Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or 40-F.
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12G3-2(b) under the Securities Exchange Act of 1934.
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-__.
The attached material is being furnished to the Securities and Exchange Commission pursuant to Rule 13a-16 and Form 6-K under
the Securities Exchange Act of 1934, as amended. This report contains Tenaris S.A Consolidated Financial Statements for the
years ended December 31, 2017, 2016 and 2015.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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TENARIS, S.A.
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Date: February 22, 2018
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/s/ Cecilia Bilesio
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Cecilia Bilesio
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Corporate Secretary
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Tenaris S.A. Consolidated Financial Statements for
the years ended December 31, 2017, 2016 and 2015
TENARIS S.A.
CONSOLIDATED
FINANCIAL STATEMENTS
For the years ended December 31, 2017, 2016 and
2015
29, Avenue de la Porte-Neuve – 3rd Floor.
L – 2227 Luxembourg
R.C.S. Luxembourg: B 85 203
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
CONSOLIDATED INCOME STATEMENT
(all amounts in thousands of US dollars, unless otherwise stated)
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Year ended December 31,
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Notes
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2017
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2016
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2015
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Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net sales
|
|
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1
|
|
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5,288,504
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4,293,592
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6,903,123
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Cost of sales
|
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2
|
|
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(3,685,057
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)
|
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(3,165,684
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)
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|
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(4,747,760
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)
|
Gross profit
|
|
|
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1,603,447
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1,127,908
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2,155,363
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Selling, general and administrative expenses
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3
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(1,270,016
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)
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(1,196,929
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)
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(1,593,597
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)
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Other operating income
|
|
|
5
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|
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|
10,516
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|
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21,127
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|
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14,603
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Other operating expenses
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|
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5
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|
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(9,359
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)
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|
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(11,163
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)
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(410,574
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)
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Operating income (loss)
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334,588
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(59,057
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)
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165,795
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Finance Income
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6
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|
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47,605
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66,204
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34,574
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Finance Cost
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6
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|
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(27,072
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)
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|
|
(22,329
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)
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(23,058
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)
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Other financial results
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6
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|
|
|
(43,550
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)
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(21,921
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)
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3,076
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Income (loss) before equity in earnings of non-consolidated companies and income tax
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311,571
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(37,103
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)
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180,387
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Equity in earnings (losses) of non-consolidated companies
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7
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116,140
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71,533
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(39,558
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)
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Income before income tax
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427,711
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34,430
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140,829
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Income tax
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8
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|
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17,136
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(17,102
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)
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(234,384
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)
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Income (loss) for continuing operations
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444,847
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17,328
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(93,555
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)
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|
|
|
|
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|
|
|
|
|
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Discontinued operations
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|
|
|
|
|
|
|
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|
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|
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Result for discontinued operations
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28
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91,542
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41,411
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19,130
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Income (loss) for the year
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536,389
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58,739
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(74,425
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)
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|
|
|
|
|
|
|
|
|
|
|
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Attributable to:
|
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|
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|
|
|
|
|
|
|
|
|
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Owners of the parent
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544,737
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55,298
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(80,162
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)
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Non-controlling interests
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(8,348
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)
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3,441
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5,737
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|
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|
|
|
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536,389
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58,739
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(74,425
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)
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Earnings per share attributable to the owners of the parent during the year:
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Weighted average number of ordinary shares (thousands)
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1,180,537
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1,180,537
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1,180,537
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Continuing operations
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|
|
|
|
|
|
|
|
|
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Basic and diluted earnings (losses) per share (U.S. dollars per share)
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0.38
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0.01
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(0.08
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)
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Basic and diluted earnings (losses) per ADS (U.S. dollars per ADS) (*)
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0.77
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0.02
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(0.17
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)
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Continuing and discontinued operations
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|
|
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|
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|
|
|
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Basic and diluted earnings (losses) per share (U.S. dollars per share)
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0.46
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0.05
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(0.07
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)
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Basic and diluted earnings (losses) per ADS (U.S. dollars per ADS) (*)
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0.92
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0.09
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(0.14
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)
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(*) Each ADS equals two shares.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(all amounts in thousands of U.S. dollars)
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Year ended December 31,
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2017
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2016
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2015
|
|
Income (loss) for the year
|
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|
536,389
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58,739
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(74,425
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)
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Items that may be subsequently reclassified to profit or loss:
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|
|
|
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Currency translation adjustment
|
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151,762
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37,187
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(256,260
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)
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Change in value of cash flow hedges
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4,502
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(7,525
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)
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10,699
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Change in value of available for sale financial instruments
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-
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|
|
|
-
|
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|
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2,486
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|
Income tax relating to components of other comprehensive income
|
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|
23
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(23
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)
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(284
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)
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Share of other comprehensive income of non-consolidated companies:
|
|
|
|
|
|
|
|
|
|
|
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- Currency translation adjustment
|
|
|
(9,548
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)
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3,473
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|
|
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(92,914
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)
|
- Changes in the fair value of derivatives held as cash flow hedges and others
|
|
|
512
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|
|
|
421
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|
|
|
(3,790
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)
|
|
|
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147,251
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|
|
33,533
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|
|
(340,063
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)
|
Items that will not be reclassified to profit or loss:
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|
|
|
|
|
|
|
|
|
|
|
|
Remeasurements of post employment benefit obligations
|
|
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(8,635
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)
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|
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(230
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)
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14,181
|
|
Income tax on items that will not be reclassified
|
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|
1,338
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|
|
|
(1,760
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)
|
|
|
(4,242
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)
|
Remeasurements of post employment benefit obligations of non-consolidated companies
|
|
|
(376
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)
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|
|
(5,475
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)
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|
|
(449
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)
|
|
|
|
(7,673
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)
|
|
|
(7,465
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)
|
|
|
9,490
|
|
Other comprehensive income (loss) for the year, net of tax
|
|
|
139,578
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|
|
26,068
|
|
|
|
(330,573
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)
|
Total comprehensive income (loss) for the year
|
|
|
675,967
|
|
|
|
84,807
|
|
|
|
(404,998
|
)
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
|
683,531
|
|
|
|
81,702
|
|
|
|
(410,187
|
)
|
Non-controlling interests
|
|
|
(7,564
|
)
|
|
|
3,105
|
|
|
|
5,189
|
|
|
|
|
675,967
|
|
|
|
84,807
|
|
|
|
(404,998
|
)
|
Total comprehensive income (loss) for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
attributable to Owners of the parent arises from
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
591,989
|
|
|
|
40,291
|
|
|
|
(429,317
|
)
|
Discontinued operations
|
|
|
91,542
|
|
|
|
41,411
|
|
|
|
19,130
|
|
|
|
|
683,531
|
|
|
|
81,702
|
|
|
|
(410,187
|
)
|
The
accompanying notes are an integral part of these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
Consolidated STATEMENT OF FINANCIAL POSITION
(all amounts in thousands of U.S. dollars)
|
|
|
|
At December 31, 2017
|
|
At December 31, 2016
|
|
|
Notes
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
10
|
|
|
6,229,143
|
|
|
|
|
|
|
|
6,001,939
|
|
|
|
|
|
Intangible assets, net
|
|
|
11
|
|
|
1,660,859
|
|
|
|
|
|
|
|
1,862,827
|
|
|
|
|
|
Investments in non-consolidated companies
|
|
|
12
|
|
|
640,294
|
|
|
|
|
|
|
|
557,031
|
|
|
|
|
|
Available for sale assets
|
|
|
31
|
|
|
21,572
|
|
|
|
|
|
|
|
21,572
|
|
|
|
|
|
Other investments
|
|
|
18
|
|
|
128,335
|
|
|
|
|
|
|
|
249,719
|
|
|
|
|
|
Deferred tax assets
|
|
|
20
|
|
|
153,532
|
|
|
|
|
|
|
|
144,613
|
|
|
|
|
|
Receivables, net
|
|
|
13
|
|
|
183,329
|
|
|
|
9,017,064
|
|
|
|
197,003
|
|
|
|
9,034,704
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
|
14
|
|
|
2,368,304
|
|
|
|
|
|
|
|
1,563,889
|
|
|
|
|
|
Receivables and prepayments, net
|
|
|
15
|
|
|
143,929
|
|
|
|
|
|
|
|
124,715
|
|
|
|
|
|
Current tax assets
|
|
|
16
|
|
|
132,334
|
|
|
|
|
|
|
|
140,986
|
|
|
|
|
|
Trade receivables, net
|
|
|
17
|
|
|
1,214,060
|
|
|
|
|
|
|
|
954,685
|
|
|
|
|
|
Other investments
|
|
|
18
|
|
|
1,192,306
|
|
|
|
|
|
|
|
1,633,142
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
18
|
|
|
330,221
|
|
|
|
5,381,154
|
|
|
|
399,737
|
|
|
|
4,817,154
|
|
Assets of disposal group classified as held for sale
|
|
|
28
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
151,417
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
14,398,218
|
|
|
|
|
|
|
|
14,003,275
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves attributable to owners of the parent
|
|
|
|
|
|
|
|
|
|
11,482,185
|
|
|
|
|
|
|
|
11,287,417
|
|
Non-controlling interests
|
|
|
|
|
|
|
|
|
|
98,785
|
|
|
|
|
|
|
|
125,655
|
|
Total equity
|
|
|
|
|
|
|
|
|
|
11,580,970
|
|
|
|
|
|
|
|
11,413,072
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
19
|
|
|
34,645
|
|
|
|
|
|
|
|
31,542
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
20
|
|
|
457,970
|
|
|
|
|
|
|
|
550,657
|
|
|
|
|
|
Other liabilities
|
|
|
21(i)
|
|
|
217,296
|
|
|
|
|
|
|
|
213,617
|
|
|
|
|
|
Provisions
|
|
|
22
|
|
|
36,438
|
|
|
|
746,349
|
|
|
|
63,257
|
|
|
|
859,073
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
19
|
|
|
931,214
|
|
|
|
|
|
|
|
808,694
|
|
|
|
|
|
Current tax liabilities
|
|
|
16
|
|
|
102,405
|
|
|
|
|
|
|
|
101,197
|
|
|
|
|
|
Other liabilities
|
|
|
21(ii)
|
|
|
197,504
|
|
|
|
|
|
|
|
183,887
|
|
|
|
|
|
Provisions
|
|
|
23(ii)
|
|
|
32,330
|
|
|
|
|
|
|
|
22,756
|
|
|
|
|
|
Customer advances
|
|
|
|
|
|
56,707
|
|
|
|
|
|
|
|
39,668
|
|
|
|
|
|
Trade payables
|
|
|
|
|
|
750,739
|
|
|
|
2,070,899
|
|
|
|
556,834
|
|
|
|
1,713,036
|
|
Liabilities of disposal group classified as held for sale
|
|
|
28
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
18,094
|
|
Total liabilities
|
|
|
|
|
|
|
|
|
|
2,817,248
|
|
|
|
|
|
|
|
2,590,203
|
|
Total equity and liabilities
|
|
|
|
|
|
|
|
|
|
14,398,218
|
|
|
|
|
|
|
|
14,003,275
|
|
Contingencies, commitments and restrictions on the distribution of profits are disclosed
in Note 25.
The accompanying notes are an integral part of these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
Consolidated statement of changes in equity
(all amounts in thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
Attributable
to owners of the parent
|
|
|
|
|
|
|
Share
Capital (1)
|
|
Legal
Reserves
|
|
Share
Premium
|
|
Currency
Translation Adjustment
|
|
Other
Reserves (2)
|
|
Retained
Earnings (3)
|
|
Total
|
|
Non-controlling
interests
|
|
Total
|
Balance
at December 31, 2016
|
|
|
1,180,537
|
|
|
|
118,054
|
|
|
|
609,733
|
|
|
|
(965,955
|
)
|
|
|
(313,088
|
)
|
|
|
10,658,136
|
|
|
|
11,287,417
|
|
|
|
125,655
|
|
|
|
11,413,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
544,737
|
|
|
|
544,737
|
|
|
|
(8,348
|
)
|
|
|
536,389
|
|
Currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
151,080
|
|
|
|
-
|
|
|
|
-
|
|
|
|
151,080
|
|
|
|
682
|
|
|
|
151,762
|
|
Remeasurements of post employment
benefit obligations, net of taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,423
|
)
|
|
|
-
|
|
|
|
(7,423
|
)
|
|
|
126
|
|
|
|
(7,297
|
)
|
Change in value of available
for sale financial instruments and cash flow hedges net of tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,549
|
|
|
|
-
|
|
|
|
4,549
|
|
|
|
(24
|
)
|
|
|
4,525
|
|
Share
of other comprehensive income of non-consolidated companies
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,548
|
)
|
|
|
136
|
|
|
|
-
|
|
|
|
(9,412
|
)
|
|
|
-
|
|
|
|
(9,412
|
)
|
Other comprehensive
income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
141,532
|
|
|
|
(2,738
|
)
|
|
|
-
|
|
|
|
138,794
|
|
|
|
784
|
|
|
|
139,578
|
|
Total comprehensive income (loss)
for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
141,532
|
|
|
|
(2,738
|
)
|
|
|
544,737
|
|
|
|
683,531
|
|
|
|
(7,564
|
)
|
|
|
675,967
|
|
Acquisition and other changes in non-controlling
interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,743
|
)
|
|
|
-
|
|
|
|
(4,743
|
)
|
|
|
4,694
|
|
|
|
(49
|
)
|
Dividends paid in cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(484,020
|
)
|
|
|
(484,020
|
)
|
|
|
(24,000
|
)
|
|
|
(508,020
|
)
|
Balance
at December 31, 2017
|
|
|
1,180,537
|
|
|
|
118,054
|
|
|
|
609,733
|
|
|
|
(824,423
|
)
|
|
|
(320,569
|
)
|
|
|
10,718,853
|
|
|
|
11,482,185
|
|
|
|
98,785
|
|
|
|
11,580,970
|
|
(1) The Company has an authorized share capital of a single class of 2.5 billion shares
having a nominal value of $1.00 per share. As of December 31, 2017 there were 1,180,536,830 shares issued. All issued shares are
fully paid.
(2) Other reserves include mainly the result of transactions with non-controlling interest
that do not result in a loss of control, the remeasurement of post-employment benefit obligations and the changes in value of cash
flow hedges and in available for sale financial instruments.
(3) The Distributable Reserve and Retained Earnings
calculated according to Luxembourg Law are disclosed in Note 25.
The accompanying notes are an integral part of these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Cont.)
|
|
|
(all amounts in thousands
of U.S. dollars)
|
|
Attributable
to owners of the parent
|
|
|
|
|
|
|
Share
Capital (1)
|
|
Legal
Reserves
|
|
Share
Premium
|
|
Currency
Translation Adjustment
|
|
Other
Reserves (2)
|
|
Retained
Earnings
|
|
Total
|
|
Non-
controlling interests
|
|
Total
|
Balance
at December 31, 2015
|
|
|
1,180,537
|
|
|
|
118,054
|
|
|
|
609,733
|
|
|
|
(1,006,767
|
)
|
|
|
(298,682
|
)
|
|
|
11,110,469
|
|
|
|
11,713,344
|
|
|
|
152,712
|
|
|
|
11,866,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,298
|
|
|
|
55,298
|
|
|
|
3,441
|
|
|
|
58,739
|
|
Currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,339
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,339
|
|
|
|
(152
|
)
|
|
|
37,187
|
|
Remeasurements of post employment
benefit obligations, net of taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,781
|
)
|
|
|
-
|
|
|
|
(1,781
|
)
|
|
|
(209
|
)
|
|
|
(1,990
|
)
|
Change in value of available
for sale financial instruments and cash flow hedges net of tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,573
|
)
|
|
|
-
|
|
|
|
(7,573
|
)
|
|
|
25
|
|
|
|
(7,548
|
)
|
Share
of other comprehensive income of non-consolidated companies
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,473
|
|
|
|
(5,054
|
)
|
|
|
-
|
|
|
|
(1,581
|
)
|
|
|
-
|
|
|
|
(1,581
|
)
|
Other comprehensive
income (loss) for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,812
|
|
|
|
(14,408
|
)
|
|
|
-
|
|
|
|
26,404
|
|
|
|
(336
|
)
|
|
|
26,068
|
|
Total comprehensive income for
the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,812
|
|
|
|
(14,408
|
)
|
|
|
55,298
|
|
|
|
81,702
|
|
|
|
3,105
|
|
|
|
84,807
|
|
Acquisition of non-controlling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
|
|
2
|
|
|
|
(1,073
|
)
|
|
|
(1,071
|
)
|
Dividends paid in cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(507,631
|
)
|
|
|
(507,631
|
)
|
|
|
(29,089
|
)
|
|
|
(536,720
|
)
|
Balance
at December 31, 2016
|
|
|
1,180,537
|
|
|
|
118,054
|
|
|
|
609,733
|
|
|
|
(965,955
|
)
|
|
|
(313,088
|
)
|
|
|
10,658,136
|
|
|
|
11,287,417
|
|
|
|
125,655
|
|
|
|
11,413,072
|
|
|
|
|
|
|
Attributable
to owners of the parent
|
|
|
|
|
|
|
Share
Capital (1)
|
|
Legal
Reserves
|
|
Share
Premium
|
|
Currency
Translation Adjustment
|
|
Other
Reserves (2)
|
|
Retained
Earnings
|
|
Total
|
|
Non-
controlling
interests
|
|
Total
|
Balance at December
31, 2014
|
|
|
1,180,537
|
|
|
|
118,054
|
|
|
|
609,733
|
|
|
|
(658,284
|
)
|
|
|
(317,799
|
)
|
|
|
11,721,873
|
|
|
|
12,654,114
|
|
|
|
152,200
|
|
|
|
12,806,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(80,162
|
)
|
|
|
(80,162
|
)
|
|
|
5,737
|
|
|
|
(74,425
|
)
|
Currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(255,569
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(255,569
|
)
|
|
|
(691
|
)
|
|
|
(256,260
|
)
|
Remeasurements of post employment
benefit obligations, net of taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,213
|
|
|
|
-
|
|
|
|
10,213
|
|
|
|
(274
|
)
|
|
|
9,939
|
|
Change in value of available
for sale financial instruments and cash flow hedges net of tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,484
|
|
|
|
-
|
|
|
|
12,484
|
|
|
|
417
|
|
|
|
12,901
|
|
Share
of other comprehensive income of non-consolidated companies
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(92,914
|
)
|
|
|
(4,239
|
)
|
|
|
-
|
|
|
|
(97,153
|
)
|
|
|
-
|
|
|
|
(97,153
|
)
|
Other comprehensive
(loss) for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(348,483
|
)
|
|
|
18,458
|
|
|
|
-
|
|
|
|
(330,025
|
)
|
|
|
(548
|
)
|
|
|
(330,573
|
)
|
Total comprehensive (loss) income
for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(348,483
|
)
|
|
|
18,458
|
|
|
|
(80,162
|
)
|
|
|
(410,187
|
)
|
|
|
5,189
|
|
|
|
(404,998
|
)
|
Acquisition of non-controlling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
659
|
|
|
|
-
|
|
|
|
659
|
|
|
|
(1,727
|
)
|
|
|
(1,068
|
)
|
Dividends paid in cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(531,242
|
)
|
|
|
(531,242
|
)
|
|
|
(2,950
|
)
|
|
|
(534,192
|
)
|
Balance
at December 31, 2015
|
|
|
1,180,537
|
|
|
|
118,054
|
|
|
|
609,733
|
|
|
|
(1,006,767
|
)
|
|
|
(298,682
|
)
|
|
|
11,110,469
|
|
|
|
11,713,344
|
|
|
|
152,712
|
|
|
|
11,866,056
|
|
(1) The Company has an authorized share capital of a single class of 2.5 billion shares
having a nominal value of $1.00 per share. As of December 31, 2016 and 2015 there were 1,180,536,830 shares issued. All issued
shares are fully paid.
(2) Other reserves include mainly the result of transactions with non-controlling interest
that do not result in a loss of control, the remeasurement of post-employment benefit obligations and the changes in value of cash
flow hedges and in available for sale financial instruments.
The accompanying notes are an integral part of these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
CONSOLIDATED STATEMENT OF CASH FLOWS
(all amounts in thousands of U.S. dollars)
|
|
|
|
Year ended December 31,
|
|
|
Notes
|
|
2017
|
|
2016
|
|
2015
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) for the year
|
|
|
|
|
536,389
|
|
|
|
58,739
|
|
|
|
(74,425
|
)
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
10 & 11
|
|
|
608,640
|
|
|
|
662,412
|
|
|
|
658,778
|
|
Impairment charge
|
|
5
|
|
|
-
|
|
|
|
-
|
|
|
|
400,314
|
|
Income tax accruals less payments
|
|
27(ii)
|
|
|
(193,989
|
)
|
|
|
(128,079
|
)
|
|
|
(91,080
|
)
|
Equity in (earnings) losses of non-consolidated companies
|
|
7
|
|
|
(116,140
|
)
|
|
|
(71,533
|
)
|
|
|
39,558
|
|
Interest accruals less payments, net
|
|
27(iii)
|
|
|
11,550
|
|
|
|
(2,567
|
)
|
|
|
26,622
|
|
Changes in provisions
|
|
|
|
|
(17,245
|
)
|
|
|
15,597
|
|
|
|
(20,678
|
)
|
Income from the sale of Conduit business
|
|
28
|
|
|
(89,694
|
)
|
|
|
-
|
|
|
|
-
|
|
Changes in working capital
|
|
27(i)
|
|
|
(855,282
|
)
|
|
|
348,199
|
|
|
|
1,373,985
|
|
Currency translation adjustment and others
|
|
|
|
|
93,746
|
|
|
|
(19,203
|
)
|
|
|
(98,070
|
)
|
Net cash (used in) provided by operating activities
|
|
|
|
|
(22,025
|
)
|
|
|
863,565
|
|
|
|
2,215,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
10 & 11
|
|
|
(558,236
|
)
|
|
|
(786,873
|
)
|
|
|
(1,131,519
|
)
|
Changes in advance to suppliers of property, plant and equipment
|
|
|
|
|
7,077
|
|
|
|
50,989
|
|
|
|
49,461
|
|
Proceeds from disposal of Conduit business
|
|
28
|
|
|
327,631
|
|
|
|
-
|
|
|
|
-
|
|
Investment in non-consolidated companies
|
|
12
|
|
|
-
|
|
|
|
(17,108
|
)
|
|
|
(4,400
|
)
|
Acquisition of subsidiaries
|
|
26
|
|
|
(10,418
|
)
|
|
|
-
|
|
|
|
-
|
|
Investment in companies under cost method
|
|
|
|
|
(3,681
|
)
|
|
|
-
|
|
|
|
-
|
|
Loan to non-consolidated companies
|
|
12 c
|
|
|
(7,056
|
)
|
|
|
(42,394
|
)
|
|
|
(22,322
|
)
|
Proceeds from disposal of property, plant and equipment and intangible assets
|
|
|
|
|
5,443
|
|
|
|
23,609
|
|
|
|
10,090
|
|
Dividends received from non-consolidated companies
|
|
12
|
|
|
22,971
|
|
|
|
20,674
|
|
|
|
20,674
|
|
Changes in investments in securities
|
|
|
|
|
565,387
|
|
|
|
652,755
|
|
|
|
(695,566
|
)
|
Net cash provided by (used in) investing activities
|
|
|
|
|
349,118
|
|
|
|
(98,348
|
)
|
|
|
(1,773,582
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
9
|
|
|
(484,020
|
)
|
|
|
(507,631
|
)
|
|
|
(531,242
|
)
|
Dividends paid to non-controlling interest in subsidiaries
|
|
|
|
|
(24,000
|
)
|
|
|
(29,089
|
)
|
|
|
(2,950
|
)
|
Acquisitions of non-controlling interests
|
|
|
|
|
(49
|
)
|
|
|
(1,071
|
)
|
|
|
(1,068
|
)
|
Proceeds from borrowings
|
|
|
|
|
1,196,781
|
|
|
|
1,180,727
|
|
|
|
2,064,218
|
|
Repayments of borrowings
|
|
|
|
|
(1,090,129
|
)
|
|
|
(1,295,560
|
)
|
|
|
(2,063,992
|
)
|
Net cash used in financing activities
|
|
|
|
|
(401,417
|
)
|
|
|
(652,624
|
)
|
|
|
(535,034
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
|
|
(74,324
|
)
|
|
|
112,593
|
|
|
|
(93,612
|
)
|
Movement in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At the beginning of the year
|
|
|
|
|
398,580
|
|
|
|
286,198
|
|
|
|
416,445
|
|
Effect of exchange rate changes
|
|
|
|
|
5,834
|
|
|
|
(211
|
)
|
|
|
(36,635
|
)
|
(Decrease) increase in cash and cash equivalents
|
|
|
|
|
(74,324
|
)
|
|
|
112,593
|
|
|
|
(93,612
|
)
|
At December 31,
|
|
27(iv)
|
|
|
330,090
|
|
|
|
398,580
|
|
|
|
286,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
Cash and cash equivalents
|
|
|
|
|
2017
|
|
|
|
2016
|
|
|
|
2015
|
|
Cash and bank deposits
|
|
|
|
|
330,221
|
|
|
|
399,900
|
|
|
|
286,547
|
|
Bank overdrafts
|
|
19
|
|
|
(131
|
)
|
|
|
(1,320
|
)
|
|
|
(349
|
)
|
|
|
|
|
|
330,090
|
|
|
|
398,580
|
|
|
|
286,198
|
|
The accompanying notes are an integral part of these Consolidated Financial
Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
Index
TO the notes to the consolidated financial statements
I
|
GENERAL INFORMATION
|
IV
|
OTHER NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
1
|
Segment information
|
II
|
ACCOUNTING POLICIES (“AP”)
|
2
|
Cost of sales
|
A
|
Basis of presentation
|
3
|
Selling, general and administrative expenses
|
B
|
Group accounting
|
4
|
Labor costs (included in Cost of sales and in Selling, general and administrative expenses)
|
C
|
Segment information
|
5
|
Other operating income and expenses
|
D
|
Foreign currency translation
|
6
|
Financial results
|
E
|
Property, plant and equipment
|
7
|
Equity in earnings (losses) of non-consolidated companies
|
F
|
Intangible assets
|
8
|
Income tax
|
G
|
Impairment of non-financial assets
|
9
|
Dividends distribution
|
H
|
Other investments
|
10
|
Property, plant and equipment, net
|
I
|
Inventories
|
11
|
Intangible assets, net
|
J
|
Trade and other receivables
|
12
|
Investments in non-consolidated companies
|
K
|
Cash and cash equivalents
|
13
|
Receivables - non current
|
L
|
Equity
|
14
|
Inventories
|
M
|
Borrowings
|
15
|
Receivables and prepayments
|
N
|
Current and deferred income tax
|
16
|
Current tax assets and liabilities
|
O
|
Employee benefits
|
17
|
Trade receivables
|
P
|
Provisions
|
18
|
Cash and cash equivalents and other investments
|
Q
|
Trade payables
|
19
|
Borrowings
|
R
|
Revenue recognition
|
20
|
Deferred income tax
|
S
|
Cost of sales and other selling expenses
|
21
|
Other liabilities
|
T
|
Earnings per share
|
22
|
Non-current allowances and provisions
|
U
|
Financial instruments
|
23
|
Current allowances and provisions
|
V
|
Non-current assets held for sale and discontinued operations
|
24
|
Derivative financial instruments
|
|
|
25
|
Contingencies, commitments and restrictions on the distribution of profits
|
III
|
FINANCIAL RISK MANAGEMENT
|
26
|
Acquisition of subsidiaries
|
|
|
27
|
Cash flow disclosures
|
A
|
Financial Risk Factors
|
28
|
Net assets of disposal group classified as held for sale
|
B
|
Category of Financial Instruments and Classification Within the Fair Value Hierarchy
|
29
|
Related party transactions
|
C
|
Fair value estimation
|
30
|
Principal subsidiaries
|
D
|
Accounting for derivative financial instruments and hedging activities
|
31
|
Nationalization of Venezuelan subsidiaries
|
|
|
32
|
Fees paid to the Company's principal accountant
|
|
|
33
|
Subsequent event
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
I. GENERAL INFORMATION
Tenaris S.A. (the “Company”) was established as a public
limited liability company (
societé anonyme
) under the laws of the Grand-Duchy of Luxembourg on December 17, 2001.
The Company holds, either directly or indirectly, controlling interests in various subsidiaries in the steel pipe manufacturing
and distribution businesses. References in these Consolidated Financial Statements to “Tenaris” refer to the Company
and its consolidated subsidiaries. A list of the principal Company’s subsidiaries is included in Note 30 to these Consolidated
Financial Statements.
The Company’s shares trade on the Buenos Aires Stock Exchange,
the Italian Stock Exchange and the Mexican Stock Exchange; the Company’s American Depositary Securities (“ADS”)
trade on the New York Stock Exchange.
These Consolidated Financial Statements were approved for issuance
by the Company’s Board of Directors on February 21, 2018.
II. Accounting policies
The principal accounting policies applied in the preparation of
these Consolidated Financial Statements are set out below. These policies have been consistently applied to all the years presented,
unless otherwise stated.
The Consolidated Financial Statements of Tenaris have been prepared
in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting
Standards Board (“IASB”) and in accordance with IFRS as adopted by the European Union, under the historical cost convention,
as modified by the revaluation of available for sale financial assets, financial assets and liabilities (including derivative instruments)
at fair value through profit or loss and plan assets measured at fair value. The Consolidated Financial Statements are, unless
otherwise noted, presented in thousands of U.S. dollars (“$”).
Whenever necessary, certain comparative amounts have been reclassified
to conform to changes in presentation in the current year.
Following the sale of the steel electric conduit business in North
America, known as Republic Conduit, the results of the mentioned business are presented as discontinued operations in accordance
with IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations". Consequently, all amounts related to discontinued
operations within each line item of the Consolidated Income Statement are reclassified into discontinued operations. The Consolidated
Statement of Cash Flows includes the cash flows for continuing and discontinued operations, cash flows from discontinued operations
and earnings per share are disclosed separately in Note 28, as well as additional information detailing net assets of disposal
group classified as held for sale and discontinued operations.
The preparation of Consolidated Financial Statements in conformity
with IFRS requires management to make certain accounting estimates and assumptions that might affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the reporting dates, and the reported amounts of revenues
and expenses during the reporting years. Actual results may differ from these estimates.
(1)
|
|
New and amended standards not yet adopted and relevant for Tenaris
|
IFRS 9, “Financial instruments”
In July 2014, the IASB issued IFRS 9, "Financial instruments",
which replaces the guidance in IAS 39. IFRS 9 includes new requirements on the classification and measurement of financial assets
and liabilities, as well as a new impairment model based on expected credit losses rather than the incurred loss impairment model
of IAS 39. It also introduces new rules for hedge accounting. IFRS 9 must be applied on annual periods beginning on or after January
1, 2018.
The Company will apply the new rules retrospectively from 1 January
2018. Comparative amounts for previous years will not be restated.
The Company has reviewed its financial assets and liabilities and
is expecting that the other investments categorized as held to maturity and carried at amortized cost will qualify for classification
at fair value through other comprehensive income. Accordingly, Tenaris expects an increase in the valuation of its financial assets
of approximately $3 million.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
A
|
|
Basis of presentation (Cont.)
|
(1)
|
|
New and amended standards not yet adopted and relevant for Tenaris (Cont.)
|
IFRS 9, “Financial instruments” (Cont.)
The new impairment model requires recognition of impairment provisions
based on expected credit losses rather than on incurred credit losses. Based on the assessments undertaken, Tenaris expects a decrease
of $ 6 million in the allowance for doubtful accounts.
The Company does not expect any significant impact related to the
new hedge accounting rules.
IFRS 15, “Revenue from contracts with customers”
In May 2014, the IASB issued IFRS 15, "Revenue from contracts
with customers", which sets out the requirements in accounting for revenue arising from contracts with customers and which
is based on the principle that revenue is recognized when control of a good or service is transferred to the customer. IFRS 15
must be applied on annual periods beginning on or after January 1, 2018.
The Company has assessed the effects of applying the new standard
and the main areas affected will be the accounting for sales of shipping services, free of charge services and rights of return.
The impact of the adoption as of January 1, 2018 on the aggregate
of revenues, cost of sales and selling expenses is expected to be a decrease of $ 0.7 million net.
The Company intends to adopt this standard using the modified retrospective
approach, meaning that the cumulative impact of the adoption will be recognized in retained earnings as of January 1, 2018 and
that comparatives will not be restated.
IFRS 16, “Leases”
In January 2016, the IASB issued IFRS 16, "Leases". The
new standard will result in almost all leases recognized on the balance sheet, as the distinction between operating and finance
leases is removed. IFRS 16 must be applied on annual periods beginning on or after January 1, 2019.
The Company's management is currently assessing the potential impact
that the application of this standard may have on the Company's financial condition or results of operations.
These standards were endorsed by the EU.
Other accounting pronouncements that became effective during 2017
have no material effect on the Company’s financial condition or results of operations.
(1)
|
|
Subsidiaries and transactions with non-controlling interests
|
Subsidiaries are all entities over which Tenaris has control. Tenaris
controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability
to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is
exercised by the Company and are no longer consolidated from the date control ceases.
The acquisition method of accounting is used to account for the
acquisition of subsidiaries by Tenaris. The cost of an acquisition is measured as the fair value of the assets transferred, equity
instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition-related costs are expensed as incurred.
Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at
their fair values at the acquisition date. Any non-controlling interest in the acquiree is measured either at fair value or at
the non-controlling interest’s proportionate share of the acquiree’s net assets. The excess of the aggregate of the
consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the identifiable
net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired,
the difference is recognized directly in the Consolidated Income Statement.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
B
|
|
Group accounting (Cont.)
|
(1)
|
|
Subsidiaries and transactions with non-controlling interests (Cont.)
|
Contingent consideration is classified either as equity or as a
financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair
value recognized in profit or loss.
If the business combination is achieved in stages, the acquisition
date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the
acquisition date. Any gains or losses arising from such remeasurement are recognized in profit or loss.
Transactions with non-controlling interests that do not result in
a loss of control are accounted as transactions with equity owners of the Company. For purchases from non-controlling interests,
the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary
is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
Material intercompany transactions, balances and unrealized gains
(losses) on transactions between Tenaris subsidiaries have been eliminated in consolidation. However, since the functional currency
of some subsidiaries is its respective local currency, some financial gains (losses) arising from intercompany transactions are
generated. These are included in the Consolidated Income Statement under
Other financial results
.
(2)
|
|
Non-consolidated companies
|
Non-consolidated companies are all entities in which Tenaris has
significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments
in non-consolidated companies (associated and joint ventures) are accounted for by the equity method of accounting and are initially
recognized at cost. The Company’s investment in non-consolidated companies includes goodwill identified in acquisition, net
of any accumulated impairment loss.
Under the equity method of accounting, the investments are initially
recognized at cost and adjusted thereafter to recognize Tenaris’s share of the post-acquisition profits or losses of the
investee in profit or loss, and Tenaris’s share of movements in other comprehensive income of the investee in other comprehensive
income. Dividends received or receivable from associates and joint ventures are recognized as a reduction in the carrying amount
of the investment.
Unrealized results on transactions between Tenaris and its non-consolidated
companies are eliminated to the extent of Tenaris’s interest in the non-consolidated companies. Unrealized losses are also
eliminated unless the transaction provides evidence of an impairment indicator of the asset transferred. Financial statements of
non-consolidated companies have been adjusted where necessary to ensure consistency with IFRS.
The Company’s pro-rata share of earnings in non-consolidated
companies is recorded in the Consolidated Income Statement under
Equity in earnings (losses) of non-consolidated companies
.
The Company’s pro-rata share of changes in other reserves is recognized in the Consolidated Statement of Changes in Equity
under
Other Reserves.
At December
31, 2017, Tenaris holds 11.46% of Ternium S.A (“Ternium”)’s common stock. The following factors and circumstances
evidence that Tenaris has significant influence (as defined by IAS 28, “Investments in associates companies and Joint Ventures”)
over Ternium, and as a result the Company’s investment in Ternium has been accounted for under the equity method:
|
§
|
Both the Company and Ternium are under the indirect common control of San Faustin S.A.;
|
|
§
|
Four out of eight members of Ternium’s Board of Directors (including Ternium’s chairman)
are also members of the Company’s Board of Directors;
|
|
§
|
Under the shareholders’ agreement by and between the Company and Techint Holdings S.à
r.l, a wholly owned subsidiary of San Faustin S.A. and Ternium’s main shareholder, dated January 9, 2006, Techint Holdings
S.à r.l, is required to take actions within its power to cause (a) one of the members of Ternium’s Board of Directors
to be nominated by the Company and (b) any director nominated by the Company to be only removed from Ternium’s Board of Directors
pursuant to previous written instructions of the Company.
|
At December 31, 2017, Tenaris holds through its Brazilian subsidiary
Confab Industrial S.A. (“Confab”), 5.2% of the shares with voting rights and 3.08% of Usinas Siderúrgicas de
Minas Gerais S.A. (“Usiminas”) total share capital.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
B
|
|
Group accounting (Cont.)
|
(2)
|
|
Non-consolidated companies (Cont.)
|
The acquisition of Usiminas shares was part of a larger transaction
performed
on January 16, 2012,
pursuant to which Ternium, certain of its subsidiaries and Confab
joined Usiminas’ existing control group through the acquisition of ordinary shares representing 27.7% of Usiminas’
total voting capital and 13.8% of Usiminas’ total share capital.
The rights of Ternium and its
subsidiaries and Confab within the Ternium - Tenaris Group are governed under a separate shareholders agreement.
Those circumstances
evidence that Tenaris has significant influence over Usiminas, consequently, accounted it for under the equity method (as defined
by IAS 28).
In April and May 2016 Tenaris’s subsidiary Confab subscribed,
in the aggregate, to 1.3 million preferred shares (BRL1.28 per share) for a total amount of BRL1.6 million (approximately $0.5
million) and 11.5 million ordinary shares (BRL5.00 per share) for a total amount of BRL57.5 million (approximately $16.6 million).
The preferred and ordinary shares were issued on June 3, 2016 and July 19, 2016, respectively. Consequently as of December 31,
2017 Tenaris owns 36.5 million ordinary shares and 1.3 million preferred shares of Usiminas.
Tenaris carries its investment in Ternium and Usiminas under the
equity method, with no additional goodwill or intangible assets recognized. Tenaris reviews investments in non-consolidated companies
for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable,
such as a significant or prolonged decline in fair value below the carrying value. At December 31, 2017, 2016 and 2015, no impairment
provisions were recorded on Tenaris’s investment in Ternium while in 2015, an impairment charge was recorded on Tenaris’s
investment in Usiminas. See Note 7 and Note 12.
The Company is organized in one major business segment, Tubes, which
is also the reportable operating segment.
The Tubes segment includes the production and sale of both seamless
and welded steel tubular products and related services mainly for the oil and gas industry, particularly oil country tubular goods
(OCTG) used in drilling operations, and for other industrial applications with production processes that consist in the transformation
of steel into tubular products. Business activities included in this segment are mainly dependent on the oil and gas industry worldwide,
as this industry is a major consumer of steel pipe products, particularly OCTG used in drilling activities. Demand for steel pipe
products from the oil and gas industry has historically been volatile and depends primarily upon the number of oil and natural
gas wells being drilled, completed and reworked, and the depth and drilling conditions of these wells. Sales are generally made
to end users, with exports being done through a centrally managed global distribution network and domestic sales are made through
local subsidiaries. Corporate general and administrative expenses have been allocated to the Tubes segment.
Others includes all other business activities and operating segments
that are not required to be separately reported, including the production and selling of sucker rods, industrial equipment, coiled
tubing, utility conduits for buildings, energy and raw materials that exceed internal requirements.
Tenaris’s Chief Operating Decision Maker (CEO) holds monthly
meetings with senior management, in which operating and financial performance information is reviewed, including financial information
that differs from IFRS principally as follows:
|
§
|
The use of direct cost methodology to calculate the inventories, while under IFRS it is at full
cost, including absorption of production overheads and depreciations;
|
|
§
|
The use of costs based on previously internally defined cost estimates, while, under IFRS, costs
are calculated at historical cost;
|
|
§
|
Other timing differences, if any.
|
Tenaris presents its geographical information in five areas: North
America, South America, Europe, Middle East and Africa and Asia Pacific. For purposes of reporting geographical information, net
sales are allocated to geographical areas based on the customer’s location; allocation of assets, capital expenditures and
associated depreciations and amortizations are based on the geographical location of the assets.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
D
|
|
Foreign currency translation
|
(1)
|
|
Functional and presentation currency
|
IAS 21 (revised) “The effects of changes in foreign exchange
rates” defines the functional currency as the currency of the primary economic environment in which an entity operates.
The functional and presentation currency of the Company is the U.S.
dollar. The U.S. dollar is the currency that best reflects the economic substance of the underlying events and circumstances relevant
to Tenaris’s global operations.
Except for the Brazilian and Italian subsidiaries whose functional
currencies are their local currencies, Tenaris determined that the functional currency of its other subsidiaries is the U.S. dollar,
based on the following principal considerations:
|
§
|
Sales are mainly negotiated, denominated and settled in U.S. dollars. If priced in a currency other
than the U.S. dollar, the sales price may consider exposure to fluctuation in the exchange rate versus the U.S. dollar;
|
|
§
|
Prices of their critical raw materials and inputs are priced and settled in U.S. dollars;
|
|
§
|
Transaction and operational environment and the cash flow of these operations have the U.S. dollar
as reference currency;
|
|
§
|
Significant level of integration of the local operations within Tenaris’s international global
distribution network;
|
|
§
|
Net financial assets and liabilities are mainly received and maintained in U.S. dollars;
|
|
§
|
The exchange rate of certain legal currencies has long-been affected by recurring and severe economic
crises.
|
(2)
|
|
Transactions in currencies other than the functional currency
|
Transactions in currencies other
than the functional currency are translated into the functional currency using the exchange rates prevailing at the date of the
transactions or valuation where items are re-measured.
At the end of each reporting period:
(i) monetary items denominated in currencies other than the functional currency are translated using the closing rates; (ii) non-monetary
items that are measured in terms of historical cost in a currency other than the functional currency are translated using the exchange
rates prevailing at the date of the transactions; and (iii) non-monetary items that are measured at fair value in a currency other
than the functional currency are translated using the exchange rates prevailing at the date when the fair value was determined.
Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in currencies other than the functional currency are recorded as gains and losses from foreign exchange and included
in
“Other financial results”
in the Consolidated Income Statement, except when deferred in equity as qualifying
cash flow hedges and qualifying net investment hedges.
(3)
|
|
Translation of financial information in currencies other than the functional currency
|
Results of operations for subsidiaries whose functional currencies
are not the U.S. dollar are translated into U.S. dollars at the average exchange rates for each quarter of the year. Financial
statement positions are translated at the year-end exchange rates. Translation differences are recognized in a separate component
of equity as currency translation adjustments. In the case of a sale or other disposal of any of such subsidiaries, any accumulated
translation difference would be recognized in income as a gain or loss from the sale.
Goodwill and fair value adjustments arising from the acquisition
of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
E
|
|
Property, plant and equipment
|
Property, plant and equipment are recognized at historical acquisition
or construction cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly
attributable to the acquisition of the items. Property, plant and equipment acquired through acquisitions accounted for as business
combinations have been valued initially at the fair market value of the assets acquired.
Major overhaul and rebuilding expenditures are capitalized as property,
plant and equipment only when it is probable that future economic benefits associated with the item will flow to the group and
the investment enhances the condition of assets beyond its original condition. The carrying amount of the replaced part is derecognized.
Maintenance expenses on manufacturing properties are recorded as cost of products sold in the year in which they are incurred.
Cost may also include transfers from equity of any gains or losses
on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
Borrowing costs that are attributable to the acquisition or construction
of certain capital assets are capitalized as part of the cost of the asset, in accordance with IAS 23(R) “Borrowing Costs”.
Assets for which borrowing costs are capitalized are those that require a substantial period of time to prepare for their intended
use.
Depreciation method is reviewed at each year end. Depreciation is
calculated using the straight-line method to depreciate the cost of each asset to its residual value over its estimated useful
life, as follows:
|
Land
|
No Depreciation
|
|
Buildings and improvements
|
30-50 years
|
|
Plant and production equipment
|
10-40 years
|
|
Vehicles, furniture and fixtures, and other equipment
|
4-10 years
|
The assets’ residual values and useful lives of significant
plant and production equipment are reviewed and adjusted, if appropriate, at each year-end date. An asset’s carrying amount
is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable
amount.
Management’s re-estimation of assets useful lives, performed
in accordance with IAS 16 “Property, Plant and Equipment”, did not materially affect depreciation expenses for 2017,
2016 and 2015.
Tenaris depreciates each significant part of an item of property,
plant and equipment for its different production facilities that (i) can be properly identified as an independent component with
a cost that is significant in relation to the total cost of the item, and (ii) has a useful operating life that is different from
another significant part of that same item of property, plant and equipment.
During 2017, the Company decided to redefine the subcategories within
property, plant and equipment items, in order to better reflect the nature and intended use of the assets. Comparative figures
were reclassified following the new subcategories.
Gains and losses on disposals are determined by comparing the proceeds
with the carrying amount of assets and are recognized under
Other operating income
or
Other operating expenses
in
the Consolidated Income Statement.
Goodwill represents
the excess of the acquisition cost over the fair value of Tenaris’s share of net identifiable assets acquired as part of
business combinations determined mainly by independent valuations. Goodwill is tested at least annually for impairment and carried
at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Goodwill is included in the Consolidated
Statement of Financial Position under
Intangible assets, net.
For the purpose of impairment
testing, goodwill is allocated to a subsidiary or group of subsidiaries that are expected to benefit from the business combination
which generated the goodwill being tested.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
F
|
|
Intangible assets (Cont.)
|
(2)
|
|
Information systems projects
|
Costs associated with maintaining computer software programs are
generally recognized as an expense as incurred. However, costs directly related to the development, acquisition and implementation
of information systems are recognized as intangible assets if it is probable that they have economic benefits exceeding one year
and comply with the recognition criteria of IAS 38.
Information systems projects recognized as assets are amortized
using the straight-line method over their useful lives, generally not exceeding a period of 3 years. Amortization charges are mainly
classified as
Selling, general and administrative expenses
in the Consolidated Income Statement.
Management’s re-estimation of assets useful lives, performed
in accordance with IAS 38 “Intangible Assets”, did not materially affect amortization expenses for 2017, 2016 and 2015.
(3)
|
|
Licenses, patents, trademarks and proprietary technology
|
Licenses, patents, trademarks, and proprietary technology acquired
in a business combination are initially recognized at fair value at the acquisition date. Licenses, patents, proprietary technology
and those trademarks that have a finite useful life are carried at cost less accumulated amortization. Amortization is calculated
using the straight-line method to allocate the cost over their estimated useful lives, and does not exceed a period of 10 years.
Amortization charges are mainly classified as
Selling, general and administrative expenses
in the Consolidated Income Statement.
The balance of acquired trademarks that have indefinite useful lives
according to external appraisal amounts to $86.7 million at December 31, 2017 and 2016, included in Hydril CGU. Main factors considered
in the determination of the indefinite useful lives, include the years that they have been in service and their recognition among
customers in the industry.
Management’s re-estimation of assets useful lives, performed
in accordance with IAS 38, did not materially affect amortization expenses for 2017, 2016 and 2015.
(4)
|
|
Research and development
|
Research expenditures as well as development costs that do not fulfill
the criteria for capitalization are recorded as
Cost of sales
in the Consolidated Income Statement as incurred. Research
and development expenditures included in
Cost of sales
for the years 2017, 2016 and 2015 totaled $63.7 million, $68.6 million
and $89.0 million, respectively.
(5)
|
|
Customer relationships
|
In accordance with IFRS 3 "Business Combinations"
and IAS 38, Tenaris has recognized the value of customer relationships separately from goodwill attributable to the acquisition
of Maverick and Hydril groups.
Customer relationships acquired in a business combination
are recognized at fair value at the acquisition date, have a finite useful life and are carried at cost less accumulated amortization.
Amortization is calculated using the straight line method over the expected life of approximately 14 years for Maverick and 10
years for Hydril.
In 2015 the Company reviewed the useful life of Prudential’s
customer relationships, related to Maverick acquisition, and decided to reduce the remaining amortization period from 5 years to
2 years, ending December 2017.
As of December 2017 the residual value of Maverick’s customer
relationships amount to $193 million and the residual useful life is 3 years, while Hydril’s customer relationships is fully
amortized
.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
G
|
|
Impairment of non-financial assets
|
Long-lived assets including identifiable intangible assets are reviewed
for impairment at the lowest level for which there are separately identifiable cash flows (cash generating units, or CGU). Most
of the Company’s principal subsidiaries that constitute a CGU have a single main production facility and, accordingly, each
of such subsidiary represents the lowest level of asset aggregation that generates largely independent cash inflows.
Assets that are subject to amortization are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets with indefinite
useful lives, including goodwill, are subject to at least an annual impairment test.
In assessing whether there is any indication that a CGU may be impaired,
external and internal sources of information are analyzed. Material facts and circumstances specifically considered in the analysis
usually include the discount rate used in Tenaris’s cash flow projections and the business condition in terms of competitive
and economic factors, such as the cost of raw materials, oil and gas prices, capital expenditure programs for Tenaris’s customers
and the evolution of the rig count.
An impairment loss is recognized for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher between the asset’s value in use and
fair value less costs of disposal. Any impairment loss is allocated to reduce the carrying amount of the assets of the CGU in the
following order:
(a)
|
|
first, to reduce the carrying amount of any goodwill allocated to the CGU; and
|
(b)
|
|
then, to the other assets of the unit (group of units) pro-rata on the basis of the
carrying amount of each asset in the unit (group of units), considering not to reduce the carrying amount of the asset below the
highest of its fair value less cost of disposal, its value in use or zero.
|
The value in use of each CGU is determined on the basis of the present
value of net future cash flows which would be generated by such CGU. Tenaris uses cash flow projections for a five year period
with a terminal value calculated based on perpetuity and appropriate discount rates.
For purposes of calculating the
fair value less costs of disposal, Tenaris uses the estimated value of future cash flows that a market participant could generate
from the corresponding CGU.
Management judgment is required to estimate discounted future cash
flows. Actual cash flows and values could vary significantly from the forecasted future cash flows and related values derived using
discounting techniques.
Non-financial assets other than goodwill that suffered an impairment
are reviewed for possible reversal at each reporting date.
Other investments consist primarily of investments in financial
instruments and time deposits with a maturity of more than three months at the date of purchase.
Certain non-derivative financial assets that the Company has both
the ability and the intention to hold to maturity have been categorized as held to maturity financial assets. They are carried
at amortized cost and the results are recognized in
Financial Results
in the Consolidated Income Statement using the effective
interest method. Held to maturity instruments with maturities greater than 12 months after the balance sheet date are included
in the non-current assets.
All other investments in financial instruments and time deposits
are categorized as financial assets “at fair value through profit or loss” because such investments are both (i) held
for trading and (ii) designated as such upon initial recognition because they are managed and their performance is evaluated on
a fair value basis. The results of these investments are recognized in
Financial Results
in the Consolidated Income Statement.
Purchases and sales of financial investments are recognized as of
their settlement date.
The fair values of quoted investments are generally based on current
bid prices. If the market for a financial investment is not active or the securities are not listed, Tenaris estimates the fair
value by using standard valuation techniques (see Section III Financial Risk Management).
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
Inventories are stated at the lower between cost and net realizable
value. The cost of finished goods and goods in process is comprised of raw materials, direct labor, utilities, freights and other
direct costs and related production overhead costs, and it excludes borrowing costs. Allocation of fixed production costs is based
on the normal level of production capacity. Supplies and raw material cost is mainly based on FIFO method while goods in progress
and finished goods cost is mainly based on specific historical production costs for each production order. Tenaris estimates net
realizable value of inventories by grouping, where applicable, similar or related items. Net realizable value is the estimated
selling price in the ordinary course of business, less any estimated costs of completion and selling expenses. Third parties goods
in transit as of year-end are valued based on the supplier’s invoice cost.
Tenaris establishes an allowance for obsolete or slow-moving inventories
related to finished goods, goods in process, supplies and spare parts. For slow moving or obsolete finished products, an allowance
is established based on management’s analysis of product aging. An allowance for obsolete and slow-moving inventory of supplies
and spare parts is established based on management's analysis of such items to be used as intended and the consideration of potential
obsolescence due to technological changes, aging and consumption patterns.
J
|
|
Trade and other receivables
|
Trade and other receivables are recognized initially at fair value,
generally the original invoice amount. Tenaris analyzes its trade receivables on a regular basis and, when aware of a specific
counterparty’s difficulty or inability to meet its obligations, impairs any amounts due by means of a charge to an allowance
for doubtful accounts. In addition, trade accounts receivable overdue by more than 180 days and which are not covered by a credit
collateral, guarantee, insurance or similar surety, are provisioned.
K
|
|
Cash and cash equivalents
|
Cash and cash equivalents are comprised of cash at banks, liquidity
funds and short-term investments with a maturity of less than three months at the date of purchase which are readily convertible
to known amounts of cash. Assets recorded in cash and cash equivalents are carried at fair market value or at historical cost which
approximates fair market value.
In the Consolidated Statement of Financial Position, bank overdrafts
are included in
Borrowings
in current liabilities.
For the purposes of the Consolidated Statement of Cash Flows, cash
and cash equivalents includes overdrafts.
The Consolidated Statement of Changes in Equity includes:
|
§
|
The value of share capital, legal reserve, share premium and other distributable reserves calculated
in accordance with Luxembourg law;
|
|
§
|
The currency translation adjustment, other reserves, retained earnings and non-controlling interest
calculated in accordance with IFRS.
|
The Company
has an authorized share capital of a single class of 2.5 billion shares having a nominal value of $1.00 per share. Total ordinary
shares issued and outstanding as of December 31, 2017, 2016 and 2015 are 1,180,536,830 with a par value of $1.00 per share with
one vote each. All issued shares are fully paid.
(3)
|
|
Dividends distribution by the Company to shareholders
|
Dividends distributions are recorded in the Company’s financial
statements when Company’s shareholders have the right to receive the payment, or when interim dividends are approved by the
Board of Directors in accordance with the by-laws of the Company.
Dividends may be paid by the Company to the extent that it has distributable
retained earnings, calculated in accordance with Luxembourg law (see Note 25 (iii)).
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
Borrowings are recognized initially at fair value net of transaction
costs incurred and subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and
the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method.
N
|
|
Current and Deferred income tax
|
The income tax expense or credit for the period is the tax payable
on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes
in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Tax is recognized in the
Consolidated Income Statement, except for tax items recognized in the Consolidated Statement of Other Comprehensive Income.
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the reporting date in the countries where the Company’s subsidiaries operate
and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and establishes provisions when appropriate.
Deferred income tax is recognized applying the liability method
on temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the financial statements.
The principal temporary differences arise from fair value adjustments of assets acquired in business combinations, the effect of
currency translation on depreciable fixed assets and inventories, depreciation on property, plant and equipment, valuation of inventories
and provisions for pension plans. Deferred tax assets are also recognized for net operating loss carry-forwards. Deferred tax assets
and liabilities are measured at the tax rates that are expected to apply in the time period when the asset is realized or the liability
is settled, based on tax laws that have been enacted or substantively enacted at the reporting date.
Deferred tax assets are recognized to the extent that it is probable
that future taxable income will be available against which the temporary differences can be utilized. At the end of each reporting
period, Tenaris reassesses unrecognized deferred tax assets. Tenaris recognizes a previously unrecognized deferred tax asset to
the extent that it has become probable that future taxable income will allow the deferred tax asset to be recovered.
Deferred tax liabilities and assets are not recognized for temporary
differences between the carrying amount and tax basis of investments in foreign operations where the company is able to control
the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable
future.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either
to settle on a net basis, or to realize the asset and settle the liability simultaneously.
(1)
|
|
Short-term obligations
|
Liabilities for wages and salaries are recognized in respect of
employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities
are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
(2)
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|
Post employment benefits
|
The Company has defined benefit and defined contribution plans.
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of service and compensation.
The liability recognized in the statement of financial position
in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting
period less the fair value of plan assets, if any. The defined benefit obligation is calculated annually (at year end) by independent
actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting
the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in
which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
O
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|
Employee benefits (Cont.)
|
(2)
|
|
Post employment benefits (Cont.)
|
Remeasurement gains and losses arising from experience adjustments
and changes in actuarial assumptions are charged or credited to equity in
Other comprehensive income
in the period in which
they arise. Past-service costs are recognized immediately in the Income Statement.
For defined benefit plans, net interest income/expense is calculated
based on the surplus or deficit derived by the difference between the defined benefit obligations less fair value of plan assets.
For defined contribution plans, the Company pays contributions to publicly or privately administered pension insurance plans on
a mandatory, contractual or voluntary basis. The Company has no further payment obligations once the contributions have been paid.
The contributions are recognized as employee benefit expenses when they are due. Prepaid contributions are recognized as an asset
to the extent that a cash refund or a reduction in the future payments is available.
Tenaris sponsors funded and unfunded defined benefit pension plans
in certain subsidiaries. The most significant are:
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§
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An unfunded defined benefit employee retirement plan for certain senior officers. The plan is designed
to provide certain benefits to those officers (additional to those contemplated under applicable labor laws) in case of termination
of the employment relationship due to certain specified events, including retirement. This unfunded plan provides defined benefits
based on years of service and final average salary. As of December 31, 2017 the outstanding liability for this plan amounts to
$46.8 million.
|
|
§
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Employees’ service rescission indemnity: the cost of this obligation is charged to the Consolidated
Income Statement over the expected service lives of employees. This provision is primarily related to the liability accrued for
employees at Tenaris’s Italian subsidiary. As from January 1, 2007 as a consequence of a change in an Italian law, employees
were entitled to make contributions to external funds, thus, Tenaris’s Italian subsidiary pays every year the required contribution
to the funds with no further obligation. As a result, the plan changed from a defined benefit plan to a defined contribution plan
effective from that date, but only limited to the contributions of 2007 onwards. As of December 31, 2017 the outstanding liability
for this plan amounts to $19.3 million.
|
|
§
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Funded retirement benefit plans held in Canada for salary and hourly employees hired prior a certain
date based on years of service and, in the case of salaried employees, final average salary. Plan assets consist primarily of investments
in equities and money market funds. Both plans were replaced for defined contribution plans. Effective June 2016 the salary plan
was frozen for the purposes of credited service as well as determination of final average pay. As of December 31, 2017 the outstanding
liability for this plan amounts to $16.7 million.
|
|
§
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Funded retirement benefit plan held in the US for the benefit of some employees hired prior a certain
date, frozen for the purposes of credited service as well as determination of final average pay for the retirement benefit calculation.
Plan assets consist primarily of investments in equities and money market funds. Additionally, an unfunded postretirement health
and life plan is present that offers limited medical and life insurance benefits to the retirees, hired before a certain date.
As of December 31, 2017 the outstanding liability for this plan amounts to $12.3 million.
|
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(3)
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Other long term benefits
|
During 2007, Tenaris launched an employee retention and long term
incentive program (the “Program”) applicable to certain senior officers and employees of the Company, who will be granted
a number of Units throughout the duration of the Program. The value of each of these Units is based on Tenaris’s shareholders’
equity (excluding non-controlling interest). Also, the beneficiaries of the Program are entitled to receive cash amounts based
on (i) the amount of dividend payments made by Tenaris to its shareholders, and (ii) the number of Units held by each beneficiary
to the Program. Units vest ratably over a period of four years and will be mandatorily redeemed by the Company ten years after
grant date, with the option of an early redemption at seven years after the grant date. As the cash payment of the benefit is tied
to the book value of the shares, and not to their market value, Tenaris valued this long-term incentive program as a long term
benefit plan as classified in IAS 19 “Employee Benefits”.
As of December 31, 2017 and 2016, the outstanding liability corresponding
to the Program amounts to $79.2 million and $78.7 million, respectively. The total value of the units granted (vested and unvested)
to date under the program, considering the number of units and the book value per share as of December 31, 2017 and 2016, is $94.8
million and $92.9 million, respectively.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
O
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|
Employee benefits (Cont.)
|
Terminations benefits are payable when employment is terminated
by Tenaris before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits.
Tenaris recognizes termination benefits at the earlier of the following dates: (a) when it can no longer withdraw the offer of
those benefits; and (b) when the costs for a restructuring that is within the scope of IAS 37 and involves the payment of terminations
benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number
of employees expected to accept the offer.
(5)
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|
Other compensation obligations
|
Employee entitlements to annual leave and long-service leave are
accrued as earned.
Compensation to employees in the event of dismissal is charged to
income in the year in which it becomes payable.
Tenaris is subject to various claims, lawsuits and other legal proceedings,
including customer claims, in which a third party is seeking payment for alleged damages, reimbursement for losses or indemnity.
Tenaris’s potential liability with respect to such claims, lawsuits and other legal proceedings cannot be estimated with
certainty. Management periodically reviews the status of each significant matter and assesses potential financial exposure. If,
as a result of past events, a potential loss from a claim or proceeding is considered probable and the amount can be reliably estimated,
a provision is recorded. Accruals for loss contingencies reflect a reasonable estimate of the losses to be incurred based on information
available to management as of the date of preparation of the financial statements, and take into consideration Tenaris’s
litigation and settlement strategies. These estimates are primarily constructed with the assistance of legal counsel. As the scope
of liabilities become better defined, there may be changes in the estimates of future costs which could have a material adverse
effect on its results of operations, financial condition and cash flows.
If Tenaris expects to be reimbursed for an accrued expense, as would
be the case for an expense or loss covered under an insurance contract, and reimbursement is considered virtually certain, the
expected reimbursement is recognized as a receivable.
This note should be read in conjunction with Note 25.
Q
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Trade and other payables
|
Trade and other payables are recognized initially at fair value,
generally the nominal invoice amount and subsequently measured at amortised cost. They are presented as current liabilities unless
payment is not due within 12 months after the reporting period.
Revenue comprises the fair value
of the consideration received or receivable for the sale of goods and services in the ordinary course of Tenaris’s activities.
Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the group.
Tenaris’s products and services are sold based upon purchase
orders, contracts or upon other persuasive evidence of an arrangement with customers, including that the sales price is known or
determinable. Sales are recognized as revenue upon delivery, when neither continuing managerial involvement nor effective control
over the products is retained by Tenaris and when collection is reasonably assured. Delivery is defined by the transfer of risk
and may include delivery to a storage facility located at one of the Company’s subsidiaries. For bill and hold transactions
revenue is recognized only to the extent (a) it is highly probable delivery will be made; (b) the products have been specifically
identified and are ready for delivery; (c) the sales contract specifically acknowledges the deferred delivery instructions; (d)
the usual payment terms apply.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
R
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Revenue recognition (Cont.)
|
The percentage of total sales that were generated from bill and
hold arrangements for products located in Tenaris’s storage facilities that have not been shipped to customers amounted to
3.3%, 2.8% and 3.0% as of December 31, 2017, 2016 and 2015, respectively. The Company has not experienced any material claims requesting
the cancellation of bill and hold transactions.
Other revenues earned by Tenaris
are recognized on the following basis:
|
§
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Construction contracts (mainly applicable to Tenaris Brazilian subsidiaries and amounted to $11
million, 0.21% of total sales). The revenue recognition of the contracts follows the IAS 11 ”Construction Contracts"
guidance, that means, when the outcome of a construction contract can be estimated reliably and it is probable that the contract
will be profitable, contract revenue is recognized over the period of the contract by reference to the stage of completion (measured
by reference to the contract costs incurred up to the end of the reporting period as a percentage of total estimated costs for
each contract).
|
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§
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Interest income: on the effective yield basis.
|
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§
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Dividend income from investments in other companies: when Tenaris’s right to receive payment
is established.
|
S
|
|
Cost of sales and other selling expenses
|
Cost of sales and other selling expenses are recognized in the Consolidated
Income Statement on the accrual basis of accounting.
Commissions, freights and other selling expenses, including shipping
and handling costs, are recorded in
Selling, general and administrative expenses
in the Consolidated Income Statement.
Earnings per share are calculated by dividing the income attributable
to owners of the parent by the daily weighted average number of common shares outstanding during the year.
There are no dilutive potential ordinary shares.
Non derivative financial instruments comprise investments in financial
debt instruments and equity, time deposits, trade and other receivables, cash and cash equivalents, borrowings and trade and other
payables. Tenaris’s non derivative financial instruments are classified into the following categories:
|
§
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Financial instruments at fair value through profit and loss: comprise mainly Other Investments
current, investments in certain financial debt instruments and time deposits held for trading expiring in less than ninety days
from the measurement date (included within cash and cash equivalents).
|
|
§
|
Loans and receivables: comprise cash and cash equivalents, trade receivables and other receivables
and are measured at amortized cost using the effective interest rate method less any impairment.
|
|
§
|
Available for sale assets: comprise the Company’s interest in the Venezuelan Companies (see
Note 31).
|
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§
|
Held to maturity: comprise financial assets that the Company has both the ability and the intention
to hold to maturity. They are measured at amortized cost using the effective interest method.
|
|
§
|
Other financial liabilities: comprise borrowings, trade and other payables and are measured at
amortized cost using the effective interest rate method.
|
The classification depends on the nature and purpose that the Company
sets to the financial instrument.
Financial assets and liabilities are recognized and derecognized
on their settlement date.
Accounting for derivative financial instruments and hedging activities
is included within the Section III, Financial Risk Management.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
V
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Non-current assets held for sale and discontinued operations
|
Non-current assets (or disposal groups) are classified as held for
sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a
sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell,
except for assets such as deferred tax assets, assets arising from employee benefits and financial assets that are carried at fair
value.
An impairment loss is recognized for any initial or subsequent write-down
of the asset (or disposal group) to fair value less costs to sell. A gain is recognized for any subsequent increases in fair value
less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognized.
Non-current assets (including those that are part of a disposal
group) are not depreciated or amortized while they are classified as held for sale. Interest and other expenses attributable to
the liabilities of a disposal group classified as held for sale continue to be recognized.
Non-current assets classified as held for sale and the assets of
a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities
of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been
disposed of or is classified as held for sale and that represents a separate line of business or geographical area of operations,
is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively
with a view to resale. The results of discontinued operations are presented separately in the Consolidated Income Statement. See
Note 28.
iii.
Financial risk management
The multinational nature of Tenaris’s operations and customer
base exposes the Company to a variety of risks, mainly related to market risks (including the effects of changes in foreign currency
exchange rates and interest rates), credit risk and capital market risk. In order to manage the volatility related to these exposures,
management evaluates exposures on a consolidated basis, taking advantage of exposure netting. The Company or its subsidiaries may
then enter into various derivative transactions in order to prevent potential adverse impacts on Tenaris’s financial performance.
Such derivative transactions are executed in accordance with internal policies and hedging practices.
A. Financial Risk Factors
(i)
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Capital Risk Management
|
Tenaris seeks to maintain a low debt to total equity ratio considering
the industry and the markets where it operates. The year-end ratio of debt to total equity (where “debt” comprises
financial borrowings and “total equity” is the sum of financial borrowings and equity) is 0.08 as of December 31, 2017
and 0.07 as of December 31, 2016. The Company does not have to comply with regulatory capital adequacy requirements.
(ii)
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Foreign exchange risk
|
Tenaris manufactures and sells its products in a number of countries
throughout the world and consequently is exposed to foreign exchange rate risk. Since the Company’s functional currency is
the U.S. dollar the purpose of Tenaris’s foreign currency hedging program is mainly to reduce the risk caused by changes
in the exchange rates of other currencies against the U.S. dollar.
Tenaris’s exposure to currency fluctuations is reviewed on
a periodic consolidated basis. A number of derivative transactions are performed in order to achieve an efficient coverage in the
absence of operative or natural hedges. Almost all of these transactions are forward exchange rates contracts (see Note 24 Derivative
financial instruments).
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
A. Financial Risk Factors (Cont.)
(ii)
|
|
Foreign exchange risk (Cont.)
|
Tenaris does not enter into derivative financial instruments
for trading or other speculative purposes, other than non-material investments in structured products.
In the case of subsidiaries with functional currencies other than
the U.S. dollar, the results of hedging activities, reported in accordance with IFRS, may not reflect entirely the management’s
assessment of its foreign exchange risk hedging program. Intercompany balances between Tenaris’s subsidiaries may generate
financial gains (losses) to the extent that functional currencies differ.
The value of Tenaris’s financial assets and liabilities is
subject to changes arising from the variation of foreign currency exchange rates. The following table provides a breakdown of Tenaris’s
main financial assets and liabilities (including foreign exchange derivative contracts) which impact the Company’s profit
and loss as of December 31, 2017 and 2016:
All amounts Long / (Short) in thousands of U.S. dollars
|
|
As of December 31,
|
Currency Exposure / Functional currency
|
|
2017
|
|
2016
|
Argentine Peso / U.S. Dollar
|
|
|
(64,482
|
)
|
|
|
(60,204
|
)
|
Euro / U.S. Dollar
|
|
|
(365,926
|
)
|
|
|
(406,814
|
)
|
U.S. Dollar / Brazilian Real
|
|
|
(183
|
)
|
|
|
125,880
|
|
The main relevant exposures correspond to:
|
§
|
Argentine Peso / U.S. dollar
|
As of December 31, 2017 and
2016 consisting primarily of Argentine Peso-denominated financial, trade, social and fiscal payables at certain Argentine
subsidiaries
whose functional currency is the U.S. dollar. A change of 1% in the ARS/USD exchange rate would have generated a pre-tax gain /
loss of $0.6 million as of December 31, 2017 and 2016.
As of December 31, 2017 and
2016, consisting primarily of Euro-denominated intercompany liabilities at certain subsidiaries
whose
functional
currency is the U.S. dollar. A change of 1% in the EUR/USD exchange rate would have generated a pre-tax gain / loss of $3.7 million
and $4.1 million as of December 31, 2017 and 2016, respectively, which would have been to a large extent offset by changes in currency
translation adjustment included in Tenaris’s net equity position.
|
§
|
U.S. dollar / Brazilian Real
|
As of December 31, 2016 consisting
primarily of Cash and cash equivalent and Other investments denominated in U.S. dollar at subsidiaries
whose
functional
currency is the Brazilian real. A change of 1% in the BRL/USD exchange rate would generate a pre-tax gain / loss of $1.3 million
in December 31, 2016 (including a gain / loss of $0.5 million in 2016 due to foreign exchange derivative contracts entered to preserve
the U.S. dollar value of trade receivables and cash denominated in Brazilian Real), which would have been to a large extent offset
by changes in currency translation adjustment included in Tenaris’s net equity position.
Considering the balances held as of December 31, 2017 on financial
assets and liabilities exposed to foreign exchange rate fluctuations, Tenaris estimates that the impact of a simultaneous 1% appreciation
/ depreciation movement in the levels of foreign currencies exchange rates relative to the U.S. dollar, would be a pre-tax gain
/ loss of $5.3 million (including a loss / gain of $6.7 million due to foreign exchange derivative contracts), which would be partially
offset by changes to Tenaris’s net equity position of $3.4 million. For balances held as of December 31, 2016, a simultaneous
1% favorable / unfavorable movement in the foreign currencies exchange rates relative to the U.S. dollar, would have generated
a pre-tax gain / loss of $6.6 million (including a loss / gain of $4.0 million due to foreign exchange derivative contracts), which
would have been partially offset by changes to Tenaris’s net equity position of $4.2 million.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
A. Financial Risk Factors (Cont.)
(iii) Interest rate risk
Tenaris is
subject to interest rate risk on its investment portfolio and its debt. The Company uses a mix of variable and fixed rate debt
in combination with its investment portfolio strategy. From time to time, the Company may choose to enter into
foreign
exchange derivative contracts and / or
interest rate swaps to mitigate the exposure to changes in the interest rates.
The following table summarizes the
proportions of variable-rate and fixed-rate debt as of each year end.
|
|
As of December 31,
|
|
|
2017
|
|
2016
|
|
|
Amount in thousands of U.S. dollars
|
|
%
|
|
Amount in thousands of U.S. dollars
|
|
%
|
Fixed rate (*)
|
|
|
946,215
|
|
|
|
98
|
%
|
|
|
820,600
|
|
|
|
98
|
%
|
Variable rate
|
|
|
19,644
|
|
|
|
2
|
%
|
|
|
19,636
|
|
|
|
2
|
%
|
Total
|
|
|
965,859
|
|
|
|
|
|
|
|
840,236
|
|
|
|
|
|
(*)
Out of the $946 Million fixed
rate borrowings $913 Million are short-term.
The Company estimates that, if market interest rates applicable
to Tenaris’s borrowings had been 100 basis points higher, then the additional pre-tax loss would have been $8.0 million in
2017 and $8.8 million in 2016.
Credit risk arises from cash and cash equivalents, deposits with
banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions.
The Company also actively monitors the creditworthiness of its treasury, derivative and insurance counterparties in order to minimize
its credit risk.
There is no significant concentration of credit risk from customers.
No single customer comprised more than 10% of Tenaris’s net sales in 2017, 2016 and 2015.
Tenaris’s credit policies related to sales of products and
services are designed to identify customers with acceptable credit history and to allow Tenaris to require the use of credit insurance,
letters of credit and other instruments designed to minimize credit risks
whenever deemed necessary.
Tenaris maintains allowances for impairment for potential credit losses
(See Section II J).
As of December 31, 2017 and 2016 trade receivables amount to $1,214.1
million and $954.7 million respectively. Trade receivables have guarantees under credit insurance of $190.7 million and $222.1
million, letter of credit and other bank guarantees of $42.2 million and $117.8 million, and other guarantees of $14.1 million
and $15.6 million as of December 31, 2017 and 2016 respectively.
As of December 31, 2017 and 2016 past due trade receivables amounted
to $230.9 million and $249.0 million, respectively. Out of those amounts $27.3 million and $83.1 million are guaranteed trade receivables
while $78.4 million and $85.7 million are included in the allowance for doubtful accounts. Both the allowance for doubtful accounts
and the existing guarantees are sufficient to cover doubtful trade receivables.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
A. Financial Risk Factors (Cont.)
Tenaris has investment guidelines with specific parameters to limit
issuer risk on marketable securities. Counterparties for derivatives and cash transactions are limited to high credit quality financial
institutions, normally investment grade.
Approximately
71% of Tenaris’s liquid financial assets correspond to Investment Grade-rated instruments as of December 31, 2017, in comparison
with approximately 82% as of December 31, 2016.
Tenaris financing strategy aims to maintain adequate financial resources
and access to additional liquidity. During 2017, Tenaris has counted on cash flows from operations as well as additional bank financing
to fund its transactions.
Management maintains sufficient cash and marketable securities to
finance normal operations and believes that Tenaris also has appropriate access to market for short-term working capital needs.
Liquid financial assets as a whole (comprising cash and cash equivalents
and other investments) were 11% of total assets at the end of 2017 compared to 16% at the end of 2016.
Tenaris has a conservative approach to the management of its liquidity,
which consists of i) cash and cash equivalents (cash in banks, liquidity funds and investments with a maturity of
less than three months at the date of purchase), and ii) Other Investments (fixed income securities, time deposits, and fund
investments).
Tenaris holds primarily investments in money market funds and variable
or fixed-rate securities from investment grade issuers. As of December 31, 2017 and 2016, Tenaris does not have direct exposure
to financial instruments issued by European sovereign counterparties.
Tenaris holds its investments primarily in U.S. dollars. As of December
31, 2017 and 2016, U.S. dollar denominated liquid assets represented approximately 93% and 95% of total liquid financial assets
respectively.
(vii)
|
|
Commodity price risk
|
In the ordinary
course of its operations, Tenaris purchases commodities and raw materials that are subject to price volatility caused by supply
conditions, political and economic variables and other factors. As a consequence, Tenaris is exposed to risk resulting from fluctuations
in the prices of these commodities and raw materials. Tenaris fixes the prices of such raw materials and commodities for short-term
periods, typically not in excess of one year, in general Tenaris does not hedge this risk.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
B. Category of Financial Instruments and Classification Within
the Fair Value Hierarchy
Accounting policies for financial instruments have been applied
to classify as either: loans and receivables, held-to-maturity, available-for-sale, or fair value through profit and loss. For
financial instruments that are measured in the statement of financial position at fair value, IFRS 13 requires a disclosure of
fair value measurements by level according to the following fair value measurement hierarchy:
Level 1 - Quoted prices (unadjusted) in active markets for identical
assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3 - Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs).
The following tables present the financial instruments by category and levels as of December
31, 2017 and 2016.
|
|
|
|
Measurement Categories
|
|
At Fair Value
|
December 31, 2017
|
|
Carrying Amount
|
|
Loans & Receivables
|
|
Held to Maturity
|
|
Available for sale
|
|
Fair value through profit and loss
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
330,221
|
|
|
|
150,948
|
|
|
|
-
|
|
|
|
-
|
|
|
|
179,273
|
|
|
|
179,273
|
|
|
|
-
|
|
|
|
-
|
|
Cash at banks
|
|
|
150,948
|
|
|
|
150,948
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Liquidity funds
|
|
|
66,033
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
66,033
|
|
|
|
66,033
|
|
|
|
-
|
|
|
|
-
|
|
Short – term investments
|
|
|
113,240
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
113,240
|
|
|
|
113,240
|
|
|
|
-
|
|
|
|
-
|
|
Other investments
|
|
|
1,192,306
|
|
|
|
-
|
|
|
|
220,838
|
|
|
|
-
|
|
|
|
971,468
|
|
|
|
459,476
|
|
|
|
511,992
|
|
|
|
-
|
|
Fixed income (time-deposit, zero coupon bonds, commercial papers)
|
|
|
437,406
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
437,406
|
|
|
|
9,943
|
|
|
|
427,463
|
|
|
|
-
|
|
Certificates of deposits
|
|
|
297,788
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
297,788
|
|
|
|
-
|
|
|
|
297,788
|
|
|
|
-
|
|
Commercial papers
|
|
|
9,943
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,943
|
|
|
|
9,943
|
|
|
|
-
|
|
|
|
-
|
|
Other notes
|
|
|
129,675
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
129,675
|
|
|
|
-
|
|
|
|
129,675
|
|
|
|
-
|
|
Bonds and other fixed income
|
|
|
754,800
|
|
|
|
-
|
|
|
|
220,838
|
|
|
|
-
|
|
|
|
533,962
|
|
|
|
449,533
|
|
|
|
84,429
|
|
|
|
-
|
|
U.S. government securities
|
|
|
130,477
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
130,477
|
|
|
|
130,477
|
|
|
|
-
|
|
|
|
-
|
|
Non - U.S. government securities
|
|
|
161,063
|
|
|
|
-
|
|
|
|
36,283
|
|
|
|
-
|
|
|
|
124,780
|
|
|
|
124,780
|
|
|
|
-
|
|
|
|
-
|
|
Corporates securities
|
|
|
378,831
|
|
|
|
-
|
|
|
|
184,555
|
|
|
|
-
|
|
|
|
194,276
|
|
|
|
194,276
|
|
|
|
-
|
|
|
|
-
|
|
Structured notes
|
|
|
68,044
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
68,044
|
|
|
|
-
|
|
|
|
68,044
|
|
|
|
-
|
|
Mortgage and asset-backed securities
|
|
|
16,385
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,385
|
|
|
|
-
|
|
|
|
16,385
|
|
|
|
-
|
|
Others
|
|
|
100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100
|
|
|
|
-
|
|
|
|
100
|
|
|
|
-
|
|
Other Investments Non- current
|
|
|
128,335
|
|
|
|
-
|
|
|
|
123,498
|
|
|
|
-
|
|
|
|
4,837
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,837
|
|
Bonds and other fixed income
|
|
|
123,498
|
|
|
|
-
|
|
|
|
123,498
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other investments
|
|
|
4,837
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,837
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,837
|
|
Trade receivables
|
|
|
1,214,060
|
|
|
|
1,214,060
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Receivables C and NC
|
|
|
327,258
|
|
|
|
176,716
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,230
|
|
|
|
-
|
|
|
|
8,230
|
|
|
|
-
|
|
Foreign exchange derivatives contracts
|
|
|
8,230
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,230
|
|
|
|
-
|
|
|
|
8,230
|
|
|
|
-
|
|
Other receivables
|
|
|
176,716
|
|
|
|
176,716
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other receivables (non-financial)
|
|
|
142,314
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Available for sale assets (*)
|
|
|
21,572
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,572
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,572
|
|
Total
|
|
|
|
|
|
|
1,541,724
|
|
|
|
344,336
|
|
|
|
21,572
|
|
|
|
1,163,808
|
|
|
|
638,749
|
|
|
|
520,222
|
|
|
|
26,409
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings C and NC
|
|
|
965,859
|
|
|
|
965,859
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Trade payables
|
|
|
750,739
|
|
|
|
750,739
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other liabilities
|
|
|
197,504
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,799
|
|
|
|
-
|
|
|
|
39,799
|
|
|
|
-
|
|
Foreign exchange derivatives contracts
|
|
|
39,799
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,799
|
|
|
|
-
|
|
|
|
39,799
|
|
|
|
-
|
|
Other liabilities (non-financial)
|
|
|
157,705
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
|
|
|
|
1,716,598
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,799
|
|
|
|
-
|
|
|
|
39,799
|
|
|
|
-
|
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
B. Category of Financial Instruments and Classification Within the Fair Value Hierarchy
(Cont.)
|
|
|
|
Measurement Categories
|
|
At Fair Value
|
December 31, 2016
|
|
Carrying Amount
|
|
Loans & Receivables
|
|
Held to Maturity
|
|
Available for sale
|
|
Fair value through profit and loss
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
399,737
|
|
|
|
92,730
|
|
|
|
-
|
|
|
|
-
|
|
|
|
307,007
|
|
|
|
307,007
|
|
|
|
-
|
|
|
|
-
|
|
Cash at banks
|
|
|
92,730
|
|
|
|
92,730
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Liquidity funds
|
|
|
215,807
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
215,807
|
|
|
|
215,807
|
|
|
|
-
|
|
|
|
-
|
|
Short – term investments
|
|
|
91,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
91,200
|
|
|
|
91,200
|
|
|
|
-
|
|
|
|
-
|
|
Other investments Current
|
|
|
1,633,142
|
|
|
|
-
|
|
|
|
246,031
|
|
|
|
-
|
|
|
|
1,387,111
|
|
|
|
607,866
|
|
|
|
779,245
|
|
|
|
-
|
|
Fixed income (time-deposit, zero cupon bonds, commercial papers)
|
|
|
782,029
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
782,029
|
|
|
|
76,260
|
|
|
|
705,769
|
|
|
|
-
|
|
Non - U.S. sovereign bills
|
|
|
41,370
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41,370
|
|
|
|
41,370
|
|
|
|
-
|
|
|
|
-
|
|
Certificates of deposits
|
|
|
525,068
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
525,068
|
|
|
|
-
|
|
|
|
525,068
|
|
|
|
-
|
|
Commercial papers
|
|
|
34,890
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34,890
|
|
|
|
34,890
|
|
|
|
-
|
|
|
|
-
|
|
Other notes
|
|
|
180,701
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
180,701
|
|
|
|
-
|
|
|
|
180,701
|
|
|
|
-
|
|
Bonds and other fixed income
|
|
|
841,638
|
|
|
|
-
|
|
|
|
246,031
|
|
|
|
-
|
|
|
|
595,607
|
|
|
|
522,131
|
|
|
|
73,476
|
|
|
|
-
|
|
U.S. government securities
|
|
|
216,732
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
216,732
|
|
|
|
216,732
|
|
|
|
-
|
|
|
|
-
|
|
Non - U.S. government securities
|
|
|
88,805
|
|
|
|
-
|
|
|
|
32,644
|
|
|
|
-
|
|
|
|
56,161
|
|
|
|
56,161
|
|
|
|
-
|
|
|
|
-
|
|
Corporates securities
|
|
|
462,625
|
|
|
|
-
|
|
|
|
213,387
|
|
|
|
-
|
|
|
|
249,238
|
|
|
|
249,238
|
|
|
|
-
|
|
|
|
-
|
|
Mortgage and asset-backed securities
|
|
|
73,476
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
73,476
|
|
|
|
-
|
|
|
|
73,476
|
|
|
|
-
|
|
Fund investments
|
|
|
9,475
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,475
|
|
|
|
9,475
|
|
|
|
-
|
|
|
|
-
|
|
Other Investments Non- current
|
|
|
249,719
|
|
|
|
-
|
|
|
|
248,049
|
|
|
|
-
|
|
|
|
1,670
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,670
|
|
Bonds and other fixed income
|
|
|
248,049
|
|
|
|
-
|
|
|
|
248,049
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other investments
|
|
|
1,670
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,670
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,670
|
|
Trade receivables
|
|
|
954,685
|
|
|
|
954,685
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Receivables C and NC
|
|
|
321,718
|
|
|
|
176,990
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,759
|
|
|
|
-
|
|
|
|
2,759
|
|
|
|
-
|
|
Foreign exchange derivatives contracts
|
|
|
2,759
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,759
|
|
|
|
-
|
|
|
|
2,759
|
|
|
|
-
|
|
Other receivables
|
|
|
176,990
|
|
|
|
176,990
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other receivables (non-financial)
|
|
|
141,969
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Available for sale assets (*)
|
|
|
21,572
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,572
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,572
|
|
Total
|
|
|
|
|
|
|
1,224,405
|
|
|
|
494,080
|
|
|
|
21,572
|
|
|
|
1,698,547
|
|
|
|
914,873
|
|
|
|
782,004
|
|
|
|
23,242
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings C and NC
|
|
|
840,236
|
|
|
|
840,236
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Trade payables
|
|
|
556,834
|
|
|
|
556,834
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other liabilities
|
|
|
183,887
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,635
|
|
|
|
-
|
|
|
|
42,635
|
|
|
|
-
|
|
Foreign exchange derivatives contracts
|
|
|
42,635
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,635
|
|
|
|
-
|
|
|
|
42,635
|
|
|
|
-
|
|
Other liabilities (non-financial)
|
|
|
141,252
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
|
|
|
|
1,397,070
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,635
|
|
|
|
-
|
|
|
|
42,635
|
|
|
|
-
|
|
(*) For further detail regarding Available for sale assets, see Note 31.
There were no transfers between Levels during the year
The fair value of financial instruments traded in active markets
is based on quoted market prices at the reporting date. A market is regarded as active if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual
and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held
by Tenaris is the current bid price. These instruments are included in Level 1 and comprise primarily corporate and sovereign debt
securities.
The fair value of financial instruments that are not traded in an
active market (such as certain debt securities, certificates of deposits with original maturity of more than three months, forward
and interest rate derivative instruments) is determined by using valuation techniques which maximize the use of observable market
data when available and rely as little as possible on entity specific estimates. If all significant inputs required to value an
instrument are observable, the instrument is included in Level 2. Tenaris values its assets and liabilities included in this level
using bid prices, interest rate curves, broker quotations, current exchange rates, forward rates and implied volatilities obtained
from market contributors as of the valuation date.
If one or more of the significant inputs are not based on observable
market data, the instruments are included in Level 3. Tenaris values its assets and liabilities in this level using observable
market inputs and management assumptions which reflect the Company’s best estimate on how market participants would price
the asset or liability at measurement date. Main balances included in this level correspond to Available for sale assets related
to Tenaris’s interest in Venezuelan companies under process of nationalization (see Note 31).
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
B. Category of Financial Instruments and Classification Within
the Fair Value Hierarchy (Cont.)
The following table presents the changes in Level 3 assets and liabilities:
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Assets / Liabilities
|
|
At the beginning of the year
|
|
|
23,242
|
|
|
|
23,234
|
|
Acquisition
|
|
|
3,681
|
|
|
|
-
|
|
Decrease due to write down
|
|
|
(564
|
)
|
|
|
-
|
|
Currency translation adjustment and others
|
|
|
50
|
|
|
|
8
|
|
At the end of the year
|
|
|
26,409
|
|
|
|
23,242
|
|
C. Fair value estimation
Financial assets or liabilities classified at fair value through
profit or loss are measured under the framework established by the IASB accounting guidance for fair value measurements and disclosures.
The fair values of quoted investments are generally based on current
bid prices. If the market for a financial asset is not active or no market is available, fair values are established using standard
valuation techniques.
Some of Tenaris’s investments are designated as held to maturity
and measured at amortized cost. Tenaris estimates that the fair value of these financial assets is 100.9% and 100.8% of its carrying
amount including interests accrued as of December 31, 2017 and 2016 respectively.
The fair value of all outstanding derivatives is determined using
specific pricing models that include inputs that are observable in the market or can be derived from or corroborated by observable
data. The fair value of forward foreign exchange contracts is calculated as the net present value of the estimated future cash
flows in each currency, based on observable yield curves, converted into U.S. dollars at the spot rate of the valuation date.
Borrowings are comprised primarily of fixed rate debt and variable
rate debt with a short term portion where interest has already been fixed. They are classified under other financial liabilities
and measured at their amortized cost. Tenaris estimates that the fair value of its main financial liabilities is approximately
99.4% of its carrying amount including interests accrued in 2017 as compared with 99.7% in 2016. Fair values were calculated using
standard valuation techniques for floating rate instruments and comparable market rates for discounting flows.
D. Accounting for derivative financial instruments and hedging
activities
Derivative financial instruments are initially recognized in the
statement of financial position at fair value through profit and loss on each date a derivative contract is entered into and are
subsequently remeasured at fair value. Specific tools are used for calculation of each instrument’s fair value and these
tools are tested for consistency on a monthly basis. Market rates are used for all pricing operations. These include exchange rates,
deposit rates and other discount rates matching the nature of each underlying risk.
As a general rule, Tenaris recognizes the full amount related to
the change in fair value of derivative financial instruments in
Financial Results
in the Consolidated Income Statement.
Tenaris designates certain derivatives as hedges of particular risks
associated with recognized assets or liabilities or highly probable forecast transactions. These transactions (mainly currency
forward contracts on highly probable forecast transactions) are classified as cash flow hedges. The effective portion of the fair
value of derivatives that are designated and qualify as cash flow hedges is recognized in equity. Amounts accumulated in equity
are then recognized in the income statement in the same period as the offsetting losses and gains on the hedged item. The gain
or loss relating to the ineffective portion is recognized immediately in the income statement. The fair value of Tenaris’s
derivative financial instruments (assets or liabilities) continues to be reflected in the statement of financial position. The
full fair value of a hedging derivative is classified as a current or non-current asset or liability according to its expiry date.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
D. Accounting for derivative financial instruments and hedging
activities (Cont.)
For transactions designated and qualifying for hedge accounting,
Tenaris documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as
its risk management objectives and strategy for undertaking various hedge transactions. Tenaris also documents its assessment on
an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in
the fair value or cash flow of hedged items. At December 31, 2017 and 2016, the effective portion of designated cash flow hedges
which is included in “
Other Reserves”
in equity amounts to
$0.2
million debit and $4.7 million credit respectively (see Note 24
Derivative financial instruments
).
The fair values of various derivative instruments used for hedging
purposes are disclosed in Note 24. Movements in the hedging reserve included within “
Other Reserves”
in equity
are also shown in Note 24.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
IV. OTHER NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In the notes all amounts are shown in thousands of
U.S. dollars, unless otherwise stated)
As mentioned in section II. AP – C, the Segment Information
is disclosed as follows:
Reportable operating segments
(All amounts in million US dollar)
Year ended December 31, 2017
|
|
Tubes
|
|
|
Other
|
|
|
Continuing operations
|
|
|
Discontinued operations
|
|
IFRS - Net Sales
|
|
|
4,966
|
|
|
|
323
|
|
|
|
5,289
|
|
|
|
12
|
|
Management view - operating income
|
|
|
115
|
|
|
|
48
|
|
|
|
163
|
|
|
|
3
|
|
Difference in cost of sales
|
|
|
164
|
|
|
|
1
|
|
|
|
165
|
|
|
|
(1
|
)
|
Direct cost and others
|
|
|
115
|
|
|
|
-
|
|
|
|
115
|
|
|
|
(1
|
)
|
Absorption
|
|
|
49
|
|
|
|
1
|
|
|
|
50
|
|
|
|
-
|
|
Differences in depreciation and amortization
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
-
|
|
Differences in selling, general and administrative expenses
|
|
|
14
|
|
|
|
(6
|
)
|
|
|
8
|
|
|
|
-
|
|
Differences in other operating income (expenses), net
|
|
|
2
|
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
IFRS - operating income
|
|
|
292
|
|
|
|
43
|
|
|
|
335
|
|
|
|
2
|
|
Financial income (expense), net
|
|
|
|
|
|
|
|
|
|
|
(23
|
)
|
|
|
-
|
|
Income before equity in earnings of non-consolidated companies and income tax
|
|
|
|
|
|
|
|
|
|
|
312
|
|
|
|
2
|
|
Equity in earnings of non-consolidated companies
|
|
|
|
|
|
|
|
|
|
|
116
|
|
|
|
-
|
|
Income before income tax
|
|
|
|
|
|
|
|
|
|
|
428
|
|
|
|
2
|
|
Capital expenditures
|
|
|
550
|
|
|
|
8
|
|
|
|
558
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
594
|
|
|
|
15
|
|
|
|
609
|
|
|
|
-
|
|
Year Ended December 31, 2016
|
|
Tubes
|
|
|
Other
|
|
|
Continuing operations
|
|
|
Discontinued operations
|
|
IFRS - Net Sales
|
|
|
4,015
|
|
|
|
278
|
|
|
|
4,294
|
|
|
|
235
|
|
Management view - operating income
|
|
|
19
|
|
|
|
19
|
|
|
|
38
|
|
|
|
62
|
|
Difference in cost of sales
|
|
|
(108
|
)
|
|
|
(8
|
)
|
|
|
(116
|
)
|
|
|
4
|
|
Direct cost and others
|
|
|
(114
|
)
|
|
|
(8
|
)
|
|
|
(122
|
)
|
|
|
4
|
|
Absorption
|
|
|
6
|
|
|
|
-
|
|
|
|
6
|
|
|
|
-
|
|
Differences in Depreciation and Amortization
|
|
|
28
|
|
|
|
-
|
|
|
|
28
|
|
|
|
-
|
|
Differences in Selling, general and administrative expenses
|
|
|
(5
|
)
|
|
|
1
|
|
|
|
(4
|
)
|
|
|
-
|
|
Differences in Other operating income (expenses), net
|
|
|
(5
|
)
|
|
|
-
|
|
|
|
(5
|
)
|
|
|
-
|
|
IFRS - operating (loss) income
|
|
|
(71
|
)
|
|
|
12
|
|
|
|
(59
|
)
|
|
|
66
|
|
Financial income (expense), net
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
-
|
|
(Loss) income before equity in earnings of non-consolidated companies and income tax
|
|
|
|
|
|
|
|
|
|
|
(37
|
)
|
|
|
66
|
|
Equity in earnings of non-consolidated companies
|
|
|
|
|
|
|
|
|
|
|
71
|
|
|
|
-
|
|
Income before income tax
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
66
|
|
Capital expenditures
|
|
|
752
|
|
|
|
33
|
|
|
|
785
|
|
|
|
2
|
|
Depreciation and amortization
|
|
|
643
|
|
|
|
14
|
|
|
|
657
|
|
|
|
5
|
|
Year Ended December 31, 2015
|
|
Tubes
|
|
|
Other
|
|
|
Continuing operations
|
|
|
Discontinued operations
|
|
IFRS - Net Sales
|
|
|
6,444
|
|
|
|
459
|
|
|
|
6,903
|
|
|
|
198
|
|
Management view - operating income
|
|
|
686
|
|
|
|
27
|
|
|
|
713
|
|
|
|
39
|
|
Difference in cost of sales
|
|
|
(225
|
)
|
|
|
-
|
|
|
|
(225
|
)
|
|
|
(9
|
)
|
Direct cost and others
|
|
|
(184
|
)
|
|
|
-
|
|
|
|
(184
|
)
|
|
|
(9
|
)
|
Absorption
|
|
|
(41
|
)
|
|
|
-
|
|
|
|
(41
|
)
|
|
|
-
|
|
Differences in Depreciation and Amortization
|
|
|
(319
|
)
|
|
|
1
|
|
|
|
(318
|
)
|
|
|
-
|
|
Differences in Selling, general and administrative expenses
|
|
|
(4
|
)
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
-
|
|
Differences in Other operating income (expenses), net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
IFRS - operating (loss) income
|
|
|
138
|
|
|
|
28
|
|
|
|
166
|
|
|
|
30
|
|
Financial income (expense), net
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
-
|
|
Income before equity in earnings of non-consolidated companies and income tax
|
|
|
|
|
|
|
|
|
|
|
181
|
|
|
|
30
|
|
Equity in losses of non-consolidated companies
|
|
|
|
|
|
|
|
|
|
|
(40
|
)
|
|
|
-
|
|
Income before income tax
|
|
|
|
|
|
|
|
|
|
|
141
|
|
|
|
30
|
|
Capital expenditures
|
|
|
1,089
|
|
|
|
41
|
|
|
|
1,130
|
|
|
|
1
|
|
Depreciation and amortization
|
|
|
638
|
|
|
|
15
|
|
|
|
653
|
|
|
|
5
|
|
Transactions between segments, which were eliminated in consolidation,
are mainly related to sales of scrap, energy, surplus raw materials and others from the Other segment to the Tubes segment for
$53, $47 and $57 million in 2017, 2016 and 2015, respectively.
In addition to the amounts reconciled above, the main differences
in net income arise from the impact of functional currencies on financial result, deferred income taxes as well as the result of
investment in non-consolidated companies and changes on the valuation of inventories according to cost estimation internally defined.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
1
|
|
Segment information (Cont.)
|
Geographical information
(all amounts in thousands of U.S. dollars)
|
|
North America
|
|
|
South America
|
|
|
Europe
|
|
|
Middle East & Africa
|
|
|
Asia Pacific
|
|
|
Unallocated (*)
|
|
|
Total continuing operations
|
|
|
Total discontinued operations
|
|
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
2,451,357
|
|
|
|
1,142,142
|
|
|
|
545,777
|
|
|
|
937,439
|
|
|
|
211,789
|
|
|
|
-
|
|
|
|
5,288,504
|
|
|
|
11,899
|
|
Total assets
|
|
|
7,925,520
|
|
|
|
2,975,599
|
|
|
|
2,002,658
|
|
|
|
391,029
|
|
|
|
441,546
|
|
|
|
661,866
|
|
|
|
14,398,218
|
|
|
|
-
|
|
Trade receivables
|
|
|
582,204
|
|
|
|
234,877
|
|
|
|
214,944
|
|
|
|
135,524
|
|
|
|
46,511
|
|
|
|
-
|
|
|
|
1,214,060
|
|
|
|
-
|
|
Property, plant and equipment, net
|
|
|
3,914,229
|
|
|
|
1,190,145
|
|
|
|
878,788
|
|
|
|
102,481
|
|
|
|
143,500
|
|
|
|
-
|
|
|
|
6,229,143
|
|
|
|
-
|
|
Capital expenditures
|
|
|
430,143
|
|
|
|
58,949
|
|
|
|
57,285
|
|
|
|
7,562
|
|
|
|
4,153
|
|
|
|
-
|
|
|
|
558,092
|
|
|
|
145
|
|
Depreciation and amortization
|
|
|
354,091
|
|
|
|
126,273
|
|
|
|
93,900
|
|
|
|
12,094
|
|
|
|
22,282
|
|
|
|
-
|
|
|
|
608,640
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
1,320,297
|
|
|
|
1,210,527
|
|
|
|
565,173
|
|
|
|
1,055,994
|
|
|
|
141,601
|
|
|
|
-
|
|
|
|
4,293,592
|
|
|
|
234,911
|
|
Total assets
|
|
|
7,467,842
|
|
|
|
2,803,848
|
|
|
|
1,925,784
|
|
|
|
593,649
|
|
|
|
482,132
|
|
|
|
578,603
|
|
|
|
13,851,858
|
|
|
|
151,417
|
|
Trade receivables
|
|
|
229,390
|
|
|
|
204,746
|
|
|
|
161,291
|
|
|
|
308,919
|
|
|
|
50,339
|
|
|
|
-
|
|
|
|
954,685
|
|
|
|
33,620
|
|
Property, plant and equipment, net
|
|
|
3,652,032
|
|
|
|
1,237,391
|
|
|
|
847,318
|
|
|
|
106,941
|
|
|
|
158,257
|
|
|
|
-
|
|
|
|
6,001,939
|
|
|
|
41,470
|
|
Capital expenditures
|
|
|
646,545
|
|
|
|
59,780
|
|
|
|
35,270
|
|
|
|
24,166
|
|
|
|
19,201
|
|
|
|
-
|
|
|
|
784,962
|
|
|
|
1,911
|
|
Depreciation and amortization
|
|
|
381,811
|
|
|
|
128,458
|
|
|
|
113,875
|
|
|
|
11,053
|
|
|
|
21,912
|
|
|
|
-
|
|
|
|
657,109
|
|
|
|
5,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
2,668,724
|
|
|
|
2,132,221
|
|
|
|
728,815
|
|
|
|
1,096,688
|
|
|
|
276,675
|
|
|
|
-
|
|
|
|
6,903,123
|
|
|
|
197,630
|
|
Total assets
|
|
|
8,625,806
|
|
|
|
2,931,297
|
|
|
|
1,877,429
|
|
|
|
429,317
|
|
|
|
423,479
|
|
|
|
512,217
|
|
|
|
14,799,545
|
|
|
|
87,429
|
|
Trade receivables
|
|
|
339,499
|
|
|
|
396,834
|
|
|
|
181,084
|
|
|
|
137,278
|
|
|
|
52,494
|
|
|
|
-
|
|
|
|
1,107,189
|
|
|
|
27,940
|
|
Property, plant and equipment, net
|
|
|
3,207,661
|
|
|
|
1,269,995
|
|
|
|
907,466
|
|
|
|
86,181
|
|
|
|
155,299
|
|
|
|
-
|
|
|
|
5,626,602
|
|
|
|
45,656
|
|
Capital expenditures
|
|
|
822,396
|
|
|
|
168,140
|
|
|
|
82,344
|
|
|
|
36,867
|
|
|
|
20,566
|
|
|
|
-
|
|
|
|
1,130,313
|
|
|
|
1,206
|
|
Depreciation and amortization
|
|
|
385,189
|
|
|
|
125,754
|
|
|
|
112,742
|
|
|
|
9,912
|
|
|
|
19,716
|
|
|
|
-
|
|
|
|
653,313
|
|
|
|
5,465
|
|
There are no revenues from external customers attributable to the
Company’s country of incorporation (Luxembourg). For geographical information purposes, “North America” comprises
Canada, Mexico and the USA (31.8%); “South America” comprises principally Argentina (14.0%), Brazil and Colombia; “Europe”
comprises principally Italy and Romania; “Middle East and Africa” comprises principally Kazakhstan, United Arab Emirates,
Nigeria and Saudi Arabia and; “Asia Pacific” comprises principally China, Japan and Thailand.
(*) Includes Investments in non-consolidated companies and Available
for sale assets for $21.6 million in 2017, 2016 and 2015 (see Note 12 and 31).
|
|
Year ended December 31,
|
|
(all amounts in thousands of U.S. dollars)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Inventories at the beginning of the year
|
|
|
1,563,889
|
|
|
|
1,843,467
|
|
|
|
2,779,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Charges of the year
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials, energy, consumables and other
|
|
|
2,794,503
|
|
|
|
1,528,532
|
|
|
|
1,934,209
|
|
Services and fees
|
|
|
244,035
|
|
|
|
199,210
|
|
|
|
298,470
|
|
Labor cost
|
|
|
778,408
|
|
|
|
658,975
|
|
|
|
947,997
|
|
Depreciation of property, plant and equipment
|
|
|
383,490
|
|
|
|
376,965
|
|
|
|
377,596
|
|
Amortization of intangible assets
|
|
|
18,621
|
|
|
|
27,244
|
|
|
|
24,100
|
|
Maintenance expenses
|
|
|
183,370
|
|
|
|
122,553
|
|
|
|
184,053
|
|
Allowance for obsolescence
|
|
|
(12,917
|
)
|
|
|
32,765
|
|
|
|
68,669
|
|
Taxes
|
|
|
18,542
|
|
|
|
16,693
|
|
|
|
21,523
|
|
Other
|
|
|
88,823
|
|
|
|
89,575
|
|
|
|
92,059
|
|
|
|
|
4,496,875
|
|
|
|
3,052,512
|
|
|
|
3,948,676
|
|
Less: Inventories at the end of the year (*)
|
|
|
(2,368,304
|
)
|
|
|
(1,593,708
|
)
|
|
|
(1,843,467
|
)
|
From discontinued operations
|
|
|
(7,403
|
)
|
|
|
(136,587
|
)
|
|
|
(137,318
|
)
|
|
|
|
3,685,057
|
|
|
|
3,165,684
|
|
|
|
4,747,760
|
|
(*) Inventories as of December 31, 2016 include $ 29.8 million related
to discontinued operations.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
3
|
|
Selling, general and administrative expenses
|
|
|
Year ended December 31,
|
|
(all amounts in thousands of U.S. dollars)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Services and fees
|
|
|
132,301
|
|
|
|
123,653
|
|
|
|
158,541
|
|
Labor cost
|
|
|
443,338
|
|
|
|
441,355
|
|
|
|
579,360
|
|
Depreciation of property, plant and equipment
|
|
|
17,979
|
|
|
|
16,965
|
|
|
|
18,543
|
|
Amortization of intangible assets
|
|
|
188,550
|
|
|
|
241,238
|
|
|
|
238,539
|
|
Commissions, freight and other selling expenses
|
|
|
339,759
|
|
|
|
243,401
|
|
|
|
351,657
|
|
Provisions for contingencies
|
|
|
17,664
|
|
|
|
30,841
|
|
|
|
19,672
|
|
Allowances for doubtful accounts
|
|
|
(5,421
|
)
|
|
|
(12,573
|
)
|
|
|
36,788
|
|
Taxes
|
|
|
56,826
|
|
|
|
67,724
|
|
|
|
129,018
|
|
Other
|
|
|
81,061
|
|
|
|
76,563
|
|
|
|
92,157
|
|
|
|
|
1,272,057
|
|
|
|
1,229,167
|
|
|
|
1,624,275
|
|
From discontinued operations
|
|
|
(2,041
|
)
|
|
|
(32,238
|
)
|
|
|
(30,678
|
)
|
|
|
|
1,270,016
|
|
|
|
1,196,929
|
|
|
|
1,593,597
|
|
4
|
|
Labor costs (included in Cost of sales and in Selling, general and administrative
expenses)
|
|
|
Year ended December 31,
|
|
(all amounts in thousands of U.S. dollars)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Wages, salaries and social security costs
|
|
|
1,144,341
|
|
|
|
988,794
|
|
|
|
1,327,968
|
|
Severance indemnities
|
|
|
34,497
|
|
|
|
73,741
|
|
|
|
176,950
|
|
Defined contribution plans
|
|
|
12,401
|
|
|
|
10,758
|
|
|
|
13,286
|
|
Pension benefits - defined benefit plans
|
|
|
15,066
|
|
|
|
10,563
|
|
|
|
14,813
|
|
Employee retention and long term incentive program
|
|
|
15,441
|
|
|
|
16,474
|
|
|
|
(5,660
|
)
|
|
|
|
1,221,746
|
|
|
|
1,100,330
|
|
|
|
1,527,357
|
|
From discontinued operations
|
|
|
(853
|
)
|
|
|
(28,306
|
)
|
|
|
(24,665
|
)
|
|
|
|
1,220,893
|
|
|
|
1,072,024
|
|
|
|
1,502,692
|
|
At year-end, the number of employees was 21,605 in 2017, 19,399 in 2016 and 21,741 in
2015.
The following table shows the geographical distribution of the employees:
Country
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Argentina
|
|
|
5,221
|
|
|
|
4,755
|
|
|
|
5,388
|
|
Mexico
|
|
|
5,139
|
|
|
|
4,968
|
|
|
|
5,101
|
|
Brazil
|
|
|
1,382
|
|
|
|
1,166
|
|
|
|
2,050
|
|
USA
|
|
|
1,953
|
|
|
|
1,636
|
|
|
|
2,190
|
|
Italy
|
|
|
2,088
|
|
|
|
1,979
|
|
|
|
2,030
|
|
Romania
|
|
|
1,870
|
|
|
|
1,631
|
|
|
|
1,624
|
|
Canada
|
|
|
919
|
|
|
|
473
|
|
|
|
546
|
|
Indonesia
|
|
|
506
|
|
|
|
509
|
|
|
|
532
|
|
Colombia
|
|
|
1,003
|
|
|
|
750
|
|
|
|
636
|
|
Japan
|
|
|
410
|
|
|
|
458
|
|
|
|
508
|
|
Other
|
|
|
1,114
|
|
|
|
1,074
|
|
|
|
1,136
|
|
|
|
|
21,605
|
|
|
|
19,399
|
|
|
|
21,741
|
|
From discontinued operations
|
|
|
-
|
|
|
|
(323
|
)
|
|
|
(292
|
)
|
|
|
|
21,605
|
|
|
|
19,076
|
|
|
|
21,449
|
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
5
|
|
Other operating income and expenses
|
|
|
Year ended December 31,
|
|
(all amounts in thousands of U.S. dollars)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Other operating income
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from other sales
|
|
|
4,395
|
|
|
|
16,275
|
|
|
|
7,480
|
|
Net rents
|
|
|
4,325
|
|
|
|
4,852
|
|
|
|
6,462
|
|
Other
|
|
|
1,796
|
|
|
|
-
|
|
|
|
661
|
|
|
|
|
10,516
|
|
|
|
21,127
|
|
|
|
14,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions to welfare projects and non-profits organizations
|
|
|
9,158
|
|
|
|
9,534
|
|
|
|
9,052
|
|
Provisions for legal claims and contingencies
|
|
|
-
|
|
|
|
10
|
|
|
|
1
|
|
Loss on fixed assets and material supplies disposed / scrapped
|
|
|
118
|
|
|
|
57
|
|
|
|
94
|
|
Impairment charge
|
|
|
-
|
|
|
|
-
|
|
|
|
400,314
|
|
Allowance for doubtful receivables
|
|
|
84
|
|
|
|
432
|
|
|
|
1,114
|
|
Other
|
|
|
-
|
|
|
|
1,378
|
|
|
|
-
|
|
|
|
|
9,360
|
|
|
|
11,411
|
|
|
|
410,575
|
|
From discontinued operations
|
|
|
(1
|
)
|
|
|
(248
|
)
|
|
|
(1
|
)
|
|
|
|
9,359
|
|
|
|
11,163
|
|
|
|
410,574
|
|
Impairment charge
Tenaris regularly conducts assessments of the carrying values of
its assets. The value-in-use was used to determine the recoverable value. Value-in-use is calculated by discounting the estimated
cash flows over a five-year period based on forecasts approved by management. For the subsequent years beyond the five-year period,
a terminal value is calculated based on perpetuity considering a nominal growth rate of 2%.
Tenaris’s main source of revenue is the sale of products and
services to the oil and gas industry and the level of such sales is sensitive to international oil and gas prices and their impact
on drilling activities.
For purposes of assessing key assumptions, Tenaris uses external
sources of information and management judgment based on past experience.
The main key assumptions used in estimating the value in use are
discount rate, growth rate and competitive and economic factors applied to determine Tenaris’s cash flow projections, such
as oil and gas prices, average number of active oil and gas drilling rigs (rig count), capital expenditure programs for Tenaris’s
customers, and raw material costs.
Management has determined the value of each of the key assumptions
as follows:
- Discount rate: based on the applicable weighted average cost of
capital (WACC), which is considered to be a good indicator of capital cost, taking into account the industry, country and size
of the business. For each CGU where assets are allocated, a specific WACC was determined taking into account the industry, country
and size of the business. In 2017, the main discount rates used were in a range between 9.4% and 11.2%.
- Growth rate: considers the long-term average growth rate for the
oil and gas industry, the higher demand to offset depletion of existing fields and the Company’s expected market penetration.
- Oil and gas prices and customer’s capital expenditures:
based on industry analysts’ reports and management’s expectations of market development respectively.
- Rig count: based on information published by Baker Hughes and
management’s expectations.
- Raw material costs: based on industry analysts’ reports
and management’s expectations.
The main factors that could result in additional impairment charges
in future periods would be an increase in the discount rate or a decrease in growth rate used in the Company’s cash flow
projections, a further deterioration of the business, competitive and economic factors, such as a decrease in oil and gas prices
and the evolution of the rig count.
As of December 31, 2017, for those CGUs carrying goodwill, a reasonably
possible change in key assumptions would not cause the carrying amount to exceed recoverable amount.
In 2015, as a result of the deterioration of business conditions,
the Company recorded impairment charges on its welded pipe assets of $400.3 million. No impairment charge was recorded in 2016
or 2017.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
(all amounts in thousands of U.S. dollars)
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
51,525
|
|
|
|
60,405
|
|
|
|
39,516
|
|
Net result on changes in FV of financial assets at FVTPL
|
|
|
(3,920
|
)
|
|
|
5,799
|
|
|
|
(4,942
|
)
|
Finance income
|
|
|
47,605
|
|
|
|
66,204
|
|
|
|
34,574
|
|
Finance cost
|
|
|
(27,072
|
)
|
|
|
(22,329
|
)
|
|
|
(23,058
|
)
|
Net foreign exchange transactions results (*)
|
|
|
(48,955
|
)
|
|
|
(2,146
|
)
|
|
|
(13,301
|
)
|
Foreign exchange derivatives contracts results (**)
|
|
|
(8,996
|
)
|
|
|
(31,310
|
)
|
|
|
30,468
|
|
Other
|
|
|
14,392
|
|
|
|
11,447
|
|
|
|
(14,473
|
)
|
Other financial results
|
|
|
(43,559
|
)
|
|
|
(22,009
|
)
|
|
|
2,694
|
|
Net financial results
|
|
|
(23,026
|
)
|
|
|
21,866
|
|
|
|
14,210
|
|
From discontinued operations
|
|
|
9
|
|
|
|
88
|
|
|
|
382
|
|
|
|
|
(23,017
|
)
|
|
|
21,954
|
|
|
|
14,592
|
|
During 2015 Tenaris has derecognized all its fixed income financial
instruments categorized as available for sale.
(*)In 2017 and 2016 includes the negative impact from Euro appreciation
against the U.S. dollar on Euro denominated intercompany liabilities in subsidiaries with functional currency U.S. Dollar, largely
offset by an increase in currency translation adjustment reserve from an Italian subsidiary.
(**) In 2016 includes the negative impact from Brazilian Real appreciation
against the U.S. dollar on hedging instruments and of Cash and cash equivalent and Other investments denominated in U.S. dollar
in subsidiaries which functional currency is the Brazilian real, partially offset by an increase in currency translation adjustment
reserve from the Brazilian subsidiaries.
7
|
|
Equity in earnings (losses) of non-consolidated companies
|
|
|
Year ended December 31,
|
|
(all amounts in thousands of U.S. dollars)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
From non-consolidated companies
|
|
|
116,140
|
|
|
|
71,533
|
|
|
|
(10,674
|
)
|
Impairment loss on non-consolidated companies (see Note 12)
|
|
|
-
|
|
|
|
-
|
|
|
|
(28,884
|
)
|
|
|
|
116,140
|
|
|
|
71,533
|
|
|
|
(39,558
|
)
|
|
|
Year ended December 31,
|
|
(all amounts in thousands of U.S. dollars)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Current tax
|
|
|
184,016
|
|
|
|
174,410
|
|
|
|
164,562
|
|
Deferred tax
|
|
|
(100,432
|
)
|
|
|
(132,969
|
)
|
|
|
79,943
|
|
|
|
|
83,584
|
|
|
|
41,441
|
|
|
|
244,505
|
|
From discontinued operations
|
|
|
(100,720
|
)
|
|
|
(24,339
|
)
|
|
|
(10,121
|
)
|
|
|
|
(17,136
|
)
|
|
|
17,102
|
|
|
|
234,384
|
|
The tax on Tenaris’s income before tax differs from the theoretical amount that
would arise using the tax rate in each country as follows:
|
|
Year ended December 31,
|
|
(all amounts in thousands of U.S. dollars)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax
|
|
|
427,711
|
|
|
|
34,430
|
|
|
|
140,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax calculated at the tax rate in each country (*)
|
|
|
6,456
|
|
|
|
(91,628
|
)
|
|
|
(71,588
|
)
|
Non taxable income / Non deductible expenses, net (*)
|
|
|
40,298
|
|
|
|
51,062
|
|
|
|
149,632
|
|
Changes in the tax rates
|
|
|
(62,968
|
)
|
|
|
4,720
|
|
|
|
6,436
|
|
Effect of currency translation on tax base (**)
|
|
|
(922
|
)
|
|
|
105,758
|
|
|
|
151,615
|
|
Accrual / Utilization of previously unrecognized tax losses (***)
|
|
|
-
|
|
|
|
(52,810
|
)
|
|
|
(1,711
|
)
|
Tax charge
|
|
|
(17,136
|
)
|
|
|
17,102
|
|
|
|
234,384
|
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
|
(*)
|
Include the effect of the impairment charges of approximately $400.3 million in 2015.
|
|
(**)
|
Tenaris applies the liability method to recognize deferred income tax on temporary
differences between the tax basis of assets and their carrying amounts in the financial statements. By application of this method,
Tenaris recognizes gains and losses on deferred income tax due to the effect of the change in the value on the tax basis in subsidiaries
(mainly Mexico, Argentina and Colombia), which have a functional currency different than their local currency. These gains and
losses are required by IFRS even though the revalued / devalued tax basis of the relevant assets will not result in any deduction
/ obligation for tax purposes in future periods.
|
|
(***)
|
It includes a deferred tax income of approximately $45 million booked in the last quarter of 2016
related to a capital loss. Amount was carried forward in line with US Regulation in force, and offset in 2017 Capital Gains.
|
Changes in the tax rates:
On December 29, 2017 Argentina
enacted amendments to several tax laws, including among others a reduction in the corporate income tax rate from 35% to 30% for
fiscal years starting 1 January 2018 to 31 December 2019 and to 25% going forward. The impact booked in the Company income tax
charge of the year was a gain of approximately $46 million of deferred tax income.
On December 22, 2017 the U.S. enacted significant changes to U.S.
tax law. The reform is complex and considers significant changes to the U.S. corporate income tax system by, among others, reducing
the Federal corporate income tax rate from 35% to 21%. The Company has made a reasonable estimate of the financial impacts of the
reform. However, given its significant changes and complexities, and considering that more accurate information on the impact and
the modalities of its application will be obtained in subsequent reporting periods, certain measurement adjustments could be needed.
The impact booked in the Company income tax charge of the year
was a gain of approximately $15.2 million of deferred tax income.
Tax charge
of the year has been affected by an extraordinary
charge related to the settlement agreement with the Italian tax authorities (see Note 25).
On November
1, 2017, the Company’s Board of Directors approved the payment of an interim dividend of $0.13 per share ($0.26 per ADS),
or approximately $153 million, paid on November 22, 2017, with an ex-dividend date of November 20, 2017.
On May 3, 2017, the Company’s Shareholders approved an annual
dividend in the amount of $0.41 per share ($0.82 per ADS). The amount approved included the interim dividend previously paid in
November 23, 2016 in the amount of $0.13 per share ($0.26 per ADS). The balance, amounting to $0.28 per share ($0.56 per ADS),
was paid on May 24, 2017. In the aggregate, the interim dividend paid in November 2016 and the balance paid in May 2017 amounted
to approximately $484.0 million
On May 4, 2016 the Company’s Shareholders approved an annual
dividend in the amount of $0.45 per share ($0.90 per ADS). The amount approved included the interim dividend previously paid in
November 25, 2015 in the amount of $0.15 per share ($0.30 per ADS). The balance, amounting to $0.30 per share ($0.60 per ADS),
was paid on May 25, 2016. In the aggregate, the interim dividend paid in November 2015 and the balance paid in May 2016 amounted
to approximately $531.2 million.
On May 6, 2015 the Company’s Shareholders approved an annual
dividend in the amount of $0.45 per share ($0.90 per ADS). The amount approved included the interim dividend previously paid in
November 27, 2014 in the amount of $0.15 per share ($0.30 per ADS). The balance, amounting to $0.30 per share ($0.60 per ADS),
was paid on May 20, 2015. In the aggregate, the interim dividend paid in November 2014 and the balance paid in May 2015 amounted
to approximately $531.2 million.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
10
|
|
Property, plant and equipment, net
|
Year ended December 31, 2017
|
|
Land and civil buildings
|
|
|
Industrial buildings, plant and production equipment
|
|
|
Vehicles, furniture and fixtures
|
|
|
Work in progress
|
|
|
Spare parts and equipment
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Values at the beginning of the year
|
|
|
599,710
|
|
|
|
10,034,500
|
|
|
|
346,486
|
|
|
|
1,492,572
|
|
|
|
25,404
|
|
|
|
12,498,672
|
|
Translation differences
|
|
|
5,493
|
|
|
|
178,598
|
|
|
|
5,518
|
|
|
|
284
|
|
|
|
331
|
|
|
|
190,224
|
|
Additions
|
|
|
63
|
|
|
|
7,423
|
|
|
|
1,252
|
|
|
|
497,423
|
|
|
|
18,490
|
|
|
|
524,651
|
|
Disposals / Consumptions
|
|
|
(1,293
|
)
|
|
|
(3,966
|
)
|
|
|
(7,319
|
)
|
|
|
(94
|
)
|
|
|
(1,812
|
)
|
|
|
(14,484
|
)
|
Increase due to business combinations (*)
|
|
|
2,187
|
|
|
|
5,654
|
|
|
|
2,444
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,285
|
|
Transfers / Reclassifications
|
|
|
105,901
|
|
|
|
1,732,376
|
|
|
|
22,161
|
|
|
|
(1,823,106
|
)
|
|
|
-
|
|
|
|
37,332
|
|
Values at the end of the year
|
|
|
712,061
|
|
|
|
11,954,585
|
|
|
|
370,542
|
|
|
|
167,079
|
|
|
|
42,413
|
|
|
|
13,246,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated at the beginning of the year
|
|
|
89,274
|
|
|
|
6,125,552
|
|
|
|
281,907
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,496,733
|
|
Translation differences
|
|
|
1,204
|
|
|
|
114,675
|
|
|
|
4,959
|
|
|
|
-
|
|
|
|
-
|
|
|
|
120,838
|
|
Depreciation charge
|
|
|
9,406
|
|
|
|
368,850
|
|
|
|
23,213
|
|
|
|
-
|
|
|
|
-
|
|
|
|
401,469
|
|
Transfers / Reclassifications
|
|
|
1,699
|
|
|
|
7,575
|
|
|
|
(405
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
8,869
|
|
Disposals / Consumptions
|
|
|
(386
|
)
|
|
|
(3,781
|
)
|
|
|
(6,205
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,372
|
)
|
Accumulated at the end of the year
|
|
|
101,197
|
|
|
|
6,612,871
|
|
|
|
303,469
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,017,537
|
|
At December 31, 2017
|
|
|
610,864
|
|
|
|
5,341,714
|
|
|
|
67,073
|
|
|
|
167,079
|
|
|
|
42,413
|
|
|
|
6,229,143
|
|
Year ended December 31, 2016
|
|
Land and civil buildings
|
|
|
Industrial buildings, plant and production equipment
|
|
|
Vehicles, furniture and fixtures
|
|
|
Work in progress
|
|
|
Spare parts and equipment
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Values at the beginning of the year
|
|
|
609,190
|
|
|
|
9,683,181
|
|
|
|
340,835
|
|
|
|
1,219,369
|
|
|
|
18,330
|
|
|
|
11,870,905
|
|
Translation differences
|
|
|
2,601
|
|
|
|
6,737
|
|
|
|
2,445
|
|
|
|
2,644
|
|
|
|
53
|
|
|
|
14,480
|
|
Additions
|
|
|
639
|
|
|
|
1,384
|
|
|
|
784
|
|
|
|
750,038
|
|
|
|
4,650
|
|
|
|
757,495
|
|
Disposals / Consumptions
|
|
|
(2,296
|
)
|
|
|
(26,073
|
)
|
|
|
(10,751
|
)
|
|
|
(4,850
|
)
|
|
|
(2,494
|
)
|
|
|
(46,464
|
)
|
Transfer to assets held for sale
|
|
|
(34,849
|
)
|
|
|
(61,380
|
)
|
|
|
(1,103
|
)
|
|
|
(1,407
|
)
|
|
|
(177
|
)
|
|
|
(98,916
|
)
|
Transfers / Reclassifications
|
|
|
24,425
|
|
|
|
430,651
|
|
|
|
14,276
|
|
|
|
(473,222
|
)
|
|
|
5,042
|
|
|
|
1,172
|
|
Values at the end of the year
|
|
|
599,710
|
|
|
|
10,034,500
|
|
|
|
346,486
|
|
|
|
1,492,572
|
|
|
|
25,404
|
|
|
|
12,498,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated at the beginning of the year
|
|
|
88,270
|
|
|
|
5,844,657
|
|
|
|
265,487
|
|
|
|
-
|
|
|
|
231
|
|
|
|
6,198,645
|
|
Translation differences
|
|
|
508
|
|
|
|
(3,318
|
)
|
|
|
1,831
|
|
|
|
-
|
|
|
|
(20
|
)
|
|
|
(999
|
)
|
Depreciation charge
|
|
|
9,621
|
|
|
|
359,516
|
|
|
|
24,260
|
|
|
|
-
|
|
|
|
533
|
|
|
|
393,930
|
|
Transfers / Reclassifications
|
|
|
(160
|
)
|
|
|
(3,328
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(744
|
)
|
|
|
(4,232
|
)
|
Transfer to assets held for sale
|
|
|
(8,552
|
)
|
|
|
(47,928
|
)
|
|
|
(966
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(57,446
|
)
|
Disposals / Consumptions
|
|
|
(413
|
)
|
|
|
(24,047
|
)
|
|
|
(8,705
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(33,165
|
)
|
Accumulated at the end of the year
|
|
|
89,274
|
|
|
|
6,125,552
|
|
|
|
281,907
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,496,733
|
|
At December 31, 2016
|
|
|
510,436
|
|
|
|
3,908,948
|
|
|
|
64,579
|
|
|
|
1,492,572
|
|
|
|
25,404
|
|
|
|
6,001,939
|
|
Property, plant and equipment include capitalized interests for
net amounts at December 31, 2017 and 2016 of $39.5 million and $25.4 million, respectively. The average capitalization interest
rates applied were 1.97% during 2017 and 1.28% during 2016.
(*) Related to Garrett LLC acquisition, see Note 26.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
11
|
|
Intangible assets, net
|
Year ended December 31, 2017
|
|
Information system projects
|
|
|
Licenses, patents and trademarks (*)
|
|
|
Goodwill
|
|
|
Customer relationships
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Values at the beginning of the year
|
|
|
554,330
|
|
|
|
461,619
|
|
|
|
2,090,257
|
|
|
|
2,058,946
|
|
|
|
5,165,152
|
|
Translation differences
|
|
|
6,265
|
|
|
|
483
|
|
|
|
(184
|
)
|
|
|
(87
|
)
|
|
|
6,477
|
|
Additions
|
|
|
28,335
|
|
|
|
5,105
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,440
|
|
Transfers / Reclassifications
|
|
|
(28,371
|
)
|
|
|
(92
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(28,463
|
)
|
Increase due to business combinations (**)
|
|
|
133
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
133
|
|
Disposals
|
|
|
-
|
|
|
|
(1,152
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,152
|
)
|
Values at the end of the year
|
|
|
560,692
|
|
|
|
465,963
|
|
|
|
2,090,073
|
|
|
|
2,058,859
|
|
|
|
5,175,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated at the beginning of the year
|
|
|
408,373
|
|
|
|
362,292
|
|
|
|
797,592
|
|
|
|
1,734,068
|
|
|
|
3,302,325
|
|
Translation differences
|
|
|
5,232
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,232
|
|
Amortization charge
|
|
|
65,249
|
|
|
|
10,546
|
|
|
|
-
|
|
|
|
131,376
|
|
|
|
207,171
|
|
Transfers / Reclassifications
|
|
|
92
|
|
|
|
(92
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accumulated at the end of the year
|
|
|
478,946
|
|
|
|
372,746
|
|
|
|
797,592
|
|
|
|
1,865,444
|
|
|
|
3,514,728
|
|
At December 31, 2017
|
|
|
81,746
|
|
|
|
93,217
|
|
|
|
1,292,481
|
|
|
|
193,415
|
|
|
|
1,660,859
|
|
Year ended December 31, 2016
|
|
Information system projects
|
|
|
Licenses, patents and trademarks (*)
|
|
|
Goodwill
|
|
|
Customer relationships
|
|
|
Total
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Values at the beginning of the year
|
|
|
524,869
|
|
|
|
494,662
|
|
|
|
2,170,709
|
|
|
|
2,059,946
|
|
|
|
5,250,186
|
|
Translation differences
|
|
|
2,264
|
|
|
|
(29
|
)
|
|
|
4,671
|
|
|
|
-
|
|
|
|
6,906
|
|
Additions
|
|
|
28,730
|
|
|
|
648
|
|
|
|
-
|
|
|
|
-
|
|
|
|
29,378
|
|
Transfers / Reclassifications
|
|
|
(546
|
)
|
|
|
(222
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(768
|
)
|
Transfer to assets held for sale
|
|
|
(836
|
)
|
|
|
(32,600
|
)
|
|
|
(85,123
|
)
|
|
|
(1,000
|
)
|
|
|
(119,559
|
)
|
Disposals
|
|
|
(151
|
)
|
|
|
(840
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(991
|
)
|
Values at the end of the year
|
|
|
554,330
|
|
|
|
461,619
|
|
|
|
2,090,257
|
|
|
|
2,058,946
|
|
|
|
5,165,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated at the beginning of the year
|
|
|
335,532
|
|
|
|
364,412
|
|
|
|
836,939
|
|
|
|
1,569,851
|
|
|
|
3,106,734
|
|
Translation differences
|
|
|
1,325
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,325
|
|
Amortization charge
|
|
|
72,632
|
|
|
|
30,633
|
|
|
|
-
|
|
|
|
165,217
|
|
|
|
268,482
|
|
Transfers / Reclassifications
|
|
|
(245
|
)
|
|
|
(153
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(398
|
)
|
Transfer to assets held for sale
|
|
|
(718
|
)
|
|
|
(32,600
|
)
|
|
|
(39,347
|
)
|
|
|
(1,000
|
)
|
|
|
(73,665
|
)
|
Disposals
|
|
|
(153
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(153
|
)
|
Accumulated at the end of the year
|
|
|
408,373
|
|
|
|
362,292
|
|
|
|
797,592
|
|
|
|
1,734,068
|
|
|
|
3,302,325
|
|
At December 31, 2016
|
|
|
145,957
|
|
|
|
99,327
|
|
|
|
1,292,665
|
|
|
|
324,878
|
|
|
|
1,862,827
|
|
(*) Includes Proprietary Technology.
(**) Related to Garrett LLC acquisition.
The geographical allocation of goodwill for the year ended December
31, 2017 was $1,168.5 million for North America, $121.2 million for South America, $2.0 million for Europe and $0.7 million for
Middle East & Africa.
The carrying amount of goodwill allocated by CGU, as of December
31, 2017, was as follows:
(All amounts in million US dollar)
|
|
As of December 31, 2017
|
|
Tubes Segment
|
|
|
Other Segment
|
|
CGU
|
|
Maverick Acquisition
|
|
|
Hydril Acquisition
|
|
|
Other
|
|
|
Maverick Acquisition
|
|
|
Total
|
|
OCTG (USA)
|
|
|
225
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
225
|
|
Tamsa (Hydril and other)
|
|
|
-
|
|
|
|
346
|
|
|
|
19
|
|
|
|
-
|
|
|
|
365
|
|
Siderca (Hydril and other)
|
|
|
-
|
|
|
|
265
|
|
|
|
93
|
|
|
|
-
|
|
|
|
358
|
|
Hydril
|
|
|
-
|
|
|
|
309
|
|
|
|
-
|
|
|
|
-
|
|
|
|
309
|
|
Coiled Tubing
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
|
|
4
|
|
Confab
|
|
|
-
|
|
|
|
-
|
|
|
|
28
|
|
|
|
-
|
|
|
|
28
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
|
3
|
|
Total
|
|
|
225
|
|
|
|
920
|
|
|
|
143
|
|
|
|
4
|
|
|
|
1,292
|
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
12
|
|
Investments in non-consolidated companies
|
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
At the beginning of the year
|
|
|
557,031
|
|
|
|
490,645
|
|
Translation differences
|
|
|
(9,548
|
)
|
|
|
3,473
|
|
Equity in earnings of non-consolidated companies
|
|
|
116,140
|
|
|
|
71,533
|
|
Dividends and distributions received (*)
|
|
|
(22,971
|
)
|
|
|
(20,674
|
)
|
Additions
|
|
|
-
|
|
|
|
17,108
|
|
Decrease / increase in equity reserves and others
|
|
|
(358
|
)
|
|
|
(5,054
|
)
|
At the end of the year
|
|
|
640,294
|
|
|
|
557,031
|
|
(*)Related to Ternium
The principal non-consolidated companies are:
|
|
|
|
% ownership at December 31,
|
|
|
Value at December 31,
|
|
Company
|
|
Country of incorporation
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
a) Ternium (*)
|
|
Luxembourg
|
|
|
11.46
|
%
|
|
|
11.46
|
%
|
|
|
563,735
|
|
|
|
491,285
|
|
b) Usiminas (**)
|
|
Brazil
|
|
|
3.08
|
%
|
|
|
3.08
|
%
|
|
|
70,642
|
|
|
|
61,904
|
|
Others
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
5,917
|
|
|
|
3,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
640,294
|
|
|
|
557,031
|
|
(*) Including treasury shares.
(**)At December 31, 2017 and 2016 the voting rights were 5.2%.
a) Ternium S.A.
Ternium S.A. (“Ternium”), is a steel producer with production
facilities in Mexico, Argentina, Brazil, Colombia, United States and Guatemala and is one of Tenaris’s main suppliers of
round steel bars and flat steel products for its pipes business.
At December 31, 2017, the closing price of Ternium’s ADSs
as quoted on the New York Stock Exchange was $31.59 per ADS, giving Tenaris’s ownership stake a market value of approximately
$725.7 million. At December 31, 2017, the carrying value of Tenaris’s ownership stake in Ternium, based on Ternium’s
IFRS financial statements, was approximately $563.7 million. See Section II.B.2.
The Company reviews periodically the recoverability of its investment
in Ternium. To determine the recoverable value, the Company estimates the value in use of the investment by calculating the present
value of the expected cash flows. The key assumptions used by the Company are based on external and internal sources of information,
and on management’s judgment based on past experience and expectations of future changes in the market.
Value-in-use was calculated by discounting the estimated cash flows
over a five year period based on forecasts approved by management. For the subsequent years beyond the five-year period, a terminal
value was calculated based on perpetuity. The discount rates used are based on the respective weighted average cost of capital
(WACC), which is considered to be a good indicator of capital cost. The discount rate used to test the investment in Ternium for
impairment was 11.5%
Summarized selected financial information of Ternium, including
the aggregated amounts of assets, liabilities, revenues and profit or loss is as follows:
|
|
Ternium
|
|
|
|
2017
|
|
|
2016
|
|
Non-current assets
|
|
|
7,727,283
|
|
|
|
5,622,556
|
|
Current assets
|
|
|
4,395,283
|
|
|
|
2,700,314
|
|
Total assets
|
|
|
12,122,566
|
|
|
|
8,322,870
|
|
Non-current liabilities
|
|
|
3,442,521
|
|
|
|
1,324,785
|
|
Current liabilities
|
|
|
2,827,275
|
|
|
|
1,831,492
|
|
Total liabilities
|
|
|
6,269,796
|
|
|
|
3,156,277
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests
|
|
|
842,347
|
|
|
|
775,295
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
9,700,296
|
|
|
|
7,223,975
|
|
Gross profit
|
|
|
2,297,271
|
|
|
|
1,839,585
|
|
Net income for the year attributable to owners of the parent
|
|
|
886,219
|
|
|
|
595,644
|
|
Total comprehensive income for the year, net of tax, attributable to owners of the parent
|
|
|
815,434
|
|
|
|
534,827
|
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
12
|
|
Investments in non-consolidated companies (Cont.)
|
b) Usiminas S.A.
Usiminas is a Brazilian producer of high quality flat steel products
used in the energy, automotive and other industries and it is Tenaris’s principal supplier of flat steel in Brazil for its
pipes and industrial equipment businesses.
As of December 31, 2017 the closing price of the Usiminas’
ordinary and preferred shares, as quoted on the BM&FBovespa Stock Exchange, was BRL10.83 ($3.27) and BRL9.1 ($2.75), respectively,
giving Tenaris’s ownership stake a market value of approximately $123.0 million. As of that date, the carrying value of Tenaris’s
ownership stake in Usiminas was approximately $70.6 million.
The Company reviews periodically the recoverability of its investment
in Usiminas. To determine the recoverable value, the Company estimates the value in use of the investment by calculating the present
value of the expected cash flows or its fair value less costs of disposal.
Usiminas financial restructuring process (that started in April
2016 with the capital increase) was completed by the end of August 2017. The completion of this process together with the increase
in the share price since June 2016 and the improvement in business conditions may lead to an increase in the value of the investment
in Usiminas in future periods.
During 2015 the Company recorded an impairment charge of $28.9 million.
Summarized selected financial information of Usiminas, including the aggregated amounts
of assets, liabilities, revenues and profit or loss is as follows:
|
|
Usiminas
|
|
|
|
2017
|
|
|
2016
|
|
Non-current assets
|
|
|
5,661,947
|
|
|
|
6,085,811
|
|
Current assets
|
|
|
2,193,096
|
|
|
|
1,970,015
|
|
Total assets
|
|
|
7,855,043
|
|
|
|
8,055,826
|
|
Non-current liabilities
|
|
|
2,344,042
|
|
|
|
2,856,883
|
|
Current liabilities
|
|
|
920,924
|
|
|
|
537,646
|
|
Total liabilities
|
|
|
3,264,966
|
|
|
|
3,394,529
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests
|
|
|
425,988
|
|
|
|
508,083
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
3,367,937
|
|
|
|
2,442,596
|
|
Gross profit
|
|
|
513,712
|
|
|
|
150,999
|
|
Net income (loss) for the year attributable to owners of the parent
|
|
|
99,853
|
|
|
|
(166,153
|
)
|
c) Techgen, S.A. de C.V. (“Techgen”)
Techgen is a Mexican natural gas-fired combined cycle electric power
plant in the Pesquería area of the State of Nuevo León, Mexico. The company started producing energy on December
1, 2016 and is fully operational, power capacity of 900 megawatts. As of December 31, 2017, Tenaris held 22% of Techgen’s
share capital, and its affiliates, Ternium and Tecpetrol International S.A. (a wholly-owned subsidiary of San Faustin S.A., the
controlling shareholder of both Tenaris and Ternium), held 48% and 30% respectively.
Techgen is a party to transportation capacity agreements for a purchasing
capacity of 150,000 MMBtu/Gas per day starting on August 1, 2016 and ending on July 31, 2036, and a party to a contract for the
purchase of power generation equipment and other services related to the equipment. As of December 31, 2017, Tenaris’s exposure
under these agreements amounted to $58.2 million and $3.9 million respectively.
Tenaris issued a corporate guarantee
covering 22% of the obligations of Techgen under a syndicated loan agreement between Techgen and several banks. The loan agreement
amounted to $720 million and has been used in the construction of the facility. The main covenants under the corporate guarantee
are Tenaris’s commitment to maintain its participation in Techgen or the right to purchase at least 22% of Techgen’s
firm energy, and compliance with a maximum permitted leverage ratio. As of December 31, 2017, the loan agreement had been fully
disbursed and, as a result, the amount guaranteed by Tenaris was approximately $158.4 million. During 2017 the shareholders of
Techgen made additional investments in Techgen, in form of subordinated loans, which in case of Tenaris amounted to $7 million.
As of December 31, 2017, the aggregate outstanding principal amount under these loans was $93.2 million.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
13
|
|
Receivables – non current
|
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Government entities
|
|
|
641
|
|
|
|
913
|
|
Employee advances and loans
|
|
|
5,891
|
|
|
|
7,202
|
|
Tax credits
|
|
|
29,404
|
|
|
|
32,769
|
|
Receivables from related parties
|
|
|
88,595
|
|
|
|
91,419
|
|
Legal deposits
|
|
|
13,568
|
|
|
|
13,876
|
|
Advances to suppliers and other advances
|
|
|
12,443
|
|
|
|
19,520
|
|
Others
|
|
|
33,428
|
|
|
|
32,217
|
|
|
|
|
183,970
|
|
|
|
197,916
|
|
Allowances for doubtful accounts (see Note 22 (i))
|
|
|
(641
|
)
|
|
|
(913
|
)
|
|
|
|
183,329
|
|
|
|
197,003
|
|
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Finished goods
|
|
|
923,316
|
|
|
|
653,482
|
|
Goods in process
|
|
|
619,796
|
|
|
|
375,822
|
|
Raw materials
|
|
|
281,083
|
|
|
|
160,284
|
|
Supplies
|
|
|
486,002
|
|
|
|
451,777
|
|
Goods in transit
|
|
|
274,175
|
|
|
|
162,766
|
|
|
|
|
2,584,372
|
|
|
|
1,804,131
|
|
Allowance for obsolescence (see Note 23 (i))
|
|
|
(216,068
|
)
|
|
|
(240,242
|
)
|
|
|
|
2,368,304
|
|
|
|
1,563,889
|
|
|
15
|
Receivables and prepayments
|
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Prepaid expenses and other receivables
|
|
|
36,587
|
|
|
|
28,278
|
|
Government entities
|
|
|
2,085
|
|
|
|
3,052
|
|
Employee advances and loans
|
|
|
12,205
|
|
|
|
10,458
|
|
Advances to suppliers and other advances
|
|
|
25,205
|
|
|
|
16,088
|
|
Government tax refunds on exports
|
|
|
17,353
|
|
|
|
9,350
|
|
Receivables from related parties
|
|
|
28,397
|
|
|
|
24,742
|
|
Derivative financial instruments
|
|
|
8,230
|
|
|
|
2,759
|
|
Miscellaneous
|
|
|
20,122
|
|
|
|
36,320
|
|
|
|
|
150,184
|
|
|
|
131,047
|
|
Allowance for other doubtful accounts (see Note 23 (i))
|
|
|
(6,255
|
)
|
|
|
(6,332
|
)
|
|
|
|
143,929
|
|
|
|
124,715
|
|
|
16
|
Current tax assets and liabilities
|
|
|
Year ended December 31,
|
|
Current tax assets
|
|
2017
|
|
|
2016
|
|
V.A.T. credits
|
|
|
76,714
|
|
|
|
61,552
|
|
Prepaid taxes
|
|
|
55,620
|
|
|
|
79,434
|
|
|
|
|
132,334
|
|
|
|
140,986
|
|
|
|
Year ended December 31,
|
|
Current tax liabilities
|
|
2017
|
|
|
2016
|
|
Income tax liabilities
|
|
|
35,210
|
|
|
|
55,841
|
|
V.A.T. liabilities
|
|
|
14,313
|
|
|
|
11,065
|
|
Other taxes
|
|
|
52,882
|
|
|
|
34,291
|
|
|
|
|
102,405
|
|
|
|
101,197
|
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Current accounts
|
|
|
1,240,769
|
|
|
|
1,026,026
|
|
Receivables from related parties
|
|
|
51,676
|
|
|
|
14,383
|
|
|
|
|
1,292,445
|
|
|
|
1,040,409
|
|
Allowance for doubtful accounts (see Note 23 (i))
|
|
|
(78,385
|
)
|
|
|
(85,724
|
)
|
|
|
|
1,214,060
|
|
|
|
954,685
|
|
The following table sets forth details of the aging of trade receivables:
|
|
|
|
|
|
|
|
Past due
|
|
|
|
Trade Receivables
|
|
|
Not Due
|
|
|
1 - 180 days
|
|
|
> 180 days
|
|
At December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed
|
|
|
247,079
|
|
|
|
219,764
|
|
|
|
22,978
|
|
|
|
4,337
|
|
Not guaranteed
|
|
|
1,045,366
|
|
|
|
841,737
|
|
|
|
115,245
|
|
|
|
88,384
|
|
Guaranteed and not guaranteed
|
|
|
1,292,445
|
|
|
|
1,061,501
|
|
|
|
138,223
|
|
|
|
92,721
|
|
Allowance for doubtful accounts
|
|
|
(78,385
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(78,385
|
)
|
Net Value
|
|
|
1,214,060
|
|
|
|
1,061,501
|
|
|
|
138,223
|
|
|
|
14,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed
|
|
|
355,508
|
|
|
|
272,393
|
|
|
|
32,241
|
|
|
|
50,874
|
|
Not guaranteed
|
|
|
684,901
|
|
|
|
518,984
|
|
|
|
87,379
|
|
|
|
78,538
|
|
Guaranteed and not guaranteed
|
|
|
1,040,409
|
|
|
|
791,377
|
|
|
|
119,620
|
|
|
|
129,412
|
|
Allowance for doubtful accounts
|
|
|
(85,724
|
)
|
|
|
(62
|
)
|
|
|
(67
|
)
|
|
|
(85,595
|
)
|
Net Value
|
|
|
954,685
|
|
|
|
791,315
|
|
|
|
119,553
|
|
|
|
43,817
|
|
Trade receivables are mainly denominated in
U.S. dollars.
18
|
|
Cash and cash equivalents and Other investments
|
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
Cash at banks
|
|
|
150,948
|
|
|
|
92,730
|
|
Liquidity funds
|
|
|
66,033
|
|
|
|
215,807
|
|
Short – term investments
|
|
|
113,240
|
|
|
|
91,200
|
|
|
|
|
330,221
|
|
|
|
399,737
|
|
Other investments - current
|
|
|
|
|
|
|
|
|
Fixed Income (time-deposit, zero coupon bonds, commercial papers)
|
|
|
437,406
|
|
|
|
782,029
|
|
Bonds and other fixed Income
|
|
|
754,800
|
|
|
|
841,638
|
|
Fund Investments
|
|
|
-
|
|
|
|
9,475
|
|
Others
|
|
|
100
|
|
|
|
-
|
|
|
|
|
1,192,306
|
|
|
|
1,633,142
|
|
Other investments - Non-current
|
|
|
|
|
|
|
|
|
Bonds and other fixed Income
|
|
|
123,498
|
|
|
|
248,049
|
|
Others
|
|
|
4,837
|
|
|
|
1,670
|
|
|
|
|
128,335
|
|
|
|
249,719
|
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Non-current
|
|
|
|
|
|
|
Bank borrowings
|
|
|
34,626
|
|
|
|
31,544
|
|
Finance lease liabilities
|
|
|
59
|
|
|
|
35
|
|
Costs of issue of debt
|
|
|
(40
|
)
|
|
|
(37
|
)
|
|
|
|
34,645
|
|
|
|
31,542
|
|
Current
|
|
|
|
|
|
|
|
|
Bank borrowings
|
|
|
930,957
|
|
|
|
807,252
|
|
Bank overdrafts
|
|
|
131
|
|
|
|
1,320
|
|
Finance lease liabilities
|
|
|
138
|
|
|
|
130
|
|
Costs of issue of debt
|
|
|
(12
|
)
|
|
|
(8
|
)
|
|
|
|
931,214
|
|
|
|
808,694
|
|
Total Borrowings
|
|
|
965,859
|
|
|
|
840,236
|
|
The maturity of borrowings is as follows:
|
|
1 year or less
|
|
|
1 - 2 years
|
|
|
2 – 3 years
|
|
|
3 - 4 years
|
|
|
4 - 5 years
|
|
|
Over 5 years
|
|
|
Total
|
|
At December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial lease
|
|
|
138
|
|
|
|
59
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
197
|
|
Other borrowings
|
|
|
931,076
|
|
|
|
4,876
|
|
|
|
4,484
|
|
|
|
4,978
|
|
|
|
20,248
|
|
|
|
-
|
|
|
|
965,662
|
|
Total borrowings
|
|
|
931,214
|
|
|
|
4,935
|
|
|
|
4,484
|
|
|
|
4,978
|
|
|
|
20,248
|
|
|
|
-
|
|
|
|
965,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest to be accrued (*)
|
|
|
14,512
|
|
|
|
1,212
|
|
|
|
1,203
|
|
|
|
1,190
|
|
|
|
174
|
|
|
|
-
|
|
|
|
18,290
|
|
Total
|
|
|
945,726
|
|
|
|
6,147
|
|
|
|
5,687
|
|
|
|
6,168
|
|
|
|
20,422
|
|
|
|
-
|
|
|
|
984,149
|
|
|
|
1 year or less
|
|
|
1 - 2 years
|
|
|
2 – 3 years
|
|
|
3 - 4 years
|
|
|
4 - 5 years
|
|
|
Over 5 years
|
|
|
Total
|
|
At December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial lease
|
|
|
130
|
|
|
|
35
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
165
|
|
Other borrowings
|
|
|
808,564
|
|
|
|
1,198
|
|
|
|
3,739
|
|
|
|
3,360
|
|
|
|
3,632
|
|
|
|
19,578
|
|
|
|
840,071
|
|
Total borrowings
|
|
|
808,694
|
|
|
|
1,233
|
|
|
|
3,739
|
|
|
|
3,360
|
|
|
|
3,632
|
|
|
|
19,578
|
|
|
|
840,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest to be accrued (*)
|
|
|
6,461
|
|
|
|
1,172
|
|
|
|
1,161
|
|
|
|
1,142
|
|
|
|
1,116
|
|
|
|
237
|
|
|
|
11,289
|
|
Total
|
|
|
815,155
|
|
|
|
2,405
|
|
|
|
4,900
|
|
|
|
4,502
|
|
|
|
4,748
|
|
|
|
19,815
|
|
|
|
851,525
|
|
(*) Includes the effect of hedge accounting.
Significant borrowings include:
|
|
|
|
|
|
In million of USD
|
Disbursement date
|
|
Borrower
|
|
Type
|
|
Original & Outstanding
|
|
Final maturity
|
2017
|
|
Tamsa
|
|
Bank loans
|
|
404
|
|
2018
|
2017
|
|
Siderca
|
|
Bank loans
|
|
311
|
|
2018
|
Dec-17
|
|
TuboCaribe
|
|
Bank loan
|
|
150
|
|
Dec-18
|
As of December 31, 2017, Tenaris was in compliance with all of its
covenants.
The weighted average interest rates before tax shown below were
calculated using the rates set for each instrument in its corresponding currency as of December 31, 2017 and 2016 (considering
hedge accounting where applicable).
|
|
2017
|
|
|
2016
|
|
Total borrowings
|
|
|
3.73
|
%
|
|
|
1.97
|
%
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
Breakdown of long-term borrowings by currency and rate is as follows:
Non-current borrowings
|
|
|
|
Year ended December 31,
|
|
Currency
|
|
Interest rates
|
|
2017
|
|
|
2016
|
|
USD
|
|
Fixed
|
|
|
19,120
|
|
|
|
19,461
|
|
EUR
|
|
Fixed
|
|
|
13,828
|
|
|
|
10,701
|
|
Others
|
|
Variable
|
|
|
1,697
|
|
|
|
1,380
|
|
Total non-current borrowings
|
|
|
|
|
34,645
|
|
|
|
31,542
|
|
Breakdown of short-term borrowings by currency and rate is as follows:
Current borrowings
|
|
|
|
Year ended December 31,
|
|
Currency
|
|
Interest rates
|
|
2017
|
|
|
2016
|
|
USD
|
|
Variable
|
|
|
17,640
|
|
|
|
17,081
|
|
USD
|
|
Fixed
|
|
|
187,872
|
|
|
|
200,448
|
|
EUR
|
|
Variable
|
|
|
169
|
|
|
|
99
|
|
EUR
|
|
Fixed
|
|
|
839
|
|
|
|
841
|
|
MXN
|
|
Fixed
|
|
|
412,719
|
|
|
|
391,318
|
|
ARS
|
|
Fixed
|
|
|
311,829
|
|
|
|
197,637
|
|
ARS
|
|
Variable
|
|
|
-
|
|
|
|
1,041
|
|
Others
|
|
Variable
|
|
|
138
|
|
|
|
35
|
|
Others
|
|
Fixed
|
|
|
8
|
|
|
|
194
|
|
Total current borrowings
|
|
|
|
|
931,214
|
|
|
|
808,694
|
|
Borrowings evolution
|
|
Year ended December 31, 2017
|
|
|
|
Non current
|
|
|
Current
|
|
At the beginning of the year
|
|
|
31,542
|
|
|
|
808,694
|
|
Translation differences
|
|
|
1,649
|
|
|
|
(3,622
|
)
|
Proceeds and repayments, net
|
|
|
1,510
|
|
|
|
105,142
|
|
Interests Accrued less payments
|
|
|
(19
|
)
|
|
|
21,880
|
|
Reclassifications
|
|
|
(309
|
)
|
|
|
309
|
|
Other Movements
|
|
|
272
|
|
|
|
-
|
|
Overdrafts variation
|
|
|
-
|
|
|
|
(1,189
|
)
|
At the end of the year
|
|
|
34,645
|
|
|
|
931,214
|
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
Deferred income taxes are calculated in full on temporary differences
under the liability method using the tax rate of each country.
The evolution of deferred tax assets and liabilities during the year are as follows:
Deferred tax liabilities
|
|
Fixed assets
|
|
|
Inventories
|
|
|
Intangible and Other (*)
|
|
|
Total
|
|
At the beginning of the year
|
|
|
263,056
|
|
|
|
36,891
|
|
|
|
514,713
|
|
|
|
814,660
|
|
Translation differences
|
|
|
2,243
|
|
|
|
(2
|
)
|
|
|
21
|
|
|
|
2,262
|
|
Charged directly to other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
(583
|
)
|
|
|
(583
|
)
|
Income statement credit (charge)
|
|
|
207,605
|
|
|
|
(1,955
|
)
|
|
|
(186,544
|
)
|
|
|
19,106
|
|
At December 31, 2017
|
|
|
472,904
|
|
|
|
34,934
|
|
|
|
327,607
|
|
|
|
835,445
|
|
|
|
Fixed assets
|
|
|
Inventories
|
|
|
Intangible and Other (*)
|
|
|
Total
|
|
At the beginning of the year
|
|
|
299,139
|
|
|
|
42,516
|
|
|
|
549,557
|
|
|
|
891,212
|
|
Translation differences
|
|
|
(540
|
)
|
|
|
-
|
|
|
|
44
|
|
|
|
(496
|
)
|
Charged directly to other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
(40
|
)
|
|
|
(40
|
)
|
Transfer to assets held for sale
|
|
|
(5,724
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,724
|
)
|
Income statement charge
|
|
|
(29,819
|
)
|
|
|
(5,625
|
)
|
|
|
(34,848
|
)
|
|
|
(70,292
|
)
|
At December 31, 2016
|
|
|
263,056
|
|
|
|
36,891
|
|
|
|
514,713
|
|
|
|
814,660
|
|
(*) Includes the effect of currency translation on
tax base (see Note 8).
Deferred tax assets
|
|
Provisions and allowances
|
|
|
Inventories
|
|
|
Tax losses (*)
|
|
|
Other
|
|
|
Total
|
|
At the beginning of the year
|
|
|
(33,276
|
)
|
|
|
(94,176
|
)
|
|
|
(199,326
|
)
|
|
|
(81,838
|
)
|
|
|
(408,616
|
)
|
Translation differences
|
|
|
(223
|
)
|
|
|
(972
|
)
|
|
|
322
|
|
|
|
(606
|
)
|
|
|
(1,479
|
)
|
Charged directly to other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(778
|
)
|
|
|
(778
|
)
|
Income statement charge / (credit)
|
|
|
7,024
|
|
|
|
5,593
|
|
|
|
(155,940
|
)
|
|
|
23,189
|
|
|
|
(120,134
|
)
|
At December 31, 2017
|
|
|
(26,475
|
)
|
|
|
(89,555
|
)
|
|
|
(354,944
|
)
|
|
|
(60,033
|
)
|
|
|
(531,007
|
)
|
(*) As of December 31, 2017, the net unrecognized deferred tax assets
amount to $98.8 million.
|
|
Provisions and allowances
|
|
|
Inventories
|
|
|
Tax losses
|
|
|
Other
|
|
|
Total
|
|
At the beginning of the year
|
|
|
(32,425
|
)
|
|
|
(107,378
|
)
|
|
|
(99,394
|
)
|
|
|
(102,396
|
)
|
|
|
(341,593
|
)
|
Translation differences
|
|
|
(3,123
|
)
|
|
|
(1,347
|
)
|
|
|
(2,741
|
)
|
|
|
14
|
|
|
|
(7,197
|
)
|
Transfer to assets held for sale
|
|
|
-
|
|
|
|
275
|
|
|
|
-
|
|
|
|
753
|
|
|
|
1,028
|
|
Charged directly to other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,823
|
|
|
|
1,823
|
|
Income statement charge / (credit)
|
|
|
2,272
|
|
|
|
14,274
|
|
|
|
(97,191
|
)
|
|
|
17,968
|
|
|
|
(62,677
|
)
|
At December 31, 2016
|
|
|
(33,276
|
)
|
|
|
(94,176
|
)
|
|
|
(199,326
|
)
|
|
|
(81,838
|
)
|
|
|
(408,616
|
)
|
The recovery analysis of deferred tax assets and deferred tax liabilities
is as follows:
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Deferred tax assets to be recovered after 12 months
|
|
|
(405,416
|
)
|
|
|
(226,431
|
)
|
Deferred tax liabilities to be recovered after 12 months
|
|
|
808,108
|
|
|
|
761,039
|
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
20
|
|
Deferred income tax (Cont.)
|
Deferred income tax assets and liabilities are offset when (1) there
is a legally enforceable right to set-off current tax assets against current tax liabilities and (2) when the deferred income taxes
relate to the same fiscal authority on either the same taxable entity or different taxable entities where there is an intention
to settle the balances on a net basis. The following amounts, determined after appropriate set-off, are shown in the Consolidated
Statement of Financial Position:
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Deferred tax assets
|
|
|
(153,532
|
)
|
|
|
(144,613
|
)
|
Deferred tax liabilities
|
|
|
457,970
|
|
|
|
550,657
|
|
|
|
|
304,438
|
|
|
|
406,044
|
|
The movement in the net deferred income tax liability account is as follows:
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
At the beginning of the year
|
|
|
406,044
|
|
|
|
549,619
|
|
Translation differences
|
|
|
783
|
|
|
|
(7,693
|
)
|
Charged directly to Other Comprehensive Income
|
|
|
(1,361
|
)
|
|
|
1,783
|
|
Income statement credit (debit)
|
|
|
(101,028
|
)
|
|
|
(132,969
|
)
|
Transfer to assets held for sale
|
|
|
-
|
|
|
|
(4,696
|
)
|
At the end of the year
|
|
|
304,438
|
|
|
|
406,044
|
|
(i)
|
|
Other liabilities – Non-current
|
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Post-employment benefits
|
|
|
125,012
|
|
|
|
125,161
|
|
Other-long term benefits
|
|
|
68,244
|
|
|
|
66,714
|
|
Miscellaneous
|
|
|
24,040
|
|
|
|
21,742
|
|
|
|
|
217,296
|
|
|
|
213,617
|
|
Post-employment benefits
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Values at the beginning of the year
|
|
|
96,229
|
|
|
|
107,601
|
|
Translation differences
|
|
|
2,893
|
|
|
|
(2,204
|
)
|
Current service cost
|
|
|
7,851
|
|
|
|
4,625
|
|
Interest cost
|
|
|
5,462
|
|
|
|
6,371
|
|
Curtailments and settlements
|
|
|
21
|
|
|
|
24
|
|
Remeasurements (*)
|
|
|
10,907
|
|
|
|
(4,501
|
)
|
Benefits paid from the plan
|
|
|
(22,107
|
)
|
|
|
(13,921
|
)
|
Other
|
|
|
633
|
|
|
|
(1,766
|
)
|
At the end of the year
|
|
|
101,889
|
|
|
|
96,229
|
|
(*) For 2017 a loss of $0.08 million is attributable to demographic
assumptions and a loss of $10.6 million to financial assumptions. For 2016 a loss of $0.6 and a gain of $5.1 million is attributable
to demographic and financial assumptions, respectively.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
21
|
|
Other liabilities (Cont.)
|
(i)
|
|
Other liabilities – Non-current (Cont.)
|
The principal actuarial assumptions used were as follows:
|
Year ended December 31,
|
|
2017
|
2016
|
Discount rate
|
1% - 7%
|
1% - 7%
|
Rate of compensation increase
|
0% - 3%
|
0% - 3%
|
As of December 31, 2017, an increase / (decrease) of 1% in the discount
rate assumption of the main plans would have generated a (decrease) / increase on the defined benefit obligation of $8.2 million
and $7.2 million respectively, and an increase / (decrease) of 1% in the rate of compensation assumption of the main plans would
have generated an increase / (decrease) impact on the defined benefit obligation of $4.0 million and $4.2 million respectively.
The above sensitivity analyses are based on a change in discount rate and rate of compensation while holding all other assumptions
constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated.
The amounts
recognized in the statement of financial position for the current annual period and the previous annual period are as follows:
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Present value of funded obligations
|
|
|
165,486
|
|
|
|
159,612
|
|
Fair value of plan assets
|
|
|
(145,692
|
)
|
|
|
(132,913
|
)
|
Liability (*)
|
|
|
19,794
|
|
|
|
26,699
|
|
(*) In 2017
and 2016, $3.3 million and $2.2 million corresponding to an overfunded plan were reclassified within other non-current assets,
respectively.
The movement in the present value
of funded obligations is as follows:
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
At the beginning of the year
|
|
|
159,612
|
|
|
|
153,974
|
|
Translation differences
|
|
|
7,300
|
|
|
|
384
|
|
Current service cost
|
|
|
592
|
|
|
|
162
|
|
Interest cost
|
|
|
6,034
|
|
|
|
6,403
|
|
Remeasurements (*)
|
|
|
3,602
|
|
|
|
7,753
|
|
Benefits paid
|
|
|
(11,654
|
)
|
|
|
(9,064
|
)
|
At the end of the year
|
|
|
165,486
|
|
|
|
159,612
|
|
(*) For 2017 a gain of $0.4 million is attributable to demographic
assumptions and a loss of $4.1 million to financial assumptions. For 2016 a gain of $0.9 and a loss of $8.7 million is attributable
to demographic and financial assumptions, respectively.
The movement in the fair value of plan assets is as follows:
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
At the beginning of the year
|
|
|
(132,913
|
)
|
|
|
(128,321
|
)
|
Translation differences
|
|
|
(6,802
|
)
|
|
|
365
|
|
Return on plan assets
|
|
|
(5,849
|
)
|
|
|
(7,022
|
)
|
Remeasurements
|
|
|
(5,874
|
)
|
|
|
(3,022
|
)
|
Contributions paid to the plan
|
|
|
(6,230
|
)
|
|
|
(4,374
|
)
|
Benefits paid from the plan
|
|
|
11,654
|
|
|
|
9,064
|
|
Other
|
|
|
323
|
|
|
|
397
|
|
At the end of the year
|
|
|
(145,692
|
)
|
|
|
(132,913
|
)
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
21
|
|
Other liabilities (Cont.)
|
(i)
|
|
Other liabilities – Non-current (Cont.)
|
The major categories of plan assets
as a percentage of total plan assets are as follows:
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Equity instruments
|
|
|
53.4
|
%
|
|
|
52.4
|
%
|
Debt instruments
|
|
|
42.9
|
%
|
|
|
43.9
|
%
|
Others
|
|
|
3.7
|
%
|
|
|
3.7
|
%
|
The principal actuarial assumptions used were as follows:
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Discount rate
|
|
|
4
|
%
|
|
|
4
|
%
|
Rate of compensation increase
|
|
|
0 % - 3 %
|
|
|
|
0 % - 3 %
|
|
The expected return on plan assets is determined by considering
the expected returns available on the assets underlying the current investment policy. Expected return on plan assets is determined
based on long-term, prospective rates of return as of the end of the reporting period.
As of December 31, 2017, an increase / (decrease) of 1% in the discount
rate assumption of the main plans would have generated a (decrease) / increase on the defined benefit obligation of $17.0 million
and $20.9 million respectively, and an increase / (decrease) of 1% in the compensation rate assumption of the main plans would
have generated an increase / (decrease) on the defined benefit obligation of $2.2 million and $1.8 million respectively. The above
sensitivity analyses are based on a change in discount rate and rate of compensation while holding all other assumptions constant.
In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated.
The employer contributions expected to be paid for the year 2018
amount approximately to $3.5 million.
The methods and types of assumptions used in preparing the sensitivity
analysis did not change compared to the previous period.
(ii)
|
|
Other liabilities – current
|
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Payroll and social security payable
|
|
|
141,886
|
|
|
|
125,991
|
|
Liabilities with related parties
|
|
|
51
|
|
|
|
135
|
|
Derivative financial instruments
|
|
|
39,799
|
|
|
|
42,635
|
|
Miscellaneous
|
|
|
15,768
|
|
|
|
15,126
|
|
|
|
|
197,504
|
|
|
|
183,887
|
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
22
|
|
Non-current allowances and provisions
|
Deducted from non-current receivables
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Values at the beginning of the year
|
|
|
(913
|
)
|
|
|
(1,112
|
)
|
Translation differences
|
|
|
106
|
|
|
|
199
|
|
Used
|
|
|
166
|
|
|
|
-
|
|
Values at the end of the year
|
|
|
(641
|
)
|
|
|
(913
|
)
|
Liabilities
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Values at the beginning of the year
|
|
|
63,257
|
|
|
|
61,421
|
|
Translation differences
|
|
|
366
|
|
|
|
3,296
|
|
Additional provisions
|
|
|
3,994
|
|
|
|
6,794
|
|
Reclassifications
|
|
|
(7,591
|
)
|
|
|
(1,932
|
)
|
Used
|
|
|
(23,588
|
)
|
|
|
(6,322
|
)
|
Values at the end of the year
|
|
|
36,438
|
|
|
|
63,257
|
|
23
|
|
Current allowances and provisions
|
Year ended December 31, 2017
|
|
Allowance for doubtful accounts - Trade receivables
|
|
|
Allowance for other doubtful accounts - Other receivables
|
|
|
Allowance for inventory obsolescence
|
|
|
|
|
|
|
|
|
|
|
|
Values at the beginning of the year
|
|
|
(85,724
|
)
|
|
|
(6,332
|
)
|
|
|
(240,242
|
)
|
Translation differences
|
|
|
(345
|
)
|
|
|
(220
|
)
|
|
|
(3,575
|
)
|
Reversals / (additional) allowances
|
|
|
5,421
|
|
|
|
(84
|
)
|
|
|
12,917
|
|
Used
|
|
|
2,263
|
|
|
|
381
|
|
|
|
14,832
|
|
At December 31, 2017
|
|
|
(78,385
|
)
|
|
|
(6,255
|
)
|
|
|
(216,068
|
)
|
Year ended December 31, 2016
|
|
Allowance for doubtful accounts - Trade receivables
|
|
|
Allowance for other doubtful accounts - Other receivables
|
|
|
Allowance for inventory obsolescence
|
|
|
|
|
|
|
|
|
|
|
|
Values at the beginning of the year
|
|
|
(101,480
|
)
|
|
|
(7,082
|
)
|
|
|
(229,200
|
)
|
Translation differences
|
|
|
(841
|
)
|
|
|
75
|
|
|
|
(2,715
|
)
|
Reversals / (additional) allowances
|
|
|
12,573
|
|
|
|
(432
|
)
|
|
|
(32,765
|
)
|
Transfer to held for sale
|
|
|
20
|
|
|
|
-
|
|
|
|
896
|
|
Used
|
|
|
4,004
|
|
|
|
1,107
|
|
|
|
23,542
|
|
At December 31, 2016
|
|
|
(85,724
|
)
|
|
|
(6,332
|
)
|
|
|
(240,242
|
)
|
Year ended December 31, 2017
|
|
Sales risks
|
|
|
Other claims and contingencies
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Values at the beginning of the year
|
|
|
13,885
|
|
|
|
8,871
|
|
|
|
22,756
|
|
Translation differences
|
|
|
247
|
|
|
|
227
|
|
|
|
474
|
|
Additional provisions
|
|
|
4,238
|
|
|
|
9,432
|
|
|
|
13,670
|
|
Reclassifications
|
|
|
-
|
|
|
|
7,591
|
|
|
|
7,591
|
|
Used
|
|
|
(6,974
|
)
|
|
|
(5,187
|
)
|
|
|
(12,161
|
)
|
At December 31, 2017
|
|
|
11,396
|
|
|
|
20,934
|
|
|
|
32,330
|
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
23
|
|
Current allowances and provisions (Cont.)
|
Year ended December 31, 2016
|
|
Sales risks
|
|
|
Other claims and contingencies
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Values at the beginning of the year
|
|
|
6,290
|
|
|
|
2,705
|
|
|
|
8,995
|
|
Translation differences
|
|
|
189
|
|
|
|
(86
|
)
|
|
|
103
|
|
Additional provisions
|
|
|
16,266
|
|
|
|
7,791
|
|
|
|
24,057
|
|
Reclassifications
|
|
|
(22
|
)
|
|
|
1,954
|
|
|
|
1,932
|
|
Used
|
|
|
(8,838
|
)
|
|
|
(3,493
|
)
|
|
|
(12,331
|
)
|
At December 31, 2016
|
|
|
13,885
|
|
|
|
8,871
|
|
|
|
22,756
|
|
24
|
|
Derivative financial instruments
|
Net fair values of derivative financial instruments
The net fair values of derivative financial instruments disclosed
within Other Receivables and Other Liabilities at the reporting date, in accordance with IAS 39, are:
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Foreign exchange derivatives contracts
|
|
|
8,230
|
|
|
|
2,759
|
|
Contracts with positive fair values
|
|
|
8,230
|
|
|
|
2,759
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange derivatives contracts
|
|
|
(39,799
|
)
|
|
|
(42,635
|
)
|
Contracts with negative fair values
|
|
|
(39,799
|
)
|
|
|
(42,635
|
)
|
Total
|
|
|
(31,569
|
)
|
|
|
(39,876
|
)
|
Foreign exchange derivative contracts and hedge
accounting
Tenaris applies hedge accounting to certain cash flow hedges of
highly probable forecast transactions. The net fair values of exchange rate derivatives and those derivatives that were designated
for hedge accounting as of December 2017 and 2016, were as follows:
|
|
|
|
|
|
|
Fair Value
|
|
|
Hedge Accounting Reserve
|
|
Purchase currency
|
|
Sell currency
|
|
Term
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
MXN
|
|
USD
|
|
|
2018
|
|
|
|
(20,447
|
)
|
|
|
(35,165
|
)
|
|
|
(534
|
)
|
|
|
9
|
|
USD
|
|
MXN
|
|
|
2018
|
|
|
|
490
|
|
|
|
694
|
|
|
|
-
|
|
|
|
(2,280
|
)
|
EUR
|
|
USD
|
|
|
2018
|
|
|
|
5,660
|
|
|
|
(360
|
)
|
|
|
1,881
|
|
|
|
-
|
|
USD
|
|
EUR
|
|
|
2018
|
|
|
|
(367
|
)
|
|
|
(33
|
)
|
|
|
-
|
|
|
|
(1,435
|
)
|
JPY
|
|
USD
|
|
|
2018
|
|
|
|
(101
|
)
|
|
|
(179
|
)
|
|
|
-
|
|
|
|
73
|
|
USD
|
|
KWD
|
|
|
2018
|
|
|
|
(630
|
)
|
|
|
(2,447
|
)
|
|
|
(520
|
)
|
|
|
(1,016
|
)
|
USD
|
|
ARS
|
|
|
2018
|
|
|
|
22
|
|
|
|
(748
|
)
|
|
|
-
|
|
|
|
-
|
|
ARS
|
|
USD
|
|
|
2018
|
|
|
|
(13,715
|
)
|
|
|
318
|
|
|
|
(1,067
|
)
|
|
|
(93
|
)
|
USD
|
|
BRL
|
|
|
2018
|
|
|
|
(17
|
)
|
|
|
(1,581
|
)
|
|
|
-
|
|
|
|
-
|
|
USD
|
|
CAD
|
|
|
2018
|
|
|
|
(2,072
|
)
|
|
|
(225
|
)
|
|
|
-
|
|
|
|
-
|
|
Others
|
|
|
|
|
|
|
|
|
(392
|
)
|
|
|
(150
|
)
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
|
|
|
|
|
|
(31,569
|
)
|
|
|
(39,876
|
)
|
|
|
(240
|
)
|
|
|
(4,742
|
)
|
Following is a summary of the hedge
reserve evolution:
|
|
Equity Reserve Dec-15
|
|
|
Movements 2016
|
|
|
Equity Reserve Dec-16
|
|
|
Movements 2017
|
|
|
Equity Reserve Dec-17
|
|
Foreign Exchange
|
|
|
2,783
|
|
|
|
(7,525
|
)
|
|
|
(4,742
|
)
|
|
|
4,502
|
|
|
|
(240
|
)
|
Total Cash flow Hedge
|
|
|
2,783
|
|
|
|
(7,525
|
)
|
|
|
(4,742
|
)
|
|
|
4,502
|
|
|
|
(240
|
)
|
Tenaris estimates that the cash flow hedge reserve at December 31,
2017 will be recycled to the Consolidated Income Statement during 2018.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
25
|
|
Contingencies, commitments and restrictions on the distribution of profits
|
Tenaris is from time to time subject to various claims, lawsuits
and other legal proceedings, including customer claims, in which third parties are seeking payment for alleged damages, reimbursement
for losses, or indemnity. Management with the assistance of legal counsel periodically reviews the status of each significant matter
and assesses potential financial exposure.
Some of these claims, lawsuits and other legal proceedings involve
highly complex issues, and often these issues are subject to substantial uncertainties and, therefore, the probability of loss
and an estimation of damages are difficult to ascertain. Accordingly, with respect to a large portion of such claims, lawsuits
and other legal proceedings, Tenaris is unable to make a reliable estimate of the expected financial effect that will result from
ultimate resolution of the proceeding. In those cases, Tenaris has not accrued a provision for the potential outcome of these cases.
If a potential loss from a claim, lawsuit or other proceeding is
considered probable and the amount can be reasonably estimated, a provision is recorded. Accruals for loss contingencies reflect
a reasonable estimate of the losses to be incurred based on information available to management as of the date of preparation of
the financial statements, and take into consideration litigation and settlement strategies. In a limited number of ongoing cases,
Tenaris was able to make a reliable estimate of the expected loss or range of probable loss and has accrued a provision for such
loss, but believes that publication of this information on a case-by-case basis would seriously prejudice Tenaris’s position
in the ongoing legal proceedings or in any related settlement discussions. Accordingly, in these cases, the Company has disclosed
information with respect to the nature of the contingency, but has not disclosed its estimate of the range of potential loss.
The Company believes that the aggregate provisions recorded for
potential losses in these consolidated financial statements (Notes 22 and 23) are adequate based upon currently available information.
However, if management’s estimates prove incorrect, current reserves could be inadequate and Tenaris could incur a charge
to earnings which could have a material adverse effect on Tenaris’s results of operations, financial condition, net worth
and cash flows.
Below is a summary description of Tenaris’s material legal
proceedings for the year ended December 31, 2017. In addition, Tenaris is subject to other legal proceedings, none of which is
believed to be material.
|
§
|
Tax assessment in Italy
|
Dalmine S.p.A. (“Dalmine”), an Italian subsidiary
of the Company, received on December 24, 2012, a tax assessment from the Italian tax authorities related to allegedly omitted withholding
tax on dividend payments made in 2007. The assessment, which was for an estimated amount of EUR298 million (approximately $357
million), comprising principal, interest and penalties, was appealed with the first-instance tax court in Milan. In February 2014,
the first-instance tax court issued its decision on this tax assessment, partially reversing the assessment and lowering the claimed
amount to approximately EUR9 million (approximately $11 million), including principal, interest and penalties. On October 2, 2014,
the Italian tax authorities appealed against the second-instance tax court decision on the 2007 assessment. On June 12, 2015, the
second-instance tax court accepted Dalmine’s defense arguments and rejected the appeal by the Italian tax authorities, thus
reversing the entire 2007 assessment and recognizing that the dividend payment was exempt from withholding tax. The Italian tax
authorities have appealed the second-instance tax court decision before the Supreme Court.
On December 24, 2013, Dalmine received a second tax assessment
from the Italian tax authorities, based on the same arguments as those in the first assessment, relating to allegedly omitted withholding
tax on dividend payments made in 2008 – the last such distribution made by Dalmine. Dalmine appealed the assessment with
the first-instance tax court in Milan. On January 27, 2016, the first-instance tax court rejected Dalmine’s appeal. This
first-instance ruling, which held that Dalmine is required to pay an amount of EUR226 million (approximately $271 million), including
principal, interest and penalties, contradicts the first and second-instance tax court rulings in connection with the 2007 assessment.
Dalmine obtained the suspension of the interim payment that would have been due, based on the first-instance decision, through
the filing with the tax authorities of a bank guarantee of EUR175 million (approximately $210 million), and appealed the January
2016 ruling with the second-instance tax court.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
25
|
|
Contingencies, commitments and restrictions on the distribution of profits (Cont.)
|
(i)
|
|
Contingencies (Cont.)
|
|
§
|
Tax assessment in Italy (Cont.)
|
On December 21, 2017, Dalmine and the Italian tax authorities
entered into a settlement agreement in connection with all withholding tax claims on 2007 and 2008 dividend payments. Under the
settlement agreement, Dalmine paid to the Italian tax administration an aggregate amount of EUR42.9 million (approximately $51
million), net of EUR3.2 million (approximately $4 million) corresponding to the amount previously paid during the litigation proceeding.
As a result of the settlement, during the year Tenaris recorded an additional charge to results, in excess of amounts already provisioned,
of approximately $29 million.
In addition, the Italian tax authorities formally notified
Dalmine that, based on applicable laws and regulations, any future distributions from Dalmine out of past or future profits will
not be subject to Italian withholding tax.
|
§
|
CSN claims relating to the January 2012 acquisition of Usiminas shares
|
In 2013, Confab Industrial S.A. (“Confab”),
a Brazilian subsidiary of the Company was notified of a lawsuit filed in Brazil by Companhia Siderúrgica Nacional (CSN)
and various entities affiliated with CSN against Confab and the other entities that acquired a participation in Usiminas’
control group in January 2012.
The CSN lawsuit alleges that, under applicable Brazilian
laws and rules, the acquirers were required to launch a tag-along tender offer to all non-controlling holders of Usiminas’
ordinary shares for a price per share equal to 80% of the price per share paid in such acquisition, or BRL28.8, and seeks an order
to compel the acquirers to launch an offer at that price plus interest. If so ordered, the offer would need to be made to 182,609,851
ordinary shares of Usiminas not belonging to Usiminas’ control group, and Confab would have a 17.9% share in that offer.
On September 23, 2013, the first instance court dismissed
the CSN lawsuit, and on February 8, 2017, the court of appeals maintained the understanding of the first instance court. On March
6, 2017, CSN filed a motion for clarification against the decision of the Court of Appeals of São Paulo, which was rejected
on July 19, 2017. On August 18, 2017, CSN filed an appeal to the Superior Court of Justice seeking the review and reversal of the
decision issued by the Court of Appeals. The Superior Court of Justice is restricted to the analysis of alleged violations to federal
laws and cannot assess matters of fact. Accordingly, the Court of Appeals must decide whether CSN’s appeal meets the requirements
for submission to the Superior Court of Justice. If declared admissible, the Superior Court of Justice will also review admissibility,
and, if also declared admissible, will then render a decision on the merits.
Tenaris continues to believe that all of CSN’s
claims and allegations are groundless and without merit, as confirmed by several opinions of Brazilian legal counsel, two decisions
issued by the Brazilian securities regulator (CVM) in February 2012 and December 2016, and the first and second instance court
decisions referred to above. Accordingly, no provision was recorded in these Consolidated Financial Statements.
|
§
|
Veracel celulose accident litigation
|
On September 21, 2007, an accident occurred in the premises
of Veracel Celulose S.A. (“Veracel”) in connection with a rupture in one of the tanks used in an evaporation system
manufactured by Confab. The Veracel accident allegedly resulted in material damages to Veracel. Itaú Seguros S.A. (“Itaú”),
Veracel’s insurer at the time of the Veracel accident, initiated a lawsuit against Confab seeking reimbursement of damages
paid to Veracel in connection with the Veracel accident. Veracel initiated a second lawsuit against Confab seeking reimbursement
of the amount paid as insurance deductible with respect to the Veracel accident and other amounts not covered by insurance. Itaú
and Veracel claim that the Veracel accident was caused by failures and defects attributable to the evaporation system manufactured
by Confab. Confab believes that the Veracel accident was caused by the improper handling by Veracel’s personnel of the equipment
supplied by Confab in violation of Confab’s instructions. The two lawsuits have been consolidated, and are now being considered
by the 6th Civil Court of São Caetano do Sul; however, each lawsuit will be adjudicated through a separate ruling. Both
proceedings are currently at evidentiary stage.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
25
|
|
Contingencies, commitments and restrictions on the distribution of profits (Cont.)
|
(i)
|
|
Contingencies (Cont.)
|
|
§
|
Veracel celulose accident litigation (Cont.)
|
On March 10, 2016, a court-appointed expert issued its
report on certain technical matters concerning the Veracel accident. Based upon a technical opinion received from a third-party
expert, in August 2016, Confab filed its objections to the expert’s report. In November 2017, the court appointed expert
filed a second report reaffirming its opinion and stating that the opinion of Confab’s appointed expert was incorrect. The
parties have a 90-day period to file their observations and/or opinions concerning the expert’s second report. Approximately
54% of the amounts claimed by Itaú and Veracel is attributable to alleged lost profits, and the contract between Confab
and Veracel expressly provided that Confab would not be liable for damages arising from loss profits. As of December 31, 2017,
the estimated amount of Itaú’s claim was approximately BRL81.9 million (approximately $24.8 million), and the estimated
amount of Veracel’s claim is approximately BRL52 million (approximately $15.7 million), for an aggregate amount BRL133.9
million ($40.5 million). The final result of this claim depends largely on the court’s evaluation of technical matters arising
from the expert’s opinion and the objections presented by Confab.
The Company has learned that Italian and Swiss authorities
are investigating whether certain payments were made from accounts of entities presumably associated with affiliates of the Company
to accounts controlled by an individual allegedly related with officers of Petróleo Brasileiro S.A. and whether any such
payments were intended to benefit Confab. Any such payments could violate certain applicable laws, including the U.S. Foreign Corrupt
Practices Act. The Company had previously reviewed certain of these matters in connection with an investigation by the Brazilian
authorities related to “Operation Lava Jato” and the Audit Committee of the Company’s Board of Directors has
engaged external counsel in connection with a review of the alleged payments and related matters. In addition, the Company has
voluntarily notified the U.S. Securities and Exchange Commission and the U.S. Department of Justice. The Company intends to share
the results of this review with the appropriate authorities, and to cooperate with any investigations that may be conducted by
such authorities. At this time, the Company cannot predict the outcome of these matters or estimate the range of potential loss
or extent of risk, if any, to the Company’s business that may result from resolution of these matters.
|
§
|
Petroamazonas penalties
|
On January 22, 2016, Petroamazonas (“PAM”),
an Ecuadorian state-owned oil company, imposed penalties to the Company’s Uruguayan subsidiary, Tenaris Global Services S.A.
(“TGS”), for its alleged failure to comply with delivery terms under a pipe supply agreement. The penalties amount
to approximately $ 22.5 million as of the date hereof. Tenaris believes, based on the advice of counsel, that PAM has no legal
basis to impose the penalties and that TGS has meritorious defenses against PAM. However, in light of the prevailing political
circumstances in Ecuador, the Company cannot predict the outcome of a claim against a state-owned company and it is not possible
to estimate the amount or range of loss in case of an unfavorable outcome.
|
§
|
Contractor claim for additional costs
|
Tenaris Bay City Inc. (“Tenaris Bay City”),
a U.S. subsidiary of the Company, has received claims from a contractor for alleged additional costs in the construction of a project
located in the Bay City area for a total amount in excess of $77 million. On June 30, 2017, the contractor filed a demand for arbitration
of these claims. An arbitral panel has been selected and a scheduling order issued. The parties are expected to submit statements
of claim in February and March of 2018. Final trial hearing on this matter is scheduled for February 2019. At this stage the Company
cannot predict the outcome of the claim or the amount or range of loss in case of an unfavorable outcome.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
25
|
|
Contingencies, commitments and restrictions on the distribution of profits (Cont.)
|
(i)
|
|
Contingencies (Cont.)
|
|
§
|
Investigation
concerning
currency exchange declarations.
|
Siderca S.A.I.C, an Argentine subsidiary of the Company
(“Siderca”), and some of its directors, employees, former directors and employees are subject to an administrative
criminal proceeding concerning alleged inaccurate information included in 15 currency exchange declarations related to the trading
of foreign currency between August and October 2008 in connection with exports of goods for a total amount of $268 million. The
case is now under consideration of a criminal court. Although theoretically this proceeding may give rise to the application of
fines in an amount up to ten times the value of the involved operations, Tenaris believes that it has meritorious defenses and
that it is unlikely that the ultimate resolution of this matter will result in a material obligation.
|
§
|
Claim for differences on gas supply prices
|
On July 7, 2016, Siderca was notified of a claim initiated
by an Argentine state-owned company for an amount of $25.4 million, allegedly owed as a result in differences in the price paid
for gas supplied to Siderca during three months in 2013. Tenaris believes, based on the advice of counsel, that it has meritorious
defenses against a substantial part of this claim, although Siderca may be required to pay part of the claimed amount.
|
§
|
Tax assessment in Mexico
|
In August 2017, Tubos de Acero de México S.A (“Tamsa”)
and Servicios Generales Tenaris Tamsa S.A (“Segeta”), two Mexican subsidiaries of the Company, were informed that the
Mexican tax authorities had determined that the tax deductions associated with purchases of scrap made by the companies during
2013, amounting to MXN1,800 million (approximately $91.2 million) in the aggregate, failed to comply with applicable requirements
and, accordingly, should be rejected. Tamsa and Segeta filed their respective responses and complaints against the determination,
and provided additional information evidencing compliance with applicable requirements for the tax deductions that are being challenged.
No final decision has yet been issued on this matter. Based on the opinion of legal counsel, Tenaris believes that it is unlikely
that the ultimate resolution of this tax assessment will result in a material obligation.
(ii)
|
|
Commitments and other purchase orders
|
Set forth is a description of Tenaris’s material outstanding
purchase commitments:
|
§
|
A Tenaris company entered into a contract with the supplier Voest Alpine Grobblech Gmb to which
it committed to purchase carbon steel for a total amount of approximately $137 million to use for manufacturing pipes related
to the Zhor gas field project.
|
|
§
|
A Tenaris company entered into a contract with Transportadora de Gas del Norte S.A.
for the service of natural gas transportation to the facilities of Siderca S.A.I.C., an Argentine subsidiary of Tenaris. As of
December 31, 2017, the aggregate commitment to take or pay the committed volumes for a 10-year term totalled approximately $77.5
million.
|
|
§
|
A Tenaris company entered into a contract with Praxair S.A. for the service of oxygen and nitrogen
supply. As of December 31, 2017, the aggregate commitment to take or pay the committed volumes for a 14-year term totalled approximately
$43.9 million.
|
|
§
|
Several Tenaris companies entered into a contract with Graftech for the supply of graphite electrodes.
As of December 31, 2017, the aggregate commitment to take or pay the committed volumes totalled approximately $78.3 million.
|
|
§
|
A Tenaris company entered into a 25-year contract (effective as of December 1, 2016,
through December 1, 2041) with Techgen for the supply of 197 MW (which represents 22% of Techgen’s capacity). Monthly payments
are determined on the basis of capacity charges, operation costs, back-up power charges, and transmission charges. As of the seventh
contract year (as long as Techgen’s existing or replacing bank facility has been repaid in full), the Tenaris company has
the right to suspend or early terminate the contract if the rate payable under the agreement is higher than the rate charged by
the
Comisión Federal de Electricidad
(“CFE”) or its successors. The Tenaris company may instruct Techgen
to sell to any affiliate, to CFE, or to any other third party all or any part of unused contracted energy under the agreement
and the Tenaris company will benefit from the proceeds of such sale.
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
25
|
|
Contingencies, commitments and restrictions on the distribution of profits (Cont.)
|
(iii)
|
|
Restrictions to the distribution of profits and payment
of dividends
|
As of December 31, 2017, equity as defined under Luxembourg law
and regulations consisted of:
(all amounts in thousands of U.S. dollars)
|
|
|
|
Share capital
|
|
|
1,180,537
|
|
Legal reserve
|
|
|
118,054
|
|
Share premium
|
|
|
609,733
|
|
Retained earnings including net income for the year ended December 31, 2017
|
|
|
16,956,761
|
|
Total equity in accordance with Luxembourg law
|
|
|
18,865,085
|
|
At least 5% of the Company’s net income per year, as calculated
in accordance with Luxembourg law and regulations, must be allocated to the creation of a legal reserve equivalent to 10% of the
Company’s share capital. As of December 31, 2017, this reserve is fully allocated and additional allocations to the reserve
are not required under Luxembourg law. Dividends may not be paid out of the legal reserve.
The Company may pay dividends to the extent, among other conditions,
that it has distributable retained earnings calculated in accordance with Luxembourg law and regulations.
At December 31, 2017, distributable amount under Luxembourg law
totals $17.6 billion, as detailed below:
(all amounts in thousands of U.S. dollars)
|
|
|
|
Retained earnings at December 31, 2016 under Luxembourg law
|
|
|
17,493,013
|
|
Other income and expenses for the year ended December 31, 2017
|
|
|
(52,232
|
)
|
Dividends approved
|
|
|
(484,020
|
)
|
Retained earnings at December 31, 2017 under Luxembourg law
|
|
|
16,956,761
|
|
Share premium
|
|
|
609,733
|
|
Distributable amount at December 31, 2017 under Luxembourg law
|
|
|
17,566,494
|
|
26
|
|
Acquisition of subsidiaries
|
In September 2017, Tenaris acquired 100% of Garrett (a pipe services
and trucking business) through the payment of a price of $10.4 million.
If the acquisition had occurred on January 1, 2017, Tenaris’s unaudited pro forma net sales and net income from continuing
operations would not have changed materially.
|
|
|
|
|
Year ended December 31,
|
|
(i)
|
|
|
Changes in working capital
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
Inventories
|
|
|
(804,415
|
)
|
|
|
244,720
|
|
|
|
936,402
|
|
|
|
|
|
Receivables and prepayments and Current tax assets
|
|
|
(6,662
|
)
|
|
|
70,874
|
|
|
|
60,009
|
|
|
|
|
|
Trade receivables
|
|
|
(259,375
|
)
|
|
|
146,824
|
|
|
|
828,265
|
|
|
|
|
|
Other liabilities
|
|
|
4,226
|
|
|
|
(79,046
|
)
|
|
|
(123,904
|
)
|
|
|
|
|
Customer advances
|
|
|
17,039
|
|
|
|
(95,112
|
)
|
|
|
1,171
|
|
|
|
|
|
Trade payables
|
|
|
193,905
|
|
|
|
59,939
|
|
|
|
(327,958
|
)
|
|
|
|
|
|
|
|
(855,282
|
)
|
|
|
348,199
|
|
|
|
1,373,985
|
|
|
(ii)
|
|
|
Income tax accruals less payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax accrued
|
|
|
(17,136
|
)
|
|
|
41,441
|
|
|
|
244,505
|
|
|
|
|
|
Taxes paid
|
|
|
(176,853
|
)
|
|
|
(169,520
|
)
|
|
|
(335,585
|
)
|
|
|
|
|
|
|
|
(193,989
|
)
|
|
|
(128,079
|
)
|
|
|
(91,080
|
)
|
|
(iii)
|
|
|
Interest accruals less payments, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest accrued
|
|
|
(20,534
|
)
|
|
|
(43,872
|
)
|
|
|
(11,517
|
)
|
|
|
|
|
Interest received
|
|
|
50,001
|
|
|
|
60,163
|
|
|
|
56,835
|
|
|
|
|
|
Interest paid
|
|
|
(17,917
|
)
|
|
|
(18,858
|
)
|
|
|
(18,696
|
)
|
|
|
|
|
|
|
|
11,550
|
|
|
|
(2,567
|
)
|
|
|
26,622
|
|
|
(iv)
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at banks, liquidity funds and short - term investments
|
|
|
330,221
|
|
|
|
399,900
|
|
|
|
286,547
|
|
|
|
|
|
Bank overdrafts
|
|
|
(131
|
)
|
|
|
(1,320
|
)
|
|
|
(349
|
)
|
|
|
|
|
|
|
|
330,090
|
|
|
|
398,580
|
|
|
|
286,198
|
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
28
|
|
Net assets of disposal group classified as held for sale
|
On December 15, 2016, Tenaris entered into an agreement with Nucor
Corporation (NC) pursuant to which it has sold to NC the steel electric conduit business in North America, known as Republic Conduit
for an amount of $328 million (net of transaction costs). The sale was completed on January 19, 2017, with effect from January
20, 2017. The result of this transaction was an after-tax gain of $89.7 million, calculated as the net proceeds of the sale less
the book value of net assets held for sale, the corresponding tax effect and related expenses.
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Income from discontinued operations
|
|
|
1,848
|
|
|
|
41,411
|
|
After tax gain on the sale of Conduit
|
|
|
89,694
|
|
|
|
-
|
|
Net Income for discontinued operations
|
|
|
91,542
|
|
|
|
41,411
|
|
Details of Conduit sale
Cash received
|
|
|
331,295
|
|
Transaction and other costs
|
|
|
(3,663
|
)
|
Carrying amount of net assets sold
|
|
|
(137,814
|
)
|
Gain on sale before income tax
|
|
|
189,817
|
|
Income tax expense on gain
|
|
|
(100,123
|
)
|
Gain on sale after income tax
|
|
|
89,694
|
|
The financial performances presented are relative to the 19 days
of January 2017 and for the years ended December 31, 2016 and 2015.
Analysis of the result of discontinued operations:
(all amounts in thousands of US dollars, unless otherwise stated)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Net sales
|
|
|
11,899
|
|
|
|
234,911
|
|
|
|
197,630
|
|
Cost of sales
|
|
|
(7,403
|
)
|
|
|
(136,587
|
)
|
|
|
(137,318
|
)
|
Gross profit
|
|
|
4,496
|
|
|
|
98,324
|
|
|
|
60,312
|
|
Selling, general and administrative expenses
|
|
|
(2,041
|
)
|
|
|
(32,238
|
)
|
|
|
(30,678
|
)
|
Other operating income & expenses
|
|
|
(1
|
)
|
|
|
(248
|
)
|
|
|
(1
|
)
|
Operating income
|
|
|
2,454
|
|
|
|
65,838
|
|
|
|
29,633
|
|
Finance Income (expenses), net
|
|
|
(9
|
)
|
|
|
(88
|
)
|
|
|
(382
|
)
|
Income before income tax
|
|
|
2,445
|
|
|
|
65,750
|
|
|
|
29,251
|
|
Income tax
|
|
|
(597
|
)
|
|
|
(24,339
|
)
|
|
|
(10,121
|
)
|
Net income
|
|
|
1,848
|
|
|
|
41,411
|
|
|
|
19,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares (thousands)
|
|
|
1,180,537
|
|
|
|
1,180,537
|
|
|
|
1,180,537
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share (U.S. dollars per share)
|
|
|
0.00
|
|
|
|
0.04
|
|
|
|
0.02
|
|
Basic and diluted earnings per ADS (U.S. dollars per ADS)
|
|
|
0.00
|
|
|
|
0.07
|
|
|
|
0.03
|
|
Summarized cash flow information is as follows
:
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Cash at the beginning
|
|
|
18,820
|
|
|
|
15,343
|
|
|
|
13,848
|
|
Cash at the end
|
|
|
206
|
|
|
|
18,820
|
|
|
|
15,343
|
|
(Decrease) Increase in cash
|
|
|
(18,614
|
)
|
|
|
3,477
|
|
|
|
1,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Used in) provided by operating activities
|
|
|
(3,046
|
)
|
|
|
24,535
|
|
|
|
42,701
|
|
Provided by (used in) investing activities
|
|
|
32
|
|
|
|
(1,058
|
)
|
|
|
(1,206
|
)
|
Used in financing activities
|
|
|
(15,600
|
)
|
|
|
(20,000
|
)
|
|
|
(40,000
|
)
|
These amounts were estimated only for disclosure purposes, as cash
flows from discontinued operations were not managed separately from other cash flows.
The following table shows the current and non-current assets and
liabilities of disposal group as at 31 December 2016, and the carrying amounts of assets and liabilities as at the date of sale.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
28 Net
assets of disposal group classified as held for sale (Cont.)
Current and non-current assets and liabilities of disposal group
ASSETS
|
|
At January 19, 2017
|
|
|
At December 31, 2016
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
41,438
|
|
|
|
|
|
|
|
41,470
|
|
|
|
|
|
Intangible assets, net (*)
|
|
|
45,894
|
|
|
|
87,332
|
|
|
|
45,894
|
|
|
|
87,364
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
|
29,349
|
|
|
|
|
|
|
|
29,819
|
|
|
|
|
|
Receivables and prepayments, net
|
|
|
1,157
|
|
|
|
|
|
|
|
451
|
|
|
|
|
|
Trade receivables, net
|
|
|
38,620
|
|
|
|
|
|
|
|
33,620
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
206
|
|
|
|
69,332
|
|
|
|
163
|
|
|
|
64,053
|
|
Total assets of disposal group classified as held for sale
|
|
|
|
|
|
|
156,664
|
|
|
|
|
|
|
|
151,417
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
5,294
|
|
|
|
|
|
|
|
4,696
|
|
|
|
|
|
Other liabilities
|
|
|
-
|
|
|
|
5,294
|
|
|
|
680
|
|
|
|
5,376
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current tax liabilities
|
|
|
65
|
|
|
|
|
|
|
|
4,100
|
|
|
|
|
|
Other liabilities
|
|
|
2,913
|
|
|
|
|
|
|
|
1,668
|
|
|
|
|
|
Trade payables
|
|
|
10,578
|
|
|
|
13,556
|
|
|
|
6,950
|
|
|
|
12,718
|
|
Total liabilities of disposal group classified as held for sale
|
|
|
|
|
|
|
18,850
|
|
|
|
|
|
|
|
18,094
|
|
(*) Includes
$45.8 million of goodwill
29
|
|
Related party transactions
|
As of December 31, 2017:
|
§
|
San Faustin S.A., a Luxembourg société anonyme (“San Faustin”), owned
713,605,187 shares in the Company, representing 60.45% of the Company’s capital and voting rights.
|
|
§
|
San Faustin owned all of its shares in the Company through its wholly-owned subsidiary Techint
Holdings S.à r.l., a Luxembourg société à responsabilité limitée (“Techint”),
who is the holder of record of the above-mentioned Tenaris shares.
|
|
§
|
Rocca & Partners Stichting Administratiekantoor Aandelen San Faustin, a Dutch private foundation
(Stichting) (“RP STAK”) held voting shares in San Faustin sufficient in number to control San Faustin.
|
|
§
|
No person or group of persons controls RP STAK.
|
Based on the information most recently available to the Company, Tenaris’s directors
and senior management as a group owned 0.08% of the Company’s outstanding shares.
Transactions and balances disclosed as with “non-consolidated
parties” are those with companies over which Tenaris exerts significant influence or joint control in accordance with IFRS,
but does not have control. All other transactions and balances with related parties which are not non-consolidated parties and
which are not consolidated are disclosed as “Other”. The following transactions were carried out with related parties:
(all amounts in thousands of U.S. dollars)
|
|
Year ended December 31,
|
|
|
2017
|
|
2016
|
|
2015
|
(i) Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Sales of goods and services
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of goods to non-consolidated parties
|
|
|
32,362
|
|
|
|
21,174
|
|
|
|
24,019
|
|
Sales of goods to other related parties
|
|
|
94,624
|
|
|
|
32,613
|
|
|
|
87,663
|
|
Sales of services to non-consolidated parties
|
|
|
11,637
|
|
|
|
9,542
|
|
|
|
10,154
|
|
Sales of services to other related parties
|
|
|
3,751
|
|
|
|
2,948
|
|
|
|
4,010
|
|
|
|
|
142,374
|
|
|
|
66,277
|
|
|
|
125,846
|
|
(b) Purchases of goods and services
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of goods to non-consolidated parties
|
|
|
234,361
|
|
|
|
67,048
|
|
|
|
260,280
|
|
Purchases of goods to other related parties
|
|
|
17,711
|
|
|
|
20,150
|
|
|
|
35,153
|
|
Purchases of services to non-consolidated parties
|
|
|
12,077
|
|
|
|
11,528
|
|
|
|
16,153
|
|
Purchases of services to other related parties
|
|
|
50,794
|
|
|
|
53,530
|
|
|
|
78,805
|
|
|
|
|
314,943
|
|
|
|
152,256
|
|
|
|
390,391
|
|
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
29
|
|
Related party transactions (Cont.)
|
(all amounts in thousands of U.S. dollars)
|
|
At December 31,
|
|
|
2017
|
|
2016
|
(ii) Period-end balances
|
|
|
|
|
|
|
|
|
(a) Arising from sales / purchases of goods / services
|
|
|
|
|
|
|
|
|
Receivables from non-consolidated parties
|
|
|
117,853
|
|
|
|
117,187
|
|
Receivables from other related parties
|
|
|
50,815
|
|
|
|
13,357
|
|
Payables to non-consolidated parties
|
|
|
(49,354
|
)
|
|
|
(21,314
|
)
|
Payables to other related parties
|
|
|
(14,475
|
)
|
|
|
(12,708
|
)
|
|
|
|
104,839
|
|
|
|
96,522
|
|
Directors’ and senior
management compensation
During the years ended December 31, 2017, 2016 and 2015, the cash
compensation of Directors and Senior managers amounted to $45.8 million, $38.6 million and $28.8 million respectively. These amounts
include cash benefits paid to certain senior managers in connection with the vesting of pre-existing retirement plans. In addition,
Directors and Senior managers received 484, 500 and 540 thousand units for a total amount of $4.7 million, $4.8 million and $5.4
million respectively in connection with the Employee retention and long term incentive program mentioned in Note O
Employee
benefits –Other long term benefits
.
30
|
|
Principal subsidiaries
|
The following is a list of Tenaris’s principal subsidiaries
and its direct and indirect percentage of ownership of each controlled company at December 31, 2017.
Company
|
Country of Incorporation
|
Main activity
|
Percentage of ownership at December 31, (*)
|
|
|
|
2017
|
2016
|
2015
|
ALGOMA TUBES INC.
|
Canada
|
Manufacturing of seamless steel pipes
|
100%
|
100%
|
100%
|
CONFAB INDUSTRIAL S.A. and subsidiaries
|
Brazil
|
Manufacturing of welded steel pipes and capital goods
|
100%
|
100%
|
100%
|
DALMINE S.p.A.
|
Italy
|
Manufacturing of seamless steel pipes
|
100%
|
100%
|
99%
|
HYDRIL COMPANY and subsidiaries (except detailed) (a)
|
USA
|
Manufacture and marketing of premium connections
|
100%
|
100%
|
100%
|
MAVERICK TUBE CORPORATION and subsidiaries
|
USA
|
Manufacturing of welded steel pipes
|
100%
|
100%
|
100%
|
NKKTUBES
|
Japan
|
Manufacturing of seamless steel pipes
|
51%
|
51%
|
51%
|
P.T. SEAMLESS PIPE INDONESIA JAYA
|
Indonesia
|
Manufacturing of seamless steel products
|
89%
|
77%
|
77%
|
PRUDENTIAL STEEL LTD.
|
Canada
|
Manufacturing of welded steel pipes
|
100%
|
100%
|
100%
|
S.C. SILCOTUB S.A.
|
Romania
|
Manufacturing of seamless steel pipes
|
100%
|
100%
|
100%
|
SIAT SOCIEDAD ANONIMA
|
Argentina
|
Manufacturing of welded and seamless steel pipes
|
100%
|
100%
|
100%
|
SIDERCA SOCIEDAD ANONIMA INDUSTRIAL Y COMERCIAL and subsidiaries
|
Argentina
|
Manufacturing of seamless steel pipes
|
100%
|
100%
|
100%
|
TALTA - TRADING E MARKETING SOCIEDADE UNIPESSOAL LDA.
|
Portugal
|
Holding Company
|
100%
|
100%
|
100%
|
TENARIS BAY CITY, INC.
|
USA
|
Manufacturing of seamless steel pipes
|
100%
|
100%
|
100%
|
TENARIS FINANCIAL SERVICES S.A.
|
Uruguay
|
Financial company
|
100%
|
100%
|
100%
|
TENARIS GLOBAL SERVICES (CANADA) INC.
|
Canada
|
Marketing of steel products
|
100%
|
100%
|
100%
|
TENARIS GLOBAL SERVICES (U.S.A.) CORPORATION
|
USA
|
Marketing of steel products
|
100%
|
100%
|
100%
|
TENARIS GLOBAL SERVICES (UK) LTD
|
United Kingdom
|
Holding company and marketing of steel products
|
100%
|
100%
|
100%
|
TENARIS GLOBAL SERVICES S.A. and subsidiaries (except detailed) (b)
|
Uruguay
|
Holding company and marketing of steel products
|
100%
|
100%
|
100%
|
TENARIS INVESTMENTS S.àr.l.
|
Luxembourg
|
Holding company
|
100%
|
100%
|
100%
|
TENARIS INVESTMENTS SWITZERLAND AG and subsidiaries
|
Switzerland
|
Holding company
|
100%
|
100%
|
100%
|
TENARIS CONNECTIONS BV
|
Netherlands
|
Development, management and licensing of intellectual property
|
100%
|
100%
|
100%
|
TENARIS TUBOCARIBE LTDA.
|
Colombia
|
Manufacturing of welded and seamless steel pipes
|
100%
|
100%
|
100%
|
TUBOS DE ACERO DE MEXICO, S.A.
|
Mexico
|
Manufacturing of seamless steel pipes
|
100%
|
100%
|
100%
|
(*) All percentages rounded.
(a) Tenaris Investments S.a.r.l. holds 100% of Hydril's subsidiaries shares except for
Technical Drilling & Production Services Nigeria. Ltd where it holds 80% for 2017, 2016 and 2015.
(b) Tenaris holds 97,5% of Tenaris Supply Chain S.A, 60% of Gepnaris S.A. and 40% of
Tubular Technical Services and Pipe Coaters, and 49% of Amaja Tubular Services Limited.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
31
|
|
Nationalization of Venezuelan Subsidiaries
|
In May 2009, within the framework of Decree Law 6058, Venezuela’s
President announced the nationalization of, among other companies, the Company's majority-owned subsidiaries TAVSA - Tubos de Acero
de Venezuela S.A. (“Tavsa”) and, Matesi Materiales Siderúrgicos S.A (“Matesi”), and Complejo Siderúrgico
de Guayana, C.A (“Comsigua”), in which the Company has a non-controlling interest (collectively, the “Venezuelan
Companies”). Tenaris and its wholly-owned subsidiary, Talta - Trading e Marketing Sociedad Unipessoal Lda (“Talta”),
initiated arbitration proceedings against Venezuela before the ICSID in Washington D.C. in connection with these nationalizations.
Matesi
On January 29, 2016, the tribunal released its award on the arbitration
proceeding concerning the nationalization of Matesi. The award upheld Tenaris’s and Talta’s claim that Venezuela had
expropriated their investments in Matesi in violation of Venezuelan law as well as the bilateral investment treaties entered into
by Venezuela with the Belgium-Luxembourg Economic Union and Portugal. The award granted compensation in the amount of $87.3 million
for the breaches and ordered Venezuela to pay an additional amount of $85.5 million in pre-award interest, aggregating to a total
award of $172.8 million, payable in full and net of any applicable Venezuelan tax, duty or charge. The tribunal granted Venezuela
a grace period of six months from the date of the award to make payment in full of the amount due without incurring post-award
interest, and resolved that if no, or no full, payment is made by then, post-award interest will apply at the rate of 9% per annum.
As of December 31, 2017, post-award interest amounted to $31.9 million.
On March 14, 2016, Venezuela requested the rectification of the
award pursuant to article 49(2) of the ICSID Convention and ICSID Arbitration Rule 49. The tribunal denied Venezuela’s request
on June 24, 2016, ordering Venezuela to reimburse Tenaris and Talta for their costs. On September 21, 2016, Venezuela submitted
a request for annulment of the award as well as the stay of enforcement of the award in accordance with the ICSID Convention and
Arbitration Rules, and the ad hoc committee that will hear Venezuela’s request was constituted on December 27, 2016. On March
24, 2017, the ad hoc committee rendered its decision to lift the stay of enforcement of the award. The ad hoc committee has not
reserved its right to reopen that decision and no appeal against such decision is provided under ICSID’s Arbitration Rules.
The parties exchanged two rounds of written submissions on Venezuela’s
request for annulment. Following the resignation of one of the ad hoc committee members, the committee was reconstituted on November
3, 2017, and the final hearing on Venezuela’s annulment request was rescheduled for March 22-23, 2018. Following the hearing,
the ad hoc committee will deliberate and issue a decision on Venezuela’s annulment application. While there is no deadline
by which the ad hoc committee must render its decision, it is presently expected that the ad hoc committee will render a decision
between June and September 2018.
Tavsa and Comsigua
On December 12, 2016, the tribunal issued its award upholding Tenaris’s
and Talta’s claim that Venezuela had expropriated their investments in Tavsa and Comsigua in violation of the bilateral investment
treaties entered into by Venezuela with the Belgium-Luxembourg Economic Union and Portugal. The award granted compensation in the
amount of $137 million and ordered Venezuela to reimburse Tenaris and Talta $3.3 million in legal fees and ICSID administrative
costs. In addition, Venezuela was ordered to pay interest from April 30, 2008 until the day of effective payment at a rate equivalent
to LIBOR + 4% per annum, which as of December 31, 2017 amounted to $88 million.
On April 11, 2017, Venezuela submitted a request for annulment of
the award as well as the stay of enforcement of the award in accordance with the ICSID Convention and Arbitration Rules. Venezuela’s
annulment request was registered on April 14, 2017. The ad hoc committee that will hear Venezuela’s request was constituted
on October 17, 2017. On October 19, 2017, Tenaris and Talta filed an opposition to Venezuela’s request to continue the stay
of enforcement of the award, which was followed by the exchange of additional written submissions between the parties. The ad hoc
committee has extended the provisional stay of enforcement of the award until it rules on Venezuela’s request. A hearing
on Venezuela’s request to continue the stay of enforcement of the award was held on February 1, 2018, and will be followed
by a decision from the ad hoc committee. The final hearing for Venezuela’s annulment request is scheduled for August 27-28,
2018. Following the hearing, the ad hoc committee will deliberate and issue a decision on Venezuela’s annulment application.
While there is no deadline by which the ad hoc committee must render its decision, it is presently expected that the ad hoc committee
will render a decision between November 2018 and February 2019.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
31
|
|
Nationalization of Venezuelan Subsidiaries (Cont.)
|
Based on the facts and circumstances described above and following
the guidance set forth by IAS 27R, the Company ceased consolidating the results of operations and cash flows of the Venezuelan
Companies as from June 30, 2009, and classified its investments in the Venezuelan Companies as financial assets based on the definitions
contained in paragraphs 11(c)(i) and 13 of IAS 32.
The Company classified its interests in the Venezuelan Companies
as available-for-sale investments since management believes they do not fulfil the requirements for classification within any of
the remaining categories provided by IAS 39 and such classification is the most appropriate accounting treatment applicable to
non-voluntary dispositions of assets.
Tenaris or its
subsidiaries have net receivables with the Venezuelan Companies as of December 31, 2017, for a total amount of approximately $27
million.
The Company records its interest in the Venezuelan Companies at
its carrying amount at June 30, 2009, and not at fair value, following the guidance set forth by paragraphs 46(c), AG80 and AG81
of IAS 39.
32
|
|
Fees paid to the Company's principal accountant
|
Total fees accrued for professional services rendered by PwC Network
firms to Tenaris S.A. and its subsidiaries are detailed as follows:
(all amounts in thousands of U.S. dollars)
|
|
Year ended December 31,
|
|
|
2017
|
|
2016
|
|
2015
|
Audit fees
|
|
|
3,995
|
|
|
|
3,588
|
|
|
|
4,372
|
|
Audit-related fees
|
|
|
88
|
|
|
|
64
|
|
|
|
78
|
|
Tax fees
|
|
|
23
|
|
|
|
14
|
|
|
|
25
|
|
All other fees
|
|
|
30
|
|
|
|
3
|
|
|
|
15
|
|
Total
|
|
|
4,136
|
|
|
|
3,669
|
|
|
|
4,490
|
|
Agreement regarding governance of Usiminas
On February 8, 2018, the Company’s affiliate Ternium announced
that its subsidiary Ternium Investments S.à r.l. had entered into a binding and immediately effective agreement (the “Agreement”)
with Nippon Steel & Sumitomo Metal Corporation (“NSSMC”), establishing certain new governance rules for Usiminas
as well as certain undertakings for the settlement of legal disputes. The new governance rules for Usiminas include, among others,
an alternation mechanism for the nomination of each of the CEO and the Chairman of the Usiminas board of directors, as well as
a new mechanism for the nomination of other members of Usiminas’ executive board. In addition, the Agreement incorporates
an exit mechanism.
Under the Agreement, the right to nominate the CEO and the Chairman
will alternate between Ternium and NSSMC at a 4-year interval, comprising two consecutive 2-year terms. For the initial four years,
Ternium will be entitled to nominate the CEO and NSSMC will be entitled to nominate the Chairman. Initially, Ternium and NSSMC
intend to nominate Sergio Leite as Usiminas’ CEO and Ruy Hirschheimer as Usiminas’ Chairman of the Board, respectively.
The executive board will be composed of six members, including the CEO and five Vice-Presidents, with Ternium and NSSMC nominating
three members each. The Agreement includes an exit mechanism consisting of a buy-and-sell procedure, exercisable at any time during
the term of the existing Usiminas shareholders' agreement after the fourth-and-a-half-year anniversary from the coming election
of Usiminas’ executive board in May 2018. Such buy-and-sell procedure would allow either Ternium or NSSMC to purchase all
or a majority of the Usiminas shares held by the other party.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015
33
|
|
Subsequent event (Cont.)
|
Agreement regarding governance of Usiminas (Cont.)
The Company’s subsidiary Confab Industrial, together with
Ternium Investments S.à r.l. and its subsidiaries Siderar S.A.I.C. and Prosid Investments, is a party to the T/T Group within
the Usiminas controlling group. Pursuant to the Agreement, the T/T Group members, including Confab, will use their reasonable best
efforts to negotiate and execute an amended and restated Usiminas’ shareholders’ agreement together with the other
minority shareholders of the control group, Previdência Usiminas, Metal One Corporation and Mitsubishi Corporation do Brasil
S.A., having the same termination date as the existing Usiminas shareholders’ agreement. If any non-affiliated controlling
group shareholder for any reason does not enter into the new shareholders agreement on or before April 10, 2018, the T/T Group
members, including Confab, will enter into a separate Usiminas’ shareholders’ agreement only among themselves and their
affiliates that are shareholders of Usiminas, which will operate as an upper-level agreement in respect of the existing shareholders
agreement and will more fully reflect and implement the new governance rules as between them and their affiliates.
Annual Dividend Proposal
On February 21, 2018 the Company’s Board of Directors proposed,
for the approval of the Annual General Shareholders' meeting to be held on May 2, 2018, the payment of an annual dividend of $0.41
per share ($0.82 per ADS), or approximately $484 million, which includes the interim dividend of $0.13 per share ($0.26 per ADS)
or approximately $153 million, paid on November 22, 2017. If the annual dividend is approved by the shareholders, a dividend of
$0.28 per share ($0.56 per ADS), or approximately $331 million will be paid on May 23, 2018, with an ex-dividend date of May 21,
2018. These Consolidated Financial Statements do not reflect this dividend payable.
|
Edgardo Carlos
|
|
|
Chief Financial Officer
|
|
-58-