.6 million, a decrease of $65 million sequentially. Total borrowings increased, with non-current borrowings at $425.1 million and current borrowings at $813.3 million.

Material Changes vs. Prior Periods

• Revenue: Net sales decreased 5% sequentially to $2,617.3 million but increased 13% year-over-year. The sequential decline was driven by lower line pipe shipments for HPI and pipeline projects, and reduced OCTG shipments in Colombia and Saudi Arabia.
• Profitability: Operating income rose 5% sequentially and 32% year-over-year. EBITDA margin improved to 27% from 25% in the prior quarter, reflecting lower raw material costs and plant allocation efficiencies.
• Segment Performance:
  • Tubes: Sales increased 16% year-over-year to $2,288.7 million. North America sales rose 32% year-over-year, while Middle East & Africa sales fell 27% sequentially.
  • Projects: Sales dropped 25% sequentially to $140.1 million due to a 40% decrease in shipments to pipeline projects in Brazil, Argentina, and Peru.
  • Others: Sales decreased 5% sequentially to $188.6 million, primarily due to lower industrial equipment sales in Brazil.
• Accounting Changes: Mexican employee statutory profit sharing ($14.1 million) was reclassified from income tax to labor costs, reducing operating income and income tax expense comparably.

Guidance, Outlook, and Risks

Outlook: Management expects global energy demand to rise despite economic difficulties in Europe. Drilling activity in North America is expected to remain stable, while activity elsewhere should increase driven by deepwater and unconventional reserves. Sales to oil and gas customers, particularly for premium products, are expected to increase. However, sales to HPI and industrial customers in Europe remain weak.

Expectations: Average selling prices may increase due to product mix improvements. Operating margins are expected to remain close to current levels for the remainder of 2012. Sales and operating income are projected to show strong year-over-year growth.

Risks: Forward-looking statements are subject to risks including uncertainties regarding future oil and gas prices and their impact on investment programs by energy companies. The company also faces risks related to currency fluctuations, as evidenced by gains derived from the strengthening of the Brazilian real against U.S. dollar-denominated debt.

Investor Verification Checklist

• Verify the impact of the functional currency change for Mexican, Canadian, and Japanese subsidiaries on future comparability.
• Monitor the recovery of pipeline project shipments in Brazil, Argentina, and Peru, which drove the sequential decline in the Projects segment.
• Assess the sustainability of the 27% EBITDA margin given the volatility in raw material costs and global economic conditions.
• Review the $504.6 million investment in Usiminas and its impact on future cash flow and capital structure.
• Track the net cash position, which decreased by $65 million sequentially despite strong operating cash flow, due to significant investing activities.