Tenaris S.A.
Tenaris Announces 2017 Third Quarter Results

LUXEMBOURG — (Marketwired) — 11/01/17 — Tenaris S.A. (NYSE: TS)
(BAE: TS) (BMV: TS) (MILAN: TEN) (‘Tenaris’) today announced its
results for the quarter and nine months ended September 30, 2017 with
comparison to its results for the quarter and nine months ended
September 30, 2016.

Summary of 2017 Third Quarter Results

(Comparison with second quarter of 2017 and third quarter of 2016)



Q3 2017 Q2 2017 Q3 2016
——– ————— —————
Net sales ($ million) 1,303 1,243 5% 987 32%
Operating income (loss) ($ million) 79 51 54% (33) 342%
Net income ($ million) 95 73 30% 15 515%
Shareholders’ net income ($
million) 105 75 41% 17 532%
Earnings per ADS ($) 0.18 0.13 41% 0.03 532%
Earnings per share ($) 0.09 0.06 41% 0.01 532%
EBITDA ($ million) 225 200 12% 133 69%
EBITDA margin (% of net sales) 17.3% 16.1% 13.5%



Sales rose strongly in the Americas quarter on quarter reflecting
seasonal factors in Canada, improved product mix and pricing in US
onshore and higher activity from private operators in Argentina.
Overall growth in sales, however, was held back by a trough in
shipments to projects in the Middle East and Africa and for National
Oil Company contracts under renewal as well as seasonal factors in
European sales to distributors of line pipe and industrial products.
Earnings per share, operating income and EBITDA margins all rose on
lower general and administrative expenses and a recovery in margins
in our non-tubular businesses.

During the quarter, we had a build up of inventories of $216 million
in anticipation of higher shipments in the forthcoming quarter and
net cash flow used in operations amounted to $2 million. After
capital expenditures of $143 million, our net cash position (cash,
other current investments and fixed income investments held to
maturity less total borrowings) declined to $974 million at the end
of the quarter.

Interim Dividend Payment

Our board of directors approved the payment of an interim dividend of
$0.13 per share ($0.26 per ADS), or approximately $153 million. The
payment date will be November 22, 2017, with an ex-dividend date on
November 20, 2017 and record date on November 21, 2017.

Appointment to the Audit Committee

Our board of directors appointed Mr. Carlos Condorelli to the audit
committee. Mr. Condorelli will contribute to the Committee his
expertise and extensive experience in audit and accounting.

Market Background and Outlook

Drilling activity in the USA and Canada, which rose at a rapid pace
in the first half of the year, has now stabilized as operators turn
their attention to improving returns on capital amidst uncertainty
about the recovery in oil and gas prices and the prospect of higher
financing costs. In the rest of the world, recovery remains more
elusive, though conditions in some markets, like the North Sea, are
gradually improving and Middle East drilling activity remains stable.
In Latin America, drilling activity in Argentina has started to
recover driven by investments in the Vaca Muerta shale play, while,
in Mexico, despite the positive results of the energy reform program,
a significant recovery in activity remains distant.

We are currently starting up our Bay City rolling mill with the first
pipe rolled on 18 October. This will reinforce our Rig Direct(TM)
service program in North America with a shorter and more efficient
supply chain, reducing lead times and inventory requirements.

In the fourth quarter and going into 2018, we expect our sales in the
Americas to continue growing as we consolidate and expand our Rig
Direct(TM) program in North America and activity in the Vaca Muerta
shale play in Argentina increases. We also expect higher sales in the
rest of the world, boosted by shipments for East Meditarrenean
pipelines, higher shipments to Middle East customers and higher sales
in Europe. EBITDA and operating income should also grow, with margins
benefiting from higher plant utilization and containment of fixed
costs.

Analysis of 2017 Third Quarter Results



Tubes Sales volume
(thousand metric tons) Q3 2017 Q2 2017 Q3 2016
——- —————- ——————–
Seamless 527 529 (0%) 416 27%
Welded 120 96 25% 62 95%
Total 647 624 4% 477 36%

Tubes Q3 2017 Q2 2017 Q3 2016
——- —————– —————–
(Net sales – $ million)
North America 633 548 16% 282 124%
South America 256 227 13% 225 14%
Europe 117 132 (11%) 126 (7%)
Middle East & Africa 170 212 (20%) 251 (32%)
Asia Pacific 51 55 (7%) 34 52%
Total net sales ($ million) 1,228 1,175 5% 917 34%
Operating income (loss) ($
million) 66 46 43% (32) 305%
Operating margin (% of sales) 5.4% 3.9% (3.5%)



Net sales of tubular products and services increased 5% sequentially
and 34% year on year, in line with the increase in shipment volumes.
In North America, sales increased due to the seasonal recovery in
Canada and better pricing and product mix in the United States. In
South America sales increased due to an increase in activity at Vaca
Muerta. In Europe sales declined reflecting seasonally lower sales of
mechanical and line pipe products and lower sales of premium OCTG in
Russia. In the Middle East and Africa sales reached a low point this
quarter but are expected to recover strongly in the coming quarters
led by shipments for East Mediterranean line pipe projects. In Asia
Pacific we had lower sales of line pipe for complex projects.

Operating income from tubular products and services, amounted to $66
million in the third quarter of 2017, compared to $46 million in the
previous quarter and a loss of $32 million in the third quarter of
2016. Sequentially, the increase in operating income is due to a
reduction in selling, general and administrative expenses, mainly
labor costs and services and fees.




Others Q3 2017 Q2 2017 Q3 2016
——- ————- ———–
Net sales ($ million) 75 68 10% 69 8%
Operating income (loss)($ million) 13 6 136% (0)
Operating margin (% of sales) 17.8% 8.3% (0.6%)



Net sales of other products and services increased 10% sequentially
and 8% year on year. The increase in sales and operating income is
mostly related to our energy related businesses, sucker rods and
coiled tubing.

Selling, general and administrative expenses, or SG&A, amounted to
$305 million, or 23.4% of net sales in the third quarter of 2017,
compared to $327 million, 26.3% in the previous quarter and $304
million, 30.9% in the third quarter of 2016. The sequential decline
in SG&A expenses is mainly explained by lower labor costs and
services and fees.

Other operating results, amounted to a loss of $1 million in the
third quarter of 2017, compared with a gain of $2 million in the
previous quarter and a gain of $17 million in the third quarter of
2016 when we recorded the sale of land not used in the production
process of the Company.

Financial results amounted to a loss of $7 million in the third
quarter of 2017, compared to a loss of $16 million in the previous
quarter and a gain of $4 million in the third quarter of 2016. The
loss of the quarter is mainly due to net foreign exchange
transactions loss because of the Euro appreciation on Euro
denominated intercompany-debt in subsidiaries with US dollar
functional currency. These losses are to a large extent offset in
equity, in the currency translation adjustment reserve.

Equity in earnings of non-consolidated companies generated a gain of
$25 million in the third quarter of 2017, compared to $30 million in
the previous quarter and $27 million in the third quarter of 2016.
These results are mainly derived from our equity investment in
Ternium (NYSE: TX) and Usiminas.

Results attributable to non-controlling interests amounted to a loss
of $10 million in the third quarter of 2017, compared to a loss of $1
million in the previous quarter and a loss of $1 million in the third
quarter of 2016. These results were mainly attributable to
non-controlling interests at our Japanese subsidiary NKKTubes and at
our subsidiaries in Ghana and Indonesia.

Cash Flow and Liquidity of 2017 Third Quarter

Net cash used by operating activities during the third quarter of
2017 was $2 million, compared to $33 million in the previous quarter
and a cash generation of $254 million in the third quarter of last
year. During the third quarter of 2017 we used $216 million for the
increase in working capital related to the increase in shipments and
production.

Capital expenditures amounted to $143 million for the third quarter
of 2017, compared to $155 million in the previous quarter and $187
million in the third quarter of 2016. Capital expenditures mainly
relates to the progress in the construction of the greenfield
seamless facility in Bay City, Texas.

We maintained a net cash position (cash, other current investments
and fixed income investments held to maturity less total borrowings)
of $974 million at September 30, 2017.

Analysis of 2017 First Nine Months Results



Increase/
9M 2017 9M 2016 (Decrease)
———- ———- ———-
Net sales ($ million) 3,700 3,248 14%
Operating income (loss) ($ million) 167 (65) 357%
Net income ($ million) 374 34 992%
Shareholders’ net income ($ million) 385 21 1,689%
Earnings per ADS ($) 0.65 0.04 1,689%
Earnings per share ($) 0.33 0.02 1,689%
EBITDA ($ million) 624 426 47%
EBITDA margin (% of net sales) 16.9% 13.1%


Increase/
Tubes Sales volume (thousand metric tons) 9M 2017 9M 2016 (Decrease)
———- ———- ———-
Seamless 1,564 1,177 33%
Welded 290 288 1%
Total 1,854 1,465 27%

Increase/
Tubes 9M 2017 9M 2016 (Decrease)
———- ———- ———-
(Net sales – $ million)
North America 1,654 929 78%
South America 686 820 (16%)
Europe 364 421 (13%)
Middle East & Africa 631 765 (18%)
Asia Pacific 152 98 56%
Total net sales ($ million) 3,488 3,033 15%
Operating income (loss) ($ million) 142 (76) 286%
Operating income (% of sales) 4.1% (2.5%)



Net sales of tubular products and services increased 15% to $3,488
million in the first nine months of 2017, compared to $3,033 million
in the first nine months of 2016, reflecting a 27% increase in
volumes and a 9% decrease in average selling prices.

Operating income from tubular products and services amounted $142
million in the first nine months of 2017 compared to a loss of $76
million in the first nine months of 2016. Results improved following
a 27% increase in shipment volumes, increasing sales and the
utilization of production capacity and therefore the absorption of
fixed costs. Additionally, severance charges were lower as market
conditions improved.



Increase/
Others 9M 2017 9M 2016 (Decrease)
———- ———- ———-
Net sales ($ million) 212 215 (2%)
Operating income ($ million) 24 11 115%
Operating margin (% of sales) 11.5% 5.3%



Net sales of other products and services decreased 2% to $212 million
in the first nine months of 2017, compared to $215 million in the
first nine months of 2016, while operating income increased 115%
reflecting higher margins.

SG&A amounted to $926 million, or 25.0% of net sales during the first
nine months of 2017, compared to $916 million, or 28.2% in the same
period of 2016. Despite a 1% increase in SG&A expenses, SG&A as a
percentage of sales declined following a 14% increase in sales.

Financial results were a loss of $27 million in the first nine months
of 2017 compared to a loss of $1 million in the same period of 2016.
The loss in the first nine months of 2017 is mainly due to the Euro
appreciation on Euro denominated intercompany-debt in subsidiaries
with US dollar functional currency. These losses are to a large
extent offset in equity, in the currency translation adjustment
reserve.

Equity in earnings of non-consolidated companies generated a gain of
$90 million in the first nine months of 2017, compared to a gain of
$57 million in the first nine months of 2016. These results are
mainly derived from our equity investment in Ternium (NYSE: TX) and
Usiminas.

Income tax amounted to a gain of $53 million in the first nine months
of 2017, compared to a gain of $10 million in the first nine months
of 2016, this result reflects primarily the effect of the Mexican
peso revaluation on the tax base used to calculate deferred taxes at
our Mexican subsidiaries which have the U.S. dollar as their
functional currency.

Results attributable to non-controlling interests amounted to a loss
of $10 million in the first nine months of 2017, compared to a gain
of $13 million in the first nine months of 2016. These negative
results were mainly attributable to non-controlling interests at our
Japanese subsidiary NKKTubes and at our subsidiaries in Ghana and
Indonesia while positive results recorded during the first nine
months of 2016 were mainly attributable to our pipe coating
subsidiary in Nigeria.

Cash Flow and Liquidity of 2017 First Nine Months

During the first nine months of 2017, net cash used in operations was
$9 million, compared to $942 million provided by operations in the
same period of 2016. Working capital increased by $581 million in the
first nine months of 2017, while it decreased by $559 million in the
first nine months of 2016.

Capital expenditures amounted to $437 million in the first nine
months of 2017, compared with $629 million in the same period of
2016. These investments are to a great extent related to the
construction of the new greenfield seamless mill in Bay City, Texas.

We maintained a net cash position (cash, other current investments
and fixed income investments held to maturity less total borrowings)
of $974 million at September 30, 2017.

Conference call

Tenaris will hold a conference call to discuss the above reported
results, on November 2, 2017, 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
‘5088749’. 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 November 2nd,
through 11.59 pm on November 10th, 2017. To access the replay by
phone, please dial +1 855 859 2056 or +1 404 537 3406 and enter
passcode ‘5088749’ 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.

Press releases and financial statements can be downloaded from
Tenaris’s website at www.tenaris.com/investors.




Consolidated Condensed Interim Income Statement

Three-month period
(all amounts in thousands of ended Nine-month period ended
U.S. dollars) September 30, September 30,
2017 2016 2017 2016
———————————————–
Continuing operations Unaudited Unaudited
Net sales 1,302,924 986,525 3,699,588 3,247,792
Cost of sales (918,338) (731,450) (2,607,923) (2,408,135)
———————————————–
Gross profit 384,586 255,075 1,091,665 839,657
Selling, general and
administrative expenses (304,723) (304,469) (926,286) (916,477)
Other operating income
(expense), net (808) 16,717 1,180 11,943
———————————————–
Operating income (loss) 79,055 (32,677) 166,559 (64,877)
Finance Income 11,776 14,226 35,762 58,333
Finance Cost (6,501) (6,913) (18,459) (16,031)
Other financial results (12,549) (3,427) (44,631) (43,355)
———————————————–
Income (loss) before equity
in earnings of non-
consolidated companies and
income tax 71,781 (28,791) 139,231 (65,930)
Equity in earnings of non-
consolidated companies 24,752 26,586 90,153 56,925
———————————————–
Income (loss) before income
tax 96,533 (2,205) 229,384 (9,005)
Income tax (1,307) 5,732 53,295 9,707
———————————————–
Income for continuing
operations 95,226 3,527 282,679 702
———————————————–

Discontinued operations
Result for discontinued
operations – 11,961 91,542 33,559
———————————————–
Income for the period 95,226 15,488 374,221 34,261
———————————————–

Attributable to:
Owners of the parent 104,854 16,603 384,505 21,498
Non-controlling interests (9,628) (1,115) (10,284) 12,763
———————————————–
95,226 15,488 374,221 34,261
———————————————–


Consolidated Condensed Interim Statement of Financial Position

(all amounts in thousands of
U.S. dollars) At September 30, 2017 At December 31, 2016
———————– ———————–
Unaudited
ASSETS
Non-current assets
Property, plant and
equipment, net 6,192,271 6,001,939
Intangible assets, net 1,729,391 1,862,827
Investments in non-
consolidated companies 625,105 557,031
Available for sale assets 21,572 21,572
Other investments 227,927 249,719
Deferred tax assets 152,059 144,613
Receivables, net 187,571 9,135,896 197,003 9,034,704
———– ———–
Current assets
Inventories, net 2,204,815 1,563,889
Receivables and
prepayments, net 182,292 124,715
Current tax assets 188,287 140,986
Trade receivables, net 1,066,522 954,685
Other investments 1,146,153 1,633,142
Cash and cash equivalents 436,359 5,224,428 399,737 4,817,154
———– ———–
Assets of disposal group
classified as held for
sale – 151,417
———– ———–
Total assets 14,360,324 14,003,275
———– ———–
EQUITY
Capital and reserves
attributable to owners of
the parent 11,495,733 11,287,417
Non-controlling interests 96,710 125,655
———– ———–
Total equity 11,592,443 11,413,072
———– ———–
LIABILITIES
Non-current liabilities
Borrowings 34,977 31,542
Deferred tax liabilities 507,612 550,657
Other liabilities 222,315 213,617
Provisions 38,072 802,976 63,257 859,073
———– ———–
Current liabilities
Borrowings 796,556 808,694
Current tax liabilities 106,529 101,197
Other liabilities 228,221 183,887
Provisions 25,973 22,756
Customer advances 85,818 39,668
Trade payables 721,808 1,964,905 556,834 1,713,036
———– ———–
Liabilities of disposal
group classified as held
for sale – 18,094
———– ———–
Total liabilities 2,767,881 2,590,203
———– ———–
Total equity and liabilities 14,360,324 14,003,275
———– ———–


Consolidated Condensed Interim Statement of Cash Flow

Three-month period Nine-month period
ended ended
September 30, September 30,
—————————————
(all amounts in thousands of U.S.
dollars) 2017 2016 2017 2016
—————————————
Cash flows from operating activities Unaudited Unaudited

Income for the period 95,226 15,488 374,221 34,261
Adjustments for:
Depreciation and amortization 146,293 167,520 457,359 494,638
Income tax accruals less payments (30,804) (47,047) (160,622) (115,778)
Equity in earnings of non-
consolidated companies (24,752) (26,586) (90,153) (56,925)
Interest accruals less payments, net 2,683 59 7,572 (12,848)
Changes in provisions (2,048) 5,676 (21,968) 13,847
Income from the sale of Conduit
business – – (89,694) –
Changes in working capital (215,926) 148,955 (581,148) 559,187
Currency translation adjustment and
Others 26,898 (10,554) 95,306 26,004
—————————————
Net cash (used in) provided by
operating activities (2,430) 253,511 (9,127) 942,386
—————————————

Cash flows from investing activities
Capital expenditures (143,356) (187,376) (437,162) (628,799)
Changes in advance to suppliers of
property, plant and equipment 1,880 7,622 6,209 41,974
Proceeds from disposal of Conduit
business – – 327,631 –
Investment in non-consolidated
companies – – – (17,108)
Loan to non-consolidated companies 1,950 (11,550) (7,056) (35,398)
Acquisition of subsidiaries (10,418) – (10,418) –
Investment in companies under cost
method – – (3,681) –
Proceeds from disposal of property,
plant and equipment and intangible
assets 1,520 18,253 4,398 22,232
Dividends received from non-
consolidated companies – – 22,971 20,674
Changes in investments in securities 341,975 93,841 512,046 419,523
—————————————
Net cash provided by (used in)
investing activities 193,551 (79,210) 414,938 (176,902)
—————————————

Cash flows from financing activities
Dividends paid – – (330,550) (354,161)
Dividends paid to non-controlling
interest in subsidiaries – (24,000) (19,200) (28,311)
Acquisitions of non-controlling
interests (3) (309) (34) (786)
Proceeds from borrowings 341,747 295,029 862,118 770,971
Repayments of borrowings (370,184) (368,324) (888,670) (976,228)
—————————————
Net cash (used in) financing
activities (28,440) (97,604) (376,336) (588,515)
—————————————

—————————————
Increase in cash and cash
equivalents 162,681 76,697 29,475 176,969
—————————————
Movement in cash and cash
equivalents
At the beginning of the period 270,837 392,643 398,580 286,198
Effect of exchange rate changes 1,260 (1,217) 6,722 4,956
Increase in cash and cash
equivalents 162,681 76,697 29,475 176,969
—————————————
At September 30, 434,778 468,123 434,777 468,123
—————————————




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).



Three-month period Nine-month period
(all amounts in thousands of U.S. ended ended
dollars) September 30, September 30,
—————————————
2017 2016 2017 2016
Operating income 79,055 (32,677) 166,559 (64,877)
Depreciation and amortization 146,293 167,520 457,359 494,638
Depreciation and amortization from
discontinued operations – (1,353) – (4,081)
—————————————
EBITDA 225,348 133,490 623,918 425,680



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 = 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 September 30,
2017 2016
———————–
Cash and cash equivalents 436,359 468,613
Other current investments 1,146,153 1,830,590
Fixed income investments held to maturity 222,992 283,833
Borrowings – current and non-current (831,533) (745,959)
———————–
Net cash / (debt) 973,971 1,837,077