Washington, D.C. 20549
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. Half-year report 2018-Interim management report.
SIGNATURE
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.
Date: August 2, 2018.
Tenaris, S.A.
By:
/s/ Cecilia Bilesio
Cecilia Bilesio
Corporate Secretary
TENARIS S.A.
HALF-YEAR REPORT 2018
Tenaris S.A. Half-year report 2018-Interim management report
|
TABLE OF CONTENTS
INTERIM MANAGEMENT REPORT
|
3
|
COMPANY OVERVIEW
|
4
|
PRINCIPAL RISKS AND UNCERTAINTIES
|
5
|
BUSINESS OVERVIEW
|
7
|
RELATED PARTY TRANSACTIONS
|
11
|
MANAGEMENT CERTIFICATION
|
12
|
FINANCIAL INFORMATION
|
13
|
CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
|
13
|
EXHIBIT
|
34
|
INVESTOR INFORMATION
|
35
|
Tenaris S.A. Half-year report 2018-Interim management report
|
I
NTERIM
M
ANAGEMENT
R
EPORT
CERTAIN DEFINED TERMS
Unless otherwise specified or if the context so requires:
|
·
|
References in this half-year report to “the Company” are exclusively to Tenaris S.A.,
a Luxembourg public limited liability company (
société anonyme
).
|
|
·
|
References in this half-year report to “Tenaris”, “we”, “us”
or “our” are to Tenaris S.A. and its consolidated subsidiaries.
|
|
·
|
References in this half-year report to “San Faustin” are to San Faustin S.A., a Luxembourg
public limited liability company (
société anonyme
) and the Company’s controlling shareholder.
|
|
·
|
“Shares” refers to ordinary shares, par value $1.00, of the Company.
|
|
·
|
“ADSs” refers to the American Depositary Shares, which are evidenced by American Depositary
Receipts, and represent two Shares each.
|
|
·
|
“OCTG” refers to oil country tubular goods.
|
|
·
|
“tons” refers to metric tons; one metric ton is equal to 1,000 kilograms, 2,204.62
pounds, or 1.102 U.S. (short) tons.
|
|
·
|
“billion” refers to one thousand million, or 1,000,000,000.
|
|
·
|
“U.S. dollars”, “US$”, “USD” or “$” each refers
to the United States dollar.
|
PURPOSE
This half-year report for the six-month period ended June 30, 2018 has been prepared
in compliance with Article 4 of the Luxembourg Transparency Law of 11 January 2008, and should be read in conjunction with the
annual report for the year ended December 31, 2017 (including the financial statements included therein) and the unaudited consolidated
condensed interim financial statements included in this half-year report.
PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION
Accounting Principles
We prepare our consolidated financial statements in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”) and in conformity
with IFRS as adopted by the European Union (“EU”).
We publish consolidated financial statements expressed in U.S. dollars. The unaudited
consolidated condensed interim financial statements included in this half-year report have been prepared in accordance with IAS
34, “Interim Financial Reporting”. These unaudited consolidated condensed interim financial statements should be read
in conjunction with the audited consolidated financial statements for the year ended December 31, 2017, which have been prepared
in accordance with IFRS. See Note 2 “Accounting Policies and Basis of Presentation” to our unaudited consolidated condensed
interim financial statements included in this half-year report.
The unaudited consolidated condensed interim financial statements included in this half-year
report have been reviewed by PricewaterhouseCoopers Société coopérative,
Cabinet de révision agréé
,
for purposes of complying with the requirements of the different jurisdictions where the Company is publicly listed.
Whenever necessary, certain comparative amounts have been reclassified to conform to
changes in presentation in the current period.
Rounding
Certain monetary amounts, percentages and other figures included in this half-year report
have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation
of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated
may not be the arithmetic aggregation of the percentages that precede them.
Tenaris S.A. Half-year report 2018-Interim management report
|
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This half-year report and any other oral or written statements made by us to the public
may contain “forward-looking statements”. Forward looking statements are based on management’s current views
and assumptions and involve known and unknown risks that could cause actual results, performance or events to differ materially
from those expressed or implied by those statements.
We use words such as “aim”, “will likely result”, “will
continue”, “contemplate”, “seek to”, “future”, “objective”,
“goal”, “should”, “will pursue”, “anticipate”,
“estimate”, “expect”, “project”, “intend”, “plan”, “believe”
and words and terms of similar substance to identify forward-looking statements, but they are not the only way we identify such
statements. All forward-looking statements are management’s present expectations of future events and are subject to a number
of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
These factors include the risks related to our business discussed under “Principal Risks and Uncertainties”, among
them, the following:
|
·
|
our ability to implement our business strategy or to grow through acquisitions, joint ventures and other investments;
|
|
|
|
|
·
|
the competitive environment in our business and our industry;
|
|
|
|
|
·
|
our ability to price our products and services in accordance with our strategy;
|
|
|
|
|
·
|
our ability to absorb cost increases and to secure supplies of essential raw materials and energy;
|
|
|
|
|
·
|
our ability to adjust fixed and semi-fixed costs to fluctuations in product demand;
|
|
|
|
|
·
|
trends in the levels of investment in oil and gas exploration and drilling worldwide;
|
|
|
|
|
·
|
changes to applicable laws and regulations, including the imposition of tariffs or quotas or other trade barriers;
and
|
|
|
|
|
·
|
general macroeconomic and political conditions and developments in the countries in which we operate or distribute pipes.
|
By their nature, certain disclosures relating to these and other risks are only estimates
and could be materially different from what actually occurs in the future. As a result, actual future gains or losses that may
affect our financial condition and results of operations could differ materially from those that have been estimated. You should
not place undue reliance on the forward-looking statements, which speak only as of the date of this half-year report. Except as
required by law, we are not under any obligation, and expressly disclaim any obligation to, update or alter any forward-looking
statements, whether as a result of new information, future events or otherwise.
COMPANY OVERVIEW
We are a leading global manufacturer and supplier of steel pipe products and related
services for the world’s energy industry and for other industrial applications. Our customers include most of the world’s
leading oil and gas companies as well as engineering companies engaged in constructing oil and gas gathering, transportation, processing
and power generation facilities. Our principal products include casing, tubing, line pipe, and mechanical and structural pipes.
Over the last two decades, we have expanded our business globally through a series of
strategic investments. We now operate an integrated worldwide network of steel pipe manufacturing, research, finishing and service
facilities with industrial operations in the Americas, Europe, Asia and Africa and a direct presence in most major oil and gas
markets.
Our mission is to deliver value to our customers through product development, manufacturing
excellence, and supply chain management. We seek to minimize risk for our customers and help them reduce costs, increase flexibility
and improve time-to-market. Our employees around the world are committed to continuous improvement by sharing knowledge across
a single global organization.
For more information on the Company, including its competitive strengths, business segments
and products see our annual report for the year ended December 31, 2017, and for a discussion and analysis of our financial condition
and results of operations see “Business overview - Operating and Financial Review and Prospects” in this half-year
report.
Tenaris S.A. Half-year report 2018-Interim management report
|
PRINCIPAL RISKS AND UNCERTAINTIES
We face certain risks associated to our business and the industry in which we operate.
We are a global steel pipe manufacturer with a strong focus on manufacturing products and related services for the oil and gas
industry. Demand for our products depends primarily on the level of exploration, development and production activities of oil and
gas companies which is affected by current and expected future prices of oil and natural gas. Several factors, such as the supply
and demand for oil and gas, and political and global economic conditions, affect, and may continue to affect, these prices. Furthermore,
climate change legislation or regulations could curtail demand for fossil fuels and therefore demand for our products and services
could be reduced. When oil and gas prices fall, oil and gas companies are generally expected to hold or reduce purchases of additional
steel pipe products. Performance may be further affected by changes in governmental policies, the impact of credit restrictions
on our customers’ ability to perform their payment obligations with us, and any adverse economic, political or social developments
in our major markets. Furthermore, competition in the global market for steel pipe products may cause us to lose market share and
hurt our sales and profitability. In addition, there is an increased risk that unfairly-traded steel pipe imports in markets in
which Tenaris produces and sells its products may affect Tenaris’s market share, deteriorate the pricing environment and
hurt sales and profitability. Limitations on our ability to protect our intellectual property rights, including our trade secrets,
could cause a loss in revenue and any competitive advantage we hold. Furthermore, cyberattacks could have a material adverse impact
on our business and results of operation. Profitability may also be hurt if increases in the cost of raw materials, energy and
other costs and limitations or disruptions to the supply of raw materials and energy, resulting in higher costs of production which
cannot be offset by higher selling prices or if the limited availability of such resources forces us to curtail production. Disruptions
to our manufacturing processes could adversely affect our operations, customer service levels and financial results. Low levels
of capacity utilization could also affect our results of operations and financial conditions. A recession in the developed countries,
a cooling of emerging market economies or an extended period of below-trend growth in the economies that are major consumers of
steel pipe products would likely result in reduced demand of our products, adversely affecting our revenues, profitability and
financial condition.
We have significant operations in various countries, including Argentina, Brazil, Canada,
Colombia, Indonesia, Italy, Japan, Mexico, Nigeria, Romania, Saudi Arabia and the United States, and we sell our products and services
throughout the world. Therefore, like other companies with worldwide operations, our business and operations have been, and could
in the future be, affected from time to time to varying degrees by political, economic and social developments and changes in,
laws and regulations. These developments and changes may include, among others, nationalization, expropriations or forced divestiture
of assets; restrictions on production, imports and exports, interruptions in the supply of essential energy inputs; restrictions
on the exchange or transfer of currency, repatriation of capital, or payment of dividends or other contractual obligations; inflation;
devaluation; war or other international conflicts; civil unrest and local security concerns, including high incidences of crime
and violence involving drug trafficking organizations that threaten the safe operation of our facilities and operations; direct
and indirect price controls; tax increases and changes in the interpretation, application or enforcement of tax laws and other
retroactive tax claims or challenges; changes in laws, norms and regulations; cancellation of contract rights; and delays or denials
of governmental approvals. As a global company, a portion of our business is carried out in currencies other than the U.S. dollar,
which is the Company’s functional and presentation currency. As a result, we are exposed to foreign exchange rate risk, which
could adversely affect our financial position and results of operations. In addition, we may be subject to regulatory risks associated
with our import and export activities.
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”). Between August 2011 and July 2012, Tenaris and its wholly-owned subsidiary Talta - Trading e Marketing Sociedade
Unipessoal Lda (“Talta”) initiated two arbitration proceedings against Venezuela before the ICSID in Washington D.C.,
seeking adequate and effective compensation for the expropriation of their investments in the Venezuelan Companies. On January
29, 2016, the tribunal in the first arbitration proceeding released its award upholding 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, which as of June 30, 2018, amounted to $41 million.
On December 12, 2016, the tribunal in the second arbitration proceeding 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 June 30, 2018, amounted to $94.6 million.
Tenaris S.A. Half-year report 2018-Interim management report
|
Venezuela submitted requests for annulment of the awards in accordance with the ICSID
Convention and Arbitration Rules. Annulment requests are pending final resolution by the ad-hoc committees.
On June 8, 2018, Tenaris and Talta filed two actions in federal court in the District
of Columbia to recognize and enforce the awards. Tenaris and Talta are in the process of effecting service on Venezuela in accordance
with US law.
For further information on the nationalization of the Venezuelan subsidiaries, see note
31 “Nationalization of Venezuelan Subsidiaries” to our audited consolidated financial statements for the year ended
December 31, 2017 and note 17 “Nationalization of Venezuelan Subsidiaries” to our unaudited consolidated condensed
interim financial statements as of June 30, 2018, included in this half-year report.
A key element of our business strategy is to develop and offer higher value-added products
and services and to continuously identify and pursue growth-enhancing strategic opportunities. Even if we successfully implement
our business strategy, it may not yield the expected results. We must necessarily base any assessment of potential acquisitions,
joint ventures and investments, on assumptions with respect to operations, profitability and other matters that may subsequently
prove to be incorrect. Failure to successfully implement our strategy, or to integrate future acquisitions and strategic investments,
or to sell acquired assets or business unrelated to our business under favorable terms and conditions, could affect our ability
to grow, our competitive position and our sales and profitability.
We may be required to record a significant charge to earnings if we must reassess our
goodwill or other assets as a result of changes in assumptions underlying the carrying value of certain assets, particularly as
a consequence of deteriorating market conditions. At June 30, 2018 we had $1,288 million in goodwill corresponding mainly to the
acquisition of Hydril, in 2007 and Maverick, in 2006. If our management was to determine in the future that the goodwill or other
assets were impaired, particularly as a consequence of deteriorating market conditions, we would be required to recognize a non-cash
charge to reduce the value of these assets, which would adversely affect our results of operations.
Potential environmental, product liability and other claims arising from the inherent
risks associated with the products we sell and the services we render, including well failures, line pipe leaks, blowouts, bursts
and fires, that could result in death, personal injury, property damage, environmental pollution or loss of production could create
significant liabilities for us. Environmental laws and regulations may, in some cases, impose strict liability (even joint and
several strict liability) rendering a person liable for damages to natural resources or threats to public health and safety without
regard to negligence or fault. In addition, we are subject to a wide range of local, provincial and national laws, regulations,
permit requirements and decrees relating to the protection of human health and the environment, including laws and regulations
relating to hazardous materials and radioactive materials and environmental protection governing air emissions, water discharges
and waste management. Laws and regulations protecting the environment have become increasingly complex and more stringent and expensive
to implement in recent years. The cost of complying with such regulations is not always clearly known or determinable since some
of these laws have not yet been promulgated or are under revision. These costs, along with unforeseen environmental liabilities,
may increase our operating costs or negatively impact our financial condition and profitability.
We conduct business in certain countries known to experience governmental corruption.
Although we are committed to conducting business in a legal and ethical manner in compliance with local and international statutory
requirements and standards applicable to our business, there is a risk that our employees or representatives may take actions that
violate applicable laws and regulations that generally prohibit the making of improper payments to foreign government officials
for the purpose of obtaining or keeping business, including laws relating to the 1997 OECD Convention on Combating Bribery of Foreign
Public Officials in International Business Transactions such as the U.S. Foreign Corrupt Practices Act, or FCPA.
As a holding company, our ability to pay cash dividends and make other payments to us
depends on the results of operations and financial condition of our subsidiaries, which could be restricted by legal, contractual
or other limitations, including exchange controls or transfer restrictions, and other agreements and commitments of our subsidiaries.
The Company’s controlling shareholder may be able to take actions that do not reflect
the will or best interests of other shareholders.
Tenaris S.A. Half-year report 2018-Interim management report
|
BUSINESS OVERVIEW
Operating and Financial Review and Prospects
The following discussion and analysis should be read in conjunction with the audited
consolidated financial statements and the related notes included in our annual report for the year ended December 31, 2017, and
is based on, and should be read in conjunction with, the unaudited consolidated condensed interim financial statements for the
six-month period ended June 30, 2018, included in this half-year report.
Certain information contained in this discussion and analysis and presented elsewhere
in this half-year report, including information with respect to our plans and strategy for our business, includes forward-looking
statements that involve risks and uncertainties. See “Cautionary Statement Concerning Forward-Looking Statements” in
this half-year report. In evaluating this discussion and analysis, you should specifically consider the various risk factors identified
in “Principal Risks and Uncertainties”, other risk factors identified elsewhere in this half-year report and other
factors that could cause results to differ materially from those expressed in such forward-looking statements.
Market Background and Outlook
Shale drilling activity in the USA increased during the first half of the year. The rapid
increase in production of crude, liquids and associated natural gas in the Permian region is, however, leading to constraints in
pipeline takeaway capacity and wider commodity spreads, which are likely to dampen further growth in US drilling activity in the
coming months. In Canada, activity is stable as growth this year has also been affected by takeaway capacity constraints. In Latin
America, despite progress on the reform programs in Brazil and Mexico and interest in the Vaca Muerta shale play in Argentina,
drilling activity has been slow to pick up. In the rest of the world, however, higher oil prices and growing demand for natural
gas are leading to a gradual recovery in onshore drilling activity.
In the second half, we expect shipment volumes to be similar to those of the first half,
with higher shipments in North America and lower shipments for East Mediterranean pipeline projects, although these will include
a second major offshore pipeline for the Zohr project. Selling prices will show a further moderate increase to compensate for additional
costs from US Section 232 tariffs. In the third quarter, we expect EBITDA and operating income, considering seasonal effects, to
be close to that of the first two quarters before rising in the fourth quarter.
Although Section 232 tariffs are today being applied to imports of steel pipes into the
United States from most countries, any relevant change in the application of these tariffs could have an impact on our future results
and market positioning.
Results of Operations
Unaudited consolidated condensed interim income statement
(all amounts in thousands of U.S. dollars, unless otherwise stated)
|
|
Six-month period ended June 30,
|
|
|
2018
|
|
2017
|
Continuing operations
|
|
|
|
%
|
|
|
|
%
|
Net sales
|
|
|
3,654,719
|
|
|
|
100.0
|
|
|
|
2,396,664
|
|
|
|
100.0
|
|
Cost of sales
|
|
|
(2,532,063
|
)
|
|
|
(69.3
|
)
|
|
|
(1,689,585
|
)
|
|
|
(70.5
|
)
|
Gross profit
|
|
|
1,122,656
|
|
|
|
30.7
|
|
|
|
707,079
|
|
|
|
29.5
|
|
Selling, general and administrative expenses
|
|
|
(687,208
|
)
|
|
|
(18.8
|
)
|
|
|
(621,563
|
)
|
|
|
(25.9
|
)
|
Other operating income (expense), net
|
|
|
(815
|
)
|
|
|
-
|
|
|
|
1,988
|
|
|
|
0.1
|
|
Operating income
|
|
|
434,633
|
|
|
|
11.9
|
|
|
|
87,504
|
|
|
|
3.7
|
|
Finance Income
|
|
|
18,982
|
|
|
|
0.5
|
|
|
|
23,986
|
|
|
|
1.0
|
|
Finance Cost
|
|
|
(20,596
|
)
|
|
|
(0.6
|
)
|
|
|
(11,958
|
)
|
|
|
(0.5
|
)
|
Other financial results
|
|
|
32,317
|
|
|
|
0.9
|
|
|
|
(32,082
|
)
|
|
|
(1.3
|
)
|
Income before equity in earnings of non-consolidated companies and income tax
|
|
|
465,336
|
|
|
|
12.7
|
|
|
|
67,450
|
|
|
|
2.8
|
|
Equity in earnings of non-consolidated companies
|
|
|
86,946
|
|
|
|
2.4
|
|
|
|
65,401
|
|
|
|
2.7
|
|
Income before income tax
|
|
|
552,282
|
|
|
|
15.1
|
|
|
|
132,851
|
|
|
|
5.5
|
|
Income tax
|
|
|
(150,576
|
)
|
|
|
(4.1
|
)
|
|
|
54,602
|
|
|
|
2.3
|
|
Income for continuing operations
|
|
|
401,706
|
|
|
|
11.0
|
|
|
|
187,453
|
|
|
|
7.8
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Result for discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
91,542
|
|
|
|
3.8
|
|
Income for the period
|
|
|
401,706
|
|
|
|
11.0
|
|
|
|
278,995
|
|
|
|
11.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
|
403,311
|
|
|
|
11.0
|
|
|
|
279,651
|
|
|
|
11.7
|
|
Non-controlling interests
|
|
|
(1,605
|
)
|
|
|
-
|
|
|
|
(656
|
)
|
|
|
-
|
|
|
|
|
401,706
|
|
|
|
|
|
|
|
278,995
|
|
|
|
|
|
Tenaris S.A. Half-year report 2018-Interim management report
|
Selected consolidated financial position data
(all figures are in Thousands)
|
|
June 30,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Current assets
|
|
|
5,521,319
|
|
|
|
5,381,154
|
|
Property, plant and equipment, net
|
|
|
6,139,845
|
|
|
|
6,229,143
|
|
Other non-current assets
|
|
|
2,829,034
|
|
|
|
2,787,921
|
|
Total assets
|
|
|
14,490,198
|
|
|
|
14,398,218
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
2,208,128
|
|
|
|
2,070,899
|
|
Non-current borrowings
|
|
|
31,826
|
|
|
|
34,645
|
|
Deferred tax liabilities
|
|
|
472,965
|
|
|
|
457,970
|
|
Other non-current liabilities
|
|
|
250,565
|
|
|
|
253,734
|
|
Total liabilities
|
|
|
2,963,484
|
|
|
|
2,817,248
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves attributable to the owners of the parent
|
|
|
11,431,575
|
|
|
|
11,482,185
|
|
Non-controlling interests
|
|
|
95,139
|
|
|
|
98,785
|
|
Equity
|
|
|
11,526,714
|
|
|
|
11,580,970
|
|
Total liabilities and equity
|
|
|
14,490,198
|
|
|
|
14,398,218
|
|
Number of shares outstanding
|
|
|
1,180,537
|
|
|
|
1,180,537
|
|
Six-month period ended June 30, 2018, compared to six-month period ended June 30,
2017
Summary
Our sales in the first half of 2018 increased 52% compared to the first half of 2017.
While the increase was mainly due to strong increase in demand in the USA and Canada, sales increased also in the rest of the regions.
EBITDA increased 80% to $717 million in the first half of 2018 compared to $399 million in the first half of 2017, following an
increase in sales and an improvement in the EBITDA margin, from 17% to 20%. Net income attributable to owners of the parent during
the first half of 2018 was $403 million or $0.68 per ADS, which compares with $280 million or $0.47 per ADS in the first half of
2017. The improvement in net income mainly reflects a better operating environment, where a 47% increase in shipments improved
the utilization of production capacity and therefore the absorption of fixed costs, a 4% increase in average selling prices, better
financial results and results from associated companies, partially offset by raw material cost increases and higher income tax.
Cash flow provided by operating activities amounted to $322 million during the first
half of 2018, net of an increase in working capital of $358 million. Following a dividend payment of $331 million in May 2018,
and capital expenditures of $196 million during the first half of 2018, we maintained a positive net cash position (i.e., cash,
other current and non-current investments less total borrowings) of $423 million at the end of June 2018.
The following table shows our net sales by business segment for the periods indicated
below:
Millions of U.S. dollars
|
|
For the six-month period ended June 30,
|
|
Increase /
|
|
|
2018
|
|
2017
|
|
Decrease
|
Tubes
|
|
|
3,452
|
|
|
|
94
|
%
|
|
|
2,260
|
|
|
|
94
|
%
|
|
|
53
|
%
|
Others
|
|
|
203
|
|
|
|
6
|
%
|
|
|
137
|
|
|
|
6
|
%
|
|
|
49
|
%
|
Total
|
|
|
3,655
|
|
|
|
100
|
%
|
|
|
2,397
|
|
|
|
100
|
%
|
|
|
52
|
%
|
Tenaris S.A. Half-year report 2018-Interim management report
|
Tubes
The following table indicates for our Tubes business segment, sales volumes of seamless
and welded pipes for the periods indicated below:
Thousands of tons
|
|
For the six-month period ended June 30,
|
|
Increase /
|
|
|
2018
|
|
2017
|
|
Decrease
|
Seamless
|
|
|
1,340
|
|
|
|
1,037
|
|
|
|
29
|
%
|
Welded
|
|
|
431
|
|
|
|
170
|
|
|
|
153
|
%
|
Total
|
|
|
1,771
|
|
|
|
1,207
|
|
|
|
47
|
%
|
The following table indicates, for our Tubes business segment, net sales by geographic
region, operating income and operating income as a percentage of net sales for the periods indicated below:
Millions of U.S. dollars
|
|
For the six-month period ended June 30,
|
|
Increase /
|
Net sales
|
|
2018
|
|
2017
|
|
Decrease
|
- North America
|
|
|
1,634
|
|
|
|
1,021
|
|
|
|
60
|
%
|
- South America
|
|
|
595
|
|
|
|
430
|
|
|
|
38
|
%
|
- Europe
|
|
|
331
|
|
|
|
247
|
|
|
|
34
|
%
|
- Middle East & Africa
|
|
|
755
|
|
|
|
461
|
|
|
|
64
|
%
|
- Asia Pacific
|
|
|
137
|
|
|
|
101
|
|
|
|
36
|
%
|
Total net sales
|
|
|
3,452
|
|
|
|
2,260
|
|
|
|
53
|
%
|
Operating income
|
|
|
391
|
|
|
|
76
|
|
|
|
411
|
%
|
Operating income (% of sales)
|
|
|
11.3
|
%
|
|
|
3.4
|
%
|
|
|
|
|
Net sales of tubular products and services
increased 53%
to $3,452 million in the first half of 2018, compared to $2,260 million in the first half of 2017, as a result of a 47% increase
in shipment and a 4% increase in average selling prices. The increase in sales came from all regions, mainly due to a strong increase
in demand in the USA and Canada. In the first half of 2018, the average number of active drilling rigs, or rig count grew 10% worldwide
compared to the first half of 2017. Rig count in the United States and Canada grew 17%, while in the rest of the world the rig
count grew 2% year on year.
Operating results from tubular products and services
increased
significantly, from $76 million in the first half of 2017, to $391 million in the first half of 2018. Results improved following
a 47% increase in shipment volumes, increasing sales and the utilization of production capacity and therefore the absorption of
fixed costs.
Others
The following table indicates, for our Others business segment, net sales, operating
income and operating income as a percentage of net sales for the periods indicated below:
Millions of U.S. dollars
|
|
For the six-month period ended June 30,
|
|
Increase /
|
|
|
2018
|
|
2017
|
|
Decrease
|
Net sales
|
|
|
203
|
|
|
|
137
|
|
|
|
49
|
%
|
Operating income
|
|
|
44
|
|
|
|
11
|
|
|
|
297
|
%
|
Operating income (% of sales)
|
|
|
21.6
|
%
|
|
|
8.1
|
%
|
|
|
|
|
Net sales of other products and services
increased 49% to $203 million in the
first half of 2018, compared to $137 million in the first half of 2017, mainly due to higher sales of energy related products,
i.e., sucker rods and coiled tubing and utility conduits for buildings.
Operating income from other products and services
increased
significantly, from $11 million in the first half of 2017 to $44 million in the first half of 2018, following the increase in sales
and an increase in operating margin from 8% to 22%.
Selling, general and administrative expenses, or SG&A,
amounted to $687 million
in the first half of 2018 and $622 million in the first half of 2017, representing 19% of sales in 2018 and 26% in 2017. Direct
selling expenses, like freights, increased due to higher shipment volumes but were partially offset by lower amortization of intangibles
following the full amortization of Hydril intangibles.
Tenaris S.A. Half-year report 2018-Interim management report
|
Financial results
amounted to a gain of $31 million in the first half of 2018,
compared to a loss of $20 million in the first half of 2017. The gain in the first half of 2018 corresponds mainly to an FX gain
of $28 million; $19 million related to the Argentine peso devaluation on Peso denominated financial, trade, social and fiscal payables
at Argentine subsidiaries which functional currency is the U.S. dollar, $14 million related to the Euro depreciation on Euro denominated
intercompany liabilities (of which $13 million are offset in the currency translation reserve in equity), partially compensated
by a loss of $6 million due to the devaluation of the Canadian dollar.
Equity in earnings of non-consolidated companies
generated a gain of $87 million
in the first half of 2018, compared to a gain of $65 million in the first half of 2017. These results are mainly derived from our
equity investment in Ternium (NYSE:TX).
Income tax
amounted to a charge of $151 million in the first half of 2018, compared
to a gain of $55 million in the first half of 2017. The increase in income tax charges reflects both the improvement in result
and the effect of the Mexican and Argentine peso devaluation on the tax base at our Mexican and Argentine subsidiaries which have
U.S. dollar as their functional currency
Liquidity and Capital Resources
The following table provides certain information related to our cash generation and
changes in our cash and cash equivalents position for the periods indicated below:
Millions of U.S. dollars
|
|
For the six-month period ended June 30,
|
|
|
2018
|
|
2017
|
Net cash provided by (used in) operating activities
|
|
|
322
|
|
|
|
(7
|
)
|
Net cash provided by investing activities
|
|
|
235
|
|
|
|
221
|
|
Net cash (used in) financing activities
|
|
|
(453
|
)
|
|
|
(348
|
)
|
Increase (decrease) in cash and cash equivalents
|
|
|
104
|
|
|
|
(133
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the beginning of year
|
|
|
330
|
|
|
|
399
|
|
Effect of exchange rate changes
|
|
|
(7
|
)
|
|
|
5
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
104
|
|
|
|
(133
|
)
|
Cash and cash equivalents at period end (net of overdrafts)
|
|
|
427
|
|
|
|
271
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at period end (net of overdrafts)
|
|
|
427
|
|
|
|
271
|
|
Bank overdrafts
|
|
|
1
|
|
|
|
0
|
|
Other current investments
|
|
|
730
|
|
|
|
1,432
|
|
Non Current Investments
|
|
|
193
|
|
|
|
279
|
|
Borrowings
|
|
|
(840
|
)
|
|
|
(853
|
)
|
Derivatives hedging borrowings and investments
|
|
|
(88
|
)
|
|
|
39
|
|
Net cash
|
|
|
423
|
|
|
|
1,168
|
|
Net cash provided by operating activities during the first half of 2018 amounted to $322
million (net of an increase in working capital of $358 million, related to the increase in shipments and production), compared
to net cash used in operations of $7 million in the first half of 2017 (net of an increase in working capital of $292 million).
Capital expenditures amounted to $196 million in the first half of 2018, compared to
$294 million in the first half of 2017, declining following the start up of our greenfield seamless facility in Bay City, Texas
at the end of 2017. Free cash flow amounted to $126 million in the first half of 2018.
Following a dividend payment of $331 million in May 2018, our financial position at June
30, 2018, amounted to a net cash position (i.e., cash, other current and non-current investments less total borrowings) of $423
million.
Tenaris S.A. Half-year report 2018-Interim management report
|
OTHER SIGNIFICANT EVENTS OF THE PERIOD
Annual General Meeting of Shareholders
On May 2, 2018, the Company’s annual general shareholders’ meeting approved
all resolutions on its agenda.
Among other resolutions adopted at the meeting, the shareholders approved the consolidated
financial statements as of and for the year ended December 31, 2017, and the annual accounts as at December 31, 2017, and acknowledged
the related management and independent auditors' reports and certifications.
The meeting also approved the payment of a dividend for the year ended December 31, 2017,
of $0.41 per share (or $0.82 per ADS), or approximately $484 million, which includes the interim dividend of $0.13 per share (or
$0.26 per ADS), or US$ approximately 153 million, paid in November 2017. Tenaris paid the balance of the annual dividend in the
amount of $0.28 per share ($0.56 per ADS), or approximately $331 million in May 2018.
The annual general meeting resolved to (i) increase the number of members of the Board
of Directors to eleven; (ii) appoint Mr. Germán Curá and Ms. Mónica Tiuba to the Board of Directors, (iii)
re-appoint Mr. Roberto Bonatti, Mr. Carlos Condorelli, Mr. Roberto Monti, Mr. Gianfelice Mario Rocca, Mr. Paolo Rocca, Mr. Jaime
Serra Puche, Mr. Yves Speeckaert, Mr. Amadeo Vázquez y Vázquez and Mr. Guillermo Vogel to the Board of Directors;
each of the persons appointed and re-appointed, respectively, in (i) and (ii) above to hold office until the next annual general
meeting of shareholders that will be convened to decide on the Company’s 2018 annual accounts.
The board of directors subsequently confirmed and re-appointed Amadeo Vázquez
y Vázquez, Jaime Serra Puche and Roberto Monti as members of Tenaris’s audit committee and appointed Ms. Tiuba as
a new member of the audit committee, with Mr. Vázquez y Vázquez to continue as chairman. All four members of the
audit committee qualify as independent directors under the articles and applicable law.
The meeting appointed PricewaterhouseCoopers Société coopérative,
Cabinet de révision agréé
(member firm of PwC International Limited) as Tenaris’s independent
auditors for the fiscal year ending December 31, 2018.
RELATED PARTY TRANSACTIONS
Tenaris is a party to several related party transactions, which include, among others,
purchases and sales of goods (including steel pipes, flat steel products, steel bars, raw materials, gas and electricity) and services
(including engineering services and related services) from or to entities controlled by San Faustin or in which San Faustin holds
significant interests. Material related party transactions are subject to the review of the audit committee of the Company’s
board of directors and the requirements of the Company’s articles of association and Luxembourg law. For further detail on
Tenaris’s related party transactions, see Note 15 “
Related party transactions
” to our unaudited consolidated
condensed interim financial statements included in this half-year report.
Tenaris S.A. Half-year report 2018-Interim management report
|
MANAGEMENT CERTIFICATION
We confirm, to the best of our knowledge, that:
|
1.
|
the unaudited consolidated condensed interim financial statements prepared in conformity with International Financial Reporting
Standards included in this half year report, give a true and fair view of the assets, liabilities, financial position and profit
or loss of Tenaris S.A. and its consolidated subsidiaries, taken as a whole; and
|
|
2.
|
the interim management report included in this half year report, includes a fair review of the important events that have occurred
during the six-month period ended June 30, 2018, and their impact on the unaudited consolidated condensed interim financial statements
for such period, material related party transactions and a description of the principal risks and uncertainties they face.
|
/s/ Paolo Rocca
Chief Executive Officer
Paolo Rocca
August 1, 2018
/s/ Edgardo Carlos
Chief Financial Officer
Edgardo Carlos
August 1, 2018
Tenaris S.A. Half-year report 2018-Interim management report
|
F
INANCIAL
I
NFORMATION
CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2018
NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
1
|
General information
|
2
|
Accounting policies and basis of presentation
|
3
|
Segment information
|
4
|
Cost of sales
|
5
|
Selling, general and administrative expenses
|
6
|
Financial results
|
7
|
Dividend distribution
|
8
|
Property, plant and equipment, net
|
9
|
Intangible assets, net
|
10
|
Cash and cash equivalents and other investments
|
11
|
Derivative financial instruments
|
12
|
Contingencies, commitments and restrictions to the distribution of profits
|
13
|
Investments in non-consolidated companies
|
14
|
Discontinued operations
|
15
|
Related party transactions
|
16
|
Category of financial instruments and classification within the fair value hierarchy
|
17
|
Nationalization of Venezuelan Subsidiaries
|
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
(In the notes all amounts are shown in U.S. dollars, unless otherwise
stated)
Tenaris S.A. (the "Company") was established as a public
limited liability company (
société 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 Condensed Interim Financial Statements to "Tenaris" refer
to Tenaris S.A. and its consolidated subsidiaries. A list of the principal Company’s subsidiaries is included in Note 30
to the Company’s audited Consolidated Financial Statements for the year ended December 31, 2017.
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 Condensed Interim Financial Statements were approved
for issuance by the Company’s Board of Directors on August 1, 2018.
|
2
|
Accounting policies and basis of presentation
|
These Consolidated Condensed Interim Financial Statements have been
prepared in accordance with IAS 34, “Interim Financial Reporting”. The accounting policies used in the preparation
of these Consolidated Condensed Interim Financial Statements are consistent with those used in the audited Consolidated Financial
Statements for the year ended December 31, 2017 except for the adoption of new and amended standards as set out below. These Consolidated
Condensed Interim Financial Statements should be read in conjunction with the audited Consolidated Financial Statements for the
year ended December 31, 2017, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standard Board (“IASB”) and in conformity with IFRS as adopted by the European
Union (“EU”).
The preparation of Consolidated Condensed Interim 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 as of the balance sheet dates, and the
reported amounts of revenues and expenses for the reported periods. Actual results may differ from these estimates.
Material inter-company transactions, balances and unrealized gains
(losses) on transactions between Tenaris’s 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 inter-company transactions
are generated. These are included in the Consolidated Condensed Interim Income Statement under
Other financial results
.
There were no changes in valuation techniques during the period
and there have been no changes in any risk management policies since the year ended December 31, 2017.
Whenever necessary, certain comparative amounts have been reclassified
to conform to changes in presentation in the current period.
Accounting pronouncements applicable as from January 1, 2018
and relevant for Tenaris
IFRS 9, “Financial instruments”
Tenaris has adopted IFRS 9 “
Financial
instruments”
from 1 January 2018 which resulted in changes in accounting policies and adjustments to the amounts recognized
in the financial statements. In accordance with the transition provisions in IFRS 9, Tenaris has adopted the new rules using the
retrospective approach, meaning that the cumulative impact of the adoption was recognized in the opening retained earnings and
other reserves of the current period as of January 1, 2018 and that comparatives were not restated.
The new impairment model requires recognition of impairment provisions
based on expected credit losses rather than on incurred credit losses. The impact of this change was a decrease of $6.4 million
in the allowance for doubtful accounts.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
|
2
|
Accounting policies and basis of presentation (Cont.)
|
Accounting pronouncements applicable as from January 1, 2018
and relevant for Tenaris (Cont.)
IFRS 9, “Financial instruments” (Cont.)
The measurement category and the carrying amount of financial assets
and liabilities in accordance with IAS 39 and IFRS 9 at January 1, 2018 are compared as follows:
Financial Assets
|
|
FVPL
|
|
Held to
maturity
|
|
Amortized cost
(loans &
receivables 2017)
|
|
FVOCI
(Available for
sale 2017)
|
Closing balance December 31, 2017 - IAS 39
|
|
|
1,163,808
|
|
|
|
344,336
|
|
|
|
1,541,724
|
|
|
|
21,572
|
|
Reclassified bonds and other fixed income from HTM to FVOCI
|
|
|
-
|
|
|
|
(344,336
|
)
|
|
|
-
|
|
|
|
344,336
|
|
Reclassified fixed income from FVPL to amortized cost
|
|
|
(550,646
|
)
|
|
|
-
|
|
|
|
550,646
|
|
|
|
-
|
|
Reclassified bonds and other fixed income from FVPL to FVOCI
|
|
|
(153,702
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
153,702
|
|
Opening balance January 1, 2018 - IFRS 9
|
|
|
459,460
|
|
|
|
-
|
|
|
|
2,092,370
|
|
|
|
519,610
|
|
|
|
Effect on other reserves
|
|
Effect on retained
earnings
|
Opening balance January 1, 2018 - IAS 39
|
|
|
(320,569
|
)
|
|
|
10,718,853
|
|
Reclassify investments from HTM to FVOCI
|
|
|
3,126
|
|
|
|
-
|
|
Reclassify investments from FVPL to FVOCI
|
|
|
(352
|
)
|
|
|
352
|
|
Opening balance January 1, 2018 - IFRS 9
|
|
|
(317,795
|
)
|
|
|
10,719,205
|
|
Since January 1, 2018 the Company classifies its financial instruments
in the following measurement categories:
Amortized Cost: Assets that are held for collection of contractual
cash flows where those cash flows represent solely payments of principal and interest. Interest income from these financial assets
is included in finance income using the effective interest rate method.
Fair value through other comprehensive income (“FVOCI”):
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash
flows represent solely payments of principal and interest. Interest income from these financial assets is included in finance income
using the effective interest rate method. Unrealized gains or losses are recorded as a fair value adjustment in the consolidated
statement of comprehensive income and transferred to the consolidated income statement when the financial asset is sold. Exchange
gains and losses and impairments related to the financial assets are immediately recognized in the consolidated income statement.
Fair value through profit and loss (“FVPL”): Assets
that do not meet the criteria for amortized cost or FVOCI. Changes in fair value of financial instruments at FVPL are immediately
recognized in the consolidated income statement.
The classification depends on the Company’s business model
for managing the financial assets and contractual terms of the cash flows.
IFRS 15, “Revenue from contracts with customers”
The group has adopted IFRS 15 “Revenue from contracts with
customers” from January 1 2018, which resulted in changes in accounting policies and adjustments to the amounts recognized
in the financial statements. The policy sets out the requirements in accounting for revenue arising from contracts with customers
and is based on the principle that revenue is recognized when control of a good or service is transferred to the customer. In accordance
with the transition provisions in IFRS 15, the group has adopted the new rules using the modified retrospective approach, meaning
that the cumulative impact of the adoption was recognized in retained earnings as of January 1, 2018 and that comparatives were
not restated.
The impact of the adoption as of January 1, 2018 on the aggregate
of revenues, cost of sales and selling expenses was a decrease of $ 0.7 million net.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
|
2
|
Accounting policies and basis of presentation (Cont.)
|
New and amended standards
not yet adopted and relevant for Tenaris
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.
This standard was endorsed by
the EU.
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.
None of the accounting pronouncements issued after December 31,
2017 and as of the date of these Consolidated Condensed Interim Financial Statements has a material effect on the Company’s
financial condition or result of operations.
3 Segment information
Reportable operating segment
(All amounts in millions of U.S. dollars)
Six-month period ended June 30, 2018
|
|
Tubes
|
|
Other
|
|
Continuing
operations
|
|
Discontinued
operations
|
IFRS - Net Sales
|
|
|
3,452
|
|
|
|
203
|
|
|
|
3,655
|
|
|
|
-
|
|
Management view - operating income
|
|
|
290
|
|
|
|
35
|
|
|
|
325
|
|
|
|
-
|
|
Difference in cost of sales
|
|
|
103
|
|
|
|
3
|
|
|
|
106
|
|
|
|
-
|
|
Direct cost and others
|
|
|
97
|
|
|
|
3
|
|
|
|
100
|
|
|
|
-
|
|
Absorption
|
|
|
6
|
|
|
|
-
|
|
|
|
6
|
|
|
|
-
|
|
Differences in depreciation and amortization
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
-
|
|
Differences in selling, general and administrative expenses
|
|
|
-
|
|
|
|
6
|
|
|
|
6
|
|
|
|
-
|
|
IFRS - operating income
|
|
|
391
|
|
|
|
44
|
|
|
|
435
|
|
|
|
-
|
|
Financial income (expense), net
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
-
|
|
Income before equity in earnings of non-consolidated companies and income tax
|
|
|
|
|
|
|
|
|
|
|
466
|
|
|
|
-
|
|
Equity in earnings of non-consolidated companies
|
|
|
|
|
|
|
|
|
|
|
87
|
|
|
|
-
|
|
Income before income tax
|
|
|
|
|
|
|
|
|
|
|
553
|
|
|
|
-
|
|
Capital expenditures
|
|
|
194
|
|
|
|
2
|
|
|
|
196
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
274
|
|
|
|
8
|
|
|
|
282
|
|
|
|
-
|
|
Six-month period ended June 30, 2017
|
|
Tubes
|
|
Other
|
|
Continuing
operations
|
|
Discontinued
operations
|
IFRS - Net Sales
|
|
|
2,260
|
|
|
|
137
|
|
|
|
2,397
|
|
|
|
12
|
|
Management view - operating income
|
|
|
(28
|
)
|
|
|
12
|
|
|
|
(16
|
)
|
|
|
3
|
|
Difference in cost of sales
|
|
|
92
|
|
|
|
(1
|
)
|
|
|
91
|
|
|
|
(1
|
)
|
Direct cost and others
|
|
|
67
|
|
|
|
(2
|
)
|
|
|
65
|
|
|
|
(1
|
)
|
Absorption
|
|
|
25
|
|
|
|
1
|
|
|
|
26
|
|
|
|
-
|
|
Differences in Depreciation and Amortization
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
-
|
|
Differences in Selling, general and administrative expenses
|
|
|
13
|
|
|
|
-
|
|
|
|
13
|
|
|
|
-
|
|
Differences in Other operating income (expenses), net
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
IFRS - operating income
|
|
|
76
|
|
|
|
11
|
|
|
|
87
|
|
|
|
2
|
|
Financial income (expense), net
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
-
|
|
Income before equity in earnings of non-consolidated companies and income tax
|
|
|
|
|
|
|
|
|
|
|
67
|
|
|
|
2
|
|
Equity in earnings of non-consolidated companies
|
|
|
|
|
|
|
|
|
|
|
65
|
|
|
|
-
|
|
Income before income tax
|
|
|
|
|
|
|
|
|
|
|
132
|
|
|
|
2
|
|
Capital expenditures
|
|
|
289
|
|
|
|
5
|
|
|
|
294
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
304
|
|
|
|
7
|
|
|
|
311
|
|
|
|
-
|
|
In the six-month period ended June 30, 2018 and 2017, 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 $26 and $25 million 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 Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
3 Segment information
(Cont.)
Geographical information
(all amounts in thousands of U.S. dollars)
|
|
North
America
|
|
South
America
|
|
Europe
|
|
Middle East
& Africa
|
|
Asia
Pacific
|
|
Total
continuing
operations
|
|
Total
discontinued
operations
|
Six-month period ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
1,690,341
|
|
|
|
679,178
|
|
|
|
380,838
|
|
|
|
763,002
|
|
|
|
141,360
|
|
|
|
3,654,719
|
|
|
|
-
|
|
Capital expenditures
|
|
|
110,708
|
|
|
|
40,049
|
|
|
|
41,613
|
|
|
|
808
|
|
|
|
2,553
|
|
|
|
195,731
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
166,903
|
|
|
|
55,277
|
|
|
|
44,077
|
|
|
|
5,217
|
|
|
|
10,729
|
|
|
|
282,203
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six-month period ended June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
1,061,010
|
|
|
|
505,220
|
|
|
|
257,230
|
|
|
|
469,841
|
|
|
|
103,363
|
|
|
|
2,396,664
|
|
|
|
11,899
|
|
Capital expenditures
|
|
|
238,140
|
|
|
|
32,445
|
|
|
|
16,005
|
|
|
|
5,188
|
|
|
|
1,883
|
|
|
|
293,661
|
|
|
|
145
|
|
Depreciation and amortization
|
|
|
179,057
|
|
|
|
62,745
|
|
|
|
51,574
|
|
|
|
6,204
|
|
|
|
11,486
|
|
|
|
311,066
|
|
|
|
-
|
|
Allocation of net sales to geographical information is based on
customer location. Allocation of depreciation and amortization is based on the geographical location of the underlying assets.
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; “South America” comprises principally Argentina, Brazil and Colombia; “Europe”
comprises principally Italy and Romania; “Middle East and Africa” comprises principally Egypt, Kazakhstan, Nigeria
and Saudi Arabia and; “Asia Pacific” comprises principally China, Japan, Indonesia and Thailand.
4 Cost of sales
|
|
Six-month period ended June 30,
|
(all amounts in thousands of U.S. dollars)
|
|
2018
|
|
2017
|
|
|
(Unaudited)
|
Inventories at the beginning of the period
|
|
|
2,368,304
|
|
|
|
1,563,889
|
|
|
|
|
|
|
|
|
|
|
Plus: Charges of the period
|
|
|
|
|
|
|
|
|
Raw materials, energy, consumables and other
|
|
|
1,686,567
|
|
|
|
1,329,052
|
|
Services and fees
|
|
|
143,862
|
|
|
|
115,251
|
|
Labor cost
|
|
|
439,051
|
|
|
|
361,198
|
|
Depreciation of property, plant and equipment
|
|
|
217,179
|
|
|
|
183,741
|
|
Amortization of intangible assets
|
|
|
4,770
|
|
|
|
11,503
|
|
Maintenance expenses
|
|
|
100,810
|
|
|
|
75,540
|
|
Allowance for obsolescence
|
|
|
14,921
|
|
|
|
(8,319
|
)
|
Taxes
|
|
|
16,497
|
|
|
|
8,924
|
|
Other
|
|
|
70,174
|
|
|
|
45,029
|
|
|
|
|
2,693,831
|
|
|
|
2,121,919
|
|
Less: Inventories at the end of the period
|
|
|
(2,530,072
|
)
|
|
|
(1,988,820
|
)
|
From discontinued operations
|
|
|
-
|
|
|
|
(7,403
|
)
|
|
|
|
2,532,063
|
|
|
|
1,689,585
|
|
5 Selling, general and administrative expenses
|
|
Six-month period ended June 30,
|
(all amounts in thousands of U.S. dollars)
|
|
2018
|
|
2017
|
|
|
(Unaudited)
|
Services and fees
|
|
|
64,458
|
|
|
|
69,476
|
|
Labor cost
|
|
|
239,563
|
|
|
|
221,689
|
|
Depreciation of property, plant and equipment
|
|
|
8,430
|
|
|
|
8,942
|
|
Amortization of intangible assets
|
|
|
51,824
|
|
|
|
106,880
|
|
Commissions, freight and other selling expenses
|
|
|
236,131
|
|
|
|
153,638
|
|
Provisions for contingencies
|
|
|
9,395
|
|
|
|
3,181
|
|
Allowances for doubtful accounts
|
|
|
(6,661
|
)
|
|
|
(4,738
|
)
|
Taxes
|
|
|
33,568
|
|
|
|
23,424
|
|
Other
|
|
|
50,500
|
|
|
|
41,112
|
|
|
|
|
687,208
|
|
|
|
623,604
|
|
From discontinued operations
|
|
|
-
|
|
|
|
(2,041
|
)
|
|
|
|
687,208
|
|
|
|
621,563
|
|
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
6 Financial results
(all amounts in thousands of U.S. dollars)
|
|
Six-month period ended June 30,
|
|
|
2018
|
|
2017
|
|
|
(Unaudited)
|
Interest Income
|
|
|
21,208
|
|
|
|
25,684
|
|
Net result on changes in FV of financial assets at FVTPL
|
|
|
(2,226
|
)
|
|
|
(1,698
|
)
|
Finance Income
|
|
|
18,982
|
|
|
|
23,986
|
|
Finance Cost
|
|
|
(20,596
|
)
|
|
|
(11,958
|
)
|
Net foreign exchange transactions results (*)
|
|
|
28,070
|
|
|
|
(33,057
|
)
|
Foreign exchange derivatives contracts results
|
|
|
4,891
|
|
|
|
(6,384
|
)
|
Other
|
|
|
(644
|
)
|
|
|
7,350
|
|
Other Financial results
|
|
|
32,317
|
|
|
|
(32,091
|
)
|
Net Financial results
|
|
|
30,703
|
|
|
|
(20,063
|
)
|
From discontinued operations
|
|
|
-
|
|
|
|
9
|
|
|
|
|
30,703
|
|
|
|
(20,054
|
)
|
(*)The six-month period ended June
2018 includes the positive impact from Euro depreciation against the U.S. dollar on Euro denominated intercompany liabilities
in subsidiaries with functional currency U.S. Dollar largely offset by a decrease in currency translation adjustment reserve from
an Italian subsidiary. Also includes the positive impact from Argentinian peso depreciation against the U.S. dollar on Peso denominated
financial, trade, social and fiscal payables at certain Argentinian subsidiaries which functional currency is the U.S. dollar.
The six-month period ended 2017 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
7 Dividend distribution
On May 2, 2018, 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 22, 2017 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 23, 2018. In the aggregate, the interim dividend paid in November 2017 and the balance paid in May 2018 amounted
to approximately $484.0 million.
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.
8 Property, plant and equipment, net
(all amounts in thousands of U.S. dollars)
|
|
2018
|
|
2017
|
|
|
(Unaudited)
|
Six-month period ended June 30,
|
|
|
|
|
Opening net book amount
|
|
|
6,229,143
|
|
|
|
6,001,939
|
|
Currency translation adjustment
|
|
|
(42,303
|
)
|
|
|
40,807
|
|
Additions (*)
|
|
|
177,583
|
|
|
|
275,690
|
|
Disposals
|
|
|
(1,908
|
)
|
|
|
(2,100
|
)
|
Transfers
|
|
|
2,939
|
|
|
|
689
|
|
Depreciation charge
|
|
|
(225,609
|
)
|
|
|
(192,683
|
)
|
At June 30,
|
|
|
6,139,845
|
|
|
|
6,124,342
|
|
(*) Mainly due to the progress in
the construction of the greenfield seamless facility in Bay City, Texas.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
9 Intangible assets,
net
(all amounts in thousands of U.S. dollars)
|
|
2018
|
|
2017
|
|
|
(Unaudited)
|
Six-month period ended June 30,
|
|
|
|
|
|
|
|
|
Opening net book amount
|
|
|
1,660,859
|
|
|
|
1,862,827
|
|
Currency translation adjustment
|
|
|
(4,631
|
)
|
|
|
562
|
|
Additions
|
|
|
18,148
|
|
|
|
17,971
|
|
Disposals
|
|
|
(800
|
)
|
|
|
(602
|
)
|
Transfers
|
|
|
(2,939
|
)
|
|
|
(689
|
)
|
Amortization charge
|
|
|
(56,594
|
)
|
|
|
(118,383
|
)
|
At June 30,
|
|
|
1,614,043
|
|
|
|
1,761,686
|
|
10 Cash and cash equivalents and other investments
(all amounts in thousands of U.S. dollars)
|
|
At June 30,
|
|
At December 31,
|
|
|
2018
|
|
2017
|
Cash and cash equivalents
|
|
(Unaudited)
|
|
|
Cash at banks
|
|
|
115,445
|
|
|
|
150,948
|
|
Liquidity funds
|
|
|
216,167
|
|
|
|
66,033
|
|
Short – term investments
|
|
|
96,348
|
|
|
|
113,240
|
|
|
|
|
427,960
|
|
|
|
330,221
|
|
|
|
|
|
|
|
|
|
|
Other investments - current
|
|
|
|
|
|
|
|
|
Bonds and other fixed Income
|
|
|
407,995
|
|
|
|
754,800
|
|
Fixed Income (time-deposit, zero coupon bonds, commercial papers)
|
|
|
322,245
|
|
|
|
437,406
|
|
Others
|
|
|
-
|
|
|
|
100
|
|
|
|
|
730,240
|
|
|
|
1,192,306
|
|
Other investments - non-current
|
|
|
|
|
|
|
|
|
Bonds and other fixed Income
|
|
|
172,605
|
|
|
|
123,498
|
|
Fixed Income (time-deposit, zero coupon bonds, commercial papers)
|
|
|
20,008
|
|
|
|
-
|
|
Others
|
|
|
4,545
|
|
|
|
4,837
|
|
|
|
|
197,158
|
|
|
|
128,335
|
|
11 Derivative financial instruments
(all amounts in thousands of U.S. dollars)
|
|
At June 30,
|
|
At December 31,
|
|
|
2018
|
|
2017
|
Assets
|
|
(Unaudited)
|
|
|
Derivatives hedging borrowings and investments
|
|
|
862
|
|
|
|
2,036
|
|
Other derivatives
|
|
|
1,622
|
|
|
|
6,195
|
|
|
|
|
2,484
|
|
|
|
8,231
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Derivatives hedging borrowings and investments
|
|
|
88,668
|
|
|
|
34,770
|
|
Other derivatives
|
|
|
2,947
|
|
|
|
5,029
|
|
|
|
|
91,615
|
|
|
|
39,799
|
|
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
12 Contingencies, commitments and restrictions
to the distribution of profits
Contingencies
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 Condensed Interim Financial Statements 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 which are outstanding as of the date of these Consolidated Condensed Interim Financial Statements. In addition, Tenaris
is subject to other legal proceedings, none of which is believed to be material.
|
§
|
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. On March 5, 2018, the court of appeals ruled that CSN’s appeal did not meet the
requirements for submission to the Superior Court of Justice and rejected the appeal. On May 8, 2018, CSN appealed against such
ruling. If CSN’s appeal is granted, the Superior Court of Justice will also review admissibility, and, if declared admissible,
will then render a decision on the merits. The Superior Court of Justice is restricted to the analysis of alleged violations to
federal laws and cannot assess matters of fact.
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.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
12 Contingencies, commitments and restrictions
to the distribution of profits (Cont.)
Contingencies (Cont.)
|
§
|
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. Evidentiary
stage for both proceedings has been closed but such decision has been appealed by Confab as explained below.
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. In
April and May 2018, the parties filed their observations and/or opinions concerning the expert’s second report. On April
17, 2018, the court closed the evidentiary stage, a decision that was appealed by Confab on May 16, 2018. Approximately 54% of
the amounts claimed by Itaú and Veracel are 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 June 30, 2018, the estimated amount
of Itaú’s claim was approximately BRL86.2 million (approximately $22.4 million), and the estimated amount of Veracel’s
claim is approximately BRL54.7 million (approximately $14.2 million), for an aggregate amount BRL140.9 million (approximately $36.6
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. On June 27, 2018, TGS initiated arbitration proceedings against PAM before
the Quito Chamber of Commerce Arbitration Center seeking reimbursement of the penalty amounts plus interest. Tenaris believes,
based on the advice of counsel, that PAM had 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.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
12 Contingencies, commitments and restrictions
to the distribution of profits (Cont.)
Contingencies (Cont.)
|
§
|
Contractor claim for additional costs
|
Tenaris Bay City Inc. (“Tenaris Bay City”),
a U.S. subsidiary of the Company, 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 $90 million. On June 30, 2017, the contractor filed a demand for arbitration
of these claims. An arbitral panel was selected and a scheduling order issued. The parties have already submitted statements of
claim and responses to the other party’s claim. The discovery process is currently underway. The 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.
|
§
|
Investigation concerning currency exchange declarations
|
Siderca S.A.I.C, an Argentine subsidiary of the Company
(“Siderca”), and some of its current and former directors and employees, were subject to an administrative criminal
proceeding before a criminal court 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 $268.8
million. On July 13, 2018, the criminal court acquitted all defendants, including Siderca.
|
§
|
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 of 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 certain purchases of scrap made by the companies
during 2013 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 challenged tax deductions. As of June 30, 2018, the estimated exposure under these proceedings, including principal, interest
and penalties, amounted to MXN4,117 million (approximately $207.3 million). No final decision has yet been issued on this matter.
Tenaris believes, based on the advice of counsel, that it is unlikely that the ultimate resolution of this tax assessment will
result in a material obligation.
Commitments and other purchase orders
Set forth is a description of Tenaris’s main outstanding commitments:
|
§
|
A Tenaris company entered into a contract with supplier Voest Alpine Grobblech Gmb pursuant to
which it committed to purchase carbon steel for a total amount of approximately $29.7 million to use for manufacturing pipes
related to the Zohr 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 June 30, 2018, the
aggregate commitment to take or pay the committed volumes for a 9-year term totalled approximately $47.4 million.
|
|
§
|
Several Tenaris companies entered into a contract with Praxair S.A. for the service of oxygen and
nitrogen supply. As of June 30, 2018, the aggregate commitment to take or pay the committed volumes for a 14-year term totalled
approximately $55.3 million.
|
|
§
|
Several Tenaris companies entered into a contract with Graftech for the supply of graphite electrodes.
As of June 30, 2018, the aggregate commitment to take or pay the committed volumes totalled approximately $66.3 million.
|
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
12 Contingencies, commitments and restrictions
to the distribution of profits (Cont.)
Commitments and other purchase orders (Cont.)
|
§
|
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.
|
|
§
|
A Tenaris company entered into a contract with Vale International S.A. for the supply of iron ore,
for which it is committed to purchase at least 70% of its annual iron ore needs, up to 770 thousand tons of pellets annually. The
contract expires on December 31, 2020. The aggregate commitment amounts to approximately $229 million.
|
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 June 30, 2018, 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
|
|
13 Investments in non-consolidated companies
This note supplements and should be read in conjunction with Note
12 to the Company’s audited Consolidated Financial Statements for the year ended December 31, 2017.
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 June 30, 2018, the closing price of Ternium’s ADSs as quoted
on the New York Stock Exchange was $34.82 per ADS, giving Tenaris’s ownership stake a market value of approximately $799.9
million. At June 30, 2018, the carrying value of Tenaris’s ownership stake in Ternium, based on Ternium’s IFRS financial
statements, was approximately $592.6 million.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
13 Investments in non-consolidated companies
(Cont.)
Usiminas is a Brazilian producer of high quality flat steel products
used in the energy, automotive and other industries and Tenaris’s principal supplier of flat steel in Brazil for its pipes
and industrial equipment businesses.
In 2014, a conflict arose between the T/T Group (comprising Confab
and Ternium’s subsidiaries Ternium Investments, Ternium Argentina and Prosid Investments) and Nippon Steel & Sumitomo
Metal Corporation (“NSSMC”) with respect to the governance of Usiminas, including with respect to the rules applicable
to the appointment of senior managers, the application of the shareholders’ agreement in matters involving fiduciary duties,
and generally with respect to Usiminas’ business strategy.
On February 8, 2018, Ternium Investments resolved the dispute with
NSSMC, and on April 10, 2018, the T/T Group entities (including Confab), the NSSMC Group and Previdência Usiminas entered
into a new shareholders’ agreement for Usiminas, amending and restating the previously existing shareholders agreement (the
“New SHA”). Usiminas’ control group now holds, in the aggregate, 483.6 million ordinary shares bound to the New
SHA, representing approximately 68.6% of Usiminas’ voting capital, with the T/T Group holding approximately 47.1% of the
total shares held by the control group (39.5% corresponding to the Ternium entities and the other 7.6% corresponding to Confab);
the NSSMC Group holding approximately 45.9% of the total shares held by the control group; and Previdência Usiminas holding
the remaining 7% of the total shares held by the control group.
The New SHA reflects the agreed-upon corporate governance rules
for Usiminas, including, among others, an alternation mechanism for the nomination of each of the chief executive officer and the
chairman of the board of directors, as well as a mechanism for the nomination of other members of Usiminas’ executive board.
The New SHA also incorporates an exit mechanism consisting of a buy-and-sell procedure, exercisable at any time during the term
of the New SHA after the fourth-and-a-half-year anniversary from the May 2018 election of Usiminas’ executive board. Such
exit mechanism shall apply with respect to shares held by the NSSMC Group and the T/T Group, and would allow either Ternium or
NSSMC to purchase all or a majority of the Usiminas shares held by the other shareholder group.
In connection with the execution of the New SHA, the Ternium entities
and Confab amended and restated their separate shareholders’ agreement governing their respective rights and obligations
as members of the T/T Group to include provisions relating to the exit mechanism and generally to conform such separate shareholders’
agreement to the other provisions of the New SHA.
As of June 30, 2018, the closing price of the Usiminas’ ordinary
and preferred shares, as quoted on the B3, was BRL11.23 ($2.91) and BRL7.32 ($1.90), respectively, giving Tenaris’s ownership
stake a market value of approximately $108.8 million. As that date, the carrying value of Tenaris’s ownership stake in Usiminas
was approximately $64.5 million.
|
c)
|
Techgen, S.A. de C.V. (“Techgen”)
|
Techgen is a Mexican company that operates a 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, with a power capacity of 900 megawatts. As of June 30, 2018, 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 June 30, 2018, Tenaris’s exposure
under these agreements amounted to $56.6 million and $1.8 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 $680 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 June 30, 2018, the loan agreement had been fully disbursed and, as a result, the amount
guaranteed by Tenaris was approximately $149.6 million. During 2018 the shareholders of Techgen made additional investments, in
Techgen, in form of subordinated loans, which in case of Tenaris amounted to $3.5 million. In the same period, there were repayments
of these loans for $5.5 million. As of June 30, 2018, the aggregate outstanding principal amount under these loans was $91.3 million.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
14 Discontinued operations
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 19 January 2017, with effect from 20 January
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.
In addition, the financial performance of the conduit business relative
to the 19 days of January 2017 showed a gain of $1.8 million.
|
|
2017
|
Income from discontinued operations
|
|
|
1,848
|
|
After tax gain on the sale of Conduit
|
|
|
89,694
|
|
Net Income for discontinued operations
|
|
|
91,542
|
|
For further information regarding this transaction please refer
to Note 28 of our Consolidated Financial Statements as of 31 December 2017.
15 Related party transactions
As of June 30, 2018:
|
§
|
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 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)
|
|
Six-month
period ended June 30,
|
|
|
|
2018
|
|
2017
|
(i)
|
Transactions
|
|
(Unaudited)
|
|
(a) Sales of goods and services
|
|
|
|
|
|
Sales of goods to non-consolidated
parties
|
|
|
13,540
|
|
|
|
16,251
|
|
|
Sales of goods to other related parties
|
|
|
65,453
|
|
|
|
18,382
|
|
|
Sales of services to non-consolidated parties
|
|
|
3,886
|
|
|
|
5,739
|
|
|
Sales of services to other
related parties
|
|
|
3,214
|
|
|
|
1,648
|
|
|
|
|
|
86,093
|
|
|
|
42,020
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Purchases of goods and
services
|
|
|
|
|
|
|
|
|
|
Purchases of goods to non-consolidated parties
|
|
|
109,334
|
|
|
|
106,301
|
|
|
Purchases of goods to other related parties
|
|
|
50,859
|
|
|
|
6,801
|
|
|
Purchases of services to non-consolidated parties
|
|
|
5,039
|
|
|
|
5,653
|
|
|
Purchases of services to
other related parties
|
|
|
25,020
|
|
|
|
25,024
|
|
|
|
|
|
190,252
|
|
|
|
143,779
|
|
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
15 Related party transactions
(Cont.)
|
(all amounts in thousands of U.S. dollars)
|
|
At June 30,
|
|
At December 31,
|
|
|
|
2018
|
|
2017
|
(ii)
|
Period-end balances
|
|
(Unaudited)
|
|
|
Arising from sales / purchases of goods / services / others
|
|
|
|
|
|
Receivables from non-consolidated parties
|
|
|
113,696
|
|
|
|
117,853
|
|
|
Receivables from other related parties
|
|
|
25,891
|
|
|
|
50,815
|
|
|
Payables to non-consolidated parties
|
|
|
(32,376
|
)
|
|
|
(49,354
|
)
|
|
Payables to other related parties
|
|
|
(22,552
|
)
|
|
|
(14,475
|
)
|
|
|
|
|
84,659
|
|
|
|
104,839
|
|
16 Category of financial instruments and
classification within the fair value hierarchy
The following table illustrates the three hierarchical levels for
valuing financial instruments at fair value and those measured at amortized cost as of June 30, 2018.
|
|
|
|
Measurement Categories
|
|
At Fair Value
|
June 30, 2018
|
|
Carrying
amount
|
|
Amortized
Cost
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
427,960
|
|
|
|
211,793
|
|
|
|
216,167
|
|
|
|
216,167
|
|
|
|
-
|
|
|
|
-
|
|
Cash at banks
|
|
|
115,445
|
|
|
|
115,445
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Liquidity funds
|
|
|
216,167
|
|
|
|
-
|
|
|
|
216,167
|
|
|
|
216,167
|
|
|
|
-
|
|
|
|
-
|
|
Short – term investments
|
|
|
96,348
|
|
|
|
96,348
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other investments
|
|
|
730,240
|
|
|
|
322,245
|
|
|
|
407,995
|
|
|
|
361,873
|
|
|
|
46,122
|
|
|
|
-
|
|
Fixed income (time-deposit, zero coupon bonds, commercial papers)
|
|
|
322,245
|
|
|
|
322,245
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Certificates of deposits
|
|
|
201,589
|
|
|
|
201,589
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial papers
|
|
|
19,861
|
|
|
|
19,861
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other notes
|
|
|
100,795
|
|
|
|
100,795
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Bonds and other fixed income
|
|
|
407,995
|
|
|
|
-
|
|
|
|
407,995
|
|
|
|
361,873
|
|
|
|
46,122
|
|
|
|
-
|
|
U.S. government securities
|
|
|
23,520
|
|
|
|
-
|
|
|
|
23,520
|
|
|
|
23,520
|
|
|
|
-
|
|
|
|
-
|
|
Non - U.S. government securities
|
|
|
134,015
|
|
|
|
-
|
|
|
|
134,015
|
|
|
|
134,015
|
|
|
|
-
|
|
|
|
-
|
|
Corporates securities
|
|
|
204,338
|
|
|
|
-
|
|
|
|
204,338
|
|
|
|
204,338
|
|
|
|
-
|
|
|
|
-
|
|
Structured notes
|
|
|
46,122
|
|
|
|
-
|
|
|
|
46,122
|
|
|
|
-
|
|
|
|
46,122
|
|
|
|
-
|
|
Derivative financial instruments
|
|
|
2,484
|
|
|
|
-
|
|
|
|
2,484
|
|
|
|
-
|
|
|
|
2,484
|
|
|
|
-
|
|
Other Investments Non- current
|
|
|
197,158
|
|
|
|
20,008
|
|
|
|
177,150
|
|
|
|
172,605
|
|
|
|
-
|
|
|
|
4,545
|
|
Bonds and other fixed income
|
|
|
172,605
|
|
|
|
-
|
|
|
|
172,605
|
|
|
|
172,605
|
|
|
|
-
|
|
|
|
-
|
|
Fixed income (time-deposit, zero coupon bonds, commercial papers)
|
|
|
20,008
|
|
|
|
20,008
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other investments
|
|
|
4,545
|
|
|
|
-
|
|
|
|
4,545
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,545
|
|
Trade receivables
|
|
|
1,536,323
|
|
|
|
1,536,323
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Receivables C and NC
|
|
|
298,010
|
|
|
|
166,043
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other receivables
|
|
|
166,043
|
|
|
|
166,043
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other receivables (non-financial)
|
|
|
131,967
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Available for sale assets (*)
|
|
|
21,572
|
|
|
|
-
|
|
|
|
21,572
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,572
|
|
Total
|
|
|
|
|
|
|
2,256,412
|
|
|
|
825,368
|
|
|
|
750,645
|
|
|
|
48,606
|
|
|
|
26,117
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings C and NC
|
|
|
840,495
|
|
|
|
840,495
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Trade payables
|
|
|
812,972
|
|
|
|
812,972
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Derivative financial instruments
|
|
|
91,615
|
|
|
|
-
|
|
|
|
91,615
|
|
|
|
-
|
|
|
|
91,615
|
|
|
|
-
|
|
Total
|
|
|
|
|
|
|
1,653,467
|
|
|
|
91,615
|
|
|
|
-
|
|
|
|
91,615
|
|
|
|
-
|
|
(*) For further detail regarding Available
for sale assets, see Note 17.
There were no transfers between Levels during the period.
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.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
16 Category of financial instruments and
classification within the fair value hierarchy (Cont.)
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.
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 17).
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
99.2% of its carrying amount including interests accrued as of June 30, 2018 as compare with 99.4% as of December 31, 2017. Fair
values were calculated using standard valuation techniques for floating rate instruments and comparable market rates for discounting
flows.
17 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”). Between August 2011 and July 2012, Tenaris and its wholly-owned subsidiary Talta - Trading e Marketing Sociedade
Unipessoal Lda (“Talta”) initiated two arbitration proceedings against Venezuela before the ICSID in Washington D.C.,
seeking adequate and effective compensation for the expropriation of their investments in the Venezuelan Companies. On January
29, 2016, the tribunal in the first arbitration proceeding released its award upholding 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, which as of June 30, 2018, amounted to $41 million.
On December 12, 2016, the tribunal in the second arbitration proceeding 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 June 30, 2018, amounted to $94.6 million.
Venezuela submitted requests for annulment of the awards in accordance with the ICSID
Convention and Arbitration Rules. Annulment requests are pending final resolution by the ad-hoc committees.
On June 8, 2018, Tenaris and Talta filed two actions in federal court in the District
of Columbia to recognize and enforce the awards. Tenaris and Talta are in the process of effecting service on Venezuela in accordance
with US law.
For further information on the nationalization of the Venezuelan subsidiaries, see note
31 “Nationalization of Venezuelan Subsidiaries” to our audited consolidated financial statements for the year ended
December 31, 2017.
|
Edgardo Carlos
|
|
|
Chief Financial Officer
|
|
Tenaris S.A. Half-year report 2018-Interim management report
|
Exhibit – Alternative performance measures
EBITDA, Earnings before interest, tax, depreciation and amortization.
EBITDA provides an analysis of the operating results excluding depreciation and amortization
and impairments, as they are non-cash variables which can vary substantially from company to company depending on accounting policies
and the accounting value of the assets. EBITDA is an approximation to pre-tax operating cash flow and reflects cash generation
before working capital variation. EBITDA is widely used by investors when evaluating businesses (multiples valuation), as well
as by rating agencies and creditors to evaluate the level of debt, comparing EBITDA with net debt.
EBITDA is calculated in the following manner:
EBITDA = Operating results + Depreciation and amortization + Impairment charges/(reversals).
|
|
Three-month period ended June 30,
|
|
Six-month period ended June 30,
|
(all amounts in thousands of U.S. dollars)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
222,436
|
|
|
|
51,490
|
|
|
|
434,633
|
|
|
|
87,504
|
|
Depreciation and amortization
|
|
|
140,401
|
|
|
|
148,848
|
|
|
|
282,203
|
|
|
|
311,066
|
|
EBITDA
|
|
|
362,837
|
|
|
|
200,338
|
|
|
|
716,836
|
|
|
|
398,570
|
|
Net Cash / (Debt)
This is the net balance of cash and cash equivalents, other current investments and fixed
income investments held to maturity less total borrowings. It provides a summary of the financial solvency and liquidity of the
company. Net cash / (debt) is widely used by investors and rating agencies and creditors to assess the company’s leverage,
financial strength, flexibility and risks.
Net cash/ debt is calculated in the following manner:
Net cash= Cash and cash equivalents + Other investments (Current and Non-Current)+/-
Derivatives hedging borrowings and investments– Borrowings (Current and Non-Current).
(all amounts in thousands of U.S. dollars)
|
|
At June 30,
|
|
|
2018
|
|
2017
|
Cash and cash equivalents
|
|
|
427,960
|
|
|
|
271,224
|
|
Other current investments
|
|
|
730,240
|
|
|
|
1,431,881
|
|
Non-current Investments
|
|
|
192,613
|
|
|
|
279,232
|
|
Derivatives hedging borrowings and investments
|
|
|
(87,806
|
)
|
|
|
38,669
|
|
Borrowings – current and non-current
|
|
|
(840,495
|
)
|
|
|
(852,865
|
)
|
Net cash / (debt)
|
|
|
422,512
|
|
|
|
1,168,141
|
|
Free Cash Flow
Free cash flow is a measure of financial performance, calculated as operating cash flow
less capital expenditures. FCF represents the cash that a company is able to generate after spending the money required to maintain
or expand its asset base.
Free cash flow is calculated in the following manner:
Free cash flow = Net cash (used in) provided by operating activities - Capital expenditures.
(all amounts in thousands of U.S. dollars)
|
|
Six-month period ended June 30,
|
|
|
2018
|
|
2017
|
Net cash provided by (used in) operating activities
|
|
|
321,675
|
|
|
|
(6,696
|
)
|
Capital expenditures
|
|
|
(195,731
|
)
|
|
|
(293,806
|
)
|
Free cash flow
|
|
|
125,944
|
|
|
|
(300,502
|
)
|
Tenaris S.A. Half-year report 2018-Interim management report
|
INVESTOR INFORMATION
Investor Relations Director
|
|
|
Giovanni Sardagna
|
|
|
|
|
|
Luxembourg Office
|
|
|
|
|
|
29 avenue de la Porte-Neuve
|
|
|
3rd Floor
|
|
|
L-2227 Luxembourg
|
|
|
(352) 26 47 89 78 tel
|
|
|
(352) 26 47 89 79 fax
|
|
|
|
|
|
Phones
|
|
|
USA 1 888 300 5432
|
|
|
Argentina (54) 11 4018 2928
|
|
General Inquiries
|
Italy (39) 02 4384 7654
|
|
investors@tenaris.com
|
Mexico (52) 229 989 1100
|
|
|
|
|
|
Stock Information
|
|
|
New York Stock Exchange (TS)
|
|
ADS Depositary Bank
|
Mercato Telematico Azionario (TEN)
|
|
Deutsche Bank
|
Mercado de Valores de Buenos Aires (TS)
|
|
CUSIP No. 88031M019
|
Bolsa Mexicana de Valores, S.A. de C.V. (TS)
|
|
|
|
|
|
Internet
|
|
|
www.tenaris.com
|
|
|
35