6-K 1 a5271019.txt TENARIS, S.A. 6-K 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 November 9, 2006 TENARIS, S.A. (Translation of Registrant's name into English) TENARIS, S.A. 46a, Avenue John F. Kennedy L-1855 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 2006 third quarter results. Tenaris Announces 2006 Third Quarter Results The financial and operational information contained in this press release is based on consolidated condensed interim financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and presented in U.S. dollars. Business Editors LUXEMBOURG--(BUSINESS WIRE)--Nov. 8, 2006--Tenaris S.A. (NYSE:TS) (BCBA:TS) (BMV:TS) (BI:TEN) ("Tenaris") today announced its results for the third quarter ended September 30, 2006 with comparison to its results for the third quarter ended September 30, 2005. Summary of 2006 Third Quarter Results (Comparison with second quarter of 2006 and third quarter of 2005) Q3 2006 Q2 2006 Q3 2005 Net sales (US$ million) 1,922.5 1,962.3 (2%) 1,640.4 17% Operating income (US$ million) 695.8 692.8 0% 475.2 46% Net income (US$ million)(1) 510.0 495.8 3% 350.9 45% Shareholders' net income (US$ million) 479.1 471.8 2% 318.9 50% Earnings per ADS (US$)(2) 0.81 0.80 2% 0.54 50% Earnings per share (US$) 0.41 0.40 2% 0.27 50% EBITDA (US$ million) 752.0 747.9 1% 528.1 42% EBITDA margin (% of net sales) 39% 38% 32% (1) As required by IAS 1 (revised) as from January 1, 2005 the income for the period disclosed in the income statement does not show minority interest. Earnings per share continue to be calculated on the net income attributable solely to the equity holders of Tenaris. (2) As of April 26, 2006, the ratio of ADSs to ordinary shares was changed from 1:10 to 1:2. Earnings per ADS are stated using the new ratio. Global demand from the oil and gas industry for our OCTG and line pipe products remained strong throughout the quarter led by growing demand for TenarisBlue(R) products in the Middle East and Africa. Oil and gas drilling activity and demand for our products and services continue to expand in this region which holds the majority of the world's known reserves. Earnings per share rose 50% year on year and matched that of the second quarter notwithstanding annual maintenance shutdowns in Europe and Canada coinciding with the holiday season. Free cash flow (net cash provided by operations less capital expenditures) was US$465.1 million and our net cash position increased to US$554.5 million at September 30 just prior to the payment of the Maverick acquisition. Market Background and Outlook Oil and gas companies continue to increase their exploration and production spending in response to sustained high oil and gas prices, declining production at mature fields and projected increases in global demand for oil and gas. This is resulting in increased drilling activity and demand for our seamless OCTG products in most markets worldwide. The Canadian and US markets are more sensitive than other markets to natural gas prices and in Canada there was a slowdown in natural gas drilling activity, particularly in less productive shallow wells, during the latter half of the quarter following declines in North American natural gas prices. The international count of active drilling rigs, as published by Baker Hughes excluding, for comparative purposes, the rig count in Iran and Sudan, averaged 941 during the third quarter of 2006, an increase of 10% compared to the same quarter of the previous year and an increase of 3% compared to the second quarter of 2006. The corresponding percentage year on year quarterly rig count in the Canadian markets showed a decline of 1% and that of the US market showed an increase of 20%. Favorable market conditions for our products and relatively stable raw material and energy costs have allowed us to record year on year sales growth and improvements in gross margins for our seamless pipe products in the year to date. Raw material and energy costs rose slightly during the third quarter and are expected to rise again in the fourth quarter but we expect to maintain a similar level of gross margin on our seamless pipe products during the fourth quarter. Demand for our welded pipe products, which has been weak during the past three quarters following gas pipeline project delays in Brazil and Argentina, is expected to recover in the fourth quarter and rebound strongly in 2007 following the receipt of orders for the 1,000 km GASCAV phase of the GASENE project in Brazil and the 1,100 km loops expansion project for the TGN and TGS pipeline networks in Argentina. Deliveries for these two projects will take place throughout 2007. Acquisition of Maverick On October 5, 2006, we acquired Maverick Tube Corporation, a leading North American producer of welded OCTG, line pipe and coiled tubing for use in oil and natural gas wells with pipe manufacturing facilities in the United States, Canada and Colombia. The value of the transaction was US$3,185 million including Maverick's net debt. Prior to our acquisition, Maverick, for the first six months of 2006, reported shipments of 735,000 short tons, net revenues of US$1,027.0 million and net income of US$124.6 million under US GAAP. Tenaris will consolidate Maverick's balance sheet and results of operations in its consolidated financial statements beginning on the fourth quarter of 2006. Analysis of 2006 Third Quarter Results (metric tons) Sales volume Q3 2006 Q3 2005 Increase/(Decrease) North America 163,000 198,000 (18%) Europe 159,000 140,000 14% Middle East & Africa 202,000 149,000 36% Far East & Oceania 80,000 92,000 (13%) South America 105,000 104,000 1% Total seamless pipes 709,000 682,000 4% Welded pipes 69,000 124,000 (44%) Total steel pipes 778,000 806,000 (3%) Sales volume of seamless pipes increased by 4% to 709,000 tons in the third quarter of 2006 from 682,000 tons in the same period of 2005. We recorded a substantial increase in sales volume in the Middle East and Africa reflecting higher oil and gas drilling activity and strong demand for our OCTG products in the Middle East and North Africa. Sales in North America were affected primarily by lower drilling activity in Mexico and lower sales of line pipe for Gulf of Mexico deepwater and process and power plant customers in the USA. Sales in Europe increased due to higher sales of line pipe products to process and power plant customers. Sales volumes of welded pipes decreased by 44% to 69,000 tons in the third quarter of 2006 from 124,000 tons in the same period of 2005. The decrease in sales was due to substantially reduced demand for welded pipes for gas pipeline projects in Brazil and Argentina. (US$ million) Net sales Q3 2006 Q3 2005 Increase/(Decrease) Seamless pipes 1,579.6 1,253.9 26% Welded pipes(a) 117.6 221.0 (47%) Energy 119.9 106.4 13% Others 105.4 59.1 78% Total 1,922.5 1,640.4 17% (a) Includes other metallic products produced by Confab, our Brazilian welded pipe subsidiary Net sales in the quarter ended September 30, 2006 increased 17% to US$1,922.5 million, compared to US$1,640.4 million in the corresponding quarter of 2005. Net sales of seamless pipes rose by 26% as the average selling price for our seamless pipe products rose 21% compared to the corresponding quarter of 2005, reflecting increased sales of premium OCTG products and higher selling prices for most of our products. Net sales of welded pipes, which included US$23 million in sales of other metallic products in the third quarter of 2006 and US$18 million of such sales in the third quarter of 2005, fell by 47% due primarily to the decline in sales volume. Net sales of energy rose by 13% due to higher Italian gas and electric energy prices and the revaluation of the euro against the US dollar. Net sales of other goods and services increased 78% due primarily to higher sales of pre-reduced hot briquetted iron from our plant in Venezuela. (percentage of net sales) Cost of sales Q3 2006 Q3 2005 Seamless pipes 45% 53% Welded pipes 75% 69% Energy 98% 100% Others 65% 63% Total 51% 59% Cost of sales, expressed as a percentage of net sales, decreased to 51% in the third quarter of 2006, compared to 59% in the same period of 2005 reflecting higher gross margins on our sales of seamless pipe products and a higher proportion of seamless pipe sales in total sales. Cost of sales for seamless pipe products, expressed as a percentage of net sales, decreased to 45% in the third quarter of 2006 compared to 53% in the same period of 2005 reflecting product repositioning efforts towards higher margin products and increased selling prices for our products. Cost of sales for welded pipe products, expressed as a percentage of net sales, increased to 75% in the third quarter of 2006 compared to 69% in the same period of 2005 reflecting the impact of an increased proportion of lower-margin export sales in the sales mix. Selling, general and administrative expenses, or SG&A, increased slightly as a percentage of net sales to 12.8% in the quarter ended September 30, 2006 compared to 12.6% in the corresponding quarter of 2005 due primarily to higher labor costs and higher commissions, freight and other selling expenses reflecting higher export sales of welded pipes. Net financial expense was US$3.7 million in the third quarter of 2006, compared to US$5.1 million in the same period of 2005. A loss of US$5.7 million on net foreign exchange transactions and changes in fair value of derivative instruments was partially offset by net interest income of US$2.2 million. Equity in earnings of associated companies generated a gain of US$29.7 million in the third quarter of 2006, compared to a gain of US$26.5 million in the third quarter of 2005. The gain in the third quarter of 2006 was derived mainly from our 11.5% equity shareholding in Ternium and the gain in the third quarter of 2005 was derived mainly from our prior investment in Sidor. Income tax charges totalled US$211.7 million in the third quarter of 2006, equivalent to 31% of income before equity in earnings of associated companies and income tax and included the benefit of a favorable tax judgment in Mexico in the amount of US$5.6 million. Income attributable to minority interest amounted to US$30.9 million in the third quarter of 2006, compared to US$32.0 million in the corresponding quarter of 2005 as an improvement in operating and financial results at our NKKTubes and Matesi subsidiaries largely offset weaker operating and financial results at our Confab subsidiary. Cash Flow and Liquidity Net cash provided by operating activities during the third quarter of 2006 was US$598.1 million. Working capital increased by US$31.1 million during the third quarter mainly due to an increase in inventories which was partially compensated by an increase in customer advances. Inventories increased by US$118.0 million primarily reflecting raw material cost increases and an increase in inventories of finished goods at the end of the period. Customer advances increased by US$83.6 million primarily reflecting the increase in our welded pipe backlog. Capital expenditures increased to US$133.0 million for the third quarter of 2006 compared to US$62.8 million in the third quarter of 2005 reflecting the ongoing implementation of our program to increase capacity for high-end products. Our net cash position (cash and cash equivalents and other current investments less borrowings) increased by US$472.3 million during the third quarter and amounted to US$554.5 million at September 30, 2006 compared to net debt of US$183.0 million at December 31, 2005. Total financial debt was US$875.3 million at September 30, 2006 compared to US$1,010.3 million at December 31, 2005. On October 5, 2006 we borrowed an additional US$2.68 billion in connection with our Maverick acquisition. Analysis of 2006 Nine Months Results Net income attributable to equity holders of the Company during the first nine months of 2006 was US$1,370.6 million, or US$1.16 per share (US$2.32 per ADS), or 24% of net sales, which compares with net income attributable to equity holders of the Company during the first nine months of 2005 of US$896.6 million, or US$0.76 per share (US$1.52 per ADS), or 19% of net sales. Operating income was US$1,989.5 million, or 35% of net sales, compared to US$1,371.5 million, or 28% of net sales. Operating income plus depreciation and amortization was US$2,155.5 million, or 38% of net sales, compared to US$1,528.2 million, or 32% of net sales. (metric tons) Sales volume 9M 2006 9M 2005 Increase/(Decrease) North America 549,000 651,000 (16%) Europe 531,000 484,000 10% Middle East & Africa 561,000 378,000 48% Far East & Oceania 242,000 292,000 (17%) South America 305,000 328,000 (7%) Total seamless pipes 2,188,000 2,132,000 3% Welded pipes 217,000 392,000 (45%) Total steel pipes 2,405,000 2,523,000 (5%) (US$ million) Net sales 9M 2006 9M 2005 Increase/(Decrease) Seamless pipes 4,657.5 3,667.0 27% Welded pipes(b) 362.5 636.8 (43%) Energy 403.7 362.6 11% Others 244.2 171.1 43% Total 5,667.9 4,837.6 17% (b) Includes other metallic products produced by Confab, our Brazilian welded pipe subsidiary Net sales in the nine months ended September 30, 2006 increased 17% to US$5,667.9 million, compared to US$4,837.6 million in the corresponding nine months of 2005. Net sales of seamless pipes rose by 27%, due primarily to higher sales of high-end products and higher selling prices for all products. Net sales of welded pipes, which included US$47 million of other metallic products in the first nine months of 2006 and US$47 million of such sales in the first nine months of 2005, fell by 43% due to the decline in sales for gas pipeline projects in Brazil and Argentina. Net sales of energy rose by 11% due to higher Italian gas and electric energy prices. Net sales of other goods and services increased 43% due to higher sales of pre-reduced hot briquetted iron from our plant in Venezuela. (percentage of net sales) Cost of sales 9M 2006 9M 2005 Seamless pipes 46% 54% Welded pipes 72% 67% Energy 97% 98% Others 69% 61% Total 52% 59% Cost of sales, expressed as a percentage of net sales, decreased to 52% in the first nine months of 2006, compared to 59% in the same period of 2005 reflecting higher gross margins on our sales of seamless pipe products and a higher proportion of seamless pipe sales in total sales. Cost of sales for seamless pipe products, expressed as a percentage of net sales, decreased to 46% in the first nine months of 2006 compared to 54% in the same period of 2005 reflecting a higher proportion of higher-margin, high-end products in the product mix and higher selling prices for our products. Cost of sales for welded pipe products, expressed as a percentage of net sales, increased to 72% in the first nine months of 2006 compared to 67% in the same period of 2005 reflecting the impact of an increased proportion of lower-margin export sales in the sales mix. Selling, general and administrative expenses, or SG&A, remained stable as a percentage of net sales at 12.6% in the nine months ended September 30, 2006 compared to 12.5% in the corresponding nine months of 2005. Net financial income was US$10.9 million in the first nine months of 2006, compared to a net financial expense of US$89.6 million in the same period of 2005. Net interest income was US$1.5 million in the first nine months of 2006 compared to a net interest expense of US$24.7 million in the same period of 2005, primarily reflecting changes in the net debt position. A gain of US$9.3 million on net foreign exchange transactions and changes in fair value of derivative instruments was recorded in the first nine months of 2006, compared to a loss of US$70.2 million during the first nine months of 2005. These gains and losses on net foreign exchange transactions and changes in fair value of derivative instruments are to a large extent offset by changes to our net equity position and arise due to the fact that many of our subsidiaries prepare their financial statements in currencies other than the US dollar in accordance with IFRS. Equity in earnings of associated companies generated a gain of US$76.7 million in the first nine months of 2006, compared to a gain of US$94.9 million in the first nine months of 2005. The gain in the first nine months of 2006 was derived mainly from our 11.5% equity shareholding in Ternium and the gain in the first nine months of 2005 was derived mainly from our prior investment in Sidor. Income tax charges totalled US$629.7 million in the first nine months of 2006, equivalent to 31% of income before equity in earnings of associated companies and income tax. Income attributable to minority interest was US$76.8 million in the first nine months of 2006, compared to US$75.9 million in the first nine months of 2005 as better operating and financial results at our NKKTubes subsidiary were largely offset by weaker operating and financial results at our Confab subsidiary. 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 Three-month period Nine-month period ended September 30, ended September 30, ------------------------------------------ (all amounts in thousands of U.S. dollars) 2006 2005 2006 2005 ------------------------------------------ (Unaudited) Net sales 1,922,491 1,640,385 5,667,908 4,837,623 Cost of sales (982,487) (962,929)(2,974,015)(2,871,831) ------------------------------------------ Gross profit 940,004 677,456 2,693,893 1,965,792 Selling, general and administrative expenses (246,506) (205,937) (712,882) (603,530) Other operating income, net 2,274 3,696 8,465 9,265 ------------------------------------------ Operating income 695,772 475,215 1,989,476 1,371,527 Financial income (expenses), net (3,743) (5,141) 10,918 (89,591) ------------------------------------------ Income before equity in earnings of associated companies and income tax 692,029 470,074 2,000,394 1,281,936 Equity in earnings of associated companies 29,653 26,502 76,725 94,944 ------------------------------------------ Income before income tax 721,682 496,576 2,077,119 1,376,880 Income tax (211,726) (145,678) (629,709) (404,392) ------------------------------------------ Income for the period 509,956 350,898 1,447,410 972,488 Attributable to: Equity holders of the Company 479,105 318,897 1,370,564 896,587 Minority interest 30,851 32,001 76,846 75,901 ------------------------------------------ 509,956 350,898 1,447,410 972,488 ------------------------------------------ Consolidated condensed interim balance sheet (all amounts in thousands of U.S. dollars) At September 30, 2006 At December 31, 2005 --------------------- --------------------- (Unaudited) ASSETS Non-current assets Property, plant and equipment, net 2,403,926 2,230,038 Intangible assets, net 165,673 159,099 Investments in associated companies 392,011 257,234 Other investments 27,473 25,647 Deferred tax assets 248,032 194,874 Receivables 39,310 3,276,425 65,852 2,932,744 ---------- ---------- Current assets Inventories 1,668,723 1,376,113 Receivables and prepayments 192,433 143,282 Current tax assets 144,307 102,455 Trade receivables 1,438,470 1,324,171 Other investments 134,651 119,907 Cash and cash equivalents 1,295,184 4,873,768 707,356 3,773,284 ---------- ---------- ---------- ---------- Total assets 8,150,193 6,706,028 EQUITY Capital and reserves attributable to the Company's equity holders Share capital 1,180,537 1,180,537 Legal reserves 118,054 118,054 Share premium 609,733 609,733 Currency translation adjustments (29,371) (59,743) Other reserves 28,835 2,718 Retained earnings 2,822,834 4,730,622 1,656,503 3,507,802 ---------- ---------- Minority interest 328,255 268,071 ---------- ---------- Total equity 5,058,877 3,775,873 ---------- ---------- LIABILITIES Non-current liabilities Borrowings 554,094 678,112 Deferred tax liabilities 361,974 353,395 Other liabilities 163,582 154,378 Provisions 80,079 43,964 Trade payables 521 1,160,250 1,205 1,231,054 ---------- ---------- Current liabilities Borrowings 321,217 332,180 Current tax liabilities 463,448 452,534 Other liabilities 187,524 138,875 Provisions 9,037 36,945 Customer advances 180,381 113,243 Trade payables 769,459 1,931,066 625,324 1,699,101 ---------- ---------- ---------- ---------- Total liabilities 3,091,316 2,930,155 ---------- ---------- Total equity and liabilities 8,150,193 6,706,028 Consolidated condensed interim cash flow statement Three-month period Nine-month period ended September ended September 30, 30, ------------------ ------------------- (all amounts in thousands of U.S. dollars) 2006 2005 2006 2005 ------------------ ------------------- (Unaudited) Cash flows from operating activities Income for the period 509,956 350,898 1,447,410 972,488 Adjustments for: Depreciation and amortization 56,218 52,911 166,008 156,654 Income tax accruals less payments 92,107 68,669 1,947 104,425 Equity in earnings of associated companies (29,653) (26,502) (76,725) (94,944) Interest accruals less payments, net 2,920 (3,204) 1,456 3,006 Income from disposal of investment - - (6,933) - Changes in provisions 2,676 2,213 8,207 (423) Proceeds from Fintecna arbitration award net of BHP settlement - - - 66,594 Changes in working capital (31,113) 32,730 (250,654)(301,376) Other, including currency translation adjustment (5,025) 8,570 21,447 25,549 ------------------ ------------------- Net cash provided by operating activities 598,086 486,285 1,312,163 931,973 ------------------ ------------------- Cash flows from investing activities Capital expenditures (132,976) (62,794) (302,077)(194,428) Acquisitions of subsidiaries (718) (72) (39,828) (48,002) Convertible loan to associated companies - (39,944) - (39,944) Proceeds from disposal of property, plant and equipment and intangible assets 13,180 2,523 16,568 5,413 Dividends and distributions received from associated companies - 18,009 - 59,127 Changes in restricted bank deposits 1,400 426 2,027 10,060 Reimbursement from trust funds - - - 119,666 Investments in short terms securities 161,786 (144,659) (14,744)(144,659) ------------------ ------------------- Net cash (used in) provided by investing activities 42,672 (226,511) (338,054)(232,767) ------------------ ------------------- Cash flows from financing activities Dividends paid - - (204,233) (199,511) Dividends paid to minority interest in subsidiaries (3,620) (5,194) (19,621) (7,924) Proceeds from borrowings 59,282 130,167 293,845 775,930 Repayments of borrowings (173,169) (284,759) (443,328) (1,019,006) ---------- --------- ---------- ----------- Net cash used in financing activities (117,507) (159,786) (373,337) (450,511) ---------- --------- ---------- ----------- Increase in cash and cash equivalents 523,251 99,988 600,772 248,695 Movement in cash and cash equivalents At beginning of the period 752,259 430,284 680,591 293,824 Effect of exchange rate changes 902 1,190 (4,951) (11,057) Increase in cash and cash equivalents 523,251 99,988 600,772 248,695 At September 30, 1,276,412 531,462 1,276,412 531,462 Cash and cash equivalents At September 30, 2006 2005 2006 2005 Cash and bank deposits 1,295,184 567,773 1,295,184 567,773 Bank overdrafts (18,751) (32,871) (18,751) (32,871) Restricted bank deposits (21) (3,440) (21) (3,440) 1,276,412 531,462 1,276,412 531,462 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: November 9, 2006 Tenaris, S.A. By: /s/ Cecilia Bilesio ----------------------- Cecilia Bilesio Corporate Secretary