Tenaris S.A. — Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2021. Although the request identifies 2021 Q4, this filing is an annual report and does not provide a clear standalone fourth-quarter financial summary. Financial statements are audited and prepared under IFRS as issued by the IASB and adopted by the EU; amounts below are U.S. dollars.
Business context
Tenaris manufactures seamless and welded steel pipes and related services, principally for oil and gas drilling and transportation, with other industrial and low-carbon-energy applications. Its reportable segment is Tubes. Results are strongly exposed to oil and gas investment, drilling activity, product pricing, and steelmaking and energy costs.
Financial performance
| Metric | 2021 | 2020 | Change or context |
|---|---|---|---|
| Net sales | $6.521 billion | $5.147 billion | Up 27% |
| Gross profit / margin | $1.910 billion / 29.3% | $1.059 billion / 20.6% | Improved |
| Operating income (loss) | $708 million / 10.8% of sales | ($663 million) / (12.9%) | Returned to profitability |
| Income (loss) for the year | $1.053 billion | ($642 million) | 2021 includes $513 million equity earnings from non-consolidated companies |
| Income attributable to parent owners | $1.100 billion | ($634 million) | Basic and diluted EPS: $0.93 vs. ($0.54) |
| Net cash from operating activities | $119 million | $1.520 billion | Lower mainly due to a $1.046 billion working-capital outflow |
| Capital expenditures | $240 million | $193 million | 2022 spending expected to increase significantly |
| Borrowings | $331 million | $619 million | Mostly bank loans; $220 million due within one year |
| Net cash position | $700 million | $1.085 billion | Declined after working-capital investment, capex and dividends |
Revenue growth reflected a 17% increase in Tubes volumes and a 6% increase in average selling prices. Tubes sales rose 24% to $5.994 billion; Others sales rose 74% to $528 million. Oil and gas generated $4.944 billion of Tubes revenue. The 2021 net result also benefited from strong results at equity-accounted steel investments, principally Ternium and Usiminas; their combined contribution is included in the $513 million equity-earnings line.
Working capital increased substantially with the activity recovery: inventories rose by approximately $1.060 billion. Cash and cash equivalents were $318 million at year-end; current and non-current other investments totaled approximately $718 million. Total assets were $14.449 billion, total liabilities $2.344 billion, and total equity $12.106 billion. The filing reports a 2.09% weighted-average borrowing rate and states that debt covenants were met.
Material changes versus comparable periods
- 2021 marked a strong recovery from 2020’s pandemic- and oil-market-related downturn: Tubes operating income improved from a $616 million loss to $613 million income.
- 2020 included $622 million of impairment charges, chiefly associated with U.S. operations. 2021 included a $57 million impairment charge related to the planned termination of NKKTubes, plus $27 million in severance charges in Tubes.
- Higher activity and selling prices improved results, while higher raw-material and energy costs partly offset the recovery. Scrap, pig iron, HBI and DRI together represented about 28% of pipe costs on average; steel billets or coils about 12%, and direct energy about 4%.
- Cash generation weakened despite higher earnings because of the working-capital build. Dividends paid in 2021 were $319 million, versus $83 million in 2020.
- North America Tubes sales increased 54% and South America increased 59%; Middle East and Africa declined 30%, and Asia Pacific declined 21%.
Outlook, risks and unusual items
- Management outlook: The filing anticipated further sales increases in the first half of 2022, with higher North American prices and shipments to a European offshore pipeline, followed by a significant Middle East and Africa recovery in the second quarter. Management expected the EBITDA margin to continue increasing in the first half. These are forward-looking statements, not results or guarantees.
- Costs and geopolitics: The Russia-Ukraine conflict began after year-end. Tenaris reported about $34 million of 2021 raw-material purchases from Russia and Ukraine, suspended transactions that would breach sanctions, and was seeking alternative supply. Higher energy and steelmaking-input costs or shortages could impair margins or disrupt production. The company was assessing potential impairment of its $16.8 million Russian joint-venture investment.
- Trade investigations: U.S. antidumping investigations involving OCTG from Argentina and Mexico, among other countries, were ongoing; final determinations were expected in the second half of 2022. A Canadian investigation of Mexican OCTG ended in January 2022 without duties.
- Operations and strategy: NKKTubes’ Japanese manufacturing operations were expected to close by the end of June 2022; the related $57 million impairment was recorded in 2021. Tenaris planned to maintain supply of certain products through its other facilities. A $190 million Argentina wind-farm project, expected to be completed in 2023, was intended to supply close to half the Campana mill’s electricity needs and reduce annual emissions there by about 150,000 tons.
- Dividend proposal: The board proposed a total 2021 annual dividend of $0.41 per share ($0.82 per ADS), approximately $484 million, including $153 million already paid; shareholder approval was required for the proposed $331 million balance.
- Contingencies: Significant disclosed matters include an ongoing Brazil-related investigation into alleged improper payments, with discussions with the SEC and DOJ and no estimable loss range; litigation and tax matters; and U.S. OCTG trade investigations. The filing says that for many proceedings, potential financial effects cannot be reliably estimated. It also reports performance guarantees of about $3.0 billion and guarantee exposure associated with the GPC joint venture.
- Other risks: Demand depends on volatile oil and gas drilling investment; competition and excess industry capacity, climate-transition regulation, raw-material and energy volatility, currency and country risks, customer credit exposure (including Pemex), and operational, product-liability and cybersecurity events could adversely affect results. Tenaris does not carry business-interruption or cybersecurity insurance.
Most important facts for investors to verify
- Review the audited IFRS statements and reconcile parent-attributable income with total net income and the substantial equity-accounted earnings contribution.
- Assess whether the working-capital build and inventory growth convert into operating cash flow as activity stabilizes, and how much liquidity remains available after capex and dividends.
- Check the subsequent outcomes of U.S. OCTG trade cases, raw-material sourcing and cost pass-through, and the effects of the Russia-Ukraine conflict, including any write-off of the Russian investment.
- Verify delivery of the 2022 sales and margin outlook, planned higher capital spending, and the status, cost and expected returns of the Argentina wind project.
- Track the NKKTubes closure and replacement capacity, the proposed dividend’s approval and payment, and developments in material legal and regulatory proceedings.