FORM 6 - K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
As of August 6, 2004
TENARIS, S.A.
(Translation of Registrant's name into English)
TENARIS, S.A.
13, rue Beaumont
L-1219 Luxembourg
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or 40-F.
Form 20-F X Form 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.
Yes No X
-------- -----
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 press release announcing
its results for the second quarter of 2004.
Tenaris Announces Second Quarter 2004 Results
LUXEMBOURG--(BUSINESS WIRE)--Aug. 5, 2004--Tenaris S.A. (NYSE:TS)
(Buenos Aires:TS) (BMV:TS) (MTA Italy:TEN)
-- The financial and operational information contained in this
press release is based on unaudited consolidated condensed
interim financial statements prepared in accordance with
international financial reporting standards (IFRS) and
presented in U.S. dollars.
Tenaris S.A. (NYSE:TS) (Buenos Aires:TS) (BMV:TS) (MTA Italy:TEN)
("Tenaris") today announces its results for the quarter and six months
ended June 30, 2004 with comparison to its results for the quarter and
six months ended June 30, 2003.
Second Quarter Summary
-- Net sales of US$996.8 million, up 14.7% from US$868.9 million
-- Operating income of US$153.7 million, up 36.7% from US$112.5
million
-- Net income of US$127.3 million, up 42.0% from US$89.7 million
-- Net earnings per share of US$0.108 (US$1.08 per ADS), up 40.3%
from US$0.077 per share
Net sales, operating income and net income all rose significantly
over the levels recorded both in the first quarter of 2004 and those
of the corresponding quarter of the previous year. Operating income
plus depreciation and amortization increased 23.7% to US$201.7
million, or 20.2% of net sales, compared to US$163.1 million, or 18.8%
of net sales in the second quarter of 2003, and net income was equal
to 12.8% of net sales. These positive results were driven by a 25%
increase in our net sales of seamless pipes and included a strong
contribution from our indirect investments in Sidor. Seamless sales
volumes benefited from strong demand in North America, which surpassed
Europe to become our highest sales volume region, as well as a
recovery in demand in the Middle East and Africa region. Average
selling prices for seamless pipes rose 7% quarter on quarter and 12%
compared to the second quarter of 2003. During the quarter, Tenaris
paid a dividend of US$0.114 per share (US$1.14 per ADS), or
approximately US$135.1 million, to shareholders.
Market Background and Outlook
In the first half of 2004, oil prices not only remained strong but
rose to their current levels exceeding US$40 per barrel. Global oil
demand has increased more rapidly than many had expected, following
faster global economic growth led by the U.S. and Chinese economies.
In response to increased consumption and higher prices, some OPEC
nationals led by Saudi Arabia increased their production but this has
not yet resulted in lower prices. Global oil and gas drilling
activity, as measured by the number of active rigs, increased
particularly in North and South America. The aggregate increase in rig
counts elsewhere, however, has been more limited and, in countries
like Iraq and Nigeria, activity continues to remain affected by
political and security issues. Tenaris has benefited from increased
demand for seamless pipes in each of our local markets of Mexico,
Argentina, Canada and Venezuela, with Mexico showing particular
strength. In addition, industrial production activity in North America
and Japan, which has been growing, led to increased demand for
seamless pipes in this sector, but in Europe the recovery in the
sector remains uncertain particularly in Italy, which is our largest
market in the region. For the rest of the year, demand for our
seamless pipes is expected to remain favorable but will be affected by
seasonal factors and sales volumes, on a comparable basis, are
unlikely to match those of the first half. Revenues, however, should
continue to benefit from higher selling prices.
Steelmaking raw material costs, which rose substantially during
2003, surged in the first quarter of 2004. After falling back briefly
in the second quarter, they are increasing again and are expected to
result in further increases in production costs in the second half of
the year.
Demand for our welded pipes continues to be affected by delays in
implementing projects in the local Brazilian market as well a lack of
projects in other South American markets and is likely to remain at
low levels for the rest of the year. The energy crisis in Argentina
should eventually result in investment in expanding the capacity of
the existing pipeline infrastructure and in construction of new
pipelines but there can be no assurance of when this might occur.
Significant Developments
Following the end of the second quarter, we completed two
acquisitions. On July 9, together with Sidor, we purchased for US$120
million the assets of Posven, a Venezuelan company, consisting
principally of an industrial facility for the production of
pre-reduced hot briquetted iron, or HBI, located in Ciudad Guayana,
Venezuela. This facility, which was idled in 2001 shortly after
starting up, has a rated annual design capacity of 1.5 million tons.
Tenaris has a 50.2% shareholding in the company formed with Sidor to
purchase and operate the facility. Once in operation, the facility,
which uses natural gas to reduce iron oxide, will provide us with a
low-cost, high quality steelmaking raw material which will improve our
competitive positioning and facilitate any future expansion of our
steelmaking capacity.
On July 26, we secured control of S.C. Silcotub S.A., a Romanian
seamless pipe producer with an annual capacity of 180,000 tons, by
paying US$42 million for the purchase of Tubman International, a
Gibraltar registered company, which owns an 84.9% shareholding in
Silcotub. The integration of Silcotub will strengthen our competitive
positioning in the European industrial and automotive market, increase
our capacity to supply small diameter OCTG products and provide us a
production base in Eastern Europe as well as access to markets in this
region.
Analysis of 2004 Second Quarter Results
(metric tons)
Sales volume Q2 2004 Q2 2003 Increase/(Decrease)
North America 194,000 147,000 32%
Europe 170,000 175,000 (3%)
Middle East & Africa 125,000 115,000 9%
Far East & Oceania 103,000 98,000 5%
South America 92,000 76,000 21%
Total seamless pipes 683,000 612,000 12%
Welded pipes 85,000 131,000 (35%)
Total steel pipes 769,000 742,000 4%
Sales volume of seamless pipes increased by 12% to 683,000 tons in
the second quarter of 2004 from 612,000 tons in the same period of
2003. This increase primarily reflects higher demand in our local
markets of Mexico, Canada, Venezuela and Argentina. Quarter on
quarter, sales volumes of seamless pipes increased by 11%, with
significant increases recorded in the Middle East and Africa and in
North America.
Sales volumes of welded pipes decreased by 35% to 85,000 tons in
the second quarter of 2004 from 131,000 tons in the same period of
2003, with demand being affected by continuing delays in implementing
pipeline projects in the Brazilian market and a lack of projects
elsewhere in South America.
(US$ million)
Net sales Q2 2004 Q2 2003 Increase/(Decrease)
Seamless pipes 797.9 637.4 25%
Welded pipes 89.8 117.9 (24%)
Energy 92.8 82.4 13%
Others 16.3 31.2 (48%)
Total 996.8 868.9 15%
Net sales in the quarter ended June 30, 2004 increased 15% to
US$996.8 million, compared to US$868.9 million in the corresponding
quarter of 2003. Net sales of seamless pipes rose by 25%, due to
higher sales volumes and higher average selling prices. Quarter on
quarter, net sales of seamless pipes increased 18% with average
selling prices up by 7%. Net sales of welded pipes, which included
US$18 million in sales of metal structures made by our Brazilian
welded pipe subsidiary in the second quarter of 2004 and US$16 million
of such sales in the second quarter of 2003, decreased 24% reflecting
the reduction in sales volume of welded pipes and a 8% increase in
average selling prices. Net sales of electricity and natural gas by
Dalmine Energie increased by 13% reflecting higher sales volumes and
an increase in the value of the Euro against the U.S. dollar. Net
sales of other goods and services decreased 48% following the
discontinuation of sales of non-pipe steel products produced by third
parties, which amounted to US$12 million in the second quarter of
2003, and a reduction in sales of excess energy to third parties from
our power generating facility in Argentina.
(percentage of net sales)
Cost of sales Q2 2004 Q2 2003
Seamless pipes 64.5% 64.2%
Welded pipes 69.7% 78.5%
Energy 96.9% 95.3%
Others 64.1% 76.3%
Total 68.0% 69.5%
Cost of sales, expressed as a percentage of net sales, decreased
1.5 percentage points to 68.0% in the second quarter of 2004, compared
to 69.5% in the same period of 2003. This decrease resulted from
higher sales of seamless pipe products as a proportion of total sales
and a decrease in cost of sales for welded pipe products. Cost of
sales for seamless pipe products, expressed as a percentage of net
sales, remained relatively stable at 64.5% in the second quarter of
2004 compared to 64.2% in the same period of 2003 with increased
average selling prices and volume-related efficiencies helping to
offset increased raw material costs. Cost of sales for welded pipe
products, expressed as a percentage of net sales, decreased to 69.7%
in the second quarter of 2004, compared to 78.5% in the same period of
2003. However, the margin on sales of welded pipes, after taking into
account selling expenses (there was a substantial increase in the
proportion of export sales in the sales mix), remained stable under
the same comparison. Cost of sales for other products, expressed as a
percentage of net sales, decreased to 64.1% in the second quarter of
2004, compared to 76.3% in the same period of 2003, due primarily to
the termination of sales of low-margin other steel products.
Selling, general and administrative expenses, or SG&A, rose to
US$167.5 million, or 16.8% of net sales in the quarter ended June 30,
2004, compared to US$146.2 million, or 16.8% of net sales, during the
corresponding quarter of 2003. An increase in selling expenses
associated with increased export sales of welded pipes and rising
freight costs offset a reduction of administrative expenses when
expressed as a percentage of net sales.
Net financial expenses totalled US$3.9 million in the second
quarter of 2004, compared to net financial expenses of US$10.9 million
in the same period of 2003. Net interest expenses increased to US$6.7
million, compared to US$4.0 million in the second quarter of 2003,
reflecting a higher net debt position. Net financial expenses for the
second quarter of 2004 included net foreign exchange translation gains
of US$2.5 million compared to net foreign exchange translation losses
of US$9.6 million in the second quarter of 2003.
Equity in earnings of associated companies generated a gain of
US$40.1 million in the second quarter of 2004, compared to a gain of
US$14.7 million in the second quarter of 2003. This reflected the
performance of our indirect investments in Sidor, whose results
benefited from strong global demand and prices for steel products.
First Half Results
Results for the six months period ended June 30, 2004 with
comparison to the results for the corresponding period of 2003.
Net income during the first half of 2004 was US$175.7 million, or
US$0.149 per share (US$1.49 per ADS), or 9.5% of net sales, which
compares with net income during the first half of 2003 of US$135.2
million, or US$0.116 per share (US$1.16 per ADS), or 8.2% of net
sales. Operating income was US$256.3 million, or 13.8% of net sales,
compared to US$211.0 million, or 12.7% of net sales. Operating income
plus depreciation and amortization was US$358.1 million, or 19.3% of
net sales, compared to US$309.5 million, or 18.7% of net sales.
(metric tons)
Sales volume 1H 2004 1H 2003 Increase/(Decrease)
North America 351,000 287,000 22%
Europe 339,000 332,000 2%
Middle East & Africa 207,000 201,000 3%
Far East & Oceania 216,000 219,000 (1%)
South America 188,000 144,000 31%
Total seamless pipes 1,301,000 1,182,000 10%
Welded pipes 155,000 239,000 (35%)
Total steel pipes 1,456,000 1,420,000 3%
Sales volume of seamless pipes increased by 10% to 1,301,000 tons
in the first half of 2004 from 1,182,000 tons in the same period of
2003. The increase in sales volumes reflects increased demand in our
local markets in North and South America.
Sales volume of welded pipes decreased by 35% to 155,000 tons in
the first half of 2004 from 239,000 tons in the same period of 2003.
This decrease was due principally to continuing delays in implementing
pipeline projects in the Brazilian market, whereas in the first half
of 2003 demand for welded pipes for pipeline projects in the Brazilian
market had been strong.
(US$ million)
Net sales 1H 2004 1H 2003 Increase/(Decrease)
Seamless pipes 1,471.7 1,203.0 22%
Welded pipes 156.2 216.4 (28%)
Energy 196.7 154.5 27%
Others 31.5 84.6 (63%)
Total 1,856.2 1,658.5 12%
Net sales in the six months ended June 30, 2004 increased 12% to
US$1,856.2 million, compared to US$1,658.5 million in the
corresponding period of 2003. Net sales of seamless pipes rose by 22%,
due to higher average selling prices and higher sales volume. Net
sales of welded pipes, which included US$33 million in sales of metal
structures made by our Brazilian welded pipe subsidiary in the first
half of 2004 and US$31 million of such sales in the first half of
2003, decreased 28% reflecting the reduction in sales volume of welded
pipes and a 3% increase in average selling prices. Net sales of
electricity and natural gas by Dalmine Energie increased by 27%
reflecting higher sales volumes and the increase in the value of the
Euro against the U.S. dollar. Net sales of other goods and services
decreased 63% following the discontinuation of sales of non-pipe steel
products produced by third parties, which amounted to US$49 million in
the first half of 2003, and a reduction in sales of excess energy to
third parties from our power generating facility in Argentina.
(percentage of net sales)
Cost of sales 1H 2004 1H 2003
Seamless pipes 65.9% 65.2%
Welded pipes 74.4% 73.4%
Energy 96.8% 97.0%
Others 66.7% 82.4%
Total 69.9% 70.1%
Cost of sales, expressed as a percentage of net sales, decreased
marginally to 69.9% in the first half of 2004, compared to 70.1% in
the same period of 2003. This decrease resulted from higher sales of
seamless pipe products as a proportion of total sales. Cost of sales
for seamless pipe products, expressed as a percentage of net sales,
increased to 65.9% in the first half of 2004 compared to 65.2% in the
same period of 2003 due to higher raw material costs outweighing the
effect of higher average selling prices and volume-related
efficiencies. Cost of sales for welded pipe products, expressed as a
percentage of net sales, remained relative stable at 74.4% in the
first half of 2004, compared to 73.4% in the same period of 2003.
However, the margin on sales of welded pipes, after taking into
account selling expenses (there was a substantial increase in the
proportion of export sales in the sales mix), decreased under the same
comparison. Cost of sales for other products, expressed as a
percentage of net sales, decreased 15.7 percentage points to 66.7% in
the first half of 2004, compared to 82.4% in the same period of 2003,
due primarily to the termination of sales of low-margin other steel
products.
Selling, general and administrative expenses, or SG&A, rose to
US$307.4 million, or 16.6% of net sales in the six months ended June
30, 2004, compared to US$279.2 million, or 16.8% of net sales, during
the corresponding period of 2003. An increase in selling expenses
associated with increased export sales of welded pipes and higher
freight costs largely offset a reduction of administrative expenses,
when expressed as a percentage of net sales.
Net financial expenses totalled US$19.3 million in the first half
of 2004, compared to net financial expenses of US$33.6 million in the
same period of 2003. Net interest expenses increased to US$12.3
million compared to US$9.3 million, principally reflecting a higher
net debt position, and foreign exchange translation losses decreased
to US$12.7 million from US$26.2 million.
Equity in earnings of associated companies generated a gain of
US$39.7 million in the first half of 2004, compared to a gain of
US$5.6 million in the first half of 2003. This reflected the
performance of our indirect investments in Sidor, whose results have
benefited from strong global demand and prices for steel products.
Income tax provisions of US$100.0 million were recorded during the
first half of 2004, compared to income tax provisions of US$36.6
million during the corresponding period of 2003. The relatively high
tax provisions recorded in the six months reflect strong earnings at
our Mexican operations and the effect of adjustments made to
preliminary provisions recorded in respect of taxes corresponding to
the 2003 annual period.
Cash Flow and Liquidity
Cash and cash equivalents, excluding investments of US$139.1
million in trust funds to support our Argentine and Brazilian
operations, increased by US$18.4 million to US$269.0 million during
the six months ended June 30, 2004 and total financial debt increased
by US$274.7 million to US$1,108.4 million from US$833.7 million at
December 31, 2003.
Net cash used in operations during the six months ended June 30,
2004 was US$82.9 million. Cash flow from operations was affected by a
substantial increase in working capital of US$311.0 million,
reflecting a net increase in trade receivables less customer advances
and trade payables of US$167.0 million, an increase in inventories of
US$84.8 million and the payment of the first instalment of the
liability towards the consortium led by BHP Billiton Petroleum Ltd.
(US$55.3 million). The increase in trade receivables reflects to
higher net sales and the increase in inventories was due to higher
costs of production and raw materials. Net cash used in investment
activities was US$57.2 million. Net cash provided by financing
activities was US$158.5 million, which includes the payment of
US$135.1 million in dividends and a net increase of US$293.6 million
in borrowings.
Some of the statements contained in this press release are
"forward-looking statements." Forward-looking statements are based on
management's current views and assumptions and involve known and
unknown risks that could cause actual results, performance or events
to differ materially from those expressed or implied by those
statements. These risks include but are not limited to risks arising
from uncertainties as to future oil prices and their impact on
investment programs by oil companies.
Consolidated Condensed Interim Income Statement
Three -month period Six -month period
ended June 30, ended June 30,
(All amounts in US$
thousands) 2004 2003 2004 2003
Net sales 996,849 868,892 1,856,195 1,658,471
Cost of sales (677,655) (604,122) (1,298,112) (1,162,656)
--------- --------- ----------- -----------
Gross profit 319,194 264,770 558,083 495,815
Selling, general and
administrative
expenses (167,547) (146,238) (307,365) (279,236)
Other operating income
and expenses 2,065 (6,078) 5,565 (5,557)
--------- --------- ----------- -----------
Operating income 153,712 112,454 256,283 211,022
Financial income
(expenses), net (3,885) (10,892) (19,323) (33,583)
--------- --------- ----------- -----------
Income before income
tax, equity in
earnings of associated
companies and minority
interest 149,827 101,562 236,960 177,439
Equity in earnings of
associated companies 40,130 14,677 39,669 5,643
--------- --------- ----------- -----------
Income before income
tax and minority
interest 189,957 116,239 276,629 183,082
Income tax (60,911) (18,694) (99,980) (36,621)
--------- --------- ----------- -----------
Net income before
minority interest 129,046 97,545 176,649 146,461
Minority interest (1,732) (7,870) (967) (11,274)
--------- --------- ----------- -----------
Net income 127,314 89,675 175,682 135,187
Consolidated Condensed Interim Balance Sheet
June 30, 2004 December 31, 2003
(All amounts in US$
thousands)
Assets
Non-current assets
Property, plant and
equipment, net 1,889,604 1,960,314
Intangible assets, net 57,619 54,037
Investments in
associated companies 68,941 45,814
Other investments 23,240 23,155
Deferred tax assets 129,788 130,812
Receivables 57,687 2,226,879 59,521 2,273,653
Current assets
Inventories 916,653 831,879
Receivables and
prepayments 178,058 165,134
Trade receivables 871,183 652,782
Other investments 139,051 138,266
Cash and cash
equivalents 268,969 2,373,914 247,834 2,035,895
Total assets 4,600,793 4,309,548
Equity and Liabilities
Shareholders' equity 1,859,365 1,841,280
Minority interest 114,334 119,984
Non-current liabilities
Borrowings 397,440 374,779
Deferred tax liabilities 396,804 418,333
Other liabilities 200,468 191,540
Provisions 29,879 23,333
Trade payables 11,265 1,035,856 11,622 1,019,607
Current liabilities
Borrowings 710,957 458,872
Current tax liabilities 120,192 108,071
Other liabilities 162,037 207,594
Provisions 32,116 39,624
Customers advances 77,747 54,721
Trade payables 488,189 1,591,238 459,795 1,328,677
Total liabilities 2,627,094 2,348,284
Total equity and
liabilities 4,600,793 4,309,548
Consolidated Condensed Interim Cash Flow Statement
Three-month period Six-month period
ended June 30, ended June 30,
(All amounts in US$
thousands) 2004 2003 2004 2003
Net income for the period 127,314 89,675 175,682 135,187
Depreciation and
amortization 48,005 50,620 101,829 98,487
Tax accruals less payments 18,430 (88,418) 8,110 (84,080)
Equity in earnings of
associated companies (40,130) (14,677) (39,669) (5,643)
Interest accruals less
payments (1,442) (2,788) (2,993) (362)
Net provisions 106 4,151 (962) 7,354
Minority interest 1,732 7,870 967 11,274
Change in working capital (136,040) (126,346) (311,021) (73,931)
Currency translation
adjustment and others (11,366) 20,812 (14,843) 10,677
--------- --------- --------- ---------
Net cash provided by (used
in) operations 6,609 (59,101) (82,900) 98,963
--------- --------- --------- ---------
Capital expenditure (42,871) (45,022) (82,783) (88,633)
Acquisitions of
subsidiaries and
associates (379) (22,533) (188) (42,546)
Cash advanced for the
Dalmine tender offer - (21,382) - (21,382)
Proceeds from disposition
of property, plant and
equipment 2,450 906 8,969 1,564
Proceeds from associated
companies - 106 - 106
Convertible loan to
associated companies - (31,128) - (31,128)
Dividends received 16,802 - 16,802 -
--------- --------- --------- ---------
Net cash used in investment
activities (23,998) (119,053) (57,200) (182,019)
Dividends paid (135,053) (115,002) (135,053) (115,002)
Dividends paid to minority
interest in subsidiaries (23) (3,499) (23) (3,499)
Proceeds from borrowings 223,069 143,145 370,763 227,638
Repayments of borrowings (25,681) (89,295) (77,152) (183,669)
--------- --------- --------- ---------
Net cash provided by (used
in) financing activities 62,312 (64,651) 158,535 (74,532)
--------- --------- --------- ---------
Increase (decrease) in cash
and cash equivalents 44,923 (242,805) 18,435 (157,588)
--------- --------- --------- ---------
Cash and cash equivalents
at the beginning of the
period, 220,968 390,051 247,834 304,536
Effect of exchange rate
changes on cash and cash
equivalents 3,078 1,717 2,700 2,015
Increase (decrease) in cash
and cash equivalents 44,923 (242,805) 18,435 (157,588)
Cash at the end of the
period 268,969 148,963 268,969 148,963
CONTACT: Tenaris
Nigel Worsnop, 1-888-300-5432
www.tenaris.com
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 6, 2004
Tenaris, S.A.
By: /s/ Cecilia Bilesio
-----------------------
Cecilia Bilesio
Corporate Secretary