Tenaris Announces 2017 Fourth Quarter and Annual Results
The financial and operational information contained in this press release is based on audited consolidated 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 and Free Cash Flow. See exhibit I for more details on these alternative performance measures.
LUXEMBOURG, Feb. 21, 2018 (GLOBE NEWSWIRE) -- Tenaris S.A. (NYSE:TS) (BAE:TS) (BMV:TS) (MILAN:TEN) (“Tenaris”) today announced its results for the fourth quarter and year ended December 31, 2017 with comparison to its results for the fourth quarter and year ended December 31, 2016.
Summary of 2017 Fourth Quarter Results
(Comparison with third quarter of 2017 and fourth quarter of 2016)
| 4Q 2017 | 3Q 2017 | 4Q 2016 | ||||||||||||
| Net sales ($ million) | 1,589 | 1,303 | 22 | % | 1,046 | 52 | % | |||||||
| Operating income ($ million) | 168 | 79 | 113 | % | 6 | 2,788 | % | |||||||
| Net income ($ million) | 162 | 95 | 70 | % | 24 | 563 | % | |||||||
| Shareholders’ net income ($ million) | 160 | 105 | 53 | % | 34 | 374 | % | |||||||
| Earnings per ADS ($) | 0.27 | 0.18 | 53 | % | 0.06 | 374 | % | |||||||
| Earnings per share ($) | 0.14 | 0.09 | 53 | % | 0.03 | 374 | % | |||||||
| EBITDA ($ million) | 319 | 225 | 42 | % | 172 | 85 | % | |||||||
| EBITDA margin (% of net sales) | 20.1 | % | 17.3 | % | 16.5 | % | ||||||||
Sales rose strongly quarter on quarter as we saw higher demand from Rig Direct® customers in USA and Canada, increasing investment in the Vaca Muerta shale play in Argentina, a ramp up in deliveries for East Mediterranean pipelines, higher OCTG sales to national oil companies (NOC) in the Middle East and strengthening demand for mechanical products in Europe. Earnings per share, operating income and EBITDA margins all rose on higher absorption of fixed costs.
During the quarter, we had an increase of working capital of $274 million with a further inventory build of $163 million in anticipation of higher shipments in the forthcoming quarter and higher trade receivables associated with a higher level of sales. Net cash flow used in operations amounted to $13 million. After capital expenditures of $121 million and dividend payments of $153 million, our net cash position (cash, other current investments and fixed income investments held to maturity less total borrowings) declined to $680 million at the end of the quarter.
Summary of 2017 Annual Results
| 12M 2017 | 12M 2016 | Increase/(Decrease) | ||||||
| Net sales ($ million) | 5,289 | 4,294 | 23% | |||||
| Operating income (loss) ($ million) | 335 | (59) | 667% | |||||
| Net income ($ million) | 536 | 59 | 813% | |||||
| Shareholders’ net income ($ million) | 545 | 55 | 885% | |||||
| Earnings per ADS ($) | 0.92 | 0.09 | 885% | |||||
| Earnings per share ($) | 0.46 | 0.05 | 885% | |||||
| EBITDA ($ million) | 943 | 598 | 58% | |||||
| EBITDA margin (% of net sales) | 17.8% | 13.9% | ||||||
In 2017, our net sales rose steadily through the year, rising 23% compared to 2016, with the fourth quarter up 52% compared to the fourth quarter of 2016. While sales rose strongly during the year to Rig Direct® customers in USA, Canada, Colombia and Thailand as well as in Saudi Arabia, there were significant declines in sales of line pipe in Brazil, shipments of OCTG to other NOC customers in the Middle East and sales for offshore projects in sub-Saharan Africa.
EBITDA rose 58% year on year, with margins recovering on higher volumes and better absorption of fixed costs. Shareholders net income rose strongly to $545 million, benefitting from higher operating income, a good return on our investment in Ternium, a tax benefit due to the reduction in tax rates in Argentina and the United States, and a gain on the sale of our Republic Conduit business at the beginning of the year.
Our net cash position declined during the year to $680 million at December 31, 2017, compared to $1.4 billion at December 31, 2016, as we completed construction of our Bay City mill, built up working capital to support our growth in sales and maintained dividend payments.
Annual Dividend Proposal
The board of directors proposes, for the approval of the annual general shareholders’ meeting to be held on May 2, 2018, the payment of an annual dividend of $0.41 per share ($0.82 per ADS), or approximately $484 million, which includes the interim dividend of $0.13 per share ($0.26 per ADS), or approximately $153 million, paid in November 2017. If the annual dividend is approved by the shareholders, a dividend of $0.28 per share ($0.56 per ADS), or approximately $331 million will be paid on May 23, 2018, with an ex-dividend date on May 21, 2018 and record date on May 22, 2018.
Market Background and Outlook
As we enter 2018, shale drilling activity in the USA and Canada, which had fallen slightly in the fourth quarter of 2017, has resumed growth. In the rest of the world, more projects are moving forward and conditions in markets like the Middle East and the North Sea have been improving but any recovery in 2018 will be gradual. In Latin America, drilling activity in Colombia and in the Vaca Muerta shale play in Argentina has been picking up. In Mexico, however, despite further positive results of the energy reform program, a significant recovery in activity remains unlikely this year.
Growth in global OCTG demand, following a 40% increase in 2017, will be more modest in 2018 and concentrated in the major markets of USA, China, Russia and the Middle East.
We expect our sales in 2018 to show good growth in most regions and product lines compared to 2017, with strong year on year growth in each quarter. Sales in the first quarter will be boosted by an exceptional level of shipments for East Mediterranean pipelines and high sales in Canada in the peak drilling season. Raw material costs have risen significantly in the last few months and we expect that there will be a compensating increase in prices as demand gradually increases. For the first quarter, our EBITDA margin should remain close to that for the fourth quarter of 2017.
At this time, there is considerable uncertainty surrounding the possible outcome, if any, of an eventual Section 232 ruling by the US government to impose tariffs or quotas on the import into the USA of steel products including pipe and tube. The US Department of Commerce has recommended that the President take such an action and outlined a number of approaches that such action could take. With the continuing uncertainty about the likely outcome of such action, we do not yet have sufficient elements to evaluate its possible impact on our operations or results.
Analysis of 2017 Fourth Quarter Results
| Tubes Sales volume (thousand metric tons) | 4Q 2017 | 3Q 2017 | 4Q 2016 | |||||||||
| Seamless | 593 | 527 | 13 | % | 458 | 29 | % | |||||
| Welded | 171 | 120 | 43 | % | 67 | 154 | % | |||||
| Total | 764 | 647 | 18 | % | 526 | 45 | % | |||||
| Tubes | 4Q 2017 | 3Q 2017 | 4Q 2016 | |||||||
| (Net sales - $ million) | ||||||||||
| North America | 707 | 633 | 12 | % | 336 | 110 | % | |||
| South America | 296 | 256 | 16 | % | 212 | 40 | % | |||
| Europe | 133 | 117 | 13 | % | 122 | 9 | % | |||
| Middle East & Africa | 290 | 170 | 71 | % | 275 | 5 | % | |||
| Asia Pacific | 51 | 51 | 0 | % | 38 | 35 | % | |||
| Total net sales ($ million) | 1,478 | 1,228 | 20 | % | 983 | 50 | % | |||
| Operating income ($ million) | 150 | 66 | 127 | % | 5 | 2,894 | % | |||
| Operating margin (% of sales) | 10.1 | % | 5.4 | % | 0.5 | % | ||||
Net sales of tubular products and services increased 20% sequentially and 50% year on year. Sequentially, the increase in sales in North America, reflects higher sales of OCTG products, line pipe and oil tools to shale producers in the United States and Canada. In South America, sales increased due to higher sales of line pipe in Argentina and increased sales of OCTG products in Colombia. In Europe we had higher sales of industrial products, line pipe for Hidrocarbon Process Industry (HPI) plants and OCTG products throughout the region. In the Middle East and Africa sales increased significantly as we started the ramp up in sales of offshore line pipe in the East Mediterranean and in sub-Saharan Africa, together with a partial recovery of OCTG sales in the Middle East. In Asia Pacific we had stable Rig Direct® sales in Thailand and low demand in the rest of the region.
Operating income from tubular products and services, amounted to $150 million in the fourth quarter of 2017, compared to $66 million in the previous quarter and $5 million in the fourth quarter of 2016. Sequentially, the increase in operating income is due to an increase in shipments that improved the utilization of production capacity and therefore the absorption of fixed costs, together with a reduction in selling, general and administrative expenses as a percentage of sales.
| Others | 4Q 2017 | 3Q 2017 | 4Q 2016 | |||||||||||
| Net sales ($ million) | 111 | 75 | 48% | 63 | 77% | |||||||||
| Operating income ($ million) | 18 | 13 | 37% | 1 | 2,533% | |||||||||
| Operating income (% of sales) | 16.5% | 17.8% | 1.1% | |||||||||||
Net sales of other products and services increased 48% sequentially and 77% year on year. The sequential increase in sales and operating income is mostly related to our sucker rods business and other energy related products.
Selling, general and administrative expenses, or SG&A, amounted to $344 million, 21.6% of net sales in the fourth quarter of 2017, compared to $305 million, 23.4% in the previous quarter and $280 million, 26.8% in the fourth quarter of 2016. Sequential SG&A increased 13% mostly due to higher selling expenses following an increase in revenues of 22% but decreased 180 basis points as a percentage of sales.
Financial results amounted to a gain of $4 million in the fourth quarter of 2017, compared to a loss of $7 million in the previous quarter and a gain of $23 million in the fourth quarter of 2016.
Equity in earnings of non-consolidated companies generated a gain of $26 million in the fourth quarter of 2017, compared to a gain of $25 million in the previous quarter and $15 million in the same period of 2016. These results are mainly derived from our equity investment in Ternium (NYSE:TX).
Income tax charges totaled $36 million in the fourth quarter of 2017. During the quarter, we recorded a gain of $61 million, due to the reduction in income tax rates in Argentina and the United States over deferred tax liabilities. A charge of $51 million was recorded mainly due to the Argentine and Mexican peso devaluation on the tax base used to calculate deferred taxes. Additionally, during the quarter we recorded an income tax charge of $19 million corresponding to a settlement agreement between Dalmine, our Italian subsidiary, and the Italian tax authorities in connection with all withholding tax claims on 2007 and 2008 dividend payments.
Results attributable to non-controlling interests amounted to gain of $2 million in the fourth quarter of 2017, compared to a loss of $10 million in the previous quarter and a loss of $9 million in the fourth quarter of 2016. During this quarter results include mainly gains from our pipe coating subsidiary in Nigeria.
Cash Flow and Liquidity of 2017 Fourth Quarter
Net cash used in operations during the fourth quarter of 2017 was $13 million, compared with uses of $2 million in the previous quarter and $79 million in the fourth quarter of 2016. Working capital increased by $274 million during the fourth quarter of 2017 mainly due to the increase in inventories and trade receivables associated with the increase in shipments and production.
Capital expenditures amounted to $121 million for the fourth quarter of 2017, compared to $143 million in the previous quarter and $158 million in the fourth quarter of 2016.
During the quarter, our net cash position declined by $294 million to $680 million at the end of the year, following the payment of an interim dividend of $153 million in November 2017.
Analysis of 2017 Annual Results
| Tubes Sales volume (thousand metric tons) | 12M 2017 | 12M 2016 | Increase/(Decrease) | |||
| Seamless | 2,157 | 1,635 | 32% | |||
| Welded | 461 | 355 | 30% | |||
| Total | 2,618 | 1,990 | 32% | |||
| Tubes | 12M 2017 | 12M 2016 | Increase/(Decrease) | |||||
| (Net sales - $ million) | ||||||||
| North America | 2,362 | 1,265 | 87% | |||||
| South America | 982 | 1,032 | (5%) | |||||
| Europe | 497 | 542 | (8%) | |||||
| Middle East & Africa | 921 | 1,041 | (11%) | |||||
| Asia Pacific | 204 | 136 | 50% | |||||
| Total net sales ($ million) | 4,966 | 4,015 | 24% | |||||
| Operating income (loss) ($ million) | 292 | (71) | 510% | |||||
| Operating income (% of sales) | 6% | (1.8%) | ||||||
Net sales of tubular products and services increased 24% to $4,966 million in 2017, compared to $4,015 million in 2016, reflecting a 32% increase in volumes and a 6% decrease in average selling prices. Sales increased mainly due to a strong increase in demand in the United States and Canada, partially offset by lower sales in the rest of the world appart from Asia Pacific. In North America, our sales increased 87%, due to the recovery in shale drilling in the United States and Canada. In the rest of the world, recovery remained more elusive, appart from Asia Pacific due to higher Rig Direct® sales in Thailand
Operating result from tubular products and services, amounted to a gain of $292 million in 2017, compared to a loss of $71 million in 2016. The recovery in Tubes operating income reflects a better operating environment, where a 32% increase in shipments improved the utilization of production capacity and therefore the absorption of fixed costs and a reduction in severance costs ($67 million in 2016 vs. $32 million in 2017). Additionally, SG&A expenses as a percentage of sales declined from 29.0% in 2016 to 24.8% in 2017.
| Others | 12M 2017 | 12M 2016 | Increase/(Decrease) | |||||
| Net sales ($ million) | 323 | 278 | 16% | |||||
| Operating income ($ million) | 43 | 12 | 254% | |||||
| Operating margin (% of sales) | 13.2% | 4.3% | ||||||
Net sales of other products and services increased 16% to $323 million in 2017, compared to $278 million in 2016, mainly due to higher sales of energy related products e.g., sucker rods and coiled tubing and excess raw materials and energy.
Operating income from other products and services, increased from $12 million in 2016 to $43 million in 2017, mainly due to improved profitability from our coiled tubing business together with higher results from sales of excess raw materials and energy.
Selling, general and administrative expenses, or SG&A, increased by $73 million (6%) in 2017 from $1,197 million in 2016 to $1,270 million in 2017. However, SG&A expenses decreased as a percentage of net sales to 24.0% in 2017 compared to 27.9% in 2016, mainly due to the effect of fixed and semi fixed expenses on higher sales (e.g., depreciation and amortization and labor costs).
Financial results amounted to a loss of $23 million in 2017, compared to a gain of $22 million in 2016. The 2017 loss is mostly related to an FX charge corresponding to the Euro appreciation on Euro denominated intercompany liabilities, fully offset in the currency translation reserve in equity.
Equity in earnings of non-consolidated companies generated a gain of $116 million in 2017, compared to $72 million in 2016. These results were mainly derived from our equity investment in Ternium (NYSE:TX).
Income tax for the year was positive amounting to $17 million. In 2017 we recorded a gain of $63 million due to the reduction in income tax rates in Argentina, the United States and Colombia over deferred tax liabilities. Additionally, during 2017 we recorded an income tax charge of $29 million corresponding to a settlement agreement between Dalmine, our Italian subsidiary, and the Italian tax authorities in connection with all withholding tax claims on 2007 and 2008 dividend payments. Under such settlement agreement, Dalmine paid to the Italian tax administration an aggregate amount of EUR42.9 million (approximately $51 million), net of EUR3.2 million (approximately $4 million) corresponding to the amount previously paid during the litigation proceeding.
Net income for the year amounted to $536 million in 2017, including a gain from discontinued operations of $92 million, compared with a gain in 2016 of $59 million, including a gain from discontinued operations of $41 million. Net income from continuing operations amounted to a gain of $445 million in 2017, which compares with a gain of $17 million in 2016. The improvement in results reflects a better operating environment, where a 32% increase in shipments improved the utilization of production capacity and therefore the absorption of fixed costs, a reduction in severance costs ($74 million in 2016 vs. $34 million in 2017), a positive income tax of $17 million reflecting primarily the effect of the changes in income tax rates in Argentina and the United States on deferred tax positions, better results from our investment in associated companies (mainly Ternium) and a gain of $92 million from the sale of Republic Conduit.
Cash Flow and Liquidity of 2017
Cash flow used in operating activities amounted to $22 million during 2017 (including an increase in working capital of $855 million). Following dividend payments of $484 million during the year, and capital expenditures of $558 million, we maintained a positive net cash position (i.e., cash, other current investments and fixed income investments held to maturity less total borrowings) of $680 million at December 31, 2017, including the $328 million we collected from the sale of Republic Conduit.
Conference call
Tenaris will hold a conference call to discuss the above reported results, on February 22, 2018, at 09:00 a.m. (Eastern Time). Following a brief summary, the conference call will be opened to questions. To access the conference call dial in +1 877 730.0732 within North America or +1 530 379.4676 Internationally. The access number is “9286689”. Please dial in 10 minutes before the scheduled start time. The conference call will be also available by webcast at www.tenaris.com/investors.
A replay of the conference call will be available on our webpage http://ir.tenaris.com/ or by phone from 12:00 pm ET on February 22 through 11:59 pm on March 3. To access the replay by phone, please dial +1 855 859.2056 or +1 404 537.3406 and enter passcode “9286689” when prompted.
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 Income Statement
| (all amounts in thousands of U.S. dollars) | Three-month period ended December 31, | Twelve-month period ended December 31, | ||||||
| 2017 | 2016 | 2017 | 2016 | |||||
| Continuing operations | ||||||||
| Net sales | 1,588,916 | 1,045,800 | 5,288,504 | 4,293,592 | ||||
| Cost of sales | (1,077,134 | ) | (757,549 | ) | (3,685,057 | ) | (3,165,684 | ) |
| Gross profit | 511,782 | 288,251 | 1,603,447 | 1,127,908 | ||||
| Selling, general and administrative expenses | (343,730 | ) | (280,452 | ) | (1,270,016 | ) | (1,196,929 | ) |
| Other operating income (expenses) net | (23 | ) | (1,979 | ) | 1,157 | 9,964 | ||
| Operating income (loss) | 168,029 | 5,820 | 334,588 | (59,057 | ) | |||
| Finance Income | 11,843 | 7,871 | 47,605 | 66,204 | ||||
| Finance Cost | (8,613 | ) | (6,298 | ) | (27,072 | ) | (22,329 | ) |
| Other financial results | 1,081 | 21,434 | (43,550 | ) | (21,921 | ) | ||
| Income (loss) before equity in earnings of non-consolidated companies and income tax | 172,340 | 28,827 | 311,571 | (37,103 | ) | |||
| Equity in earnings of non-consolidated companies | 25,987 | 14,608 | 116,140 | 71,533 | ||||
| Income before income tax | 198,327 | 43,435 | 427,711 | 34,430 | ||||
| Income tax | (36,159 | ) | (26,809 | ) | 17,136 | (17,102 | ) | |
| Income for continuing operations | 162,168 | 16,626 | 444,847 | 17,328 | ||||
| Discontinued operations | ||||||||
| Result for discontinued operations | - | 7,852 | 91,542 | 41,411 | ||||
| Income for the year | 162,168 | 24,478 | 536,389 | 58,739 | ||||
| Attributable to: | ||||||||
| Owners of the parent | 160,232 | 33,800 | 544,737 | 55,298 | ||||
| Non-controlling interests | 1,936 | (9,322 | ) | (8,348 | ) | 3,441 | ||
| 162,168 | 24,478 | 536,389 | 58,739 | |||||
Consolidated Statement of Financial Position
| (all amounts in thousands of U.S. dollars) | At December 31, 2017 | At December 31, 2016 | |||
| ASSETS | |||||
| Non-current assets | |||||
| Property, plant and equipment, net | 6,229,143 | 6,001,939 | |||
| Intangible assets, net | 1,660,859 | 1,862,827 | |||
| Investments in non-consolidated companies | 640,294 | 557,031 | |||
| Available for sale assets | 21,572 | 21,572 | |||
| Other investments | 128,335 | 249,719 | |||
| Deferred tax assets | 153,532 | 144,613 | |||
| Receivables, net | 183,329 | 9,017,064 | 197,003 | 9,034,704 | |
| Current assets | |||||
| Inventories, net | 2,368,304 | 1,563,889 | |||
| Receivables and prepayments, net | 143,929 | 124,715 | |||
| Current tax assets | 132,334 | 140,986 | |||
| Trade receivables, net | 1,214,060 | 954,685 | |||
| Other investments | 1,192,306 | 1,633,142 | |||
| Cash and cash equivalents | 330,221 | 5,381,154 | 399,737 | 4,817,154 | |
| Assets of disposal group classified as held for sale | - | 151,417 | |||
| Total assets | 14,398,218 | 14,003,275 | |||
| EQUITY | |||||
| Capital and reserves attributable to owners of the parent | 11,482,185 | 11,287,417 | |||
| Non-controlling interests | 98,785 | 125,655 | |||
| Total equity | 11,580,970 | 11,413,072 | |||
| LIABILITIES | |||||
| Non-current liabilities | |||||
| Borrowings | 34,645 | 31,542 | |||
| Deferred tax liabilities | 457,970 | 550,657 | |||
| Other liabilities | 217,296 | 213,617 | |||
| Provisions | 36,438 | 746,349 | 63,257 | 859,073 | |
| Current liabilities | |||||
| Borrowings | 931,214 | 808,694 | |||
| Current tax liabilities | 102,405 | 101,197 | |||
| Other liabilities | 197,504 | 183,887 | |||
| Provisions | 32,330 | 22,756 | |||
| Customer advances | 56,707 | 39,668 | |||
| Trade payables | 750,739 | 2,070,899 | 556,834 | 1,713,036 | |
| Liabilities of disposal group classified as held for sale | - | 18,094 | |||
| Total liabilities | 2,817,248 | 2,590,203 | |||
| Total equity and liabilities | 14,398,218 | 14,003,275 | |||
Consolidated Statement of Cash Flows
| Three-month period ended December 31, | Twelve-month period ended December 31, | ||||||||
| (all amounts in thousands of U.S. dollars) | 2017 | 2016 | 2017 | 2016 | |||||
| Cash flows from operating activities | |||||||||
| Income for the period | 162,168 | 24,478 | 536,389 | 58,739 | |||||
| Adjustments for: | |||||||||
| Depreciation and amortization | 151,281 | 167,774 | 608,640 | 662,412 | |||||
| Income tax accruals less payments | (33,367 | ) | (12,301 | ) | (193,989 | ) | (128,079 | ) | |
| Equity in earnings of non-consolidated companies | (25,987 | ) | (14,608 | ) | (116,140 | ) | (71,533 | ) | |
| Interest accruals less payments, net | 3,978 | 10,281 | 11,550 | (2,567 | ) | ||||
| Changes in provisions | 4,723 | 1,750 | (17,245 | ) | 15,597 | ||||
| Income from the sale of Conduit business | - | - | (89,694 | ) | - | ||||
| Changes in working capital | (274,134 | ) | (210,988 | ) | (855,282 | ) | 348,199 | ||
| Currency translation adjustment and Others | (1,561 | ) | (45,207 | ) | 93,746 | (19,203 | ) | ||
| Net cash (used in) provided by operating activities | (12,899 | ) | (78,821 | ) | (22,025 | ) | 863,565 | ||
| Cash flows from investing activities | |||||||||
| Capital expenditures | (121,074 | ) | (158,074 | ) | (558,236 | ) | (786,873 | ) | |
| Changes in advance to suppliers of property, plant and equipment | 868 | 9,015 | 7,077 | 50,989 | |||||
| Proceeds from disposal of Conduit business | - | - | 327,631 | - | |||||
| Investment in non-consolidated companies | - | - | - | (17,108 | ) | ||||
| Acquisition of subsidiaries | - | - | (10,418 | ) | - | ||||
| Investment in companies under cost method | - | - | (3,681 | ) | - | ||||
| Loan to non-consolidated companies | - | (6,996 | ) | (7,056 | ) | (42,394 | ) | ||
| Proceeds from disposal of property, plant and equipment and intangible assets | 1,045 | 1,377 | 5,443 | 23,609 | |||||
| Dividends received from non-consolidated companies | - | - | 22,971 | 20,674 | |||||
| Changes in investments in securities | 53,341 | 233,232 | 565,387 | 652,755 | |||||
| Net cash provided by (used in) investing activities | (65,820 | ) | 78,554 | 349,118 | (98,348 | ) | |||
| Cash flows from financing activities | |||||||||
| Dividends paid | (153,470 | ) | (153,470 | ) | (484,020 | ) | (507,631 | ) | |
| Dividends paid to non-controlling interest in subsidiaries | (4,800 | ) | (778 | ) | (24,000 | ) | (29,089 | ) | |
| Acquisitions of non-controlling interests | (15 | ) | (285 | ) | (49 | ) | (1,071 | ) | |
| Proceeds from borrowings | 334,663 | 384,756 | 1,196,781 | 1,180,727 | |||||
| Repayments of borrowings | (201,459 | ) | (294,332 | ) | (1,090,129 | ) | (1,295,560 | ) | |
| Net cash used in financing activities | (25,081 | ) | (64,109 | ) | (401,417 | ) | (652,624 | ) | |
| (Decrease) increase in cash and cash equivalents | (103,800 | ) | (64,376 | ) | (74,324 | ) | 112,593 | ||
| Movement in cash and cash equivalents | |||||||||
| At the beginning of the period | 434,778 | 468,123 | 398,580 | 286,198 | |||||
| Effect of exchange rate changes | (888 | ) | (5,167 | ) | 5,834 | (211 | ) | ||
| (Decrease) increase in cash and cash equivalents | (103,800 | ) | (64,376 | ) | (74,324 | ) | 112,593 | ||
| At December 31, | 330,090 | 398,580 | 330,090 | 398,580 | |||||
Exhibit I – Alternative performance measures
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 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= Operating results + Depreciation and amortization + Impairment charges/(reversals).
| (all amounts in thousands of U.S. dollars) | Three-month period ended December 31, | Twelve-month period ended December 31, | ||||
| 2017 | 2016 | 2017 | 2016 | |||
| Operating income | 168,029 | 5,820 | 334,588 | (59,057 | ) | |
| Depreciation and amortization | 151,281 | 167,774 | 608,640 | 662,412 | ||
| Depreciation and amortization from discontinued operations | - | (1,222 | ) | - | (5,303 | ) |
| EBITDA | 319,310 | 172,372 | 943,228 | 598,052 | ||
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/debt = Cash and cash equivalents + Other investments (Current)+ Fixed income investments held to maturity – Borrowings (Current and Non-current).
| (all amounts in thousands of U.S. dollars) | At December 31, | |||
| 2017 | 2016 | |||
| Cash and bank deposits | 330,221 | 399,737 | ||
| Other current investments | 1,192,306 | 1,633,142 | ||
| Fixed income investments held to maturity | 123,498 | 248,049 | ||
| Borrowings | (965,859 | ) | (840,236 | ) |
| Net cash / (debt) | 680,166 | 1,440,692 | ||
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.
| (all amounts in thousands of U.S. dollars) | Three-month period ended December 31, | Twelve-month period ended December 31, | ||||||
| 2017 | 2016 | 2017 | 2016 | |||||
| Net cash (used in) provided by operating activities | (12,899 | ) | (78,821 | ) | (22,025 | ) | 863,565 | |
| Capital expenditures | (121,074 | ) | (158,074 | ) | (558,236 | ) | (786,873 | ) |
| Free cash flow | (133,973 | ) | (236,895 | ) | (580,261 | ) | 76,692 | |
Giovanni Sardagna
Tenaris
1-888-300-5432
www.tenaris.com