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Tenaris Announces 2024 Second Quarter Results
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, Free Cash Flow, Net cash / debt and Operating working capital days. See exhibit I for more details on these alternative performance measures.
LUXEMBOURG, July 31, 2024 (GLOBE NEWSWIRE) -- Tenaris S.A. (NYSE and Mexico: TS and EXM Italy: TEN) ("Tenaris") today announced its results for the quarter ended June 30, 2024 in comparison with its results for the quarter ended June 30, 2023.
Summary of 2024 Second Quarter Results
(Comparison with first quarter of 2024 and second quarter of 2023)
2Q 2024
1Q 2024
2Q 2023
Net sales ($ million)
3,322
3,442
(3
%)
4,075
(18
%)
Operating income ($ million)
512
812
(37
%)
1,278
(60
%)
Net income ($ million)
348
750
(54
%)
1,136
(69
%)
Shareholders' net income ($ million)
335
737
(55
%)
1,123
(70
%)
Earnings per ADS ($)
0.59
1.27
(54
%)
1.90
(69
%)
Earnings per share ($)
0.29
0.64
(54
%)
0.95
(69
%)
EBITDA* ($ million)
650
987
(34
%)
1,409
(54
%)
EBITDA margin (% of net sales)
19.6
%
28.7
%
34.6
%
*EBITDA in 2Q 2024 includes a $171 million loss from the provision for ongoing litigation related to the acquisition of a participation in Usiminas. If this charge was not included EBITDA would have amounted to $821 million, or 24.7% of sales. For more information, see note 18 "Contingencies, commitments and restrictions to the distribution of profits - CSN claims relating to the January 2012 acquisition of Usiminas" included in the company's Consolidated Condensed Interim Financial Statements as of June 30, 2024.
Net sales in the second quarter were more resilient than expected with shipments remaining at a high level in the Middle East, the United States and in offshore regions, while average selling prices benefited from a favorable mix of products. Margins, however, were affected by the ongoing decline in OCTG prices in the Americas, and net income was affected by an extraordinary provision recorded in other operating income and expenses.
During the quarter, our free cash flow amounted to $774 million and, after spending $459 million on dividends and $492 million on share buybacks, our positive net cash position amounted to $3.8 billion at June 30, 2024.
Market Background and Outlook
The outlook for oil demand and supply remains solid even if the announced rollback of OPEC+ voluntary production cuts has introduced some uncertainty.
OCTG imports into the United States have remained high through the year, while oil and gas drilling activity is being affected by ongoing industry consolidation, low natural gas prices and high financing costs for smaller operators. OCTG inventories have risen and prices continue to fall.
Political and economic volatility is affecting drilling activity in Mexico and Argentina, and there are delays in defining the pipeline infrastructure investment required to further develop the prolific Vaca Muerta shale.
In the rest of the world, demand from offshore developments and for gas drilling associated with LNG projects remains supportive going into 2025.
In the third quarter, our sales and EBITDA will be affected by lower activity in the United States and Latin America and the extended decline in OCTG prices in the Americas. As anticipated, we will have maintenance stoppages at many of our mills, including the installation of a new furnace at our Siderca steel shop.
Considering this environment, we are acting to reduce costs, increase competitiveness and align our industrial system.
Analysis of 2024 Second Quarter Results
Tubes
The following table indicates, for our Tubes business segment, sales volumes of seamless and welded pipes for the periods indicated below:
Tubes Sales volume (thousand metric tons)
2Q 2024
1Q 2024
2Q 2023
Seamless
805
777
4
%
844
(5
%)
Welded
228
269
(15
%)
255
(11
%)
Total
1,033
1,046
(1
%)
1,099
(6
%)
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:
Tubes
2Q 2024
1Q 2024
2Q 2023
(Net sales - $ million)
North America
1,410
1,488
(5
%)
2,142
(34
%)
South America
582
614
(5
%)
893
(35
%)
Europe
267
226
18
%
270
(1
%)
Asia Pacific, Middle East and Africa
810
804
1
%
612
32
%
Total net sales ($ million)
3,069
3,132
(2
%)
3,918
(22
%)
Operating income ($ million)
449
769
(42
%)
1,251
(64
%)
Operating margin (% of sales)
14.6
%
24.6
%
31.9
%
Net sales of tubular products and services decreased 2% sequentially and 22% year on year. Although on a sequential basis total volumes sold decreased 1%, seamless volumes increased 4%. Average selling prices decreased 1% as a favorable product mix offset price declines in the Americas. In North America lower prices throughout the region were partially offset by higher offshore sales in the Gulf of Mexico. In South America we had lower OCTG prices in Argentina and Colombia and lower sales in the Caribbean. In Asia Pacific, Middle East and Africa continued high level of sales in Saudi Arabia and the UAE and a resumption of sales in Kuwait were offset by lower sales in Algeria and Iraq and offshore line pipe.
Operating results from tubular products and services amounted to a gain of $449 million in the second quarter of 2024 compared to a gain of $769 million in the previous quarter and $1,251 million in the second quarter of 2023. Our Tubes operating income in 2Q 2024 includes a $171 million loss from the provision for ongoing litigation related to the acquisition of a participation in Usiminas. On the other hand, operating income of the quarter includes a gain amounting to $14 million from a positive legal claim resolution in Mexico.
Others
The following table indicates, for our Others business segment, net sales, operating income and operating income as a percentage of net sales for the periods indicated below:
Others
2Q 2024
1Q 2024
2Q 2023
Net sales ($ million)
253
310
(18
%)
157
61
%
Operating income ($ million)
62
42
47
%
27
129
%
Operating margin (% of sales)
24.7
%
13.7
%
17.3
%
Net sales of other products and services decreased 18% sequentially and increased 61% year on year. Sequentially, sales declined mainly due to a decline in coating sales following the conclusion of certain projects, partially offset by higher sales of coiled tubing and oil services in Argentina.
Selling, general and administrative expenses, or SG&A, amounted to $497 million, or 15.0% of net sales, in the second quarter of 2024, compared to $508 million, 14.8% in the previous quarter and $529 million, 13.0% in the second quarter of 2023. Sequentially, the decline in SG&A is mainly due to a $30 million reduction in depreciation and amortization following the final valuation of the recently acquired coating assets, partially offset by an increase in services and fees, taxes and other.
Other operating results amounted to a loss of $170 million in the second quarter of 2024, compared to a gain of $12 million in the previous quarter and a $1 million loss in the second quarter of 2023. In the second quarter of 2024 we recorded a $171 million loss from provision for ongoing litigation related to the acquisition of a participation in Usiminas. For more information, see note 18 "Contingencies, commitments and restrictions to the distribution of profits - CSN claims relating to the January 2012 acquisition of Usiminas" included in the company's Consolidated Condensed Interim Financial Statements as of June 30, 2024.
Financial results amounted to a gain of $57 million in the second quarter of 2024, compared to a loss of $25 million in the previous quarter and a gain of $40 million in the second quarter of 2023. Financial result of the quarter is mainly attributable to a $53 million net finance income from the net return of our portfolio investments.
Equity in (losses) earnings of non-consolidated companies generated a loss of $83 million in the second quarter of 2024, compared to a gain of $48 million in the previous quarter and $96 million in the second quarter of 2023. These results are mainly derived from our participation in Ternium (NYSE:TX). The quarter includes an $83 million loss from the provision for ongoing litigation related to the acquisition of a participation in Usiminas on our investment in Ternium. For more information, see note 18 "Contingencies, commitments and restrictions to the distribution of profits - CSN claims relating to the January 2012 acquisition of Usiminas" included in the company's Consolidated Condensed Interim Financial Statements as of June 30, 2024.
Income tax charge amounted to $138 million in the second quarter of 2024, compared to $85 million in the previous quarter and $278 million in the second quarter of 2023. Despite lower income before tax, the tax charge of the quarter was sequentially higher basically due to the impact of the foreign exchange devaluation in Mexico mainly on the fiscal values of fixed assets and inventory.
Cash Flow and Liquidity of 2024 Second Quarter
Net cash generated by operating activities during the second quarter of 2024 was $935 million, compared to $887 million in the previous quarter and $1.3 billion in the second quarter of 2023. During the second quarter of 2024 cash generated by operating activities includes a net working capital reduction of $285 million.
With capital expenditures of $161 million, our free cash flow amounted to $774 million during the quarter. After a dividend payment of $459 million in May 2024 and share buybacks of $492 million in the quarter, our net cash position amounted to $3.8 billion at June 30, 2024.
Analysis of 2024 First Half Results
6M 2024
6M 2023
Increase/(Decrease)
Net sales ($ million)
6,763
8,216
(18
%)
Operating income ($ million)
1,323
2,630
(50
%)
Net income ($ million)
1,098
2,265
(52
%)
Shareholders' net income ($ million)
1,072
2,252
(52
%)
Earnings per ADS ($)
1.87
3.81
(51
%)
Earnings per share ($)
0.93
1.91
(51
%)
EBITDA* ($ million)
1,637
2,886
(43
%)
EBITDA margin (% of net sales)
24.2
%
35.1
%
*EBITDA in 6M 2024 includes a $171 million loss from the provision for ongoing litigation related to the acquisition of a participation in Usiminas. If this charge was not included EBITDA would have amounted to $1,808 million, or 26.7% of sales. For more information, see note 18 "Contingencies, commitments and restrictions to the distribution of profits - CSN claims relating to the January 2012 acquisition of Usiminas" included in the company's Consolidated Condensed Interim Financial Statements as of June 30, 2024.
Our sales in the first half of 2024 decreased 18% compared to the first half of 2023 as volumes of tubular products shipped decreased 6% and tubes average selling prices decreased 16% while sales in the Others segment increased 74%. Following the decrease in sales, mainly due to the tubes average price decline, EBITDA margin declined from 35.1% to 24.2% and EBITDA declined 43%. EBITDA includes a $171 million loss from the provision for ongoing litigation related to the acquisition of a participation in Usiminas, included in other operating expenses. Additionally, related to the same case, net income includes an $83 million loss from our participation in Ternium.
Cash flow provided by operating activities amounted to $1.8 billion during the first half of 2024, including a reduction in working capital of $276 million. After capital expenditures of $333 million, our free cash flow amounted to $1.5 billion. Following a dividend payment of $459 million in May 2024 and share buybacks for $803 million in the semester, our positive net cash position amounted to $3.8 billion at the end of June 2024.
The following table shows our net sales by business segment for the periods indicated below:
Net sales ($ million)
6M 2024
6M 2023
Increase/(Decrease)
Tubes
6,200
92
%
7,892
96
%
(21
%)
Others
563
8
%
324
4
%
74
%
Total
6,763
8,216
(18
%)
Tubes
The following table indicates, for our Tubes business segment, sales volumes of seamless and welded pipes for the periods indicated below:
Tubes Sales volume (thousand metric tons)
6M 2024
6M 2023
Increase/(Decrease)
Seamless
1,582
1,684
(6
%)
Welded
496
538
(8
%)
Total
2,078
2,222
(6
%)
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:
Tubes
6M 2024
6M 2023
Increase/(Decrease)
(Net sales - $ million)
North America
2,896