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 and Net cash / debt. See exhibit I for more details on these alternative performance measures.
LUXEMBOURG, Aug. 05, 2020 (GLOBE NEWSWIRE) — Tenaris S.A. (NYSE and Mexico: TS and MTA Italy: TEN) (“Tenaris”) today announced its results for the quarter ended June 30, 2020 in comparison with its results for the quarter ended June 30, 2019.Summary of 2020 Second Quarter Results(Comparison with first quarter 2020 and second quarter of 2019)*EBITDA is defined as operating (loss) income plus depreciation, amortization and impairment charges / (reversals). EBITDA includes severance charges of $54 million in Q2 2020 and $23 million in Q1 2020. If these charges were not included EBITDA would have been $113 million (9.1%) in Q2 2020 and $303 million (17,2%) in Q1 2020.Our second quarter sales were down 30% sequentially following the rapid decline in economic activity, oil consumption and drilling activity as a result of the measures to contain the COVID-19 pandemic around the world. Sales in North and South America were particularly affected but some areas, like the Middle East and offshore, showed more resilience.In response to this crisis, which will have a profound and extended impact on our sector, and the severe reduction in our revenues, we have implemented actions to adjust the level of our operations around the world, reset our fixed cost structure, reduce working capital and bolster our financial condition.EBITDA for the quarter, which includes $54 million of severance charges, remained positive even as it was affected by the low absorption of fixed and semi-fixed costs and inefficiencies related to the steep decline in capacity utilization at our production facilities. We did, however, record a net loss of $50 million as we advanced with our restructuring measures.Free cash flow remained strong at $402 million, with a further reduction in working capital of $446 million, bringing the reduction in the first half to $763 million. Consequently, our net cash position (i.e., cash, other current and non-current investments less total borrowings) has improved and stood at $670 million as of June 30 2020.Market Background and OutlookThe collapse in global oil consumption as a result of the measures taken to contain the spread of the COVID-19 pandemic has resulted in a steep build up of inventories around the world. Even though economic activity and oil consumption have recovered to some extent since the low point reached in April, and an exceptional level of production cuts has been coordinated, the level of oil inventories and production capacity will take a long time to rebalance before a recovery in consumption to pre-pandemic levels. This remains distant and beset with uncertainty. In this environment, investments in exploration and production of oil and gas have been severely curtailed and are not expected to recover any time soon.Demand for tubular products from the oil and gas industry has fallen significantly during the second quarter, following the reduction in rigs, and we expect it will fall further in the second half as a result of lower drilling activity and high inventory levels, particularly in North America. Sales will be further affected by realized pricing declines.In this uncertain environment, we are anticipating a further significant reduction in sales and margins during the third quarter of 2020, with all regions being affected, before seeing an improvement in the fourth quarter. Our third quarter EBITDA margin, excluding restructuring charges, could fall close to a low single digit level while we expect to continue to reduce working capital and generate positive free cash flow.Analysis of 2020 Second Quarter ResultsTubes
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