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Tenaris - Analysis of 2012 third quarter results
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Monday, 12 Nov 2012
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Tubes Sales volume (tonnes)

Q3 '12Q2 '12QoQQ3 '11YoY
Seamless642,000.0701,000.0-8.4650,000.0-1%
Welded305,000287,0006%266,00015%
Total947,000988,000-4%916,0003%



(Net sales - USD million)

Q3 '12Q2 '12QoQQ3 '11YoY
North America1,260.01,270.10.01,014.424%
South America61053714%49024%
Europe253285-11%273-7%
Middle East & Africa235.9352.5-33%355.2-34%
Far East & Oceania109.4130.4-16%142.2-23%
Total net sales2,468.52,575.4-4%2,275.28%
Operating income559.8589.3-5%440.827%
Operating margin (% of sales)23%23%19%



Net sales of tubular products and services increased 8% year on year but decreased 4% sequentially as sales were mainly affected by lower shipments to the Middle East and lower demand for industrial products in Europe. In North America, sequentially lower sales of deepwater line pipe in the Gulf of Mexico were largely offset by higher sales in Mexico. Sales increased in South America, mainly in Argentina and Colombia. In Europe, lower demand from the industrial sector and seasonally lower sales to distributors were the main causes of the sequential decrease. In the Middle East and Africa sales decreased sequentially due to lower shipments relating to the timing of orders. In the Far East and Oceania sales decreased sequentially due to lower sales of OCTG and structural products.

Operating income from tubular products and services, which, in the third quarter of 2012, included a non recurring gain of USD 49.2 million, increased 27% YoY but decreased 5% sequentially. The sequential decline in operating income reflects a lower proportion of seamless pipes in the sales mix and efficiency losses related to operational issues at the Tamsa steel shop and plant maintenance shutdowns.

Others

Q3 '12Q2 '12QoQQ3 '11YoY
Net sales188.5226.6-0.2219.6-14%
Operating income2432-24%28-14%
Operating margin (% of sales)000


In USD Million

Net sales of other products and services decreased 14% year on year and 17% sequentially, reflecting lower sales of industrial equipment in Brazil, which also impacted operating income and margins.

Selling, general and administrative expenses, or SG&A, amounted to 17.3% of net sales in the third quarter of 2012, compared to 17.4% in the previous quarter and 18.5% in the third quarter of 2011.

Other operating income, net, amounted to USD 44.2 million in the third quarter of 2012, compared to USD 0.8 million in the previous quarter and USD 1.6 million in the third quarter of 2011. In August, 2012, Confab, our Brazilian subsidiary, collected USD 49 million from the Brazilian government, in interest and monetary adjustment over a tax benefit received in 1991.

Net interest expenses amounted to USD 8.8 million in the third quarter of 2012, compared to USD 7.0 million in the previous quarter and USD 8.5 million in the third quarter of 2011.

Other financial results generated a loss of USD 15.2 million during the third quarter of 2012, compared to a loss of USD 16.5 million in the previous quarter and a gain of USD 28.0 million during the third quarter of 2011. These results largely reflect gains and losses on net foreign exchange transactions and the fair value of derivative instruments and are partially offset by changes to our net equity position. During the third quarter of 2011, these gains were mainly attributable to the revaluation of the US dollar against the Brazilian real (+18.6%), as our Brazilian subsidiaries held a positive net financial position in US dollar in the quarter.

Equity in earnings of associated companies generated a gain of USD 14.4 million in the third quarter of 2012, compared to a gain of USD 11.1 million in the previous quarter and a gain of USD 1.5 million in the third quarter of 2011. These gains were derived mainly from our equity investment in Ternium and reflected higher results at Ternium.

Income tax charges totaled USD 136.5 million in the third quarter of 2012, equivalent to 24% of income before equity in earnings of associated companies and income tax, compared to 25% in the previous quarter and in the third quarter of 2011.

Results attributable to non controlling interests amounted to gains of USD 1.1 million in the third quarter of 2012, compared to losses of USD 0.9 million in the previous quarter and to gains of USD 40.5 million in the third quarter of 2011. Year on year, the reduction in gains attributable to non controlling interests is due to the acquisition of all the non controlling interests in Confab in the second quarter of 2012.

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