Tenaris Says Oil and Gas Drilling Should Pick Up by End of Year
05/08/2013 - Tenaris said first quarter sales decreased as higher sales of premium OCTG products in Saudi Arabia and Sub-Saharan Africa did not fully compensate for lower sales in South America and the impact of lower market prices for less differentiated products in North America.
Tenaris S.A. announced its results for the quarter ended 31 March 2013 in comparison with its results for the quarter ended 31 March 2012.
Summary of 2013 First Quarter Results
(Comparison with fourth and first quarters of 2012)
First quarter sales decreased 3% sequentially as higher sales of premium OCTG products in Saudi Arabia and Sub-Saharan Africa did not fully compensate for lower sales in South America and the impact of lower market prices for less differentiated products in North America. EBITDA and operating margins maintained a good level in a competitive market.
Cash provided by operating activities reached US$563 million during the quarter and at the end of the quarter we had a net cash position (cash and other current investments less total borrowings) of US$121 million.
Market Background and Outlook
Over the past three quarters, drilling activity in North America has slowed down but should start to pick up by the end of the year, while in the rest of the world it should continue to increase slowly, supported by current oil and gas prices.
In the second quarter, the Canadian break up will affect the company’s sales in North America. Sales in the Middle East are expected to increase further from the level of the first quarter. In the second half, sales of line pipe in Brazil will be affected by delays in project execution. Industrial customers in Europe will continue to be affected by weak economic activity.
In this environment, sales and margins for the rest of the year are expected to remain close to current levels with product mix improvements helping to offset the impact of lower prices in less differentiated segments.
Analysis of 2013 First Quarter Results
Net sales of tubular products and services decreased 3% sequentially but increased 4% year on year. Sales decreased sequentially as higher sales of premium in Saudi Arabia and Sub-Saharan Africa did not fully compensate for lower sales in South America and lower market prices in North America. In North America, higher sales in Canada largely offset the effect of lower market prices and less favorable product mix in the United States. In South America, sales decreased due to lower sales of line pipe in Argentina and of OCTG in Colombia. In Europe, sales increased due to higher sales of line pipe for offshore projects in Norway. In the Middle East and Africa, sales increased due to higher sales of premium products in Saudi Arabia and Sub-Saharan Africa. In the Far East and Oceania, sales decreased due to lower sales of line pipe and industrial products in the region.
Operating income from tubular products and services decreased 8% sequentially and 1% year on year, reflecting a decline in sales and in operating margin.
Net sales of other products and services increased 6% sequentially but declined 12% year on year. The sequential increase in sales and operating income was mainly due to higher sales and operating income of our industrial equipment business in Brazil.
