Tenaris SA Annual Report 2015

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FY2015 Annual Report · Tenaris SA

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Annual Report
2015

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”,

a Luxembourg public limited liability company (société anonyme) and the

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

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-

by American Depositary Receipts, and represent two Shares each.

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

“OCTG” refers to oil country tubular goods.

current goals and expectations relating to Tenaris’s future financial

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

condition and performance. Sections of this annual report that by

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

their nature contain forward-looking statements include, but are not

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

limited to, “Business Overview”, “Principal Risks and Uncertainties”,

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

and “Operating and Financial Review and Prospects”. In addition

•

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

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

Presentation of certain financial and other information

materially from those described in the forward-looking statements.

These factors include, but are not limited to:

ACCOUNTING PRINCIPLES

We prepare our consolidated financial statements in conformity

•

our ability to implement our business strategy or to grow through

with International Financial Reporting Standards, as issued by the

acquisitions, joint ventures and other investments;

International Accounting Standards Board, or IFRS, and adopted by the

European Union, or E.U.

•

the competitive environment in our business and our industry;

our ability to price our products and services in accordance with our

We publish consolidated financial statements expressed in U.S.

strategy;

dollars. Our consolidated financial statements included in this annual

•

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

report are those as of December 31, 2015 and 2014, and for the

raw materials and energy;

years ended December 31, 2015, 2014 and 2013. Information as of

•

our ability to adjust fixed and semi-fixed costs to fluctuations in

December 31, 2014, included in this annual report is derived from our

product demand;

audited restated consolidated financial statements for the year ended

•

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

December 31, 2014.

worldwide; and

•

general macroeconomic and political conditions in the countries in

ROUNDING

which we operate or distribute pipes.

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

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

are 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.

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

155.

Tenaris S.A. Annual Accounts (Luxembourg GAAP)

167.

Investor information

Annual Report4.

TenarisLeading indicators

TUBES SALES VOLUMES (thousands of tons)

Seamless

Welded

Total

TUBES PRODUCTION VOLUMES (thousands of tons)

Seamless

Welded

Total

FINANCIAL INDICATORS (millions of $)

Net sales

Operating income

EBITDA (1)

Net income (loss)

Cash flow from operations

Capital expenditures

BALANCE SHEET (millions of $)

Total assets

Total borrowings

Net financial debt / (cash) (2)

Total liabilities

Shareholders’ equity including non-controlling interests

PER SHARE / ADS DATA ($ per share / per ADS) (3)

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

(Loss) Earnings per share

(Loss) Earnings per ADS

Dividends per share (5)

Dividends per ADS (5)

ADS Stock price at year-end

NUMBER OF EMPLOYEES (4)

2015

2014

2013

2,028

605

2,633

1,780

633

2,413

7,101

195

1,255

(74)

2,215

1,132

14,887

972

(1,849)

3,021

11,866

2,790

885

3,675

2,940

908

3,848

2,612

1,049

3,661

2,611

988

3,599

10,338

10,597

1,899

2,720

1,181

2,044

1,089

16,511

999

(1,257)

3,704

12,806

2,185

2,795

1,574

2,377

753

15,931

931

(911)

3,461

12,470

1,180,537

(0.07)

(0.14)

0.45

0.90

23.80

21,741

0.98

1.96

0.45

0.90

30.21

27,816

1.31

2.63

0.43

0.86

43.69

26,825

1. Defined as operating income plus depreciation, amortization and impairment charges/(reversals). In
2015, the EBITDA figure excludes an impairment charge of $400 million on our North American
welded pipe operations and in 2014 excludes an impairment charge of $206 million on our welded
pipe operations in Colombia and Canada. EBITDA in 2015 includes severance charges of $177
million. If these charges were not included 2015 EBITDA would have been $1,432 million.

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

investments held to maturiy.

3. Each ADS represents two shares.

4. As of December 31.

5. Proposed or paid in respect of the year.

Annual ReportLetter from the Chairman

Dear Shareholders,

The collapse in the price of oil and the decline in oil and gas drilling activity worldwide are resulting in
profound changes in the markets where we operate. This is the most severe downturn in our industry I have
experienced and, this month, the number of active rigs drilling for oil and gas reached the lowest level recorded
since Baker Hughes began publishing this statistic over 60 years ago.

Our operating and financial results are clearly being affected. In a market where demand for OCTG products fell
from 17.7 million tons in 2014 to 11.2 million tons in 2015, reflecting sharply lower drilling activity and inventory
adjustments, particularly in the USA and Canada, our sales for the year fell 31% to $7.1 billion. EBITDA declined
to $1.3 billion, or 18% of sales, and we recorded a net loss for shareholders of $80 million, or $0.07 per share, after
impairment and other charges.

These results reflect ongoing efforts to adjust Tenaris to the changing market environment. We have focused strongly
on reducing costs using the flexibility of our industrial structure, maintaining high levels of efficiency in our mills
even with low volumes, improving the efficiency of our purchasing processes and reducing our fixed cost structure.

We have focused on cash flow management, generating $2.2 billion from operations during the year, including
a $1.4 billion reduction in working capital, and maintained investments in strategic projects including the Bay
City mill and service development for our customers.

Our financial position remains solid with net cash of $1.8 billion at the end of the year. In this context, we are
proposing to maintain our dividend at $0.45 per share for the 2015 fiscal year.

Around the world, we are strengthening our market position in the many distinct geographical and product
segments where we operate. Each of our business units is developing strategies to take advantage of the
eventual recovery, leveraging on our competitive advantages of financial strength, product technology, service
development and on-the-ground customer relationships. In a low price environment, customers are looking for
ways to transform the costs in their supply chain on a sustainable basis and we stand out as a supplier that can
guarantee continuity, commitment, quality and innovation in every operational situation.

In the United States, we rolled out our Rig Direct™ service program in the Eagle Ford and Permian regions,
investing in new service centers in Freeport and Midland. This way of operating the tubular supply chain, where
we synchronize deliveries from our mills and manage the supply of pipes and accessories directly to the rig,
contributes to a more sustainable, cost-efficient operation, reducing working capital and inventory obsolescence
and simplifying operating procedures. By the end of the year we were supplying 50 rigs and the program will be
strengthened when our Bay City mill starts operations later this year.

In the North Sea, we were awarded a multi-year contract to supply Maersk’s Culzean development, which is
expected to supply 5% of the UK’s natural gas requirements from 2020. The supply package of sour service
casing includes our newly developed Blue® Max and Blue® Heavy Wall connections fully tested under the API
5C5 CAL IV protocol, our Dopeless® technology and a full scope of pipe management services supported by
local threading and repair capabilities.

We are in the final stages of negotiation of a global long-term agreement with Chevron. As part of the process,
we recently concluded agreements to serve their operations in Thailand and Permian. In Thailand, we are
preparing two local service centers to supply pipes and accessories ready for running offshore on a just-in-time
basis using an innovative pipe by pipe tracking solution to optimize material and quality management. In the
Permian, Chevron’s operation is being served under our Rig Direct™ program.

TenarisThrough the year we have consolidated our leading position in the offshore line pipe segment supplying major
projects in the Gulf of Mexico and sub-Saharan Africa and our coating facility in Nigeria made an important
contribution to our results.

In the difficult environment for the energy sector, other segments of our business are receiving more visibility. In
the automotive sector, for example, we have built a leading position in tubular components for airbags, where
we have a 40% global market share. In 2015 we delivered a record 70 million pieces. This year, we have been
awarded a long-term contract for the supply of tubes for the ring gears in the new 10-speed gearbox transmission
developed for Ford and GM. This is a sector which requires constant effort and focus on the long-term to develop
products, service, quality and reliability for demanding customers.

We are taking care to maintain the long-term values on which the company has been founded. Safety is a
key value for an industrial company like ours, essential for our competitive differentiation and the long-term
sustainability of our operations. Our main safety indicators improved as we implemented a zero tolerance
program alongside our safe hour and safe start programs. Our average injury frequency rate declined 15% in
2015 compared to 2014 and has declined 46% over the past four years.

I would also like to mention the recognition that TenarisUniversity has achieved over the past year. The MOOCs
(Massive Online Open Courses) on OCTG products and services that it produced in 2015 for the edX platform
founded by Harvard and MIT achieved outstanding performance ratings and completion rates around the
world. And Tenaris was included within the top ten companies for its employee training and development
practices in 2016 by Training Magazine, an established US publication.

As we enter 2016, oil and gas prices have declined further and oil and gas companies are making further substantial
cutbacks on their investment programs. Demand for OCTG continues to decline, particularly in the United States
and Canada where drilling activity is falling rapidly and inventory levels remain high in relation to consumption.

In this difficult context, we are organizing the company and defining our strategies to be prepared for an
extended period of low oil prices. At the same time, we are concentrating on preparing for the inevitable
recovery in each of our business units. Thus we are maintaining our strategic investments in the Bay City mill,
product development, service development and human resources.

Our customers need to develop transformational changes to their supply structures with partners having
the global reach and financial strength to support them in their operations worldwide. We think we are well
positioned to help them. Ours is a cyclical industry, and however long this downturn lasts, we are confident that
we will emerge from it with a stronger market position.

I am aware of the profound impact this downturn is having on our employees and our communities: we are
making many difficult decisions to secure the future growth and competitiveness of the company. I especially
want to thank them for the spirit, commitment and support that I see in all areas. I would also like to express
my thanks to our customers, suppliers and shareholders for their continuing support and confidence in Tenaris.

March 30, 2016

/s/ Paolo Rocca

Paolo Rocca

Annual ReportCompany 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.

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A

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 29 “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.

We 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 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.

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. As of to date, our investments include
controlling or strategic interests in: Tubos de
Acero de México S.A., or Tamsa, the sole Mexican
producer of seamless steel pipe products; Dalmine
S.p.A., or Dalmine, a leading Italian producer of
seamless steel pipe products; Confab Industrial
S.A., or Confab, the leading Brazilian producer
of welded steel pipe products; NKKTubes, a
leading Japanese producer of seamless steel pipe
products; Algoma Tubes Inc., or AlgomaTubes,
the sole Canadian producer of seamless steel
pipe products; S.C. Silcotub S.A., or Silcotub, a
leading Romanian producer of seamless steel pipe
products; Maverick Tube Corporation, or Maverick,
a leading North American producer of welded
steel pipe products with operations in the United
States, Canada and Colombia; Hydril Company,
or Hydril, a leading North American manufacturer
of premium connection products for oil and gas
drilling production; Seamless Pipe Indonesia Jaya,
or SPIJ, an Indonesian oil country tubular goods,
or OCTG, processing business with heat treatment
and premium connection threading facilities; Pipe
Coaters Nigeria Ltd, the leading company in the
Nigerian coating industry; Usinas Siderúrgicas
de Minas Gerais S.A., or Usiminas, a Brazilian
producer of high quality flat steel products used in
the energy, automotive and other industries; and a
sucker rod business, in Campina, Romania.

In addition, we have established a global network
of pipe finishing, distribution and service facilities

10.

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 select
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”). In addition, we continue to build a new
greenfield seamless mill in Bay City, Texas. The new

facility will include a state-of-the-art rolling mill as
well as finishing and heat treatment lines. We plan
to bring the 600,000 tons per year capacity mill
and logistics center into operation in 2017, within
a budget of approximately $1.5 billion to $1.8
billion. As of December 31, 2015, approximately
$0.8 billion had already been invested and an
additional $0.3 billion had been committed.

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. For example, in
February 2014, we entered into an agreement with
our affiliates Ternium S.A., or Ternium and Tecpetrol
International S.A. (a wholly-owned subsidiary of San
Faustin, the controlling shareholder of both Tenaris
and Ternium) to build a natural gas-fired combined
cycle electric power plant in Mexico¸ expected to be
completed in 2016, which will supply Tenaris’s and
Ternium’s respective Mexican industrial facilities.
For information on the new power plant, see note
12 c) “Investments in non-consolidated companies
– Techgen S.A. de C.V.” to our audited consolidated
financial statements included in this annual report.

TenarisEnhancing 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. For example, in Mexico, since
1994, we supply Pemex, the state-owned oil
company, one of the world’s largest crude oil and
condensates producers under just-in-time, or JIT,
agreements, which allow us to provide it with
comprehensive pipe management services on a
continuous basis.

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 more than 60 years of operating experience; and
our strong financial condition.

•

11.

Business Segments
Tenaris has one major business segment, Tubes,
which is also the reportable operating segment.

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.

Annual Report12.

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

Our Products
Our principal finished products are seamless
and welded steel casing and tubing, line pipe
and various other mechanical and structural
steel pipes for different uses. Casing and tubing
products are also commonly referred to as OCTG
products. We manufacture our steel pipe products
in a wide range of specifications, which vary
in diameter, length, thickness, finishing, steel
grades, coating, 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.

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.

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 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 the premium connections business
of Hydril , 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.

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

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

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

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.

Tenaris13.

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 $89 million for R&D in 2015, compared
to $107 million in 2014 and $106 million in 2013.

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 Campana
in Argentina, at Veracruz in Mexico, at Dalmine in
Italy, at the product testing facilities of NKKTubes
in Japan and at the new R&D center at Ilha do
Fundao, Rio de Janeiro, Brazil (which commenced
operations 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;
sucker rods; and
coatings.

Annual Report
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

10000

9972

10834

10597

10338

8000

6000

7101

D
S
U

1.6

1.4

1.2

1.0

0.8

0.6

1.44

1.31

0.98

1.13

0.95

4000

Tenaris in numbers

2000

0.2

0.4

-0.2

-0.07

2011 2012 2013 2014

2015

2011 2012 2013 2014

2015

Trend information

Leading indicators

RIG COUNT INTERNATIONAL
EARNINGS PER SHARE

NET SALES BY
NET SALES BY
BUSINESS SEGMENT
BUSINESS SEGMENT
MISC
GAS

OIL

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

OIL

TUBES
91%

OTHER
9%

MIDDLE EAST
& AFRICA
15%

FAR EAST

& OCEANIA

PERSONNEL EMPLOYED

PER COUNTRY

ROMANIA

COLOMBIA

INDONESIA

CANADA

JAPAN

OTHER

COUNTRIES

EUROPE
10%

SOUTH
AMERICA
30%

NORTH

AMERICA

40%

UNITED

STATES

10%

ITALY

ARGENTINA

25%

BRAZIL

MEXICO

23%

LOST TIME ACCIDENTS INDEX
EARNINGS PER SHARE
EARNINGS PER SHARE
PERSONNEL EMPLOYED
PERSONNEL EMPLOYED
NET SALES BY
REGIONAL AREA
PER COUNTRY
PER COUNTRY

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

EBITDA MARGIN

NET SALES BY

REGIONAL AREA

S
D
G
S
I
1.6
U
R
1200
1.4

1000
1.2

1.0
800
0.8
600
0.6

400
0.4

0.2
200
0
0
-0.2

TUBES
91%

242
1.31

1004

48
1.44
226

960

248

1050

0.98

229

894

228
1.13

897

0.95

2011 2012 2013 2014
2011 2012 2013 2014

-0.07
2015
2015

OTHER
9%

TUBES
OTHER
91%
9%

S
G
R

MIDDLE EAST
MIDDLE EAST
& AFRICA
& AFRICA
N
N
15%
15%
O
O
I
I
L
L
L
L
I
I
M
M

D
S
U

FAR EAST
& OCEANIA
OTHER
4%
9%

FAR EAST
MIDDLE EAST
N
S
& OCEANIA
& AFRICA
R
S
O
U
T
I
N
L
4%
15%
O
L
E
H
I
M
D
N
C
R
A
C
E
M
A
P

COLOMBIA
ROMANIA
ROMANIA
3%
7%
7%
INDONESIA
INDONESIA
2%
2%
D
S
1.6
1.6
CANADA
CANADA
U
3%
3%
1.4
1.4

1.44

D
S
U

1.44
1.31

COLOMBIA
3%

JAPAN
ROMANIA
JAPAN
FAR EAST
7%
2%
2%
& OCEANIA
OTHER
OTHER
4%
COUNTRIES
COUNTRIES
5%
5%

TUBES
91%
INDONESIA
2%
%
CANADA
3%
25

1.31

COLOMBIA
3%
TUBES
91%

12000

1027
10000

658
9972
10000

10834
9972
503

10834
10597
494

10597
10338

10338

8000

1621

1606

1745

7101

6000
1263

6000

4000

2000

334

835

3.5

2.5

1.5

EUROPE
0
10%
2011

NORTH
NORTH
SOUTH
EUROPE
SOUTH
0
AMERICA
AMERICA
AMERICA
AMERICA
10%
2012
2013
2014 2015
2011 2012 2013 2014
2015
2011 2012 2013 2014
2015
40%
40%
30%
30%

1.13

0.95
2.2

1.2
3.2
1.0

0.8

1.2

1.13
3.0
1.0

0.8

0.95

0.6

0.4

2.7

0.98

2.5

0.5
EUROPE
0
10%

0.2
0.2
UNITED
UNITED
0
0
STATES
STATES
10%
10%
MEXICO
BRAZIL
SOUTH
-0.2
23%
9%
AMERICA
ITALY
2011 2012 2013 2014
2011 2012 2013 2014
2015
30%
9%

MEXICO
BRAZIL
NORTH
-0.07
23%
9%
AMERICA
2015
2011 2012 2013 2014
40%

-0.2
ITALY
9%

ARGENTINA
ARGENTINA
25%
25%

UNITED
STATES
10%
-5
ITALY
9%

-0.07

2015

BRAZIL
9%

MEXICO
23%

2011 2012 2013 2014

NET SALES

EARNINGS PER SHARE

14.

10000

9972

10834

10597

10338

1.6

D
S
U

1.6

1.4

1.2
9972
1.0

1.4
10834
1.2
1.13

1.0

1.44

10597
1.13

1.44
1.31
10338

1.31

0.98

7101

0.8

0.95

7101

6000

0.6

0.4

0.2

-0.2

-0.2
2011 2012 2013 2014

2015
2011 2012 2013 2014

2011 2012 2013 2014
2015

2015

-0.07

NET SALES

12000

8000

6000

4000

2000

2011 2012 2013 2014

2015

RIG COUNT INTERNATIONAL

600

400

200

2011 2012 2013 2014

2015

Source: Baker Hughes

12000

10000

8000

4000

2000

600

400

200

Source: Baker Hughes

RIG COUNT INTERNATIONAL

RIG COUNT USA AND CANADA

LOST TIME ACCIDENTS INDEX

RIG COUNT INTERNATIONAL
RIG COUNT INTERNATIONAL
LOST TIME ACCIDENTS INDEX
RETURN ON EQUITY
RETURN ON EQUITY

RETURN ON EQUITY

RIG COUNT USA AND CANADA
EBITDA MARGIN

EBITDA MARGIN

LOST TIME ACCIDENTS INDEX

OIL

GAS

MISC

OIL

OIL
GAS

GAS

MISC
GAS

OIL

GAS

OIL

GAS

MISC

OIL

GAS

1200

228

1000

800

897

226

228

960

897

248

242

226

1050

1004

960

248

229

1050

1200

1000

S
G
R

228

229

894

800

897

248

242

1027
658
1004

658
1050
503

226
1027

960

1621

1621
1606

1263

S
G
R

229
494
503

894
1745
1606

494

1745

334

835

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

3.5
1027

2.5

2
1263
1.5

3.5
658
3.2
3

2.5
1621
2

1.5

0.5

3.2
503
3.0

494
3.0

1606

1745
2.2

2.7
2.5

2.5

2.7

2.2

334

835

2011 2012 2013 2014
2013
2012

2011
2012

2011

2015
2014 2015
2013

2014 2015

0
2011

0
2011 2012 2013 2014
2011 2012 2013 2014
2015
2014 2015
2012
2013

2015

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

3.5

2.5

1.5

0.5

50
48
242
226

1004
960
2.7

38
50
248
242

1050
1004

2.5

248
44

229
1050

229

894

48
41
226
228

960
897

2.2

S
G
R

1200
25

1000
20
3.2

800
15

1200
41
25
228
1000
20
3.0
897
800
15

600
10

400
5

200
0

0
-5

0
-5
2011 2012 2013 2014
2011 2012 2013 2014
2015

2011 2012 2013 2014
2015
2011 2012 2013 2014
2015

2011 2012 2013 2014

2015
2015

S
G
R

-5

30
1027
25

1027
658

658
503

494
503

494

1621

1621
1606

1745
1606

1745

15
1263

1263

334

835

0
2014 2015
2011
2012
2013
2014 2015
2011
2012
2013
2011 2012 2013 2014
2015
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015

Source: Baker Hughes

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

3.2
3.0

3.0

2.7

2.5

2.2

3.5

3.2
3

2.5

1.5

0.5

0
2011 2012 2013 2014
2011 2012 2013 2014 2015

2011 2012 2013 2014

OTHER

COUNTRIES

ARGENTINA

25%

2015

JAPAN

OTHER

MIDDLE EAST

& AFRICA

15%

FAR EAST

& OCEANIA

PERSONNEL EMPLOYED

PER COUNTRY

ROMANIA

COLOMBIA

JAPAN

INDONESIA

CANADA

OTHER

COUNTRIES

EUROPE

10%

SOUTH

NORTH

AMERICA

2011 2012 2013 2014 2015

30%

40%

ITALY

UNITED

STATES

10%

BRAZIL

MEXICO

23%

ARGENTINA

25%

RETURN ON EQUITY

EBITDA MARGIN

-5

2015

2011 2012 2013 2014

2015

2011 2012 2013 2014 2015

Tenaris

NET SALES

EARNINGS PER SHARE

NET SALES

NET SALES BY
NET SALES BY
EARNINGS PER SHARE
BUSINESS SEGMENT
BUSINESS SEGMENT

NET SALES BY
REGIONAL AREA

NET SALES BY
NET SALES BY
REGIONAL AREA
BUSINESS SEGMENT

TUBES
91%

OTHER
9%

MIDDLE EAST
MIDDLE EAST
& AFRICA
& AFRICA
TUBES
15%
15%
91%

FAR EAST
FAR EAST
& OCEANIA
& OCEANIA
OTHER
4%
4%
9%

D
S
U

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

-0.2

1.44

1.31

0.98

1.13

0.95

-0.07

EUROPE
10%

SOUTH
SOUTH
AMERICA
AMERICA
30%
30%

NORTH
NORTH
AMERICA
AMERICA
40%
40%

2011 2012 2013 2014

2015

ROMANIA
7%

PERSONNEL EMPLOYED
PERSONNEL EMPLOYED
NET SALES BY
PER COUNTRY
PER COUNTRY
REGIONAL AREA
ROMANIA
COLOMBIA
COLOMBIA
3%
3%
7%
MIDDLE EAST
INDONESIA
INDONESIA
& AFRICA
2%
2%
15%
CANADA
CANADA
3%
3%

JAPAN
JAPAN
2%
2%
FAR EAST
& OCEANIA
OTHER
OTHER
4%
COUNTRIES
COUNTRIES
5%
5%

UNITED
STATES
10%

UNITED
STATES
10%
EUROPE
ITALY
10%
9%

ITALY
9%

BRAZIL
9%

ARGENTINA
25%

MEXICO
23%

MEXICO
SOUTH
23%
AMERICA
30%

NORTH
AMERICA
40%

15.
PERSONNEL EMPLOYED
PER COUNTRY

ROMANIA
7%

COLOMBIA
3%

INDONESIA
2%
CANADA
3%

JAPAN
2%
OTHER
COUNTRIES
5%

UNITED
STATES
10%

ITALY
9%

ARGENTINA
25%

MEXICO
23%

BRAZIL
9%

NET SALES

EARNINGS PER SHARE

RIG COUNT INTERNATIONAL

NET SALES BY

RIG COUNT USA AND CANADA

RIG COUNT USA AND CANADA
RIG COUNT INTERNATIONAL

NET SALES BY

LOST TIME ACCIDENTS INDEX
RIG COUNT USA AND CANADA

LOST TIME ACCIDENTS INDEX
PERSONNEL EMPLOYED
PER COUNTRY

RETURN ON EQUITY

RETURN ON EQUITY
LOST TIME ACCIDENTS INDEX

EBITDA MARGIN

EBITDA MARGIN
RETURN ON EQUITY

EBITDA MARGIN

2015
2015

2011 2012 2013 2014

2011 2012 2013 2014
2015
2011 2012 2013 2014

10000

9972

10834

10597

10338

1.6

1.44

1.31

10834

10597

1.4

12000

1.2

1.13

10000

1.0

1.13

9972

10338
0.98

0.98

7101

0.8

8000

0.8

0.95

7101

-0.07

0.6

6000

0.4

4000

0.2

2000

-0.2

2011 2012 2013 2014

2015

REGIONAL AREA

OIL

MIDDLE EAST

GAS

OTHER

& AFRICA

15%

BUSINESS SEGMENT

OIL

GAS

MISC

TUBES

91%

1200

228

1000

248

242

226

248

229

1050

1004

960

800

897

894

12000

8000

6000

4000

2000

600

400

200

3.5

2.5

1.5

0.5

10000

9972

10834

10597

10338

7101

1.44

1.31

0.98

1.13

0.95

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

-0.2

12000

8000

6000

4000

2000

1200

1000

800

600

400

200

MISC
FAR EAST
& OCEANIA
4%

248

242

494

503

1004

494
1050

229

800

897

1745

894

1621

1606

334

835

1200

1027

228

658

1000

226

658

503

960

600

1263

400

200

2011 2012 2013 2014

2015

2011 2012 2013 2014

2015

-0.07

2011 2012 2013 2014

2015

EUROPE

10%

SOUTH

AMERICA

2011

2012

2013

30%

2013

2014 2015
2011 2012 2013 2014

NORTH
AMERICA
2014 2015
40%
2015

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

248

242

1050

1004

229

894

1027

658

494

503

1621

1606

1745

1263

334

835

3.2

3.0

2.7

2.5

2.2

-5

2011 2012 2013 2014

2015

2011

2012

2013

2014 2015

2011 2012 2013 2014

2015

2011 2012 2013 2014

2015

2011 2012 2013 2014 2015

Source: Baker Hughes

ROMANIA
7%
N
N
S
S
R
R
S
O
O
INDONESIA
U
U
T
I
I
N
L
L
O
O
L
L
2%
E
H
H
I
I
M
M
D
N
N
C
R
R
A
A
CANADA
C
S
E
E
M
M
G
A
P
P
3%
R
4

BRAZIL
9%
2011 2012 2013 2014
2011

0
2011 2012 2013 2014
2013

1
1
UNITED
0.5
0.5
STATES
10%
0
ITALY
9%

3.5

3.2
3

3.2
1027
3.0

658
3.0

2.2
1621

2.2
1606

1263

2.5

1.5

COLOMBIA
3%

GAS

MEXICO
23%

S
T
N
E
D
C
C
A

503
2.7

2012

OIL

JAPAN
2%
OTHER
COUNTRIES
5%

494
2.7

2.5
1745

2.5

334

835
ARGENTINA
25%

2015

2015
2014 2015

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
25
4

20
3.5

3
15
2.5
10
2

5
1.5

-5

3.2

3.0

2.7

2.5

2.2

1
0
0.5
-5
0
2011 2012 2013 2014

2011 2012 2013 2014
2011 2012 2013 2014

2015

2015
2015

%
%

30
25

25
20

20
15

15
10

10
5

5
0

0
-5
2011 2012 2013 2014 2015

2011 2012 2013 2014 2015
2011 2012 2013 2014
2015

2011 2012 2013 2014 2015

Annual Report

16.

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 and the corresponding capital spending
by oil and gas companies depends primarily on
current and expected future prices of oil and natural
gas and is sensitive to the industry’s view of future
economic growth and the resulting impact on
demand for oil and natural gas. The level of drilling
activity has been severely affected by a strong decline
in 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,
and may continue to affect, these prices. Oil and gas
prices are reaching levels which, in some areas, are
close to or even below operating costs; accordingly,
oil and gas companies may cut back further on
their investment plans and consequently, absent
a significant improvement in market conditions,
demand for our products may decline further.
Inventory levels of steel pipe in the oil and gas
industry can vary significantly and these fluctuations
can affect demand for our products. When oil and
gas prices fall, as has recently happened, oil and
gas companies draw from existing inventory and
are generally expected to hold or reduce purchases
of additional steel pipe products. Furthermore,
competition in the global market for steel pipe
products may cause us to lose market share and
hurt our sales and our profitability may be hurt if
increases in the cost of raw materials and energy
cannot be offset by higher selling prices. In addition,
there is an increased risk that unfairly-traded steel
pipe imports in markets in which Tenaris produces
and sells its products may affect Tenaris’s market
share, deteriorate the pricing environment and hurt
sales and profitability. 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 temporarily suspended certain of our
operations given the impact to our business of the
sharp decline of oil prices and high levels of unfairly
traded imports of products. Temporary suspensions
of operations may give rise to labor conflicts and
affect operations, profitability and may trigger
impairment assessments of assets. Performance
may also be 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. We have significant operations in various
countries, including Argentina, Brazil, Canada,
Colombia, Italy, Japan, Mexico, Nigeria, 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, economic 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

Tenaris17.

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.

Beginnig in 2009, Venezuela nationalized our
investments in, and assumed exclusive operation
control over the assets of, Tubos de Acero de
Venezuela S.A. or Tavsa, Matesi, Materiales
Siderúrgicos S.A., or Matesi, and Complejo
Siderurgico de Guayana, C.A., or Comsigua. 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. The Company 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, Tavsa
and Comsigua. On January 29, 2016, the ICSID
released its award for the expropriation of our
investment in Matesi and granted compensation
in the amount of $87 million for the breaches and
ordered Venezuela to pay an additional amount
of $86 million in pre-award interest, aggregating

to a total award of $173 million, payable in full
and net of any applicable Venezuelan tax, duty
or charge. However, given the current economic
and political situation of Venezuela, we can give
no assurance that the Venezuelan government
will honor the award for the expropriation of our
investments in Matesi nor agree to pay a fair and
adequate compensation for our interest in Tavsa
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 30 “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 continue to pursue growth-enhancing strategic
opportunities. Any of the components of our overall
business strategy could cost more than anticipated
or may not be successfully implemented or could be
delayed or abandoned. We must necessarily base any
assessment of potential acquisitions, joint ventures
and investments, 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 investments, 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.

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, 2015 we had
$1,334 million in goodwill corresponding mainly to

Annual Report18.

the acquisition of Hydril, in 2007 ($920 million) and
Maverick, in 2006 ($275 million). As of December
31, 2015, we recorded an impairment charge of
$400 million on the goodwill of our welded pipe
assets in the United States, reflecting the decline in
oil prices, and their impact on drilling activity and
the demand outlook for welded pipe products in the
United States. Additionally, as of December 31, 2015
we also recorded a $29 million impairment on the
carrying value of our investment in Usiminas. 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,
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, and the U.K Bribery Act 2010.

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 22, 23 and 25
of our audited consolidated financial statements
included in this annual report.

TenarisOperating 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 E.U.

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. We 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.

19.

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. Crude oil prices have fallen from over
$100 per barrel in June 2014 to their current levels
of around $40 per barrel, as rapid production
growth in the U.S. and Canada, slowing global
demand growth and OPEC’s decision not to cut
production levels have combined to create an excess
of supply in the market. Natural gas prices have
also fallen on increased supply and limited demand
growth. In this context, oil and gas operators are
cutting back further on their investment plans,
with a second successive year of substantial capital
expenditure reductions expected in North America
and the rest of the world.

In 2015, worldwide drilling activity declined 35%
compared to the level of 2014. In the United States
the rig count in 2015 declined by 48% and in
Canada by 49%. In the rest of the world, the rig
count declined 13% in 2015.

A growing proportion of exploration and production
spending by oil and gas companies has been directed

Annual Report20.

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.
However, in the current low oil price environment this
trend will be temporarily affected as some complex
projects have been cancelled or postponed.

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.

In addition, there is an increased risk of unfairly-
traded steel pipe imports in markets in which we
produce and sell our products. In August 2014,
the United States imposed anti-dumping duties on

OCTG imports from various countries, including
Korea. However, despite the trade case ruling,
imports from Korea continued at a very high
level for some months and in September 2015 the
petitioners filed for the initiation of the annual
review. Similarly, in Canada, the Canada Border
Services Agency introduced anti-dumping duties
on OCTG imports from Korea and other countries
in March 2015.

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 the 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.

The costs of steelmaking raw materials and of
steel coils and plates declined during 2015. As a
reference, prices for hot rolled coils, HRC Midwest
USA Mill, published by CRU, averaged $506 per
ton in 2015 and $724 per ton in 2014. However, our
costs were negatively affected by lower absorption
of fixed costs on lower sales.

Tenaris21.

Summary of results
In 2015, our net sales declined 31% compared to
2014, affected by adverse market conditions. Sales of
Tubes were down 45% in North America and 21%
in the rest of the world where they were supported
by our positioning in Argentina and a good level
of shipments to South American pipeline projects.
EBITDA, which included restructuring costs of $177
million, declined 54% year on year to $1.3 billion in
2015, with the margin affected by lower absorption
of fixed costs on lower sales. In our operating
income, we recorded an impairment charge of $400
million on the goodwill of our welded pipe assets in
the United States, reflecting the decline in oil prices,
and their impact on drilling activity and the demand
outlook for welded pipe products in the regions
served by these facilities. Our net result was further
affected by noncash deferred income tax charges of
$152 million resulting from currency depreciation in
Argentina and Mexico and a net loss of $40 million
on our share of the earnings of non-consolidated
companies. Net loss attributable to owners of the
parent during 2015 was $80 million.

Cash flow from operations amounted to $2.2 billion
for the year. After capital expenditure of $1.1
billion and dividend payments of $531 million, we
had a net cash position (cash and cash equivalents,
other current investments and fixed income
investments held to maturity less total borrowings)
of $1.8 billion at December 31, 2015, compared
with $1.3 billion at December 31, 2014.

Outlook
As we enter 2016, oil and gas prices have fallen
further and are now reaching levels which, in some
areas, are close to or even below operating costs. At
these levels, oil and gas companies are cutting back
further on their investment plans, with a second
successive year of substantial capital expenditure
reductions expected in North America and the rest
of the world. Drilling activity continues to decline
and the U.S. rig count has reached levels below
those seen in previous downturns.

Global demand for OCTG will decline further in
2016, particularly in the United States and Canada
where substantial activity reductions are expected
and inventories remain high in relation to the
level of consumption. In the rest of the world,
demand in the Middle East will benefit from the
end of last year’s inventory reductions but in many
other regions it will be affected by further declines
in activity and inventory reductions. Absent a
significant improvement in market conditions
during the year, we expect global OCTG demand
in 2016 to fall around 20% over the level of 2015.

Our sales in 2016 will be further affected by lower
selling prices reflecting the intense competitive
environment and lower shipments for South
American pipeline projects. We will continue to
adjust our operations in these unfavorable conditions,
reducing costs and strengthening our market position
in preparation for an eventual recovery.

Annual Report22.

Results of Operations

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

FOR THE YEAR ENDED DECEMBER 31

2015

2014

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

Finance income

Finance cost

Other financial results

Income before equity in earnings of non-consolidated companies and income tax

Equity in earnings (losses) of non-consolidated companies

Income before income tax

Income tax

(Loss) Income for the year (1)

(LOSS) INCOME ATTRIBUTABLE TO (1)

Owners of the parent

Non-controlling interests

(Loss) Income for the year (1)

Depreciation and amortization

Weighted average number of shares outstanding

Basic and diluted (loss) 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.

7,101

(4,885)

2,216

(1,624)

(396)

195

(23)

210

(40)

170

(245)

(74)

(80)

(74)

10,338

(6,287)

4,051

(1,964)

(188)

1,899

(44)

1,932

(165)

1,767

(586)

1,181

1,159

1,181

(659)

(616)

1,180,536,830

(0.07)

0.45

0.98

0.45

Tenaris

Millions 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

23.

2015

2014

5,743

5,672

3,472

7,396

5,160

3,955

14,887

16,511

1,755

223

750

293

3,021

11,713

153

11,866

2,603

714

357

3,704

12,654

152

12,806

14,887

16,511

1,181

1,180,536,830

Annual Report

24.

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

Finance income

Finance cost

Other financial results

Income before equity in earnings of non-consolidated companies and income tax

Equity in earnings (losses) of non-consolidated companies

Income before income tax

Income tax

(Loss) Income for the year

(LOSS) INCOME ATTRIBUTABLE TO

Owners of the parent

Non-controlling interests

2015

2014

100.0

(68.8)

31.2

(22.9)

(5.6)

2.8

0.5

(0.3)

0.0

3.0

(0.6)

2.4

(3.4)

(1.0)

(1.1)

0.1

100.0

(60.8)

39.2

(19.0)

(1.8)

18.4

0.4

(0.4)

0.4

18.7

(1.6)

17.1

(5.7)

11.4

11.2

0.2

TenarisFiscal Year Ended December 31, 2015,
Compared to Fiscal Year Ended December 31, 2014

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

25.

Millions of U.S. dollars

FOR THE YEAR ENDED DECEMBER 31

Tubes

Others

Total

2015

91%

100%

9,582

756

10,338

2014

93%

100%

Increase /
(Decrease)

(33%)

(13%)

(31%)

6,444

657

7,101

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

2015

2014

Seamless

Welded

Total

2,028

605

2,633

2,790

885

3,675

Increase /
(Decrease)

(27%)

(32%)

(28%)

Annual Report
26.

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

2015

2014

NET SALES

North America

South America

Europe

Middle East & Africa

Far East & Oceania

Total net sales

Operating income (1)

Operating income (% of sales)

2,538

1,858

695

1,082

272

6,444

138

2.1%

4,609

1,823

924

1,817

408

9,582

1,866

19.5%

(1) Tubes operating income includes severance charges of $164 million in 2015. Additionally, in 2015
includes a goodwill impairment charge of $400 million on our welded pipe operations in the United
States and in 2014 includes an impairment charge of $206 million on our welded pipe operations in
Colombia and Canada.

Increase /
(Decrease)

(45%)

(25%)

(40%)

(33%)

(93%)

Tenaris27.

Net sales of tubular products and services decreased
33% to $6,444 million in 2015, compared to $9,582
million in 2014, reflecting a 28% decline in volumes
and a 6% decrease in average selling prices. Sales
were negatively affected by the adjustment in oil
and gas drilling activity in response to the collapse
in oil and gas prices and inventory adjustments
taking place particularly in the Middle East and
Africa and in the United States. We estimate that
demand for OCTG products in 2015 declined 37%
when compared to 2014. In North America, sales
decreased 45%, mainly due to lower sales in the
U.S. onshore and Canada reflecting a decline in
average drilling activity and pricing pressures due
to inventory adjustments. In South America, sales
remained stable as higher sales of tubular products
for pipeline projects in Brazil and Argentina were
offset by lower shipments of OCTG products in the
region. In Europe, sales decreased mainly due to a
lower level of sales of OCTG and line pipe products
in continental Europe. In the Middle East and
Africa, sales decreased mainly due to lower sales

in the Middle East reflecting OCTG destocking
and lower sales to offshore projects in sub-Saharan
Africa. In the Far East and Oceania, sales decreased
due to lower activity in the region.

Operating income from tubular products and
services, decreased 93% to $138 million in
2015, from $1,866 million in 2014. Operating
income in 2015 includes an impairment charge
of $400 million on our welded pipe operations
in the United States, while in 2014 it includes
an impairment charge of $206 million on our
welded pipe operations in Colombia and Canada.
Additionally, in 2015 we had severance costs in
the Tubes segment, to adjust the workforce to
current market conditions, which amounted to
$164 million. Excluding these non-recurring events,
Tubes operating income declined 66%, as it was
negatively affected by a decline in sales of 33% and
a decline in operating margins of 10 percentage
points, mostly due to industrial inefficiencies
associated with low levels of capacity utilization.

Annual Report28.

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

2015

2014

Net sales

Operating income

Operating income (% of sales)

657

8.8%

756

4.4%

Increase /
(Decrease)

(13%)

74%

Net sales of other products and services decreased
13% to $657 million in 2015, compared to $756
million in 2014, mainly due to lower sales of energy
related products, e.g., sucker rods and coiled tubing,
following the decline in oil and gas drilling activity
in response to the collapse in oil and gas prices.

Operating income from other products and
services, increased 74% to $58 million in 2015,
from $33 million in 2014, mainly reflecting an
improved operating performance and margins at
our industrial equipment business in Brazil.

Selling, general and administrative expenses, or
SG&A, decreased by $ 340 million (17%) in 2015
from $1,964 million in 2014 to $1,624 million in
2015, mainly reflecting lower selling expenses due
to the decline in sales. However, SG&A expenses

increased as a percentage of net sales to 22.9% in
2015 compared to 19.0% in 2014, mainly due to
the effect of fixed and semi fixed expenses on lower
sales (e.g., depreciation and amortization and labor
costs). During 2015, SG&A labor costs include $73
million of severance charges related to workforce
adjustments to the difficult market conditions.

Other operating income and expenses resulted
in losses of $396 million in 2015, compared to
losses of $188 million in 2014, mainly due to asset
impairment charges amounting to $400 million in
2015 and $206 million in 2014. These impairment
charges mainly reflect the decline in oil prices, and
its impact on drilling activity and therefore on the
expected demand for OCTG products, particularly
on our welded pipe operations in the United States,
Colombia and Canada.

Tenaris29.

Financial results amounted to a gain of $14 million in
2015, compared to a gain of $33 million in 2014.

Equity in (losses) earnings of non-consolidated
companies generated a loss of $40 million in 2015,
compared to a loss of $165 million in 2014. During
2015 we recorded an impairment charge of $29
million on our direct investment in Usiminas, while
during 2014 we recorded an impairment charge
of $161 million related to our direct investment
in Usiminas. Apart from the impairment result,
these results were mainly derived from our equity
investment in Ternium (NYSE:TX).

The decline in net income mainly reflects a
challenging operating environment affected
by lower shipments and prices, inefficiencies
associated with low utilization of production
capacity, severance costs to adjust the workforce
to current market conditions, impairments and a
high deferred-tax charge affected by the effect of
currency translation on tax base.

Income attributable to non-controlling interest
was $6 million in 2015, compared to $23 million
in 2014. These results are mainly attributable to
NKKTubes, our Japanese subsidiary.

Income tax charges totalled $245 million in 2015,
including a deferred tax charge of $152 million on the
effect of currency translation on tax base.

Net loss for the year amounted to $74 million in
2015, compared to a gain of $1,181 million in 2014.

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

Decrease in cash and cash equivalents

Cash and cash equivalents at the beginning of year (excluding overdrafts)

Effect of exchange rate changes

Decrease in cash and cash equivalents

Cash and cash equivalents at the end of year (excluding overdrafts)

Bank overdrafts

Other current investments

Fixed income investments held to maturity

Borrowings

Net cash

2015

2014

2,215

(1,774)

(535)

(94)

416

(37)

(94)

286

2,141

393

(972)

1,849

2,044

(1,786)

(424)

(165)

598

(16)

(165)

416

1,838

–

(999)

1,257

Annual Report30.

Our financing strategy aims at maintaining
adequate financial resources and access to
additional liquidity. During 2015 we generated
$2.2 billion of operating cash flow, our capital
expenditures amounted to $1.1 billion and we
paid dividends amounting to $531 million. At the
end of the year we had a net cash position of $1.8
billion, compared to $1.3 billion at the beginning
of the year.

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.

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.

At December 31, 2015, liquid financial assets as
a whole (i.e., cash and cash equivalents, other
current investments and fixed income investments
held to maturity) were 19% of total assets
compared to 14% at the end of 2014.

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, 2015,
U.S. dollar denominated liquid assets represented
87%, of total liquid financial assets compared to
83% at the end of 2014.

TenarisOperating activities
Net cash provided by operations during 2015
was $2.2 billion, compared to $2.0 billion during
2014. This 8% increase was mainly attributable
to a decrease in working capital needs. During
2015 working capital decreased $1.4 billion,
while during 2014 it increased $72 million. The
main yearly variation was related to a decrease
in inventories during 2015, amounting to $936
million, which compares with an increase in
inventory of $73 million in 2014. Additionally,
during 2015 trade receivables decreased $828
million, partially offset by an increase in trade
payables of $328 million and an increase in other
liabilities of $124 million. For more information
on cash flow disclosures and changes to working
capital, see note 27 “Cash flow disclosures” to our
audited consolidated financial statements included
in this annual report.

Investing activities
Net cash used in investing activities was
$1.8 billion in 2015, similar to 2014. Capital
expenditures were also stable at $1.1 billion during
each year, as we advanced with the construction of
the greenfield seamless mill in Bay City, Texas.

Financing activities
Net cash used in financing activities, including
dividends paid, proceeds and repayments of
borrowings and acquisitions of non-controlling
interests, was $535 million in 2015, compared to
$424 million in 2014.

Dividends paid during 2015 amounted to $531
million, equal to 2014.

31.

During 2015 we had no significant net proceeds/
repayments from borrowings as our short-term
facilities were mostly renewed as they became
due, while in 2014 we had net proceeds from
borrowings of $156 million.

Our total liabilities to total assets ratio was
0.20:1 as of December 31, 2015 and 0.22:1 as of
December 31, 2014.

Principal Sources of Funding
During 2015, we funded our operations with
operating cash flows and bank financing. Short-
term bank borrowings were used as needed
throughout the year.

Financial liabilities
During 2015, borrowings decreased by $28 million,
to $972 million at December 31, 2015, from $999
million at December 31, 2014.

Borrowings consist mainly of bank loans. As
of December 31, 2015 U.S. dollar-denominated
borrowings plus borrowings denominated in other
currencies swapped to the U.S. dollar represented
82% of total borrowings.

For further information about our financial debt,
please see note 19 “Borrowings” to our audited
consolidated financial statements included in this
annual report.

Annual Report32.

The following table shows the composition of our
financial debt at December 31, 2015 and 2014:

Millions of U.S. dollars

Bank borrowings

Bank overdrafts

Finance lease liabilities

Total borrowings

Our weighted average interest rates before tax
(considering hedge accounting), amounted to
1.5% at December 31, 2015 and to 1.9% at
December 31, 2014.

2015

2014

971

972

997

999

TenarisThe maturity of our financial debt is as follows:

Millions of U.S. dollars

AT DECEMBER 31, 2015

Borrowings

Interests to be accrued

Total

1 year
or less

748

749

1-2
years

201

202

2-3
years

3-4
years

4-5
years

Over
5 years

33.

Total

972

978

Our current borrowings to total borrowings ratio
decreased from 0.97:1 as of December 31, 2014
to 0.77:1 as of December 31, 2015. Our liquid
financial assets exceeded our total borrowings, we
had a net cash position (cash and cash equivalents,
other current investments and fixed income
investments held to maturity less total borrowings)
of $1.8 billion at December 31, 2015, compared to
$1.3 billion at December 31, 2014.

For information on our derivative financial
instruments, please see “Quantitative and
Qualitative Disclosure about Market Risk –
Accounting for Derivative Financial Instruments
and Hedging Activities” and note 24 “Derivative
financial instruments” to our audited consolidated
financial statements included in this annual report.

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

Annual Report

34.

Significant borrowings
Our most significant borrowings as of December 31,
2015 were as follows:

Millions of U.S. dollars

Disbursement date

Borrower

Type

2015

Mainly 2015

2015

Tamsa

Siderca

Tubocaribe

Bank loans

As of December 31, 2015, Tenaris was in compliance
with all of its covenants.

Original
& Outstanding

Final Maturity

607

105

200

2016

January 2017

Tenaris

Quantitative and Qualitative
Disclosure about Market Risk

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

In millions of U.S. dollars

EXPECTED MATURITY DATE

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

35.

The following information should be read together
with section III, “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, 2015 and 2014
which included fixed and variable interest rate
obligations, detailed by maturity date:

AT DECEMBER 31, 2015

2016

2017

2018

2019

2020

Thereafter

Total (1)

NON-CURRENT DEBT

Fixed rate

Floating rate

CURRENT DEBT

Fixed rate

Floating rate

–

732

748

201

–

201

–

223

732

972

AT DECEMBER 31, 2014

2015

2016

2017

2018

2019

Thereafter

Total (1)

EXPECTED MATURITY DATE

NON-CURRENT DEBT

Fixed rate

Floating rate

CURRENT DEBT

Fixed rate

Floating rate

–

725

243

968

–

725

243

999

(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.

Annual Report
36.

Our weighted average interest rates before tax
(considering hedge accounting), amounted to
1.5% at December 31, 2015 and to 1.9% at
December 31, 2014.

Our financial liabilities (other than trade payables
and derivative financial instruments) consist mainly
of bank loans. As of December 31, 2015 U.S. dollar
denominated financial debt plus debt denominated
in other currencies swapped to the U.S. dollar
represented 82% of total financial debt. For further
information about our financial debt, please see
note 19 “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, 2015, we had variable
interest rate debt of $17 million and fixed rate debt
of $955 million ($732 million of the fixed rate debt
are short-term).

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 2015, had the U.S. dollar average
exchange rate been weaker by 5% against the
currencies of the countries where we have labor

Tenaris37.

costs, operating income (excluding impairment
charges) would have decreased approximately by
10%, compared with 3% in 2014, mainly because
these foreign currency expenses were less affected
by the downturn of the activity.

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.

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, 2015.

All amounts in millions of U.S. dollars

CURRENCY EXPOSURE / FUNCTIONAL CURRENCY

Euro / U.S. dollar

Argentine Peso / U.S. dollar

Brazilian real / U.S. dollar

Long / (Short)
Position

(335)

(73)

(67)

The main relevant exposures as of December 31,
2015 corresponds to Euro-denominated
intercompany liabilities at certain subsidiaries which
functional currency is the U.S. dollar and Argentine
peso-denominated financial, trade, social and
fiscal payables at our Argentine subsidiaries which
functional currency is the U.S. dollar.

Annual Report38.

Foreign Currency Derivative Contracts
The net fair value of our foreign currency
derivative contracts amounted to a liability of
$16 million at December 31, 2015 and $31 million
at December 31, 2014. For further detail on our
foreign currency derivative contracts, please
see note 24 “Derivative financial instruments –
Foreign exchange derivative contracts and hedge
accounting” to our audited consolidated financial
statements included in this annual report.

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

Tenarisor liabilities) continues to be reflected on the
consolidated statement of financial position.

At December 31, 2015, the effective portion of
designated cash flow hedges, included in other
reserves in shareholders’ equity amounted to a gain
of $3 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 2015.

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.

39.

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.

Annual ReportRecent
developments

Environmental
regulation

40.

Annual Dividend Approval
On February 24, 2016 the Company’s board of
directors proposed, for the approval of the annual
general shareholders' meeting to be held on May 4,
2016, the payment of an annual dividend of $0.45
per share ($0.90 per ADS), or approximately $531
million, which includes the interim dividend of
$0.15 per share ($0.30 per ADS) or approximately
$177 million, paid in November 2015. If the
annual dividend is approved by the shareholders,
a dividend of $0.30 per share ($0.60 per ADS), or
approximately $354 million will be paid on May
25, 2016, with an ex-dividend date of May 23, 2016
and record date on May 24, 2016.

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.

TenarisRelated party
transactions

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 28 “Related
party transactions” to our audited consolidated
financial statements, included in this annual report.

41.

Annual ReportEmployees

42.

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

AT DECEMBER 31

Argentina

Mexico

United States

Brazil

Italy

Romania

Colombia

Canada

Indonesia

Japan

Other Countries

Total employees

2015

5,388

5,101

2,190

2,050

2,030

1,624

636

546

532

508

1,136

21,741

At December 31, 2014 and December 31, 2013,
the number of persons employed by Tenaris was
27,816 and 26,825 respectively.

We estimate that global OCTG demand declined
37% in 2015 and in 2016 it could fall around
20% over the level of 2015. The number of
our employees declined 22% during 2015 as
we adjusted our operations to face the new
environment. We are reducing our labor costs
worldwide through a wide set of measures, while
preserving our key competences and maintaining
our focus on the relation with our communities.

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), significant fluctuations in
exchange rates, together with inflationary pressures,
affect our costs, increase labor demands and could
eventually generate higher levels of labor conflicts.

Tenaris43.

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 the 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 thereof 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. 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 otherwise provided by applicable
law, only shareholders holding Shares 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 validly cast at the meeting. Unless otherwise
provided by applicable law, an extraordinary
general shareholders’ meeting may not validly
deliberate on proposed amendments to the
Company’s articles of association unless a quorum

Annual Report44.

of at least half of the Shares is represented at the
meeting. If a quorum is not reached at the first
extraordinary shareholders’ meeting, a second
extraordinary shareholders’ meeting may be
convened in accordance with the Company’s
articles of association and applicable law and
such second extraordinary general shareholders’
meeting shall validly deliberate regardless of the
number of Shares represented. 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 of
the votes validly cast 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
validly cast 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 restated consolidated financial statements
for the year 2014 and our consolidated financial
statements and annual accounts included in this
report, will take place in the Company’s registered
office in Luxembourg, on Wednesday May 4, 2016,
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” 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

Tenaris45.

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
regulated market, the minimum number of directors
must be five. The Company’s current board of
directors is composed of ten directors; however, at
the next annual general shareholders’ meeting, it
will be proposed that the number of members of
the board of directors be reduced to nine.

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 the
board of directors is authorized until 2020, 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. Under the Company’s
articles of association, however, 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).

Annual Report46.

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. At the next annual
general shareholders’ meeting, it will be proposed

that all of the current directors, except for Mr.
Carlos Franck, be reappointed to the board
of directors, each to hold office until the next
annual general shareholders’ meeting that will
be convened to decide on the Company’s 2016
annual accounts.

Name

Position

Principal Occupation

Years as Director

Age at
December 31, 2015

Roberto Bonatti (1)

Carlos Condorelli

Carlos Franck

Roberto Monti

Gianfelice Mario Rocca (1)

Paolo Rocca (1)

Jaime Serra Puche

Alberto Valsecchi

Director

Amadeo Vázquez y Vázquez

Director

President of San Faustin

Director of Tenaris and Ternium

President of Inverban

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

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.

Tenaris

47.

Carlos Franck
Mr. Franck is a member of the
Company’s board of directors. He
is president of Inverban S.A. and a
member of the board of directors of
Siderca, Techint Holdings S.à r.l. and
Siderar. He has financial planning and
control responsibilities in subsidiaries
of San Faustin. He serves as
treasurer of the board of the Di Tella
University and as president of Adobe,
an Argentine NGO. Mr. Franck is
an Argentine citizen. Mr. Franck
intends to retire and accordingly, at
the next annual general shareholders’s
meeting, he will not be proposed as
candidate to the board of directors.

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

Gianfelice Mario Rocca
Mr. Rocca is a member of the
Company’s board of directors.
He is a grandson of Agostino Rocca.
He is the chairman of the board of
directors of San Faustin, a member
of the board of directors of Ternium,
the president of the Humanitas
Group and the 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 president of
Assolombarda, the largest territorial
association of entrepreneurs in Italy
and part of Confindustria (Italian
employers’ organization).
In addition, he is member of the EIT
Governing Board (European Institute
of Innovation and Technology).
He is chairman of Humanitas
University, board member of Bocconi
University, member of the Advisory
Board of Politecnico di Milano, the
Allianz Group, the Aspen Institute
Executive Committee, the Trilateral
Commission, and the European
Advisory Board of Harvard Business
School. Mr. Rocca is an Italian citizen.

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.

Annual ReportGuillermo Vogel
Mr. Vogel is vicepresident finance of
the Company’s board of directors.
He is the vice chairman of Tamsa,
the chairman of Grupo Collado,
Exportaciones IM Promoción and
Canacero, a member of the board
of directors of each of Techint,
S.A. de C.V., Corporación Alfa, the
Universidad Panamericana – IPADE,
Rassini, Corporación Mexicana de
Inversiones de Capital, Innovare,
Grupo Assa and the American Iron
and Steel Institute. In addition,
he is a member of The Trilateral
Commission and member of
the International Board of The
Manhattan School of Music.
Mr. Vogel is a Mexican citizen.

Messrs. Monti, Serra Puche and
Vázquez y Vázquez qualify as
independent directors under the
Company’s articles of association.

48.

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. He is a member
of the Executive Committee of the
World Steel Association. Mr. Rocca
is an Italian citizen.

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 the Mexico Fund, Grupo Vitro,
Grupo Modelo and Alpek S.A..
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 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 alternate
director of Gas Natural BAN, S.A,
of Grupo Gas Natural Fenosa. He
is a member of the advisory board
of the Fundación de Investigaciones
Económicas Latinoamericanas
and member of the Asociación
Empresaria Argentina. He served as
chief executive officer of Banco Río
de la Plata S.A. until August 1997,
independent director and chairman
of the Audit Committee of BBVA
Banco Francés S.A. until 2003, and
chairman of the board of directors
of Telecom Argentina S.A. until
April 2007. Mr. Vázquez y Vázquez
is a Spanish and Argentine citizen.

TenarisDirector 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.

49.

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 regulated market, 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.

Annual Report50.

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
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 6,
2015, the Company’s board of directors reappointed
Jaime Serra Puche, Amadeo Vázquez y Vázquez
and Roberto Monti as members of the Company’s
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

Tenaris51.

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;
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 material 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.

Annual Report52.

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

Name

Position

Age at
December 31, 2015

Paolo Rocca

Edgardo Carlos

Chairman and Chief Executive Officer

Chief Financial Officer

Gabriel Casanova

Supply Chain Director

Vincenzo Crapanzano

Industrial Director

Alejandro Lammertyn

Planning Director

Paola Mazzoleni

Carlos Pappier

Marcelo Ramos

Germán Curá

Sergio de la Maza

Renato Catallini

Human Resources Director

Chief Process and Information Officer

Technology Director

North American Area Manager

Central American Area Manager

Brazilian Area Manager

Javier Martínez Alvarez

Southern Cone Area Manager

Gabriel Podskubka

Eastern Hemisphere Area Manager

Sergio Tosato

European Area Manager

Tenaris

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 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. He is a member
of the Executive Committee of the
World Steel Association. Mr. Rocca
is an Italian citizen.

Edgardo Carlos
Mr. Carlos currently serves as our
chief financial officer, a position
that he assumed on July 1, 2013.
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
and financial manager for North
America and in 2007 he became
administration and financial director
for Central America. In 2009 he was
appointed economic and financial
planning director, until he assumed
his current position. 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.

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. Mr. Crapanzano is
an Italian citizen.

53.

Alejandro Lammertyn
Mr. Lammertyn currently serves
as our planning director, a position
he assumed in April 2013.
Mr. Lammertyn began his career with
Tenaris in 1990. Previously he served
as assistant to the CEO for marketing,
organization and mill allocation,
supply chain director, commercial
director and Eastern Hemisphere
area manager. Mr. Lammertyn is
an Argentine citizen.

Paola Mazzoleni
Ms. Mazzoleni currently serves as
our human resources director, a
position she assumed on January
1, 2016. After receiving a degree in
Philosophy, she started her career
in Dalmine in 2001 in the human
resources department, working in
recruitment and selection. She next
coordinated the company’s Global
Trainee Program and then served
as the regional head in Italy of
TenarisUniversity. Ms. Mazzoleni
was appointed as human resources
director in Romania in 2008, in
Italy in 2012 and in the United
States in 2014. Ms. Mazzoleni is
an Italian citizen.

Annual Report54.

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.

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

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 and
Italian 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.

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 API. He assumed his
current position in October 2006.
Mr. Curá is a U.S. 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.

Tenaris55.

Gabriel Podskubka
Mr. Podskubka currently serves
as our Eastern Hemisphere area
manager, based in Dubai. He
assumed his current position in April
2013 after serving as the head of
our operations in Eastern Europe
for 4 years. After graduating as an
industrial engineer Mr. Podskubka
joined the Techint group in 1995
in the marketing department of
Siderca. He held various positions
in the marketing, commercial,
and industrial areas until he was
appointed as oil & gas sales director
in the United States in 2006. Mr.
Podskubka is an Argentine citizen.

Sergio Tosato
Mr. Tosato currently serves as our
European Area Manager, a position
he assumed in April 2015. Mr. Tosato
first joined Dalmine in 1974 in the
personnel organization area, and has
held many positions within Tenaris,
including industrial coordination
director, director of operations in
Siderca and manufacturing director
in Dalmine. Since 2013, he was the
director for industrial expansion,
with responsibility over the
greenfield seamless mill project
in Bay City, Texas, until he assumed
his current position. Mr. Tosato is
an Italian citizen.

Annual Report56.

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
2015 a fee of $85,000. The chairman of the audit
committee received as additional compensation
a fee of $65,000 while the other members of
the audit committee received an additional fee
of $55,000. 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.

During the years ended December 31, 2015, 2014
and 2013, the cash compensation of directors and
senior managers amounted to $29.2 million, $26.0
million and $28.1 million, respectively. In addition,
directors and senior managers received 540, 567
and 534 thousand units for a total amount of $5.4
million, $6.2 million and $5.6 million, respectively,
in connection with the Employee retention and
long term incentive program described in note O
(2) “Employee benefits –Other long term benefits”
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 to its Chairman the authority

Tenaris57.

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, 2015, appointed by the
shareholders’ meeting held on May 6, 2015, was
PricewaterhouseCoopers Société Coopérative.,
Cabinet de révision agréé, 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
Fees paid for tax compliance professional services.

Fees Paid to the Company’s Independent Auditor
In 2015, PwC served as the principal external
auditor for the Company. Fees payable to PwC in
2015 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

2015

4,372

4,490

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 the date of this annual report, was 1,400,603,
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

Edgardo Carlos

Gabriel Podskubka

Total

Number of
Shares Held

1,325,446

67,211

4,000

3,946

1,400,603

Annual Report
58.

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 share capital), (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 PLC (2)

Directors and senior

management as a group

Public

Total

713,605,187

81,903,771

60.45%

6.94%

1,400,603

0.12%

383,627,269

32.50%

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 voting rights in San Faustin sufficient
to control San Faustin. No person or group of persons controls RP STAK.

(2) On March 1, 2016, Aberdeen Asset Management PLC filed a Schedule 13(G) with the SEC informing
that, as of December 31, 2015, it is deemed to be the beneficial owner of 79,833,738 Shares of
Tenaris, representing 6.8% of Tenaris’s issued and outstanding capital share. In addition, Aberdeen
Asset Management PLC informed Tenaris that, as of December 31, 2015, (i) it held 2,070,033
Shares, representing 0.14% (in addition to its ADSs holdings reported in the above mentioned
Schedule 13(G)); and (i) based on it ADSs and Shares’ holdings, it held 5.41% of Tenaris’s 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, 2015. All issued shares are fully paid.

The Company’s articles of association authorize
the board of directors until 2020, 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

Tenaris

59.

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).

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 represented
at the meeting.

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 voting rights in San
Faustin sufficient 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 39.44% 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

Annual Report60.

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.

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.

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.

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.

On February 24, 2016, management reported to
the audit committee of the Company’s board of
directors that management had conducted its
assessment of the effectiveness of the Company’s
internal controls over financial reporting for the
year ended December 31, 2015, and that, based
on management’s evaluation and considering
the inherent limitations to the effectiveness of
any internal control system, management had
concluded that the Company’s internal controls
over financial reporting were effective as of
December 31, 2015.

TenarisManagement
certification

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

61.

the consolidated financial statements prepared in conformity with International
Financial Reporting Standards as issued by the International Accounting Standards
Board and as adopted by the European Union, 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 on the consolidated financial statements included
in this annual report, which has been combined with the management report on the
annual accounts 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.

/s/ Paolo Rocca

Chief Executive Officer
Paolo Rocca

March 30, 2016

/s/ Edgardo Carlos

Chief Financial Officer
Edgardo Carlos

March 30, 2016

Annual Report62.

TenarisTenaris S.A.
Consolidated
Financial Statements

For the years ended December 31, 2015, 2014 and 2013

63.

Annual Report64.

TenarisAudit report

To the Shareholders

of Tenaris S.A.

65.

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 31 December 2015, and the consolidated income statement, consolidated
statement of comprehensive income, consolidated statement of changes in equity
and 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 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 about 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

Annual Report
66.

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 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 31 December
2015, 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 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,
30 March 2016

PricewaterhouseCoopers, Société coopérative
Represented byRepresented by

/s/ Mervyn R. Martins

Mervyn R. Martins

PricewaterhouseCoopers, Société coopérative, 2, rue Gerhard Mercator, 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

Tenaris67.

Consolidated Income Statement

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

YEAR ENDED DECEMBER 31

Notes

2015

2014

2013

CONTINUING OPERATIONS

Net sales

Cost of sales

Gross profit

Selling, general and administrative expenses

Other operating income

Other operating expenses

Operating income

Finance Income

Finance Cost

Other financial results

Income before equity in earnings of non-consolidated companies and income tax

Equity in earnings (losses) of non-consolidated companies

Income before income tax

Income tax

(Loss) Income for the year

ATTRIBUTABLE TO

Owners of the parent

Non-controlling interests

7,100,753

10,337,962

10,596,781

(4,885,078)

(6,287,460)

(6,456,786)

2,215,675

4,050,502

4,139,995

(1,624,275)

(1,963,952)

(1,941,213)

14,603

(410,575)

195,428

34,574

(23,058)

2,694

27,855

(215,589)

14,305

(28,257)

1,898,816

2,184,830

38,211

(44,388)

39,214

34,767

(70,450)

7,004

209,638

1,931,853

2,156,151

(39,558)

(164,616)

46,098

170,080

1,767,237

2,202,249

(244,505)

(586,061)

(627,877)

(74,425)

1,181,176

1,574,372

(80,162)

1,158,517

1,551,394

5,737

22,659

22,978

(74,425)

1,181,176

1,574,372

EARNINGS PER SHARE ATTRIBUTABLE TO THE OWNERS

OF THE PARENT DURING THE PERIOD

Weighted average number of ordinary shares (thousands)

1,180,537

CONTINUING OPERATIONS

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

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

(*) Each ADS equals two shares.

(0.07)

(0.14)

0.98

1.96

1.31

2.63

Annual Report

Consolidated Statement of comprehensive income

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31

2015

2014

2013

(Loss) Income for the year

(74,425)

1,181,176

1,574,372

68.

ITEMS THAT WILL NOT BE RECLASSIFIED TO PROFIT OR LOSS

Remeasurements of post employment benefit obligations

Income tax on items that will not be reclassified

ITEMS THAT MAY BE SUBSEQUENTLY RECLASSIFIED TO PROFIT OR LOSS

Currency translation adjustment

Change in value of cash flow hedges and available for sale financial instruments

Share of other comprehensive income of non-consolidated companies:

Currency translation adjustment

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

Income tax related to cash flow hedges and available for sale financial instruments

Other comprehensive (loss) for the year, net of tax

Total comprehensive (loss) income for the year

ATTRIBUTABLE TO

Owners of the parent

Non-controlling interests

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

14,181

(4,242)

9,939

1,850

(513)

1,337

(256,260)

13,185

(197,711)

(10,483)

(92,914)

(4,239)

(284)

(340,512)

(330,573)

(404,998)

(54,688)

(3,857)

400

(266,339)

(265,002)

18,314

(4,865)

13,449

(1,941)

2,941

(87,666)

2,682

478

(83,506)

(70,057)

916,174

1,504,315

(410,187)

5,189

894,929

21,245

1,480,572

23,743

(404,998)

916,174

1,504,315

Tenaris

Consolidated Statement of financial position

All amounts in thousands of U.S. dollars

AT DECEMBER 31

Notes

2015

2014

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment, net

Intangible assets, net

Investments in non-consolidated companies

Available for sale assets

Other investments

Deferred tax assets

Receivables

CURRENT ASSETS

Inventories

Receivables and prepayments

Current tax assets

Trade receivables

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

CURRENT LIABILITIES

Borrowings

Current tax liabilities

Other liabilities

Provisions

Customer advances

Trade payables

Total liabilities

Total equity and liabilities

21 (I)

22 (II)

21 (II)

23 (II)

Contingencies, commitments and restrictions on the distribution of profits are disclosed in Note 25.

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

69.

9,114,356

5,672,258

2,143,452

490,645

21,572

394,746

200,706

220,564

1,843,467

148,846

188,180

1,135,129

2,140,862

9,143,943

5,159,557

2,757,630

643,630

21,572

1,539

268,252

262,176

2,779,869

267,631

129,404

1,963,394

1,838,379

286,547

5,743,031

417,645

7,396,322

14,886,974

16,510,678

11,713,344

152,712

11,866,056

12,654,114

152,200

12,806,314

223,221

750,325

231,176

61,421

748,295

136,018

222,842

8,995

134,780

503,845

1,266,143

1,754,775

3,020,918

14,886,974

30,833

714,123

285,865

70,714

968,407

352,353

296,277

20,380

133,609

831,803

1,101,535

2,602,829

3,704,364

16,510,678

Annual Report

Consolidated Statement of changes in equity

All amounts in thousands of U.S. dollars

ATTRIBUTABLE TO OWNERS OF THE PARENT

70.

Balance at December 31, 2014

1,180,537

118,054

609,733

(658,284)

(317,799)

Share
Capital (1)

Legal
Reserves

Share
Premium

Currency
Translation
Adjustment

Other
Reserves (2)

(Loss) income for the year

Currency translation adjustment

Remeasurements of post employment benefit

obligations, net of taxes

Change in value of available for sale financial

instruments and cash flow hedges net of tax

Share of other comprehensive income of

non-consolidated companies

Other comprehensive (loss) income for the year

Total comprehensive (loss) income for the year

Acquisition of non-controlling interests

Dividends paid in cash

–

(255,569)

–

10,213

12,484

–

(92,914)

(4,239)

–

(348,483)

18,458

–

659

–

Balance at December 31, 2015

1,180,537

118,054

609,733

(1,006,767)

(298,682)

(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, 2015 there were 1,180,536,830 shares issued. All issued shares are fully paid.

(2) Other reserves include mainly the result of transactions with non-controlling interest that do not result in a loss of control, the
remeasurement of post-employment benefit obligations and the changes in value of cash flow hedges and in available for sale
financial instruments.

(3) The Distributable Reserve and Retained Earnings calculated according to Luxembourg Law are disclosed in Note 25

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

Tenaris

ATTRIBUTABLE TO OWNERS OF THE PARENT

Total

71.

Retained
Earnings (3)

Total

Non-controlling
Interests

11,721,873

12,654,114

152,200

12,806,314

(80,162)

5,737

(74,425)

–

(255,569)

10,213

(691)

(274)

(256,260)

9,939

12,484

417

12,901

–

(97,153)

–

(97,153)

–

(330,025)

(80,162)

(410,187)

–

659

(531,242)

(548)

5,189

(1,727)

(2,950)

(330,573)

(404,998)

(1,068)

(534,192)

11,110,469

11,713,344

152,712

11,866,056

Annual Report

Consolidated Statement of changes in equity (cont.)

All amounts in thousands of U.S. dollars

ATTRIBUTABLE TO OWNERS OF THE PARENT

72.

Balance at December 31, 2013

1,180,537

118,054

609,733

(406,744)

(305,758)

Share
Capital (1)

Legal
Reserves

Share
Premium

Currency
Translation
Adjustment

Other
Reserves (2)

Income for the year

Currency translation adjustment

Remeasurements of post employment benefit

obligations, net of taxes

Change in value of available for sale financial

instruments and cash flow hedges net of tax

Share of other comprehensive income of non-

consolidated companies

Other comprehensive (loss) income for the year

Total comprehensive income for the year

Acquisition and increase of non-controlling interests

Dividends paid in cash

–

(196,852)

–

1,503

(9,694)

(54,688)

(3,857)

(251,540)

(12,048)

–

Balance at December 31, 2014

1,180,537

118,054

609,733

(658,284)

(317,799)

Balance at December 31, 2012

1,180,537

118,054

609,733

(316,831)

(314,297)

Income for the year

Currency translation adjustment

Effect of adopting IAS 19R

Hedge reserve, net of tax

Share of other comprehensive income of

non-consolidated companies

Other comprehensive (loss) income for the year

Total comprehensive income for the year

Acquisition and increase of non-controlling interests

Dividends paid in cash

–

(2,247)

–

(87,666)

(89,913)

–

13,449

2,960

2,682

19,091

(10,552)

–

Balance at December 31, 2013

1,180,537

118,054

609,733

(406,744)

(305,758)

(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, 2014 and 2013 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.

Tenaris

ATTRIBUTABLE TO OWNERS OF THE PARENT

Total

73.

Retained
Earnings

Total

Non-controlling
Interests

11,094,598

12,290,420

179,446

12,469,866

1,158,517

22,659

1,181,176

–

1,158,517

(196,852)

1,503

(859)

(166)

(197,711)

1,337

(9,694)

(389)

(10,083)

(58,545)

–

(58,545)

(263,588)

894,929

(1,414)

21,245

(265,002)

916,174

–

(152)

(145)

(531,242)

(48,339)

(579,581)

11,721,873

12,654,114

152,200

12,806,314

10,050,835

11,328,031

171,561

1,499,592

1,551,394

22,978

1,574,372

–

(2,247)

13,449

2,960

(84,984)

306

–

459

–

(1,941)

13,449

3,419

(84,984)

–

(70,822)

765

(70,057)

1,551,394

1,480,572

23,743

1,504,315

–

(10,552)

2,784

(7,768)

(507,631)

(18,642)

(526,273)

11,094,598

12,290,420

179,446

12,469,866

Annual Report

74.

Consolidated Statement of cash flows

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31

CASH FLOWS FROM OPERATING ACTIVITIES

(Loss) income for the year

ADJUSTMENTS FOR:

Depreciation and amortization

Impairment charge

Income tax accruals less payments

Equity in (earnings) losses of non-consolidated companies

Interest accruals less payments, net

Changes in provisions

Changes in working capital

Other, including currency translation adjustment

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures

Changes in advance to suppliers of property, plant and equipment

Investment in non-consolidated companies

Acquisition of subsidiaries and non-consolidated companies

Net loan to non-consolidated companies

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

Dividends received from non-consolidated companies

Changes in investments in 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 in cash and cash equivalents

MOVEMENT IN CASH AND CASH EQUIVALENTS

At the beginning of the year

Effect of exchange rate changes

Decrease in cash and cash equivalents

At December 31

CASH AND CASH EQUIVALENTS

Cash and bank deposits

Bank overdrafts

(*) Mainly related to the renewal of short-term local facilities carried out during the years 2015, 2014 and 2013.

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

Notes

2015

2014

2013

(74,425)

1,181,176

1,574,372

10 & 11

27 (ii)

27 (iii)

658,778

400,314

(91,080)

39,558

(1,975)

(20,678)

27 (i)

1,373,985

(69,473)

615,629

205,849

79,062

164,616

(37,192)

(4,982)

(72,066)

(88,025)

610,054

–

125,416

(46,098)

(29,723)

(1,800)

188,780

(43,649)

2,215,004

2,044,067

2,377,352

10 & 11

(1,131,519)

(1,089,373)

12c

49,461

(4,400)

–

(22,322)

10,090

20,674

(63,390)

(1,380)

(28,060)

(21,450)

11,156

17,735

(753,498)

(22,234)

–

33,186

16,334

(695,566)

(611,049)

(582,921)

(1,773,582)

(1,785,811)

(1,309,133)

(531,242)

(2,950)

(1,068)

(531,242)

(48,339)

(145)

(507,631)

(18,642)

(7,768)

2,064,218

3,046,837

2,460,409

(2,063,992)

(2,890,717)

(3,143,241)

(535,034)

(423,606)

(1,216,873)

(93,612)

(165,350)

(148,654)

416,445

(36,635)

(93,612)

27 (iv)

286,198

286,547

(349)

286,198

598,145

(16,350)

(165,350)

416,445

417,645

(1,200)

416,445

772,656

(25,857)

(148,654)

598,145

614,529

(16,384)

598,145

Tenaris

Index to the notes to the
Consolidated Financial Statements

General Information

IV.

Other notes to the Restated 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

Current and Deferred income tax

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

Financial instruments by category

Fair value hierarchy

Fair value estimation

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 income and expenses

Financial results

Equity in earnings (losses) of non-consolidated companies

75.

Income tax

Dividends distribution

10.

Property, plant and equipment, net

11.

Intangible assets, net

12.

Investments in non-consolidated companies

13.

Receivables - non current

14.

Inventories

15.

Receivables and prepayments

16.

Current tax assets and liabilities

17.

Trade receivables

18.

Cash and cash equivalents and Other investments

19.

Borrowings

20.

Deferred income tax

21.

Other liabilities

22.

Non-current allowances and provisions

23.

Current allowances and provisions

24.

Derivative financial instruments

25.

Contingencies, commitments and restrictions

on the distribution of profits

26.

Acquisition of subsidiaries and

non-consolidated companies

Accounting for derivative financial instruments

27.

Cash flow disclosures

and hedging activities

28.

Related party transactions

29.

Principal subsidiaries

30.

Nationalization of Venezuelan Subsidiaries

31.

Fees paid to the Company's principal accountant

32.

Subsequent event

Annual Report

76.

I. General information

II. Accounting policies

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. A list of the principal
Company’s subsidiaries is included in Note 29 to
these Consolidated Financial Statements.

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 24, 2016.

Restatement of 2014 Financial Statements
On May 28, 2015, the Company restated its
Consolidated Financial Statements for the year
ended December 31, 2014 to reduce the carrying
amount of the Company’s investment in Usinas
Siderúrgicas de Minas Gerais S.A. Usiminas
(“Usiminas”). All information as of December
31, 2014 included in these Consolidated Financial
Statements is derived from the Company's audited
Restated Consolidated Financial Statements for the
year ended December 31, 2014.

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
available for sale financial assets and 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.

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.

Tenaris•

•

1. New and amended standards not yet adopted

and relevant for Tenaris
IFRS 15, “Revenue from contracts with customers”
In May 2014, the IASB issued IFRS 15, “Revenue
from contracts with customers”, which sets out
the requirements in accounting for revenue arising
from contracts with customers and which is based
on the principle that revenue is recognized when
control of a good or service is transferred to the
customer. IFRS 15 must be applied on annual
periods beginning on or after January 1, 2018.

IFRS 9, “Financial instruments”
In July 2014, the IASB issued IFRS 9, “Financial
instruments”, which replaces the guidance in
IAS 39. It includes requirements on the classification
and measurement of financial assets and liabilities,
as well as an expected credit losses model that
replaces the current incurred loss impairment
model. IFRS 9 must be applied on annual periods
beginning on or after January 1, 2018.

Amendments to IFRS 10, “Consolidated financial
statements” and IAS 28, “Investments in associates
and joint ventures”
In September 2014, the IASB issued the
Amendments to IFRS 10, “Consolidated
financial statements” and IAS 28, “Investments
in associates and joint ventures”, which addresses
an acknowledged inconsistency between the
requirements of both standards in dealing with
the sale or contribution of assets between an
investor and its associate or joint venture. These
amendments must be applied on annual periods
beginning on or after January 1, 2016.

These standards are not effective for the financial
year beginning January 1, 2015 and have not been
early adopted.

These standards have not been endorsed by the EU.

The Company’s management has not yet assessed
the potential impact that the application of these
standards may have on the Company’s financial
condition or results of operations.

77.

•

2. New and amended standards adopted

for Tenaris
Amendments to IAS 32, ‘Financial instruments:
Presentation’, IAS 36, ‘Impairment of assets' and
IAS 39, ‘Financial instruments: Recognition and
measurement’
All the amendments to the standards IAS 32,
‘Financial instruments: Presentation’ – Offsetting
ﬁnancial assets and ﬁnancial liabilities, IAS 36,
‘Impairment of assets’ – Recoverable amount
disclosures for non-ﬁnancial assets and IAS 39,
‘Financial instruments: Recognition and
measurement’ – Novation of derivatives and
continuation of hedge accounting have been
analyzed by the Company. The application of these
standards did not materially affect the Company’s
financial condition or results of operations.

B. Group accounting

1. Subsidiaries and transactions with

non-controlling interests
Subsidiaries are all entities over which Tenaris
has control. Tenaris controls an entity when it is
exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to
affect those returns through its power over the entity.
Subsidiaries are fully 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

Annual Report78.

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 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.

Transactions with non-controlling interests that
do not result in a loss of control are accounted 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.

of between 20% and 50% of the voting rights.
Investments in non-consolidated companies
(associated and joint ventures) are accounted
for by the equity method of accounting and
are initially recognized at cost. The Company’s
investment in non-consolidated companies
includes goodwill identified in acquisition, net
of any accumulated impairment loss.

Unrealized results on transactions between
Tenaris and its non-consolidated companies are
eliminated to the extent of Tenaris’ interest in
the non-consolidated companies. Unrealized
losses are also eliminated unless the transaction
provides evidence of an impairment indicator of
the asset transferred. Financial statements of non-
consolidated companies have been adjusted where
necessary to ensure consistency with IFRS.

The Company’s pro-rata share of earnings in
non-consolidated companies is recorded in the
Consolidated Income Statement under Equity in
earnings (losses) of non-consolidated 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, 2015, Tenaris holds 11.46%
of Ternium’s common stock. The following
factors and circumstances evidence that Tenaris
has significant influence (as defined by IAS 28,
“Investments in associates companies”) over
Ternium, and as a result the Company’s investment
in Ternium has been accounted for under the
equity method:

2. Non-consolidated companies
Non-consolidated companies are all entities in
which Tenaris has significant influence but not
control, generally accompanying a shareholding

•

Both the Company and Ternium are under the
indirect common control of San Faustin S.A.;
Four out of eight members of Ternium’s Board of
Directors (including Ternium’s chairman) are also
members of the Company’s Board of Directors;

Tenaris
79.

•

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 $22.6 million less
than its proportional ownership of Ternium’s
shareholders’ equity at the transaction date. As
a result of this treatment, Tenaris’ investment in
Ternium will not reflect its proportional ownership
of Ternium’s net equity position.

At December 31, 2015, 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.
The acquisition of Usiminas shares was part of
a larger transaction performed on January 16,
2012, pursuant to which Ternium, certain of its
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. The rights of Ternium and its subsidiaries
and Confab within the Ternium/Tenaris Group are
governed under a separate shareholders agreement.

Those circumstances evidence that Tenaris has
significant influence over Usiminas, consequently,
accounted it for under the equity method (as
defined by IAS 28, “Investments in Associates and
Joint Ventures”).

Tenaris reviews investments in non-consolidated
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 and
Usiminas at its proportional equity value, with no
additional goodwill or intangible assets recognized.
At December 31, 2015, 2014 and 2013, no
impairment provisions were recorded on Tenaris’
investment in Ternium while in 2014 and 2015,
impairment charges were recorded on Tenaris’
investment in Usiminas. See Note 7 and Note 12.

C. Segment information
The Company is organized in one major business
segment, Tubes, which is also the reportable
operating segment.

Annual Report

80.

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 are 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.

Tenaris’ 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:

areas based on the customer’s location; allocation
of assets, capital expenditures and associated
depreciations and amortizations are based on the
geographical 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.

Except for the Brazilian and Italian subsidiaries
whose functional currencies are their local
currencies, Tenaris determined that the functional
currency of its other subsidiaries is the U.S. dollar,
based on the following principal considerations:

•

The use of direct cost methodology to calculate
the inventories, while under IFRS it is at full cost,
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;
Other timing differences.

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

•

Sales are mainly negotiated, denominated and
settled in U.S. dollars. If priced in a currency
other than the U.S. dollar, the sales price considers
exposure to fluctuation in the exchange rate versus
the U.S. dollar;
Prices of their critical raw materials and inputs are
priced and settled in U.S. dollars;
Transaction and operational environment and the
cash flow of these operations have the U.S. dollars
as reference currency;
Significant level of integration of the local
operations within Tenaris’ international global
distribution network;
Net financial assets and liabilities are mainly
received and maintained in U.S. dollars;

Tenaris
•

The exchange rate of certain legal currencies
has long-been affected by recurring and severe
economic crises.

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.

81.

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 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 in 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

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.

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.

Annual Report82.

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 assets’ 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 2015, 2014 and 2013.

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’ 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 in 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 that
they have economic benefits exceeding one year.

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

Tenaris
83.

Management’s re-estimation of assets useful lives,
performed in accordance with IAS 38 (“Intangible
Assets”), did not materially affect depreciation
expenses for 2015, 2014 and 2013.

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, 2015
and 2014, included in Hydril CGU. 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.

Management’s re-estimation of assets useful lives,
performed in accordance with IAS 38 (“Intangible
Assets”), did not materially affect depreciation
expenses for 2015, 2014 and 2013.

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
2015, 2014 and 2013 totaled $89.0 million, $106.9
million and $105.6 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 groups.

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.

Prudential, a welded pipe mill producing OCTG and
line pipe products in Canada, has been negatively
affected by current market conditions (including an
increase in unfairly traded imports of OCTG and
line pipe products), reflected in a loss of market share
and in the decline in the level of its profitability. Based
on these circumstances, the Company has reviewed
the useful life of Prudential’s customer relationships
and decided to reduce the remaining amortization
period from 5 years to 2 years, consequently a higher
amortization charge of approximately $31.2 million
was included in Consolidated Income Statement
under Selling, general and administrative expenses for
the year ended December 31, 2015.

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 of such subsidiary
represents the lowest level of asset aggregation that
generates largely independent cash inflows.

Annual Report
84.

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.

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’ 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’ 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
recoverable amount. The recoverable amount is
the higher between 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.

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.

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.

Certain non-derivative financial assets that the
Company has both the ability and the intention
to hold to maturity have been categorized as held
to maturity financial assets. They are carried at
amortized cost and the results are recognized in
“Financial Results” in the Consolidated Income
Statement using the effective interest method. Held
to maturity instruments with maturities greater
than 12 months after the balance sheet date are
included in the non-current assets.

All other investments in financial instruments and
time deposits are categorized as financial assets

Tenaris“at fair value through profit or loss” because
such investments are both (i) held for trading and
(ii) designated as such upon initial recognition
because they are managed and their performance is
evaluated on a fair value basis. The results of these
investments are recognized in Financial Results in
the Consolidated Income Statement.

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

The fair values of quoted investments are generally
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).

I. Inventories
Inventories are stated at the lower between cost
and net realizable value. The cost of finished
goods and goods in process is comprised of raw
materials, direct labor and utilities (based on
FIFO method) and other direct costs and related
production overhead costs. 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 obsolete and
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.

85.

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. For this
purpose, trade accounts receivable overdue by
more than 180 days and which are not covered by
a credit collateral, guarantee, insurance or similar
surety, are fully provisioned.

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.

Annual Report
86.

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, 2015,
2014 and 2013 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 25).

M. Borrowings

Borrowings are recognized initially at fair value
net of transaction costs incurred and subsequently
measured 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 basis 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 depreciable fixed assets and inventories,
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

Tenaris87.

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. Post employment benefits
The Company has defined benefit and defined
contribution plans. A defined benefit plan is a
pension plan that defines 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.

The Company applied IAS 19 (amended 2011),
“Employee Benefits”, as from January 1, 2013.
In accordance with the amended standard, post-
employment benefits are accounted as follows.

The liability recognized in the 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 period less the fair value
of plan assets, if any. The defined benefit obligation
is calculated annually (at year end) by independent
actuaries using the projected unit credit method.
The present value of the defined benefit obligation
is determined by discounting the estimated future
cash outflows using interest rates of high-quality
corporate bonds that are denominated in the
currency in which the benefits will be paid, and that
have terms to maturity approximating to the terms
of the related pension obligation.

Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions
are charged or credited to equity in “Other
comprehensive income” in the period in which they
arise. Past-service costs are recognized immediately
in the income statement.

For defined benefit plans, net interest income/
expense is calculated based on the surplus or deficit
derived by the difference between the defined benefit
obligations less plan assets. For defined contribution
plans, the Company pays contributions to publicly
or privately administered pension insurance plans
on a mandatory, contractual or voluntary basis. The
Company has no further payment obligations once
the contributions have been paid. The contributions
are recognized as employee benefit expense when
they are due. Prepaid contributions are recognized
as an asset to the extent that a cash refund or a
reduction in the future payments is available.

Tenaris sponsors funded and unfunded defined
benefit pension plans in certain subsidiaries. The
most significant are:

•

An unfunded defined benefit employee retirement
plan for certain senior officers. The plan is
designed to provide certain benefits to those
officers (additional to those contemplated under
applicable labor laws) in case of termination of the
employment relationship due to certain specified
events, including retirement. This unfunded plan
provides defined benefits based on years of service
and final average salary.
Employees’ service rescission indemnity: 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.

Annual Report88.

•

Funded retirement benefit plans held in Canada for
salary and hourly employees hired prior a certain
date based on years of service and, in the case of
salaried employees, final average salary. Plan assets
consist primarily of investments in equities and
money market funds. Both plans were replaced
for defined contribution plans. Effective June 2016
the salary plan will be frozen for the purposes of
credited service as well as determination of final
average pay.
Funded retirement benefit plan held in the US for
the benefit of some employees hired prior a certain
date, frozen for the purposes of credited service
as well as determination of final average pay for
the retirement benefit calculation. Plan assets
consist primarily of investments in equities and
money market funds. Additionally, an unfunded
postretirement health and life plan that offers
limited medical and life insurance benefits to the
retirees, hired before a certain date.

2. Other long term benefits
During 2007, Tenaris launched an employee
retention and long term incentive program (the
“Program”) applicable to certain senior officers
and employees of the Company, who will be
granted a number of Units throughout the
duration of the Program. The value of each of
these Units is based on Tenaris’ shareholders’
equity (excluding non-controlling interest). Also,
the beneficiaries of the Program are entitled to
receive cash amounts based on (i) the amount
of dividend payments made by Tenaris to its
shareholders, and (ii) the number of Units held by
each beneficiary to the Program. Units vest ratably
over a period of four years and will be redeemed by
the Company ten years after grant date, with the
option of an early redemption at seven years after
grant date. As the cash payment 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.

As of December 31, 2015 and 2014, the
outstanding liability corresponding to the Program
amounts to $84.0 million and $98.1 million,
respectively. The total value of the units granted to
date under the program, considering the number
of units and the book value per share as of
December 31, 2015 and 2014, is $105.3 million and
$107.4 million, respectively.

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

Compensation to employees in the event of
dismissal is charged to income in the year in which
it becomes payable.

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 based on

Tenaris89.

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.

reasonably assured. Delivery is defined by the
transfer of risk 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 highly
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.

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,
generally the nominal invoice amount.

The percentage of total sales that were generated
from bill and hold arrangements for products
located in Tenaris’ storage facilities that have not
been shipped to customers amounted to 2.9%,
1.1% and 1.3% as of December 31, 2015, 2014
and 2013, 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 basis:

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’ 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

•

•
•

Construction contracts (mainly applicable to
Tenaris Brazilian subsidiaries and amounted to
1.55% of total sales). The revenue recognition
of the contracts follows the IAS 11 guidance,
that means, when the outcome of a construction
contract can be estimated reliably and it is probable
that the contract will be profitable, contract revenue
is recognized over the period of the contract by
reference to the stage of completion (measured by
reference to the contract costs incurred up to the
end of the reporting period as a percentage of total
estimated costs for each contract).
Interest income: on the effective yield basis.
Dividend income from investments in other
companies: when Tenaris’ right to receive payment
is established.

Annual Report90.

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.

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:

expiring in less than ninety days from the
measurement date (included within cash and cash
equivalents) and investments in certain financial
debt instruments and time deposits held for trading.
Loans and receivables: comprise cash and cash
equivalents, trade receivables and other receivables
and are measured at amortized cost using the
effective interest rate method less any impairment.
Available for sale assets: comprise the Company’s
interest in the Venezuelan Companies (see Note 30).
Held to maturity: comprise financial assets
that the Company has both the ability and the
intention to hold to maturity. They are measured at
amortized cost using the effective interest method.
Other financial liabilities: comprise borrowings,
trade and other payables and are measured
at amortized cost using the effective interest
rate method.

•

The categorization depends on the nature and
purpose that the Company sets to the financial
instrument.

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

•

Financial instruments at fair value through profit
and loss: comprise mainly Other Investments

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

TenarisIII. Financial risk management

91.

The multinational nature of Tenaris’ 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 2015.

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’ 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’ 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 24 Derivative financial instruments).

A. Financial risk factors

I. Capital Market Risk
Tenaris seeks to maintain a low 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 0.08 as
of December 31, 2015 and 0.07 as of December
31, 2014. The Company does not have to comply
with regulatory capital adequacy requirements as
known in the financial services industry.

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’ subsidiaries may generate financial
gains (losses) to the extent that functional
currencies differ.

Annual Report
92.

The value of Tenaris’ 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’ main financial
assets and liabilities (including foreign exchange
derivative contracts) which impact the Company’s
profit and loss as of December 31, 2015 and 2014:

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

AS OF DECEMBER 31

2015

2014

CURRENCY EXPOSURE / FUNCTIONAL CURRENCY

Argentine Peso / U.S. dollar

Euro / U.S. dollar

Brazilian Real / U.S. dollar

(73,399)

(334,831)

(66,826)

(191,095)

(189,366)

150,486

The main relevant exposures correspond to:

Argentine Peso / U.S. dollar
As of December 31, 2015 and 2014 consisting
primarily of Argentine Peso-denominated
financial, trade, social and fiscal payables at
certain Argentine subsidiaries which functional
currency is the U.S. dollar. A change of 1% in the
ARS/USD exchange rate would have generated a
pre-tax gain / loss of $0.7 million and $1.9 million
as of December 31, 2015 and 2014, respectively.

Euro / U.S. dollar
As of December 31, 2015 and 2014, consisting
primarily of Euro-denominated intercompany
liabilities at certain subsidiaries which functional
currency is the U.S. dollar. A change of 1% in the

EUR/USD exchange rate would have generated a
pre-tax gain / loss of $3.3 million and $1.9 million
as of December 31, 2015 and 2014, respectively,
which would have been to a large extent offset by
changes to Tenaris’ net equity position.

Considering the balances held as of December
31, 2015 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 $5.1
million (including a loss / gain of $5.3 million due
to foreign exchange derivative contracts), which
would be partially offset by changes to Tenaris’
net equity position of $3.9 million. For balances
held as of December 31, 2014, 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 $7.5
million (including a loss / gain of $2.8 million due
to foreign exchange derivative contracts), which
would have been partially offset by changes to
Tenaris’ net equity position of $1.8 million.

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.

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

93.

AS OF DECEMBER 31

Fixed rate (short term financing)

Variable rate

Total (*)

Amount in
thousands of
U.S. dollars

954,681

16,835

971,516

2015

Percentage

98%

Amount in
thousands of
U.S. dollars

755,498

243,742

999,240

2014

Percentage

76%

24%

(*) As of December 31, 2015 approximately 59% of the total debt balance corresponded to fixed-rate

borrowings where the original period was nonetheless equal to or less than 360 days. This
compares to approximately 73% of the total outstanding debt balance as of December 31, 2014.

The Company estimates that, if market interest
rates applicable to Tenaris’ borrowings had been
100 basis points higher, then the additional pre-tax
loss would have been $10.8 million in 2015 and
$6.3 million in 2014.

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’ net sales in 2015,
2014 and 2013.

Tenaris’ 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, 2015 and 2014 trade receivables
amount to $1,135.1 million and $1,963.4 million
respectively. Trade receivables have guarantees
under credit insurance of $325.1 million and $460.5
million, letter of credit and other bank guarantees
of $20.5 million and $98.4 million, and other
guarantees of $7.9 million and $12.3 million as of
December 31, 2015 and 2014 respectively.

As of December 31, 2015 and 2014 past due
trade receivables amounted to $333.8 million and

Annual Report

94.

$350.1 million, respectively. Out of those amounts
$84.9 million and $75.8 million are guaranteed
trade receivables while $101.5 million and $69.0
million are included in the allowance for doubtful
accounts. Past due receivable not provisioned
relate to a number of customers for whom there
is no recent history of default. The allowance for
doubtful accounts and the existing guarantees are
sufficient to cover doubtful trade receivables.

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 92% of Tenaris’ liquid financial
assets correspond to Investment Grade-rated
instruments as of December 31, 2015, in
comparison with approximately 89% as of
December 31, 2014.

VI. Liquidity risk
Tenaris financing strategy aims to maintain
adequate financial resources and access to
additional liquidity. During 2015, Tenaris has
counted on cash flows from operations as well as
additional bank financing to fund its transactions.

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.

Liquid financial assets as a whole (comprising cash
and cash equivalents and other investments) were
19% of total assets at the end of 2015 compared to
14% at the end of 2014.

Tenaris has a conservative approach to the
management of its liquidity, which consists of
cash in banks, liquidity funds and short-term
investments mainly 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, 2015 and 2014, Tenaris does not have direct
exposure to financial instruments issued by
European sovereign counterparties.

Tenaris holds its investments primarily in U.S.
dollars. As of December 31, 2015 and 2014, U.S.
dollar denominated liquid assets represented
approximately 87% and 83% of total liquid
financial assets respectively.

VII. Commodity price risk
In the ordinary course of its operations, Tenaris
purchases commodities and raw materials that
are subject to price volatility caused by supply
conditions, political and economic variables and
other factors. As a consequence, Tenaris is exposed
to risk resulting from fluctuations in the prices of
these commodities and raw materials. Tenaris fixes
the prices of such raw materials and commodities
for short-term periods, typically not in excess of one
year, in general Tenaris does not hedge this risk.

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

95.

DECEMBER 31, 2015

Assets at fair
value through
profit and loss

Held
to
maturity

Loans
and
receivables

Available
for
sale

Total

ASSETS AS PER STATEMENT OF FINANCIAL POSITION

Derivative financial instruments

Trade receivables

Other receivables

Available for sale assets (See note 30)

Other investments

Cash and cash equivalents

Total

DECEMBER 31, 2015

LIABILITIES AS PER STATEMENT OF FINANCIAL POSITION

Borrowings

Derivative financial instruments

Trade and other payables

Total

18,248

–

2,142,524

185,528

–

393,084

–

1,135,129

131,896

–

101,019

–

21,572

–

18,248

1,135,129

131,896

21,572

2,535,608

286,547

2,346,300

393,084

1,368,044

21,572

4,129,000

Liabilities at
fair value
through profit
and loss

Other
financial
liabilities

Total

–

971,516

34,540

–

518,714

971,516

34,540

518,714

34,540

1,490,230

1,524,770

Annual Report

96.

DECEMBER 31, 2014

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

25,588

–

Trade receivables

Other receivables

Available for sale assets (See note 30)

Other investments

Cash and cash equivalents

Total

DECEMBER 31, 2014

LIABILITIES AS PER STATEMENT OF FINANCIAL POSITION

Borrowings

Derivative financial instruments

Trade and other payables

Total

–

1,452,159

296,873

1,963,394

172,190

–

21,572

25,588

1,963,394

172,190

21,572

387,759

1,839,918

120,772

–

417,645

1,774,620

2,256,356

409,331

4,440,307

Liabilities at
fair value
through profit
and loss

Other
financial
liabilities

Total

–

999,240

56,834

–

866,688

999,240

56,834

866,688

56,834

1,865,928

1,922,762

C. Fair value hierarchy
IFRS 13 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).

Tenaris

The following table presents the assets and
liabilities that are measured at fair value as of
December 31, 2015 and 2014.

97.

DECEMBER 31, 2015

Level 1

Level 2

Level 3 (*)

Total

ASSETS

Cash and cash equivalents

Other investments

Derivatives financial instruments

Available for sale assets (*)

Total

LIABILITIES

Derivatives financial instruments

Total

185,528

1,348,269

–

792,593

18,250

–

1,533,797

810,843

–

185,528

1,662

2,142,524

–

21,572

23,234

18,250

21,572

2,367,874

–

34,540

–

34,540

DECEMBER 31, 2014

Level 1

Level 2

Level 3 (*)

Total

ASSETS

Cash and cash equivalents

Other investments

Derivatives financial instruments

Available for sale assets (*)

Total

LIABILITIES

Derivatives financial instruments

Total

(*) For further detail regarding Available for sale assets, see Note 30.

296,873

1,277,465

–

560,914

25,588

–

1,574,338

586,502

–

296,873

1,539

1,839,918

–

21,572

23,111

25,588

21,572

2,183,951

–

56,834

–

56,834

Annual Report
98.

There were no transfers between Level 1 and 2
during the period.

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 when 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 obtained 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’ interest in Venezuelan companies under
process of nationalization (see Note 30).

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

99.

YEAR ENDED DECEMBER 31

At the beginning of the period

Currency translation adjustment and others

At the end of the year

Assets / Liabilities

2015

2014

23,111

123

23,234

24,070

(959)

23,111

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 generally
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.

Some of Tenaris investments are designated as
held to maturity and measured at amortized
cost. Tenaris estimates that the fair value of these
financial assets is 99% of its carrying amount
including interests accrued as of December 31, 2015.

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

Annual Report
100.

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.

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 amortized cost. Tenaris
estimates that the fair value of its main financial
liabilities is approximately 99% of its carrying
amount including interests accrued in 2015 as
compared with 100% in 2014. 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’
derivative financial instruments (assets or liabilities)

Tenaris
101.

continues to be reflected in the statement of
financial position. The full fair value of a hedging
derivative is classified as a current or 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, 2015 and 2014, the effective
portion of designated cash flow hedges which is
included in “Other Reserves” in equity amounts to
$2.8 million credit and $7.9 million debit (see Note
24 Derivative financial instruments).

The fair values of various derivative instruments
used for hedging purposes are disclosed in Note
24. Movements in the hedging reserve included
within “Other Reserves” in equity are also shown
in Note 24.

Annual ReportIV. Other notes to the
Consolidated financial statements

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

102.

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, 2015

IFRS - Net Sales

MANAGEMENT VIEW

Operating income

Differences in cost of sales and others

Differences in impairment / Depreciation and amortization

IFRS - Operating income

Financial income (expense), net

Income before equity in earnings of non-consolidated companies and income tax

Equity in losses of non-consolidated companies

Income before income tax

Capital expenditures

Depreciation and amortization

Tubes

Other

Total

6,443,814

656,939

7,100,753

685,870

(228,948)

(319,293)

137,629

66,431

(9,794)

1,162

57,799

752,301

(238,742)

(318,131)

195,428

14,210

209,638

(39,558)

170,080

1,088,901

638,456

42,618

20,322

1,131,519

658,778

Tenaris
103.

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31, 2014

IFRS - Net Sales

MANAGEMENT VIEW

Operating income

Differences in cost of sales and others

Depreciation and amortization/Impairment

IFRS - Operating income

Financial income (expense), net

Income before equity in earnings of non-consolidated companies and income tax

Equity in losses of non-consolidated companies

Income before income tax

Capital expenditures

Depreciation and amortization

Tubes

Other

Total

9,581,615

756,347

10,337,962

2,022,429

(35,463)

(121,289)

27,735

2,050,164

5,197

207

(30,266)

(121,082)

1,865,677

33,139

1,898,816

33,037

1,931,853

(164,616)

1,767,237

1,051,148

593,671

38,225

21,958

1,089,373

615,629

YEAR ENDED DECEMBER 31, 2013

Tubes

Other

Total

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 non-consolidated companies and income tax

Equity in earnings of non-consolidated companies

Income before income tax

Capital expenditures

Depreciation and amortization

9,812,295

784,486

10,596,781

2,098,160

(1,855)

711

91,265

(3,337)

(114)

2,189,425

(5,192)

597

2,097,016

87,814

2,184,830

(28,679)

2,156,151

46,098

2,202,249

721,869

589,482

31,629

20,572

753,498

610,054

Transactions between segments, which were eliminated in consolidation, mainly related to
sales of scrap, energy, surplus raw materials and others from the Other segment to the Tubes
segment for $57,468, $233,863 and $276,388 in 2015, 2014 and 2013, respectively.

Net income under Management view amounted to $18.2 million, while under IFRS amounted
to $74.4 million loss. In addition to the amounts reconciled above, the main differences arise
from the impact of functional currencies on financial result, deferred income taxes as well as
the result of investment in non-consolidated companies and changes on the valuation of
inventories according to cost estimation internally defined.

Annual Report

104.

Geographical information

All amounts in thousands of U.S. dollars

North

America

South

America

Europe

Middle East
& Africa

Far East &
Oceania

Unallocated
(*)

Total

YEAR ENDED DECEMBER 31, 2015

Net sales

Total assets

Trade receivables

Property, plant and

equipment, net

Capital expenditures

Depreciation and amortization

YEAR ENDED DECEMBER 31, 2014

Net sales

Total assets

Trade receivables

Property, plant and

equipment, net

Capital expenditures

Depreciation and amortization

YEAR ENDED DECEMBER 31, 2013

Net sales

Total assets

Trade receivables

Property, plant and

equipment, net

Capital expenditures

Depreciation and amortization

2,865,041

8,713,235

367,439

2,133,534

2,931,297

396,834

3,253,317

1,269,995

823,602

390,654

168,140

125,754

728,815

1,096,688

1,877,429

181,084

907,466

82,344

112,742

429,317

137,278

86,181

36,867

9,912

4,977,239

9,550,349

733,864

2,125,984

3,340,973

554,542

2,953,763

1,303,162

610,252

345,185

338,995

120,905

979,042

1,843,778

1,857,285

259,115

683,283

111,232

119,226

598,175

340,880

60,354

10,891

10,154

958,178

2,119,896

4,412,263

8,130,812

613,735

2,586,496

3,150,000

506,044

2,561,557

364,806

2,292,811

1,098,733

1,059,887

285,413

327,344

283,265

110,496

151,550

140,180

562,206

373,844

59,196

5,048

10,594

276,675

423,479

52,494

155,299

20,566

19,716

411,919

498,694

74,993

158,995

18,003

20,159

519,948

592,065

124,550

163,140

28,222

21,440

–

7,100,753

512,217

14,886,974

–

1,135,129

5,672,258

1,131,519

658,778

–

10,337,962

665,202

16,510,678

–

1,963,394

5,159,557

1,089,373

615,629

–

10,596,781

934,330

15,930,970

–

1,982,979

4,673,767

753,498

610,054

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 (27.4%); “South America” comprises principally
Argentina (18.8%), Brazil and Colombia; “Europe” comprises principally Italy, Norway and
Romania; “Middle East and Africa” comprises principally Angola, Nigeria and Saudi Arabia and;
“Far East and Oceania” comprises principally China, Japan and Indonesia.

(*) Includes Investments in non-consolidated companies and Available for sale assets for $21.6

million in 2015, 2014 and 2013 (see Note 12 and 30).

Tenaris

2. Cost of sales

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31

105.

2015

2014

2013

INVENTORIES AT THE BEGINNING OF THE YEAR

2,779,869

2,702,647

2,985,805

PLUS: CHARGES OF THE PERIOD

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

For the year ended December 2015, labor cost
includes approximately $104 million of severance
indemnities related to the adjustment of the
workforce to current market conditions.

1,934,209

3,944,283

3,749,921

–

298,470

947,997

377,596

24,100

184,053

68,669

21,523

92,059

4,338

453,818

–

422,142

1,204,720

1,199,351

366,932

17,324

217,694

4,704

20,024

130,845

368,507

8,263

202,338

70,970

4,956

147,180

3,948,676

6,364,682

6,173,628

(1,843,467)

(2,779,869)

(2,702,647)

4,885,078

6,287,460

6,456,786

Annual Report
106.

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

For the year ended December 2015, labor cost
includes approximately $73 million of severance
indemnities related to the adjustment of the
workforce to current market conditions.

2015

2014

2013

158,541

579,360

18,543

238,539

351,657

19,672

36,788

129,018

92,157

178,700

594,660

20,197

211,176

598,138

35,557

21,704

165,675

138,145

177,996

575,588

19,132

214,152

600,239

31,429

23,236

170,659

128,782

1,624,275

1,963,952

1,941,213

Tenaris107.

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' service rescission indemnity (including those classified as defined contribution plans)

Pension benefits - defined benefit plans

Employee retention and long term incentive program

At the year-end, the number of employees was 21,741 in 2015, 27,816 in 2014 and 26,825 in 2013.

The following table shows the geographical
distribution of the employees:

COUNTRY

Argentina

Mexico

Brazil

USA

Italy

Romania

Canada

Indonesia

Colombia

Japan

Other

2015

2014

2013

1,504,918

1,743,253

1,714,471

13,286

14,813

(5,660)

17,431

18,645

20,051

10,978

32,112

17,378

1,527,357

1,799,380

1,774,939

2015

2014

2013

5,388

5,101

2,050

2,190

2,030

1,624

546

532

636

508

6,421

5,518

3,835

3,549

2,352

1,725

1,225

677

614

588

6,379

5,290

3,309

3,449

2,352

1,637

1,280

711

627

565

1,136

21,741

1,312

27,816

1,226

26,825

Annual Report108.

5. Other operating income and expenses

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31

(I) OTHER OPERATING INCOME

Net income from other sales

Net rents

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

Impairment charge

Allowance for doubtful receivables

Other

2015

2014

2013

7,480

6,462

661

14,603

9,052

400,314

1,114

–

8,843

4,041

14,971

27,855

9,961

(760)

203

205,849

336

–

10,663

3,494

148

14,305

21,147

(2)

–

1,708

5,365

410,575

215,589

28,257

Tenaris

109.

Impairment charge
Tenaris’ 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.

A continuous decline in oil prices and futures
resulted in reductions in Tenaris customers`
investments. Drilling activity and demand of
products and services, particularly in North
America, continues to decline. Selling prices of
products in North America were also affected by
high levels of unfairly traded imported products
(including the accumulation of excess inventories
of imported products).

Tenaris regularly conducts assessments of the
carrying values of its assets. The value-in-use was
used to determine the recoverable value. 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.

The main key assumptions, used in estimating
the value in use are oil and natural gas prices
evolution, the level of drilling activity and Tenaris’
market share.

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
2015, the main discount rates used were in a range
between 9% and 13%.

During the third quarter 2015 and as a result of the
deterioration of business conditions for its welded
pipe assets in the United States, Tenaris decided
to write down the goodwill value on these assets
recording an impairment charge of $400.3 million.
Consequently, the carrying value of the assets
impaired was as follows:

All amounts in thousands of U.S. dollars

Assets before
impairment

Impairment

Assets after
impairment

OCTG - USA

1,382,993

(400,314)

982,679

Annual Report
110.

The main factors that could result in additional
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
further deterioration of the business, competitive
and economic factors, such as the oil and gas prices,
capital expenditure program of Tenaris’ clients,
the evolution of the rig count, the competitive
environment and the cost of raw materials.

As of December 31, 2015 for the OCTG – USA
CGU an increase of 100 Bps in the discount rate, a
decline of 100 Bps in the growth rate or a decline
of 5% in the cash flow projections, would not
generate a material effect on the carrying amount
of the CGU as of that date.

All amounts in thousands of U.S. dollars

Following the requirements of IAS 36, Tenaris
has determined the CGU for which a reasonable
possible change in a key assumptions would cause
the CGU’s carrying amount to exceed its recoverable
amount. For Tubocaribe an increase of 100 Bps in
the discount rate would generate an impairment of
$32 million; a decline of 100 Bps in the growth rate
would generate an impairment of $19 million; and
a decline of 5% in the cash flow projections would
generate an impairment of $14 million.

At December 31, 2014, the Company recorded
an impairment charge over its welded pipe assets
in Colombia and Canada. The carrying value
of the assets impaired (i.e., property, plant and
equipment and intangible assets) was as follows:

Tubocaribe – Colombia

Prudential – Canada

Total

Assets
before
impairment

Impairment

255,060

261,497

(174,239)

(31,610)

516,557

(205,849)

Assets
after
impairment

80,821

229,887

310,708

Tenaris

111.

2015

2014

2013

39,516

–

(4,942)

–

34,574

34,582

4,992

(1,478)

115

38,211

34,046

191

540

(10)

34,767

(23,058)

(44,388)

(70,450)

(13,301)

30,468

(14,473)

2,694

50,298

(4,733)

(6,351)

39,214

37,179

4,414

(34,589)

7,004

14,210

33,037

(28,679)

6. Financial results

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31

Interest Income

Interest from available-for-sale financial assets

Net result on changes in FV of financial assets at FVTPL

Net result on available-for-sale financial assets

Finance Income

Finance Cost

Net foreign exchange transactions results

Foreign exchange derivatives contracts results

Other

Other financial results

Net financial results

During the period Tenaris has derecognized all its
fixed income financial instruments categorized as
available for sale. Following is an evolution of the
available for sale financial assets reserve in Other
Comprehensive Income.

Equity Reserve
Dec-13

Movements
2014

Equity Reserve
Dec-14

Movements
2015

Equity Reserve
Dec-15

Available for sale

Total Available for sale reserve

(39)

(2,447)

(2,486)

2,486

–

Annual Report112.

7. Equity in earnings (losses) of non-consolidated

companies

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31

From non-consolidated companies

Gain on equity interest (see Note 26)

Impairment loss on non-consolidated companies (see Note 12)

8. Income tax

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31

Current tax

Deferred tax

2015

2014

2013

(10,674)

–

(28,884)

(39,558)

(24,696)

21,302

(161,222)

(164,616)

46,098

–

46,098

2015

2014

2013

164,562

79,943

244,505

695,136

(109,075)

586,061

594,179

33,698

627,877

TenarisThe 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

113.

2015

2014

2013

Income before income tax

170,080

1,767,237

2,202,249

Tax calculated at the tax rate in each country (*)

Non taxable income / Non deductible expenses, net (*)

Changes in the tax rates

Effect of currency translation on tax base (**)

Utilization of previously unrecognized tax losses

Tax charge

(61,624)

149,789

6,436

151,615

(1,711)

312,714

132,551

3,249

138,925

465,029

72,768

8,287

92,695

(1,378)

(10,902)

244,505

586,061

627,877

(*) Include the effect of the impairment charges of approximately $400.3 million and $205.8 million

in 2015 and 2014, respectively.

(**) Tenaris applies the liability method to recognize deferred income tax on temporary differences
between the tax basis 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 basis in subsidiaries (mainly Argentinian, Colombia
and Mexican), which have a functional currency different than 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.

9. Dividends distribution
On November 4, 2015, the Company’s Board of
Directors approved the payment of an interim
dividend of $0.15 per share ($0.30 per ADS), or
approximately $177 million, on November 25, 2015,
with an ex-dividend date of November 23, 2015.

On May 6, 2015 the Company’s Shareholders
approved an annual dividend in the amount of $0.45
per share ($0.90 per ADS). The amount approved
included the interim dividend previously paid in
November 27, 2014 in the amount of $0.15 per share
($0.30 per ADS). The balance, amounting to $0.30
per share ($0.60 per ADS), was paid on May 20,
2015. In the aggregate, the interim dividend paid in
November 2014 and the balance paid in May 2015
amounted to approximately $531.2 million.

On May 7, 2014 the Company’s Shareholders
approved an annual dividend in the amount of

$0.43 per share ($0.86 per ADS). The amount
approved included the interim dividend previously
paid in November 21, 2013 in the amount of $0.13
per share ($0.26 per ADS). The balance, amounting
to $0.30 per share ($0.60 per ADS), was paid
on May 22, 2014. In the aggregate, the interim
dividend paid in November 2013 and the balance
paid in May 2014 amounted to approximately
$507.6 million.

On May 2, 2013, the Company’s shareholders
approved an annual dividend in the amount of $0.43
per share ($0.86 per ADS). The amount approved
included the interim dividend previously paid in
November 2012, in the amount of $0.13 per share
($0.26 per ADS). The balance, amounting to $0.30
per share ($0.60 per ADS), was paid on May 23,
2013. In the aggregate, the interim dividend paid in
November 2012 and the balance paid in May 2013
amounted to approximately $507.6 million.

Annual Report114.

10. Property, plant and equipment, net

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31, 2015

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

1,633,797

8,233,902

359,554

Translation differences

Additions (*)

Disposals / Consumptions

Transfers / Reclassifications

(28,711)

13,065

(1,892)

149,844

(250,470)

16,064

(55,452)

475,748

(9,382)

2,022

(8,940)

23,718

846,538

(10,352)

1,036,818

(5,691)

(649,631)

38,075

(1,919)

(2,246)

(285)

(974)

11,111,866

(300,834)

1,065,723

(72,260)

(1,295)

Values at the end of the year

1,766,103

8,419,792

366,972

1,217,682

32,651

11,803,200

DEPRECIATION AND IMPAIRMENT

Accumulated at the beginning of the year

418,210

5,301,765

216,982

Translation differences

Depreciation charge

Transfers / Reclassifications

Disposals / Consumptions

(8,956)

45,644

2,474

(1,873)

(135,538)

325,241

(4,114)

(54,639)

(7,528)

24,313

1,987

(6,788)

Accumulated at the end of the year

455,499

5,432,715

228,966

–

15,352

(1,093)

941

(1,485)

5,952,309

(153,115)

396,139

(1,138)

(63,253)

13,762

6,130,942

At December 31, 2015

1,310,604

2,987,077

138,006

1,217,682

18,889

5,672,258

(*) The increase is mainly due to progress in the construction of the greenfield seamless facility in Bay City, Texas.

Tenaris

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31, 2014

COST

Land,
building and
improvements

Plant and
production
equipment

Vehicles,
furniture and
fixtures

Work in
progress

Spare
parts and
equipment

Total

115.

Values at the beginning of the year

1,498,188

8,073,413

339,314

Translation differences

Additions (*)

Disposals / Consumptions

Increase due to business combinations

Transfers / Reclassifications

Values at the end of the year

DEPRECIATION AND IMPAIRMENT

(15,137)

(241,044)

56,078

(2,179)

5,059

91,788

3,359

(32,567)

20,803

409,938

(4,445)

4,959

(6,436)

2,758

23,404

1,633,797

8,233,902

359,554

Accumulated at the beginning of the year

373,304

5,131,501

197,555

Translation differences

Depreciation charge

Transfers / Reclassifications

Increase due to business combinations

Impairment charge (See Note 5)

Disposals / Consumptions

(5,996)

47,132

2,044

3,019

(1,316)

(134,723)

313,745

(38)

12,745

7,905

(29,370)

(3,677)

25,088

603

2,291

–

(4,878)

Accumulated at the end of the year

418,210

5,301,765

216,982

441,902

(7,719)

937,927

–

859

(526,431)

846,538

–

37,754

10,390,571

(854)

5,823

(4,922)

243

(269,199)

1,008,146

(46,104)

29,510

(1,058)

38,075

11,111,866

14,444

5,716,804

(256)

1,164

–

(144,652)

387,129

588

17,080

10,924

(35,564)

15,352

5,952,309

At December 31, 2014

1,215,587

2,932,137

142,572

846,538

22,723

5,159,557

Property, plant and equipment include capitalized interests for net amounts at December 31, 2015 and 2014 of
$15.5 million and $3.3 million, respectively.

(*) The increase is mainly due to progress in the construction of the greenfield seamless facility in Bay City, Texas.

Annual Report

116.

11. Intangible assets, net

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31, 2015

COST

Values at the beginning of the year

Translation differences

Additions

Transfers / Reclassifications

Disposals

Information
system
projects

Licenses,
patents and
trademarks (*)

Goodwill

Customer
relationships

Total

471,935

(12,127)

65,022

(56)

494,014

2,182,004

2,059,946

5,207,899

(127)

774

1,028

(1,027)

(11,295)

–

(23,549)

65,796

1,123

(1,083)

Values at the end of the year

524,869

494,662

2,170,709

2,059,946

5,250,186

AMORTIZATION AND IMPAIRMENT

Accumulated at the beginning of the year

Translation differences

Amortization charge

Impairment charge (See Note 5)

Transfers / Reclassifications

283,679

(7,454)

59,342

–

(35)

332,823

436,625

1,397,142

2,450,269

–

30,588

–

1,001

–

400,314

–

172,709

–

(7,454)

262,639

400,314

966

Accumulated at the end of the year

335,532

364,412

836,939

1,569,851

3,106,734

At December 31, 2015

189,337

130,250

1,333,770

490,095

2,143,452

(*) Includes Proprietary Technology.

Tenaris

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31, 2014

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

Impairment charge (See Note 5)

Accumulated at the end of the year

117.

Information
system
projects

Licenses,
patents and
trademarks (*)

Goodwill

Customer
relationships

Total

400,488

492,829

2,147,242

2,059,946

5,100,505

(9,590)

79,983

1,090

(64)

(63)

1,244

556

–

(552)

(6,481)

–

41,243

–

(16,134)

81,227

1,646

41,271

(616)

471,935

494,014

2,182,004

2,059,946

5,207,899

249,916

(6,425)

40,188

–

302,444

340,488

1,140,421

2,033,269

–

30,379

–

96,137

–

157,933

98,788

(6,425)

228,500

194,925

283,679

332,823

436,625

1,397,142

2,450,269

At December 31, 2014

188,256

161,191

1,745,379

662,804

2,757,630

(*) Includes Proprietary Technology.

The geographical allocation of goodwill for
the year ended December 31, 2015 was $1.214.3
million for North America, $116.9 million for
South America $1.9 million for Europe, and $0.7
million for Middle East & Africa.

Annual Report

118.

The carrying amount of goodwill allocated by
CGU, as of December 31, 2015, was as follows:

All amounts in million U.S.dollars

As of December 31, 2015

Tubes Segment

Other Segment

Total

CGU

OCTG (USA)

Tamsa (Hydril and other)

Siderca (Hydril and other)

Hydril

Electric Conduits

Coiled Tubing

Other

Total

Maverick
Acquisition

Hydril
Acquisition

Other

Maverick
Acquisition

225

–

271

–

346

265

309

–

920

–

139

–

225

365

358

309

1,334

Tenaris

12. Investments in non-consolidated companies

119.

YEAR ENDED DECEMBER 31

At the beginning of the year

Translation differences

Equity in earnings of non-consolidated companies

Impairment loss in non-consolidated companies

Dividends and distributions received

Additions (c)

Decrease due to consolidation (*)

Decrease / increase in equity reserves

At the end of the period

(*) See Note 26

2015

2014

643,630

(92,914)

(10,674)

(28,884)

(20,674)

4,400

–

(4,239)

912,758

(54,688)

(24,696)

(161,222)

(17,735)

1,380

(8,310)

(3,857)

490,645

643,630

The principal non-consolidated 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

2015

2014

2015

2014

11.46% (*)

2.5% - 5%

–

449,375

36,109

5,161

490,645

527,080

113,099

3,451

643,630

a) Ternium S.A.
Ternium S.A. (“Ternium”), is a steel producer
with production facilities in Mexico, Argentina,
Colombia, United States and Guatemala and is one
of Tenaris’ main suppliers of round steel bars and
flat steel products for its pipes business.

was $12.4 per ADS, giving Tenaris’ ownership stake
a market value of approximately $285.5 million
(Level 1). At December 31, 2015, the carrying
value of Tenaris’ ownership stake in Ternium,
based on Ternium’s IFRS financial statements, was
approximately $449.4 million. See Section II.B.2.

At December 31, 2015, the closing price of Ternium’s
ADSs as quoted on the New York Stock Exchange

The Company reviews periodically the recoverability
of its investment in Ternium. To determine the

Annual Report

120.

recoverable value, the Company estimates the
value in use of the investment by calculating the
present value of the expected cash flows. The key
assumptions used by the Company are based on
external and internal sources of information, and
management judgment based on past experience
and expectations of future changes in the market.

Value-in-use was 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 was calculated based on perpetuity
considering a nominal growth rate of 2%. 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.
The discount rate used to test the investment in
Ternium for impairment was 10.6%.

b) Usiminas S.A.
Usiminas is a Brazilian producer of high quality
flat steel products used in the energy, automotive
and other industries and it is Tenaris’ principal
supplier of flat steel in Brazil for its pipes and
industrial equipment businesses.

At December 31, 2015, the closing price of the
Usiminas’ ordinary shares as quoted on the
BM&F Bovespa Stock Exchange was BRL 4.0
(approximately $1.03) per share, giving Tenaris’
ownership stake a market value of approximately
$25.7 million (Level 1). At December 31, 2015,
the carrying value of Tenaris’ ownership stake in
Usiminas, was approximately $36.1 million.

The Company reviews periodically the
recoverability of its investment in Usiminas. To
determine the recoverable value, the Company

estimates the value in use of the investment by
calculating the present value of the expected cash
flows. There is a significant interaction among
the principal assumptions made in estimating
Usiminas’ cash flow projections, which include
iron ore and steel prices, foreign exchange
and interest rates, Brazilian GDP and steel
consumption in the Brazilian market. The key
assumptions used by the Company are based on
external and internal sources of information, and
management judgment based on past experience
and expectations of future changes in the market.

Usiminas’ financial statements as of December 31,
2015 described a downgraded economic scenario
for the company that caused a significant impact
on its financial leverage and cash generation. In
addition, Usiminas’ auditors included in their
report on these financial statements an emphasis
of matter paragraph which, without qualifying
their opinion, indicated the existence of “a
material uncertainty that may cast significant
doubt about the Company’s ability to continue
as a going concern” as a result of the risk of not
achieving an action plan defined by Usiminas’
management to equalize its financial obligations
with cash generation. Consequently, Tenaris,
in a conservative approach and considering the
guidance of IAS 36, assessed the recoverable value
of its investment in Usiminas based on Usiminas
ordinary shares average market price for December
2015, and impaired its investment by $28.9 million.

c) Techgen, S.A. de C.V. (“Techgen”)
Techgen is a Mexican company currently
undertaking the construction and operation of a
natural gas-fired combined cycle electric power plant
in the Pesquería area of the State of Nuevo León,
Mexico, with a power capacity of between 850

Tenaris121.

and 900 megawatts. As of February 2014, Tenaris
completed the initial investments in Techgen of
22% of its share capital, the remaining ownership
is held by Ternium and Tecpetrol International S.A.
(a wholly-owned subsidiary of San Faustin S.A.,
the controlling shareholder of both Tenaris and
Ternium) by 48% and 30% respectively.

Techgen is a party to transportation capacity
agreements for a purchasing capacity of 150,000
MMBtu/Gas per day starting on June 1, 2016 and
ending on May 31, 2036, and a party to a contract
for the purchase of power generation equipment
and other services related to the equipment. As
of December 31, 2015, Tenaris exposure under
these agreements amount to $62.6 million and $2.2
million respectively.

Tenaris issued a Corporate Guarantee covering
22% of the obligations of Techgen under a
syndicated loan agreement between Techgen and
several banks. The loan agreement amounted to
$800 million to be used in the construction of the
facility. The main covenants under the Corporate
Guarantee are limitations on the sale of certain
assets and compliance with financial ratios
(e.g. leverage ratio). As of December 31, 2015,
disbursements under the loan agreement amounted
$800 million, as a result the amount guaranteed by
Tenaris was approximately $176 million.

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

Total comprehensive loss for the year, net of tax, attributable to owners of the parent

2015

2014

Usiminas S.A.

Ternium S.A.

Usiminas S.A.

Ternium S.A.

5,343,038

1,765,733

5,480,389

2,582,204

8,372,431

3,104,137

6,341,290

3,348,869

7,108,771

8,062,593

11,476,568

9,690,159

2,117,536

1,151,383

1,558,979

1,700,617

2,617,657

1,795,583

1,964,070

2,091,386

3,268,919

3,259,596

4,413,240

4,055,456

405,880

3,115,551

70,801

(1,053,806)

769,849

7,877,449

1,400,177

8,127

(457,750)

768,749

5,016,528

447,311

61,531

937,502

8,726,057

1,800,888

(198,751)

(495,603)

Annual Report

122.

13. 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

Others

Allowances for doubtful accounts – see Note 22 (I)

14. Inventories

YEAR ENDED DECEMBER 31

Finished goods

Goods in process

Raw materials

Supplies

Goods in transit

Allowance for obsolescence – see Note 23 (I)

2015

2014

1,113

11,485

25,660

62,675

14,719

70,509

35,515

221,676

(1,112)

220,564

1,697

12,214

29,997

43,093

21,313

119,970

35,588

263,872

(1,696)

262,176

2015

2014

741,437

407,126

277,184

503,692

143,228

1,012,297

622,365

396,847

554,946

386,954

2,072,667

2,973,409

(229,200)

(193,540)

1,843,467

2,779,869

Tenaris15. Receivables and prepayments

123.

YEAR ENDED DECEMBER 31

2015

2014

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 23 (I)

29,463

3,498

10,951

27,823

7,053

14,249

18,155

44,736

40,377

3,189

16,478

42,832

16,956

63,733

25,588

66,470

155,928

275,623

(7,082)

(7,992)

148,846

267,631

Annual Report
124.

16. 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

17. Trade receivables

YEAR ENDED DECEMBER 31

Current accounts

Receivables from related parties

Allowance for doubtful accounts – see Note 23 (I)

2015

2014

60,730

127,450

74,129

55,275

188,180

129,404

46,600

24,661

64,757

136,018

239,468

27,156

85,729

352,353

2015

2014

1,216,126

2,002,867

20,483

29,505

1,236,609

2,032,372

(101,480)

(68,978)

1,135,129

1,963,394

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

125.

AT DECEMBER 31, 2015

Trade Receivables

Not Due

Past due

Guaranteed

Not guaranteed

Guaranteed and not guaranteed

Allowance for doubtful accounts

Net Value

AT DECEMBER 31, 2014

Guaranteed

Not guaranteed

Guaranteed and not guaranteed

Allowance for doubtful accounts

Net Value

Trade receivables are mainly denominated in U.S. dollar.

1 - 180 days

> 180 days

353,537

883,072

1,236,609

(101,480)

1,135,129

268,606

634,250

902,856

–

902,856

571,170

1,461,202

2,032,372

495,336

1,186,958

1,682,294

(68,978)

–

1,963,394

1,682,294

33,706

152,173

185,879

(1,664)

184,215

70,239

203,116

273,355

(902)

272,453

51,225

96,649

147,874

(99,816)

48,058

5,595

71,128

76,723

(68,076)

8,647

Annual Report

126.

18. Cash and cash equivalents and Other investments

YEAR ENDED DECEMBER 31

CASH AND CASH EQUIVALENTS

Cash at banks

Liquidity funds

Short – term investments

OTHER INVESTMENTS - CURRENT

Fixed Income (time-deposit, zero coupon bonds, commercial papers)

Bonds and other fixed Income

Fund Investments

OTHER INVESTMENTS - NON-CURRENT

Bonds and other fixed Income

Others

2015

2014

101,019

81,735

103,793

120,772

110,952

185,921

286,547

417,645

877,436

1,203,695

59,731

718,877

817,823

301,679

2,140,862

1,838,379

393,084

1,662

394,746

–

1,539

Tenaris

19. Borrowings

YEAR ENDED DECEMBER 31

NON-CURRENT

Bank borrowings

Finance lease liabilities

CURRENT

Bank borrowings and other loans including related companies

Bank overdrafts

Finance lease liabilities

Costs of issue of debt

Total Borrowings

127.

2015

2014

223,050

171

223,221

747,704

349

371

(129)

748,295

971,516

30,104

729

30,833

966,741

1,200

486

(20)

968,407

999,240

Annual Report128.

The maturity of borrowings is as follows:

AT DECEMBER 31, 2015

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, 2014

Financial lease

Other borrowings

Total borrowings

Interest to be accrued (*)

Total

(*)

Includes the effect of hedge accounting.

371

747,924

748,295

1,152

749,447

487

967,920

968,407

19,398

987,805

138

201,152

201,290

1,050

202,340

392

7,117

7,509

2,586

10,095

1,261

1,290

1,031

2,321

219

1,147

1,366

1,074

2,440

1,285

1,289

1,010

2,299

1,259

1,356

1,057

2,413

–

880

990

1,870

1,207

1,228

1,055

2,283

–

18,472

1,046

19,518

–

19,374

2,168

21,542

542

970,974

971,516

6,279

977,795

1,216

998,024

999,240

27,338

1,026,578

Tenaris

Significant borrowings include:

In million of USD

Disbursement date

Borrower

Type

Original &
Outstanding

Final maturity

2015

Mainly 2015

2015

Tamsa

Siderca

Bank loans

Tubocaribe

Bank loan

607

105

200

2016

Jan-17

129.

As of December 31, 2015, 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, 2015 and 2014 (considering hedge
accounting where applicable).

Total borrowings

2015

2014

1.52%

1.89%

Annual Report130.

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

Non current borrowings

Currency

USD

ARS

EUR

Others

Total non-current borrowings

Interest rates

Year ended December 31

Fixed

Variable

2015

2014

219,778

–

2,922

521

223,221

21,079

4,933

3,981

840

30,833

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

Current borrowings

Currency

Interest rates

Year ended December 31

USD

EUR

MXN

ARS

BRL

ARS

Others

Variable

Fixed

Variable

Fixed

Variable

Fixed

2015

2014

16,046

2,482

1,047

614,916

113,326

–

165

210

184,103

14,577

24,030

1,272

522,225

184,791

34,446

252

2,640

Total current borrowings

748,295

968,407

Tenaris

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

Deferred tax liabilities

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

131.

At the beginning of the year

Translation differences

Charged directly to Other Comprehensive Income

Income statement credit / (charge)

At December 31, 2015

At the beginning of the year

Translation differences

Charged directly to Other Comprehensive Income

Income statement credit / (charge)

At December 31, 2014

(*)

Includes the effect of currency translation on tax base explained in Note 8.

Fixed
assets

346,385

(13,641)

–

(18,903)

313,841

360,208

(3,067)

–

(10,756)

346,385

Inventories

Intangible
and Other (*)

Total

44,234

482,446

873,065

–

682

(1,718)

42,516

11,154

3,999

51,958

(2,487)

3,999

31,337

549,557

905,914

21,526

548,219

929,953

–

682

22,026

44,234

849

(906)

(65,716)

482,446

(2,218)

(224)

(54,446)

873,065

Annual Report

132.

Deferred tax assets

At the beginning of the year

Translation differences

Charged directly to Other Comprehensive Income

Income statement charge / (credit)

At December 31, 2015

Provisions and
allowances

Inventories

(45,336)

9,709

–

(11,500)

(189,709)

4,049

–

78,282

Tax
losses (*)

(41,652)

6,988

–

(64,730)

Other

Total

(150,497)

(427,194)

1,020

527

46,554

21,766

527

48,606

(47,127)

(107,378)

(99,394)

(102,396)

(356,295)

At the beginning of the year

Translation differences

Increase due to business combinations

Charged directly to Other Comprehensive Income

Income statement charge / (credit)

At December 31, 2014

(53,636)

(162,242)

(25,810)

(134,319)

(376,007)

4,317

(1,255)

979

4,259

2,334

(297)

(682)

(28,822)

(45,336)

(189,709)

1,500

(3,535)

–

(13,807)

(41,652)

322

(281)

8,473

(5,368)

337

(16,259)

(54,629)

(150,497)

(427,194)

(*) As of December 31, 2015, the recognized deferred tax assets on tax losses amount to $99.4 million and the net

unrecognized deferred tax assets amount to $33.7 million.

Tenaris

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

133.

2015

2014

(109,025)

843,022

(119,192)

868,289

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 in 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 (debit)

Increase due to business combinations

At the end of the period

2015

2014

(200,706)

750,325

549,619

(268,252)

714,123

445,871

2015

2014

445,871

553,946

19,279

4,526

79,943

–

549,619

6,255

113

(109,075)

(5,368)

445,871

Annual Report134.

21. Other liabilities

I. Other liabilities – Non current

YEAR ENDED DECEMBER 31

Post-employment benefits

Other-long term benefits

Miscellaneous

Post-employment benefits
Unfunded

YEAR ENDED DECEMBER 31

Values at the beginning of the period

Current service cost

Interest cost

Curtailments and settlements

Remeasurements (*)

Translation differences

Benefits paid from the plan

Other

At the end of the year

(*) For 2015 and 2014, a gain of $9.1 and $12.2 million respectively is attributable to demographic
assumptions, and a gain of $0.6 and a loss of $2.4 million respectively is attributable to financial
assumptions.

2015

2014

135,880

78,830

16,466

164,217

98,069

23,579

231,176

285,865

2015

2014

126,733

136,931

5,918

6,164

(128)

(9,743)

(8,418)

(16,062)

3,137

107,601

7,582

9,254

(236)

(9,824)

(8,665)

(8,006)

(303)

126,733

TenarisThe principal actuarial assumptions used
were as follows:

YEAR ENDED DECEMBER 31

Discount rate

Rate of compensation increase

135.

2015

2014

2% - 7%

0% - 3%

2% - 7%

2% - 3%

As of December 31, 2015, an increase / (decrease)
of 1% in the discount rate assumption would have
generated a (decrease) / increase on the defined
benefit obligation of $8.6 million and $9.1 million
respectively, and an increase / (decrease) of 1% in
the rate of compensation assumption would have
generated an increase / (decrease) impact on the
defined benefit obligation of $4.7 million and $4.2
million respectively. The above sensitivity analyses
are based on a change in discount rate and rate of

compensation while holding all other assumptions
constant. In practice, this is unlikely to occur,
and changes in some of the assumptions may
be correlated.

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

YEAR ENDED DECEMBER 31

Present value of funded obligations

Fair value of plan assets

Liability (*)

(*) In 2015 and 2014, $2.6 million and $2.4 million corresponding to an overfunded plan were

reclassified within other non-current assets, respectively.

2015

2014

153,974

(128,321)

25,653

183,085

(147,991)

35,094

Annual Report136.

The movement in the present value of funded
obligations is as follows:

YEAR ENDED DECEMBER 31

At the beginning of the year

Translation differences

Current service cost

Interest cost

Remeasurements (*)

Benefits paid

Movement in the fair value of plan assets

(*) For 2015 and 2014, a gain of $1.1 and a loss of $1.5 million respectively is attributable to
demographic assumptions, and a gain of $5 and a loss of $ 14.6 million respectively is
attributable to financial assumptions.

The movement in the fair value of plan assets
is as follows:

YEAR ENDED DECEMBER 31

At the beginning of the year

Return on plan assets

Remeasurements

Translation differences

Contributions paid to the plan

Benefits paid from the plan

Other

At the end of the year

2015

2014

183,085

(18,507)

1,155

6,725

(6,124)

(12,360)

153,974

177,433

(10,000)

2,266

7,621

16,104

(10,339)

183,085

2015

2014

(147,991)

(145,777)

(5,021)

1,686

15,651

(5,066)

12,360

(7,842)

(8,130)

8,911

(5,548)

10,339

(128,321)

(147,991)

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

137.

AT DECEMBER, 31

Equity instruments

Debt instruments

Others

The principal actuarial assumptions used
were as follows:

YEAR ENDED DECEMBER 31

Discount rate

Rate of compensation increase

2015

2014

52.3%

44.3%

3.4%

52.7%

43.7%

3.6%

2015

2014

0 % - 2 %

2 % - 3 %

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.

As of December 31, 2015, an increase / (decrease)
of 1% in the discount rate assumption would have
generated a (decrease) / increase on the defined
benefit obligation of $18 million and $22.2 million
respectively, and an increase / (decrease) of 1%

in the compensation rate assumption would have
generated an increase / (decrease) on the defined
benefit obligation of $2.2 million and $2 million
respectively. The above sensitivity analyses are
based on a change in discount rate and rate of
compensation while holding all other assumptions
constant. In practice, this is unlikely to occur,
and changes in some of the assumptions may
be correlated.

The employer contributions expected to be paid for
the year 2016 amount approximately to $3.9 million.

Annual Report138.

The expected maturity of undiscounted
post- employment benefits is as follows:

AT 31 DECEMBER 2015

Less than
1 year

1 - 2 years

2 - 3 years

3 - 4 years

4 - 5 years

Over 5
years

Unfunded Post-employment

10,488

5,334

16,694

5,587

5,343

234,606

benefits

Funded Post-employment benefits

Total

8,144

18,632

8,437

13,771

8,768

25,462

9,001

14,588

9,239

14,582

290,089

524,695

The methods and types of assumptions used in
preparing the sensitivity analysis did not change
compared to the previous period.

II. Other liabilities – current

YEAR ENDED DECEMBER 31

Payroll and social security payable

Liabilities with related parties

Derivative financial instruments

Miscellaneous

22. Non-current allowances and provisions

I. Deducted from non current receivables

YEAR ENDED DECEMBER 31

Values at the beginning of the year

Translation differences

Used

Values at the end of the year

2015

2014

173,528

204,558

351

34,445

14,518

5,305

56,834

29,580

222,842

296,277

2015

2014

(1,696)

(2,979)

584

–

534

749

(1,112)

(1,696)

Tenaris

II. Liabilities

YEAR ENDED DECEMBER 31

Values at the beginning of the year

Translation differences

Additional provisions

Reclassifications

Used

Increase due to business combinations

Values at the end of the year

23. Current allowances and provisions

I. Deducted from assets

139.

2015

2014

70,714

(20,725)

9,390

6,562

(4,520)

–

66,795

(10,253)

18,029

(2,276)

(5,146)

3,565

61,421

70,714

YEAR ENDED DECEMBER 31, 2015

Values at the beginning of the year

Translation differences

Additional allowances

Used

At December 31, 2015

YEAR ENDED DECEMBER 31, 2014

Values at the beginning of the year

Translation differences

Additional allowances

Increase due to business combinations

Used

At December 31, 2014

Allowance for doubtful
accounts - Trade receivables

Allowance for other doubtful
accounts - Other receivables

Allowance for inventory
obsolescence

(68,978)

1,033

(36,788)

3,253

(101,480)

(51,154)

384

(21,704)

(88)

3,584

(68,978)

(7,992)

1,732

(1,114)

292

(7,082)

(9,396)

1,335

(336)

(38)

443

(7,992)

(193,540)

10,056

(68,669)

22,953

(229,200)

(228,765)

5,141

(4,704)

(875)

35,663

(193,540)

Annual Report140.

II. Liabilities

YEAR ENDED DECEMBER 31, 2015

Values at the beginning of the year

Translation differences

Additional allowances

Reclassifications

Used

At December 31, 2015

YEAR ENDED DECEMBER 31, 2014

Values at the beginning of the year

Translation differences

Additional allowances

Reclassifications

Used

At December 31, 2014

Sales risks

Other claims and
contingencies

7,205

(517)

8,540

(8,985)

6,290

9,670

(747)

14,100

–

(15,818)

7,205

13,175

(973)

1,743

(6,610)

(4,630)

2,705

16,045

(1,777)

2,668

2,275

(6,036)

13,175

Total

20,380

(1,490)

10,283

(6,563)

(13,615)

8,995

25,715

(2,524)

16,768

2,275

(21,854)

20,380

24. 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

Foreign exchange derivatives contracts

Contracts with positive fair values

Foreign exchange derivatives contracts

Contracts with negative fair values

Total

2015

2014

18,247

(34,540)

(16,293)

25,588

(56,834)

(31,246)

Tenaris
141.

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 and those derivatives that were
designated for hedge accounting as of December
2015 and 2014, were as follows:

Purchase currency

Sell currency

USD

MXN

USD

EUR

BRL

USD

KWD

USD

BRL

CNH

GBP

MXN

USD

EUR

USD

EUR

JPY

USD

ARS

USD

Others

Total

Term

2016

Fair Value

Hedge Accounting Reserve

2015

2014

(24,364)

(45,061)

14,466

331

957

–

(24)

(8,639)

402

–

465

18,105

(6,186)

982

(96)

(5,079)

1,908

1,632

1,089

438

927

(16,293)

(31,246)

2015

320

(21)

–

(819)

–

3,175

–

100

2,783

2014

120

(66)

(6,186)

–

138

(1,797)

630

(1,245)

–

403

–

(7,916)

Following is a summary of the hedge
reserve evolution:

Equity Reserve Dec-13

Movements 2014

Equity Reserve Dec-14

Movements 2015

Equity Reserve Dec-15

Foreign Exchange

Total Cash flow Hedge

120

(8,036)

(7,916)

10,699

2,783

Tenaris estimates that the cash flow hedge reserve
at December 31, 2015 will be recycled to the
Consolidated Income Statement during 2016.

Annual Report142.

25. Contingencies, commitments and restrictions

on the distribution of profits

Set forth below is a description of Tenaris’
material ongoing legal proceedings:

Contingencies
Tenaris is from time to time subject to various
claims, lawsuits and other legal proceedings,
including customer claims, in which third parties
are seeking payment for alleged damages,
reimbursement for losses or indemnity. Some of
these claims, lawsuits and other legal proceedings
involve highly complex issues, and often these
issues are subject to substantial uncertainties.
Accordingly, the potential liability with respect
to a large portion of such claims, lawsuits and
other legal proceedings cannot be estimated with
certainty. Management with the assistance of legal
counsel periodically reviews the status of each
significant matter and assesses potential financial
exposure. If a potential loss from a claim, lawsuit
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
based on information available to management
as of the date of preparation of the financial
statements, and take into consideration litigation
and settlement strategies. The Company believes
that the aggregate provisions recorded for potential
losses in these financial statements (Notes 22
and 23) are adequate based upon currently
available information. However, if management’s
estimates prove incorrect, current reserves could
be inadequate and Tenaris could incur a charge
to earnings which could have a material adverse
effect on Tenaris’ results of operations, financial
condition, net worth and cash flows.

Tax assessment in Italy
An Italian subsidiary of Tenaris, received on
December 24, 2012 a tax assessment from the
Italian tax authorities related to allegedly omitted
withholding tax on dividend payments made in
2007. The assessment, which was for an estimated
amount of EUR292 million (approximately
$318 million), comprising principal, interest and
penalties, was appealed with the first-instance tax
court in Milan. In February 2014, the first-instance
tax court issued its decision on this tax assessment,
partially reversing the assessment and lowering
the claimed amount to approximately EUR9
million (approximately $10 million), including
principal, interest and penalties. On October 2,
2014, the Italian tax authorities appealed against
the second-instance tax court decision on the 2007
assessment. On June 12, 2015, the second-instance
tax court accepted the Tenaris subsidiary defense
arguments and rejected the appeal by the Italian tax
authorities, thus reversing the entire 2007 assessment
and recognizing that the dividend payment was
exempt from withholding tax. The Italian tax
authorities have appealed the second-instance tax
court decision before the Supreme Court.

On December 24, 2013, the Italian subsidiary
received a second tax assessment from the Italian
tax authorities, based on the same arguments as
those in the first assessment, relating to allegedly
omitted withholding tax on dividend payments
made in 2008 – the last such distribution made
by the Italian subsidiary. The assessment, which

Tenaris143.

was for an estimated amount of EUR254 million
(approximately $276 million), comprising principal
interest and penalties, was appealed with the first-
instance tax court in Milan. On January 27, 2016,
the first-instance tax court rejected the appeal filed
by the Italian subsidiary. This first-instance ruling,
which held that the Italian subsidiary is required to
pay an amount of EUR220 million (approximately
$240 million) including principal interest and
penalties, contradicts the first- and second-instance
tax court rulings in connection with the 2007
assessment. Tenaris continues to believe that the
Italian subsidiary has correctly applied the relevant
legal provisions; accordingly, the Italian subsidiary
will appeal the January 2016 first-instance ruling
against the second-instance tax court and will also
request the suspension of its effects.

Based, among other things, on the tax court
decisions on the 2007 assessment and the opinion
of counsels, Tenaris believes that it is not probable
that the ultimate resolution of either the 2007 or
the 2008 tax assessment will result in a material
obligation.

CSN claims relating to the January 2012 acquisition
of Usiminas shares
In 2013, Confab was notified of a lawsuit filed
in Brazil by Companhia Siderúrgica Nacional
(CSN) and various entities affiliated with CSN
against Confab and the other entities that acquired
a participation in Usiminas’ control group 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
non-controlling holders of Usiminas ordinary
shares for a price per share equal to 80% of
the price per share paid in such acquisition,
or BRL28.8, 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 that offer.

On September 23, 2013, the first instance court
issued its decision finding in favor of Confab and
the other defendants and dismissing the CSN
lawsuit. The claimants appealed the court decision
and the defendants filed their response to the
appeal. It is currently expected that the court of
appeals will issue its judgment on the appeal in the
first half of 2016.

The Company is aware that on November 10,
2014, CSN filed a separate complaint with
Brazil’s securities regulator Comissão de Valores
Mobiliários (CVM) on the same grounds and
with the same purpose as the lawsuit referred to
above. The CVM proceeding is underway and the
Company has not yet been served with process or
requested to provide its response.

Finally, on December 11, 2014, CSN filed a
claim with Brazil’s antitrust regulator Conselho
Administrativo de Defesa Econômica (CADE). In
its claim, CSN alleged that the antitrust clearance
request related to the January 2012 acquisition,
which was approved by CADE without restrictions
in August 2012, contained a false and deceitful

Annual Report144.

description of the acquisition aimed at frustrating
the minority shareholders’ right to a tag-along
tender offer, and requested that CADE investigate
and reopen the antitrust review of the acquisition
and suspend the Company’s voting rights in
Usiminas until the review is completed. On May
6, 2015, CADE rejected CSN’s claim. CSN did not
appeal the decision and on May 19, 2015, CADE
finally closed the file.

Tenaris believes that all of CSN's claims and
allegations are groundless and without merit, as
confirmed by several opinions of Brazilian legal
counsel and previous decisions by CVM, including
a February 2012 decision determining that the
above mentioned acquisition did not trigger any
tender offer requirement, and, more recently,
the first instance court decision on this matter
first referred to above. Accordingly, no provision
was recorded in these Consolidated Financial
Statements.

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

•

A Tenaris company is a party to a contract with
Nucor Corporation under which it is committed

to purchase on a monthly basis a minimum
volume of hot-rolled steel coils at prices that
are negotiated annually by reference to prices
to comparable Nucor customers. The contract
became effective in May 2013 and will be in force
until December 2017; provided, however, that
either party may terminate the contract at any
time after January 1, 2015 with a 12-month prior
notice. Due to the current weak pipe demand
associated with the reduction in drilling activity,
the parties entered into a temporary agreement
pursuant to which application of the minimum
volume requirements were suspended, and Tenaris
is temporarily allowed to purchase steel volumes
in accordance with its needs. As of December 31,
2015, the estimated aggregate contract amount
through December 31, 2016, calculated at current
prices, is approximately $221 million.

•

A Tenaris company entered into various contracts
with suppliers pursuant to which it committed to
purchase goods and services for a total amount
of approximately $347.9 million related to the
investment plan to expand Tenaris’ U.S. operations
with the construction of a state-of-the-art seamless
pipe mill in Bay City, Texas. As of December 31,
2015 approximately $836.5 million had already
been invested.

TenarisRestrictions to the distribution of profits and

payment of dividends
As of December 31, 2015, 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, 2015

Total equity in accordance with Luxembourg law

145.

1,180,537

118,054

609,733

18,024,204

19,932,528

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, 2015, 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, 2015, distributable amount
under Luxembourg law totals $18.6 billion, as
detailed below:

All amounts in thousands of U.S. dollars

Retained earnings at December 31, 2014 under Luxembourg law

Other income and expenses for the year ended December 31, 2015 (*)

Dividends approved

Retained earnings at December 31, 2015 under Luxembourg law

Share premium

Distributable amount at December 31, 2015 under Luxembourg law

(*) In 2015 result under Luxembourg GAAP was affected by the written down of the value of

its investment.

21,072,180

(2,516,734)

(531,242)

18,024,204

609,733

18,633,937

Annual Report146.

26. Acquisition of subsidiaries and non-

consolidated companies

In September 2014, Tenaris closed the acquisition of
100% of the shares of Socobras Participações Ltda.
(“Socobras”), a holding company that owned 50%
of the shares of Socotherm Brasil S.A.(“Socotherm”).
Tenaris already owned the other 50% interest in
Socotherm, following completion of this transaction,
Tenaris now owns 100% of Socotherm.

Tenaris accounted for this transaction as a step-
acquisition whereby Tenaris’ ownership interest
in Socotherm held before the acquisition was
remeasured to fair value at that date. As a result,
Tenaris recorded a result of approximately $21.3
million resulting from the difference between
the carrying value of its initial investments in
Socotherm and the fair value which was included
in “Equity in earnings (losses) of non-consolidated
companies” in the Consolidated Income Statement.

The purchase price amounted to $29.6 million,
net assets acquired (including PPE, inventories
and cash and cash equivalents) amounted to $9.6
million and goodwill for $20 million.

Had the transaction been consummated on
January 1, 2014, then Tenaris’ unaudited pro
forma net sales and net income from continuing
operations would not have changed materially.

Tenaris27. Cash flow disclosures

147.

YEAR ENDED DECEMBER 31

2015

2014

2013

(I) CHANGES IN WORKING CAPITAL

Inventories

Receivables and prepayments and Current tax assets

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, 2015, 2014 and 2013, the
components of the line item “other, including
currency translation adjustment” are immaterial
to net cash provided by operating activities.

936,402

60,009

828,265

(123,904)

1,171

(327,958)

(72,883)

(31,061)

20,886

(61,636)

76,383

(3,755)

287,874

62,114

129,939

(151,578)

(77,099)

(62,470)

1,373,985

(72,066)

188,780

244,505

(335,585)

(91,080)

(11,517)

28,238

(18,696)

(1,975)

286,547

(349)

286,198

586,061

(506,999)

79,062

6,174

31,306

(74,672)

(37,192)

417,645

(1,200)

416,445

627,877

(502,461)

125,416

37,356

42,091

(109,170)

(29,723)

614,529

(16,384)

598,145

Annual Report

148.

28. Related party transactions

As of December 31, 2015:

•

San Faustin S.A., a Luxembourg 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 Société
à Responsabilité Limitée (“Techint”), who is
the holder of record of the above-mentioned
Tenaris shares.

•

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.

Transactions and balances disclosed as with “non-
consolidated parties” 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 non-consolidated
parties and which are not consolidated are disclosed
as “Other”.

TenarisThe following transactions were carried out with
related parties:

149.

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31

I. TRANSACTIONS

A. SALES OF GOODS AND SERVICES

Sales of goods to non-consolidated parties

Sales of goods to other related parties

Sales of services to non-consolidated parties

Sales of services to other related parties

B. PURCHASES OF GOODS AND SERVICES

Purchases of goods to non-consolidated parties

Purchases of goods to other related parties

Purchases of services to non-consolidated parties

Purchases of services to other related parties

2015

2014

2013

24,019

87,663

10,154

4,010

33,342

103,377

10,932

3,264

35,358

115,505

15,439

5,035

125,846

150,915

171,337

260,280

302,144

35,153

16,153

78,805

44,185

27,304

90,652

390,391

464,285

320,000

14,828

56,820

100,677

492,325

AT DECEMBER 31

2015

2014

II. PERIOD-END BALANCES

A. ARISING FROM SALES / PURCHASES OF GOODS / SERVICES

Receivables from non-consolidated parties

Receivables from other related parties

Payables to non-consolidated parties

Payables to other related parties

B. FINANCIAL DEBT

Borrowings from associated parties

73,412

23,995

(20,000)

(19,655)

57,752

–

104,703

31,628

(53,777)

(28,208)

54,346

(200)

Directors’ and senior management compensation
During the years ended December 31, 2015, 2014
and 2013, the cash compensation of Directors and
Senior managers amounted to $29.6 million, $25.6
million and $27.1 million respectively. In addition,

Directors and Senior managers received 540, 567
and 534 thousand units for a total amount of $5.4
million, $6.2 million and $5.6 million respectively
in connection with the Employee retention and long
term incentive program mentioned in Note O (2).

Annual Report150.

29. Principal subsidiaries

The following is a list of Tenaris’ principal
subsidiaries and its direct and indirect percentage
of ownership of each controlled company at
December 31, 2015.

Company

Country of
Incorporation

Main activity

Percentage of ownership
at December 31 (*)

Algoma Tubes Inc.

Confab Industrial S.A. and subsidiaries

Canada

Brazil

Manufacturing of seamless steel pipes

Manufacturing of welded steel pipes

Dalmine S.p.A.

Hydril Company and subsidiaries (except detailed) (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

Japan

Indonesia

Canada

Romania

Argentina

2015

2014

2013

100%

99%

100%

99%

100%

99%

100%

and capital goods

Manufacturing of seamless steel pipes

Manufacturing and marketing of

premium connections

Manufacturing of welded steel pipes

100%

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

51%

77%

100%

51%

77%

100%

51%

77%

100%

Siderca S.A.I.C. and subsidiaries

Argentina

Manufacturing of seamless steel pipes

100%

(except detailed)

Tenaris

Company

Country of
Incorporation

Main activity

Percentage of ownership
at December 31 (*)

151.

Talta - Trading e Marketing Sociedade Unipessoal Lda.

Madeira

Trading and holding Company

Tenaris Bay City

Tenaris Financial Services S.A.

Tenaris Global Services (Canada) Inc.

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

Tenaris Global Services Nigeria Limited

Tenaris Global Services S.A. and subsidiaries (b)

USA

Uruguay

Canada

USA

Nigeria

Uruguay

Manufacturing of seamless steel pipes

Financial Company

Marketing of steel products

Holding company and marketing of

steel products

Tenaris Global Services (Uk) Ltd

United Kingdom

Marketing of steel products

Tenaris Investments S.àr.l.

Luxembourg

Holding Company

Tenaris Investments S.àr.l., Luxemburg, Zug Branch

Switzerland

Holding company and financial services

Tenaris Investments Switzerland AG and subsidiaries

Switzerland

Holding Company

(except detailed)

2015

2014

2013

100%

Tubos de Acero de Mexico S.A.

Mexico

Manufacturing of seamless steel pipes

100%

(*) All percentages rounded.

(a) Tenaris Investments S.a.r.l. holds 100% of Hydril's subsidiaries shares except for Technical
Drilling & Production Services Nigeria. Ltd where it holds 80% for 2015, 2014 and 2013.

(b) Tenaris holds 97,5% of Tenaris Supply Chain S.A, 60% of Gepnaris S.A. and 40% of Tubular

Technical Services and Pipe Coaters, and 49% of Amaja Tubular Services Limited.

Annual Report

152.

30. Nationalization of Venezuelan Subsidiaries

In May 2009, within the framework of Decree
Law 6058, Venezuela’s President 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 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. Venezuela did not pay any
compensation for these assets.

Tenaris’ 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
International Centre for Settlement of Investment
Disputes (“ICSID”) in connection with the
nationalization process.

In August 2011, Tenaris and its wholly-owned
subsidiary Talta - Trading e Marketing Sociedad
Unipessoal Lda (“Talta”), initiated arbitration
proceedings against Venezuela before the ICSID
in Washington D.C., seeking adequate and
effective compensation for the expropriation
of their investment in Matesi. On January 29,
2016, the tribunal released its award. The award
upheld Tenaris’ and Talta’s claim that Venezuela
had expropriated their investments in Matesi in
violation of Venezuelan law as well as the bilateral
investment treaties entered into by Venezuela with
the Belgium-Luxembourg Economic Union and
Portugal. The award granted compensation in
the amount of $87.3 million for the breaches and
ordered Venezuela to pay an additional amount
of $85.5 million in pre-award interest, aggregating
to a total award of $172.8 million, payable in
full and net of any applicable Venezuelan tax,
duty or charge. The tribunal granted Venezuela
a grace period of six months from the date of
the award to make payment in full of the amount
due without incurring post-award interest, and
resolved that if no, or no full, payment is made by
then, post-award interest would apply at the rate
of 9% per annum.

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.
The tribunal in these proceedings was constituted
in July 2013. Following the exchange of further
written submissions by the Parties, an oral hearing

Tenaris153.

was held on June 15-23, 2015 in Washington DC.
The parties submitted their post-hearing briefs
on September 11, 2015; in their brief Tenaris
and Talta claimed a principal sum of $243.7
million plus pre-award interest of $471.1 million,
plus post-award interest. There is no procedural
deadline by which the award must be rendered.

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.

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, 2015,
for a total amount of approximately $27.0 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.

The Company classified its interests in the
Venezuelan Companies as available-for-sale
investments since management believes they do
not fulfil the requirements for classification within

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

31. Fees paid to the Company’s principal accountant

All amounts in thousands of U.S. dollars

YEAR ENDED DECEMBER 31

Audit Fees

Audit-Related Fees

Tax Fees

All Other Fees

Total

2015

2014

2013

4,372

5,231

142

5,723

143

117

4,490

5,497

6,034

Annual Report154.

32. Subsequent events

Annual Dividend Proposal
On February 24, 2016 the Company’s Board of
Directors proposed, for the approval of the Annual
General Shareholders' meeting to be held on May
4, 2016, the payment of an annual dividend of
$0.45 per share ($0.90 per ADS), or approximately
$531.2 million, which includes the interim
dividend of $0.15 per share ($0.30 per ADS) or
approximately $177.1 million, paid on November
25, 2015. If the annual dividend is approved by the
shareholders, a dividend of $0.30 per share ($0.60
per ADS), or approximately $354.1 million will be
paid on May 25, 2016, with an ex-dividend date
of May 24, 2016. These Consolidated Financial
Statements do not reflect this dividend payable.

/s/ Edgardo Carlos

Chief Financial Officer
Edgardo Carlos

TenarisTenaris S.A.
Société Anonyme
Annual accounts

Luxembourg GAAP as at December 31, 2015

155.

Annual Report156.

TenarisAudit report

To the Shareholders

of Tenaris S.A.

157.

Report on the annual accounts
We have audited the accompanying annual accounts of Tenaris S.A., which comprise the
balance sheet as at 31 December 2015, 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 about 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.

Annual Report158.

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, the annual accounts give a true and fair view of the financial position
of Tenaris S.A. as of 31 December 2015, 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, which is responsibility of the Board of Directors, is consistent
with the annual accounts and includes the information required by the law with respect
to Corporate Governance Statements.

Luxembourg,
30 March 2016

PricewaterhouseCoopers, Société coopérative
Represented by

/s/ Mervyn R. Martins

Mervyn R. Martins

PricewaterhouseCoopers, Société coopérative, 2, rue Gerhard Mercator, 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

TenarisBalance Sheet
as at December 31, 2015

Expressed in United States Dollars

ASSETS

C. FIXED ASSETS

III. Financial fixed assets

1. Shares in affiliated undertakings

D. CURRENT ASSETS

II. Debtors

2. Amounts owed by affiliated undertakings

a) becoming due and payable within one year

4. Other receivables

a) becoming due and payable within one year

IV. Cash at bank and cash in hand

Total assets

LIABILITIES

A. CAPITAL AND RESERVES

I. Subscribed capital

II. Share premium and similar premiums

IV. Reserves

1. Legal reserve

V. Profit or loss brought forward

VI. Profit or loss for the financial year

VII. Interim dividend

D. NON-SUBORDINATED DEBTS

6. Amounts owed to affiliated undertakings

a) becoming due and payable within one year

b) becoming due and payable after more than one year

9. Other creditors

a) becoming due and payable within one year

Total liabilities

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

Note

2015

2014

159.

19,955,026,411

23,006,961,885

19,955,026,411

23,006,961,885

4,305,445

2,528,182

85,725

551,150

285

317,613

4,942,320

2,846,080

19,959,968,731

23,009,807,965

1,180,536,830

609,732,757

5,6

118,053,683

20,718,019,221

21,545,028,256

(2,516,734,206)

(295,767,461)

5,8

(177,080,525)

19,932,527,760

22,980,503,540

7,035,793

7,186,486

18,460,359

20,082,849

1,944,819

2,035,090

27,440,971

29,304,425

19,959,968,731

23,009,807,965

Annual Report

Profit and loss account
for the year ended December 31, 2015

160.

Expressed in United States Dollars

A. CHARGES

5. Other operating charges

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

8. Interest and other financial charges

a) concerning affiliated undertakings

b) other interest and similar financial charges

11. Income tax

Total charges

B. INCOME

6. Income from financial fixed assets

a) derived from affiliated undertakings

7. Income from financial current assets

a) derived from affiliated undertakings

b) other income from financial current assets

13. Loss for the financial year

Total income

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

Note

2015

2013

22,982,906

28,563,073

2,493,111,324

288,522,631

713,713

772,069

125

3,626

4,357

2,516,811,694

317,862,197

–

22,000,000

70,835

6,653

19,715

75,021

2,516,734,206

295,767,461

2,516,811,694

317,862,197

Tenaris

Notes to audited annual accounts
as at December 31, 2015

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).

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

The financial year starts on January 1 and ends on
December 31 of each year.

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, 2014 relating to items of
balance sheet, profit and loss and the notes to
the accounts are reclassified whenever necessary
to ensure comparability with the figures for the
financial year ended December 31, 2015.

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.

Accounting policies and valuation rules are, besides
the ones laid down by the law of 19 December 2002,
determined and applied by the Board of Directors.

161.

The preparation of these annual accounts 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 income and
charges during the reporting years. Actual results
may differ from these estimates.

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.
Non-current assets remain at the exchange rate on
the day of incorporation. 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.

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

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.

Annual Report162.

3.4. Debtors
Debtors are valued at their nominal value. They
are subject to value adjustments where their
recovery is compromised. These value adjustments
are not continued if the reasons for which the value
adjustments were made have ceased to apply.

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.

3.6. Non-subordinated debts
Non-subordinated debts are stated at nominal value.

4. Financial fixed assets

Shares in affiliated undertakings
Tenaris holds the 100% shares of Tenaris Investments
S.à r.l. (Tenaris Investments) with registered office
in Luxembourg and holds, indirectly through this
wholly-owned subsidiary, the 100% shares of
Confab Industrial S.A., Hydril Company, Inversiones
Lucerna Limitada, Maverick Tube Corporation,
Siderca S.A.I.C., Talta - Trading e Marketing,
Sociedade Unipessoal Lda., Tenaris Investments
Switzerland AG, Tenaris Solutions AG, Tubos de
Acero de México S.A., Tenaris Bay City, Inc., Tenaris
Rods (USA), Inc., Algoma Tubes Inc., Siderca
International ApS, Socobras Participações Ltda.,
Tubman Holdings (Gibraltar) Limited and Tenaris
Connections BV, the 50% shares of Exiros B.V and
the 11.5% of Ternium S.A.

Movements during the financial year are as follows:

Expressed in United States Dollars

Gross book value - opening balance

Decreases for the financial year (a)

Gross book value - closing balance

Accumulated value adjustments - opening balance

Allocations for the financial year (b)

Accumulated value adjustments - closing balance

Net book value - closing balance

Net book value - opening balance

23,453,141,905

(558,824,150)

22,894,317,755

(446,180,020)

(2,493,111,324)

(2,939,291,344)

19,955,026,411

23,006,961,885

(a) On December 7, 2010, Tenaris entered into a master credit agreement with Tenaris Investments

(b) In 2015, results of the Company’s subsidiaries indirectly held through its wholly-owned subsidiary

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, 2015, in connection with cancellations of loans to Tenaris, the value of the
participation of Tenaris in Tenaris Investments decreased by USD 558.8 million.

Tenaris Investments were affected by adverse market conditions reflecting the decline in oil prices and
their impact on drilling activity and on the demand outlook for tubular products. The management of
the Company has assessed the value of its investment and recorded an impairment charge of USD 2.5
billion as of December 31, 2015 under Luxembourg GAAP.

TenarisAs of December 31, 2015 Tenaris Investments
reported an equity of USD 20.0 billion and a loss
for the financial year of USD 5.2 billion.

163.

5. Capital and reserves

Expressed in United States Dollars

Item

Subscribed
capital

Share
premium

Legal
reserve

Retained
earnings

Interim
dividend

Capital and
reserves

Balance at the beginning of the financial year

1,180,536,830

609,732,757

118,053,683

21,249,260,795

(177,080,525)

22,980,503,540

Loss for the financial year

Dividend paid (1)

Interim Dividend (2)

–

(2,516,734,206)

–

(2,516,734,206)

(531,241,574)

177,080,525

(354,161,049)

–

(177,080,525)

Balance at the end of the financial year

1,180,536,830

609,732,757

118,053,683

18,201,285,015

(177,080,525)

19,932,527,760

(1) As approved by the ordinary shareholders’ meeting held on May 6, 2015.

(2) As approved by the board of directors’ meeting held on November 4, 2015.

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, 2015 was 1,180,536,830 shares with
a par value of USD 1 per share.

The board of directors is authorized until June
5, 2020, to increase the issued share capital,
through issues of shares within the limits of the
authorized capital.

Annual Report

164.

6. Legal reserve

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

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.

8. Interim dividend paid

In November 2015, the Company paid an interim
dividend of USD 177.1 million based on the
board of directors’ decision of November 4,
2015 and in compliance with the conditions set
out in the “Amended law of August 10, 1915 on
commercial companies” regarding the payment of
interim dividends.

7. Distributable amounts

9. Taxes

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

At December 31, 2015, profit brought forward after
deduction of the loss and the interim dividend for
the financial year of Tenaris under Luxembourg law
totaled approximately USD 18.0 billion.

For the financial year ended December 31, 2015
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.

Tenaris
10. Balances with affiliated undertakings

Expressed in United States Dollars

165.

Within
a year

After more
than one year

Total at
December 31, 2015

Total at
December 31, 2014

ASSETS

DEBTORS

becoming due and payable within one year

Tenaris Solutions A.G.

Others

Total

NON-SUBORDINATED DEBTS

becoming due and payable within one year

Siderca Sociedad Anónima Industrial y Comercial

Dalmine S.p.A.

Tenaris Solutions Uruguay S.A.

Tubos de Acero de México S.A.

Maverick Tube Corporation

Tenaris Solutions AG

SIAT Sociedad Anónima

Others

becoming due and payable after more than one year

Siderca Sociedad Anónima Industrial y Comercial

Tenaris Solutions AG

Tenaris Solutions Uruguay S.A.

Total

4,304,708

737

4,305,445

3,279,001

1,425,235

194,471

482,368

1,550,104

–

103,740

874

–

4,304,708

2,527,543

737

639

4,305,445

2,528,182

3,279,001

1,425,235

194,471

482,368

1,550,104

–

103,740

874

3,155,569

1,577,664

363,670

277,331

277,592

94,586

1,423,769

16,305

13,085,389

6,733,038

264,422

–

11,530,043

6,514,874

415,442

11,530,043

6,514,874

415,442

7,035,793

18,460,359

25,496,152

27,269,335

Annual Report

166.

11. Other operating charges

Expressed in United States Dollars

Services and fees

Board of director’s accrued fees

Others

2015

2014

21,242,051

26,825,906

1,025,000

715,855

1,025,000

712,167

22,982,906

28,563,073

12. Parent Company

13. Subsequent event

As of December 31, 2015:

•

San Faustin S.A., a Luxembourg 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 Société à
Responsabilité Limitée (“Techint”), who is the holder
of record of the above-mentioned Tenaris shares.

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.

Annual Dividend Proposal
On February 24, 2016 the Company’s board
of directors proposed, for the approval of the
annual general shareholders' meeting to be
held on May 4, 2016, the payment of an annual
dividend of USD 0.45 per share (USD 0.90 per
ADS) or approximately USD 531.2 million, which
includes the interim dividend of USD 0.15 per
share (USD 0.30 per ADS), or approximately
USD 177.1 million, paid in November 2015. 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 354.1 million will be
paid on May 25, 2016, with an ex-dividend date
of May 23, 2016. These annual accounts do not
reflect this dividend payable.

/s/ Edgardo Carlos
Chief Financial Officer

Tenaris

Investor information

Investor Relations Director
Giovanni Sardagna

General inquiries
investors@tenaris.com

167.

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)

Annual Reportwww.tenaris.com