Tenaris SA Annual Report 2012

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FY2012 Annual Report · Tenaris SA

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Annual Report
2012

Certain defined terms

Cautionary statement concerning

Unless otherwise specified or if the context so requires:

forward-looking statements

This annual report and any other oral or written statements made by

•

References in this annual report to “the Company” refer exclusively

us to the public may contain “forward-looking statements”. Forward

to Tenaris S.A., a Luxembourg public limited liability company (société

looking statements are based on management’s current views and

anonyme).

assumptions and involve known and unknown risks that could cause

•

References in this annual report to “Tenaris”, “we”, “us” or “our”

actual results, performance or events to differ materially from those

refer to Tenaris S.A. and its consolidated subsidiaries. See Accounting

expressed or implied by those statements.

Policies A, B and L to our audited consolidated financial statements

included in this annual report.

We use words such as “aim”, “will likely result”, “will continue”,

•

References in this annual report to “San Faustin” refer to San Faustin S.A.

“contemplate”, “seek to”, “future”, “objective”, “goal”, “should”,

(formerly known as San Faustin N.V.), a Luxembourg public limited liability

“will pursue”, “anticipate”, “estimate”, “expect”, “project”,

company (société anonyme) and the Company’s controlling shareholder.

“intend”, “plan”, “believe” and words and terms of similar substance

“Shares” refers to ordinary shares, par value $1.00, of the Company.

to identify forward-looking statements, but they are not the only way

“ADSs” refers to the American Depositary Shares, which are evidenced

we identify such statements. This annual report contains forward-looking

•

by American Depositary Receipts, and represent two Shares each.

statements, including with respect to certain of our plans and current

•

“tons” refers to metric tons; one metric ton is equal to 1,000

goals and expectations relating to Tenaris’s future financial condition

kilograms, 2,204.62 pounds, or 1.102 U.S. (short) tons.

and performance. Sections of this annual report that by their nature

•

“billion” refers to one thousand million, or 1,000,000,000.

contain forward-looking statements include, but are not limited

“U.S. dollars”, “US$”, “USD” or “$” each refers to the United States dollar.

to, “Business overview”, “Principal Risks and Uncertainties”,

and “operating and Financial Review and Prospects”. in addition

to the risks related to our business discussed under “Principal Risks

Presentation of certain financial and other information

and Uncertainties”, other factors could cause actual results to differ

materially from those described in the forward-looking statements.

ACCoUNTiNg PRiNCiPLeS

These factors include, but are not limited to:

We prepare our consolidated financial statements in conformity

with international Financial Reporting Standards, as issued

•

our ability to implement our business strategy or to grow through

by the international Accounting Standards Board and adopted

acquisitions, joint ventures and other investments;

by the european Union, or iFRS.

•

the competitive environment and our ability to price our products

and services in accordance with our strategy;

We publish consolidated financial statements expressed in U.S. dollars.

•

trends in the levels of investment in oil and gas exploration and

our consolidated financial statements included in this annual report

drilling worldwide;

are those as of December 31, 2012 and 2011, and for the years ended

•

general macroeconomic and political conditions in the countries in which

December 31, 2012, 2011 and 2010.

we operate or distribute pipes; and

•

our ability to absorb cost increases and to secure supplies of essential

RoUNDiNg

raw materials and energy.

Certain monetary amounts, percentages and other figures included

in this annual report have been subject to rounding adjustments.

By their nature, certain disclosures relating to these and other risks are

Accordingly, figures shown as totals in certain tables may not be the

only estimates and could be materially different from what actually

arithmetic aggregation of the figures that precede them, and figures

occurs in the future. As a result, actual future gains or losses that may

expressed as percentages in the text may not total 100% or, as

affect our financial condition and results of operations could differ

applicable, when aggregated may not be the arithmetic aggregation

materially from those that have been estimated. You should not place

of the percentages that precede them.

undue reliance on the forward-looking statements, which speak only

as of the date of this annual report. except as required by law, we are

not under any obligation, and expressly disclaim any obligation, to

update or alter any forward-looking statements, whether as a result

of new information, future events or otherwise.

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Index

05.

Leading indicators

06.

Letter from the Chairman

08.

Company profile

09.

Management report

09.

Information on Tenaris

09.

10.

13.

14.

16.

19.

35.

40.

41.

42.

43.

The Company

Overview

History and Development of Tenaris

Business Overview

Research and Development

Tenaris in numbers

Principal Risks and Uncertainties

Operating and Financial Review and Prospects

Quantitative and Qualitative Disclosure

about Market Risk

Recent Developments

Environmental Regulation

Related Party Transactions

Employees

Corporate Governance

61.

Management certification

Financial information

63.

Consolidated Financial Statements

153.

Tenaris S.A. Annual accounts

(Luxembourg GAAP)

166.

Investor information

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Leading indicators

TUBeS SALeS VoLUMeS (thousands of tons)

Seamless

Welded

Total

TUBeS PRoDUCTioN VoLUMeS (thousands of tons)

Seamless

Welded

Total

FiNANCiAL iNDiCAToRS (millions of USD)

Net sales

operating income

eBiTDA (1)

Net income

Cash flow from operations

Capital expenditures

BALANCe SHeeT (millions of USD)

Total assets

Total borrowings

Net financial debt / (cash) (2)

Total liabilities

Shareholders’ equity including non-controlling interests

PeR SHARe / ADS DATA (USD per share / per ADS) (3)

Number of shares outstanding (4) (thousands of shares)

earnings per share

earnings per ADS

Dividends per share (5)

Dividends per ADS (5)

ADS Stock price at year-end

NUMBeR oF eMPLoYeeS (4)

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2012

2011

2010

2,676

1,188

3,864

2,806

1,188

3,994

10,834

2,357

2,875

1,701

1,860

790

15,964

1,744

271

4,404

11,560

2,613

1,134

3,747

2,683

1,073

3,756

9,972

1,845

2,399

1,421

1,283

863

14,864

931

(324)

3,691

11,173

2,206

902

3,108

2,399

983

3,382

7,712

1,519

1,959

1,141

871

847

14,364

1,244

(276)

3,814

10,551

1,180,537

1.44

2.88

0.43

0.86

41.92

26,673

1.13

2.26

0.38

0.76

37.18

26,980

0.95

1.91

0.34

0.68

48.98

25,422

1. Defined as operating income plus depreciation, amortization and impairment charges/(reversals)
and in 2012 excludes a non-recurring gain of $49.2 million, recorded in other operating income
corresponding to a tax related lawsuit collected in Brazil.

2. Defined as borrowings less cash and cash equivalents and other current investments.

3. each ADS represents two shares.

5. Proposed or paid in respect of the year.

4. As of December 31.

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Letter from the Chairman

Dear Shareholders,

2012 was another good year for Tenaris. We further strengthened our competitive positioning, had a good
industrial performance, posted solid growth in earnings per share and took a further decisive step for the
future when we decided to build a new greenfield seamless mill in the United States.

The North American shale revolution, and the surge in U.S. oil and gas production, is transforming the
world’s energy industry with new opportunities for Tenaris. In 2012, our sales to the region rose 21% year
on year and represented 49% of our total sales for the year. This was achieved based on our leading position
in the Gulf of Mexico deepwater, the shale plays, Canadian thermal projects and throughout Mexico.

We will build our seamless pipe mill in Bay City, Texas. We plan to bring the 600,000 tons per year
capacity mill and logistics center into operation in 2016 within a budget of $1.5 billion. This investment
will further strengthen our competitive positioning in North America and reflects our confidence in the
future development of the region as a new frontier for the energy industry.

Oil and gas companies are moving forward with investments in deepwater and other complex operations
around the world, increasing demand for products which can perform reliably and efficiently under the
most demanding drilling conditions. In 2012, our sales of premium casing and tubing products rose 27%
year on year. Sales of our Dopeless® connections were particularly strong with growth of 75% by volume
year on year. We continue to expand our portfolio of premium connections to satisfy the increasingly
complex needs of a dynamic industry.

In Brazil, where the energy industry faces the challenge of developing the pre-salt deepwater complex,
we invested $1.3 billion during 2012, including the acquisition of non-controlling interests in our Confab
subsidiary. We signed an expanded long-term agreement with Petrobras, including the supply of premium
OCTG products with TenarisHydril technology. We are strengthening our competitive position with the
development of new products, with the opening of our Research Center in Rio de Janeiro, and through
product development and logistics integration with our main steel supplier.

Elsewhere, we have expanded our network of facilities, service yards, and the level of technical service
we provide our customers and strengthened our presence in markets such as Saudi Arabia, Iraq, Nigeria,
Angola, Indonesia and Australia where we are anticipating demand growth.

All our safety indicators improved across almost all of our facilities. The implementation of our
Safe Hour program throughout our operations around the world is having important results. We will
maintain our resolute focus on improving our safety performance at all levels. Safety is an increasingly
important element of our competitive differentiation in the eyes of our customers and the communities
where we operate.

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To reduce our energy consumption and environmental footprint, we are investing in a large number of
projects at our industrial facilities throughout the world. During the year, our new rolling mill in Mexico
was awarded the LEED (Leadership in Energy and Environmental Design) certification from the US Green
Building Council, becoming the first industrial facility of its type to achieve this recognition.

TenarisUniversity is a key component of our drive to create a sustainable, truly global company with
common managerial and industrial practices and a shared culture. Campuses were recently opened in
Brazil and Mexico to add to those in Argentina and Italy. Over 1.2 million hours of training are delivered
annually throughout Tenaris with courses designed for both factory and managerial employees. Highly
specialized on-line courses are now being developed with key academic universities, the first of which is
one on thermo-mechanical processing of metals developed with the University of Sheffield.

Education is the focus of our community development programs, in every community in which we operate.
In addition to our traditional forms of support through scholarships and teacher training, we launched a
program to establish a series of technical schools specializing in electronics and electro-mechanics. The first
Roberto Rocca Technical School has been opened this month in Campana, Argentina. The objective of the
program is to strengthen and modernize technical education, preparing professionals capable of dealing
with the challenges of today’s industrial management by promoting best teaching practices and innovation.

Our operating and financial results reflect the progress we have made this year. Our EBITDA increased
20% to $2.9 billion and our margin reached an industry-leading level of 27%. Earnings per share rose
28% and we are proposing to increase the annual dividend for a second consecutive year by 13%.

Looking ahead, we see an industry which is changing rapidly, in terms of regional growth, product and
service requirements and project development. Our challenge is to prepare our industrial base, our human
resources, our product development, service deployment and internal processes to meet the demands of
this very dynamic environment.

In closing, I would like to thank our employees for the commitment and dedication they have shown
throughout the year. It is their contribution day after day that makes the difference and without it these
results would not have been possible. I would also like to express my thanks to our customers, suppliers
and shareholders for their continuous support and confidence in Tenaris.

March 27, 2013

Paolo Rocca

Company profile

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Tenaris is a leading supplier of tubes and related services for the world’s energy industry and certain other
industrial applications. Our mission is to deliver value to our customers through product development,
manufacturing excellence and supply chain management. We seek to minimize risk for our customers and
help them reduce costs, increase flexibility and improve time-to-market. Our employees around the world
are committed to continuous improvement by sharing knowledge across a single global organization.

Nisku

Red Deer

Prudential

Bakersfield

Hickman

Oklahoma City

Conroe

Monterrey

Poza Rica

Guadalajara

Tamsa

AlgomaTubes

Pittsburgh

Louisville
Counce

Cedar Springs
Westwego

Mexico City

Villahermosa

Dos Bocas

Comalcaco

Ciudad del Carmen

Aberdeen

Esbjerg

Copenhagen

Dalmine

Munich

Silcotub

Campina
Ploiesti

Bucharest

Ankara

Aksai

Atyrau

Ashgabat

Erbil

Misurata

Dammam

Basra

Bahrain

Doha

New Delhi

Mumbai

NKKTubes

TuboCaribe
Barrancabermeja

Villavicencio

Neiva

Lima

Callao

Lagos

Accra

Luba

Warri

Onne
Malabo

Natal

Luanda

Confab

Rio das Ostras

Rio de Janeiro

Maputo

Santiago

Siderca

Villa Mercedes

Montevideo
Siat

Ho Chi Minh

Kuala Lumpur

Batam

Balikpapan

SPIJ

Jakarta

Moresby

Darwin

Broome

Perth

Manufacturing Centers

R&D Centers

Service Centers

Commercial Offices

Information
on Tenaris

The Company
Our holding company’s legal and commercial name
is Tenaris S.A. The Company was established as a
public limited liability company (société anonyme)
organized under the laws of the Grand Duchy of
Luxembourg. The Company’s registered office is
located at 29 avenue de la Porte-Neuve, 3rd Floor,
L-2227, Luxembourg, telephone (352) 2647-8978.

The Company has no branches. For information on
the Company’s subsidiaries, see note 30 “Principal
subsidiaries” to our audited consolidated financial
statements included in this annual report.

Overview
We are a leading global manufacturer and supplier
of steel pipe products and related services for the
world’s energy industry and for other industrial
applications. Our customers include most of the
world’s leading oil and gas companies as well as
engineering companies engaged in constructing oil
and gas gathering, transportation, processing and
power generation facilities. Our principal products
include casing, tubing, line pipe, and mechanical
and structural pipes.

Over the last two decades, we have expanded our
business globally through a series of strategic
investments. We now operate an integrated
worldwide network of steel pipe manufacturing,
research, finishing and service facilities with
industrial operations in the Americas, Europe, Asia
and Africa and a direct presence in most major oil
and gas markets.

to minimize risk for our customers and help them
reduce costs, increase flexibility and improve
time-to-market. Our employees around the world are
committed to continuous improvement by sharing
knowledge across a single global organization.

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History and Development of Tenaris
Tenaris began with the formation of Siderca
S.A.I.C., or Siderca, the sole Argentine
producer of seamless steel pipe products, by San
Faustin’s predecessor in Argentina in 1948. We
acquired Siat, an Argentine welded steel pipe
manufacturer, in 1986. We grew organically in
Argentina and then, in the early 1990s, began
to evolve beyond this initial base into a global
business through a series of strategic investments.
These investments included the acquisition,
directly or indirectly, of controlling or strategic
interests in the following companies:

•

Tubos de Acero de México S.A., or Tamsa, the sole
Mexican producer of seamless steel pipe products
(June 1993);
Dalmine S.p.A., or Dalmine, a leading
Italian producer of seamless steel pipe products
(February 1996);
Tubos de Acero de Venezuela S.A., or Tavsa,
the sole Venezuelan producer of seamless steel
pipe products (October 1998)(1);
Confab Industrial S.A., or Confab, the leading
Brazilian producer of welded steel pipe products
(August 1999). During the second quarter of 2012,
we acquired all the remaining non-controlling
interests in Confab;

Our mission is to deliver value to our customers
through product development, manufacturing
excellence, and supply chain management. We seek

(1) In 2009, the Venezuelan government nationalized Tavsa. For

more information on the Tavsa nationalization process, see note
31 “Nationalization of Venezuelan Subsidiaries” to our audited
consolidated financial statements included in this annual report.

10.

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NKKTubes, a leading Japanese producer
of seamless steel pipe products (August 2000);
Algoma Tubes Inc., or AlgomaTubes, the sole
Canadian producer of seamless steel pipe
products (October 2000);
S.C. Silcotub S.A., or Silcotub, a leading Romanian
producer of seamless steel pipe products (July 2004);
Maverick Tube Corporation, or Maverick, a
leading North American producer of welded
steel pipe products with operations in the U.S.,
Canada and Colombia (October 2006);
Hydril Company, or Hydril, a leading North
American manufacturer of premium connection
products for oil and gas drilling production
(May 2007);
Seamless Pipe Indonesia Jaya, or SPIJ, an Indonesian
oil country tubular goods, or OCTG, processing
business with heat treatment and premium
connection threading facilities (April 2009);
Pipe Coaters Nigeria Ltd, the leading company
in the Nigerian coating industry (November 2011);
Usinas Siderúrgicas de Minas Gerais S.A., or
Usiminas, where through our subsidiary Confab,
we hold an interest representing 5.0% of the shares
with voting rights and 2.5% of the total share
capital (January 2012); and
a sucker rod business, in Campina, Romania
(February 2012).

In addition, we have established a global network
of pipe finishing, distribution and service facilities
with a direct presence in most major oil and gas
markets and a global network of research and
development centers.

Business Overview
Our business strategy is to continue expanding our
operations worldwide and further consolidate our

position as a leading global supplier of high-quality
tubular products and services to the energy and
other industries by:

•

pursuing strategic investment opportunities in
order to strengthen our presence in local and
global markets;
expanding our comprehensive range of products
and developing new high-value products designed
to meet the needs of customers operating in
increasingly challenging environments;
securing an adequate supply of production inputs
and reducing the manufacturing costs of our core
products; and
enhancing our offer of technical and pipe
management services designed to enable customers
to optimize their selection and use of our products
and reduce their overall operating costs.

Pursuing strategic investment opportunities

and alliances
We have a solid record of growth through strategic
investments and acquisitions. We pursue selective
strategic investments and acquisitions as a means
to expand our operations and presence in selected
markets, enhance our global competitive position and
capitalize on potential operational synergies. Our
track record on companies’ acquisitions is described
above (See “History and Development of Tenaris”).

Developing high-value products
We have developed an extensive range of high-
value products suitable for most of our customers’
operations using our network of specialized
research and testing facilities and by investing in our
manufacturing facilities. As our customers expand
their operations, we seek to supply high-value
products that reduce costs and enable them to operate
safely in increasingly challenging environments.

Securing inputs for our manufacturing operations
We seek to secure our existing sources of raw
material and energy inputs, and to gain access to
new sources, of low-cost inputs which can help us
maintain or reduce the cost of manufacturing our
core products over the long term.

Enhancing our offer of technical and pipe

management services
We continue to enhance our offer of technical
and pipe management services for our customers
worldwide. Through the provision of these services,
we seek to enable our customers to optimize their
operations, reduce costs and to concentrate on
their core businesses. They are also intended to
differentiate us from our competitors and further
strengthen our relationships with our customers
worldwide through long-term agreements.

Our Competitive Strengths
We believe our main competitive strengths include:

•

•
•

•

our global production, commercial and
distribution capabilities, offering a full product
range with flexible supply options backed up by
local service capabilities in important oil and gas
producing and industrial regions around the world;
our ability to develop, design and manufacture
technologically advanced products;
our solid and diversified customer base and
historic relationships with major international
oil and gas companies around the world, and our
strong and stable market shares in the countries in
which we have manufacturing operations;
our proximity to our customers;
our human resources around the world with their
diverse knowledge and skills;
our low-cost operations, primarily at state-of-the-art,

strategically located production facilities with
favorable access to raw materials, energy and labor,
and 50 years of operating experience; and
our strong financial condition.

•

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Business Segments
Following the acquisition of the remaining non-
controlling interests in Confab and its further delisting,
the Company has changed its internal organization
and therefore combined the Tubes and Projects
segments, that had been reported in the Consolidated
Financial Statements as of December 31, 2011.

In the past, the Projects segment’s operations mainly
comprised the operations of Confab in Brazil. The
business in Brazil has changed with the development
of the Brazilian offshore pre-salt projects. Historically,
most of Projects sales were of line pipe for onshore
pipelines and equipment for petrochemical and
mining applications, but now, we are positioning
ourselves as a supplier of mainly OCTG and offshore
line pipe, very similar to the rest of the Tubes segment.
In order to strengthen Tenaris’s position in Brazil,
in 2012, we acquired the remaining non-controlling
interests in Confab and changed its internal
organization in order to fully integrate the Brazilian
operations with the rest of the Tubes operations.

Therefore, as from September 2012, after including
the operations of the formerly Projects segment
into Tubes, Tenaris has one major business
segment, Tubes, which is also our reportable
operating segment.

Additionally, the coiled tubing operations, which
were previously included in the Tubes segment and
which accounted for 1% of total net sales in 2011,
have been reclassified to Others.

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The Tubes segment includes the production and
sale of both seamless and welded steel tubular
products and related services mainly for the oil
and gas industry, particularly oil country tubular
goods (OCTG) used in drilling operations, and
for other industrial applications with production
processes that consist in the transformation of steel
into tubular products. Business activities included
in this segment are mainly dependent on the oil
and gas industry worldwide, as this industry is a
major consumer of steel pipe products, particularly
OCTG used in drilling activities. Demand for steel
pipe products from the oil and gas industry has
historically been volatile and depends primarily
upon the number of oil and natural gas wells being
drilled, completed and reworked, and the depth and
drilling conditions of these wells. Sales are generally
made to end users, with exports being done through
a centrally managed global distribution network
and domestic sales made through local subsidiaries.

Corporate general and administrative expenses
have been allocated to the Tubes segment.

Others include all other business activities and
operating segments that are not required to be
separately reported, including the production and
selling of sucker rods, welded steel pipes for electric
conduits, industrial equipment, coiled tubing, energy
and raw materials that exceed internal requirements.

For more information on our business segments,
see accounting policy C “Segment information”
to our audited consolidated financial statements
included in this annual report.

pipes for different uses. Casing and tubing are also
known as oil country tubular goods or OCTG.
We manufacture our steel pipe products in a wide
range of specifications, which vary in diameter,
length, thickness, finishing, steel grades, threading
and coupling. For most complex applications,
including high pressure and high temperature
applications, seamless steel pipes are usually
specified and, for some standard applications,
welded steel pipes can also be used.

Casing
Steel casing is used to sustain the walls of oil and
gas wells during and after drilling.

Tubing
Steel tubing is used to conduct crude oil and natural
gas to the surface after drilling has been completed.

Line pipe
Steel line pipe is used to transport crude oil and
natural gas from wells to refineries, storage tanks
and loading and distribution centers.

Mechanical and structural pipes
Mechanical and structural pipes are used by
general industry for various applications, including
the transportation of other forms of gas and
liquids under high pressure.

Cold-drawn pipe
The cold-drawing process permits the production
of pipes with the diameter and wall thickness
required for use in boilers, superheaters, condensers,
heat exchangers, automobile production and several
other industrial applications.

Our Products
Our principal finished products are seamless
and welded steel casing and tubing, line pipe and
various other mechanical and structural steel

Premium joints and couplings
Premium joints and couplings are specially
designed connections used to join lengths of steel
casing and tubing for use in high temperature or

13.

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high pressure environments. A significant portion
of our steel casing and tubing products are supplied
with premium joints and couplings. We own an
extensive range of premium connections, and
following the integration of Hydril’s premium
connections business, we market our premium
connection products under the TenarisHydril brand
name. In addition, we hold licensing rights to
manufacture and sell the Atlas Bradford range of
premium connections outside of the United States.

Coiled tubing
Coiled tubing is used for oil and gas drilling and
well workovers and for subsea pipelines.

Other Products
We also manufacture sucker rods used in oil
extraction activities, industrial equipment of
various specifications and diverse applications,
including liquid and gas storage equipment, and
welded steel pipes for electric conduits used in
the construction industry. In addition, we sell raw
materials that exceed our internal requirements.

Research and Development
Research and development, or R&D, of new
products and processes to meet the increasingly
stringent requirements of our customers is an
important aspect of our business.

R&D activities are carried out primarily at our
specialized research facilities located at our
Campana plant in Argentina, at our Veracruz
plant in Mexico, at our Dalmine plant in Italy,
at the product testing facilities of NKKTubes in
Japan and at the research facilities of the Centro
Sviluppo Materiali S.p.A, or CSM, in Rome. We
have an 8% interest in CSM, which was acquired
in 1997. In addition, we are building a new
R&D center at Ilha do Fundao, Rio de Janeiro,

Brazil, which we expect will start operating in
2014. We strive to engage some of the world’s
leading industrial research institutions to solve
the problems posed by the complexities of oil
and gas projects with innovative applications. In
addition, our global technical sales team is made
up of experienced engineers who work with our
customers to identify solutions for each particular
oil and gas drilling environment.

Product development and research currently
being undertaken are focused on the increasingly
challenging energy markets and include:

•

•
•

•

proprietary premium joint products including
Dopeless® technology;
heavy wall deep water line pipe, risers and
welding technology;
proprietary steels;
tubes and components for the car industry
and mechanical applications;
tubes for boilers;
welded pipes for oil and gas and other
applications; and
sucker rods.

In addition to R&D aimed at new or improved
products, we continuously study opportunities
to optimize our manufacturing processes. Recent
projects in this area include modeling of rolling and
finishing process and the development of different
process controls, with the goal of improving
product quality and productivity at our facilities.

We seek to protect our intellectual property, from
R&D and innovation, through the use of patents
and trademarks that allow us to differentiate
ourselves from our competitors.

We spent $83.0 million for R&D in 2012, compared
to $68.4 million in 2011 and $61.8 million in 2010.

NET SALES

EARNINGS PER SHARE

NET SALES BY

BUSINESS SEGMENT

NET SALES BY

REGIONAL AREA

N
O
I
L
L
I
M

D
S
U

12000

11988

10000

8000

6000

10834

9972

8149

7712

1.80

D
S
U

1.8

1.6

1.4

1.2

1.0

0.8

1.44

0.98

0.95

1.13

4000

Tenaris in numbers

2000

0.4

0.6

0.2

2008 2009 2010 2011

2012

2008 2009 2010 2011 2012

Trend information

Leading indicators

TUBES
93%

OTHER
7%

MIDDLE EAST
& AFRICA
12%

FAR EAST

& OCEANIA

PERSONNEL EMPLOYED

PER COUNTRY

CANADA

INDONESIA

COLOMBIA

ROMANIA

JAPAN

OTHER

COUNTRIES

EUROPE
10%

SOUTH
AMERICA
25%

NORTH

AMERICA

49%

BRAZIL

12%

ITALY

UNITED

STATES

13%

MEXICO

19%

ARGENTINA

25%

NET SALES

EARNINGS PER SHARE

14.

RIG COUNT INTERNATIONAL
EARNINGS PER SHARE
NET SALES BY
NET SALES BY
BUSINESS SEGMENT
BUSINESS SEGMENT

RIG COUNT USA AND CANADA
NET SALES
NET SALES
NET SALES BY
NET SALES BY
NET SALES BY
BUSINESS SEGMENT
REGIONAL AREA
REGIONAL AREA

LOST TIME ACCIDENTS INDEX
EARNINGS PER SHARE
EARNINGS PER SHARE
PERSONNEL EMPLOYED
PERSONNEL EMPLOYED
PER COUNTRY
PER COUNTRY

NET SALES BY
REGIONAL AREA

RETURN ON EQUITY
NET SALES BY
NET SALES BY
PERSONNEL EMPLOYED
BUSINESS SEGMENT
BUSINESS SEGMENT
PER COUNTRY

EBITDA MARGIN

NET SALES BY

REGIONAL AREA

OIL

GAS

MISC

S
G
R

1400
D
S
U

1200
1.8

1.6
1000
1.4
800
1.2

1.0
600
0.8
400
0.6

0.4
200
0.2
0
0

TUBES
93%

226

1.44
960

1.80

242

814

228

897

1.13

238

825

0.95

209

764
0.98

2008 2009 2010 2011
2012
2008 2009 2010 2011 2012

OIL

GAS
MIDDLE EAST
MIDDLE EAST
& AFRICA
& AFRICA
N
N
12%
12%
O
O
I
I
L
L
L
L
I
I
M
M

D
S
U

OTHER
7%

TUBES
93%

S
G
R

FAR EAST
FAR EAST
& OCEANIA
& OCEANIA
OTHER
4%
4%
7%

CANADA
CANADA
MIDDLE EAST
5%
5%
N
S
R
S
O
& AFRICA
U
T
I
COLOMBIA
L
N
O
L
12%
E
H
I
M
2%
D
N
C
R
A
C
E
M
A
P

INDONESIA
3%
COLOMBIA
2%

D
S
U

INDONESIA
3%

FAR EAST
& OCEANIA
4%
OTHER
OTHER
COUNTRIES
COUNTRIES
4%
4%

JAPAN
2%

CANADA
5%

INDONESIA
3%

TUBES
93%

TUBES
COLOMBIA
93%
2%
%
ROMANIA
6%

D
S
ROMANIA
ROMANIA
U
6%
6%
1.80
1.80
1.8

1.8

12000

11988

1710
10000

10000

1027

9972

658

9972

10834

8000

8149

1092

8149

7712

7712
1621

6000

921

1263

4000

790

2000

2000
541
380
EUROPE
EUROPE
SOUTH
SOUTH
0
0
10%
10%
AMERICA
AMERICA
25%
25%
2009
2010
2012
2011
2008
2008 2009 2010 2011
2008 2009 2010 2011

NORTH
NORTH
AMERICA
AMERICA
49%
49%
2012
2012

1
EUROPE
0
10%

1.6

1.4
5.0
1.2

1.4

1.2

1.0

0.8

0.6

1.44

0.98
3.7

0.98

0.95
3.2

3.4

1.13

0.95

1.13

3.0

0.4
0.4
BRAZIL
12%
0.2
0.2

BRAZIL
12%

MEXICO
MEXICO
UNITED
NORTH
SOUTH
19%
19%
STATES
0
0
ARGENTINA
ITALY
AMERICA
ITALY
AMERICA
13%
25%
9%
49%
9%
25%
2012
2008 2009 2010 2011
2008 2009 2010 2011 2012
2008 2009 2010 2011 2012

UNITED
STATES
13%

0
ARGENTINA
ITALY
25%
9%

UNITED
STATES
13%

2008 2009 2010 2011

10834

9972

1.44

7712

0.98

0.95

1.13

0.95

1.13

1.6

1.4
8149
1.2

1.0

0.8

0.6

0.4

0.2

0
2008 2009 2010 2011 2012

2012
2008 2009 2010 2011 2012

2008 2009 2010 2011

Source: Baker Hughes.

RIG COUNT INTERNATIONAL

RIG COUNT USA AND CANADA

LOST TIME ACCIDENTS INDEX

RIG COUNT INTERNATIONAL
RETURN ON EQUITY

RETURN ON EQUITY

RIG COUNT USA AND CANADA
EBITDA MARGIN

EBITDA MARGIN

LOST TIME ACCIDENTS INDEX

OIL

GAS

MISC

OIL

GAS

MISC

OIL

GAS

OIL

GAS

MISC

OIL

GAS

228

238

897

825

238

209

825

764

242

814

242

209

814

764

226

228

226

960

897

960

S
G
R

242

814

24
1710

238
1710

209

764

825

228

226
1027

960
1092

897
1092

1027
658

658

1710

1621

N
O
I
L
L
I
M
R
E
P

S
R
U
O
H
N
A
M

S
T
N
E
D
C
C
A

N
O
I
L
L
I
M
R
E
P

S
R
U
O
H
N
A
M

S
T
N
E
D
C
C
A

S
G
R

N
O
I
L
L
I
M
R
E
P

S
R
U
O
H
N
A
M

S
T
N
E
D
C
C
A

S
G
R

1400
%

1027

658

5.0
5

5.0

1092

3.7

3.4

1263

1621

3.7

3.2

921
3

790

1200
50

1000
40

242

5.0

800
30
600

814

3.4

20
400

10
200

3.2

3.0

1
380
0
2011
2009
2008 2009 2010 2011

2010

0
2008

2012
2008 2009 2010 2011

2012

921

1263

790

541

380

541

2008 2009 2010 2011
2009
2010

2008
2009

2008

2012
2010
2011

2011
2012

2012

226

228

226

960

897

960

242

209

814

764
3.7

238

228

238

209

825

764

897

825

3.2

3.0

S
G
R

1710

1027

658

1092

1621

921

1263

790

541

380

N
O
I
L
L
I
M
R
E
P

S
R
S
U
T
N
O
E
H
D
/
N
C
A
C
M
A

N
O
I
L
L
I
M
R
E
P

S
T
N
E
D
C
C
A

0
0
2008 2009 2010 2011

0
0
2008 2009 2010 2011
2012
2008 2009 2010 2011

2012
2008 2009 2010 2011
2008 2009 2010 2011
2012

2012
2012

10
2012
2008
2010
2009
2008 2009 2010 2011
2008 2009 2010 2011 2012

2011
2012
2008
2010
2008 2009 2010 2011 2012
2012

2009

2011

2008 2009 2010 2011 2012

Source: Baker Hughes.

s
i
r
a
n
e
T

D
S
U

12000

11988

12000

11988
1.8

1.80

1.8

1.80

10834

9972

10000

8000

8149

7712

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

8000

6000

4000

2000

NET SALES

10000

6000

4000

2000

1400

1200

1000

800

600

400

200

2008 2009 2010 2011

2012

RIG COUNT INTERNATIONAL

1400

1200

1000

800

600

400

200

2008 2009 2010 2011

2012

Source: Baker Hughes.

MEXICO
19%

OTHER

MIDDLE EAST

& AFRICA

12%

FAR EAST

& OCEANIA

JAPAN

OTHER

COUNTRIES

PERSONNEL EMPLOYED

PER COUNTRY

CANADA

INDONESIA

JAPAN

COLOMBIA

ROMANIA

OTHER

COUNTRIES

ARGENTINA

2012

25%

EUROPE

10%

SOUTH

NORTH

AMERICA

2008 2009 2010 2011 2012

25%

49%

BRAZIL

12%

ITALY

UNITED

MEXICO

STATES

19%

13%

ARGENTINA

25%

RETURN ON EQUITY

EBITDA MARGIN

2012

2008 2009 2010 2011

2012

2008 2009 2010 2011 2012

5.0

3.7

3.4

3.2

3.0

0
2008 2009 2010 2011

2008 2009 2010 2011

S
R
U
O
H
N
A
M

NET SALES

EARNINGS PER SHARE

NET SALES

NET SALES BY
BUSINESS SEGMENT

NET SALES BY
EARNINGS PER SHARE
BUSINESS SEGMENT

NET SALES BY
NET SALES BY
NET SALES BY
REGIONAL AREA
REGIONAL AREA
BUSINESS SEGMENT

PERSONNEL EMPLOYED
PERSONNEL EMPLOYED
NET SALES BY
PER COUNTRY
PER COUNTRY
REGIONAL AREA

15.
PERSONNEL EMPLOYED
PER COUNTRY

TUBES
93%

D
S
U

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

OTHER
7%

MIDDLE EAST
& AFRICA
TUBES
12%
93%

MIDDLE EAST
& AFRICA
12%

FAR EAST
FAR EAST
& OCEANIA
& OCEANIA
OTHER
4%
4%
7%

1.80

1.44

0.98

0.95

1.13

2008 2009 2010 2011 2012

EUROPE
10%

SOUTH
AMERICA
25%

NORTH
AMERICA
49%

INDONESIA
CANADA
INDONESIA
CANADA
MIDDLE EAST
3%
5%
3%
5%
& AFRICA
COLOMBIA
COLOMBIA
12%
2%
2%

JAPAN
JAPAN
FAR EAST
2%
2%
& OCEANIA
OTHER
OTHER
4%
COUNTRIES
COUNTRIES
4%
4%

ROMANIA
ROMANIA
6%
6%

CANADA
5%

INDONESIA
3%

COLOMBIA
2%

ROMANIA
6%

t
r
o
p
e
R

JAPAN
2%

a
OTHER
u
n
COUNTRIES
n
4%
A

BRAZIL
12%

BRAZIL
12%
EUROPE
ITALY
10%
9%

ITALY
9%

UNITED
STATES
13%

MEXICO
SOUTH
19%
AMERICA
25%

MEXICO
19%

NORTH
ARGENTINA
ARGENTINA
AMERICA
25%
25%
49%

BRAZIL
12%

ITALY
9%

UNITED
STATES
13%

MEXICO
19%

ARGENTINA
25%

LOST TIME ACCIDENTS INDEX
RIG COUNT USA AND CANADA

LOST TIME ACCIDENTS INDEX

JAPAN
2%

OTHER
COUNTRIES
4%

1027

658

3.7
3.2
1263

1621
3.2
3.0

3.0

RETURN ON EQUITY

RETURN ON EQUITY
LOST TIME ACCIDENTS INDEX

EBITDA MARGIN

EBITDA MARGIN
RETURN ON EQUITY

EBITDA MARGIN

N
O
I
L
L
I
M
R
E
P

S
R
U
O
H
N
A
%
M

S
T
N
E
D
C
C
A

5.0

3.7

3.4

3.2

3.0

50
7

6
40
5
30
4

3
20

2
10
1

0
0

2008 2009 2010 2011

2008 2009 2010 2011
2012
2008 2009 2010 2011

2012
2012

10
0
2008 2009 2010 2011 2012
2008 2009 2010 2011

2008 2009 2010 2011 2012

2012

2008 2009 2010 2011 2012

1
541
UNITED
0
STATES
ARGENTINA
13%
25%
2008 2009 2010 2011
2012
2008 2009 2010 2011
2012
2011
2008

2012

2008 2009 2010 2011 2012

2008 2009 2010 2011 2012
2008 2009 2010 2011

RIG COUNT INTERNATIONAL

RIG COUNT USA AND CANADA

PERSONNEL EMPLOYED
PER COUNTRY

12000

11988

10000

10834

9972

8000

8149

7712

10834

9972

1.44

8149

7712

0.98

0.95

1.13

0.95

1.13

1.8

12000

1.80

1.8

11988

1.80

1.6

10000

1.4

1.6

1.4

1.2

8000

1.2

1.0

6000

0.8

0.6

4000

0.6

0.4

2000

0.2

0.4

0.2

6000

4000

2000

TUBES

93%

1400

1200

1000

800

600

400

200

2008 2009 2010 2011

2012

NET SALES

EARNINGS PER SHARE

RIG COUNT INTERNATIONAL

NET SALES BY

BUSINESS SEGMENT

NET SALES BY

REGIONAL AREA

OIL

GAS

MISC

OIL

MIDDLE EAST

GAS

12000

11988

10834

9972

8149

7712

1.44

0.98

0.95

1.13

1.80

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

2008 2009 2010 2011

2012

2008 2009 2010 2011 2012

2008 2009 2010 2011

2012

790

EUROPE

10%

541

380

SOUTH

AMERICA

2008

2009

25%

2009

2010

10000

8000

6000

4000

2000

1400

1200

1000

800

600

400

200

Source: Baker Hughes.

RIG COUNT INTERNATIONAL

RIG COUNT USA AND CANADA

LOST TIME ACCIDENTS INDEX

RETURN ON EQUITY

EBITDA MARGIN

OIL

GAS

MISC

OIL

GAS

226

960

228

897

238

825

242

814

209

764

1710

1027

658

1621

921

1263

1092

790

541

380

Source: Baker Hughes.

5.0

3.7

3.4

3.2

3.0

2008 2009 2010 2011

2012

2008

2009

2010

2011

2012

2008 2009 2010 2011

2012

2008 2009 2010 2011

2012

2008 2009 2010 2011 2012

OTHER

226

228

960

897

226

960

228

238

897

825

238

209

825

764

242

814

242

209

814

764

MISC
FAR EAST
& OCEANIA
4%

1710

1000

1710

242

1027

238

228

1027
658

1092

897

226

658

960

1621

209

764

814

825

921

1263

& AFRICA

12%

1400

1200

800

600

400

200

6
1710
5.0
5

5.0

3.4
921

1092

3.7
3.4

790

2
BRAZIL
1
12%

ITALY
9%

CANADA
5%
N
N
S
S
R
R
S
S
O
O
U
U
T
T
I
I
COLOMBIA
L
L
N
N
O
O
L
L
E
E
H
H
I
I
2%
M
M
D
D
N
N
C
C
R
R
A
A
C
C
E
E
M
M
S
A
A
ROMANIA
P
P
G
R
6%
7

NORTH
AMERICA
49%
2011
2012
2012

2008 2009 2010 2011

INDONESIA
GAS
3%

MEXICO
19%

2010
2011

2010

2009

2012

380

OIL

16.

s
i
r
a
n
e
T

Principal risks
and uncertainties

We face certain risks associated to our business
and the industry in which we operate. We are a
global steel pipe manufacturer with a strong focus
on manufacturing products and related services for
the oil and gas industry. Demand for our products
depends primarily on the level of exploration,
development and production activities of oil and
gas companies which is affected by current and
expected future prices of oil and natural gas.
Several factors, such as the supply and demand
for oil and gas, and political and global economic
conditions, affect these prices. The global financial
and economic crisis, which started in September
2008 and lasted through much of 2009, resulted in
a significant decline in oil and gas prices, affected
the level of drilling activity and triggered efforts to
reduce inventories, adversely affecting demand for
our products and services. This had, and to some
extent continues to have, a negative impact on
our business, revenues, profitability and financial
position. The global economy began to recover in
the second half of 2009, but the recovery has been
slow and uncertain. Performance may be further
affected by changes in governmental policies, the
impact of credit restrictions on our customers’
ability to perform their payment obligations with
us and any adverse economic, political or social
developments in our major markets. Furthermore,
our profitability may be hurt if increases in
the cost of raw materials and energy could not
be offset by higher selling prices. Although we
responded well to the crisis, a new global recession,
a recession in the developed countries, a cooling of
emerging market economies or an extended period
of below-trend growth in the economies that are
major consumers of steel pipe products would
likely result in reduced demand of our products,
adversely affecting our revenues, profitability and
financial condition.

We have significant operations in various countries,
including Argentina, Brazil, Canada, Colombia,
Italy, Japan, Mexico, Romania and the United
States, and we sell our products and services
throughout the world. Therefore, like other
companies with worldwide operations, our business
and operations have been, and could in the future
be, affected from time to time to varying degrees
by political, economical and social developments
and changes in laws and regulations. These
developments and changes may include, among
others, nationalization, expropriations or forced
divestiture of assets; restrictions on production,
imports and exports, interruptions in the supply of
essential energy inputs; exchange and/or transfer
restrictions, inability or increasing difficulties to
repatriate income or capital or to make contract
payments; inflation; devaluation; war or other
international conflicts; civil unrest and local security
concerns, including high incidences of crime and
violence involving drug trafficking organizations
that threaten the safe operation of our facilities
and operations; direct and indirect price controls;
tax increases and changes in the interpretation,
application or enforcement of tax laws and other
retroactive tax claims or challenges; changes in laws,
norms and regulations; cancellation of contract
rights; and delays or denials of governmental
approvals. As a global company, a portion of our
business is carried out in currencies other than
the U.S. dollar, which is the Company’s functional
currency. As a result, we are exposed to foreign
exchange rate risk, which could adversely affect our
financial position and results of operations.

In 2009, Venezuela’s former President Hugo
Chávez announced the nationalization of Tavsa,
Matesi, Materiales Siderúrgicos S.A., or Matesi,
and Complejo Siderurgico de Guayana, C.A., or

17.

t
r
o
p
e
R

a
u
n
n
A

Comsigua, and Venezuela formally assumed exclusive
operational control over the assets of Tavsa. In 2010,
Venezuela’s National Assembly declared Matesi’s
assets to be of public and social interest and ordered
the Executive Branch to take the necessary measures
for the expropriation of such assets. Our investments
in Tavsa, Matesi and Comsigua are protected under
applicable bilateral investment treaties, including
the bilateral investment treaty between Venezuela
and the Belgian-Luxembourgish Union, and
Tenaris continues to reserve all of its rights under
contracts, investment treaties and Venezuelan and
international law. Tenaris has consented to the
jurisdiction of the International Centre for Settlement
of Investment Disputes, or ICSID in connection with
the nationalization process. In August 2011 and July
2012, respectively, Tenaris and its wholly-owned
subsidiary Talta - Trading e Marketing Sociedad
Unipessoal Lda, or Talta, initiated arbitration
proceedings against Venezuela before the ICSID
seeking adequate and effective compensation for
the expropriation of their investments in Matesi
and Tavsa and Comsigua. However, we can give no
assurance that the Venezuelan government will agree
to pay a fair and adequate compensation for our
interest in Tavsa, Matesi and Comsigua, or that any
such compensation will be freely convertible into
or exchangeable for foreign currency. For further
information on the nationalization of the Venezuelan
subsidiaries, see note 31 “Nationalization of
Venezuelan Subsidiaries” to our audited consolidated
financial statements included in this annual report.

A key element of our business strategy is to develop
and offer higher value-added products and services
and to continuously identify and pursue growth-
enhancing strategic opportunities. For example, in
January 2012, through our subsidiary Confab, we
acquired a participation in Usiminas, representing

5.0% of the shares with voting rights and 2.5%
of the total share capital. We must necessarily
base any assessment of potential acquisitions
and partnerships on assumptions with respect to
operations, profitability and other matters that
may subsequently prove to be incorrect. Failure to
successfully implement our strategy, or to integrate
future acquisitions and strategic partnerships, or
to sell acquired assets or business unrelated to our
business under favorable terms and conditions, could
affect our ability to grow, our competitive position
and our sales and profitability. In addition, failure to
agree with our joint venture partner in Japan on the
strategic direction of our joint operations may have
an adverse impact on our operations in Japan.

We may be required to record a significant charge
to earnings if we must reassess our goodwill or
other assets as a result of changes in assumptions
underlying the carrying value of certain assets,
particularly as a consequence of deteriorating
market conditions. At December 31, 2012 we
had $1,806.9 million in goodwill corresponding
mainly to the acquisition of Hydril, in 2007 ($919.9
million) and Maverick, in 2006 ($771.3 million).
As of December 31, 2012, an impairment test over
our investment in Usiminas was performed and
subsequently, the goodwill of such investment was
written down by $73.7 million. The impairment was
mainly due to expectations of a weaker industrial
environment in Brazil, where industrial production
and consequently steel demand have been suffering
downward adjustments. In addition, a higher degree
of uncertainty regarding the future prices of iron ore
let to a reduction in the forecast of long term iron
ore prices that affected cash flow expectations. If our
management were to determine in the future that the
goodwill or other assets were impaired, particularly
as a consequence of deteriorating market conditions,

18.

s
i
r
a
n
e
T

we would be required to recognize a non-cash charge
to reduce the value of these assets, which would
adversely affect our results of operations.

Potential environmental, product liability and other
claims arising from the inherent risks associated
with the products we sell and the services we render,
including well failures, line pipe leaks, blowouts,
bursts and fires, that could result in death, personal
injury, property damage, environmental pollution or
loss of production could create significant liabilities
for us. Environmental laws and regulations may, in
some cases, impose strict liability (even joint and
several strict liability) rendering a person liable for
damages to natural resources or threats to public
health and safety without regard to negligence or
fault. In addition, we are subject to a wide range of
local, provincial and national laws, regulations, permit
requirements and decrees relating to the protection of
human health and the environment, including laws
and regulations relating to hazardous materials and
radioactive materials and environmental protection
governing air emissions, water discharges and waste
management. Laws and regulations protecting the
environment have become increasingly complex and
more stringent and expensive to implement in recent
years. The cost of complying with such regulations is
not always clearly known or determinable since some
of these laws have not yet been promulgated or are
under revision. These costs, along with unforeseen
environmental liabilities, may increase our operating
costs or negatively impact our net worth.

We conduct business in certain countries known
to experience governmental corruption. Although
we are committed to conducting business in a
legal and ethical manner in compliance with local
and international statutory requirements and

standards applicable to our business, there is a risk
that our employees or representatives may take
actions that violate applicable laws and regulations
that generally prohibit the making of improper
payments to foreign government officials for the
purpose of obtaining or keeping business, including
laws relating to the 1997 OECD Convention on
Combating Bribery of Foreign Public Officials in
International Business Transactions such as the U.S.
Foreign Corrupt Practices Act, or FCPA. Particularly
in respect of FCPA, we entered into settlements with
the U.S. Department of Justice, or DOJ, and the U.S.
Securities and Exchange Commission, or SEC, on
May 17, 2011 and we undertook several remediation
efforts, including voluntary enhancements to our
compliance program. If we fail to comply with any
term or in any way violate any provision of the
settlements, we could be subject to severe sanctions
and civil and criminal prosecution.

As a holding company, our ability to pay expenses,
debt service and cash dividends depends on the
results of operations and financial condition of
our subsidiaries, which could be restricted by
legal, contractual or other limitations, including
exchange controls or transfer restrictions, and other
agreements and commitments of our subsidiaries.

The Company’s controlling shareholder may be
able to take actions that do not reflect the will or
best interests of other shareholders.

Our financial risk management is described in
Section III. Financial Risk Management, and our
provisions and contingent liabilities are described in
accounting policy P and notes 23, 24 and 26 of our
audited consolidated financial statements included
in this annual report.

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Operating and financial
review and prospects

The following discussion and analysis of our
financial condition and results of operations are
based on, and should be read in conjunction with,
our audited consolidated financial statements and the
related notes included elsewhere in this annual report.
This discussion and analysis presents our financial
condition and results of operations on a consolidated
basis. We prepare our consolidated financial
statements in conformity with IFRS, as issued by the
IASB and adopted by the European Union.

Certain information contained in this discussion
and analysis and presented elsewhere in this annual
report, including information with respect to
our plans and strategy for our business, includes
forward looking statements that involve risks
and uncertainties. See “Cautionary Statement
Concerning Forward-Looking Statements”. In
evaluating this discussion and analysis, you should
specifically consider the various risk factors
identified in “Principal Risks and Uncertainties”,
other risk factors identified elsewhere in this
annual report and other factors that could cause
results to differ materially from those expressed in
such forward looking statements.

Overview
We are a leading global manufacturer and supplier
of steel pipe products and related services for the
energy industry and other industries.
We are a leading global manufacturer and supplier
of steel pipe products and related services for
the world’s energy industry as well as for other
industrial applications. Our customers include
most of the world’s leading oil and gas companies
as well as engineering companies engaged in
constructing oil and gas gathering and processing

and power facilities. Over the last two decades,
we have expanded our business globally through
a series of strategic investments, and we now
operate an integrated worldwide network of
steel pipe manufacturing, research, finishing and
service facilities with industrial operations in the
Americas, Europe, Asia and Africa and a direct
presence in most major oil and gas markets.

Our main source of revenue is the sale of products
and services to the oil and gas industry, and the level
of such sales is sensitive to international oil and gas
prices and their impact on drilling activities.
Demand for our products and services from
the global oil and gas industry, particularly for
tubular products and services used in drilling
operations, represents a substantial majority of
our total sales. Our sales, therefore, depend on
the condition of the oil and gas industry and our
customers’ willingness to invest capital in oil and
gas exploration and development as well as in
associated downstream processing activities.
The level of these expenditures is sensitive to oil
and gas prices as well as the oil and gas industry’s
view of such prices in the future.

A growing proportion of exploration and
production spending by oil and gas companies
has been directed at offshore, deep drilling and
non-conventional drilling operations in which
high-value tubular products, including special
steel grades and premium connections, are usually
specified. Technological advances in drilling
techniques and materials are opening up new areas
for exploration and development. More complex
drilling conditions are expected to continue to
demand new and high value products and services
in most areas of the world.

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In 2012, global drilling activity remained relatively
stable. In North America the rig count decreased
1% in 2012 compared to 2011. In the first half
of 2012, oil directed drilling activity increased
due to strong oil prices, offsetting the decline in
gas directed drilling activity, however, drilling
activity in the second half of 2012 was affected by
continuing low natural gas prices and lower liquids
prices largely resulting from regional pipeline and
processing infrastructure restraints. In 2013, we
expect drilling activity to recover gradually from
current levels but to remain, on average, slightly
below the level of 2012.

In the rest of the world, although the overall rig
count remained relatively stable, consumption of
OCTG premium products has been increasing
led by growth in the development of deepwater
and unconventional reserves as well as complex
conventional gas drilling.

In 2013, we expect higher levels of demand for
premium OCTG products particularly in regions
such as the Middle East and sub-Saharan Africa.

Overall sales growth is expected to be moderate
as higher oil and gas sales in Eastern Hemisphere
markets are largely offset by lower sales in North
America and in European industrial markets.

Operating margins are expected to remain around
2012 levels with product mix and industrial
efficiency improvements offsetting the impact of
lower prices in less differentiated products.

Our business is highly competitive.
The global market for steel pipes is highly
competitive, with the primary competitive factors
being price, quality, service and technology. We
sell our products in a large number of countries
worldwide and compete primarily against European
and Japanese producers in most markets outside
North America. In the United States and Canada we
compete against a wide range of local and foreign
producers. Competition in markets worldwide has
been increasing, particularly for products used in
standard applications, as producers in countries like
China and Russia increase production capacity and
enter export markets.

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Our production costs are sensitive to prices of
steelmaking raw materials and other steel products.
We purchase substantial quantities of steelmaking
raw materials, including ferrous steel scrap,
direct reduced iron (DRI), pig iron, iron ore and
ferroalloys, for use in our production of our
seamless pipe products. In addition, we purchase
substantial quantities of steel coils and plate for use
in the production of our welded pipe products. Our
production costs, therefore, are sensitive to prices
of steelmaking raw materials and certain steel
products, which reflect supply and demand factors
in the global steel industry and in the countries
where we have our manufacturing facilities.

Despite showing high levels of volatility, in average,
the costs of steelmaking raw materials and of
steel coils and plates decreased in 2012 compared
to 2011, reflecting weak steel consumption due to
uncertain macroeconomic conditions. We expect
these costs to remain stable during 2013.

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Results of Operations

Thousands of U.S. dollars (except number of shares and per share amounts)

FoR THe YeAR eNDeD DeCeMBeR 31

2012

2011

Selected consolidated income statement data

CoNTiNUiNg oPeRATioNS

Net sales

Cost of sales

Gross profit

Selling, general and administrative expenses

other operating income (expenses), net

Operating income

interest income

interest expense

other financial results

Income before equity in earnings of associated companies and income tax

equity in (losses) earnings of associated companies

Income before income tax

income tax

Income for the year (1)

iNCoMe ATTRiBUTABLe To (1)

owners of the parent

Non-controlling interests

Income for the year (1)

Depreciation and amortization

Weighted average number of shares outstanding

Basic and diluted earnings per share

Dividends per share (2)

(1) international Accounting Standard No. 1 (“iAS 1”) (revised), requires that income for the year as shown
on the income statement does not exclude non-controlling interests. earnings per share, however,
continue to be calculated on the basis of income attributable solely to the owners of the parent.

(2) Dividends per share correspond to the dividends proposed or paid in respect of the year.

10,834,030

9,972,478

(6,637,293)

(6,273,407)

4,196,737

3,699,071

(1,883,789)

(1,859,240)

43,659

5,050

2,356,607

1,844,881

33,459

(55,507)

(28,056)

30,840

(52,407)

11,268

2,306,503

1,834,582

(63,534)

61,509

2,242,969

1,896,091

(541,558)

(475,370)

1,701,411

1,420,721

1,699,047

1,331,157

2,364

89,564

1,701,411

1,420,721

(567,654)

(554,345)

1,180,536,830

1.44

0.43

1.13

0.38

Thousands of U.S. dollars (except number of shares)

AT DeCeMBeR 31

Selected consolidated financial position data

Current assets

Property, plant and equipment, net

other non-current assets

Total assets

Current liabilities

Non-current borrowings

Deferred tax liabilities

other non-current liabilities

Total liabilities

Capital and reserves attributable to the owners of the parent

Non-controlling interests

Total Equity

Total liabilities and equity

Share capital

Number of shares outstanding

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2012

2011

6,987,116

4,434,970

4,541,839

6,393,221

4,053,653

4,416,761

15,963,925

14,863,635

2,829,374

2,403,699

532,407

749,235

292,583

149,775

828,545

308,673

4,403,599

3,690,692

11,388,016

10,506,227

172,310

666,716

11,560,326

11,172,943

15,963,925

14,863,635

1,180,537

1,180,536,830

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The following table sets forth our operating and
other costs and expenses as a percentage of net
sales for the periods indicated.

Percentage of net sales

FoR THe YeAR eNDeD DeCeMBeR 31

CoNTiNUiNg oPeRATioNS

Net sales

Cost of sales

Gross profit

Selling, general and administrative expenses

other operating income (expenses), net

Operating income

interest income

interest expense

other financial results

Income before equity in earnings of associated companies and income tax

equity in (losses) earnings of associated companies

Income before income tax

income tax

Income for the year

iNCoMe ATTRiBUTABLe To

owners of the parent

Non-controlling interests

2012

2011

100.0

(61.3)

38.7

(17.4)

0.4

21.8

0.3

(0.5)

(0.3)

21.3

(0.6)

20.7

(5.0)

15.7

0.0

(62.9)

37.1

(18.6)

0.1

18.5

0.3

(0.5)

0.1

18.4

0.6

19.0

(4.8)

14.2

13.3

0.9

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Fiscal year ended December 31, 2012
Compared to fiscal year ended December 31, 2011

Changes in Segment Reporting
Following the acquisition of the remaining
non-controlling interests in Confab, we have
changed our internal organization and therefore
combined the Tubes and Projects segments.

Therefore, as from September 2012, after including
the operations of the formerly Projects segment into
Tubes, Tenaris has one major business segment,
Tubes, which is also our reportable operating segment.

which accounted for 1% of total sales in 2011,
have been reclassified to Others.

Comparative amounts have been reclassified
to conform to changes in presentation in 2012.
For more information on our business
segments, see accounting policy C “Segment
information” to our audited consolidated
financial statements included in this
annual report.

Additionally, the coiled tubing operations, which
were previously included in the Tubes segment and

The following table shows our net sales by
business segment for the periods indicated below:

Millions of U.S. dollars

FoR THe YeAR eNDeD DeCeMBeR 31

Tubes

others

Total

2012

93%

100%

9,111.7

860.8

9,972.5

2011

91%

100%

increase /
(Decrease)

10%

(6%)

10,023.3

810.7

10,834.0

Tubes
The following table indicates, for our Tubes
business segment, sales volumes of seamless and
welded pipes for the periods indicated below:

Thousands of tons

FoR THe YeAR eNDeD DeCeMBeR 31

2012

2011

Seamless

Welded

Total

2,676

1,188

3,864

2,613

1,134

3,747

increase /
(Decrease)

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The following table indicates, for our Tubes business
segment, net sales by geographic region, operating
income and operating income as a percentage of net
sales for the periods indicated below:

Millions of U.S. dollars

FoR THe YeAR eNDeD DeCeMBeR 31

2012

2011

NeT SALeS

North America

South America

europe

Middle east & Africa

Far east & oceania

Total net sales

operating income

operating income (% of sales)

4,953.6

2,305.4

1,042.1

1,246.7

475.5

4,060.9

2,079.5

1,056.5

1,330.7

584.1

10,023.3

9,111.7

2,251.8

22%

1,702.2

19%

increase /
(Decrease)

22%

11%

(1%)

(6%)

(19%)

10%

32%

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Net sales of tubular products and services
iincreased 10% to $10,023.3 million in 2012,
compared to $9,111.7 million in 2011, reflecting
a 3% increase in volumes and a 7% increase in
average selling prices, driven by an improvement
in the mix of products which offset the impact
of lower prices in less differentiated products. In
North America, the increase in sales was mainly
driven by higher liquids drilling activity, together
with a recovery in activity in the Gulf of Mexico
and higher drilling activity in Mexico. In South
America, sales increased led by higher demand
from offshore projects in Brazil and increasing
activity levels in Argentina, which more than offset
lower demand in the Andean region. In Europe,
we had higher sales of OCTG products in the
North Sea and Romania due to higher oil and gas
drilling activity, which were offset by lower demand

for mechanical products. In the Middle East
and Africa, sales decreased mainly due to lower
shipments of line pipe products and lower selling
prices. In the Far East and Oceania, sales decreased
mainly due to lower shipments of OCTG products
to China and Indonesia, partially offset by higher
shipments to regional hydrocarbon process
industry, or HPI, projects.

Operating income from tubular products and
services increased 32% to $2,251.8 million in 2012,
from $1,702.2 million in 2011. The increase in the
operating income was mainly driven by a 10%
increase in sales and a higher operating margin
(22% in 2012 vs. 19% in 2011). Our operating
margin increased in 2012 due to an increase in
average selling prices, lower raw material costs and
operating efficiency improvements.

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Others
The following table indicates, for our Others
business segment, net sales, operating income and
operating income as a percentage of net sales for
the periods indicated below:

Millions of U.S. dollars

FoR THe YeAR eNDeD DeCeMBeR 31

2012

2011

Net sales

operating income

operating income (% of sales)

810.7

104.8

13%

860.8

142.7

17%

increase /
(Decrease)

(6%)

(27%)

Net sales of other products and services decreased
6% to $810.7 million in 2012, compared to $860.8
million in 2011, mainly due to lower sales of
industrial equipment in Brazil, partially offset by
higher sales of sucker rods.

Operating income from other products and
services decreased 27% to $104.8 million in
2012, from $142.7 million in 2011, reflecting
the reduction in activity levels in our industrial
equipment business in Brazil, which had a negative
impact in operating performance and margins.

Selling, general and administrative expenses, or
SG&A, decreased as a percentage of net sales to
17.4% in 2012 compared to 18.6% in 2011, mainly
due to the better absorption of fixed and semi-fixed
expenses on higher sales.

Other operating income and expenses, net resulted
in income of $43.7 million in 2012, compared to
income of $5.1 million in 2011. This significant
improvement is attributable to a $49.2 million

judgment that Confab, our Brazilian subsidiary,
collected in 2012, from the Brazilian government,
representing interest and monetary adjustment
over a tax benefit obtained in 1991.

Net interest expenses totalled $22.0 million in
2012, compared to $21.6 million in 2011, which
included $5.2 million in losses on interest rate
swaps in 2011 and none in 2012. Excluding the
effect of interest rate swaps in 2011, net interest
expenses increased during 2012, mainly due to
an increase in net debt of $595.0 million (mainly
due to $700.0 million syndicated loans taken to
finance investments in Brazil), partially offset by
lower cost of debt.

Other financial results generated a loss of $28.1
million in 2012, compared to a gain of $11.3 million
during 2011. These results largely reflect gains
and losses on net foreign exchange transactions
($10.9 million loss in 2012 compared with $65.4
million gain in 2011) and the fair value of derivative
instruments ($3.2 million loss in 2012 compared

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with $49.3 million loss in 2011) and are to a large
extent offset by changes to our net equity position.
These results are mainly attributable to variations
in the exchange rates between our subsidiaries’
functional currencies (other than the U.S. dollar)
and the U.S. dollar in accordance with IFRS,
principally the variations of the Brazilian real,
Argentine peso and Mexican peso.

Equity in earnings (losses) of associated companies
generated a loss of $63.5 million in 2012, compared
to a gain of $61.5 million in 2011. During 2012
we recorded impairment charges amounting to
$73.7 million on our investment in Usiminas,
reflecting changes to the operating environment
in Brazil, particularly in relation to Usiminas’
mining projects. In addition, the $275.3 million
impairment charge recorded by Ternium on its
investment in Usiminas had indirectly, a negative
impact on our 11.5% participation in Ternium.

to 25.9% of income before equity in earnings of
associated companies and income tax.

Net income increased to $1,701.4 million in 2012,
compared to $1,420.7 million in 2011, mainly
reflecting higher operating results, partially offset
by lower results from associated companies.

Income attributable to owners of the parent was
$1,699.0 million, or $1.44 per share ($2.88 per
ADS), in 2012, compared to $1,331.2 million, or
$1.13 per share ($2.26 per ADS) in 2011.

Income attributable to non-controlling interest was
$2.4 million in 2012, compared to $89.6 million
in 2011, as during the second quarter of 2012, we
acquired all the non-controlling interests in Confab,
which thereby became our wholly-owned subsidiary.

Income tax charges totalled $541.6 million in 2012,
equivalent to 23.5% of income before equity in
earnings of associated companies and income tax,
compared to $475.4 million in 2011, equivalent

Liquidity and Capital Resources
The following table provides certain information
related to our cash generation and changes in our
cash and cash equivalents position for each of the
last two years:

Millions of U.S. dollars

FoR THe YeAR eNDeD DeCeMBeR 31

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities

Increase (Decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of year

effect of exchange rate changes

increase (Decrease) in cash and cash equivalents

Cash and cash equivalents at the end of year

2012

2011

1,860.4

(1,484.3)

(425.5)

(49.5)

815.0

7.1

(49.5)

772.7

1,283.3

(603.0)

(667.9)

12.4

820.2

(17.6)

12.4

815.0

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Our financing strategy aims at maintaining
adequate financial resources and access to additional
liquidity. During 2012, we counted on cash flows
from operations as well as additional bank financing
to fund our transactions, including investments
of $1.3 billion in Brazil to acquire a participation
in Usiminas and the remaining non-controlling
interests in Confab. Short-term bank borrowings
were used as needed throughout the year. As a result,
we moved from a net cash position of $323.6 million
at December 31, 2011 to a net debt position of
$271.3 million at December 31, 2012.

We believe that funds from operations, the availability
of liquid financial assets and our access to external
borrowing through the financial markets will be
sufficient to satisfy our working capital needs, to
finance our planned capital spending program, to
service our debt in the foreseeable future and to
address short-term changes in business conditions.

At December 31, 2012, liquid financial assets as
a whole (i.e., cash and cash equivalents and other
current investments) were 9.2% of total assets
compared to 8.4% at the end of 2011.

We hold primarily investments in liquidity
funds and variable or fixed-rate securities from
investment grade issuers. We hold our cash and
cash equivalents primarily in U.S. dollars and in
major financial centers. As of December 31, 2012,
U.S. dollar denominated liquid assets represented
79%, of total liquid financial assets compared
to 66% at the end of 2011. As of December 31,
2011, an estimated 20% of our liquid financial
assets were momentarily invested in Brazilian real-
denominated instruments held at our Brazilian
subsidiary, in anticipation of Confab’s planned
disbursement of the purchase price for the
acquisition of a participation in Usiminas, which
was completed in January 2012.

We have a conservative approach to the management
of our liquidity, which consists mainly of cash and
cash equivalents and other current investments,
comprising cash in banks, liquidity funds and highly
liquid short and medium-term securities. These assets
are carried at fair market value, or at historical cost
which approximates fair market value.

Cash and cash equivalents (excluding bank
overdrafts) increased by $4.7 million, to $828.5
million at December 31, 2012, compared with
$823.7 million at December 31, 2011. Other
current investments also increased, by $213.6
million to $644.4 million as of December 31, 2012
from $430.8 million as of December 31, 2011.

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Operating activities
Net cash provided by operations during 2012 was
$1,860.4 million, compared to $1,283.3 million
during 2011. This 45% increase was mainly
attributable to higher operating results and lower
investments in working capital, partially offset
by higher income tax payments. Working capital
increased by $303.0 million during 2012, compared
with an increase of $649.6 million in 2011,
reflecting more stable values of our inventories and
trade receivables, following a more gradual growth
of sales, 9% in 2012, compared to 29% in 2011.

Investing activities
Net cash used in investing activities in 2012 was
$1,484.3 million, compared to $603.0 million in
2011. The increase was due to:

•

higher investments in acquisition of subsidiaries
and associated companies ($510.8 million in 2012,
compared to $9.4 million in 2011), as in 2012 we
acquired a participation in Usiminas for a total
consideration of $504.6 million;
an increase in investments in short term securities
of $213.6 million in 2012, while in 2011 we reduced
our short term investments by $245.4 million;
partially offset by
lower capital expenditures, $789.7 million in 2012,
compared to $862.7 million in 2011, as we have
already completed most of the investments at our
small diameter rolling mill at our Veracruz facility
in Mexico.

Financing activities
Net cash used in financing activities, including
dividends paid, proceeds and repayments of
borrowings and acquisitions of non-controlling
interests, was $425.5 million in 2012, compared to
$667.9 million in 2011.

Dividends paid during 2012 amounted to $448.6
million, compared to $401.4 million in 2011.

Investments in non-controlling interest amounted
to $758.6 million in 2012, compared to $16.6
million in 2011, as in 2012 we acquired the
remaining non-controlling interests in Confab.

Net proceeds from borrowings (proceeds less
repayments) totaled $782.6 million in 2012, compared
to net repayments of borrowings of $227.2 million
in 2011, as a result of borrowings used to finance the
acquisition of our participation in Usiminas and the
remaining non-controlling interests in Confab.

Our total liabilities to total assets ratio was
0.28:1 as of December 31, 2012 and 0.25:1 as of
December 31, 2011.

Principal Sources of Funding
During 2012, we counted on cash flows from
operations as well as additional bank financing
to fund our transactions including investments of
$1.3 billion in Brazil. Short-term bank borrowings
were used as needed throughout the year.

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Financial liabilities
During 2012, total financial debt increased by
$813.3 million, to $1,744.2 million at December
31, 2012, from $930.9 million at December 31,
2011. During 2012, we entered into two syndicated
loan agreements, one in January 2012, amounting
to $350 million, to finance our investment in
Usiminas and one in April 2012, amounting to
$350 million, to finance the acquisition of the
remaining minority interest in Confab.

of bank loans, including syndicated loans. As
of December 31, 2012 U.S. dollar-denominated
financial debt plus debt denominated in
other currencies swapped to the U.S. dollar
represented 81% of total financial debt. For
further information about our financial debt,
please see note 20 “Borrowings” to our audited
consolidated financial statements included in
this annual report.

Our financial liabilities (other than trade payables
and derivative financial instruments) consist mainly

The following table shows the composition
of our financial debt at December 31, 2012
and 2011:

Thousands of U.S. dollars

Bank borrowings

Bank overdrafts

Finance lease liabilities

Total borrowings

The weighted average interest rates before tax
(considering hedge accounting), amounted to
2.6% at December 31, 2012 and to 3.8% at
December 31, 2011

2012

2011

1,686,213

921,905

55,802

2,177

8,711

260

1,744,192

930,876

The maturity of our financial debt is as follows:

Thousands of U.S. dollars

AT DeCeMBeR 31, 2012

Borrowings

interests to be accrued

Total

1 year
or less

1-2
years

2-3
years

3-4
years

4-5
years

over
5 years

Total

1,211,785

18,615

1,230,400

231,422

12,802

244,224

162,400

5,753

168,153

83,971

3,344

87,315

45,847

748

46,595

8,767

230

8,997

1,744,192

41,492

1,785,684

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Our current debt to total debt ratio decreased from
0.84:1 as of December 31, 2011 to 0.69:1 as of
December 31, 2012.

Activities” and note 25 “Derivative financial
instruments” to our audited consolidated financial
statements included in this annual report.

For information on our derivative financial
instruments, please see “Quantitative and Qualitative
Disclosure about Market Risk – Accounting for
Derivative Financial Instruments and Hedging

For information regarding the extent to which
borrowings are at fixed rates, please see
“Quantitative and Qualitative Disclosure about
Market Risk”.

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Significant borrowings
Our most significant borrowings as of December 31,
2012 were as follows:

Millions of U.S. dollars

Disbursement date

Borrower

Type

2012

January 2012

April 2012

2012

Tamsa

Confab

Maverick

Siderca

Dalmine

Several bank loans

Syndicated

Several bank loans

The main covenants in our syndicated loan
agreements are limitations on liens and
encumbrances, limitations on the sale of certain
assets, restrictions on distributions, restrictions
on investments, compliance with financial ratios
(i.e., leverage ratio and interest coverage ratio)
and restrictions on amendments or payments of
subordinated indebtedness.

As of December 31, 2012, Tenaris was in compliance
with all of its financial and other covenants.

original
& outstanding

Final Maturity

420.8

350.0

223.7

162.7

2013 & 2014

January 2017

April 2015

Mainly 2013

Quantitative and Qualitative
Disclosure about Market Risk

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The multinational nature of our operations and
customer base expose us to a variety of risks,
including the effects of changes in foreign currency
exchange rates, interest rates and commodity
prices. In order to reduce the impact related to
these exposures, management evaluates exposures
on a consolidated basis to take advantage
of natural exposure netting. For the residual
exposures, we may enter into various derivative
transactions in order to reduce potential adverse
effects on our financial performance. Such
derivative transactions are executed in accordance
with internal policies and hedging practices. We do
not enter into derivative financial instruments for

Thousands of U.S. dollars

exPeCTeD MATURiTY DATe

trading or other speculative purposes, other than
non-material investments in structured products.

The following information should be read together
with section 3, “Financial risk management” to
our audited consolidated financial statements
included elsewhere in this annual report.

Debt Structure
The following tables provide a breakdown of our
debt instruments at December 31, 2012 and 2011
which included fixed and variable interest rate
obligations, detailed by maturity date:

AT DeCeMBeR 31, 2012

2013

2014

2015

2016

2017

Thereafter

Total (1)

NoN-CURReNT DeBT

Fixed rate

Floating rate

CURReNT DeBT

Fixed rate

Floating rate

–

8,312

223,110

7,672

154,728

1,129

82,842

952

44,895

2,244

6,523

20,309

512,098

758,465

453,320

–

758,465

453,320

1,211,785

231,422

162,400

83,971

45,847

8,767

1,744,192

AT DeCeMBeR 31, 2011

2012

2013

2014

2015

2016

Thereafter

Total (1)

exPeCTeD MATURiTY DATe

NoN-CURReNT DeBT

Fixed rate

Floating rate

CURReNT DeBT

Fixed rate

Floating rate

–

78,328

32,581

887

7,641

1,112

7,641

863

5,715

3,018

11,989

84,208

65,567

567,726

213,375

781,101

–

110,909

8,528

8,753

6,578

15,007

567,726

213,375

930,876

(1) As most borrowings are based on short-term fixed rates, or floating rates that approximate market rates, with interest rate

resetting every 3 to 6 months, the fair value of the borrowings approximates its carrying amount and is not disclosed separately.

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The weighted average interest rates before tax
(calculated using the rates set for each instrument
at year end, in its corresponding currency and
considering derivative financial instruments
designated for hedge accounting), amounted
to 2.6% at December 31, 2012 and to 3.8% at
December 31, 2011.

Our financial liabilities (other than trade payables
and derivative financial instruments) consist mainly
of bank loans. As of December 31, 2012 U.S. dollar
denominated financial debt plus debt denominated
in other currencies swapped to the U.S. dollar
represented 81% of total financial debt. For further
information about our financial debt, please see
note 20 “Borrowings” to our audited consolidated
financial statements included in this annual report.

Interest Rate Risk
Fluctuations in market interest rates create a
degree of risk by affecting the amount of our
interest payments. At December 31, 2012, we had
variable interest rate debt of $965.4 million and
fixed rate debt of $778.8 million. This risk is to a
great extent mitigated by our investment portfolio.

In addition, in the past, we have entered into
foreign exchange derivative contracts and/
or interest rate swaps in order to mitigate the
exposure to changes in interest rates, but there
were no interest rate derivatives outstanding at
December 31, 2012, nor at December 31, 2011.

Foreign Exchange Rate Risk
We manufacture and sell our products in a
number of countries throughout the world and

consequently we are exposed to foreign exchange
rate risk. Since the Company’s functional currency
is the U.S. dollar, the purpose of our foreign
currency hedging program is mainly to reduce the
risk caused by changes in the exchange rates of
other currencies against the U.S. dollar.

Most of our revenues are determined or influenced
by the U.S. dollar. In addition, most of our costs
correspond to steelmaking raw materials and steel
coils and plates, also determined or influenced by
the U.S. dollar. However, outside the United States,
a portion of our expenses is incurred in foreign
currencies (e.g. labor costs). Therefore, when
the U.S. dollar weakens in relation to the foreign
currencies of the countries where we manufacture
our products, the U.S. dollar-reported expenses
increase. In 2012, a 5% weakening of the U.S. dollar
average exchange rate against the currencies of the
countries where we have labor costs would have
decreased operating income by approximately 3%.

Our consolidated exposure to currency fluctuations
is reviewed on a periodic basis. A number of
hedging transactions are performed in order to
achieve an efficient coverage in the absence of
operative or natural hedges. Almost all of these
transactions are forward exchange rate contracts.

Because certain subsidiaries have functional
currencies other than the U.S. dollar, the results
of hedging activities as reported in the income
statement under IFRS may not reflect entirely
management’s assessment of its foreign exchange
risk hedging needs. Also, intercompany balances
between our subsidiaries may generate exchange
rate results to the extent that their functional
currencies differ.

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The value of our financial assets and liabilities is
subject to changes arising out of the variation of
foreign currency exchange rates. The following
table provides a breakdown of our main financial
assets and liabilities (including foreign exchange
derivative contracts) that impact our profit and
loss as of December 31, 2012.

All amounts in thousands of U.S. dollars

CURReNCY exPoSURe / FUNCTioNAL CURReNCY

Argentine Peso / U.S. dollar

euro / U.S. dollar

Canadian dollar / U.S. dollar

U.S. dollar / Brazilian real

Mexican Peso / U.S. dollar

Japanese Yen / U.S. dollar

Long / (Short)
Position

(168,816)

(117,370)

(37,782)

(27,269)

(2,456)

2,099

The main relevant exposures as of December 31, 2012
corresponds to Argentine peso-denominated trade,
social and fiscal payables at our Argentine subsidiaries
which functional currency is the U.S. dollar, and Euro-
denominated liabilities at certain subsidiaries which
functional currency was the U.S. dollar.

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Foreign Currency Derivative Contracts
At December 31, 2012 and 2011, Tenaris was party to
foreign currency forward agreements as detailed below.

Thousands of U.S. dollars

Currencies

Contract

Contract
Amount

Average contractual
exchange rate

Term

Fair value at

December 31, 2012

BRL/US$

US$/MxP

US$/ARS

US$/eUR

BRL/eUR

CAD/US$

KWD/US$

CoP/US$

others

Brazilian Real Forward sales

Mexican Peso Forward purchases

Argentine Peso Forward purchases

euro Forward purchases

euro Forward purchases / Brazilian Real Forward Sales

Canadian Dollar Forward sales

Kuwaiti Dinar Forward sales

Colombian Pesos Forward sales

373,025

343,663

227,032

130,151

113,994

96,163

52,460

30,927

2.07

13.18

5.16

1.31

2.67

1.00

0.28

1,823.00

2013

824

1,324

1,301

1,201

1,272

(105)

(151)

(847)

(998)

3,821

Thousands of U.S. dollars

Currencies

Contract

US$/MxP

BRL/US$

US$/ARS

CAD/US$

others

Mexican Peso Forward purchases

Brazilian Real Forward sales

Argentine Peso Forward purchases

Canadian Dollar Forward sales

US$ / CAD

Canadian Dollar Forward Purchases

(embedded into purchase contract)

Contract
Amount

Average contractual
exchange rate

Term

Fair value at

December 31, 2011

260,327

53,817

352,920

63,828

–

198,927

12.26

1.79

4.53

1.03

–

1.03

2013

2012

–

2017

(41,163)

3,260

(842)

(749)

(308)

435

(39,367)

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Accounting for Derivative Financial Instruments

and Hedging Activities
Derivative financial instruments are classified as
financial assets (or liabilities) at fair value through
profit or loss. Their fair value is calculated using
standard pricing techniques and, as a general rule, we
recognize the full amount related to the change in its
fair value under financial results in the current period.

We designate for hedge accounting certain derivatives
that hedge risks associated with recognized assets,
liabilities or highly probable forecast transactions.
These instruments are classified as cash flow hedges.
The effective portion of the fair value of such
derivatives is accumulated in a reserve account in
equity. Amounts accumulated in equity are then
recognized in the income statement in the same
period than the offsetting losses and gains on the
hedged item are recorded. The gain or loss relating
to the ineffective portion is recognized immediately
in the income statement. The fair value of our
derivative financial instruments (assets or liabilities)
continues to be reflected on the consolidated
statement of financial position.

At December 31, 2012, the effective portion of
designated cash flow hedges, included in other
reserves in shareholders’ equity amounted to a loss
of $2.9 million.

Concentration of credit risk
There is no significant concentration of credit
from customers. No single customer comprised
more than 10% of our net sales in 2012.

Our credit policies related to sales of products
and services are designed to identify customers
with acceptable credit history, and to allow us
to use credit insurance, letters of credit and
other instruments designed to minimize credit
risk whenever deemed necessary. We maintain
allowances for potential credit losses.

Commodity Price Sensitivity
We use commodities and raw materials that
are subject to price volatility caused by supply
conditions, political and economic variables and
other unpredictable factors. As a consequence, we
are exposed to risk resulting from fluctuations in
the prices of these commodities and raw materials.
Although we fix the prices of such raw materials
and commodities for short-term periods, typically
not in excess of one year, in general we do not
hedge this risk. In the past we have occasionally
used commodity derivative instruments to hedge
certain fluctuations in the market prices of raw
material and energy.

Recent
developments

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CSN Lawsuit Seeking Tender Offer to Minority

Holders of Usiminas Ordinary Shares
Confab was notified of a lawsuit filed in Brazil
by Companhia Siderúrgica Nacional (CSN)
and various entities affiliated with CSN against
Confab and various subsidiaries of Ternium. The
entities named in the CSN lawsuit had acquired a
participation in Usiminas in January 2012.

The CSN lawsuit alleges that, under applicable
Brazilian laws and rules, the acquirers were
required to launch a tag-along tender offer to all
minority holders of Usiminas ordinary shares for a
price per share equal to 80% of the price per share
paid in such acquisition, or 28.8 Brazilian reais
(BRL), and seeks an order to compel the acquirers
to launch an offer at that price plus interest. If
so ordered, the offer would need to be made to
182,609,851 ordinary shares of Usiminas not
belonging to Usiminas’ control group, and Confab
would have a 17.9% share in the offer.

Tenaris believes that CSN's allegations are
groundless and without merit, as confirmed
by several opinions of Brazilian counsel and
previous decisions by Brazil's securities regulator
Comissão de Valores Mobiliários, including a
February 2012 decision determining that the above
mentioned acquisition did not trigger any tender
offer requirement. Accordingly, no provision was

recorded in the audited consolidated financial
statements included in this annual report.

Annual Dividend Proposal
On February 21, 2013 the Company’s board of
directors proposed, for the approval of the annual
general shareholders' meeting to be held on May 2,
2013, the payment of an annual dividend of $0.43
per share ($0.86 per ADS), or approximately $507.6
million, which includes the interim dividend of
$0.13 per share ($0.26 per ADS) or approximately
$153.5 million, paid in November 2012. If the annual
dividend is approved by the shareholders, a dividend
of $0.30 per share ($0.60 per ADS), or approximately
$354.2 million will be paid on May 23, 2013, with
an ex-dividend date of May 20, 2013. Our audited
consolidated financial statements included in this
annual report do not reflect this dividend payable.

Appointment of Chief Financial Officer
Effective as of July 1, 2013, Edgardo Carlos will
assume the position of Chief Financial Officer,
replacing Ricardo Soler.

Mr. Carlos previously served as our financial director,
as administration & finance director for Mexico and
Central America, and currently holds the position of
economic and financial planning director.

Environmental
regulation

Related party
transactions

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Tenaris is a party to several related party
transactions, which include, among others,
purchases and sales of goods (including steel pipes,
flat steel products, steel bars, raw materials, gas
and electricity) and services (including engineering
services and related services) from or to entities
controlled by San Faustin or in which San Faustin
holds significant interests. Material related
party transactions, as explained in Corporate
Governance – Audit Committee, are subject to the
review of the audit committee of the Company’s
board of directors and the requirements of the
Company’s articles of association and Luxembourg
law. For further detail on Tenaris’s related
party transactions, see Note 29 “Related party
transactions” to our audited consolidated financial
statements, included in this annual report.

We are subject to a wide range of local,
provincial and national laws, regulations,
permit requirements and decrees relating to the
protection of human health and the environment,
including laws and regulations relating to
hazardous materials and radioactive materials and
environmental protection governing air emissions,
water discharges and waste management. Laws
and regulations protecting the environment have
become increasingly complex and more stringent
and expensive to implement in recent years.
International environmental requirements vary.

The ultimate impact of complying with existing
laws and regulations is not always clearly known
or determinable since regulations under some of
these laws have not yet been promulgated or are
undergoing revision. The expenditures necessary
to remain in compliance with these laws and
regulations, including site or other remediation
costs, or costs incurred from potential environmental
liabilities, could have a material adverse effect on our
financial condition and profitability. While we incur
and will continue to incur expenditures to comply
with applicable laws and regulations, there always
remains a risk that environmental incidents or
accidents may occur that may negatively affect our
reputation or our operations.

Compliance with applicable environmental laws and
regulations is a significant factor in our business.
We have not been subject to any material penalty
for any material environmental violation in the
last five years, and we are not aware of any current
material legal or administrative proceedings pending
against us with respect to environmental matters
which could have an adverse material impact on our
financial condition or results of operations.

Employees

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The following table shows the number of persons
employed by Tenaris:

The number of our employees remained relatively
stable during 2012.

AT DeCeMBeR 31

Argentina

Mexico

United States

Brazil

italy

Romania

Canada

indonesia

Colombia

Japan

other Countries

Total employees

2012

6,621

4,930

3,522

3,161

2,493

1,534

1,334

752

623

593

1,110

26,673

Approximately 55% of our employees are
unionized. We believe that we enjoy good or
satisfactory relations with our employees and
their unions in each of the countries in which
we have manufacturing facilities, and we have
not experienced any major strikes or other
labor conflicts with a material impact on our
operations over the last five years. In some
of the countries in which we have significant
production facilities (e.g., Argentina and Brazil),
the revaluation of local currencies against the
U.S. dollar, together with inflationary pressures,
negatively affect our costs, increase labor
demands and could eventually generate higher
levels of labor conflicts.

At December 31, 2011 and December 31, 2010,
the number of persons employed by Tenaris was
26,980 and 25,422 respectively.

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Corporate governance

The Company’s corporate governance practices
are governed by Luxembourg Law (including,
among others, the law of August 10, 1915 on
commercial companies, the law of January
11, 2008, implementing the European Union’s
transparency directive, and the law of May 24,
2011, implementing the European Union’s
directive on the exercise of certain shareholders’
rights in general meetings of listed companies)
and the Company’s articles of association. As a
Luxembourg company listed on the New York
Stock Exchange (the NYSE), the Bolsa Mexicana
de Valores, S.A. de C.V. (the Mexican Stock
Exchange), the Bolsa de Comercio de Buenos Aires
(the Buenos Aires Stock Exchange) and Borsa
Italiana S.p.A. (the Italian Stock Exchange), the
Company is required to comply with some, but
not all, of the corporate governance standards of
these exchanges. The Company, however, , believes
that its corporate governance practices meet, in
all material respects, the corporate governance
standards that are generally required for controlled
companies by all of the exchanges on which the
Company’s securities trade.

For a summary of the significant ways in which the
Company’s corporate governance practices differ
from the corporate governance standards required
for controlled companies by the exchanges on
which the Company’s shares trade, please visit our
website at http://www.tenaris.com/investors/

Shareholders’ Meetings; Voting Rights;

Election of Directors
Each Share entitles the holder to one vote at
the Company’s general shareholders’ meetings.
Shareholder action by written consent is not
permitted, but proxy voting is permitted. Notices
of general shareholders’ meetings are governed
by the provisions of Luxembourg law. Pursuant

to applicable Luxembourg law, the Company
must give notice of the calling of any general
shareholders’ meeting at least 30 days prior to
the date for which the meeting is being called,
by publishing the relevant convening notice
in the Luxembourg Official Gazette and in a
leading newspaper having general circulation
in Luxembourg and by issuing a press release
informing of the calling of such meeting. If an
extraordinary general shareholders’ meeting is
adjourned for lack of a quorum, a new convening
notice must be published at least 17 days prior
to the date for which the second-call meeting is
being called. In case Shares are listed on a foreign
regulated market, notices of general shareholders’
meetings shall also comply with the requirements
(including as to content and publicity) and follow
the customary practices of such regulated market.

Pursuant to our articles of association, for as long
as the Shares or other securities of the Company
are listed on a regulated market within the
European Union (as they currently are), and unless
as may otherwise be provided by applicable law,
only shareholders holding shares of the Company
as of midnight, central European time, on the day
that is fourteen days prior to the day of any given
general shareholders’ meeting can attend and
vote at such meeting. The board of directors may
determine other conditions that must be satisfied
by shareholders in order to participate in a general
shareholders’ meeting in person or by proxy,
including with respect to deadlines for submitting
supporting documentation to or for the Company.

No attendance quorum is required at ordinary
general shareholders’ meetings, and resolutions may
be adopted by a simple majority vote of the Shares
represented and voted at the meeting. Unless as may
otherwise be provided by applicable Luxembourg
law, an extraordinary general shareholders’ meeting

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may not validly deliberate on proposed amendments
to the Company’s articles of association unless a
quorum of at least 50% of the issued share capital
is represented at the meeting. If a quorum is not
reached, such meeting may be reconvened at a
later date with no quorum requirements by means
of the notification procedures described above.
In both cases, the Luxembourg Companies Law
and the Company’s articles of association require
that any resolution of an extraordinary general
shareholders’ meeting as to amendments to the
Company’s articles of association be adopted
by a two-thirds majority votes of the Shares
represented at the meeting. If a proposed resolution
consists of changing the Company’s nationality
or of increasing the shareholders’ commitments,
the unanimous consent of all shareholders is
required. Directors are elected at ordinary general
shareholders’ meetings.

Cumulative voting is not permitted. The
Company’s articles of association do not provide
for staggered terms and directors are elected for
a maximum of one year and may be reappointed
or removed by the general shareholders’ meeting
at any time, with or without cause, by resolution
passed by a simple majority vote of the Shares
represented and voted at the meeting. In the case
of a vacancy occurring in the Board of Directors,
the remaining directors may temporarily fill such
vacancy with a temporary director appointed by
resolution adopted with the affirmative vote of a
majority of the remaining directors; provided that
the next general shareholder’s meeting shall be

called upon to ratify such appointment. The term
of any such temporary director shall expire at the
end of the term of office of the director whom
such temporary director replaced.

The next Company’s annual general shareholders’
meeting that will consider, among other things,
our audited consolidated financial statements and
annual accounts, included in this annual report will
take place in Luxembourg, on Thursday May 2,
2013 at 9:30 A.M., Luxembourg time.

The rights of the shareholders attending the
meetings are governed by the Luxembourg law of
24 May 2011 on the exercise of certain rights of
shareholders in general meetings of listed companies.
For a description of the items of the agenda of
the meetings and the procedures for attending and
voting the meetings, please see the “Notice of the
Annual General Meeting of Shareholders and of an
Extraordinary General Meeting of Shareholders” on
the Company’s website at www.tenaris.com/investors.

Board of Directors
Management of the Company is vested in a
board of directors with the broadest power to act
on behalf of the Company and accomplish or
authorize all acts and transactions of management
and disposal that are within its corporate purpose
and not specifically reserved in the articles of
association or by applicable law to the general
shareholders’ meeting. The Company’s articles
of association provide for a board of directors

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consisting of a minimum of three and a maximum
of fifteen directors; however, for as long as the
Company’s shares are listed on at least one stock
exchange, the minimum number of directors must
be five. The Company’s current board of directors
is composed of ten directors.

The board of directors is required to meet as often
as required by the interests of the Company and
at least four times per year. A majority of the
members of the board of directors in office present
or represented at the board of directors’ meeting
constitutes a quorum, and resolutions may be
adopted by the vote of a majority of the directors
present or represented. In the case of a tie, the
chairman is entitled to cast the deciding vote.

Directors are elected at the annual ordinary
general shareholders’ meeting to serve one-year
renewable terms, as determined by the general
shareholders’ meeting. The general shareholders’
meeting also determines the number of
directors that will constitute the board and their
compensation. The general shareholders’ meeting
may dismiss all or any one member of the board
of directors at any time, with or without cause,
by resolution passed by a simple majority vote,
irrespective of the number of shares represented
at the meeting.

Under the Company’s articles of association, until
May 12, 2017, the board of directors is authorized
to increase the issued share capital in whole or in
part from time to time, through issues of shares

within the limits of the authorized share capital
against compensation in cash, compensation in
kind at a price or if shares are issued by way of
incorporation of reserves, at an amount, which
shall not be less than the par value and may include
such issue premium as the board of directors shall
decide. However, under the Company’s articles of
association, the Company’s existing shareholders
shall have a preferential right to subscribe for any
new Shares issued pursuant to the authorization
granted to its board of directors, except in the
following cases (in which cases no preferential
subscription rights shall apply):

•

any issuance of Shares (including, without
limitation, the direct issuance of Shares or upon
the exercise of options, rights convertible into
shares, or similar instruments convertible or
exchangeable into Shares) against a contribution
other than in cash;
any issuance of Shares (including by way of
free Shares or at discount), up to an amount of
1.5% of the issued share capital of the Company,
to directors, officers, agents, employees of the
Company, its direct or indirect subsidiaries, or
its affiliates (collectively, the “Beneficiaries”),
including, without limitation, the direct issuance
of Shares or upon the exercise of options, rights
convertible into Shares, or similar instruments
convertible or exchangeable into Shares, issued
for the purpose of compensation or incentive of
the Beneficiaries or in relation thereto (which the
board of directors shall be authorized to issue
upon such terms and conditions as it deems fit).

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Amendment of the Company’s articles of
association requires the approval of shareholders
at an extraordinary shareholders’ meeting with a
two-thirds majority vote of the Shares present or
represented at the meeting.

The following table sets forth the name of the
Company’s current directors, their respective
positions on the board, their principal occupation,
their years of service as board members and their age.

Name

Position

Principal occupation

Years as Director

Age at
December 31, 2012

Roberto Bonatti (1)

Carlos Condorelli

Carlos Franck

Roberto Monti

gianfelice Mario Rocca (1)

Paolo Rocca (1)

Jaime Serra Puche

Alberto Valsecchi

Director

President of San Faustin

Director of Tenaris and Ternium

President of Santa María

Member of the board of directors of Petrobras energia

Chairman of the board of directors of San Faustin

Chairman and chief executive officer of Tenaris

Chairman of SAi Consultores

Director of Tenaris

Amadeo Vázquez y Vázquez

Director

Director of gas Natural Ban S.A.

guillermo Vogel

Director

Vice chairman of Tamsa

(1) Paolo Rocca and gianfelice Rocca are brothers, and Roberto Bonatti is Paolo and gianfelice Rocca’s first cousin.

Roberto Bonatti
Mr. Bonatti is a member of the
Company’s board of directors.
He is a grandson of Agostino Rocca,
founder of the Techint group, a
group of companies controlled
by San Faustin. Throughout his
career in the Techint group he has
been involved specifically in the
engineering and construction and
corporate sectors. He was first
employed by the Techint group in
1976, as deputy resident engineer
in Venezuela. In 1984, he became a
director of San Faustin, and since
2001 he has served as its president.
In addition, Mr. Bonatti currently
serves as president of Sadma
Uruguay S.A. He is also a member of
the board of directors of Ternium.
Mr. Bonatti is an Italian citizen.

Carlos Condorelli
Mr. Condorelli is a member of the
Company’s board of directors. He
served as our chief financial officer
from October 2002 until September
2007. He is also a board member of
Ternium. He began his career within
the Techint group in 1975 as an analyst
in the accounting and administration
department of Siderar S.A.I.C., or
Siderar. He has held several positions
within Tenaris and other Techint
group companies, including finance
and administration director of
Tamsa and president of the board of
directors of Empresa Distribuidora
La Plata S.A., or Edelap, an Argentine
utilities company. Mr. Condorelli is an
Argentine citizen.

Carlos Franck
Mr. Franck is a member of the
Company’s board of directors.
He is president of Santa María
S.A.I.F. and Inverban S.A. and a
member of the board of directors
of Siderca, Techint Financial
Corporation N.V., Techint Holdings
S.à r.l., Siderar and Tecgas N.V. He
has financial planning and control
responsibilities in subsidiaries
of San Faustin. He serves as
treasurer of the board of the Di
Tella University. Mr. Franck is an
Argentine citizen.

Roberto Monti
Mr. Monti is a member of the
Company’s board of directors. He
is member of the board of directors
of Petrobras Energia. He has served
as vice president of Exploration
and Production of Repsol YPF and
chairman and chief executive officer
of YPF. He was also president of
Dowell, a subsidiary of Schlumberger
and president of Schlumberger
Wire & Testing division for East
Hemisphere Latin America. Mr.
Monti is an Argentine citizen.

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Gianfelice Mario Rocca
Mr. Rocca is a member of the
Company’s board of directors.
He is a grandson of Agostino Rocca.
He is chairman of the board of
directors of San Faustin, a member
of the board of directors of Ternium,
president of the Humanitas Group
and honorary president of the board
of directors of Techint Compagnia
Tecnica Internazionale S.p.A.
and president of Tenova S.p.A. In
addition, he sits on the board of
directors or executive committees
of several companies, including
Allianz S.p.A., Brembo and Buzzi
Unicem. He is chairman of the
board of the Italian Institute of
Technology. He is a member of the
Advisory Board of Allianz Group,
the Trilateral Commission and
the European Advisory Board of
Harvard Business School.
Mr. Rocca is an Italian citizen.

Paolo Rocca
Mr. Rocca is the chairman of the
Company’s board of directors and
our chief executive officer. He is a
grandson of Agostino Rocca. He
is also chairman of the board of
directors of Tamsa. He is also the
chairman of the board of directors
of Ternium, a director and vice
president of San Faustin, and
a director of Techint Financial
Corporation N.V. Mr. Rocca is
a member of the International
Advisory Committee of the New
York Stock Exchange. Mr. Rocca
is an Italian citizen.

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Jaime Serra Puche
Mr. Serra Puche is a member of the
Company’s board of directors. He
is the chairman of SAI Consultores,
a Mexican consulting firm, and a
member of the board of directors of
Chiquita Brands International, the
Mexico Fund, Grupo Vitro, Grupo
Modelo and Grupo Financiero BBVA
Bancomer. Mr. Serra Puche served as
Mexico’s Undersecretary of Revenue,
Secretary of Trade and Industry,
and Secretary of Finance. He led
the negotiation and implementation
of NAFTA. Mr. Serra Puche is a
Mexican citizen.

Alberto Valsecchi
Mr. Valsecchi is a member of the
Company’s board of directors. He
served as our chief operating officer
from February 2004 until July 2007.
He joined the Techint group in 1968
and has held various positions within
Tenaris and other Techint group
companies. He has retired from his
executive positions. He is also a
member of the board of directors
of San Faustin and has been elected
as the chairman of the board of
directors of Dalmine, a position he
assumed in May 2008. Mr. Valsecchi
is an Italian citizen.

Amadeo Vázquez y Vázquez
Mr. Vázquez y Vázquez is a member
of the Company’s board of directors.
He is an independent member of the
board of directors of Gas Natural
Ban S.A. He is a member of the
Asociación Empresaria Argentina,
of the Fundación Mediterránea,
and of the Advisory Board of
the Fundación de Investigaciones
Económicas Latinoamericanas.
He served as chief executive officer
of Banco Río de la Plata S.A. until
August 1997 and was also the
chairman of the board of directors
of Telecom Argentina S.A. until
April 2007. Mr. Vázquez y Vázquez
is a Spanish and Argentine citizen.

Guillermo Vogel
Mr. Vogel is a member of the
Company’s board of directors.
He is the vice chairman of Tamsa,
the chairman of Grupo Collado
S.A.B. de C.V, the vice chairman of
Estilo y Vanidad S.A. de C.V. and a
member of the board of directors
of each of Alfa S.A.B. de C.V., the
American Iron and Steel Institute,
the North American Steel Council,
the Universidad Panamericana and
the IPADE. In addition, he is a
member of the board of directors
and the investment committee of
the Corporación Mexicana de
Inversiones de Capital. Mr. Vogel
is a Mexican citizen.

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Director Liability
Each director must act in the interest of the
Company, and in accordance with applicable
laws, regulations, and the Company’s articles of
association. Directors are also bound by a general
duty of care owed to the Company.

Under Luxembourg law, a director may be
liable to the Company for any damage caused
by management errors, such as wrongful acts
committed during the execution of his or her
mandate, and to the Company, its shareholders
and third parties in the event that the Company,
its shareholders or third parties suffer a loss due
to an infringement of either the Luxembourg
law on commercial companies or the Company’s
articles of association.

Under Luxembourg law, any director having a
conflict of interest in respect of a transaction
submitted for approval to the board of directors
may not take part in the deliberations concerning
such transaction and must inform the board of
such conflict and cause a record of his statement
to be included in the minutes of the meeting.
Subject to certain exceptions, transactions in which
any directors may have had an interest conflicting
with that of the Company must be reported at the
next general shareholders’ meeting following any
such transaction.

A director will not be liable for acts committed
pursuant to a board resolution if, notwithstanding
his or her presence at the board meeting at which
such resolution was adopted, such director advised
the board of directors that he or she opposed the
resolution and caused a record of such opposition
to be included in the minutes of the meeting.

Causes of action against directors for damages
may be initiated by the Company upon a resolution

of the general shareholders’ meeting passed by a
simple majority vote, irrespective of the number of
shares represented at the meeting. Causes of action
against directors who misappropriate corporate
assets or commit a breach of trust may be brought
by any shareholder for personal losses different
from those of the Company.

It is customary in Luxembourg that the shareholders
expressly discharge the members of the board of
directors from any liability arising out of or in
connection with the exercise of their mandate when
approving the annual accounts of the Company at
the annual general shareholders meeting. However,
such discharge will not release the directors from
liability for any damage caused by wrongful acts
committed during the execution of their mandate
or due to an infringement of either the Luxembourg
law on commercial companies or the Company’s
articles of association vis-à-vis third parties.

Audit Committee
Pursuant to the Company’s articles of association,
as supplemented by the audit committee’s charter,
for as long as the Company’s shares are listed on at
least one stock exchange, the Company must have
an audit committee composed of three members,
all of which must qualify as independent directors
under the Company’s articles of association.

Under the Company’s articles of association, an
independent director is a director who:

•

is not and has not been employed by us or our
subsidiaries in an executive capacity for the
preceding five years;
is not a person that controls us, directly or indirectly,
and is not a member of the board of directors of a
company controlling us, directly or indirectly;
does not have (and is not affiliated with a
company or a firm that has) a significant business

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relationship with us, our subsidiaries or our
controlling shareholder;
is not and has not been affiliated with or
employed by a present or former auditor of us, our
subsidiaries or our controlling shareholder for the
preceding five years; and
is not a spouse, parent, sibling or relative up to the
third degree of any of the above persons.

•

The Company’s board of directors has an audit
committee consisting of three members. On
May 2, 2012, the Company’s board of directors
reappointed Jaime Serra Puche, Amadeo Vázquez
y Vázquez and Roberto Monti as members of our
audit committee. All three members of the audit
committee qualify as independent directors under
the Company’s articles of association.

Under the Company’s articles of association, the
audit committee is required to report to the board
of directors on its activities from time to time, and
on the adequacy of the systems of internal control
over financial reporting once a year at the time
the annual accounts are approved. In addition, the
charter of the audit committee sets forth, among
other things, the audit committee’s purpose and
responsibilities. The audit committee assists the
board of directors in its oversight responsibilities
with respect to our financial statements, and
the independence, performance and fees of our
independent auditors. The audit committee
also performs other duties entrusted to it by the
Company’s board of directors.

In addition, the audit committee is required by
the Company’s articles of association to review

“material transactions”, as such term is defined
under the Company’s articles of association, to be
entered into by the Company or its subsidiaries
with “related parties”, as such term is defined in
the Company’s articles of association, in order
to determine whether their terms are consistent
with market conditions or are otherwise fair
to the Company and/or its subsidiaries. In
the case of material transactions entered into
by the Company’s subsidiaries with related
parties, the Company’s audit committee will
review those transactions entered into by those
subsidiaries whose boards of directors do not have
independent members.

Under the Company’s articles of association, as
supplemented by the audit committee’s charter, a
material transaction is:

•

any transaction between the Company or its
subsidiaries with related parties (x) with an
individual value equal to or greater than $10
million, or (y) with an individual value lower
than $10 million, when the aggregate sum – as
reflected in the financial statements of the four
fiscal quarters of the Company preceding the date
of determination- of any series of transactions for
such lower value that can be deemed to be parts of
a unique or single transaction (but excluding any
transactions that were reviewed and approved by
Company’s audit committee or board of directors,
as applicable, or the independent members of
the board of directors of any of its subsidiaries)
exceeds 1.5% of the Company’s consolidated net
sales made in the fiscal year preceding the year on
which the determination is made;

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•

any corporate reorganization transaction
(including a merger, spin-off or bulk transfer of a
business) affecting the Company for the benefit of,
or involving, a related party; and
any corporate reorganization transaction (including
a merger, spin-off or bulk transfer of a business) not
reviewed and approved by the independent members
of the board of directors of any of the Company’s
direct or indirect subsidiaries, affecting any of the
Company’s direct or indirect subsidiaries for the
benefit of, or involving, a related party.

The audit committee has the power (to the
maximum extent permitted by applicable laws)
to request that the Company or relevant subsidiary
provide any information necessary for it to review
any material transaction. A related party transaction
shall not be entered into without prior review by
the Company’s audit committee and approval by
the board of directors unless (i) the circumstances
underlying the proposed transaction justify that
it be entered into before it can be reviewed by the
Company’s audit committee or approved by the
board of directors and (ii) the related party agrees
to unwind the transaction if the Company’s audit
committee or board of directors does not approve it.

The audit committee has the authority to
engage independent counsel and other advisors
to review specific issues as the committee may
deem necessary to carry out its duties and to
conduct any investigation appropriate to fulfill
its responsibilities, and has direct access to the
Company’s internal and external auditors as well
as to the Company’s management and employees
and, subject to applicable laws, its subsidiaries.

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Senior management
Our current senior management as of the date
of this annual report consists of:

Name

Position

Age at
December 31, 2012

Paolo Rocca

Ricardo Soler (*)

Chairman and Chief executive officer

Chief Financial officer

gabriel Casanova

Supply Chain Director

Carlos Pappier

Marco Radnic

Marcelo Ramos

Chief Process and information officer

Human Resources Director

Technology Director

Vincenzo Crapanzano

industrial Director

germán Curá

Sergio de la Maza

Renato Catallini

North American Area Manager

Central American Area Manager

Brazilian Area Manager

Javier Martínez Alvarez

Southern Cone Area Manager

Alejandro Lammertyn

eastern Hemisphere Area Manager

Luca Zanotti

european Area Manager

(*) effective as of July 1, 2013, edgardo Carlos will replace Ricardo Soler as chief financial officer.

Paolo Rocca
Mr. Rocca is the chairman of the
Company’s board of directors and
our chief executive officer. He is
a grandson of Agostino Rocca.
He is also chairman of the board
of directors of Tamsa. He is also
the chairman of the board of
directors of Ternium, a director
and vice president of San Faustin,
and a director of Techint Financial
Corporation N.V. Mr. Rocca is
a member of the International
Advisory Committee of the New
York Stock Exchange. Mr. Rocca is
an Italian citizen.

Ricardo Soler
Mr. Soler currently serves as our
chief financial officer, a position that
he assumed in October 2007 and
since September 2012 the ad interim
director of the Planning Department.
Previously he served as chief
executive officer of Hydril and from
1999 until November 2006 served
as managing director of our welded
pipe operations in South America
and as executive vice-president of
Confab and Siat. He started his
career in the Techint group in 1973
as a planning analyst at Siderar.
He served as Siderca's financial
director from 1993 until 1995.
Mr. Soler is an Argentine citizen.

Edgardo Carlos
Mr. Carlos who will assume the
position of chief financial officer
on July 1, 2013, currently serves
as our economic & financial
planning director, reporting to the
chief financial officer. He joined
the Techint Group in 1987 in the
accounting department of Siderar.
After serving as financial manager for
Sidor, in Venezuela, in 2001 he joined
Tenaris as our financial director. In
2005 he was appointed administration
& financial manager for North
America and in 2007 he became
administration & financial director
for Central America. In 2009 he was
appointed economic & financial
planning director. Mr. Carlos is an
Argentine citizen.

Gabriel Casanova
Mr. Casanova currently serves as
our supply chain director, with
responsibility for the execution of
all contractual deliveries to
customers. After graduating as a
marine and mechanical engineer, he
joined Siderca’s export department
in 1987. In 1995 he became Siderca’s
Chief Representative in China and
from 1997 to 2009 he held several
positions in the commercial area
in Dalmine. In 2009 he became the
head of our supply chain network
and in October 2012 he assumed his
current position. Mr. Casanova is an
Argentine citizen.

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Carlos Pappier
Mr. Pappier currently serves as our
chief process and information officer.
Previously, he served as planning
director. He began his career within
the Techint group in 1984 as a cost
analyst in Siderar. After holding
several positions within Tenaris
and other Techint group companies
in 2002, he became chief of staff
of Tenaris. He assumed his current
position in May 2010. Mr. Pappier
is an Argentine citizen.

Marco Radnic
Mr. Radnic currently serves as
our human resources director. He
began his career within the Techint
group in the Industrial Engineering
Department of Siderar in 1975.
Later he held several positions in
the technical departments of Siderca
and various companies within the
Techint group. After holding several
positions in the marketing and
procurement areas in Europe, in
1996 he became commercial director
of Dalmine. In 1998, he became the
director of our Process and Power
Services business unit. In 2001,
he was appointed chief of staff
for Paolo Rocca in Buenos Aires.
He assumed his current position
in December 2002. Mr. Radnic
is an Argentine citizen.

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Marcelo Ramos
Mr. Ramos currently serves as
our technology director, with
responsibility over technology
and quality. Previously he served
as quality director and managing
director of NKKTubes and our
Japanese operations. He joined the
Techint group in 1987 and has held
various positions within Tenaris
including quality control director
at Siderca. He assumed his current
position in April 2010, when the
quality and technology departments
were combined. Mr. Ramos is an
Argentine citizen.

Vincenzo Crapanzano
Mr. Crapanzano currently serves as
our industrial director, a position he
assumed in April 2011. Previously
he served as our European area
manager, Mexican area manager
and executive vice president of
Tamsa. Prior to joining Tenaris,
he held various positions at Grupo
Falck from 1979 to 1989. When
Dalmine acquired the tubular assets
of Grupo Falck in 1990, he was
appointed managing director of the
cold drawn tubes division. He is also
vice president of Centro Sviluppo
Materiali S.p.A, and of Federacciai.
Mr. Crapanzano is an Italian citizen.

Germán Curá
Mr. Curá currently serves as our
North American area manager.
He is a marine engineer and was
first employed with Siderca in 1988.
Previously, he served as Siderca’s
exports director, Tamsa’s exports
director and commercial director,
sales and marketing manager of
our Middle East office, president
of Algoma Tubes, president and
chief executive officer of Maverick
Tubulars and president and chief
executive officer of Hydril, director
of our Oilfield Services business unit
and Tenaris commercial director. He
was also a member of the board of
directors of the American Petroleum
Institute (API). He assumed his
current position in October 2006.
Mr. Curá is an USA citizen.

Sergio de la Maza
Mr. de la Maza currently serves as
our Central American area manager
and also serves as a director and
executive vice-president of Tamsa.
Previously he served as our Mexican
area manager. He first joined
Tamsa in 1980. From 1983 to 1988,
Mr. de la Maza worked in several
positions in Tamsa and Dalmine.
He then became manager of Tamsa’s
new pipe factory and later served as
manufacturing manager and quality
director of Tamsa. Subsequently, he
was named manufacturing director
of Siderca. He assumed his current
position in 2006. Mr. de la Maza is
a Mexican citizen.

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Renato Catallini
Mr. Catallini currently serves as our
Brazilian area manager, a position
that he assumed in October 2012,
after having served as our supply
chain director since August 2007. He
joined Tenaris in 2001 in the supply
management area, as a general
manager of Exiros Argentina. In July
2002, he was appointed operations
director and subsequently, in January
2005, became managing director of
Exiros. Before joining Tenaris, he
worked for ten years in the energy
sector, working for TGN, Nova Gas
Internacional, TransCanada Pipelines
and TotalFinaElf, among others.
Mr. Catallini is an Argentine citizen.

Javier Martínez Alvarez
Mr. Martínez Alvarez currently
serves as our Southern Cone area
manager, a position he assumed
in June 2010, having previously
served as our Andean area manager.
He began his career in the Techint
group in 1990, holding several
positions including planning
manager of Siderar and commercial
director of Ternium-Sidor. In 2006,
he joined Tenaris as our Venezuela
area manager. Mr Martínez Alvarez
is an Argentine citizen.

Alejandro Lammertyn
Mr. Lammertyn currently serves
as our Eastern Hemisphere Area
Manager based in Dubai. He
assumed his current position in
August 2010, after a restructuring
of the commercial department
aimed at strengthening our regional
presence in the eastern hemisphere.
Mr. Lammertyn began his career
with Tenaris in 1990. Previously
he served as assistant to the CEO
for marketing, organizational model
and mill allocation matters, supply
chain director and commercial
director. Mr. Lammertyn is an
Argentine citizen.

Luca Zanotti
Mr. Zanotti currently serves as our
European area manager, a position
he assumed in April 2011. He joined
Tenaris in 2002 as planning and
administration director in Exiros,
the supply management area.
He was later appointed raw
materials director and in July 2007
became managing director of Exiros,
a position he held until June 2010.
In July 2010 he became the senior
assistant to the European area
manager. Before joining Tenaris,
he was a senior manager at A.T.
Kearney in Milan, where he worked
from 1998 to 2002, and prior
to that he held various business
development positions in the Far
East for Lovato Electric. Mr. Zanotti
is an Italian citizen.

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Directors’ and senior management compensation
The compensation of the members of the
Company’s board of directors is determined at the
annual ordinary general shareholders’ meeting.
Each member of the board of directors received
as compensation for their services for the year
2012 a fee of $80,000. The chairman of the audit
committee received as additional compensation
a fee of $60,000 while the other members of
the audit committee received an additional fee
of $50,000. Under the Company’s articles of
association, the members of the audit committee
are not eligible to participate in any incentive
compensation plan for employees of the Company
or any of its subsidiaries.

The aggregate cash compensation received by
directors and senior management for the years
ended December 31, 2012, 2011 and 2010,
amounted to $24.1 million, $25.7 million and
$18.6 million, respectively. In addition, directors
and senior management received 542 thousand,
555 thousand and 485 thousand units, for a
total amount of $5.2 million, $4.9 million and
$4.1 million, respectively, in connection with
the Employee retention and long term incentive
program described in note O (d) “Employee
benefits –Employee retention and long term
incentive program” to our audited consolidated
financial statements included in this annual report.

There are no service contracts between any
director and Tenaris that provide for material
benefits upon termination of employment.

Auditors
The Company’s articles of association require
the appointment of an independent audit firm
in accordance with applicable law. The primary

responsibility of the auditor is to audit the
Company’s annual accounts and to submit a
report on the accounts to shareholders at the
annual shareholders’ meeting. In accordance
with applicable law, auditors are chosen from
among the members of the Luxembourg Institute
of Independent Auditors (Institut des réviseurs
d’entreprises). Auditors are appointed by the general
shareholders’ meeting upon recommendation from
our audit committee through a resolution passed by
a simple majority vote, irrespective of the number
of Shares represented at the meeting, to serve one-
year renewable terms. Auditors may be dismissed
by the general shareholders meeting at any time,
with or without cause. Luxembourg law does not
allow directors to serve concurrently as independent
auditors. As part of their duties, the auditors report
directly to the audit committee.

The Company’s audit committee is responsible
for, among other things, the oversight of the
Company’s independent auditors. The audit
committee has adopted in its charter a policy
of pre-approval of audit and permissible non-
audit services provided by its independent
auditors. Under the policy, the audit committee
makes its recommendations to the shareholders’
meeting concerning the continuing appointment
or termination of the Company’s independent
auditors. On a yearly basis, the audit committee
reviews together with management and the
independent auditor, the audit plan, audit related
services and other non-audit services and approves,
ad-referendum of the general shareholders’
meeting, the related fees. The general shareholders’
meeting normally approves such audit fees and
authorizes the audit committee to approve any
increase or reallocation of such audit fees as may
be necessary, appropriate or desirable under the
circumstances. The audit committee delegates

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to its Chairman the authority to consider and
approve, on behalf of the audit committee,
additional non-audit services that were not
recognized at the time of engagement, which must
be reported to the other members of the audit
committee at its next meeting. No services outside
the scope of the audit committee’s approval can be
undertaken by the independent auditor.

Our independent auditor for the fiscal year
ended December 31, 2012, appointed by the
shareholders’ meeting held on May 2, 2012, was
PricewaterhouseCoopers Société Coopérative.,
Réviseur d’entreprises agree in connection with all
of our annual accounts and financial statements.

Audit-Related Fees
Audit-related fees are typically services that are
reasonably related to the performance of the
audit or review of the consolidated financial
statements of the Company and the statutory
financial statements of the Company and its
subsidiaries and are not reported under the
audit fee item above. This item includes fees for
attestation services on financial information
of the Company and its subsidiaries included
in their annual reports that are filed with their
respective regulators.

Tax Fees
Tax fees paid for tax compliance professional
services.

Fees Paid to the Company’s Independent Auditor
In 2012, PwC served as the principal external
auditor for the Company. Fees payable to PwC in
2012 are detailed below.

All Other Fees
Fees paid for the support in the development of
training courses.

Thousands of U.S. dollars

FoR THe YeAR eNDeD DeCeMBeR 31

Audit Fees

Audit-Related Fees

Tax Fees

All other Fees

Total

2012

5,446

335

137

5,950

Share Ownership
To our knowledge, the total number of Shares (in
the form of ordinary shares or ADSs) beneficially
owned by our directors and senior management
as of February 28, 2013 was 1,400,839, which
represents 0.12% of our outstanding Shares.

The following table provides information
regarding share ownership by our directors and
senior management:

Audit Fees
Audit fees were paid for professional services
rendered by the auditors for the audit of the
consolidated financial statements and internal
control over financial reporting of the Company,
the statutory financial statements of the Company
and its subsidiaries, and any other audit services
required for the SEC or other regulatory filings.

Director or officer

guillermo Vogel

Carlos Condorelli

Ricardo Soler

Total

Number of
Shares Held

1,325,446

67,211

8,182

1,400,839

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Major shareholders
The following table shows the beneficial ownership
of the Shares by (1) the Company’s major
shareholders (persons or entities that have notified
the Company of holdings in excess of 5% of the
Company’s voting rights), (2) non-affiliated public
shareholders, and (3) the Company’s directors and
senior management as a group. The information
below is based on the most recent information
provided to the Company.

identity of Person or group

Number

Percent

San Faustin (1)

Aberdeen Asset Management

713,605,187

59,184,400

60.45%

5.01%

PLC’s Fund Management

operating Subsidiaries (2)

Directors and senior

management as a group

Public

Total

1,400,839

0.12%

406,346,404

34.42%

1,180,536,830

100.00%

(1) San Faustin owns all of its shares in the Company through its wholly-owned subsidiary Techint

Holdings S.à r.l. The Dutch private foundation (Stichting) Rocca & Partners Stichting
Administratiekantoor Aandelen San Faustin ("RP STAK") holds shares in San Faustin sufficient in
number to control San Faustin. No person or group of persons controls RP STAK.

(2) on April 27, 2011, Aberdeen Asset Management PLC's Fund Management operating Subsidiaries
informed Tenaris, pursuant to the Luxembourg Transparency Law, that as of April 26, 2011, it is
deemed to be the beneficial owner of 59,184,400 ordinary shares of Tenaris, par value U.S.$ 1.00
per share, representing 5.01% of Tenaris's issued and outstanding capital and votes.

The voting rights of the Company’s major
shareholders do not differ from the voting rights
of other shareholders. None of its outstanding
shares have any special control rights. There are
no restrictions on voting rights, nor are there, to

the Company’s knowledge, any agreements among
shareholders of the Company that might result
in restrictions on the transfer of securities or the
exercise of voting rights.

The Company does not know of any significant
agreements or other arrangements to which the
Company is a party and which take effect, alter
or terminate in the event of a change of control
of the Company. The Company does not know of
any arrangements, the operation of which may at
a subsequent date result in a change of control of
the Company.

Information required under the Luxembourg Law

on takeovers of May 19, 2006
The Company has an authorized share capital of a
single class of 2,500,000,000 shares with a par value
of $ 1.00 per share. Our authorized share capital is
fixed by the Company’s articles of association as
amended from time to time with the approval of
our shareholders in an extraordinary shareholders’
meeting. There were 1,180,536,830 shares issued as of
December 31, 2012. All issued shares are fully paid.

The Company’s articles of association authorize
the board of directors until May 12, 2017, to
increase the issued share capital in whole or in
part from time to time, through issues of shares
within the limits of the authorized share capital
against compensation in cash, compensation
in kind at a price or if shares are issued by way
of incorporation of reserves, at an amount,
which shall not be less than the par value and

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may include such issue premium as the board
of directors shall decide. However, under the
Company’s articles of association, the Company’s
existing shareholders shall have a preferential right
to subscribe for any new Shares issued pursuant to
the authorization granted to its board of directors,
except in the following cases (in which cases no
preferential subscription rights shall apply):

•

any issuance of Shares (including, without
limitation, the direct issuance of Shares or upon
the exercise of options, rights convertible into
shares, or similar instruments convertible or
exchangeable into Shares) against a contribution
other than in cash;
any issuance of Shares (including by way of free
Shares or at discount), up to an amount of 1.5%
of the issued share capital of the Company, to
directors, officers, agents or employees of the
Company, its direct or indirect subsidiaries, or
its affiliates (collectively, the “Beneficiaries”),
including, without limitation, the direct issuance
of Shares or upon the exercise of options, rights
convertible into Shares, or similar instruments
convertible or exchangeable into Shares, issued
for the purpose of compensation or incentive of
the Beneficiaries or in relation thereto (which the
board of directors shall be authorized to issue
upon such terms and conditions as it deems fit).

The Company is controlled by San Faustin, which
owns 60.45% of the Company’s outstanding
shares, through its wholly owned subsidiary Techint
Holdings S.à r.l. The Dutch private foundation
(Stichting) RP STAK holds shares in San Faustin
sufficient in number to control San Faustin. No
person or group of persons controls RP STAK.

Our directors and senior management as a group
own 0.12% of the Company’s outstanding shares,
while the remaining 39.43% are publicly traded.
The Company’s shares trade on the Italian Stock
Exchange, the Buenos Aires Stock Exchange and the
Mexican Stock Exchange; in addition, the Company’s
ADSs trade on the New York Stock Exchange. See
“Corporate Governance – Major Shareholders”.

None of the Company’s outstanding securities has
any special control rights. There are no restrictions
on voting rights, nor are there, to our knowledge,
any agreements among our shareholders that
might result in restrictions on the transfer of
securities or the exercise of voting rights.

The Company’s articles of association do not
contain any redemption or sinking fund provisions,
nor do they impose any restrictions on the transfer
of the Company’s shares.

There are no significant agreements to which the
Company is a party and which take effect, alter or
terminate in the event of a change in the control
of the Company following a takeover bid, thereby

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materially and adversely affecting the Company,
nor are there any agreements between us and
members of our board of directors or employees
that provide for compensation if they resign or
are made redundant without reason, or if their
employment ceases pursuant to a takeover bid.

In addition, under the Company’s articles of
association, the audit committee is required to
report to the board of directors on its activities from
time to time, and on the adequacy of the systems of
internal control over financial reporting once a year
at the time the annual accounts are approved.

Management is vested in a board of directors.
Directors are elected at the annual ordinary
shareholders’ meeting to serve one-year
renewable terms. See “Corporate Governance –
Board of Directors”.

Internal control over financial reporting
Management is responsible for establishing and
maintaining adequate internal control over financial
reporting. Tenaris’s internal control over financial
reporting was designed by management to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation and fair
presentation of its consolidated financial statements
for external purposes in accordance with IFRS.

Because of its inherent limitations, internal
control over financial reporting may not prevent
or detect misstatements or omissions. In addition,
projections of any evaluation of effectiveness to
future periods are subject to the risk that controls
may become inadequate because of changes in
conditions, or that the degree of compliance with
the policies or procedures may deteriorate.

On a yearly basis, management conducts its
assessment of the effectiveness of Tenaris’s
internal control over financial reporting based
on the framework in Internal Control- Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

Management
certification

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We confirm, to the best of our knowledge, that:

the consolidated financial statements prepared in conformity with International
Financial Reporting Standards, included in this annual report, give a true and fair view
of the assets, liabilities, financial position and profit or loss of Tenaris S.A. and its
consolidated subsidiaries, taken as a whole;

the annual accounts prepared in accordance with Luxembourg legal and regulatory
requirements, included in this annual report, give a true and fair view of the assets,
liabilities, financial position and profit or loss of Tenaris S.A.; and

the consolidated management report, which has been combined with the management
report for Tenaris S.A., included in this annual report, gives a fair review of the
development and performance of the business and the position of Tenaris S.A.,
or Tenaris S.A. and its consolidated subsidiaries, taken as a whole, as applicable,
together with a description of the principal risks and uncertainties they face.

Chief Executive Officer
Paolo Rocca
March 27, 2013

Chief Financial Officer
Ricardo Soler
March 27, 2013

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Tenaris S.A.
Consolidated
financial statements

For the years ended December 31, 2012, 2011 and 2010

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Audit report

To the Shareholders

of Tenaris S.A.

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Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of Tenaris S.A.
and its subsidiaries, which comprise the consolidated statement of financial position
as at December 31, 2012, and the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated statement of changes in equity
and the consolidated statement of cash flows for the year then ended and a summary
of significant accounting policies and other explanatory information.

Board of Directors’ responsibility for the consolidated financial statements
The Board of Directors is responsible for the preparation and fair presentation of
these consolidated financial statements in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board and
in accordance with International Financial Reporting Standards as adopted by the
European Union, and for such internal control as the Board of Directors determines is
necessary to enable the preparation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error.

Responsibility of the “Réviseur d’entreprises agréé”
Our responsibility is to express an opinion on these consolidated financial statements
based on our audit. We conducted our audit in accordance with International
Standards on Auditing as adopted for Luxembourg by the “Commission de
Surveillance du Secteur Financier”. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance
whether the consolidated financial statements are free from material misstatement. An
audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend
on the judgment of the “Réviseur d’entreprises agréé” including the assessment of the
risks of material misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the “Réviseur d’entreprises agréé”
considers internal control relevant to the entity’s preparation and fair presentation
of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting

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estimates made by the Board of Directors, as well as evaluating the overall presentation
of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.

Opinion
In our opinion, these consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. and its subsidiaries as of December 31,
2012, and of its consolidated financial performance and its consolidated cash flows for
the year then ended in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board and in accordance with
International Financial Reporting Standards as adopted by the European Union.

Report on other legal and regulatory requirements
The management report, including the corporate governance statement, which is the
responsibility of the Board of Directors, is consistent with the consolidated financial
statements and includes the information required by the law with respect to the
corporate governance statement.

Luxembourg,
March 27, 2013

PricewaterhouseCoopers, Société coopérative
Represented by

Fabrice Goffin

PricewaterhouseCoopers, Société coopérative, 400 Route d’esch, B.P. 1443, L-1014 Luxembourg
T: +352 494848 1, F: +352 494848 2900, www.pwc.lu

Cabinet de révision agréé. expert-comptable (autorisation gouvernementale n°10028256)
R.C.S. Luxembourg B 65 477 - TVA LU25482518

Consolidated Income Statement

All amounts in thousands of U.S. dollars, unless otherwise stated

YeAR eNDeD DeCeMBeR 31

Notes

2012

2011

2010

CoNTiNUiNg oPeRATioNS

Net sales

Cost of sales

Gross profit

Selling, general and administrative expenses

other operating income

other operating expenses

Operating income

interest income

interest expense

other financial results

Income before equity in earnings of associated companies and income tax

equity in (losses) earnings of associated companies

Income before income tax

income tax

Income for the year

ATTRiBUTABLe To

owners of the parent

Non-controlling interests

eARNiNgS PeR SHARe ATTRiBUTABLe To THe oWNeRS

oF THe PAReNT DURiNg YeAR

Weighted average number of ordinary shares (thousands)

Basic and diluted earnings per share (U.S. dollars per share)

Basic and diluted earnings per ADS (U.S. dollars per ADS)

The accompanying notes are an integral part of these consolidated financial statements.

10,834,030

9,972,478

7,711,598

(6,637,293)

(6,273,407)

(4,748,767)

4,196,737

3,699,071

2,962,831

(1,883,789)

(1,859,240)

(1,522,410)

71,380

(27,721)

11,541

(6,491)

85,658

(7,029)

2,356,607

1,844,881

1,519,050

33,459

(55,507)

(28,056)

30,840

(52,407)

11,268

32,855

(64,103)

(21,305)

2,306,503

1,834,582

1,466,497

(63,534)

61,509

70,057

2,242,969

1,896,091

1,536,554

(541,558)

(475,370)

(395,507)

1,701,411

1,420,721

1,141,047

1,699,047

1,331,157

1,127,367

2,364

89,564

13,680

1,701,411

1,420,721

1,141,047

1,180,537

1.44

2.88

1.13

2.26

0.95

1.91

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Consolidated statement of comprehensive income

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31

2012

2011

2010

Income for the year

1,701,411

1,420,721

1,141,047

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oTHeR CoMPReHeNSiVe iNCoMe

Currency translation adjustment

Changes in the fair value of derivatives held as cash flow hedges

Share of other comprehensive income of associates

Currency translation adjustment

Changes in the fair value of derivatives held as cash flow hedges

income tax relating to components of other comprehensive income (*)

Other comprehensive income for the year, net of tax

Total comprehensive income for the year

ATTRiBUTABLe To

owners of the parent

Non-controlling interests

(*) Relates to Cash flow hedges.

The accompanying notes are an integral part of these Consolidated Financial Statements.

(4,547)

5,631

(325,792)

983

108,184

7,649

(108,480)

2,078

(618)

(43,278)

730

(2,231)

11,413

1,049

(3,316)

(105,936)

(369,588)

124,979

1,595,475

1,051,133

1,266,026

1,598,910

1,010,520

1,211,945

(3,435)

40,613

54,081

1,595,475

1,051,133

1,266,026

Consolidated statement of financial position

All amounts in thousands of U.S. dollars

AT DeCeMBeR 31

Notes

2012

2011

ASSETS

NoN-CURReNT ASSeTS

Property, plant and equipment, net

intangible assets, net

investments in associated companies

other investments

Deferred tax assets

Receivables

CURReNT ASSeTS

inventories

Receivables and prepayments

Current tax assets

Trade receivables

Available for sale assets

other investments

Cash and cash equivalents

Total assets

EQUITY

Capital and reserves attributable to owners of the parent

Non-controlling interests

Total equity

LIABILITIES

NoN-CURReNT LiABiLiTieS

Borrowings

Deferred tax liabilities

other liabilities

Provisions

Trade payables

CURReNT LiABiLiTieS

Borrowings

Current tax liabilities

other liabilities

Provisions

Customer advances

Trade payables

Total liabilities

Total equity and liabilities

12 & 27

22 (i)

23 (ii)

22 (ii)

24 (ii)

Contingencies, commitments and restrictions to the distribution of profits are disclosed in Note 26.

The accompanying notes are an integral part of these Consolidated Financial Statements.

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4,434,970

3,199,916

983,061

2,603

214,199

142,060

2,985,805

260,532

175,562

2,070,778

21,572

644,409

828,458

8,976,809

6,987,116

4,053,653

3,375,930

670,248

2,543

234,760

133,280

2,806,409

241,801

168,329

1,900,591

21,572

430,776

823,743

8,470,414

6,393,221

15,963,925

14,863,635

11,388,016

172,310

11,560,326

10,506,227

666,716

11,172,943

532,407

749,235

225,398

67,185

–

1,574,225

1,211,785

254,603

318,828

26,958

134,010

883,190

1,286,993

149,775

828,545

233,653

72,975

2,045

781,101

326,480

305,214

33,605

55,564

2,829,374

4,403,599

15,963,925

901,735

2,403,699

3,690,692

14,863,635

Consolidated statement of changes in equity

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All amounts in thousands of U.S. dollars

ATTRiBUTABLe To oWNeRS oF THe PAReNT

Share
Capital (1)

Legal
Reserves

Share
Premium

Currency
Translation
Adjustment

other
Reserves

Balance at January 1, 2012

1,180,537

118,054

609,733

(211,366)

9,688

Income for the year

Currency translation adjustment

Hedge reserve, net of tax

Share of other comprehensive income of associates

Other comprehensive income for the year

Total comprehensive income for the year

Acquisition and increase of non-controlling interests (*)

Dividends paid in cash

–

2,421

–

(108,480)

(106,059)

–

3,925

1,997

5,922

–

(268,517)

–

Balance at December 31, 2012

1,180,537

118,054

609,733

(317,425)

(252,907)

(1) The Company has an authorized share capital of a single class of 2.5 billion shares having a nominal value of $1.00 per share.

As of December 31, 2012 there were 1,180,536,830 shares issued. All issued shares are fully paid.

(2) The Distributable Reserve and Retained earnings calculated according to Luxembourg Law are disclosed in Note 26.

(*) See Note 27.

The accompanying notes are an integral part of these Consolidated Financial Statements.

ATTRiBUTABLe To oWNeRS oF THe PAReNT

Total

Retained
earnings (2)

Total

Non-controlling
interests

8,799,581

10,506,227

666,716

11,172,943

1,699,047

2,364

1,701,411

–

2,421

3,925

(106,483)

(100,137)

(6,968)

1,088

(4,547)

5,013

(106,402)

(5,799)

(105,936)

1,699,047

1,598,910

(3,435)

1,595,475

–

(448,604)

(268,517)

(448,604)

(490,066)

(905)

(758,583)

(449,509)

10,050,024

11,388,016

172,310

11,560,326

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Consolidated statement of changes in equity (cont.)

All amounts in thousands of U.S. dollars

ATTRiBUTABLe To oWNeRS oF THe PAReNT

Share
Capital (1)

Legal
Reserves

Share
Premium

Currency
Translation
Adjustment

other
Reserves

Balance at January 1, 2011

1,180,537

118,054

609,733

108,419

15,809

Income for the year

Currency translation adjustment

Hedge reserve, net of tax

Share of other comprehensive income of associates

Other comprehensive income for the year

Total comprehensive income for the year

Acquisition and increase of non-controlling interests

Treasury shares held by associated companies

Dividends paid in cash

–

(276,507)

–

(43,278)

(319,785)

–

Balance at December 31, 2011

1,180,537

118,054

609,733

(211,366)

–

(1,582)

730

(852)

(1,930)

(3,339)

–

9,688

Balance at January 1, 2010

1,180,537

118,054

609,733

29,533

10,484

Income for the year

Currency translation adjustment

Hedge reserve, net of tax

Share of other comprehensive income of associates

Other comprehensive income for the year

Total comprehensive income for the year

Acquisition and increase of non-controlling interests

Dividends paid in cash

–

67,473

–

11,413

78,886

–

4,643

1,049

5,692

(367)

–

Balance at December 31, 2010

1,180,537

118,054

609,733

108,419

15,809

(1) The Company has an authorized share capital of a single class of 2.5 billion shares having a nominal value of $1.00 per share.

As of December 31, 2011 and 2010 there were 1,180,536,830 shares issued. All issued shares are fully paid.

The accompanying notes are an integral part of these Consolidated Financial Statements.

ATTRiBUTABLe To oWNeRS oF THe PAReNT

Total

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Retained
earnings

Total

Non-controlling
interests

7,869,807

9,902,359

648,221

10,550,580

1,331,157

89,564

1,420,721

–

(276,507)

(49,285)

(325,792)

(1,582)

(42,548)

334

–

(1,248)

(42,548)

(320,637)

(48,951)

(369,588)

1,331,157

1,010,520

40,613

1,051,133

–

(1,930)

(3,339)

577

–

(1,353)

(3,339)

(401,383)

(22,695)

(424,078)

8,799,581

10,506,227

666,716

11,172,943

7,143,823

9,092,164

628,672

9,720,836

1,127,367

13,680

1,141,047

–

67,473

4,643

12,462

84,578

1,127,367

1,211,945

40,711

(310)

–

40,401

54,081

108,184

4,333

12,462

124,979

1,266,026

–

(367)

(401,383)

(2,651)

(31,881)

(3,018)

(433,264)

7,869,807

9,902,359

648,221

10,550,580

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Consolidated statement of cash flows

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31

CASH FLoWS FRoM oPeRATiNg ACTiViTieS

income for the year

ADJUSTMeNTS FoR:

Depreciation and amortization

income tax accruals less payments

equity in losses (earnings) of associated companies

interest accruals less payments, net

Changes in provisions

impairment reversal

Changes in working capital

other, including currency translation adjustment

Net cash provided by operating activities

CASH FLoWS FRoM iNVeSTiNg ACTiViTieS

Capital expenditures

Acquisitions of subsidiaries and associated companies

increase due to sale of associated company

Proceeds from disposal of property, plant and equipment and intangible assets

Dividends and distributions received from associated companies

Changes in investments in short terms securities

Net cash used in investing activities

CASH FLoWS FRoM FiNANCiNg ACTiViTieS

Dividends paid

Dividends paid to non-controlling interest in subsidiaries

Acquisitions of non-controlling interests

Proceeds from borrowings

Repayments of borrowings

Net cash used in financing activities

(Decrease) / Increase in cash and cash equivalents

MoVeMeNT iN CASH AND CASH eqUiVALeNTS

At the beginning of the year

effect of exchange rate changes

(Decrease) / increase in cash and cash equivalents

At December 31

CASH AND CASH eqUiVALeNTS

Cash and bank deposits

Bank overdrafts

The accompanying notes are an integral part of these Consolidated Financial Statements.

Notes

2012

2011

2010

10 & 11

28 (ii)

28 (iii)

28 (i)

10 & 11

1,701,411

1,420,721

1,141,047

567,654

(160,951)

63,534

(25,305)

(12,437)

–

(303,012)

29,519

554,345

120,904

(61,509)

(24,880)

(2,443)

–

(649,640)

(74,194)

1,860,413

1,283,304

506,902

(25,447)

(70,057)

17,700

(364)

(67,293)

(676,582)

44,914

870,820

(789,731)

(510,825)

3,140

8,012

18,708

(862,658)

(847,316)

(9,418)

–

6,431

17,229

(302)

–

9,290

14,034

(96,549)

(213,633)

245,448

(1,484,329)

(602,968)

(920,843)

(448,604)

(401,383)

(905)

(758,583)

2,054,090

(1,271,537)

(22,695)

(16,606)

726,189

(953,413)

(425,539)

(667,908)

(49,455)

12,428

(31,881)

(3,018)

647,608

(862,921)

(651,595)

(701,618)

820,165

1,528,707

815,032

7,079

(49,455)

(17,561)

12,428

28 (iv)

772,656

815,032

828,458

(55,802)

772,656

823,743

(8,711)

815,032

(6,924)

(701,618)

820,165

843,861

(23,696)

820,165

Index to the notes to the
Consolidated financial statements

General Information

IV.

Other notes to the Consolidated financial statements

II.

Accounting policies (“AP”)

Basis of presentation

Group accounting

Segment information

Foreign currency translation

Property, plant and equipment

Intangible assets

Impairment of non financial assets

Other investments

Inventories

Trade and other receivables

Cash and cash equivalents

Equity

Borrowings

Segment information

Cost of sales

Selling, general and administrative expenses

Labor costs (included in Cost of sales and in Selling,

general and administrative expenses)

Other operating items

Financial results

Equity in (losses) earnings earnings of associated companies

Income tax

Earnings and dividends per share

10.

Property, plant and equipment, net

11.

Intangible assets, net

12.

Investments in associated companies

13.

Other investments - non current

14.

Receivables - non current

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Current and Deferred income tax

15.

Inventories

Employee benefits

Provisions

Trade payables

Revenue recognition

Cost of sales and sales expenses

Earnings per share

Financial instruments

III.

Financial risk management

Financial Risk Factors

16.

Receivables and prepayments

17.

Current tax assets and liabilities

18.

Trade receivables

19.

Other investments and Cash and cash equivalents

20.

Borrowings

21.

Deferred income tax

22.

Other liabilities

23.

Non-current allowances and provisions

24.

Current allowances and provisions

25.

Derivative financial instruments

Financial instruments by category

26.

Contingencies, commitments and restrictions

Fair value hierarchy

Fair value estimation

on the distribution of profits

27.

Business combinations and other acquisitions

Accounting for derivative financial instruments

28.

Cash flow disclosures

and hedging activities

29.

Related party transactions

30.

Principal subsidiaries

31.

Nationalization of Venezuelan Subsidiaries

32.

Fees paid to the Company’s principal accountant

33.

Subsequent events

I. General information

II. Accounting policies

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Tenaris S.A. (the “Company”) was established
as a public limited liability company (Societé
Anonyme) under the laws of the Grand-Duchy
of Luxembourg on December 17, 2001. The
Company holds, either directly or indirectly,
controlling interests in various subsidiaries in
the steel pipe manufacturing and distribution
businesses. References in these Consolidated
Financial Statements to “Tenaris” refer to Tenaris
S.A. and its consolidated subsidiaries.

The Company’s shares trade on the Buenos Aires
Stock Exchange, the Italian Stock Exchange and
the Mexican Stock Exchange; the Company’s
American Depositary Securities (“ADS”) trade on
the New York Stock Exchange.

These Consolidated Financial Statements were
approved for issuance by the Company’s board
of directors on February 21, 2013.

The principal accounting policies applied in the
preparation of these Consolidated Financial
Statements are set out below. These policies
have been consistently applied to all the years
presented, unless otherwise stated.

A. Basis of presentation
The Consolidated Financial Statements of
Tenaris have been prepared in accordance with
International Financial Reporting Standards
(“IFRS”), as issued by the International
Accounting Standards Board (“IASB”) and
adopted by the European Union, under the
historical cost convention, as modified by the
revaluation of financial assets and liabilities
(including derivative instruments) at fair value
through profit or loss. The Consolidated Financial
Statements are, unless otherwise noted, presented
in thousands of U.S. dollars (“$”).

Whenever necessary, certain comparative amounts
have been reclassified to conform to changes in
presentation in the current year.

Under Mexican law, the Company’s Mexican
subsidiaries are required to pay to their employees
an annual benefit calculated on a similar basis to
that used for local income tax purposes. Employee
statutory profit sharing is recorded in current
other liabilities in the Consolidated Statement
of Financial Position. Effective January 1, 2012,
the Mexican employee statutory profit sharing
provision has been included as part of labor cost
(approximately $43.8 million and $48.0 million
in Cost of sales and $6.0 million and $6.5 million
in Selling, general and administrative expenses,
respectively, for the years ended December 31, 2011
and December 31, 2010 respectively), while in the
past was part of the Income tax line and reclassified
for comparative purposes.

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The preparation of Consolidated Financial
Statements in conformity with IFRS requires
management to make certain accounting estimates
and assumptions that might affect the reported
amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the reporting
dates, and the reported amounts of revenues and
expenses during the reporting years. Actual results
may differ from these estimates.

1. New and amended standards effective

in 2012 and relevant for Tenaris
There are no IFRSs or IFRIC interpretations that
are effective for the first time for the financial year
beginning on January 1, 2012 that have a material
impact on Tenaris.

•

2. New standards, interpretations and

amendments to published standards that are not

yet effective and have not been early adopted
International Accounting Standard (“IAS”) 1
(amended 2012), “Presentation of financial
statements”
In June 2011, the IASB issued IAS 1 (amended
2011), “Presentation of financial statements”.
The amendment requires entities to separate
items presented in Other Comprehensive Income
into two groups, based on whether or not they
may be recycled to profit or loss in the future.
IAS 1 (amended 2011) must be applied for annual
periods beginning on or after July 1, 2012.

IAS 19 (amended 2011), “Employee benefits”
In June 2011, the IASB issued IAS 19 (amended
2011), “Employee benefits”, which makes
significant changes to the recognition and
measurement of defined benefit pension expense
and termination benefits, and to the disclosures
for all employee benefits. IAS 19 (amended 2011)
must be applied for annual periods beginning on
or after 1 January 2013.

The Company has not early adopted the IAS 19
revised. The impact of adoption as of January 1, 2013,
on the change in value of the pension plans is expected
to be an approximately $69 million increase in the
present value of funded and unfunded obligations,
with the corresponding impact recognized in equity.

•

IFRS 9, “Financial Instruments”
In November 2009 and October 2010, the IASB
issued IFRS 9 “Financial Instruments” which
establishes principles for the financial reporting of
financial assets by simplifying their classification
and measurement.

This standard is applicable for annual periods
beginning on or after January 1, 2015. Earlier
application is not permitted for entities that
prepare financial statements in accordance with
IFRS as adopted by the EU, since the standard is
not yet adopted by the EU.

•

IFRS 10, “Consolidated financial statements”
In May 2011, the IASB issued IFRS 10, “Consolidated
financial statements”. IFRS 10 replaces all of the
guidance on control and consolidation in IAS 27 and
SIC-12. IFRS 10 must be applied for annual periods
beginning on or after January 1, 2013.

IFRS 12, “Disclosures of interest in other entities”
In May 2011, the IASB issued IFRS 12, “Disclosures
of interest in other entities”. This standard includes
the disclosure requirements for all forms of interest
in other entities. IFRS 12 must be applied for annual
periods beginning on or after January 1, 2013.

IFRS 13, “Fair value measurement”
In May 2011, the IASB issued IFRS 13, “Fair
value measurement”. IFRS 13 explains how to
measure fair value and aims to enhance fair value
disclosures. IFRS 13 must be applied for annual
periods beginning on or after January 1, 2013.

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The Company’s management has not assessed
the potential impact that the application of these
standards may have on the Company's financial
condition or results of operations, except as
indicated above.

over the fair value of the identifiable net assets
acquired is recorded as goodwill. If this is less than
the fair value of the net assets of the subsidiary
acquired, the difference is recognized directly in
the Consolidated Income Statement.

Management assessed the relevance of other new
standards, amendments or interpretations not yet
effective and concluded that they are not relevant
to Tenaris.

B. Group accounting

1. Subsidiaries and transactions with

non-controlling interests
Subsidiaries are all entities which are controlled
by Tenaris as a result of its ability to govern an
entity’s financial and operating policies generally
accompanying a shareholding of more than 50%
of the voting rights. Subsidiaries are consolidated
from the date on which control is exercised by the
Company and are no longer consolidated from the
date control ceases.

The purchase method of accounting is used to
account for the acquisition of subsidiaries by
Tenaris. The cost of an acquisition is measured
as the fair value of the assets given, equity
instruments issued and liabilities incurred or
assumed at the date of exchange. Acquisition-
related costs are expensed as incurred. Identifiable
assets acquired, liabilities and contingent liabilities
assumed in a business combination are measured
initially at their fair values at the acquisition
date. Any non-controlling interest in the acquiree
is measured either at fair value or at the non-
controlling interest’s proportionate share of the
acquiree’s net assets. The excess of the aggregate
of the consideration transferred and the amount
of any non-controlling interest in the acquiree

The Company accounts for transactions with non-
controlling interests that do not result in a loss of
control as transactions with equity owners of the
Company. For purchases from non-controlling
interests, the difference between any consideration
paid and the relevant share acquired of the carrying
value of net assets of the subsidiary is recorded
in equity. Gains or losses on disposals to non-
controlling interests are also recorded in equity.

Material inter-company transactions, balances
and unrealized gains (losses) on transactions
between Tenaris subsidiaries have been eliminated
in consolidation. However, since the functional
currency of some subsidiaries is its respective local
currency, some financial gains (losses) arising
from inter-company transactions are generated.
These are included in the Consolidated Income
Statement under Other financial results.

See Note 30 for the list of the principal subsidiaries.

2. Associates
Associates are all entities in which Tenaris has
significant influence but not control, generally
accompanying a shareholding of between 20%
and 50% of the voting rights. Investments in
associates are accounted for by the equity method
of accounting and are initially recognized at cost.
The Company’s investment in associates includes
goodwill identified in acquisition, net of any
accumulated impairment loss.

Unrealized results on transactions between Tenaris
and its associated companies are eliminated to

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the extent of Tenaris’s interest in the associated
companies. Unrealized losses are also eliminated
unless the transaction provides evidence of an
impairment indicator of the asset transferred.
Financial statements of associated companies
have been adjusted where necessary to ensure
consistency with IFRS.

The Company’s pro-rata share of earnings in
associates is recorded in the Consolidated Income
Statement under Equity in earnings of associated
companies. The Company’s pro-rata share of
changes in other reserves is recognized in the
Consolidated Statement of Changes in Equity
under Other Reserves.

At December 31, 2012, Tenaris holds 11.46%
of Ternium’s common stock (including treasury
shares). The following factors and circumstances
evidence that Tenaris has significant influence
(as defined by IAS 28, “Investments in Associates”)
over Ternium, and as a result the Company’s
investment in Ternium has been accounted for
under the equity method:

•

Both the Company and Ternium are under the
indirect common control of San Faustin S.A.;
Four out of the nine members of Ternium’s board
of directors (including Ternium’s chairman) are
also members of the Company’s board of directors;
Under the shareholders agreement by and between
the Company and Techint Holdings S.à r.l, a
wholly owned subsidiary of San Faustin S.A. and
Ternium’s main shareholder, dated January 9, 2006,
Techint Holdings S.à r.l, is required to take actions
within its power to cause (a) one of the members
of Ternium’s board of directors to be nominated
by the Company and (b) any director nominated by
the Company to be only removed from Ternium’s
board of directors pursuant to previous written
instructions of the Company.

The Company’s investment in Ternium is carried
at incorporation cost plus proportional ownership
of Ternium’s earnings and other shareholders’
equity accounts. Because the exchange of its
holdings in Amazonia and Ylopa for shares in
Ternium was considered to be a transaction
between companies under common control of
San Faustin S.A. (formerly San Faustin N.V.),
Tenaris recorded its initial ownership interest in
Ternium at $229.7 million, the carrying value
of the investments exchanged. This value was
$22.6 million less than Tenaris’s proportional
ownership of Ternium’s shareholders’ equity at
the transaction date. As a result of this treatment,
Tenaris’s investment in Ternium will not reflect its
proportional ownership of Ternium’s net equity
position. Ternium carried out an initial public
offering (“IPO”) of its shares on February 1, 2006,
listing its ADS on the New York Stock Exchange.

At December 31, 2012, Tenaris holds through
its Brazilian subsidiary Confab Industrial S.A.
(“Confab”), 5.0% of the shares with voting rights
and 2.5% of Usiminas’s total share capital. For
the factors and circumstances that evidence that
Tenaris has significant influence (as defined by IAS
28, “Investments in Associates”) over Usiminas to
account it for under the equity method, see Note 27.

Tenaris reviews investments in associated
companies for impairment whenever events or
changes in circumstances indicate that the asset’s
carrying amount may not be recoverable, such as a
significant or prolonged decline in fair value below
the carrying value.

Tenaris carries its investment in Ternium at its
proportional equity value, with no additional goodwill
or intangible assets recognized. At December 31,
2012, 2011 and 2010, no impairment provisions were
recorded on Tenaris’ investment in Ternium.

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Tenaris carries its investment in Usiminas at its
proportional equity value, plus goodwill and
intangible assets recognized. At December 31,
2012, an impairment charge was recorded on
Tenaris’ investment in Usiminas, see Note 27.

C. Segment information
Following the acquisition of the non-controlling
interests in Confab and its further delisting, the
Company has changed its internal organization
and therefore combined the Tubes and Projects
segment, reported in the Consolidated Financial
Statements as of December 31, 2011.

The Projects segment operations mainly comprised
the operations of Confab in Brazil. The business
in Brazil has changed with the development of the
Brazilian offshore pre-salt projects. Historically,
most of Projects sales were of line pipe for onshore
pipelines and equipment for petrochemical and
mining applications, but now, the Company is
positioning itself as a supplier of mainly OCTG
and offshore line pipe, very similar to the rest
of the Tubes segment. In order to strengthen
Tenaris’s position in Brazil, the Company acquired
the non-controlling interest and delisted Confab,
changing its internal organization in order to fully
integrate the Brazilian operations with the rest of
the Tubes operations.

Therefore, as from September 2012, after including
the operations of the formerly Projects segment
into Tubes, the Company is organized in one
major business segment, Tubes, which is also the
reportable operating segment.

Additionally, the coiled tubing operations, which
were previously included in the Tubes segment and
which accounted for 1% of total net sales in 2011,
have been reclassified to Others.

Corporate general and administrative expenses
have been allocated to the Tubes segment.

Others include all other business activities and
operating segments that are not required to be
separately reported, including the production
and selling of sucker rods, welded steel pipes for
electric conduits, industrial equipment, coiled
tubing, energy and raw materials that exceed
internal requirements.

Tenaris’s Chief Operating Decision Maker
(CEO) holds monthly meetings with senior
management, in which operating and financial
performance information is reviewed, including
financial information that differs from IFRS
principally as follows:

•

The use of direct cost methodology to calculate
the inventories, while under IFRS it is at full cost,

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including absorption of production overheads
and depreciations.
The use of costs based on previously internally
defined cost estimates, while, under IFRS, costs are
calculated at historical cost (with the FIFO method).
The sales of energy and surplus raw materials,
are considered as lower cost of goods sold, while
under IFRS are considered as revenues.
Other timing and no significant differences.

•

other than the U.S. dollar, the sales price considers
exposure to fluctuation in the exchange rate versus
the U.S. dollar;
The prices of their critical raw materials and
inputs are priced and settled in U.S. dollars;
Their net financial assets and liabilities are mainly
received and maintained in U.S. dollars;
The exchange rate of Argentina’s legal currency
has long-been affected by recurring and severe
economic crises.

•

Tenaris groups its geographical information
in five areas: North America, South America,
Europe, Middle East and Africa, and Far East and
Oceania. For purposes of reporting geographical
information, net sales are allocated to geographical
areas based on the customer’s location; allocation
of assets and capital expenditures and associated
depreciation and amortization are based on the
geographic location of the assets.

D. Foreign currency translation

1. Functional and presentation currency
IAS 21 (revised) defines the functional currency as
the currency of the primary economic environment
in which an entity operates.

The functional and presentation currency of the
Company is the U.S. dollar. The U.S. dollar is the
currency that best reflects the economic substance
of the underlying events and circumstances
relevant to Tenaris global operations.

Tenaris determined that the functional currency of its
Argentine subsidiaries (i.e., Siderca S.A.I.C. (“Siderca”)
and its subsidiaries in that country) is the U.S. dollar,
based on the following principal considerations:

•

Their sales are mainly negotiated, denominated
and settled in U.S. dollars. If priced in a currency

In addition, the Company’s Colombian
subsidiaries and most of its distribution and
trading subsidiaries and intermediate holding
subsidiaries have the U.S. dollar as their functional
currency, reflecting the transaction environment
and cash flow of these operations.

Starting January 1, 2012, the Company changed
the functional currency of its Mexican, Canadian
and Japanese subsidiaries from their respective
local currencies to the U.S. dollar.

In Mexico, following the start up of a new rolling
mill for the production of seamless pipes at its
subsidiary, Tubos de Acero de Mexico S.A., or
Tamsa, the Company has concluded that the most
appropriate functional currency for Tamsa is the U.S.
dollar. The new added capacity is converting Tamsa
into a major exporter of seamless steel pipes, as a
great majority of its production will be exported to
most major oil and gas markets with a U.S. dollar
economic environment; in addition, seamless pipes
sales are denominated and settled in U.S. dollars.

In Canada, the Company has concluded that the
most appropriate functional currency for its two
major steel pipe production facilities (Algoma and
Prudential) is the U.S. dollar, due to a significant
increase in the level of integration of the local
operations within Tenaris’s international supply

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chain system, evidenced by a higher level of
imports as well as a higher level of exports from the
Canadian production facilities to the U.S. market.

The Company believes that due to the high level
of integration in terms of sales and supply chain
of its worldwide operations in the Tubes segment,
the U.S. dollar is the currency that best reflects the
economic environment in which it operates, which
is consistent with that of the oil and gas industry.

As a result of these changes in functional currency,
a majority of the Company’s subsidiaries other
than the Italian and Brazilian have the U.S. dollar
as their functional currency.

currencies other than the functional currency are
recorded as gains and losses from foreign exchange
and included in “Other financial results” in the
Consolidated Income Statement, except when
deferred in equity as qualifying cash flow hedges
and qualifying net investment hedges. Translation
differences on non-monetary financial assets
and liabilities such as equities held at fair value
through profit or loss are recognized in profit or
loss as part of the “fair value gain or loss,” while
translation differences on non-monetary financial
assets such as equities classified as available for
sale are included in the “available for sale reserve”
in equity. Tenaris had no such assets or liabilities
for any of the periods presented.

2. Transactions in currencies other than the

3. Translation of financial information in

functional currency
Transactions in currencies other than the functional
currency are translated into the functional currency
using the exchange rates prevailing at the date
of the transactions or valuation where items are
re-measured.

At the end of each reporting period: (i) monetary
items denominated in currencies other than the
functional currency are translated using the closing
rates; (ii) non-monetary items that are measured
in terms of historical cost in a currency other
than the functional currency are translated using
the exchange rates prevailing at the date of the
transactions; and (iii) non-monetary items that
are measured at fair value in a currency other than
the functional currency are translated using the
exchange rates prevailing at the date when the fair
value was determined.

Foreign exchange gains and losses resulting from
the settlement of such transactions and from
the translation at year-end exchange rates of
monetary assets and liabilities denominated in

currencies other than the functional currency
Results of operations for subsidiaries whose
functional currencies are not the U.S. dollar are
translated into U.S. dollars at the average exchange
rates for each quarter of the year. Financial Statement
positions are translated at the end-of-year exchange
rates. Translation differences are recognized in a
separate component of equity as currency translation
adjustments. In the case of a sale or other disposal of
any of such subsidiaries, any accumulated translation
difference would be recognized in income as a gain or
loss from the sale.

E. Property, plant and equipment
Property, plant and equipment are recognized
at historical acquisition or construction cost
less accumulated depreciation and impairment
losses; historical cost includes expenditure that
is directly attributable to the acquisition of the
items. Property, plant and equipment acquired
through acquisitions accounted for as business
combinations have been valued initially at the fair
market value of the assets acquired.

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Major overhaul and rebuilding expenditures are
capitalized as property, plant and equipment only
when it is probable that future economic benefits
associated with the item will flow to the group
and the investment enhances the condition of
assets beyond its original condition. The carrying
amount of the replaced part is derecognized.
Ordinary maintenance expenses on manufacturing
properties are recorded as cost of products sold in
the year in which they are incurred.

Borrowing costs that are attributable to the
acquisition or construction of certain capital assets
are capitalized as part of the cost of the asset, in
accordance with IAS 23(R) (“Borrowing Costs”).
Assets for which borrowing costs are capitalized
are those that require a substantial period of time
to prepare for their intended use.

Depreciation method is reviewed at each year end.
Depreciation is calculated using the straight-line
method to depreciate the cost of each asset to its
residual value over its estimated useful life, as follows:

Land

Buildings and improvements

Plant and production equipment

Vehicles, furniture and fixtures, and other equipment

No Depreciation

30-50 years

10-40 years

4-10 years

The asset’s residual values and useful lives of significant
plant and production equipment are reviewed, and
adjusted if appropriate, at each year-end date.

Management’s re-estimation of assets useful lives,
performed in accordance with IAS 16 (“Property
plant and equipment”), did not materially affect
depreciation expenses for 2012.

Tenaris depreciates each significant part of an item
of property, plant and equipment for its different

production facilities that (i) can be properly
identified as an independent component with a
cost that is significant in relation to the total cost
of the item, and (ii) has a useful operating life that
is different from another significant part of that
same item of property, plant and equipment.

Gains and losses on disposals are determined by
comparing the proceeds with the carrying amount
of assets and are recognized under Other operating
income or Other operating expenses in the
Consolidated Income Statement.

F. Intangible assets

1. Goodwill
Goodwill represents the excess of the acquisition
cost over the fair value of Tenaris’s share of net
identifiable assets acquired as part of business
combinations determined mainly by independent
valuations. Goodwill is tested annually for
impairment and carried at cost less accumulated
impairment losses. Impairment losses on goodwill
are not reversed. Goodwill is included on the
Consolidated Statement of Financial Position
under Intangible assets, net.

For the purpose of impairment testing, goodwill is
allocated to a subsidiary or group of subsidiaries that
are expected to benefit from the business combination
which generated the goodwill being tested.

2. Information systems projects
Costs associated with maintaining computer
software programs are generally recognized as an
expense as incurred. However, costs directly related
to the development, acquisition and implementation
of information systems are recognized as intangible
assets if it is probable they have economic benefits
exceeding one year.

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Information systems projects recognized as assets
are amortized using the straight-line method over
their useful lives, not exceeding a period of 3 years.
Amortization charges are mainly classified as
Selling, general and administrative expenses in the
Consolidated Income Statement.

3. Licenses, patents, trademarks and

proprietary technology
Licenses, patents, trademarks, and proprietary
technology acquired in a business combination are
initially recognized at fair value at the acquisition
date. Licenses, patents, proprietary technology
and those trademarks that have a finite useful life
are carried at cost less accumulated amortization.
Amortization is calculated using the straight-line
method to allocate the cost over their estimated
useful lives, and does not exceed a period of 10 years.

The balance of acquired trademarks that have
indefinite useful lives according to external appraisal
amounts to $86.7 million at December 31, 2012 and
2011. Main factors considered in the determination
of the indefinite useful lives, include the years that
they have been in service and their recognition among
customers in the industry.

Customer relationships acquired in a business
combination are recognized at fair value at the
acquisition date, have a finite useful life and are
carried at cost less accumulated amortization.
Amortization is calculated using the straight line
method over the expected life of approximately
14 years for Maverick and 10 years for Hydril.

G. Impairment of non financial assets
Long-lived assets including identifiable intangible
assets are reviewed for impairment at the lowest
level for which there are separately identifiable
cash flows (cash generating units, or CGU). Most
of the Company’s principal subsidiaries that
constitute a CGU have a single main production
facility and, accordingly, each such subsidiary
represents the lowest level of asset aggregation
that generates largely independent cash inflows.

Assets that are subject to amortization are
reviewed for impairment whenever events or
changes in circumstances indicate that the carrying
amount may not be recoverable. Intangible assets
with indefinite useful life, including goodwill, are
subject to at least an annual impairment test.

4. Research and development
Research expenditures as well as development costs
that do not fulfill the criteria for capitalization
are recorded as Cost of sales in the Consolidated
Income Statement as incurred. Research and
development expenditures included in Cost of sales
for the years 2012, 2011 and 2010 totaled $83.0
million, $68.4 million and $61.8 million, respectively.

5. Customer relationships
In accordance with IFRS 3 and IAS 38, Tenaris
has recognized the value of customer relationships
separately from goodwill attributable to the
acquisition of Maverick and Hydril.

In assessing whether there is any indication that
a CGU may be impaired, external and internal
sources of information are analyzed. Material
facts and circumstances specifically considered in
the analysis usually include the discount rate used
in Tenaris’s cash flow projections and the business
condition in terms of competitive and economic
factors, such as the cost of raw materials, oil
and gas prices, competitive environment, capital
expenditure programs for Tenaris’s customers and
the evolution of the rig count.

An impairment loss is recognized for the amount
by which the asset’s carrying amount exceeds its

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recoverable amount. The recoverable amount is
the higher of the asset’s value in use and fair value
less costs to sell. Any impairment loss is allocated
to reduce the carrying amount of the assets of the
CGU in the following order:

(a) first, to reduce the carrying amount of any
goodwill allocated to the CGU; and
(b) then, to the other assets of the unit (group
of units) pro rata on the basis of the carrying
amount of each asset in the unit (group of units),
considering not to reduce the carrying amount of
the asset below the highest of its fair value less cost
to sell, its value in use or zero.

The value in use of each CGU is determined on
the basis of the present value of net future cash
flows which would be generated by such CGU.
Tenaris uses cash flow projections for a five year
period with a terminal value calculated based on
perpetuity and appropriate discount rates.

For purposes of calculating the fair value less costs
to sell Tenaris uses the estimated value of future
cash flows that a market participant could generate
from the corresponding CGU. Tenaris uses cash
flow projections for a five year period with a
terminal value calculated based on perpetuity and
appropriate discount rates.

Management judgment is required to estimate
discounted future cash flows. Actual cash flows
and values could vary significantly from the
forecasted future cash flows and related values
derived using discounting techniques.

Non-financial assets other than goodwill that
suffered an impairment are reviewed for possible
reversal at each reporting date. In 2010, the
Company reversed the impairment registered

in 2008 corresponding to Prudential CGU’s
Customer Relationships (see Note 5).

In 2012 and 2011, none of the Company’s CGUs
including long-lived assets with finite useful lives,
were tested for impairment as no impairment
indicators were identified.

H. Other investments
Other investments consist primarily of investments
in financial instruments and time deposits with
a maturity of more than three months at the date
of purchase.

These investments are categorized as financial
assets “at fair value through profit or loss”.

Purchases and sales of financial investments are
recognized as of their settlement date.

The fair values of quoted investments are based
on current bid prices. If the market for a financial
investment is not active or the securities are not
listed, Tenaris estimates the fair value by using
standard valuation techniques (see Section III
Financial Risk Management).

Results from financial investments are recognized
in Financial Results in the Consolidated Income
Statement.

I. Inventories
Inventories are stated at the lower of cost
(calculated principally on the first-in-first-out
“FIFO” method) and net realizable value. The
cost of finished goods and goods in process is
comprised of raw materials, direct labor, other
direct costs and related production overhead costs.

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It excludes borrowing costs. Tenaris estimates net
realizable value of inventories by grouping, where
applicable, similar or related items. Net realizable
value is the estimated selling price in the ordinary
course of business, less any estimated costs of
completion and selling expenses. Goods in transit at
year end are valued based on supplier’s invoice cost.

Tenaris establishes an allowance for obsolete
or slow-moving inventory related to finished
goods, supplies and spare parts. For slow moving
or obsolete finished products, an allowance is
established based on management’s analysis of
product aging. An allowance for slow-moving
inventory of supplies and spare parts is established
based on management's analysis of such items to be
used as intended and the consideration of potential
obsolescence due to technological changes.

J. Trade and other receivables
Trade and other receivables are recognized initially
at fair value, generally the original invoice amount.
Tenaris analyzes its trade receivables on a regular
basis and, when aware of a specific counterparty’s
difficulty or inability to meet its obligations,
impairs any amounts due by means of a charge to
an allowance for doubtful accounts. Additionally,
this allowance is adjusted periodically based on the
aging of receivables.

K. Cash and cash equivalents
Cash and cash equivalents are comprised of cash in
banks, liquidity funds and short-term investments
with a maturity of less than three months at the
date of purchase which are readily convertible to
known amounts of cash. Assets recorded in cash
and cash equivalents are carried at fair market
value or at historical cost which approximates fair
market value.

In the Consolidated Statement of Financial
Position, bank overdrafts are included in
Borrowings in current liabilities.

For the purposes of the Consolidated Statement
of Cash Flows, cash and cash equivalents includes
overdrafts.

L. Equity

1. Equity components
The Consolidated Statement of Changes in Equity
includes:

•

The value of share capital, legal reserve, share
premium and other distributable reserves calculated
in accordance with Luxembourg Law;
The currency translation adjustment, other
reserves, retained earnings and non-controlling
interest calculated in accordance with IFRS.

2. Share capital
The Company has an authorized share capital of a
single class of 2.5 billion shares having a nominal value
of $1.00 per share. Total ordinary shares issued and
outstanding as of December 31, 2012, 2011 and 2010
are 1,180,536,830 with a par value of $1.00 per share
with one vote each. All issued shares are fully paid.

3. Dividends distribution by the Company to

shareholders
Dividends distributions are recorded in the Company’s
financial statements when Company’s shareholders
have the right to receive the payment, or when interim
dividends are approved by the Board of Directors in
accordance with the by-laws of the Company.

Dividends may be paid by the Company to the extent
that it has distributable retained earnings, calculated
in accordance with Luxembourg law (see Note 26).

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M. Borrowings
Borrowings are recognized initially at fair value net
of transaction costs incurred. In subsequent years,
borrowings are valued at amortized cost.

N. Current and Deferred income tax
The tax expense for the period comprises current
and deferred tax. Tax is recognized in the
Consolidated Income Statement, except for tax
items recognized in the Consolidated Statement
of Other Comprehensive Income.

The current income tax charge is calculated on the
basis of the tax laws enacted or substantively enacted
at the reporting date in the countries where the
Company’s subsidiaries operate and generate taxable
income. Management periodically evaluates positions
taken in tax returns with respect to situations in which
applicable tax regulations are subject to interpretation
and establishes provisions when appropriate.

Deferred income tax is recognized applying the
liability method on temporary differences arising
between the tax bases of assets and liabilities and
their carrying amounts in the financial statements.
The principal temporary differences arise from fair
value adjustments of assets acquired in business
combinations, the effect of currency translation on
fixed assets, depreciation on property, plant and
equipment, valuation of inventories and provisions
for pension plans. Deferred tax assets are also
recognized for net operating loss carry-forwards.
Deferred tax assets and liabilities are measured at
the tax rates that are expected to apply in the time
period when the asset is realized or the liability is
settled, based on tax laws that have been enacted
or substantively enacted at the reporting date.

Deferred tax assets are recognized to the extent
it is probable that future taxable income will be

available against which the temporary differences
can be utilized. At the end of each reporting
period, Tenaris reassesses unrecognized deferred
tax assets. Tenaris recognizes a previously
unrecognized deferred tax asset to the extent that
it has become probable that future taxable income
will allow the deferred tax asset to be recovered.

O. Employee benefits

1. Employee severance indemnity
Employee severance indemnity costs are assessed
at each year-end using the projected unit credit
method, obligations are measured at the present
value of the estimated future cash outflows, based
on actuarial calculations provided by independent
advisors and in accordance with current legislation
and labor contracts applicable in each respective
country. The cost of this obligation is charged
to the Consolidated Income Statement over the
expected service lives of employees.

This provision is primarily related to the liability
accrued for employees at Tenaris’s Italian subsidiary.

As from January 1, 2007 as a consequence of a
change in an Italian law, employees were entitled
to make contributions to external funds, thus,
Tenaris’s Italian subsidiary pays every year the
required contribution to the funds with no further
obligation. As a result, the plan changed from a
defined benefit plan to a defined contribution plan
effective from that date, but only limited to the
contributions of 2007 onwards.

2. Defined benefit pension obligations
Defined benefit plans determine an amount of
pension benefit that an employee will receive on
retirement, usually dependent on one or more factors
such as age, years of service and compensation.

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The liability recognized in the Consolidated Statement
of Financial Position in respect of defined benefit
pension plans is the present value of the defined
benefit obligation at the end of the reporting year less
the fair value of plan assets together with adjustments
for unrecognized past-service costs and unrecognized
actuarial gains and losses. The present value of the
defined benefit pension obligation is calculated, at
least at each year-end by independent advisors using
the projected unit credit method based on actuarial
calculations provided by independent advisors.

Certain officers of Tenaris are covered by defined
benefit employee retirement plans designed to
provide post-retirement and other benefits.

Benefits under this plan are provided in U.S. dollars,
and are calculated based on seven-year salary averages.

Tenaris sponsors other funded and unfunded
non-contributory defined benefit pension plans
in certain subsidiaries. The plans provide defined
benefits based on years of service and, in the case
of salaried employees, final average salary.

All of Tenaris’s plans recognize actuarial gains
and losses over the average remaining service lives
of employees.

3. Other compensation obligations
Employee entitlements to annual leave and long-
service leave are accrued as earned.

Other length of service based compensation to
employees in the event of dismissal or death is charged
to income in the year in which it becomes payable.

4. Employee retention and long term

incentive program
On January 1, 2007 Tenaris adopted an employee
retention and long term incentive program. Pursuant

to this program, certain senior executives will be
granted with a number of units equivalent in value
to the equity book value per share (excluding non-
controlling interest). The units will be vested over a
four year period and Tenaris will redeem vested units
following a period of seven years from the grant date,
or when the employee ceases employment, at the
equity book value per share at the time of payment.
Beneficiaries will also receive a cash amount per unit
equivalent to the dividend paid per share whenever the
Company pays a cash dividend to its shareholders. As
the cash redemption of the benefit is tied to the book
value of the shares, and not to their market value,
Tenaris valued this long-term incentive program as a
long term benefit plan as classified in IAS 19.

The total value of the units granted to date under
the program, considering the number of units and
the book value per share amounts to $71.9 million
and $55.5 million at December 31, 2012 and 2011,
respectively. As of December 31, 2012, and 2011
Tenaris has recorded a total liability of $68.8 million
and $50.3 million, respectively, based on actuarial
calculations provided by independent advisors.

P. Provisions
Tenaris is subject to various claims, lawsuits
and other legal proceedings, including customer
claims, in which a third party is seeking payment
for alleged damages, reimbursement for losses or
indemnity. Tenaris’ potential liability with respect
to such claims, lawsuits and other legal proceedings
cannot be estimated with certainty. Management
periodically reviews the status of each significant
matter and assesses potential financial exposure.
If, as a result of past events, a potential loss from a
claim or proceeding is considered probable and the
amount can be reasonably estimated, a provision
is recorded. Accruals for loss contingencies reflect
a reasonable estimate of the losses to be incurred

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based on information available to management as of
the date of preparation of the financial statements,
and take into consideration Tenaris’ litigation and
settlement strategies. These estimates are primarily
constructed with the assistance of legal counsel. As
the scope of liabilities become better defined, there
may be changes in the estimates of future costs which
could have a material adverse effect on its results of
operations, financial condition and cash flows.

If Tenaris expects to be reimbursed for an accrued
expense, as would be the case for an expense or
loss covered under an insurance contract, and
reimbursement is considered virtually certain, the
expected reimbursement is recognized as a receivable.

Q. Trade payables
Trade payables are recognized initially at fair value
and subsequently measured at amortized cost.

R. Revenue recognition
Revenue comprises the fair value of the consideration
received or receivable for the sale of goods and services
in the ordinary course of Tenaris’s activities. Revenue
is shown net of value-added tax, returns, rebates and
discounts and after eliminating sales within the group.

Tenaris’ products and services are sold based
upon purchase orders, contracts or upon other
persuasive evidence of an arrangement with
customers, including that the sales price is known
or determinable. Sales are recognized as revenue
upon delivery, when neither continuing managerial
involvement nor effective control over the products
is retained by Tenaris and when collection is
reasonably assured. Delivery is defined by the
transfer of risk, provision of sales contracts and
may include delivery to a storage facility located
at one of the Company’s subsidiaries. For bill and

hold transactions revenue is recognized only to
the extent (a) it is probable delivery will be made;
(b) the products have been specifically identified
and are ready for delivery; (c) the sales contract
specifically acknowledges the deferred delivery
instructions; (d) the usual payment terms apply.

The percentage of total sales that were generated
from bill and hold arrangements for products
located in Tenaris’s storage facilities that have not
been shipped to customers amounted to 2.2 %,
1.3% and 1.2% as of December 31, 2012, 2011
and 2010, respectively. The Company has not
experienced any material claims requesting the
cancellation of bill and hold transactions.

Other revenues earned by Tenaris are recognized
on the following bases:

•
•

Interest income: on the effective yield basis.
Dividend income from investments in other
companies: when Tenaris’ right to receive payment
is established.

S. Cost of sales and sales expenses
Cost of sales and sales expenses are recognized in
the Consolidated Income Statement on the accrual
basis of accounting.

Commissions, freight and other selling expenses,
including shipping and handling costs, are
recorded in Selling, general and administrative
expenses in the Consolidated Income Statement.

T. Earnings per share
Earnings per share are calculated by dividing the
income attributable to owners of the parent by the
daily weighted average number of common shares
outstanding during the year.

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U. Financial instruments
Non derivative financial instruments comprise
investments in financial debt instruments and equity,
time deposits, trade and other receivables, cash and
cash equivalents, borrowings, and trade and other
payables. Tenaris non derivative financial instruments
are classified into the following categories:

•

•
•

Financial instruments at fair value through
profit and loss: comprise mainly cash and cash
equivalents and investments in financial debt
instruments and time deposits held for trading.
Loans and receivables: measured at amortized
cost using the effective interest rate method less
any impairment; comprise trade receivables and
other receivables.
Available for sale assets: see Note 31.
Other financial liabilities: measured at amortized
cost using the effective interest rate method;
comprise borrowings and trade and other payables.

The categorization depends on the nature and
purpose of the financial instrument and is
determined at the time of initial recognition.

Financial assets and liabilities are recognized and
derecognized on their settlement date.

In accordance with IAS 39 (“Financial Instruments:
Recognition and Measurement”) embedded
derivatives are accounted separately from their host
contracts. The result has been recognized under
“Foreign exchange derivatives contracts results”.

Accounting for derivative financial instruments
and hedging activities is included within the
Section III, Financial Risk Management.

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III. Financial risk management

The multinational nature of Tenaris’s operations and
customer base exposes the Company to a variety of
risks, mainly related to market risks (including the
effects of changes in foreign currency exchange rates
and interest rates), credit risk and capital market
risk. In order to manage the volatility related to these
exposures, the management evaluates exposures on
a consolidated basis, taking advantage of logical
exposure netting. The Company or its subsidiaries
may then enter into various derivative transactions
in order to prevent potential adverse impacts on
Tenaris’ financial performance. Such derivative
transactions are executed in accordance with internal
policies and hedging practices. The Company’s
objectives, policies and processes for managing these
risks remained unchanged during 2012.

A. Financial risk factors

I. Capital Market Risk
Tenaris seeks to maintain an adequate debt to total
equity ratio considering the industry and the markets
where it operates. The year-end ratio of debt to total
equity (where “debt” comprises financial borrowings
and “total equity” is the sum of financial borrowings
and equity) is 0.13 as of December 31, 2012, in
comparison with 0.08 as of December 31, 2011. The
Company does not have to comply with regulatory
capital adequacy requirements as known in the
financial services industry.

II. Foreign exchange risk
Tenaris manufactures and sells its products in a
number of countries throughout the world and

consequently is exposed to foreign exchange rate
risk. Since the Company’s functional currency is
the U.S. dollar the purpose of Tenaris’s foreign
currency hedging program is mainly to reduce the
risk caused by changes in the exchange rates of
other currencies against the U.S. dollar.

Tenaris’s exposure to currency fluctuations is
reviewed on a periodic consolidated basis. A
number of derivative transactions are performed in
order to achieve an efficient coverage in the absence
of operative or natural hedges. Almost all of these
transactions are forward exchange rates contracts
(see Note 25 Derivative financial instruments).

Tenaris does not enter into derivative financial
instruments for trading or other speculative
purposes, other than non-material investments in
structured products.

Because certain subsidiaries have functional
currencies other than the U.S. dollar, the results
of hedging activities, reported in accordance with
IFRS, may not reflect entirely the management’s
assessment of its foreign exchange risk hedging
program. Inter-company balances between Tenaris’s
subsidiaries may generate financial gains (losses) to
the extent that functional currencies differ.

The value of Tenaris’s financial assets and
liabilities is subject to changes arising out of the
variation of foreign currency exchange rates.
The following table provides a breakdown of
Tenaris’s main financial assets and liabilities
(including foreign exchange derivative contracts)

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which impact the Company’s profit and loss as of
December 31, 2012 and 2011:

currency was the U.S. dollar. A change of 1% in
the EUR/USD exchange rate would have generated
a pre-tax gain / loss of $1.1 million.

All amounts Long / (Short) in thousands of U.S.dollars

AS oF DeCeMBeR 31

2012

2011

CURReNCY exPoSURe / FUNCTioNAL CURReNCY

Argentine Peso / U.S. dollar

euro / U.S. dollar

Canadian dollar / U.S. dollar

U.S. dollar / Brazilian Real

Mexican Peso / U.S. Dollar

Japanese Yen / U.S. Dollar

(168,816)

(117,370)

(37,782)

(27,269)

(2,456)

2,099

(181,622)

66,272

(23,670)

(64,060)

56,652

(68,366)

The main relevant exposures correspond to:

Argentine Peso / U.S. dollar
As of December 31, 2012 and 2011primarily of
Argentine Peso-denominated trade, social and
fiscal payables at certain Argentine subsidiaries
which functional currency was the U.S. dollar.
A change of 1% in the ARS/USD exchange rate
would have generated a pre-tax gain / loss of $1.7
million and $1.8 million as of December 31, 2012
and 2011, respectively.

Euro / U.S. dollar
As of December 31, 2012, primarily of
Euro-denominated liabilities at certain subsidiaries
which functional currency was the U.S. dollar.
A change of 1% in the EUR/USD exchange rate
would have generated a pre-tax gain / loss of $1.2
million, which would have been to a large extent
offset by changes to Tenaris’ net equity position.

As of December 31, 2011, primarily of U.S.
dollar-denominated borrowings at certain
European subsidiaries which functional currency
was the Euro, partially offset by Euro denominated
trade payables at subsidiaries which functional

Considering the balances held as of December
31, 2012 on financial assets and liabilities exposed
to foreign exchange rate fluctuations, Tenaris
estimates that the impact of a simultaneous 1%
favorable / unfavorable movement in the levels of
foreign currencies exchange rates relative to the
U.S. dollar, would be a pre-tax gain / loss of $4.7
million (including a loss / gain of $10.6 million due
to foreign exchange derivative contracts), which
would be partially offset by changes to Tenaris’s
net equity position of $0.9 million. For balances
held as of December 31, 2011, a simultaneous 1%
favorable/unfavorable movement in the foreign
currencies exchange rates relative to the U.S. dollar,
would have generated a pre-tax gain / loss of $6.4
million (including a loss / gain of $0.3 million due
to foreign exchange derivative contracts), which
would have been partially offset by changes to
Tenaris’ net equity position of $1.0 million.

Additionally, from 2007 through January 1, 2012
the Company recognized an embedded derivative
in connection with a USD-denominated ten-
year steel supply agreement signed in 2007 by a
Canadian subsidiary. The Company estimates
that the impact of a 1% favorable / unfavorable
movement in the USD/CAD exchange rate would
have resulted in a maximum pre-tax gain / loss of
approximately $1.9 million in connection with this
instrument as of December 31, 2011.

III. Interest rate risk
Tenaris is subject to interest rate risk on its
investment portfolio and its debt. The Company
uses a mix of variable and fixed rate debt in
combination with its investment portfolio strategy.
From time to time, the Company may choose to

enter into foreign exchange derivative contracts and
/ or interest rate swaps to mitigate the exposure to
changes in the interest rates.

The following table summarizes the proportions of
variable-rate and fixed-rate debt as of each year end.

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AS oF DeCeMBeR 31

Fixed rate

Variable rate

Total

Amount in
thousands of
U.S. dollars

778,774

965,418

1,744,192

2012

Percentage

45%

55%

Amount in
thousands of
U.S. dollars

651,934

278,942

930,876

2011

Percentage

70%

30%

The Company estimates that, if market interest
rates applicable to Tenaris’s borrowings had been
100 basis points higher, then the additional pre-tax
loss would have been $10.9 million in 2012 and
$7.3 million in 2011.

Tenaris’s exposure to interest risk associated
with its debt is also mitigated by its investment
portfolio. Tenaris estimates that, if interest rates
on the benchmark rates for Tenaris portfolio had
been 100 basis points higher, then the additional
pre-tax gain would have been $5.7 million in 2012
and $7.1 million in 2011, partially offsetting the
net losses to Tenaris’s borrowing costs.

IV. Credit risk
Credit risk arises from cash and cash equivalents,
deposits with banks and financial institutions,
as well as credit exposures to customers,
including outstanding receivables and committed
transactions. The Company also actively monitors
the creditworthiness of its treasury, derivative and
insurance counterparties in order to minimize its
credit risk.

There is no significant concentration of credit risk
from customers. No single customer comprised more
than 10% of Tenaris’s net sales in 2012 and 2011.

Tenaris’s credit policies related to sales of products
and services are designed to identify customers
with acceptable credit history, and to allow Tenaris
to require the use of credit insurance, letters of
credit and other instruments designed to minimize
credit risks whenever deemed necessary. Tenaris
maintains allowances for impairment for potential
credit losses (See Section II J).

As of December 31, 2012 and 2011 trade receivables
amount to $2,070.8 million and $1,900.6 million
respectively. Trade receivables have guarantees
under letter of credit and other bank guarantees of
$100.3 million and $240.1 million, credit insurance
of $539.3 million and $562.1 million and other
guarantees of $11.8 million and $16.2 million as of
December 31, 2012 and 2011 respectively.

As of December 31, 2012 and 2011 trade receivables
amounting to $364.3 million and $352.6 million

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were past due but not impaired, respectively. These
relate to a number of customers for whom there is
no recent history of default.

Management maintains sufficient cash and
marketable securities to finance normal operations
and believes that Tenaris also has appropriate access
to market for short-term working capital needs.

The amount of the allowance for doubtful accounts
was $29.1 million as of December 31, 2012 and $25.9
million as of December 31, 2011. The allowance for
doubtful accounts and the existing guarantees are
sufficient to cover doubtful trade receivables.

Liquid financial assets as a whole (comprising
cash and cash equivalents and other current
investments) were 9.2% of total assets at the end
of 2012 compared to 8.4% at the end of 2011.

V. Counterparty risk
Tenaris has investment guidelines with specific
parameters to limit issuer risk on marketable
securities. Counterparties for derivatives and cash
transactions are limited to high credit quality
financial institutions, normally investment grade.

Approximately 88.7% of Tenaris’s liquid financial
assets correspond to Investment Grade-rated
instruments as of December 31, 2012, in comparison
with approximately 94.7% as of December 31, 2011.

VI. Liquidity risk
Tenaris financing strategy aims to maintain
adequate financial resources and access to
additional liquidity. During 2012, Tenaris has
counted on cash flows from operations as well as
additional bank financing to fund its transactions.

Tenaris has a conservative approach to the
management of its liquidity, which consists of
cash in banks, liquidity funds and short-term
investments with a maturity of less than three
months at the date of purchase.

Tenaris holds primarily investments in money
market funds and variable or fixed-rate securities
from investment grade issuers. As of December 31,
2012, Tenaris exposure to financial instruments
issued by European sovereign counterparties
amounted to $2.1 million. As of December
31, 2011, Tenaris did not have direct exposure
on financial instruments issued by European
sovereign counterparties.

Tenaris holds its cash and cash equivalents primarily
in U.S. dollars. As of December 31, 2012 and 2011,

U.S. dollar denominated liquid assets represented
approximately 79% and 66% of total liquid
financial assets respectively. As of December 31,
2011 an estimated 20% of the Company’s liquid
financial assets were momentarily invested in
Brazilian Real-denominated instruments held at
its Brazilian subsidiary, Confab Industrial S.A., to

fund the disbursement of a participation in Usinas
Siderúrgicas de Minas Gerais S.A. (Usiminas) which
was completed in January, 2012 (See note 27).

B. Financial instruments by category
The accounting policies for financial instruments
have been applied to the line items below:

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DeCeMBeR 31, 2012

Assets at fair
value through
profit and loss

Loans
and
receivables

Available
for
sale

Total

ASSeTS AS PeR STATeMeNT oF FiNANCiAL PoSiTioN

Derivative financial instruments

17,852

–

Trade receivables

other receivables

Available for sale assets

other investments

Cash and cash equivalents

Total

DeCeMBeR 31, 2012

LiABiLiTieS AS PeR STATeMeNT oF FiNANCiAL PoSiTioN

Borrowings

Derivative financial instruments

Trade and other payables (*)

Total

(*) The maturity of most of trade payables is less than one year.

–

647,012

828,458

2,070,778

157,614

–

21,572

–

17,852

2,070,778

157,614

21,572

647,012

828,458

1,493,322

2,228,392

21,572

3,743,286

Liabilities at
fair value
through profit
and loss

other
financial
liabilities

Total

–

1,744,192

14,031

–

926,764

14,031

926,764

14,031

2,670,956

2,684,987

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DeCeMBeR 31, 2011

Assets at fair
value through
profit and loss

Loans
and
receivables

Available
for
sale

Total

ASSeTS AS PeR STATeMeNT oF FiNANCiAL PoSiTioN

Derivative financial instruments

6,382

–

Trade receivables

other receivables

Available for sale assets

other investments

Cash and cash equivalents

Total

DeCeMBeR 31, 2011

LiABiLiTieS AS PeR STATeMeNT oF FiNANCiAL PoSiTioN

Borrowings

Derivative financial instruments

Trade and other payables (*)

Total

(*) The maturity of most of trade payables is less than one year.

–

433,319

823,743

1,900,591

119,283

–

21,572

–

6,382

1,900,591

119,283

21,572

433,319

823,743

1,263,444

2,019,874

21,572

3,304,890

Liabilities at
fair value
through profit
and loss

other
financial
liabilities

Total

–

930,876

45,749

–

946,392

930,876

45,749

946,392

45,749

1,877,268

1,923,017

C. Fair value by hierarchy
IFRS 7 requires for financial instruments that are
measured in the statement of financial position at
fair value, a disclosure of fair value measurements
by level according to the following fair value
measurement hierarchy:

Level 1- Quoted prices (unadjusted) in active
markets for identical assets or liabilities.

Level 2- Inputs other than quoted prices included
within level 1 that are observable for the asset
or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices).

Level 3- Inputs for the asset or liability that are
not based on observable market data (that is,
unobservable inputs).

The following table presents the assets and
liabilities that are measured at fair value as of
December 31, 2012 and 2011.

DeCeMBeR 31, 2012

Level 1

Level 2

Level 3

Total

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ASSeTS

Cash and cash equivalents

other investments

Foreign exchange derivatives contracts

Available for sale assets (*)

Total

LiABiLiTieS

828,458

451,152

–

193,257

17,852

–

1,279,610

211,109

–

2,603

–

21,572

24,175

828,458

647,012

17,852

21,572

1,514,894

Foreign exchange derivatives contracts

Total

–

14,031

–

14,031

DeCeMBeR 31, 2011

Level 1

Level 2

Level 3

Total

ASSeTS

Cash and cash equivalents

other investments

Foreign exchange derivatives contracts

embedded derivative (See Note 25)

Available for sale assets (*)

Total

LiABiLiTieS

Foreign exchange derivatives contracts

embedded derivative (See Note 25)

Total

(*) For further detail regarding Available for sale assets, see Note 31.

823,743

350,481

–

80,295

5,238

–

1,174,224

85,533

–

45,040

–

45,040

–

2,543

–

1,144

21,572

25,259

–

709

823,743

433,319

5,238

1,144

21,572

1,285,016

45,040

709

45,749

98.

s
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The fair value of financial instruments traded in
active markets is based on quoted market prices at
the reporting date. A market is regarded as active
if quoted prices are readily and regularly available
from an exchange, dealer, broker, industry group,
pricing service, or regulatory agency, and those
prices represent actual and regularly occurring
market transactions on an arm’s length basis.
The quoted market price used for financial assets
held by Tenaris is the current bid price. These
instruments are included in Level 1 and comprise
primarily corporate and sovereign debt securities.

The fair value of financial instruments that are not
traded in an active market (such as certain debt
securities, certificates of deposits with original
maturity of more than three months, forward and
interest rate derivative instruments) is determined by
using valuation techniques which maximize the use
of observable market data where available and rely

as little as possible on entity specific estimates. If all
significant inputs required to value an instrument
are observable, the instrument is included in Level
2. Tenaris values its assets and liabilities included
in this level using bid prices, interest rate curves,
broker quotations, current exchange rates, forward
rates and implied volatilities grabbed from market
contributors as of the valuation date.

If one or more of the significant inputs are not
based on observable market data, the instruments
are included in Level 3. Tenaris values its assets
and liabilities in this level using observable market
inputs and management assumptions which reflect
the Company’s best estimate on how market
participants would price the asset or liability at
measurement date. Main balances included in this
level correspond to Available for sale assets related
to Tenaris’s interest in Venezuelan companies under
process of nationalization (see Note 31).

The following table presents the changes in Level 3
assets and liabilities:

YeAR eNDeD DeCeMBeR 31

Net assets at the beginning of the year

Loss for the year

Reclassifications

Currency translation adjustment and others

Net assets at the end of the year

99.

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a
u
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n
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Assets / Liabilities

2012

2011

24,550

(435)

–

24,175

41,021

(3,078)

(13,320)

(73)

24,550

D. Fair value estimation
Financial assets or liabilities classified as assets
at fair value through profit or loss are measured
under the framework established by the IASB
accounting guidance for fair value measurements
and disclosures.

The fair values of quoted investments are based on
current bid prices. If the market for a financial asset
is not active or no market is available, fair values are
established using standard valuation techniques.

For the purpose of estimating the fair value of
Cash and cash equivalents and Other Investments
expiring in less than ninety days from the

measurement date, the Company usually chooses
to use the historical cost because the carrying
amount of financial assets and liabilities with
maturities of less than ninety days approximates
to their fair value.

The fair value of all outstanding derivatives is
determined using specific pricing models that
include inputs that are observable in the market or
can be derived from or corroborated by observable
data. The fair value of forward foreign exchange
contracts is calculated as the net present value of
the estimated future cash flows in each currency,
based on observable yield curves, converted into
U.S. dollars at the spot rate of the valuation date.

100.

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Borrowings are comprised primarily of fixed
rate debt and variable rate debt with a short
term portion where interest has already been
fixed. They are classified under other financial
liabilities and measured at their carrying amount.
Tenaris estimates that the fair value of its main
financial liabilities is approximately 101.1% of
its carrying amount including interests accrued
in 2012 as compared with 98.8% in 2011. Tenaris
estimates that a change of 100 basis points in the
reference interest rates would have an estimated
impact of approximately 0.1% in the fair value of
borrowings as of December 31, 2012 and 0.3% in
2011. Fair values were calculated using standard
valuation techniques for floating rate instruments
and comparable market rates for discounting flows.

E. Accounting for derivative financial

instruments and hedging activities
Derivative financial instruments are initially
recognized in the statement of financial position
at fair value through profit and loss on each
date a derivative contract is entered into and are
subsequently remeasured at fair value. Specific
tools are used for calculation of each instrument’s
fair value and these tools are tested for consistency
on a monthly basis. Market rates are used for all
pricing operations. These include exchange rates,
deposit rates and other discount rates matching the
nature of each underlying risk.

As a general rule, Tenaris recognizes the full
amount related to the change in fair value of
derivative financial instruments in Financial
results in the Consolidated Income Statement.

Tenaris designates certain derivatives as hedges
of particular risks associated with recognized
assets or liabilities or highly probable forecast
transactions. These transactions (mainly
currency forward contracts on highly probable
forecast transactions) are classified as cash flow
hedges. The effective portion of the fair value
of derivatives that are designated and qualify as
cash flow hedges is recognized in equity. Amounts
accumulated in equity are then recognized in the
income statement in the same period than the
offsetting losses and gains on the hedged item.
The gain or loss relating to the ineffective portion
is recognized immediately in the income statement.
The fair value of Tenaris’s derivative financial
instruments (assets or liabilities) continues to be
reflected on the statement of financial position.
The full fair value of a hedging derivative is
classified as a non current asset or liability
according to its expiry date.

For transactions designated and qualifying for
hedge accounting, Tenaris documents at the
inception of the transaction the relationship
between hedging instruments and hedged items, as
well as its risk management objectives and strategy

for undertaking various hedge transactions.
Tenaris also documents its assessment on an
ongoing basis, of whether the derivatives that are
used in hedging transactions are highly effective
in offsetting changes in the fair value or cash
flow of hedged items. At December 31, 2012 and
2011, the effective portion of designated cash flow
hedges amounts to $2.9 million and $8.2 million is
included in Other Reserves in equity (see Note 25
Derivative financial instruments).

The fair values of various derivative instruments
used for hedging purposes are disclosed in Note
25. Movements in the hedging reserve included
within Other Reserves in equity are also shown
in Note 25.

101.

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IV. Other notes to the
Consolidated financial statements

in the notes all amounts are shown in thousands of U.S. dollars, unless otherwise stated.

102.

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1. Segment information
As mentioned in section II. AP – C, the Segment
Information is disclosed as follows:

Reportable operating segments

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31, 2012

MANAgeMeNT VieW

Net sales

Sales of energy and surplus raw materials

IFRS - Net Sales

MANAgeMeNT VieW

operating income

Differences in cost of sales and others

Depreciation and amortization (**)

IFRS - Operating income

Financial income (expense), net

Income before equity in earnings of associated companies and income tax

equity in earnings of associated companies

Income before income tax

Capital expenditures

Depreciation and amortization

Tubes

other

Total

10,022,501

822

741,074

69,633

10,763,575

70,455

10,023,323

810,707

10,834,030

2,198,704

109,385

2,308,089

(58,385)

111,509

(1,147)

(3,459)

(59,532)

108,050

2,251,828

104,779

2,356,607

(50,104)

2,306,503

(63,534)

2,242,969

771,734

549,130

17,997

18,524

789,731

567,654

Transactions between segments, which were eliminated in consolidation, include sales of scrap and
pipe protectors from the other segment to the Tubes segment for $345.285, $266,806 and
$204,478 in 2012, 2011 and 2010, respectively.

(*) Comparative amounts have been reclassified to disclose the information according to the

reporting segment the Company is organized since September 30, 2012.

(**) Depreciation and amortization under Management view is $108.0 million higher, mainly
because goodwill and other tangible and intangible assets were depreciated differently.

Net income under Management view amounted to $ 1.463 million, while under iFRS amounted to
$ 1.701 million. in addition to the amounts reconciled above, the main differences arise from the
impact of functional currencies on financial result, income taxes as well as the result of investment
in associated companies.

103.

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r
o
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a
u
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n
A

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31, 2011 (*)

iFRS

NeT SALeS

oPeRATiNg iNCoMe

Financial income (expense), net

Income before equity in earnings of associated companies and income tax

equity in earnings of associated companies

Income before income tax

Capital expenditures

Depreciation and amortization

Tubes

other

Total

9,111,691

1,702,188

860,787

142,693

9,972,478

1,844,881

(10,299)

1,834,582

61,509

1,896,091

849,362

538,921

13,296

15,424

862,658

554,345

YeAR eNDeD DeCeMBeR 31, 2010 (*)

Tubes

other

Total

iFRS

NeT SALeS

oPeRATiNg iNCoMe

Financial income (expense), net

Income before equity in earnings of associated companies and income tax

equity in earnings of associated companies

Income before income tax

Capital expenditures

Depreciation and amortization

impairment reversal

7,032,388

1,427,373

679,210

7,711,598

91,677

1,519,050

(52,553)

1,466,497

70,057

1,536,554

847,316

506,902

67,293

842,127

488,670

67,293

5,189

18,232

–

(*) Comparative amounts have been reclassified to disclose the information according to the

reporting segment the Company is organized since September 30, 2012.

(**) Depreciation and amortization under Management view is $108.0 million higher, mainly
because goodwill and other tangible and intangible assets were depreciated differently.

104.

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Geographical information

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31, 2012

Net sales

Total assets

Trade receivables

Property, plant and

equipment, net

Capital expenditures

Depreciation and amortization

YeAR eNDeD DeCeMBeR 31, 2011

Net sales

Total assets

Trade receivables

Property, plant and

equipment, net

Capital expenditures

Depreciation and amortization

YeAR eNDeD DeCeMBeR 31, 2010

Net sales

Total assets

Trade receivables

Property, plant and

equipment, net

Capital expenditures

Depreciation and amortization

North

America

South

America

europe

Middle east
& Africa

Far east &
oceania

Unallocated
(*)

Total

5,270,062

7,779,205

528,443

2,717,234

3,824,931

867,223

2,222,906

1,003,871

338,827

316,158

237,456

103,537

4,350,815

7,226,605

518,272

2,051,826

496,021

294,602

3,295,081

7,316,794

430,184

1,883,992

561,782

258,428

2,564,518

3,373,855

545,336

892,572

150,419

113,729

1,911,824

3,106,212

332,263

862,433

123,586

104,992

1,092,642

2,327,901

273,824

985,617

185,354

116,771

1,119,887

2,396,443

320,075

882,185

176,861

117,360

1,271,585

449,056

286,212

64,632

9,720

7,989

1,349,334

522,926

377,569

64,450

22,669

2,495

805,617

1,264,610

2,292,675

315,443

837,764

130,232

115,776

347,492

259,434

34,047

20,839

1,215

482,507

578,199

115,076

157,944

18,374

23,199

587,924

651,986

139,339

162,620

16,688

26,159

434,466

607,731

84,318

162,344

10,877

26,491

–

10,834,030

1,004,633

15,963,925

–

2,070,778

4,434,970

789,731

567,654

–

9,972,478

691,820

14,863,635

–

1,900,591

4,053,653

862,658

554,345

–

7,711,598

693,427

14,364,331

–

1,421,642

3,780,580

847,316

506,902

There are no revenues from external customers attributable to the Company’s country of
incorporation (Luxembourg). For geographical information purposes, “North America” comprises
Canada, Mexico and the USA; “South America” comprises principally Argentina, Brazil,
Colombia, ecuador and Venezuela; “europe” comprises principally germany, italy, Norway,
Romania and the United Kingdom; “Middle east and Africa” comprises principally Angola, iraq,
Saudi Arabia, United Arab emirates and Nigeria; “Far east and oceania” comprises principally
China, indonesia and Japan.

(*) includes investments in associated companies and Available for sale assets for $21.6 million in

2012, 2011 and 2010 (see Note 12 and 31).

2. Cost of sales

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31

2012

2011

2010

105.

t
r
o
p
e
R

a
u
n
n
A

iNVeNToRieS AT THe BegiNNiNg oF THe YeAR

2,806,409

2,460,384

1,687,059

PLUS: CHARgeS oF THe YeAR

Raw materials, energy, consumables and other

increase in inventory due to business combinations

Services and fees

Labor cost

Depreciation of property, plant and equipment

Amortization of intangible assets

Maintenance expenses

Allowance for obsolescence

Taxes

other

LeSS: iNVeNToRieS AT THe eND oF THe YeAR

4,330,547

4,409,698

3,690,900

1,486

433,944

10,688

368,910

1,256,041

1,177,067

333,466

7,091

260,274

49,907

6,793

137,140

312,601

6,561

220,240

11,067

4,958

97,642

–

329,687

989,332

290,299

3,351

174,966

(34,522)

7,121

70,958

6,816,689

6,619,432

5,522,092

(2,985,805)

(2,806,409)

(2,460,384)

6,637,293

6,273,407

4,748,767

106.

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3. Selling, general and administrative expenses

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31

Services and fees

Labor cost

Depreciation of property, plant and equipment

Amortization of intangible assets

Commissions, freight and other selling expenses

Provisions for contingencies

Allowances for doubtful accounts

Taxes

other

4. Labor costs
included in Cost of sales and in Selling, general
and administrative expenses.

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31

Wages, salaries and social security costs

employees’ severance indemnity

Pension benefits - defined benefit plans

employee retention and long term incentive program

At the year-end, the number of employees was 26,673 in 2012, 26,980 in 2011 and 25,422 in 2010.

2012

2011

2010

213,073

570,950

15,023

212,074

550,611

21,163

3,840

170,582

126,473

218,991

533,219

12,400

222,783

545,228

35,847

7,749

148,912

134,111

207,427

460,667

12,506

200,746

420,417

26,430

(17,361)

120,591

90,987

1,883,789

1,859,240

1,522,410

2012

2011

2010

1,778,117

1,666,176

1,414,491

16,549

12,480

19,845

14,923

10,300

18,887

12,850

8,795

13,863

1,826,991

1,710,286

1,449,999

107.

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5. Other operating items

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31

(i) oTHeR oPeRATiNg iNCoMe

Reimbursement from insurance companies and other third parties agreements (See note 26 b)

Net income from other sales

Net rents

impairment reversal (*)

other

(ii) oTHeR oPeRATiNg exPeNSeS

Contributions to welfare projects and non-profits organizations

Provisions for legal claims and contingencies

Loss on fixed assets and material supplies disposed / scrapped

Allowance for doubtful receivables

2012

2011

2010

49,495

12,314

2,988

–

6,583

71,380

22,226

(668)

227

5,936

27,721

695

5,510

2,487

–

2,849

11,541

4,341

1,411

691

6,491

9,810

1,955

2,793

67,293

3,807

85,658

3,304

2,741

352

632

7,029

(*) 2010 Impairment reversal
In 2010, the Company reversed the impairment
registered in 2008 corresponding to Prudential
CGU’s Customer Relationships as there had been
an improvement in the outlook of the economic and
competitive conditions for the Canadian oil and gas
market compared to that foreseen at the end of 2008.
The main key assumptions that Tenaris considered
were the expected oil and natural gas prices
evolution and the level of drilling activity in Canada.
Tenaris used the average number of active oil and
gas drilling rigs, or rig count, as published by Baker
Hughes, as a general indicator of activity in the oil
and gas sector. The rig count in Canada increased
59% from an annual average of 221 in 2009 to an
annual average of 351 in 2010. In that environment,
Tenaris expected that its competitive conditions and
activity levels would continue to improve.

The recoverable amount of the Prudential
(Canada) CGU was estimated based on the value
in use. Value in use was calculated in the same way
as that for CGU containing goodwill (see Note 11).
The discount rate used was based on a weighted
average cost of capital (WACC) of 10.7%.

The Company has increased the carrying amount
of the Customer Relationships by $67.3 million to
its recoverable amount which in accordance with
IAS 36 is the one that would have been determined
(net of amortization) had no impairment loss
been recognized for the asset in the year 2008. In
addition, the Company recognized the respective
deferred tax effect of $16.9 million in Income tax
in the Consolidated Income Statement.

108.

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6. Financial results

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31

interest income

interest expense (*)

Interest net

Net foreign exchange transaction results

Foreign exchange derivatives contracts results (**)

other

Other financial results

Net financial results

(*) iincludes losses on interest rate swaps of $5.2 million and $15.6 million in 2011 and 2010 respectively. in
order to partially hedge future interest payments related to long-term debt, Tenaris entered into interest
rate swaps and swaps with an embedded knock-in options. A knock-in swap is a type of barrier option,
which is activated if the reference rate reaches a set level (“knock in”) at the end of a certain period. A
total notional amount of $500 million was covered by these instruments which coverage began between
April and June 2009, and expired between April and June 2011.

(**) includes a loss on identified embedded derivatives of $0.4 million, $3.1 million and gains of $6.1 million

for 2012, 2011 and 2010, respectively.

7. Equity in earnings of associated companies

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31

From associated companies

gain (Loss) on sale of associated companies and others

impairment loss on associated companies (see Note 27)

2012

2011

2010

33,459

(55,507)

(22,048)

(10,929)

(3,194)

(13,933)

(28,056)

30,840

(52,407)

(21,567)

65,365

(49,349)

(4,748)

11,268

32,855

(64,103)

(31,248)

(26,581)

7,183

(1,907)

(21,305)

(50,104)

(10,299)

(52,553)

2012

2011

2010

4,217

5,899

(73,650)

(63,534)

61,509

–

70,553

(496)

–

61,509

70,057

8. Income tax

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31

Current tax

Deferred tax

109.

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2012

2011

2010

636,624

(95,066)

541,558

573,769

(98,399)

475,370

340,686

54,821

395,507

The tax on Tenaris’ income before tax differs from
the theoretical amount that would arise using the
tax rate in each country as follows:

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31

2012

2011

2010

Income before income tax

2,242,969

1,896,091

1,536,554

Tax calculated at the tax rate in each country

Non taxable income / Non deductible expenses

Changes in the tax rates

effect of currency translation on tax base (*)

Utilization of previously unrecognized tax losses

Tax charge

(*) Tenaris applies the liability method to recognize deferred income tax on temporary differences
between the tax bases of assets and their carrying amounts in the financial statements. By
application of this method, Tenaris recognizes gains and losses on deferred income tax due to the
effect of the change in the value on the tax bases in subsidiaries, which have a functional currency
different to their local currency. These gains and losses are required by iFRS even though the
revalued / devalued tax basis of the relevant assets will not result in any deduction / obligation for
tax purposes in future periods.

456,530

80,527

4,707

5,214

(5,420)

418,358

43,265

(7,736)

25,000

(3,517)

361,235

22,202

(17)

12,158

(71)

541,558

475,370

395,507

110.

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9. Earnings and dividends per share
Earnings per share are calculated by dividing the
net income attributable to owners of the parent
by the daily weighted average number of ordinary
shares in issue during the year.

YeAR eNDeD DeCeMBeR 31

2012

2011

2010

Net income attributable to the owners of the parent

Weighted average number of ordinary shares in issue (thousands)

Basic and diluted earnings per share (U.S. dollars per share)

Basic and diluted earnings per ADS (U.S. dollars per ADS) (*)

Dividends paid

Basic and diluted dividends per share (U.S. dollars per share)

Basic and diluted dividends per ADS (U.S. dollars per ADS) (*)

(*) each ADS equals to two shares

1,699,047

1,180,537

1.44

2.88

1,331,157

1,180,537

1.13

2.26

1,127,367

1,180,537

0.95

1.91

(448,604)

(401,383)

0.38

0.76

0.34

0.68

0.34

0.68

111.

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On November 7, 2012, the Company’s board of
directors approved the payment of an interim
dividend of $0.13 per share ($0.26 per ADS), or
approximately $153.5 million, on November 22, 2012,
with an ex-dividend date of November 19, 2012.

On May 2, 2012, the Company’s shareholders
approved an annual dividend in the amount of $0.38
per share ($0.76 per ADS). The amount approved
included the interim dividend previously paid in
November 2011, in the amount of $0.13 per share
($0.26 per ADS). The balance, amounting to $0.25
per share ($0.50 per ADS), was paid on May 24,
2012. In the aggregate, the interim dividend paid in
November 2011 and the balance paid in May 2012
amounted to approximately $449 million.

On June 1, 2011, the Company’s shareholders
approved an annual dividend in the amount of $0.34

per share ($0.68 per ADS). The amount approved
included the interim dividend previously paid in
November 2010, in the amount of $0.13 per share
($0.26 per ADS). The balance, amounting to $0.21
per share ($0.42 per ADS), was paid on June 23,
2011. In the aggregate, the interim dividend paid in
November 2010 and the balance paid in June 2011
amounted to approximately $401 million.

On June 2, 2010, the Company’s shareholders
approved an annual dividend in the amount of $0.34
per share ($0.68 per ADS). The amount approved
included the interim dividend previously paid in
November 2009, in the amount of $0.13 per share
($0.26 per ADS). The balance, amounting to $0.21
per share ($0.42 per ADS), was paid on June 24,
2010. In the aggregate, the interim dividend paid in
November 2009 and the balance paid in June 2010
amounted to approximately $401 million.

112.

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10. Property, plant and equipment, net

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31, 2012

CoST

Land,
building and
improvements

Plant and
production
equipment

Vehicles,
furniture and
fixtures

Work in
progress

Spare
parts and
equipment

Total

Values at the beginning of the year

1,311,786

7,149,005

287,202

Translation differences

Additions

Disposals / Consumptions

increase due to business combinations

Transfers / Reclassifications

Values at the end of the year

DePReCiATioN

(8,824)

29,000

(1,513)

–

87,545

877

14,765

(57,128)

5,325

390,514

(2,881)

3,121

(6,927)

138

40,618

1,417,994

7,503,358

321,271

Accumulated at the beginning of the year

293,438

4,580,997

164,292

Translation differences

Depreciation charge

Transfers / Reclassifications

Disposals / Consumptions

(1,869)

39,082

1,256

(101)

396

282,375

831

(53,274)

(2,043)

25,702

(754)

(5,028)

Accumulated at the end of the year

331,806

4,811,325

182,169

318,297

(5,201)

693,729

(58)

720

(517,593)

489,894

–

40,822

9,107,112

6,313

(4,060)

102

459

(15,991)

746,928

(69,686)

6,285

1,543

43,674

9,776,191

14,732

247

1,330

(377)

(11)

5,053,459

(3,269)

348,489

956

(58,414)

15,921

5,341,221

At December 31, 2012

1,086,188

2,692,033

139,102

489,894

27,753

4,434,970

113.

t
r
o
p
e
R

a
u
n
n
A

Land,
building and
improvements

Plant and
production
equipment

Vehicles,
furniture and
fixtures

Work in
progress

Spare
parts and
equipment

Total

850,865

(101,796)

24,282

(296)

–

538,731

6,669,883

(302,323)

1,400

(13,305)

9,563

783,787

214,568

(5,947)

2,729

(4,963)

291

80,524

930,125

(12,343)

790,211

–

(1,389,696)

36,923

8,702,364

(1,283)

7,718

(2,553)

285

(268)

(423,692)

826,340

(21,117)

10,139

13,078

1,311,786

7,149,005

287,202

318,297

40,822

9,107,112

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31, 2011

CoST

Values at the beginning of the year

Translation differences

Additions

Disposals / Consumptions

increase due to business combinations

Transfers / Reclassifications

Values at the end of the year

DePReCiATioN

Accumulated at the beginning of the year

Translation differences

Depreciation charge

Transfers / Reclassifications

Disposals / Consumptions

210,139

(26,304)

30,554

79,093

(44)

4,551,800

146,315

(147,688)

267,449

(79,710)

(10,854)

(4,277)

25,475

577

(3,798)

–

13,530

4,921,784

(309)

1,523

(12)

–

(178,578)

325,001

(52)

(14,696)

14,732

5,053,459

Accumulated at the end of the year

293,438

4,580,997

164,292

At December 31, 2011

1,018,348

2,568,008

122,910

318,297

26,090

4,053,653

Property, plant and equipment include capitalized interests for net amounts at December 31, 2012 and
2011 of $4,038 (there were no capitalized interests during the year 2012) and $4,560 (out of which
$537 were capitalized during the year 2011), respectively.

114.

s
i
r
a
n
e
T

11. Intangible assets, net

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31, 2012

CoST

Values at the beginning of the year

Translation differences

Additions

Transfers / Reclassifications

increase due to business combinations

Disposals

Values at the end of the year

AMoRTiZATioN AND iMPAiRMeNT

Accumulated at the beginning of the year

Translation differences

Amortization charge

Disposals

Transfers / Reclassifications

information
system
projects

Licenses,
patents and
trademarks (*)

goodwill

Customer
relationships

Total

268,237

495,417

2,146,243

2,059,946

4,969,843

(1,277)

42,762

874

(83)

(78)

(1,558)

–

1,117

–

(1,282)

42,803

(684)

1,128

(83)

310,524

493,822

2,147,433

2,059,946

5,011,725

191,571

243,580

340,488

818,274

1,593,913

(827)

27,808

(103)

(242)

30,284

–

(179)

–

161,073

–

(1,069)

219,165

(103)

(97)

Accumulated at the end of the year

218,531

273,443

340,488

979,347

1,811,809

At December 31, 2012

91,993

220,379

1,806,945

1,080,599

3,199,916

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31, 2011

CoST

Values at the beginning of the year

Translation differences

Additions

Transfers / Reclassifications

increase due to business combinations

Disposals

Values at the end of the year

AMoRTiZATioN AND iMPAiRMeNT

Accumulated at the beginning of the year

Translation differences

Amortization charge

Disposals

115.

t
r
o
p
e
R

a
u
n
n
A

information
system
projects

Licenses,
patents and
trademarks (*)

goodwill

Customer
relationships

Total

241,116

(8,955)

35,848

261

–

(33)

498,162

2,147,066

2,071,315

4,957,659

(3,144)

(1,908)

(11,369)

470

(71)

–

1,085

–

(25,376)

36,318

190

1,085

(33)

268,237

495,417

2,146,243

2,059,946

4,969,843

159,661

(4,646)

36,579

(23)

213,092

(139)

30,627

–

342,396

(1,908)

–

660,694

1,375,843

(4,558)

162,138

–

(11,251)

229,344

(23)

Accumulated at the end of the year

191,571

243,580

340,488

818,274

1,593,913

At December 31, 2011

76,666

251,837

1,805,755

1,241,672

3,375,930

(*) includes Proprietary Technology.

The geographical allocation of goodwill was
$1,614.5 million for North America and $189.4
million for South America for years ended
December 31, 2012 and 2011. For Europe, $2.4
million and $0.8 million and Middle East & Africa
$0.7 million and $1.1 million for the years ended
December 31, 2012 and 2011, respectively.

116.

s
i
r
a
n
e
T

The carrying amount of goodwill allocated by
CGU, as of December 31, 2012, was as follows:

All amounts in million U.S.dollars

CgU

oCTg (USA and Colombia)

Tamsa (Hydril and other)

Siderca (Hydril and other)

Hydril

electric Conduits

Coiled Tubing

other

Total

Tubes Segment

other Segment

Total

Maverick
Acquisition

Hydril
Acquisition

other

Maverick
Acquisition

721.5

–

45.8

–

345.9

265.0

309.0

–

767.3

919.9

–

19.4

93.3

–

3.0

115.7

–

4.0

–

4.0

721.5

365.3

358.3

309.0

45.8

4.0

3.0

1,806.9

Impairment tests
In 2012 and 2011, the CGU’s shown in the previous
table were tested for impairment. No other CGU
was tested for impairment in 2012 and 2011 as no
impairment indicators were identified.

Tenaris determined that the CGUs with a
significant amount of goodwill in comparison to
the total amount of goodwill as of December 31,
2012, were: OCTG, Tamsa, Siderca and Hydril,
which represented 97.1% of total goodwill.

The value-in-use was used to determine the
recoverable amount for all the CGUs with a
significant amount of goodwill in comparison to
the total amount of goodwill.

Value-in-use is calculated by discounting the
estimated cash flows over a five year period based
on forecasts approved by management. For the
subsequent years beyond the five-year period, a
terminal value is calculated based on perpetuity
considering a nominal growth rate of 2%. The
growth rate considers the long-term average
growth rate for the oil and gas industry, the higher
demand to offset depletion of existing fields and
the Company’s expected market penetration.

Tenaris’s main source of revenue is the sale
of products and services to the oil and gas
industry, and the level of such sales is sensitive to
international oil and gas prices and their impact
on drilling activities. The main key assumptions,

117.

t
r
o
p
e
R

a
u
n
n
A

shared by all four CGUs are oil and natural gas
prices evolution and the level of drilling activity.
Tenaris uses the average number of active oil and
gas drilling rigs, or rig count, as published by Baker
Hughes, as a general indicator of activity in the oil
and gas sector. In the case of the OCTG CGU, these
assumptions are mainly related to the U.S. market.
In the case of Tamsa CGU and Siderca CGU,
assumptions are mainly related to the countries
where they are located, Mexico and Argentina
respectively, and to the international markets
as both facilities export a large amount of their
production. Regarding Hydril CGU, assumptions
are mainly related to the worldwide market.

In addition, key assumptions for OCTG CGU,
Tamsa CGU and Siderca CGU also include raw
materials costs as their production process consists
on the transformation of steel into pipes. In the
case of Tamsa CGU and Siderca CGU, steel comes
from their own steel shops, therefore they consume
steelmaking raw materials (e.g., iron ore and metal
scrap). In the case of OCTG CGU, the main raw
material is hot rolled steel coils. In the case of
Hydril CGU, raw material costs are negligible.

For purposes of assessing key assumptions,
Tenaris uses external sources of information and
management judgment based on past experience.

The discount rates used are based on the respective
weighted average cost of capital (WACC) which is
considered to be a good indicator of capital cost.
For each CGU where assets are allocated, a specific
WACC was determined taking into account the

industry, country and size of the business. In 2012
and 2011, the discount rates used were in a range
between 9% and 12%.

From the CGUs with a significant amount of
goodwill assigned in comparison to the total amount
of goodwill, Tenaris has determined that the CGU
for which a reasonable possible change in a key
assumption would cause the CGUs’ carrying amount
to exceed its recoverable amount was OCTG CGU.

In OCTG CGU, the recoverable amount calculated
based on value in use exceeded carrying value
by $102 million as of December 31, 2012. The
main factors that could result in impairment
charges in future periods would be an increase
in the discount rate / decrease in growth rate
used in the Company’s cash flow projections
and a deterioration of the business, competitive
and economic factors, such as the cost of
raw materials, oil and gas prices, competitive
environment, capital expenditure program of
Tenaris’s clients and the evolution of the rig
count in the U.S. market. As there is a significant
interaction among the principal assumptions
made in estimating its cash flow projections, the
Company believes that a sensitivity analysis that
considers changes in one assumption at a time
could be potentially misleading. A reduction in
cash flows of 4.8%, a fall in growth rate to 1.4%
or a rise in discount rate of 40 basis points would
remove the remaining headroom.

As of December 31, 2012, no cumulative amount of
recognized impairment charges are subject to reversal.

118.

s
i
r
a
n
e
T

12. Investments in associated companies

YeAR eNDeD DeCeMBeR 31

At the beginning of the year

Translation differences

equity in earnings of associated companies

impairment loss in associated companies

Dividends and distributions received

Treasury shares held by associated companies

Acquisitions

Sale of associated company

increase in equity reserves

At the end of the year

2012

2011

670,248

(108,480)

10,116

(73,650)

(18,708)

–

504,597

(3,140)

2,078

671,855

(43,278)

61,509

–

(17,229)

(3,339)

–

730

983,061

670,248

The principal associated companies are:

Company

Country of incorporation

% ownership - voting rights
at December 31

Value at
December 31

Ternium S.A.

Luxembourg

Usiminas S.A.

Brazil

others

–

(*) including treasury shares

2012

2011

2012

2011

11.46% (*)

2.5% - 5%

–

11.46% (*)

–

611,764

346,941

24,356

983,061

651,021

–

19,227

670,248

119.

t
r
o
p
e
R

a
u
n
n
A

Summarized selected financial information of
Ternium and Usiminas, including the aggregated
amounts of assets, liabilities, revenues and profit
or loss is as follows:

Non-current assets

Current assets

Total assets

Non-current liabilities

Current liabilities

Total liabilities

Non-controlling interests

Revenues

gross profit

Net (loss) income for the year attributable to owners of the parent

2012

2011

Usiminas S.A.

Ternium S.A.

Total

Ternium S.A.

10,762,700

7,211,371

17,974,071

5,275,579

3,655,628

8,931,207

5,195,688

5,547,374

16,038,279

10,866,999

26,905,278

10,743,062

4,334,830

2,643,954

2,245,907

2,125,446

6,580,737

4,769,400

1,922,481

1,979,383

6,978,784

4,371,353

11,350,137

3,901,864

932,050

1,074,763

2,006,813

6,502,352

8,608,054

15,110,406

340,380

(319,116)

1,736,964

2,077,344

139,235

(179,881)

1,084,827

9,122,832

2,102,705

513,540

120.

s
i
r
a
n
e
T

13. Other investments – non current

YeAR eNDeD DeCeMBeR 31

investments in other companies

others

14. Receivables – non current

YeAR eNDeD DeCeMBeR 31

government entities

employee advances and loans

Tax credits

Receivables from related parties

Legal deposits

Advances to suppliers and other advances

Derivative financial instruments

others

Allowances for doubtful accounts – see Note 23 (i)

2012

2011

2,293

310

2,603

2,277

266

2,543

2012

2011

2,962

12,583

22,352

19,349

24,312

22,752

–

40,745

145,055

(2,995)

3,387

14,763

12,440

22,177

31,643

27,167

427

24,721

136,725

(3,445)

142,060

133,280

15. Inventories

YeAR eNDeD DeCeMBeR 31

Finished goods

goods in process

Raw materials

Supplies

goods in transit

Allowance for obsolescence – see Note 24 (i)

16. Receivables and prepayments

121.

t
r
o
p
e
R

a
u
n
n
A

2012

2011

1,024,746

757,185

473,278

524,539

391,225

969,636

693,739

499,112

465,443

331,216

3,170,973

2,959,146

(185,168)

(152,737)

2,985,805

2,806,409

YeAR eNDeD DeCeMBeR 31

2012

2011

Prepaid expenses and other receivables

government entities

employee advances and loans

Advances to suppliers and other advances

government tax refunds on exports

Receivables from related parties

Derivative financial instruments

Miscellaneous

Allowance for other doubtful accounts – see Note 24 (i)

49,456

6,600

13,421

65,843

30,206

42,361

17,852

45,309

271,048

(10,516)

260,532

72,278

7,392

11,978

61,659

25,973

14,892

5,955

47,354

247,481

(5,680)

241,801

122.

s
i
r
a
n
e
T

17. Current tax assets and liabilities

YeAR eNDeD DeCeMBeR 31

CURReNT TAx ASSeTS

V.A.T. credits

Prepaid taxes

CURReNT TAx LiABiLiTieS

income tax liabilities

V.A.T. liabilities

other taxes

18. Trade receivables

YeAR eNDeD DeCeMBeR 31

Current accounts

Receivables from related parties

Allowance for doubtful accounts – see Note 24 (i)

2012

2011

97,173

78,389

114,561

53,768

175,562

168,329

129,419

27,394

97,790

254,603

222,087

24,392

80,001

326,480

2012

2011

2,077,117

1,911,952

22,804

14,588

2,099,921

1,926,540

(29,143)

(25,949)

2,070,778

1,900,591

The following table sets forth details of the aging
of trade receivables:

AT DeCeMBeR 31, 2012

Trade Receivables

Not Due

Past due

123.

t
r
o
p
e
R

a
u
n
n
A

guaranteed

Not guaranteed

Guaranteed and not guaranteed

Allowance for doubtful accounts

Net Value

AT DeCeMBeR 31, 2011

guaranteed

Not guaranteed

Guaranteed and not guaranteed

Allowance for doubtful accounts

Net Value

1 - 180 days

> 180 days

651,399

1,448,522

2,099,921

547,986

1,159,158

1,707,144

(29,143)

–

2,070,778

1,707,144

818,438

1,108,102

1,926,540

657,786

890,188

1,547,974

(25,949)

–

1,900,591

1,547,974

98,475

259,165

357,640

(1,138)

356,502

137,344

195,324

332,668

(4,129)

328,539

4,938

30,199

35,137

(28,005)

7,132

23,308

22,590

45,898

(21,820)

24,078

19. Cash and cash equivalents, and Other investments

YeAR eNDeD DeCeMBeR 31

2012

2011

oTHeR iNVeSTMeNTS

Financial debt instruments and time deposits

CASH AND CASH eqUiVALeNTS

Cash at banks

Liquidity funds

Short – term investments

Cash and cash equivalents

644,409

430,776

285,395

301,663

241,400

202,927

258,723

362,093

828,458

823,743

124.

s
i
r
a
n
e
T

20. Borrowings

YeAR eNDeD DeCeMBeR 31

NoN-CURReNT

Bank borrowings

Finance lease liabilities

Costs of issue of debt

CURReNT

2012

2011

536,134

151,475

1,547

(5,274)

100

(1,800)

532,407

149,775

Bank borrowings and other loans including related companies

1,157,983

772,825

Bank overdrafts

Finance lease liabilities

Costs of issue of debt

Total Borrowings

55,802

630

(2,630)

1,211,785

1,744,192

8,711

160

(595)

781,101

930,876

125.

t
r
o
p
e
R

a
u
n
n
A

The maturity of borrowings is as follows:

AT DeCeMBeR 31, 2012

1 year or less

1 - 2 years

2 - 3 years

3 - 4 years

4 - 5 years

over 5 years

Total

Financial lease

other borrowings

Total borrowings

interest to be accrued (*)

Total

AT DeCeMBeR 31, 2011

Financial lease

other borrowings

Total borrowings

interest to be accrued (*)

Total

630

1,211,155

1,211,785

18,615

1,230,400

160

780,941

781,101

16,050

797,151

415

231,007

231,422

12,802

244,224

110,819

110,909

1,797

112,706

403

161,997

162,400

5,753

168,153

8,518

8,528

808

9,336

372

83,599

83,971

3,344

87,315

–

8,753

725

9,478

225

45,622

45,847

748

46,595

–

6,578

618

7,196

132

8,635

8,767

2,177

1,742,015

1,744,192

230

41,492

8,997

1,785,684

–

15,007

749

15,756

260

930,616

930,876

20,747

951,623

(*)

includes the effect of hedge accounting.

Significant borrowings include:

in million of $

Disbursement date

Borrower

Type

original &
outstanding

Final maturity

2012

January 2012

April 2012

2012

Tamsa

Confab

Maverick

Siderca

Dalmine

Bank loans

Syndicated

Bank loans

420.8

350.0

223.7

162.7

2013 & 2014

January 2017 (**)

April 2015 (**)

Mainly 2013

(**) The main covenants on these loan agreements are limitations on liens and encumbrances, limitations on the sale of

certain assets, restrictions on distributions, restrictions on investments, compliance with financial ratios (i.e., leverage ratio
and interest coverage ratio) and restrictions on amendments or payments of subordinated indebtedness.

126.

s
i
r
a
n
e
T

As of December 31, 2012, Tenaris was in
compliance with all of its covenants.

The weighted average interest rates before tax
shown below were calculated using the rates set
for each instrument in its corresponding currency

as of December 31, 2012 and 2011 (considering
hedge accounting). The changes in interest rate are
basically due to changes in floating interest rate
and to the designation for hedge accounting of
certain Argentine Peso-denominated debts.

2012

2011

2.60%

3.84%

Total borrowings

Breakdown of long-term borrowings by currency
and rate is as follows:

Non current borrowings

Currency

USD

ARS

MxN

others

interest rates

Year ended December 31

Variable

Fixed

Variable

Fixed

2012

2011

510,892

13,491

–

1,206

6,818

65,087

–

77,553

480

6,655

Total non current borrowings

532,407

149,775

Breakdown of short-term borrowings by currency
and rate is as follows:

Current borrowings

Currency

interest rates

Year ended December 31

127.

t
r
o
p
e
R

a
u
n
n
A

USD

eURo

MxN

BRL

ARS

others

Variable

Fixed

Variable

Fixed

Variable

Fixed

2012

2011

240,894

104,845

179,549

65,107

339,683

–

239,446

32,650

227

9,384

165,827

173

38,076

814

173,313

49,171

339,733

6,911

2,561

4,522

Total current borrowings

1,211,785

781,101

128.

s
i
r
a
n
e
T

21. Deferred income tax
Deferred income taxes are calculated in full on
temporary differences under the liability method
using the tax rate of each country.

The evolution of deferred tax assets and
liabilities during the year are as follows:

Deferred tax liabilities

At the beginning of the year

Translation differences

increase due to business combinations

Charged directly to other Comprehensive income

income statement credit

At December 31, 2012

At the beginning of the year

Translation differences

Charged directly to other Comprehensive income

income statement charge / (credit)

At December 31, 2011

(a) includes the effect of currency translation on tax base explained in Note 8.

Deferred tax assets

Fixed
assets

inventories

intangible
and other (a)

Total

354,053

25,739

596,954

976,746

541

636

–

(19,746)

335,484

373,759

(31,095)

–

11,389

354,053

–

(10,470)

15,269

31,852

(2,055)

–

(4,058)

25,739

(239)

–

618

(46,202)

551,131

673,201

(3,567)

234

(72,914)

596,954

302

636

618

(76,418)

901,884

1,078,812

(36,717)

234

(65,583)

976,746

At the beginning of the year

Translation differences

increase due to business combinations

income statement charge / (credit)

At December 31, 2012

Provisions and
allowances

inventories

Tax
losses

other

Total

(70,388)

(171,465)

(35,196)

(105,912)

(382,961)

2,301

(45)

11,726

647

(189)

–

(12,553)

12,055

(199)

–

2,370

2,749

(234)

13,598

(56,406)

(183,560)

(23,141)

(103,741)

(366,848)

At the beginning of the year

Translation differences

Charged directly to other Comprehensive income

income statement credit

At December 31, 2011

(68,855)

5,299

–

(6,832)

(146,413)

(29,440)

(110,401)

(355,109)

454

–

(25,506)

(805)

–

(4,951)

3,555

1,246

(312)

8,503

1,246

(37,601)

(70,388)

(171,465)

(35,196)

(105,912)

(382,961)

The recovery analysis of deferred tax assets
and deferred tax liabilities is as follows:

YeAR eNDeD DeCeMBeR 31

Deferred tax assets to be recovered after 12 months

Deferred tax liabilities to be recovered after 12 months

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2012

2011

(111,616)

889,543

(135,918)

913,867

Deferred income tax assets and liabilities are offset
when (1) there is a legally enforceable right to set-
off current tax assets against current tax liabilities
and (2) when the deferred income taxes relate
to the same fiscal authority on either the same

taxable entity or different taxable entities where
there is an intention to settle the balances on a net
basis. The following amounts, determined after
appropriate set-off, are shown in the Consolidated
Statement of Financial Position:

YeAR eNDeD DeCeMBeR 31

Deferred tax assets

Deferred tax liabilities

The movement on the net deferred income
tax liability account is as follows:

YeAR eNDeD DeCeMBeR 31

At the beginning of the year

Translation differences

Charged directly to other Comprehensive income

income statement credit

Deferred employees’ statutory profit sharing charge

increase due to business combinations

At the end of the year

2012

2011

(214,199)

749,235

535,036

(234,760)

828,545

593,785

2012

2011

593,785

3,051

618

(95,066)

32,246

402

723,703

(28,214)

1,480

(98,399)

(4,785)

–

535,036

593,785

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22. Other liabilities

I. Other liabilities – Non current

YeAR eNDeD DeCeMBeR 31

employee severance indemnity

Pension benefits

employee retention and long term incentive program

Taxes Payable

Derivative Financial instruments

Miscellaneous

Employees’ severance indemnity
The amounts recognized in the statement
of financial position are as follows:

YeAR eNDeD DeCeMBeR 31

At the beginning of the year

Current service cost

interest Cost

Actuarial gains and losses

Translation differences

Used

increase due to business combinations

other

At the end of the year

2012

2011

44,040

49,221

68,771

2,065

–

61,301

225,398

44,598

43,621

50,260

4,307

13,738

77,129

233,653

2012

2011

44,598

1,123

1,487

3,054

213

(5,825)

1,189

(1,799)

46,459

810

1,676

937

(1,203)

(4,399)

–

318

44,040

44,598

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2012

2011

10,885

1,123

1,487

3,054

16,549

11,500

810

1,676

937

14,923

2012

2011

3% - 6%

3% - 5%

4% - 7%

3% - 5%

The amounts recognized in the income
statement are as follows:

YeAR eNDeD DeCeMBeR 31

expenses for defined contribution plans

Current service cost

interest cost

Actuarial losses

Total included in Labor costs

The principal actuarial assumptions used
were as follows:

YeAR eNDeD DeCeMBeR 31

Discount rate

Rate of compensation increase

Pension benefits

Unfunded
The amounts recognized in the statement of financial
position for the current annual period and previous
four annual periods are determined as follows:

YeAR eNDeD DeCeMBeR 31

2012

2011

2010

2009

2008

Present value of unfunded obligations

Unrecognized actuarial losses

Liability

Actuarial losses / (gains)

68,870

(21,613)

47,257

2,194

63,133

(20,611)

42,522

6,011

52,917

(15,643)

37,274

5,141

44,261

(11,235)

33,026

(2,482)

40,339

(14,580)

25,759

2,104

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The amounts recognized in the income statement
are as follows:

YeAR eNDeD DeCeMBeR 31

Current service cost

interest cost

Net actuarial losses recognized in the year

Total included in Labor costs

Movement in the present value
of unfunded obligation:

YeAR eNDeD DeCeMBeR 31

At the beginning of the year

Translation differences

Transfers, reclassifications and new participants of the plan

Total expenses

Actuarial losses

Benefits paid

other

At the end of the year

The principal actuarial assumptions used
were as follows:

YeAR eNDeD DeCeMBeR 31

Discount rate

Rate of compensation increase

2012

2011

2,043

4,132

924

7,099

2,062

3,518

959

6,539

2012

2011

63,133

52,917

(62)

884

6,175

2,194

(3,517)

(210)

969

5,580

6,011

(1,871)

(263)

68,870

63,133

2012

2011

4% - 7%

2% - 3%

5% - 7%

2% - 3%

Funded
The amounts recognized in the statement of financial
position for the current annual period and previous four
annual periods are as follows:

YeAR eNDeD DeCeMBeR 31

2012

2011

2010

2009

2008

Present value of funded obligations

Unrecognized actuarial losses

Fair value of plan assets

(Assets) / Liability (*)

Actuarial losses / (gains) - Liability

Actuarial (gains) / losses - Assets

187,772

(47,502)

172,116

(38,754)

162,740

(20,425)

144,005

(10,053)

(140,550)

(134,581)

(134,346)

(120,505)

(280)

14,902

(2,908)

(1,219)

11,315

8,813

7,969

11,142

(366)

13,447

11,827

(7,694)

117,463

(4,581)

(99,511)

13,371

(11,787)

18,820

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(*) in 2012 and 2011, $2.2 million and $2.3 million corresponding to an

overfunded plan were reclassified within other non-current assets, respectively.

The amounts recognized in the income statement
are as follows:

YeAR eNDeD DeCeMBeR 31

Current service cost

interest cost

Net actuarial losses recognized in the year

expected return on plan assets

Total included in Labor costs

2012

2,584

7,921

3,194

(8,318)

5,381

2011

2,556

8,285

1,599

(8,679)

3,761

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Movement in the present value of funded obligations:

YeAR eNDeD DeCeMBeR 31

At the beginning of the year

Translation differences

Total expenses

Actuarial losses

Benefits paid

other

At the end of the year

Movement in the fair value of plan assets:

YeAR eNDeD DeCeMBeR 31

At the beginning of the year

Translation differences

expected return on plan assets

Actuarial (gains) / losses

Contributions paid

Benefits paid

other

At the end of the year

The major categories of plan assets as a percentage
of total plan assets are as follows:

AT DeCeMBeR, 31

equity instruments

Debt instruments

others

2012

2011

172,116

162,740

(62)

10,505

14,902

(9,636)

(53)

(2,888)

10,841

11,315

(10,077)

185

187,772

172,116

2012

2011

(134,581)

(134,346)

1,588

(8,318)

(2,908)

(5,972)

9,636

2,617

(8,679)

8,813

(13,108)

10,077

(140,550)

(134,581)

2012

2011

40.0%

43.0%

17.0%

55.5%

40.4%

4.1%

The principal actuarial assumptions used
were as follows:

YeAR eNDeD DeCeMBeR 31

Discount rate

Rate of compensation increase

expected rates of return of plan assets

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2012

2011

4% - 5%

3% - 4%

4% - 6%

5% - 6%

3% - 4%

3% - 7%

The expected return on plan assets is determined
by considering the expected returns available on
the assets underlying the current investment policy.
Expected return on plan assets is determined based
on long-term, prospective rates of return as of the
end of the reporting period.

The employer contributions expected to be
paid for the year 2013 amounts approximately
to $5.9 million.

II. Other liabilities – current

YeAR eNDeD DeCeMBeR 31

Payroll and social security payable

Liabilities with related parties

Derivative financial instruments

Miscellaneous

2012

2011

261,223

225,823

4,023

14,031

39,551

745

32,011

46,635

318,828

305,214

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23. Non-current allowances and provisions

I. Deducted from non current receivables

YeAR eNDeD DeCeMBeR 31

Values at the beginning of the year

Translation differences

Reversals

Used

At December 31

II. Liabilities

YeAR eNDeD DeCeMBeR 31

Values at the beginning of the year

Translation differences

Additional provisions

Reclassifications

Used

At December 31

2012

2011

(3,445)

450

–

(3,806)

276

(2,995)

(3,445)

2012

2011

72,975

(4,427)

10,871

–

(12,234)

67,185

83,922

(7,480)

10,402

(274)

(13,595)

72,975

24. Current allowances and provisions

I. Deducted from assets

Allowance for doubtful
accounts - Trade receivables

Allowance for other doubtful
accounts - other receivables

Allowance for inventory
obsolescence

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YeAR eNDeD DeCeMBeR 31, 2012

Values at the beginning of the year

Translation differences

Additional allowances

increase due to business combinations

Used

At December 31, 2012

YeAR eNDeD DeCeMBeR 31, 2011

Values at the beginning of the year

Translation differences

Additional allowances

Used

At December 31, 2011

II. Liabilities

YeAR eNDeD DeCeMBeR 31, 2012

Values at the beginning of the year

Translation differences

Additional allowances / (reversals)

Reclassifications

Used

At December 31, 2012

YeAR eNDeD DeCeMBeR 31, 2011

Values at the beginning of the year

Translation differences

Additional allowances

Reclassifications

Used

At December 31, 2011

(25,949)

(65)

(3,840)

(269)

980

(29,143)

(20,828)

142

(7,749)

2,486

(25,949)

(5,680)

359

(5,936)

–

741

(10,516)

(6,574)

305

(694)

1,283

(5,680)

Sales risks

other claims and contingencies

11,286

(82)

16,619

344

(14,055)

14,112

6,182

(534)

10,915

2,463

(7,740)

11,286

22,319

245

(6,995)

(354)

(2,369)

12,846

18,919

(493)

15,941

(2,038)

(10,010)

22,319

(152,737)

985

(49,907)

(604)

17,095

(185,168)

(151,439)

3,969

(11,067)

5,800

(152,737)

Total

33,605

163

9,624

(10)

(16,424)

26,958

25,101

(1,027)

26,856

425

(17,750)

33,605

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25. Derivative financial instruments

Net fair values of derivative financial instruments
The net fair values of derivative financial instruments
disclosed within Other Receivables and Other Liabilities
at the reporting date, in accordance with IAS 39, are:

YeAR eNDeD DeCeMBeR 31

2012

2011

Foreign exchange derivatives contracts

embedded Canadian dollar forward purchases

Contracts with positive fair values

Foreign exchange derivatives contracts

embedded Canadian dollar forward purchases

Contracts with negative fair values

Total

17,852

–

17,852

(14,031)

–

(14,031)

3,821

5,238

1,144

6,382

(45,040)

(709)

(45,749)

(39,367)

Foreign exchange derivative contracts

and hedge accounting
Tenaris applies hedge accounting to certain cash
flow hedges of highly probable forecast transactions.
The net fair values of exchange rate derivatives,
including embedded derivatives and those derivatives
that were designated for hedge accounting as of
December 2012 and 2011, were as follows:

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Purchase currency

Sell currency

USD

BRL

KWD

CAD

USD

CoP

ARS

USD

eUR

USD

eUR

MxN

USD

others

Subtotal

CAD

Total

Term

2013

Fair Value

Hedge Accounting Reserve

2012

1,301

824

1,272

(151)

(105)

1,201

1,324

(847)

(998)

2011

(842)

3,260

161

(749)

(625)

(41,163)

2012

(4,043)

(818)

2,913

(125)

–

(563)

–

(224)

2011

(8,067)

–

(144)

–

3,821

(39,802)

(2,860)

(8,211)

USD (embedded derivative)

2012

–

3,821

435

–

(39,367)

(2,860)

(8,211)

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Following is a summary of the hedge
reserve evolution:

equity Reserve Dec-10

Movements 2011

equity Reserve Dec-11

Movements 2012

equity Reserve Dec-12

Foreign exchange

interest Rate

Total Cash flow Hedge

(3,562)

(5,367)

(8,929)

(4,649)

5,367

718

(8,211)

–

(8,211)

5,351

–

5,351

(2,860)

–

(2,860)

Tenaris estimates that the cash flow hedge reserve
at December 31, 2012 will be recycled to the
Consolidated Income Statement during 2013.

26. Contingencies, commitments and restrictions

on the distribution of profits

Contingencies
Tenaris is involved in litigation arising from time
to time in the ordinary course of business. Based
on management’s assessment and the advice of
legal counsel, it is not anticipated that the ultimate
resolution of pending litigation will result in
amounts in excess of recorded provisions (Notes
23 and 24) that would be material to Tenaris’s
Consolidated Financial Position, results of
operations and cash flows.

a. Conversion of tax loss carry-forwards
On December 18, 2000, the Argentine tax
authorities notified Siderca S.A.I.C., a Tenaris
subsidiary organized in Argentina (“Siderca”),
of an income tax assessment related to the
conversion of tax loss carry-forwards into Debt
Consolidation Bonds under Argentine Law No.
24.073. The adjustments proposed by the tax
authorities represent an estimated contingency of
approximately Argentinean pesos (“ARS”) 116.7
million (approximately $23.8 million) at December
31, 2012, in taxes and penalties. Tenaris believes
that it is not probable that the ultimate resolution

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of the matter will result in an obligation.
Accordingly, no provision was recorded in these
Consolidated Financial Statements.

b. Collection of Court Judgment in Brazil
In August 2012, Confab Industrial S.A., a Tenaris
subsidiary organized in Brazil (“Confab”) collected
from the Brazilian government an amount, net
of attorney fees and other related expenses,
of approximately Brazilian reais (“BRL”) 99.8
million (approximately $49.2 million), recorded
in other operating income. The income tax effect
on this gain amounted to approximately $17.1
million. This payment was ordered by a final
court judgment that represents Confab’s right
to interest and monetary adjustment over a tax
benefit that had been paid to Confab in 1991
and determined the amount of such right. While
certain extraordinary appeals from the Brazilian
government seeking to reverse the court judgment
are still pending, Tenaris believes that the
likelihood of a reversal is remote.

•

Commitments
Set forth is a description of Tenaris’s main
outstanding commitments:

•

A Tenaris company is a party to a five-year
contract with Nucor Corporation, under which

it committed to purchase from Nucor steel
coils, with deliveries starting in January 2007
on a monthly basis. The Tenaris company had
negotiated a one-year extension to the original
contract, through December 2012. This contract
has expired on December 31, 2012. A new
three-month contract through March 2013 was
renegociated and therefore as of December 31,
2012 no significant commitment arises.

A Tenaris company has renegotiated its previous
ten year steel bars purchase contract with Rio
Tinto Fer et Titane (ex- QIT), under which the
Tenaris company had originally committed to
purchase steel bars, with deliveries starting in July
2007. The amended contract gives either party
the right to terminate the agreement upon a 2
year-written notice. As of December 31, 2012 no
significant commitment arises.

A Tenaris company entered into a contract with
Siderar, a subsidiary of Ternium, for the supply of
steam generated at the power generation facility
that Tenaris owns in the compound of the Ramallo
facility of Siderar. Under this contract, Tenaris is
required to provide to Siderar 250 tn/hour of steam
through 2018, and Siderar has the obligation to take
or pay this volume. The amount of this gas supply
agreement totals approximately $79.9 million.

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Restrictions to the distribution of profits and

payment of dividends
As of December 31, 2012, equity as defined under
Luxembourg law and regulations consisted of:

All amounts in thousands of U.S. dollars

Share capital

Legal reserve

Share premium

Retained earnings including net income for the year ended December 31, 2012

Total equity in accordance with Luxembourg law

1,180,537

118,054

609,733

22,411,870

24,320,194

At least 5% of the Company’s net income per year,
as calculated in accordance with Luxembourg law
and regulations, must be allocated to the creation of
a legal reserve equivalent to 10% of the Company’s
share capital. As of December 31, 2012, this reserve
is fully allocated and additional allocations to the
reserve are not required under Luxembourg law.
Dividends may not be paid out of the legal reserve.

The Company may pay dividends to the extent,
among other conditions, that it has distributable
retained earnings calculated in accordance with
Luxembourg law and regulations.

At December 31, 2012, distributable amount
under Luxembourg law totals $23.0 billion, as
detailed below.

All amounts in thousands of U.S. dollars

Retained earnings at December 31, 2011 under Luxembourg law

other income and expenses for the year ended December 31, 2012

Dividends paid

Retained earnings at December 31, 2012 under Luxembourg law

Share premium

Distributable amount at December 31, 2012 under Luxembourg law

23,024,194

(163,720)

(448,604)

22,411,870

609,733

23,021,603

27. Business combinations and other acquisitions

Acquisition of participation in Usinas Siderúrgicas

de Minas Gerais S.A. (“Usiminas”)
On January 16, 2012, Tenaris’s Brazilian subsidiary,
Confab acquired 25 million ordinary shares of
Usiminas, representing 5.0% of the shares with
voting rights and 2.5% of the total share capital.
The price paid for each ordinary share was BRL36,

representing a total cost to Confab of $504.6
million. Confab financed the acquisition through
an unsecured 5-year term loan in the principal
amount of $350 million and cash on hand.

This acquisition is part of a larger transaction
pursuant to which Ternium, certain of its

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subsidiaries and Confab joined Usiminas’s existing
control group through the acquisition of ordinary
shares representing 27.7% of Usiminas’ total voting
capital and 13.8% of Usiminas’ total share capital.
In addition, Ternium, its subsidiaries and Confab
entered into an amended and restated Usiminas
shareholders’ agreement with Nippon Steel,
Mitsubishi, Metal One and Caixa dos Empregados
da Usiminas (“CEU”), an Usiminas employee fund,
governing the parties’ rights within the Usiminas
control group. As a result of these transactions, the
control group, which holds 322.7 million ordinary
shares representing the majority of Usiminas’ voting
rights, is now formed as follows: Nippon Group
46.1%, Ternium/Tenaris Group 43.3%, and CEU
10.6%. The rights of Ternium and its subsidiaries
and Confab within the Ternium/Tenaris Group are
governed under a separate shareholders agreement.

As of the date of issuance of these Consolidated
Financial Statements, the Company has completed
its purchase price allocation procedures and
determined a goodwill included within the
investment balance of $142.7 million.

An impairment test over the investment in Usiminas
was performed as of December 31, 2012, and
subsequently the goodwill of such investment was
written down by $73.7 million. The impairment was
mainly due to expectations of a weaker industrial
environment in Brazil, where industrial production
and consequently steel demand have been suffering
downward adjustments. In addition, a higher degree
of uncertainty regarding future prices of iron ore
led to a reduction in the forecast of long term iron
ore prices that affected cash flow expectations.

rate used to test the investment in Usiminas for
impairment was 9.6%.

In 2012, the Company’s investment in Usiminas,
contributed a total loss of $93.2 million mainly
as a result of the above mentioned impairment
of goodwill, a $11.4 million amortization of the
difference between the fair value and book value of
fixed assets and a $8.1 million loss from net losses
in the year. In addition, the Company recognized
other negative adjustments in connection with its
investment in Usiminas for a total amount of $63.5
million. These negative adjustments, which are
recorded as other comprehensive loss, are mainly
attributable to a currency translation adjustment
generated by the investment in Usiminas being
maintained in BRL and are calculated as provided
by IAS 21. As a result of these losses and the
dividend received of approximately $1.0 million,
the Company’s participation in Usiminas as of
December 31, 2012 amounted to $346.9 million.

On February 18, 2013, Usiminas published its
annual accounts as of and for the year ended
December 31, 2012, which state that revenues,
post-tax losses from continuing operations and net
assets amounted to $6.502 million, $319 million
and $8.127 million, respectively.

Tenaris Brazilian subsidiary was notified of a
lawsuit filed in Brazil by Companhia Siderúrgica
Nacional (CSN) and various entities affiliated
with CSN against this subsidiary and various
subsidiaries of Ternium. The entities named in
the CSN lawsuit had acquired a participation in
Usiminas in January 2012.

To determine the recoverable value, the value in
use was used, which was calculated as the present
value of the expected cash flows, considering
the expected prices for the years covered by the
projection. As of December 31, 2012 the discount

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acquisition, or 28.8 Brazilian reais (BRL), and seeks
an order to compel the acquirers to launch an offer at
that price plus interest. If so ordered, the offer would
need to be made to 182,609,851 ordinary shares of
Usiminas not belonging to Usiminas' control group,
and Confab would have a 17.9% share in the offer.

Tenaris believes that CSN's allegations are
groundless and without merit, as confirmed by
several opinions of Brazilian counsel and previous
decisions by Brazil's securities regulator Comissão
de Valores Mobiliários, including a February 2012
decision determining that the above mentioned
acquisition did not trigger any tender offer
requirement. Accordingly, no provision was recorded
in these Consolidated Financial Statements.

Confab delisting
Following a proposal by shareholders representing
32.6% of the shares held by the public in its
controlled Brazilian subsidiary Confab, on March
22, 2012, Tenaris launched a delisting tender
offer to acquire all of the ordinary and preferred
shares held by the public in Confab for a price
in cash of BRL 5.85 per ordinary or preferred
share, subject to adjustments as described in the
offer documents. The shareholders parties to the
proposal had agreed to the offer price and had
committed to tender their shares into the offer.

On April 23, 2012, at the auction for the offer, a
total of 216,269,261 Confab shares were tendered.
As a result, Tenaris attained the requisite threshold
to delist Confab from the São Paulo Stock
Exchange. The final cash price paid in the auction
was BRL 5.90 per ordinary or preferred share (or
approximately $3.14 per ordinary or preferred
share). Subsequent to the auction, on April 23,
2012, Tenaris acquired 6,070,270 additional
Confab shares in the market at the same price.
Upon settlement of the offer and these subsequent

purchases on April 26, 2012, Tenaris held in the
aggregate approximately 95.9% of Confab.

Tenaris later acquired additional shares representing
approximately 2.3% of Confab at the same price
paid in the auction of the offer and on June 6, 2012,
Confab exercised its right to redeem the remaining
shares at the same price paid to the tendering
shareholders (adjusted by Brazil’s SELIC rate). Confab
became a wholly-owned subsidiary of Tenaris.

Tenaris’s total investment in Confab shares
pursuant to these transactions amounted to
approximately $758.5 million.

Business combinations
In August 2012, Tenaris acquired 100% of the
shares of Filettature attrezzature speciali tubolari
S.R.L. (“Fast”), for a purchase price of $21.4
million. Net equity acquired amounts to $19.9
million (mainly cash and cash equivalents for $14.9
million and fixed assets for $6.3 million).

In October 2011, Tenaris acquired Pipe Coaters
Nigeria Ltd (Pipe Coaters), through the payment
of a price of $11.3 million. Tenaris holds 40% of
the shares and got the control. Net assets acquired
amount to $24.7 million.

Had both transaction been consummated on
January 1, 2012 and January 1, 2011, respectively,
then Tenaris’s unaudited pro forma net sales and
net income from continuing operations would not
have changed materially.

Non-controlling interests
During the years ended December 31, 2011
and 2010 additional shares of certain Tenaris
subsidiaries were acquired from non-controlling
shareholders for approximately $16.6 million and
$3.0 million, respectively.

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28. Cash flow disclosures

YeAR eNDeD DeCeMBeR 31

2012

2011

2010

(i) CHANgeS iN WoRKiNg CAPiTAL

inventories

Receivables and prepayments

Trade receivables

other liabilities

Customer advances

Trade payables

(ii) iNCoMe TAx ACCRUALS LeSS PAYMeNTS

Tax accrued

Taxes paid

(iii) iNTeReST ACCRUALS LeSS PAYMeNTS, NeT

interest accrued

interest received

interest paid

(iV) CASH AND CASH eqUiVALeNTS

Cash at banks, liquidity funds and short - term investments

Bank overdrafts

As of December 31, 2012, 2011 and 2010, the
components of the line item “other, including
currency translation adjustment” are immaterial
to net cash provided by operating activities.

(174,670)

(26,285)

(166,985)

6,202

78,446

(19,720)

(335,337)

122,419

(456,874)

(30,058)

(16,168)

66,378

(773,325)

(51,449)

(111,340)

22,781

(25,056)

261,807

(303,012)

(649,640)

(676,582)

541,558

(702,509)

(160,951)

22,048

41,996

(89,349)

(25,305)

828,458

(55,802)

772,656

475,370

(354,466)

120,904

21,567

38,399

(84,846)

(24,880)

823,743

(8,711)

815,032

395,507

(420,954)

(25,447)

31,248

44,269

(57,817)

17,700

843,861

(23,696)

820,165

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29. Related party transactions

As of December 31, 2012:

•

San Faustin S.A., a Luxembourg public limited
liability company (Société Anonyme) (“San
Faustin”), owned 713,605,187 shares in the
Company, representing 60.45% of the Company’s
capital and voting rights.

San Faustin owned all of its shares in the Company
through its wholly-owned subsidiary Techint
Holdings S.à r.l., a Luxembourg private limited
liability company (Société à Responsabilité
Limitée) (“Techint”).

Rocca & Partners Stichting Administratiekantoor
Aandelen San Faustin, a Dutch private foundation
(Stichting) (“RP STAK”) held shares in San Faustin
sufficient in number to control San Faustin.

•

No person or group of persons controls RP STAK.

Based on the information most recently available
to the Company, Tenaris’s directors and senior
management as a group owned 0.12% of the
Company’s outstanding shares.

At December 31, 2012, the closing price of
Ternium’s ADSs as quoted on the New York Stock
Exchange was $23.55 per ADS, giving Tenaris’s
ownership stake a market value of approximately
$541.0 million. At December 31, 2012, the carrying
value of Tenaris’ ownership stake in Ternium,
based on Ternium’s IFRS financial statements, was
approximately $611.8 million. See Section II.B.2.

Transactions and balances disclosed as with
“Associated” companies are those with companies
over which Tenaris exerts significant influence
or joint control in accordance with IFRS, but
does not have control. All other transactions
and balances with related parties which are not
Associated and which are not consolidated are
disclosed as “Other”.

The following transactions were carried out with
related parties:

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31

I. TRANSACTIONS

A. SALeS oF gooDS AND SeRViCeS

Sales of goods to associated parties

Sales of goods to other related parties

Sales of services to associated parties

Sales of services to other related parties

B. PURCHASeS oF gooDS AND SeRViCeS

Purchases of goods to associated parties

Purchases of goods to other related parties

Purchases of services to associated parties

Purchases of services to other related parties

AT DeCeMBeR 31

II. YEAR-END BALANCES

A. ARiSiNg FRoM SALeS / PURCHASeS oF gooDS / SeRViCeS

Receivables from associated parties

Receivables from other related parties

Payables to associated parties

Payables to other related parties

B. FiNANCiAL DeBT

Borrowings from associated parties

Borrowings from other related parties

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2012

2011

2010

43,501

77,828

14,583

4,000

39,476

106,781

14,732

4,740

38,442

104,036

12,073

4,063

139,912

165,729

158,614

444,742

19,745

112,870

87,510

664,867

170,675

22,134

88,707

113,764

395,280

169,506

30,671

63,043

132,614

395,834

2012

2011

64,125

20,389

(86,379)

(14,123)

(15,988)

(3,909)

(2,212)

(6,121)

40,305

11,352

(38,129)

(6,983)

6,546

(8,650)

(1,851)

(10,501)

Directors’ and senior management compensation
During the years ended December 31, 2012, 2011
and 2010, the cash compensation of Directors and
Senior managers amounted to $24.1 million, $25.7
million and $18.6 million respectively. In addition,

Directors and Senior managers received 542, 555
and 485 thousand units for a total amount of $5.2
million, $4.9 million and $4.1 million respectively
in connection with the Employee retention and long
term incentive program mentioned in Note O (4).

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30. Principal subsidiaries

The following is a list of Tenaris’s principal
subsidiaries and its direct and indirect percentage
of ownership of each controlled company at
December 31, 2012.

Company

Country of
incorporation

Main activity

Percentage of ownership
at December 31 (*)

Algoma Tubes inc.

Confab industrial S.A. and subsidiaries (a)

Canada

Brazil

Manufacturing of seamless steel pipes

Manufacturing of welded steel pipes

Dalmine S.p.A.

Hydril Company and subsidiaries (except detailed) (b)

inversiones Berna S.A.

Maverick Tube Corporation and subsidiaries

(except detailed)

NKKTubes

PT Seamless Pipe indonesia Jaya

Prudential Steel ULC

S.C. Silcotub S.A.

Siat S.A.

italy

USA

Chile

USA

Japan

indonesia

Canada

Romania

Argentina

and capital goods

Manufacturing of seamless steel pipes

Manufacturing and marketing of

premium connections

Financial Company

Manufacturing of welded steel pipes

Manufacturing of seamless steel pipes

Manufacturing of seamless steel products

Manufacturing of welded steel pipes

Manufacturing of seamless steel pipes

Manufacturing of welded and seamless

steel pipes

2012

2011

2010

100%

99%

100%

51%

77%

100%

41%

99%

100%

51%

77%

100%

82%

100%

41%

99%

100%

51%

77%

100%

82%

Siderca S.A.i.C. and subsidiaries

Argentina

Manufacturing of seamless steel pipes

100%

(except detailed) (c)

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Company

Country of
incorporation

Main activity

Percentage of ownership
at December 31 (*)

Talta - Trading e Marketing Sociedade Unipessoal Lda.

Madeira

Trading and holding Company

Tenaris Financial Services S.A.

Tenaris global Services (Canada) inc.

Uruguay

Canada

Financial Company

Marketing of steel products

Tenaris global Services (Panama) S.A. - Suc. Colombia

Colombia

Marketing of steel products

Tenaris global Services (U.S.A.) Corporation

Tenaris global Services Nigeria Limited

Tenaris global Services Norway A.S.

Tenaris global Services S.A. and subsidiaries

(except detailed) (d)

USA

Nigeria

Norway

Uruguay

Marketing of steel products

Marketing and distribution of steel

products and holding company

Tenaris global Services (Uk) Ltd

United Kingdom

Marketing of steel products

Tenaris investments S.ar.l.

Luxembourg

Holding Company

Tenaris investments S.ar.l., Zug Branch

Switzerland

Financial services

Tenaris investments Switzerland Ag and subsidiaries

Switzerland

Holding Company

(except detailed)

Tubos de Acero de Mexico S.A.

Tubos del Caribe Ltda.

Mexico

Colombia

Manufacturing of seamless steel pipes

Manufacturing of welded steel pipes

(*) All percentages rounded.

(a) For 2011 and 2010, Tenaris holds 99% of the voting shares of Confab industrial S.A.

(b) Tenaris holds 100% of Hydril’s subsidiaries except for Technical Drilling & Production Services

Nigeria Ltd. where it holds 60%.

(d) Tenaris holds 95% of Tenaris Supply Chain S.A, 95% of Tenaris Saudi Arabia Limited 60% of

gepnaris S.A. and 40% of Tubular Technical Services and Pipe Coaters.

2012

2011

2010

100%

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31. Nationalization of Venezuelan Subsidiaries

In May 2009, within the framework of Decree
Law 6058, Venezuela’s President Hugo Chávez
announced the nationalization of, among
other companies, the Company's majority-
owned subsidiaries TAVSA - Tubos de Acero de
Venezuela S.A. (“Tavsa”) and, Matesi Materiales
Siderúrgicos S.A (“Matesi”), and Complejo
Siderúrgico de Guayana, C.A (“Comsigua”), in
which the Company has a non-controlling interest
(collectively, the “Venezuelan Companies”).

In July 2009, President Chávez issued Decree 6796,
which ordered the acquisition of the Venezuelan
Companies' assets and provided that Tavsa's assets
would be held by the Ministry of Energy and
Oil, while Matesi and Comsigua's assets would
be held by the Ministry of Basic Industries and
Mining. Decree 6796 also required the Venezuelan
government to create certain committees at each
of the Venezuelan Companies; each transition
committee must ensure the nationalization of each
Venezuelan Company and the continuity of its
operations, and each technical committee (to be
composed of representatives of Venezuela and the
private sector) must negotiate over a 60-day period
(extendable by mutual agreement) a fair price for
each Venezuelan Company to be transferred to
Venezuela. In the event the parties failed to reach
agreement by the expiration of the 60-day period
(or any extension thereof), the applicable Ministry
would assume control and exclusive operation
of the relevant Venezuelan Company, and the
Executive Branch would be required to order their
expropriation in accordance with the Venezuelan

Expropriation Law. The Decree also specifies that
all facts and activities thereunder are subject to
Venezuelan law and any disputes relating thereto
must be submitted to Venezuelan courts.

In August 2009, Venezuela, acting through the
transition committee appointed by the Minister
of Basic Industries and Mines of Venezuela,
unilaterally assumed exclusive operational
control over Matesi, and in November, 2009,
Venezuela, acting through PDVSA Industrial S.A.
(a subsidiary of Petróleos de Venezuela S.A.),
formally assumed exclusive operational control
over the assets of Tavsa.

In 2010, Venezuela’s National Assembly declared
Matesi’s assets to be of public and social interest
and ordered the Executive Branch to take the
necessary measures for the expropriation of such
assets. In June 2011, President Chávez issued Decree
8280, which orders the expropriation of Matesi’s
assets as may be required for the implementation
of a state-owned project for the production, sale
and distribution of briquettes, and further instructs
to commence negotiations and take any actions
required for the acquisition of such assets.

Tenaris’s investments in the Venezuelan companies
are protected under applicable bilateral investment
treaties, including the bilateral investment treaty
between Venezuela and the Belgium-Luxembourg
Economic Union, and Tenaris continues to reserve
all of its rights under contracts, investment treaties
and Venezuelan and international law. Tenaris has
also consented to the jurisdiction of the ICSID in
connection with the nationalization process.

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In August 2011, Tenaris and its wholly-owned
subsidiary Talta - Trading e Marketing Sociedad
Unipessoal Lda (Talta), initiated arbitration
proceedings against Venezuela before the
International Centre for Settlement of Investment
Disputes (ICSID) in Washington D.C., pursuant to the
bilateral investment treaties entered into by Venezuela
with the Belgium-Luxembourg Economic Union and
Portugal. In these proceedings, Tenaris and Talta
seek adequate and effective compensation for the
expropriation of their investment in Matesi. This case
was registered by the ICSID on September 30, 2011.

In July 2012, Tenaris and Talta initiated separate
arbitration proceedings against Venezuela before the
ICSID, seeking adequate and effective compensation
for the expropriation of their respective investments
in Tavsa and Comsigua. This case was registered by
the ICSID on August 27, 2012.

Based on the facts and circumstances described
above and following the guidance set forth by IAS
27R, the Company ceased consolidating the results
of operations and cash flows of the Venezuelan
Companies as from June 30, 2009, and classified
its investments in the Venezuelan Companies as

financial assets based on the definitions contained
in paragraphs 11(c)(i) and 13 of IAS 32.

The Company classified its interests in the Venezuelan
Companies as available-for-sale investments since
management believes they do not fulfill the requirements
for classification within any of the remaining
categories provided by IAS 39 and such classification
is the most appropriate accounting treatment
applicable to non-voluntary dispositions of assets.

Tenaris or its subsidiaries have net receivables with
the Venezuelan Companies as of December 31, 2012
for a total amount of approximately $28 million.

The Company records its interest in the Venezuelan
Companies at its carrying amount at June 30, 2009,
and not at fair value, following the guidance set forth
by paragraphs 46(c), AG80 and AG81 of IAS 39.

32. Fees paid to the Company’s principal accountant

Total fees accrued for professional services
rendered by PwC Network firms to Tenaris S.A.
and its subsidiaries are detailed as follows:

All amounts in thousands of U.S. dollars

YeAR eNDeD DeCeMBeR 31

Audit Fees

Audit-Related Fees

Tax Fees

All other Fees

Total

2012

2011

2010

5,446

335

137

5,398

151

4,291

161

5,950

5,652

4,617

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33. Subsequent events

Annual Dividend Proposal
On February 21, 2013 the Company’s board of
directors proposed, for the approval of the Annual
General Shareholders' meeting to be held on May
2, 2013, the payment of an annual dividend of
$0.43 per share ($0.86 per ADS), or approximately
$507.6 million, which includes the interim
dividend of $0.13 per share ($0.26 per ADS) or
approximately $153.5 million, paid on November
22, 2012. If the annual dividend is approved by the
shareholders, a dividend of $0.30 per share ($0.60
per ADS), or approximately $354.2 million will be
paid on May 23, 2013, with an ex-dividend date
of May 20, 2013. These Consolidated Financial
Statements do not reflect this dividend payable.

Ricardo Soler
Chief Financial Officer

Tenaris S.A.
Annual accounts

Luxembourg GAAP as at December 31, 2012

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Audit report

To the Shareholders

of Tenaris S.A.

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Report on the annual accounts
We have audited the accompanying annual accounts of Tenaris S.A., which comprise the
balance sheet as at December 31, 2012, the profit and loss account for the year then ended,
and a summary of significant accounting policies and other explanatory information.

Board of Directors’ responsibility for the annual accounts
The Board of Directors is responsible for the preparation and fair presentation of these
annual accounts in accordance with Luxembourg legal and regulatory requirements
relating to the preparation of the annual accounts, and for such internal control as
the Board of Directors determines is necessary to enable the preparation of annual
accounts that are free from material misstatement, whether due to fraud or error.

Responsibility of the “Réviseur d’entreprises agréé”
Our responsibility is to express an opinion on these annual accounts based on our
audit. We conducted our audit in accordance with International Standards on Auditing
as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier”.
Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance whether the annual accounts are free
from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the annual accounts. The procedures selected depend on the
judgment of the “Réviseur d’entreprises agréé”, including the assessment of the risks
of material misstatement of the annual accounts, whether due to fraud or error. In
making those risk assessments, the “Réviseur d’entreprises agréé” considers internal
control relevant to the entity’s preparation and fair presentation of the annual accounts
in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by the Board of Directors,
as well as evaluating the overall presentation of the annual accounts.

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We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.

Opinion
In our opinion, these annual accounts give a true and fair view of the financial position
of Tenaris S.A. as of December 31, 2012, and of the results of its operations for the
year then ended in accordance with Luxembourg legal and regulatory requirements
relating to the preparation of the annual accounts.

Report on other legal and regulatory requirements
The management report, including the corporate governance statement, which is the
responsibility of the Board of Directors, is consistent with the annual accounts and includes
the information required by the law with respect to the corporate governance statement.

Luxembourg,
March 27, 2013

PricewaterhouseCoopers, Société coopérative
Represented by

Fabrice Goffin

PricewaterhouseCoopers, Société coopérative, 400 Route d’esch, B.P. 1443, L-1014 Luxembourg
T: +352 494848 1, F: +352 494848 2900, www.pwc.lu

Cabinet de révision agréé. expert-comptable (autorisation gouvernementale n°10028256)
R.C.S. Luxembourg B 65 477 - TVA LU25482518

Balance sheet
as at December 31, 2012

expressed in United States Dollars

ASSETS

C. FixeD ASSeTS

iii. Financial fixed assets

1. Shares in affiliated undertakings

D. CURReNT ASSeTS

ii. Debtors

Note

2012

2011

24,346,876,393

24,954,298,976

24,346,876,393

24,954,298,976

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2. Amounts owed by affiliated undertakings becoming due and payable after less than one year

2,797,315

2,411,657

4. other debtors becoming due and payable after less than one year

iV. Cash at bank and cash in hand

Total assets

LIABILITIES

A. CAPiTAL AND ReSeRVeS

i. Subscribed capital

ii. Share premium

iV. Reserves

1. Legal reserve

V. Profit brought forward

Vi. (Loss) Profit for the financial year

Vii. interim dividend

D. NoN-SUBoRDiNATeD DeBTS

6. Amounts owed to affiliated undertakings

a) becoming due and payable after less than one year

b) becoming due and payable after more than one year

9. other creditors becoming due and payable after less than one year

Total liabilities

The accompanying notes are an integral part of these annual accounts.

27,500

504,986

29,045

24,831

3,329,801

2,465,533

24,350,206,194

24,956,764,509

5,7

5,6

1,180,536,830

609,732,757

118,053,683

22,729,060,527

16,384,035,353

(163,720,365)

6,793,629,170

5,8

(153,469,789)

24,320,193,643

24,932,518,004

10,11

12,292,822

16,008,192

10,406,201

11,979,710

1,711,537

1,860,594

30,012,551

24,246,505

24,350,206,194

24,956,764,509

Profit and loss account
for the financial year ended December 31, 2012

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expressed in United States Dollars

A. CHARGES

3. Staff costs

5. other operating charges

6. Value adjustments and fair value adjustments on financial fixed assets

8. interest payable and similar charges

a) concerning affiliated undertakings

b) other interest payable and similar charges

10. Tax on profit or loss

12. Profit for the financial year

Total charges

B. INCOME

6. income from financial fixed assets

a) derived from affiliated undertakings

b) gain from the transfer of shares in affiliated undertakings

7. income from financial current assets

b) other income

10. Loss for the financial year

Total income

The accompanying notes are an integral part of these annual accounts.

Note

2012

2011

–

25,830

34,413,375

34,788,280

157,657,389

–

757,215

440,413

2,221

–

2,038

–

6,793,629,170

192,830,233

6,828,885,731

29,000,000

–

6,828,757,092

109,868

128,639

163,720,365

–

192,830,233

6,828,885,731

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Notes to audited annual accounts
as at December 31, 2012

1. General information
Tenaris S.A. (the “Company” or “Tenaris”) was
established on December 17, 2001 under the name
of Tenaris Holding S.A. as a public limited liability
company under Luxembourg’s 1929 holding
company regime (societé anonyme holding).
On June 26, 2002, the Company changed its name
to Tenaris S.A. On January 1, 2011, the Company
became an ordinary public limited liability
company (Société Anonyme).

3.2. Foreign currency translation
Current and non-current assets and liabilities
denominated in currencies other than the United
States Dollar (“USD”) are translated into USD at
the rate of exchange at the balance sheet date. The
resulting gains or losses are reflected in the Profit
and loss account for the financial year. Income
and expenses in currencies other than the USD are
translated into USD at the exchange rate prevailing
at the date of each transaction.

Tenaris’s object is to invest mainly in companies
that manufacture and market steel tubes and other
related businesses.

3.3. Financial fixed assets
Shares in affiliated undertakings are stated at
purchase price, adding to the price paid the
expenses incidental thereto.

Tenaris prepares and publishes consolidated
financial statements which include further
information on Tenaris and its subsidiaries.
The financial statements are available at the
registered office of the Company, 29, Avenue de
la Porte-Neuve – L-2227 – 3rd Floor, Luxembourg.

2. Presentation of the comparative financial data
The comparative figures for the financial year
ended December 31, 2011 relating to items of
balance sheet, profit and loss and the notes to
the accounts have been reclassified to ensure
comparability with the figures for the financial
year ended December 31, 2012.

Whenever necessary, the Company conducts
impairment tests on its fixed assets in accordance
with Luxembourg regulations.

In case of other than a temporary decline in
respect of the fixed assets value, its carrying value
will be reduced to recognize this decline. If there
is a change in the reasons for which the value
adjustments were made, these adjustments could
be reversed, if appropriate.

3.4. Debtors
Amounts owed by affiliated undertakings are
stated at amortized cost. Other receivables are
valued at nominal value.

3. Summary of significant accounting policies

3.1. Basis of presentation
These annual accounts have been prepared in
accordance with Luxembourg legal and regulatory
requirements under the historical cost convention.

3.5. Cash at bank and cash in hand
Cash at bank and cash in hand mainly comprise
cash at bank and liquidity funds. Assets recorded
in cash at bank and cash in hand are carried
at fair market value or at historical cost which
approximates fair market value.

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3.6. Non-subordinated debts
Non-subordinated debts are stated at amortized
cost. Other creditors are valued at nominal value.

4. Financial fixed assets

Shares in affiliated undertakings
Movements of investments in affiliated undertakings
during the financial year are as follows:

All amounts in United States Dollars,unless otherwise stated

Company

Country

% of
ownership

Book value at
12.31.2011

Decreases

Book value at
12.31.2012

Equity at
12.31.2012

Profit for the
financial year
ended on
12.31.2012

Tenaris investments S.ar.l. (*)

Luxembourg

100.0%

24,954,298,976

(607,422,583)

24,346,876,393

25,302,266,525

619,510,037

Shares in affiliated undertakings

24,954,298,976

(607,422,583)

24,346,876,393

25,302,266,525

619,510,037

(*) Tenaris holds directly or indirectly through its wholly-owned subsidiary Tenaris investments S.à r.l
the 100% shares of: Confab industrial S.A., Hydril Company, inversiones Berna S.A., inversiones
Lucerna S.A., Maverick Tube Corporation, Siderca S.A.i.C., Talta - Trading e Marketing, Sociedade
Unipessoal Lda.,Tenaris investments Limited, Tenaris investments Switzerland Ag, Tenaris
Solutions Ag, Texas Pipe Threaders Co. and Tubos de Acero de México S.A.. Additionally, Tenaris
holds through its wholly-owned subsidiary Tenaris investments S.à r.l the 11.5% of Ternium S.A.

On December 7, 2010, Tenaris entered into a
master credit agreement with Tenaris Investments
pursuant to which, upon request from Tenaris,
Tenaris Investments may, but shall not be required
to, from time to time make loans to Tenaris. Any
loan under the master credit agreement may be
repaid or prepaid from time to time through a
reduction of the capital of Tenaris Investments by
an amount equivalent to the amount of the loan
then outstanding (including accrued interest). As
a result of reductions in the capital of Tenaris
Investments made during the financial year
ended December 31, 2012, in connection with
cancellations of loans to Tenaris, the value of the
participation of Tenaris in Tenaris Investments
decreased by USD 449.8 million.

The Company has reviewed the carrying value
of its investment, and as a consequence an
impairment test over the underlying investment
in Usiminas (one of the investments held
indirectly through Tenaris Investments S.à r.l.)
was performed as of December 31, 2012, and
subsequently the value of such investment
was written down by USD157.7 million. The
impairment was mainly due to expectations
of a weaker industrial environment in Brazil,
where industrial production and consequently
steel demand have been suffering downward
adjustments. In addition, a higher degree of
uncertainty regarding future prices of iron ore led
to a reduction in the forecast of long term iron
ore prices that affected cash flow expectations.

5. Capital and reserves

expressed in United States Dollars

item

Subscribed
capital

Share
premium

Legal
reserve

Retained
earnings

interim
dividend

Capital and
reserves

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Balance at the beginning of the financial year

1,180,536,830

609,732,757

118,053,683

23,024,194,734

Loss for the financial year

Dividend paid (1)

interim dividend (2)

–

(163,720,365)

(295,134,207)

–

24,932,518,004

(163,720,365)

(295,134,207)

–

(153,469,789)

Balance at the end of the financial year

1,180,536,830

609,732,757

118,053,683

22,565,340,162

(153,469,789)

24,320,193,643

(1) As approved by the ordinary shareholders’ meeting held on May 2, 2012.

(2) As approved by the board of directors’ meeting held on November 7, 2012.

The authorized capital of the Company amounts
to USD 2.5 billion. The total authorized share
capital of the Company is represented by
2,500,000,000 shares with a par value of USD 1 per
share. The total capital issued and fully paid-up at
December 31, 2012 was 1,180,536,830 shares with
a par value of USD 1 per share.

The board of directors is authorized until May
12, 2017, to increase the issued share capital,
through issues of shares within the limits of the
authorized capital.

6. Legal reserve

In accordance with Luxembourg law, the Company
is required to set aside a minimum of 5% of its
annual net profit for each financial year to a legal
reserve. This requirement ceases to be necessary
once the balance on the legal reserve has reached
10% of the issued share capital. The Company’s
reserve has already reached this 10%. If the legal
reserve later falls below the 10% threshold, at least
5% of net profits again must be allocated toward

the reserve. The legal reserve is not available for
distribution to the shareholders.

7. Distributable amounts

Dividends may be paid by Tenaris upon the
ordinary shareholders’ meeting approval to the
extent distributable retained earnings exist.

At December 31, 2012, profit brought forward after
deduction of the loss and the interim dividend for
the financial year of Tenaris under Luxembourg law
totaled approximately USD 22.6 billion.

The share premium amounting to USD 0.6 billion
can also be reimbursed.

8. Interim dividend paid

In November 2012, the Company paid an interim
dividend of USD 153.5 million based on the
board of director’s decision of November 7,
2012 and in compliance with the conditions set

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out in the “Amended law of August 10, 1915 on
commercial companies” regarding the payment
of interim dividends.

9. Taxes

For the financial year ended December 31, 2012 the
Company did not realize any profits subject to tax in
Luxembourg and will therefore be only subject to the
minimum income tax applicable to a Soparfi (société
de participations financières). The Company is also
liable to the minimum Net Wealth Tax.

10. Non subordinated debt

expressed in United States Dollars

After less
than
one year

After more than
one year and
within five years

Total at
December 31, 2012

Total at
December 31, 2011

Amounts owed to affiliated undertakings

12,292,822

16,008,192

28,301,014

22,385,911

Board of director's accrued fees

other creditors

Total

960,000

751,537

–

960,000

751,537

960,000

900,594

14,004,359

16,008,192

30,012,551

24,246,505

11. Balances with affiliated undertakings

expressed in United States Dollars

ASSETS

DeBToRS

becoming due and payable after less than one year

Tenaris Solutions A.g.

others

LIABILITIES

NoN-SUBoRDiNATeD DeBTS

becoming due and payable after less than one year

Siderca S.A.i.C.

Dalmine S.p.A.

others

becoming due and payable after more than one year

Siderca S.A.i.C.

Siat S.A.

Tenaris Solutions A.g.

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2012

2011

2,797,315

–

2,401,421

10,236

2,797,315

2,411,657

7,001,107

4,025,240

1,266,475

7,726,436

1,809,597

870,168

12,292,822

10,406,201

10,542,917

1,570,495

3,894,780

8,980,610

1,353,218

1,645,882

16,008,192

11,979,710

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12. Other operating charges

expressed in United States Dollars

Services and fees

Board of director’s accrued fees

others

2012

2011

32,436,419

33,556,724

960,000

1,016,956

960,000

271,556

34,413,375

34,788,280

13. Income from financial fixed assets derived

from affiliated undertakings

In November 2012, Tenaris S.A. received a dividend
from Tenaris Investments S.à r.l amounting to USD
29.0 million.

14. Parent Company
As of December 31, 2012:

•

San Faustin owned all of its shares in the Company
through its wholly-owned subsidiary Techint Holdings
S.ar.l., a Luxembourg private limited liability company
(Société à Responsabilité Limitée) (“Techint”).

Rocca & Partners Stichting Administratiekantoor
Aandelen San Faustin, a Dutch private foundation
(Stichting) (“RP STAK”) held shares in San Faustin
sufficient in number to control San Faustin.

•

No person or group of persons controls RP STAK.

•

Based on the information most recently available
to the Company, Tenaris’ directors and senior
management as a group owned 0.12% of the
Company’s outstanding shares.

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15. Subsequent event

Annual Dividend Proposal
On February 21, 2013 the Company’s board
of directors proposed, for the approval of the
annual general shareholders' meeting to be
held on May 2, 2013, the payment of an annual
dividend of USD 0.43 per share (USD 0.86 per
ADS) or approximately USD 507.6 million, which
includes the interim dividend of USD 0.13 per
share (USD 0.26 per ADS), or approximately USD
153.5 million, paid on November 22, 2012. If the
annual dividend is approved by the shareholders,
a dividend of USD 0.30 per share (USD 0.60 per
ADS), or approximately USD 354.2 million will be
paid on May 23, 2013, with an ex-dividend date
of May 20, 2013. These annual accounts do not
reflect this dividend payable.

Ricardo Soler
Chief Financial Officer

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Investor information

Investor Relations Director
Giovanni Sardagna

General inquiries
investors@tenaris.com

ADS depositary bank
Deutsche Bank
CUSIP No. 88031M019

Internet
www.tenaris.com

Luxembourg Office
29 avenue de la Porte-Neuve
3rd Floor
L-2227 Luxembourg
(352) 26 47 89 78 tel
(352) 26 47 89 79 fax

Phones
USA 1 888 300 5432
Argentina (54) 11 4018 2928
Italy (39) 02 4384 7654
Mexico (52) 55 5282 9929

Stock information
New York Stock Exchange (TS)
Mercato Telematico Azionario (TEN)
Mercado de Valores de Buenos Aires (TS)
Bolsa Mexicana de Valores, S.A. de C.V. (TS)