The financial and operational information contained in this press release is based on unaudited consolidated condensed interim financial statements presented in U.S. dollars and prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standard Board and adopted by the European Union, or IFRS. Additionally, this press release includes non-IFRS alternative performance measures i.e., EBITDA, Net cash / debt, Free Cash Flow and Operating working capital days. See exhibit I for more details on these alternative performance measures.
LUXEMBOURG, April 25, 2024 (GLOBE NEWSWIRE) — Tenaris S.A. (NYSE and Mexico: TS and EXM Italy: TEN) (“Tenaris”) today announced its results for the quarter ended March 31, 2024 in comparison with its results for the quarter ended March 31, 2023.
Summary of 2024 First Quarter Results
(Comparison with fourth and first quarter of 2023)
1Q 20244Q 20231Q 2023Net sales ($ million)3,442 3,415 1%4,141 (17%)Operating income ($ million)812 819 (1%)1,351 (40%)Net income ($ million)750 1,146 (35%)1,129 (34%)Shareholders’ net income ($ million)737 1,129 (35%)1,129 (35%)Earnings per ADS ($)1.27 1.92 (34%)1.91 (34%)Earnings per share ($)0.64 0.96 (34%)0.96 (34%)EBITDA ($ million)987 975 1%1,477 (33%)EBITDA margin (% of net sales)28.7%28.6% 35.7%
Net sales, operating income and EBITDA remained in line with our results for the fourth quarter of last year despite lower OCTG prices in the Americas. This reflected a solid performance across our business lines and included an increase in Rig Direct shipments in North America and the realization of a major coating project in Mexico at our newly acquired TenarisShawcor business. Net income, which did not include any extraordinary effects, declined to $750 million, or 22% of sales.
During the quarter, our free cash flow amounted to $715 million and, after spending $311 million on share buybacks, our positive net cash position increased to $3.9 billion at March 31, 2024.
Market Background and Outlook
Demand for oil and gas continues to grow to meet the needs of developing countries and secure affordable energy during the energy transition.
Although oil prices have risen, there has been no pick up in drilling activity in the USA so far this year and in North America it remains below last year’s level. At the same time, OCTG imports increased which is delaying price stabilization.
In the rest of the world, offshore projects are proceeding in line with our expectations and demand in the Middle East remains at a good level. In Latin America, however, political and economic volatility is affecting activity.
For the second quarter, as anticipated, our sales and margins will be lower than the first quarter reflecting the ongoing decline in OCTG prices in the Americas. In the third quarter, we will have stoppages at many of our mills, including at our Siderca steel shop where we will install a new furnace that will improve our environmental footprint, and this will lead to a further decline in sales and margins in the quarter.
Analysis of 2024 First Quarter Results
Tubes Sales volume (thousand metric tons)1Q 20244Q 20231Q 2023Seamless7777602%840(8%)Welded2692469%283(5%)Total1,0461,0064%1,123(7%)
Tubes1Q 20244Q 20231Q 2023(Net sales – $ million) North America1,488 1,501 (1%)2,229 (33%)South America614 590 4%975 (37%)Europe226 302 (25%)252 (10%)Asia Pacific, Middle East and Africa804 805 0%519 55%Total net sales ($ million)3,132 3,198 (2%)3,975 (21%)Operating income ($ million)769 780 (1%)1,312 (41%)Operating margin (% of sales)24.6%24.4% 33.0%
Net sales of tubular products and services decreased 2% sequentially and 21% year on year. Volumes increased 4% sequentially but decreased 7% year on year while average selling prices decreased 6% sequentially and 15% year on year. In North America, higher seasonal sales in Canada were largely offset by lower OCTG prices throughout the region. In South America, higher sales for pipeline projects and for offshore drilling in Guyana compensated lower OCTG prices in Argentina and Colombia. In Europe sales declined due to lower sales for offshore line pipe products. In Asia Pacific, Middle East and Africa we had a continuing high level of sales throughout the region.
Operating income from tubular products and services amounted to $769 million in the first quarter of 2024, compared to $780 million in the previous quarter and $1,312 million in the first quarter of 2023. Operating margin of the quarter remained stable as the reduction in prices was compensated by a reduction in costs. Operating income of the quarter includes gains amounting to $25 million from positive legal claim’s resolutions in Mexico and Brazil.
Others1Q 20244Q 20231Q 2023Net sales ($ million)310 217 43%167 86%Operating income ($ million)42 39 7%40 7%Operating margin (% of sales)13.7%18.1% 23.8%
Net sales of other products and services increased 43% sequentially and 86% year on year. Quarterly sales included $160 million from the coating business acquired in the previous quarter.
Selling, general and administrative expenses, or SG&A, amounted to $508 million, or 14.8% of net sales, in the first quarter of 2024, compared to $471 million, 13.8% in the previous quarter and $487 million, 11.8% in the first quarter of 2023. Sequentially, our SG&A expenses increased mainly due to higher selling expenses associated with higher shipment volumes, higher depreciation and amortization due to the integration of the coating business acquired in the previous quarter and higher provisions for contingencies.
Financial results amounted to a loss of $25 million in the first quarter of 2024, compared to a gain of $93 million in the previous quarter and a gain of $21 million in the first quarter of 2023. The loss of the quarter is mainly explained by a $68 million loss from the change in fair value of U.S. dollar denominated Argentine bonds, partially offset by net finance income of $35 million and other net foreign exchange gains of $8 million.
Equity in earnings of non-consolidated companies generated a gain of $48 million in the first quarter of 2024, compared to a gain of $57 million in the previous quarter and a gain of $53 million in the first quarter of 2023. Results from non-consolidated companies are mainly derived from our participation in Ternium (NYSE:TX).
Income tax charge amounted to $85 million in the first quarter of 2024, compared to a gain of $177 million in the previous quarter and a charge of $296 million in the first quarter of 2023. The charge of the quarter is net of $104 million tax gains, mostly related to the effect of inflation adjustment in Argentina.
Cash Flow and Liquidity
Net cash provided by operations during the first quarter of 2024 was $887 million, compared with $836 million in the previous quarter and $921 million in the first quarter of 2023. Working capital increased by $10 million during the quarter.
Capital expenditures amounted to $172 million for the first quarter of 2024, compared to $167 million in the previous quarter and $117 million in the first quarter of 2023.
During the quarter free cash flow amounted to $715 million, compared to $669 million in the previous quarter and $804 million in the first quarter of 2023.
Following share buybacks of $311 million during the quarter, our positive net cash position increased to $3.9 billion at March 31, 2024, compared to $3.4 billion at December 31, 2023.
Conference call
Tenaris will hold a conference call to discuss the above reported results, on April 26, 2024, at 08:00 a.m. (Eastern Time). Following a brief summary, the conference call will be opened to questions.
To listen to the conference please join through one of the following options:
ir.tenaris.com/events-and-presentations or
https://edge.media-server.com/mmc/p/nk5skspv
If you wish to participate in the Q&A session please register at the following link:
https://register.vevent.com/register/BI6438ef4528ce4b68a87ee220e3cc959e
Please connect 10 minutes before the scheduled start time.
A replay of the conference call will also be available on our webpage at:
ir.tenaris.com/events-and-presentations
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 and gas prices and their impact on investment programs by oil and gas companies.
Consolidated Condensed Interim Income Statement
(all amounts in thousands of U.S. dollars)Three-month period ended March 31, 2024 2023 UnauditedNet sales3,441,544 4,141,181 Cost of sales(2,134,052)(2,307,779)Gross profit1,307,492 1,833,402 Selling, general and administrative expenses(508,132)(487,347)Other operating income (expense), net12,304 5,299 Operating income811,664 1,351,354 Finance Income56,289 47,887 Finance Cost(20,583)(31,545)Other financial results, net(60,468)4,477 Income before equity in earnings of non-consolidated companies and income tax786,902 1,372,173 Equity in earnings of non-consolidated companies48,179 53,006 Income before income tax835,081 1,425,179 Income tax(84,856)(295,972)Income for the period750,225 1,129,207 Attributable to: Shareholders’ equity736,980 1,128,627 Non-controlling interests13,245 580 750,225 1,129,207
Consolidated Condensed Interim Statement of Financial Position
(all amounts in thousands of U.S. dollars)At March 31, 2024 At December 31, 2023 Unaudited ASSETS Non-current assets Property, plant and equipment, net6,094,145 6,078,179 Intangible assets, net1,356,065 1,377,110 Right-of-use assets, net137,026 132,138 Investments in non-consolidated companies1,681,971 1,608,804 Other investments983,519 405,631 Deferred tax assets774,014 789,615 Receivables, net177,22111,203,961 185,95910,577,436Current assets Inventories, net3,911,719 3,921,097 Receivables and prepayments, net291,694 228,819 Current tax assets261,983 256,401 Trade receivables, net2,303,293 2,480,889 Derivative financial instruments2,883 9,801 Other investments2,248,863 1,969,631 Cash and cash equivalents1,323,35010,343,785 1,637,82110,504,459Total assets 21,547,746 21,081,895EQUITY Shareholders’ equity 17,407,503 16,842,972Non-controlling interests 201,564 187,465Total equity 17,609,067 17,030,437LIABILITIES Non-current liabilities Borrowings28,122 48,304 Lease liabilities97,078 96,598 Derivative financial instruments- 255 Deferred tax liabilities488,082 631,605 Other liabilities282,147 271,268 Provisions103,465998,894 101,4531,149,483Current liabilities Borrowings608,278 535,133 Lease liabilities42,097 37,835 Derivative financial instruments3,569 10,895 Current tax liabilities476,280 488,277 Other liabilities493,293 422,645 Provisions35,492 35,959 Customer advances239,342 263,664 Trade payables1,041,4342,939,785 1,107,5672,901,975Total liabilities 3,938,679 4,051,458Total equity and liabilities 21,547,746 21,081,895
Consolidated Condensed Interim Statement of Cash Flows
(all amounts in thousands of U.S. dollars) Three-month period ended March 31, 2024 2023 UnauditedCash flows from operating activities Income for the period 750,225 1,129,207 Adjustments for: Depreciation and amortization 175,442 125,453 Income tax accruals less payments (29,222)188,856 Equity in earnings of non-consolidated companies (48,179)(53,006)Interest accruals less payments, net 11,938 (3,700)Changes in provisions 1,545 7,957 Changes in working capital (9,548)(460,557)Others, including net foreign exchange 34,776 (13,440)Net cash provided by operating activities 886,977 920,770 Cash flows from investing activities Capital expenditures (172,097)(117,088)Changes in advance to suppliers of property, plant and equipment 2,952 33 Loan to joint ventures (1,354)- Proceeds from disposal of property, plant and equipment and intangible assets 5,412 4,796 Changes in investments in securities (759,667)(890,636)Net cash used in investing activities (924,754)(1,002,895) Cash flows from financing activities Changes in non-controlling interests 1,120 – Acquisition of treasury shares (311,064)- Payments of lease liabilities (16,768)(10,758)Proceeds from borrowings 829,947 559,274 Repayments of borrowings (754,078)(679,892)Net cash used in financing activities (250,843)(131,376) Decrease in cash and cash equivalents (288,620)(213,501) Movement in cash and cash equivalents At the beginning of the period 1,616,597 1,091,433 Effect of exchange rate changes (4,921)(16,518)Decrease in cash and cash equivalents (288,620)(213,501) 1,323,056 861,414
Exhibit I – Alternative performance measures
Alternative performance measures should be considered in addition to, not as substitute for or superior to, other measures of financial performance prepared in accordance with IFRS.
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 recurring 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 = Net income for the period + Income tax charges +/- Equity in Earnings (losses) of non-consolidated companies +/- Financial results + Depreciation and amortization +/- Impairment charges/(reversals)
EBITDA is a non-IFRS alternative performance measure.
(all amounts in thousands of U.S. dollars)Three-month period ended March 31, 2024 2023 Income for the period750,225 1,129,207 Income tax charge84,856 295,972 Equity in earnings of non-consolidated companies(48,179)(53,006)Financial Results24,762 (20,819)Depreciation and amortization175,442 125,453 EBITDA987,106 1,476,807
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.
Free cash flow is a non-IFRS alternative performance measure.
(all amounts in thousands of U.S. dollars)Three-month period ended March 31, 2024 2023 Net cash provided by operating activities886,977 920,770 Capital expenditures(172,097)(117,088)Free cash flow714,880 803,682
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).
Net cash/debt is a non-IFRS alternative performance measure.
(all amounts in thousands of U.S. dollars)At March 31, 2024 2023 Cash and cash equivalents1,323,350 861,494 Other current investments2,248,863 1,081,141 Non-current investments976,206 375,677 Derivatives hedging borrowings and investments- 11,680 Current borrowings(608,278)(536,907)Non-current borrowings(28,122)(56,739)Net cash / (debt)3,912,019 1,736,346
Operating working capital days
Operating working capital is the difference between the main operating components of current assets and current liabilities. Operating working capital is a measure of a company’s operational efficiency, and short-term financial health.
Operating working capital days is calculated in the following manner:
Operating working capital days = [(Inventories + Trade receivables – Trade payables – Customer advances) / Annualized quarterly sales ] x 365
Operating working capital days is a non-IFRS alternative performance measure.
(all amounts in thousands of U.S. dollars)At March 31, 2024 2023 Inventories3,911,719 3,991,501 Trade receivables2,303,293 2,834,369 Customer advances(239,342)(136,172)Trade payables(1,041,434)(1,067,602)Operating working capital4,934,236 5,622,096 Annualized quarterly sales13,766,176 16,564,724 Operating working capital days131 124
Giovanni Sardagna
Tenaris
1-888-300-5432
www.tenaris.com