TENARIS S.A.
ANNUAL REPORT 2016
TABLE OF CONTENTS
Company Profile .............................................................................................................................................. 2
Letter From The Chairman .............................................................................................................................. 3
Management Report ........................................................................................................................................ 5
Leading Indicators ....................................................................................................................................... 7
Information on Tenaris ................................................................................................................................ 8
The Company .............................................................................................................................................. 8
................................................................................................................................................ 8
Overview
History and Development of Tenaris ........................................................................................................... 8
Business Overview ...................................................................................................................................... 9
Research and Development ....................................................................................................................... 12
Principal Risks and Uncertainties .............................................................................................................. 15
Operating and Financial Review and Prospects ......................................................................................... 18
Quantitative and Qualitative Disclosure about Market Risk...................................................................... 27
Recent Developments ................................................................................................................................ 29
Environmental Regulation ......................................................................................................................... 30
Related Party Transactions ........................................................................................................................ 30
.............................................................................................................................................. 30
Employees
Corporate Governance ............................................................................................................................... 31
Management Certification .......................................................................................................................... 43
Financial Information .................................................................................................................................... 44
Consolidated Financial Statements ............................................................................................................ 44
Tenaris S.A. Annual Accounts (Luxembourg GAAP) ............................................................................ 102
Exhibit I – Alternative performance measures ......................................................................................... 112
COMPANY PROFILE
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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LETTER FROM THE CHAIRMAN
Dear Shareholders,
In December, we closed what was a very difficult year for Tenaris, and I am pleased to say that the prospects for
2017 are much more promising.
Tenaris has weathered this industry-changing downturn exceptionally well and I am proud of the way our
employees have responded to the changes in market conditions and the circumstances of the company.
This is reflected in our financial results. Over the past two years during this unprecedented downturn in our sector,
our sales have fallen 57% from $10.1 billion to $4.3 billion. Even so, for 2016, we were able to post a positive net
income of $59 million. Our cash flow performance and our management of working capital has been very
effective. In the two years of the downturn, we generated $3.1 billion in cash flow from operations, spent $1.9
billion on investments strengthening our regional deployment particularly in the US market, paid $1 billion in
dividends to our shareholders, and we increased our net cash by $0.2 billion to end 2016 with a net cash position
of $1.4 billion. We have further strengthened our balance sheet with the sale of our Republic Conduit business to
Nucor in January for $332 million, a price which reflects its excellent performance over the past three years.
Considering this outstanding financial performance, we are proposing a total dividend of $0.41 per share ($0.82
per ADS) for the year.
In the Eastern Hemisphere, at a time when new project developments have been limited, we have been particularly
successful in complex projects and have become clear leaders in the Eastern Mediterranean. Here the development
of offshore, sour gas reserves is proceeding apace. In January, we completed deliveries of 72 thousand tons for
two pipelines connecting the deepwater Zohr reserve to onshore processing facilities in Egypt. Based on our
performance in meeting the tight delivery schedule and demanding specifications required for this fast track
project, we are winning further large orders in the region. These include a complex welded pipeline, which will
be fabricated in our Confab mill in Brazil. Our success in these and similar developments are supporting our plant
load through 2017 and into 2018 and will reinforce our track record for future complex projects.
In North America, our mill in Bay City is starting heat treatment and pipe threading operations this month and is
scheduled to roll its first seamless pipe during September. It will be the most modern, most automated, productive
and environmentally efficient mill in our industrial system and throughout the world.
The Bay City mill is located close to the main shale plays that are leading the rapid expansion we are seeing unfold
in the North American market. It will become the heart of our US Rig Direct™ program, which has been
expanding rapidly in a market where rigs have been increasing at a rate of 13 rigs per week over the past four
months. In an industry looking for sustainable cost reductions, we offer a differentiated solution based on a shorter
and more efficient supply chain with a comprehensive product range. This, together with technical assistance and
field support, is helping our customers to reduce overall drilling costs, streamline processes and lower their
environmental footprint.
With the improvement in market conditions and the growth of our Rig Direct™ program worldwide, our agenda
has changed substantially from that of the past two years. We currently serve over 100 customers and close to 300
rigs with our Rig Direct™ service. We are focused on compliance in meeting customer commitments and
managing a rapidly increasing plant load in our industrial system. We are bringing back employees and hiring
new ones as our operations ramp up.
Price levels fell to unsustainable levels during the downturn and we are now starting to see prices rise with the
increase in demand in North America and following the impact of higher raw material costs. We are working with
our Rig Direct™ customers to minimize the impact of higher material costs with innovative products and services
that improve operational efficiencies.
This year, we expect the market recovery to be concentrated on shale drilling in the USA and Canada. Looking
further ahead, we see signs that various projects will move forward in offshore regions of the Eastern Hemisphere
and some recovery can be expected in this important market for 2018.
In Argentina, drilling activity has been affected by extended stoppages in the southern region but we expect that
there will be recovery during the year led by investments in the Vaca Muerta shale play. In Mexico, Pemex has
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cut back activity to a very low level and we expect to see a recovery only in 2018 consequent to the energy reform
process.
We have focused for many years on improving our safety performance, introducing and strengthening safety
management routines and tools, challenging attitudes and behavior and installing an agenda of continuous
improvements. Our safety indicators have improved over these years and 2016 was no exception. However,
despite this growing dedication and commitment, in the first months of 2017, we registered three fatal accidents
in different locations. All our team deeply regret the pain and suffering caused by these accidents to the families
and communities affected. Safety is, and always will be, an absolute priority in every aspect of our activities and
these tragic events will continue to strengthen our commitment in this regard.
To better prepare the company for the challenges ahead, we are renewing our agenda at TenarisUniversity. For
more than 10 years, our corporate university has played a key role in unifying knowledge and values across our
global organization, providing a common curriculum and extensive training for our employees and stakeholders
at all levels. TenarisUniversity will retain its core management and leadership development programs, but will
now increasingly focus on inspiring employees to seek excellence in knowledge, encouraging them to customize
their training in accordance with specific interests and creating high quality networking opportunities.
The downturn of the past two years has had a profound impact on our employees and our communities. We have
made many difficult decisions to secure the future growth and competitiveness of the company. Now we have a
more positive agenda in front of us but one that will continue to bring major challenges. I want to thank our
employees for the commitment and support that that they have shown through this period and look forward to
seeing their continuing contributions in the time ahead. I would also like to express my thanks to our customers,
suppliers and shareholders for their continuing support and confidence in Tenaris.
March 30, 2017
/s/ Paolo Rocca
Paolo Rocca
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MANAGEMENT REPORT
CERTAIN DEFINED TERMS
Unless otherwise specified or if the context so requires:
References in this annual report to “the Company” refer exclusively to Tenaris S.A., a Luxembourg
public limited liability company (société anonyme).
References in this annual report to “Tenaris”, “we”, “us” or “our” refer to Tenaris S.A. and its
consolidated subsidiaries. See Accounting Policies A, B and L to our audited consolidated financial
statements included in this annual report.
References in this annual report to “San Faustin” refer to San Faustin S.A., a Luxembourg Société
Anonyme and the Company’s controlling shareholder.
“Shares” refers to ordinary shares, par value $1.00, of the Company.
“ADSs” refers to the American Depositary Shares, which are evidenced by American Depositary
Receipts, and represent two Shares each.
“OCTG” refers to oil country tubular goods.
“tons” refers to metric tons; one metric ton is equal to 1,000 kilograms, 2,204.62 pounds, or 1.102 U.S.
(short) tons.
“billion” refers to one thousand million, or 1,000,000,000.
“U.S. dollars”, “US$”, “USD” or “$” each refers to the United States dollar.
PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION
Accounting Principles
We prepare our consolidated financial statements in conformity with International Financial Reporting Standards,
as issued by the International Accounting Standards Board, or IFRS, and as adopted by the European Union, or
E.U. Additionally, this annual report includes non-IFRS alternative performance measures such as EBITDA, Net
cash/debt position and Free Cash Flow. See Exhibit I for more details on these alternative performance measures.
Following the sale of our steel electric conduit business in North America, known as Republic Conduit, the results
of the mentioned business are presented as discontinued operations in accordance with IFRS 5 "Non-current
Assets Held for Sale and Discontinued Operations". Consequently, all amounts related to discontinued operations
within each line item of the consolidated income statement are reclassified into discontinued operations. The
consolidated statement of cash flows includes the cash flows for continuing and discontinued operations; cash
flows from discontinued operations and earnings per share are disclosed separately in note 28 “Net assets of
disposal group classified as held for sale” to our audited consolidated financial statements included in this annual
report, as well as additional information detailing net assets of disposal group classified as held for sale and
discontinued operations.
We publish consolidated financial statements expressed in U.S. dollars. Our consolidated financial statements
included in this annual report are those as of December 31, 2016 and 2015, and for the years ended December 31,
2016, 2015 and 2014.
Rounding
Certain monetary amounts, percentages and other figures included in this annual report have been subject to
rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation
of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as
applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This annual report and any other oral or written statements made by us to the public may contain “forward-
looking statements”. Forward looking statements are based on management’s current views and assumptions
and involve known and unknown risks that could cause actual results, performance or events to differ materially
from those expressed or implied by those statements.
We use words such as “aim”, “will likely result”, “will continue”, “contemplate”, “seek to”, “future”,
“objective”, “goal”, “should”, “will pursue”, “anticipate”, “estimate”, “expect”, “project”, “intend”, “plan”,
“believe” and words and terms of similar substance to identify forward-looking statements, but they are not the
only way we identify such statements. This annual report contains forward-looking statements, including with
respect to certain of our plans and current goals and expectations relating to Tenaris’s future financial condition
and performance. Sections of this annual report that by their nature contain forward-looking statements include,
but are not limited to, “Business Overview”, “Principal Risks and Uncertainties”, and “Operating and Financial
Review and Prospects”. In addition to the risks related to our business discussed under “Principal Risks and
Uncertainties”, other factors could cause actual results to differ materially from those described in the forward-
looking statements. These factors include, but are not limited to:
our ability to implement our business strategy or to grow through acquisitions, joint ventures and other
investments;
the competitive environment in our business and our industry;
our ability to price our products and services in accordance with our strategy;
our ability to absorb cost increases and to secure supplies of essential raw materials and energy;
our ability to adjust fixed and semi-fixed costs to fluctuations in product demand;
trends in the levels of investment in oil and gas exploration and drilling worldwide; and
general macroeconomic and political conditions in the countries in which we operate or distribute pipes.
By their nature, certain disclosures relating to these and other risks are only estimates and could be materially
different from what actually occurs in the future. As a result, actual future gains or losses that may affect our
financial condition and results of operations could differ materially from those that have been estimated. You
should not place undue reliance on the forward-looking statements, which speak only as of the date of this
annual report. Except as required by law, we are not under any obligation, and expressly disclaim any obligation
to update or alter any forward-looking statements, whether as a result of new information, future events or
otherwise.
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Item 1. Leading 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 (loss) income
EBITDA (1)
Net income (loss)
Cash flow from operations
Capital expenditures
BALANCE SHEET (millions of $)
Total assets
Total borrowings
Net cash position (2)
Total liabilities
Shareholders’ equity including non-controlling interests
PER SHARE / ADS DATA ($ PER SHARE / PER ADS) (3)
Number of shares outstanding (4) (thousands of shares)
Earnings (loss) per share
Earnings (loss) per ADS
Dividends per share (5)
Dividends per ADS (5)
ADS Stock price at year-end
Number of employees (4)
2016
2015
2014
1,635
355
1,990
2,028
605
2,633
2,790
885
3,675
1,735
305
2,040
1,780
633
2,413
2,940
908
3,848
4,294
(59)
598
59
864
787
6,903
166
1,219
(74)
2,215
1,132
14,003
840
1,441
2,590
11,413
14,887
972
1,849
3,021
11,866
10,141
1,881
2,696
1,181
2,044
1,089
16,511
999
1,257
3,704
12,806
1,180,537
0.05
0.09
0.41
0.82
35.71
19,399
1,180,537
(0.07)
(0.14)
0.45
0.90
23.80
21,741
1,180,537
0.98
1.96
0.45
0.90
30.21
27,816
(1) Defined as operating income plus depreciation, amortization and impairment charges/(reversals). See Exhibit I.
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 includes
severance charges of $74 and $177 million in 2016 and 2015 respectively. If these charges were not included, EBITDA would have
been $672 and $1,396 million.
(2) Defined as cash and cash equivalents, other current investments and fixed income investments held to maturity less total borrowings.
See Exhibit I.
(3) Each ADS represents two shares.
(4) As of December 31.
(5)
Proposed or paid in respect of the year.
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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 holds, either directly or indirectly, controlling interests in various subsidiaries in the steel pipe
manufacturing and distribution businesses. For information on the Company’s subsidiaries, see note 30 “Principal
subsidiaries” to our audited consolidated financial statements included in this annual report.
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.
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, among others, the following operating businesses:
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;
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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 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 $1.8 billion. As of December 31, 2016,
approximately $1.3 billion had already been invested and an additional $176 million 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 for the supply
of Tenaris’s and Ternium’s respective Mexican industrial facilities. The new power plant became fully operational
during 2016. For more 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.
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Enhancing our offer of technical and pipe management services - Rig DirectTM - and extending their global
deployment
We continue to enhance our offer of technical and pipe management services, which we now call Rig Direct™
services, and extend their deployment worldwide. For many years, we have provided these services, managing
customer inventories and directly supplying pipes to their rigs on a just-in-time basis in markets like Mexico and
Argentina. Now, in response to changes in market conditions and the increased focus of customers on reducing
costs and improving the efficiency of their operations, we have extended the deployment of our Rig Direct™
services throughout North America and in other markets throughout the world (e.g. North Sea, Romania and
Thailand). Through the provision of Rig Direct™ services, we seek to enable our customers to optimize their
operations, reduce costs and to concentrate on their core businesses. They are also intended to differentiate us
from our competitors and further strengthen our relationships with our customers worldwide through long-term
agreements.
Our Competitive Strengths
We believe our main competitive strengths include:
our global production, commercial and distribution capabilities, offering a full product range with
flexible supply options backed up by local service capabilities in important oil and gas producing and
industrial regions around the world;
our ability to develop, design and manufacture technologically advanced products;
our solid and diversified customer base and historic relationships with major international oil and gas
companies around the world, and our strong and stable market shares in the countries in which we have
manufacturing operations;
our proximity to our customers;
our human resources around the world with their diverse knowledge and skills;
our low-cost operations, primarily at state-of-the-art, strategically located production facilities with
favorable access to raw materials, energy and labor, and more than 60 years of operating experience; and
our strong financial condition.
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, industrial equipment, coiled tubing, energy and raw materials
that exceed internal requirements.
For more information on our business segments, see accounting policy C “Segment information” to our audited
consolidated financial statements included in this annual report.
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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.
Tubing. Steel tubing is used to conduct crude oil and natural gas to the surface after drilling has been completed.
Line pipe. Steel line pipe is used to transport crude oil and natural gas from wells to refineries, storage tanks and
loading and distribution centers.
Mechanical and structural pipes. Mechanical and structural pipes are used by general industry for various
applications, including the transportation of other forms of gas and liquids under high pressure.
Cold-drawn pipe. The cold-drawing process permits the production of pipes with the diameter and wall thickness
required for use in boilers, superheaters, condensers, heat exchangers, automobile production and several other
industrial applications.
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.
Coiled tubing. Coiled tubing is used for oil and gas drilling and well workovers and for subsea pipelines.
Other Products. We also manufacture sucker rods used in oil extraction activities, industrial equipment of various
specifications and diverse applications, including liquid and gas storage equipment. In addition, we sell raw
materials that exceed our internal requirements.
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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
Ilha do Fundao, Rio de Janeiro, Brazil, at Veracruz in Mexico, at Dalmine in Italy, and at the product testing
facilities of NKKTubes in Japan. 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.
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 innovation and trade secrets, through the use of patents, trademarks and other intellectual
property tools that allow us to differentiate ourselves from our competitors.
We spent $69 million for R&D in 2016, compared to $89 million in 2015 and $107 million in 2014.
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TENARIS IN NUMBERS
Trend information
Leading indicators
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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 and the
investments by the oil and gas companies declined in 2016 for the second consecutive year as they continued to
be severely affected by the 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. 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, if increases in the cost of raw materials and energy cannot be offset by higher selling prices,
our profitability may be hurt. 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.
During the last two years we have temporarily suspended some 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 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.
Beginning 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. The Company and its wholly-owned subsidiary Talta - Trading
e Marketing Sociedad Unipessoal Lda, or Talta, initiated arbitration proceedings against Venezuela before the
International Centre for Settlement of Investment Disputes, or ICSID, seeking adequate and effective
compensation for the expropriation of their investments in Matesi, Tavsa and Comsigua. On January 29, 2016,
the tribunal released its award for the expropriation of our investment in Matesi, 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. Similarly, on December 12, 2016, the tribunal issued its award for the expropriation of our
investments in Tavsa and Comsigua, granted compensation in the amount of $137 million and ordered Venezuela
to reimburse Tenaris and Talta $3.3 million in legal fees and ICSID administrative costs. In addition, Venezuela
was ordered to pay interest from April 30, 2008 until the day of effective payment at a rate equivalent to LIBOR
15
+ 4% per annum, which as of December 31, 2016 amounted $76 million. 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 31
“Nationalization of Venezuelan Subsidiaries” to our audited consolidated financial statements included in this
annual report.
A key element of our business strategy is to develop and offer higher value-added products and services and to
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, 2016 we had $1,293 million in goodwill corresponding
mainly to the acquisition of Hydril, in 2007 ($920 million) and Maverick, in 2006 ($229 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. For a
discussion of an ongoing investigation by the audit committee of the Company’s board of directors of certain
matters related to these laws, see note 25 “Contingencies, commitments and restrictions on the distribution of
profits – (i) Contingencies – Ongoing investigation” to our audited consolidated financial statements included in
this annual report. Violations of these laws could result in monetary or other penalties against us or our
subsidiaries, including potential criminal sanctions, and could damage our reputation and, therefore, our ability to
do business.
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
16
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.
17
Operating and Financial Review and Prospects
The following discussion and analysis of our financial condition and results of operations are based on, and
should be read in conjunction with, our audited consolidated financial statements and the related notes included
elsewhere in this annual report. This discussion and analysis presents our financial condition and results of
operations on a consolidated basis. We prepare our consolidated financial statements in conformity with IFRS,
as issued by the IASB and as 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.
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 fell from over $100 per barrel in June 2014 to less than $30 per barrel in February 2016, then rose
to above $50 per barrel at the end of 2016. Such price increase was mainly due to an agreement between OPEC
and some non-OPEC countries to cut production in order to accelerate the rebalancing of supply and demand and
to reduce excess inventory levels. Natural gas prices (Henry Hub) have also fallen to less than $2 per million BTU
at the beginning of 2016 and recovered to levels above $3 per million BTU at the end of 2016.
In 2016, worldwide drilling activity declined 32% compared to the level of 2015. In the United States the rig count
in 2016 declined by 48%. In May 2016 approximately 400 rigs were active; however, a subsequent increase in
activity resulted in more than 700 active rigs at the beginning of 2017. When compared to 2015, in Canada the rig
count in 2016 declined by 34%, while in the rest of the world, it declined 18%.
A growing proportion of exploration and production spending by oil and gas companies has been directed at
offshore, deep drilling and non-conventional drilling operations in which high-value tubular products, including
special steel grades and premium connections, are usually specified. Technological advances in drilling techniques
and materials are opening up new areas for exploration and development. More complex drilling conditions are
expected to continue to demand new and high value products and services in most areas of the world. However,
as a result of the decline in oil prices in 2015 and for much of 2016, the level of investments by oil and gas
companies in such complex projects decreased, as some of these projects were 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.
18
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, with a
final determination expected during April 2017. 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 increased during 2016. As a reference, prices
for hot rolled coils, HRC Midwest USA Mill, published by CRU, averaged $571 per ton in 2016 and $506 per ton
in 2015, with an increase of more than 50% between the beginning and the end of 2016.
Sale of North American Electric Conduit Business to Nucor
On January 20, 2017, we completed the sale of our steel electric conduit business in North America, known as
Republic Conduit, to Nucor Corporation for a total consideration of $332 million, subject to a working capital
adjustment. The gain, net of fees and expenses arising from this sale is currently estimated to be approximately
$189 million and will be recorded in the first quarter of 2017. As of December 31, 2016 the conduit business was
classified as a discontinued operation.
Summary of results
In 2016, our net sales declined 38% compared to 2015, affected by continued adverse market conditions. Sales of
Tubes were down 38%, reflecting lower drilling activity in North and South America and in offshore regions
worldwide, declines in selling prices and the completion of shipments for pipeline projects in Brazil and Argentina
after the first quarter of the year. EBITDA declined 51% year on year, reflecting lower sales and a reduction in
gross margins on lower average selling prices and lower absorption of fixed costs. Net income amounted to a gain
of $59 million in 2016 compared to a loss of $74 million in 2015, which included an impairment charge of $400
million.
In spite of capital expenditures of $787 million, mainly related to the construction of our greenfield project in Bay
City, we reached a positive free cash flow of $77 million in 2016. After dividend payments of $508 million, our
net cash position reached $1.4 billion at December 31, 2016, compared with $1.8 billion at December 31, 2015.
Outlook
As we enter 2017, in the United States and Canada, a rapid recovery is taking place in shale drilling activity, as
oil and gas companies increase investments following two consecutive years of declining expenditure. The
recovery is supported by oil prices around $50/bbl and natural gas prices (Henry Hub) around $3 per million BTU,
drilling efficiencies and the relatively low cost of drilling materials, equipment and services. In addition, the
agreement between OPEC and some non-OPEC countries late last year to cut production to accelerate the
rebalancing of supply and demand and reduce excess inventory levels has reinforced confidence that the current
level of oil prices can be sustained.
In the rest of the world, exploration and production spending plans are more subdued. In offshore areas, operators
have begun to move forward with selected projects but the overall level of spending is expected to decline for a
third successive year as the previous backlog of investments sanctioned prior to 2015 are completed. Onshore
spending is expected to be more stable and can be expected to recover in regions such as Colombia.
We expect our sales to rise steadily through the year based on higher demand from Rig Direct™ customers in
North America and a strong backlog of orders for the Eastern Hemisphere. Although prices have begun to rise in
North America, increases in our average selling prices will be held back by the prices fixed in our Eastern
Hemisphere backlog. Our EBITDA, following the first quarter, should also rise steadily through the year with
margins improving in the second half as a result of better absorption of fixed costs.
19
Results of Operations
Millions of U.S. dollars
(except number of shares and per share amounts)
For the year ended December 31,
2016
2015
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 (loss) income
Finance income
Finance cost
Other financial results
(Loss) income before equity in earnings (losses) of non-
consolidated companies and income tax
Equity in earnings (losses) of non-consolidated companies
Income before income tax
Income tax
Income (loss) for the year for continuing operations
Discontinued operations
Result for discontinued operations
Income (loss) for the year (1)
Income (loss) attributable to (1):
Owners of the parent
Non-controlling interests
Income (loss) for the year (1)
4,294
(3,166)
1,128
(1,197)
10
(59)
66
(22)
(22)
(37)
72
34
(17)
17
41
59
55
3
59
6,903
(4,748)
2,155
(1,594)
(396)
166
35
(23)
3
180
(40)
141
(234)
(94)
19
(74)
(80)
6
(74)
Depreciation and amortization for continuing operations
Weighted average number of shares outstanding
Basic and diluted earnings (losses) per share for continuing
operations
Basic and diluted earnings (losses) per share
Dividends per share (2)
(657)
1,180,536,830
(653)
1,180,536,830
0.01
0.05
0.41
(0.08)
(0.07)
0.45
_______________
(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.
20
Millions of U.S. dollars (except number of shares)
Selected consolidated financial position data
Current assets
Property, plant and equipment, net
Other non-current assets
Assets of disposal group classified as held for sale
Total assets
Current liabilities
Non-current borrowings
Deferred tax liabilities
Other non-current liabilities
Liabilities of disposal group classified as held for sale
Total liabilities
Capital and reserves attributable to the owners of the parent
Non-controlling interests
Total equity
At December 31,
2016
2015
4,817
6,002
3,033
151
14,003
1,713
32
551
277
18
2,590
11,287
126
11,413
5,743
5,672
3,472
-
14,887
1,755
223
750
293
-
3,021
11,713
153
11,866
Total liabilities and equity
14,003
14,887
Share capital
Number of shares outstanding
1,181
1,180,536,830
1,181
1,180,536,830
21
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,
2016
2015
Continuing Operations
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Other operating income (expenses), net
Operating (loss) income
Finance income
Finance cost
Other financial results
(Loss) income before equity in earnings (losses) of non-
consolidated companies and income tax
Equity in earnings (losses) of non-consolidated companies
Income before income tax
Income tax
Income (loss) for the year for continuing operations
Discontinued operations
Result for discontinued operations
Income (loss) for the year
Income (loss) attributable to:
Owners of the parent
Non-controlling interests
100.0
(73.7)
26.3
(27.9)
0.2
(1.4)
1.5
(0.5)
(0.5)
(0.9)
1.7
0.8
(0.4)
0.4
1.0
1.4
1.3
0.1
100.0
(68.8)
31.2
(23.1)
(5.7)
2.4
0.5
(0.3)
0.0
2.6
(0.6)
2.0
(3.4)
(1.4)
0.3
(1.1)
(1.2)
0.1
Fiscal Year Ended December 31, 2016, Compared to Fiscal Year Ended December 31, 2015
The following table shows our net sales by business segment for the periods indicated below:
Millions of U.S. dollars
For the year ended December 31,
2016
2015
Increase /
(Decrease)
Tubes
Others
Total
Tubes
4,015
278
4,294
94%
6%
100%
6,444
459
6,903
93%
7%
100%
(38%)
(39%)
(38%)
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,
2016
2015
Increase /
(Decrease)
Seamless
Welded
Total
1,635
355
1,990
2,028
605
2,633
(19%)
(41%)
(24%)
22
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,
2016
2015
Net sales
- North America
- South America
- Europe
- Middle East & Africa
- Asia Pacific
Total net sales
Operating (loss) income (1)
Operating (loss) income (% of sales)
_______________
1,265
1,032
542
1,041
136
4,015
(71)
(1.8%)
2,538
1,858
695
1,082
272
6,444
138
2.1%
Increase /
(Decrease)
(50%)
(44%)
(22%)
(4%)
(50%)
(38%)
(152%)
(1) Tubes operating income includes severance charges of $67 million in 2016 and $164 million in 2015. Additionally, Tubes operating
income in 2015 also includes an impairment charge of $400 million on our welded pipe operations in the United States.
Net sales of tubular products and services decreased 38% to $4,015 million in 2016, compared to $6,444 million
in 2015, reflecting a 24% decline in volumes and an 18% 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, inventory
adjustments and price declines, together with a decline of shipments to line pipe project in South America. In
North America, our sales decreased 50%, due to the downturn in activity, inventory adjustments and lower prices.
In South America, sales declined 44% due to the downturn in drilling activity in Argentina and Colombia, price
declines and the lack of shipments to line pipe project in Argentina and Brazil following the first quarter sales. In
Europe, sales declined 22% due to lower drilling activity and price declines but sales of industrial products and to
hydrocarbon process industry and power generation customers were maintained at similar levels to those of 2015.
In the Middle East and Africa sales declined 4% as shipments to Middle East customers and sales of offshore line
pipe and coating services in Africa increased strongly but sales were affected by price declines and severely
reduced offshore drilling activity and inventory adjustments in Africa. In Asia Pacific, sales were affected by
lower drilling activity in the region, principally in Indonesia, price declines, and lower sales of non-OCTG
products in the region.
Operating (loss) income from tubular products and services, amounted to a loss of $71 million, compared to a
$138 million gain in 2015. The decline in Tubes operating income was due to lower sales and a reduction in gross
margin from 32% in 2015 to 27% in 2016. Additionally, our selling, general and administrative expenses, or
SG&A, as a percentage of sales increased from 24% in 2015 to 29% in 2016, due to the negative effect of fixed
and semi-fixed expenses on lower sales.
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,
2016
2015
Increase /
(Decrease)
Net sales
Operating income
Operating income (% of sales)
278
12
4.3%
459
28
6.1%
(39%)
(57%)
Net sales of other products and services decreased 39% to $278 million in 2016, compared to $459 million in
2015, due to lower sales of industrial equipment in Brazil and lower sales of energy related products, i.e., sucker
rods and coiled tubing.
Operating income from other products and services, decreased 57% to $12 million in 2016, from $28 million in
2015, mainly due to lower operating income from our sucker rods business.
23
Selling, general and administrative expenses, or SG&A, decreased by $397 million (25%) in 2016 from $1,594
million in 2015 to $1,197 million in 2016, mainly due to lower labor costs and selling expenses. However, SG&A
expenses increased as a percentage of net sales to 27.9% in 2016 compared to 23.1% in 2015, mainly due to the
effect of fixed and semi fixed expenses on lower sales (e.g., depreciation and amortization and labor costs).
Other operating income and expenses resulted in a gain of $10 million in 2016, compared to a loss of $396
million in 2015, mainly due to asset impairment charges in our Tubes segment, related to our welded pipe
operations in the United States, amounting to $400 million in 2015.
Financial results amounted to a gain of $22 million in 2016, compared to a gain of $15 million in 2015. The
increase was due to higher interest income partially offset by negative other financial results, mostly foreign
exchange derivatives contracts results.
Equity in earnings (losses) of non-consolidated companies generated a gain of $72 million in 2016, compared
to a loss of $40 million in 2015. During 2015 we recorded an impairment charge of $29 million on our direct
investment in Usiminas. Apart from the impairment result in 2015, these results were mainly derived from our
equity investment in Ternium (NYSE:TX).
Net income for the year amounted to $59 million in 2016, including a gain from discontinued operations of $41
million, compared with a loss of $74 million, including a gain from discontinued operations of $19 million. Net
income from continuing operations amounted to a gain of $17 million in 2016, which compares with a loss of $94
million in 2015. The loss in 2015 included an impairment charge of $400 million. Results in 2016 and 2015 reflect
a challenging operating environment affected by a reduction in drilling activity and in the demand for OCTG
products, deriving in lower shipments and prices, inefficiencies associated with low utilization of production
capacity and severance costs to adjust the workforce to the new market conditions.
Income attributable to non-controlling interests was $3 million in 2016, compared to $6 million in 2015.These
results are mainly attributable to NKKTubes, our Japanese subsidiary.
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,
2016
2015
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of year
(excluding overdrafts)
Effect of exchange rate changes
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the end of year
(excluding overdrafts)
Cash and cash equivalents at the end of year
(excluding overdrafts)
Bank overdrafts
Other current investments
Non-current fixed income investments held to maturity
Borrowings
Net cash
864
(98)
(653)
113
286
(0)
113
399
399
1
1,633
248
(840)
1,441
2,215
(1,774)
(535)
(94)
416
(37)
(94)
286
286
0
2,141
393
(972)
1,849
Our financing strategy aims at maintaining adequate financial resources and access to additional liquidity.
During 2016 we generated $864 million of operating cash flow, our capital expenditures amounted to $787
24
million and we paid dividends amounting to $508 million. At the end of the year we had a net cash position of
$1.4 billion, compared to $1.8 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 amortized cost which approximates
fair market value.
At December 31, 2016, liquid financial assets as a whole (i.e., cash and cash equivalents, other current investments
and non-current fixed income investments held to maturity) were 16% of total assets compared to 19% at the end
of 2015.
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, 2016, U.S. dollar denominated liquid assets represented 95% of total liquid financial assets
compared to 87% at the end of 2015.
Operating activities
Net cash provided by operations during 2016 was $864 million, compared to $2.2 billion during 2015. This 61%
decrease was mainly attributable to a smaller reduction in working capital. During 2016 the reduction in working
capital amounted to $348 million, while during 2015 it amounted to $1.4 billion. The main yearly variation was
related to a reduction of $245 million in inventories during 2016, which compares with a reduction in inventory
of $936 million in 2015, reflecting the decline in production and shipments. Additionally, during 2016 trade
receivables and trade payables decreased $147 million and $60 million respectively, partially offset by an increase
of $79 million in other liabilities and of $95 million in customer advances. 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 $98 million in 2016 compared to $1.8 billion in 2015. Capital
expenditures decreased to $787 million from $1.1 billion in 2015, mainly related to the construction of the
greenfield seamless mill in Bay City, Texas. Additionally, we reduced our financial investments by $653 million
in 2016 compared to an increase of $696 million in 2015.
Financing activities
Net cash used in financing activities, including dividends paid, proceeds and repayments of borrowings and
acquisitions of non-controlling interests, was $653 million in 2016, compared to $535 million in 2015.
Dividends paid during 2016 amounted to $508 million, while $531 million were paid in 2015.
During 2016 we had net repayments of borrowings of $115 million, while in 2015 we had no significant net
proceeds/repayments from borrowings.
Our total liabilities to total assets ratio was 0.18:1 as of December 31, 2016 and 0.20:1 as of December 31, 2015.
Principal Sources of Funding
During 2016, we funded our operations with operating cash flows and bank financing. Short-term bank
borrowings were used as needed throughout the year.
25
Financial liabilities
During 2016, borrowings decreased by $131 million, to $840 million at December 31, 2016, from $972 million
at December 31, 2015.
Borrowings consist mainly of bank loans. As of December 31, 2016 U.S. dollar-denominated borrowings plus
borrowings denominated in other currencies swapped to the U.S. dollar represented 96% 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.
The following table shows the composition of our financial debt at December 31, 2016 and 2015:
Millions of U.S. dollars
2016
2015
Bank borrowings
Bank overdrafts
Finance lease liabilities
Total borrowings
839
1
0
840
971
0
1
972
Our weighted average interest rates before tax (considering hedge accounting), amounted to 1.97% at December
31, 2016 and to 1.52% at December 31, 2015.
The maturity of our financial debt is as follows:
Millions of U.S.
dollars
At December 31,
2016
Borrowings
Interests to be
accrued
Total
1 year or
less
1 - 2
years
2 - 3
years
3 - 4
years
4 - 5
years
Over 5
years
Tota
l
809
6
815
1
1
2
4
1
5
3
1
5
4
1
5
20
840
0
20
11
852
Our current borrowings to total borrowings ratio increased from 0.77:1 as of December 31, 2015 to 0.96:1 as of
December 31, 2016. Our liquid financial assets exceeded our total borrowings, we had a net cash position (cash
and cash equivalents, other current investments and non-current fixed income investments held to maturity less
total borrowings) of $1.4 billion at December 31, 2016, compared to $1.8 billion at December 31, 2015.
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”.
Significant Borrowings
Our most significant borrowings as of December 31, 2016 were as follows:
Millions of U.S. dollars
Disbursement date
2016
2015
2016
Borrower
Tamsa
TuboCaribe
Siderca
Type
Bank loans
Bank loan
Bank loans
Original &
Outstanding
391
200
198
Final maturity
2017
Jan-17
2017
As of December 31, 2016, Tenaris was in compliance with all of its covenants.
26
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 trading or
other speculative purposes, other than non-material investments in structured products.
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, 2016 and 2015 which
included fixed and variable interest rate obligations, detailed by maturity date:
At December 31, 2016
Expected maturity date
2017
2018
2019
2020
(in millions of U.S. dollars)
2021
Thereafter Total (1)
Non-current Debt
Fixed rate
Floating rate
Current Debt
Fixed rate
Floating rate
-
-
790
18
809
1
0
-
-
1
4
0
-
-
4
3
0
-
-
3
3
1
-
-
4
19
0
-
-
20
30
1
790
18
840
At December 31, 2015
Expected maturity date
2016
2017
2018
2020
(in millions of U.S. dollars)
2019
Thereafter Total (1)
Non-current Debt
Fixed rate
Floating rate
Current Debt
Fixed rate
Floating rate
_______________
-
-
201
0
732
16
748
-
-
201
1
0
-
-
1
1
0
-
-
1
1
0
-
-
1
18
-
223
1
-
-
18
732
16
972
(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.
Our weighted average interest rates before tax (considering hedge accounting), amounted to 1.97% at December
31, 2016 and to 1.52% at December 31, 2015.
Our financial liabilities (other than trade payables and derivative financial instruments) consist mainly of bank
loans. As of December 31, 2016 U.S. dollar denominated financial debt plus debt denominated in other currencies
swapped to the U.S. dollar represented 96% 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.
27
Interest Rate Risk
Fluctuations in market interest rates create a degree of risk by affecting the amount of our interest payments. At
December 31, 2016, we had variable interest rate debt of $20 million and fixed rate debt of $821 million ($790
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. Had the U.S. dollar average exchange rate been weaker by
5% against the currencies of the countries where we have labor costs, operating income would have decreased
approximately by $45 million in 2016, compared with $64 million in 2015.
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, 2016.
All amounts in millions of U.S. dollars
Currency Exposure
Functional currency
Long / (Short) Position
Argentine Peso
Euro
U.S. dollar
U.S. dollar
U.S. dollar
Brazilian real
(60)
(407)
126
The main relevant exposures as of December 31, 2016 were to Argentine peso-denominated financial, trade, social
and fiscal payables at our Argentine subsidiaries, for which the functional currency is the U.S. dollar, Euro-
denominated intercompany liabilities at certain subsidiaries for which functional currency is the U.S. dollar and Cash
and cash equivalent and Other investments denominated in U.S. dollars at subsidiaries for which the functional currency
is the Brazilian real.
Foreign Currency Derivative Contracts
The net fair value of our foreign currency derivative contracts amounted to a liability of $40 million at December
31, 2016 and $16 million at December 31, 2015. 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.
28
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 when the offsetting losses
and gains on the hedged item are recorded. The gain or loss relating to the ineffective portion is recognized
immediately in the income statement. The fair value of our derivative financial instruments (assets or liabilities)
continues to be reflected on the consolidated statement of financial position.
At December 31, 2016, the effective portion of designated cash flow hedges, included in other reserves in
shareholders’ equity amounted to a loss of $5 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 2016.
Our credit policies related to sales of products and services are designed to identify customers with acceptable
credit history, and to allow us to use credit insurance, letters of credit and other instruments designed to minimize
credit risk whenever deemed necessary. We maintain allowances for potential credit losses.
Commodity Price Sensitivity
We use commodities and raw materials that are subject to price volatility caused by supply conditions, political
and economic variables and other unpredictable factors. As a consequence, we are exposed to risk resulting from
fluctuations in the prices of these commodities and raw materials. Although we fix the prices of such raw materials
and commodities for short-term periods, typically not in excess of one year, in general we do not hedge this risk.
Recent Developments
Annual Dividend Proposal
On February 22, 2017 the Company’s board of directors proposed, for the approval of the annual general
shareholders' meeting to be held on May 3, 2017, the payment of an annual dividend of $0.41 per share ($0.82
per ADS), or approximately $484 million, which includes the interim dividend of $0.13 per share ($0.26 per ADS)
or approximately $153 million, paid in November 2016. If the annual dividend is approved by the shareholders,
a dividend of $0.28 per share ($0.56 per ADS), or approximately $331 million will be paid on May 24, 2017, with
an ex-dividend date of May 22, 2017 and record date on May 23, 2017.
Latest developments on 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 Brazilian reais 28.8, 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. On February 8, 2017, the court of appeals issued its decision on the
merits and upheld the ruling of the first instance court, holding that Confab and the other defendants did not have
29
the obligation to launch a tender offer. CSN has filed a motion for clarification and may still appeal to the Superior
Court of Justice or the Federal Supreme Court.
Environmental Regulation
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.
Related 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 29 “Related party transactions” to our audited consolidated financial statements,
included in this annual report.
Employees
The following table shows the number of persons employed by Tenaris:
Mexico
Argentina
Italy
United States
Romania
Brazil
Colombia
Indonesia
Canada
Japan
Other Countries
Employees in discontinued operations
Total employees
At December
31, 2016
4,968
4,755
1,979
1,636
1,631
1,166
750
509
473
458
1,074
19,399
(323)
19,076
30
At December 31, 2015 and December 31, 2014, the number of persons employed by Tenaris was 21,741 and
27,816 respectively.
The number of our employees declined 11% during 2016 as we adjusted our operations to face the decline in
drilling activity and demand of pipes. During 2015 and 2016 we reduced our labor costs worldwide by 40%
through a wide set of measures, while preserving our key competences and maintaining our focus on the relation
with our communities.
Approximately 65% 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.
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.B. 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 Recueil Electronique des Sociétés et
Associations (Luxembourg’s electronic 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 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
31
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
consolidated financial statements and annual accounts included in this report, will take place in the Company’s
registered office in Luxembourg, on Wednesday May 3, 2017, 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 meeting and the procedures for attending and voting the meeting, 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 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 nine directors.
The board of directors is required to meet as often as required by the interests of the Company and at least four
times per year. A majority of the members of the board of directors in office present or represented at the board
of directors’ meeting constitutes a quorum, and resolutions may be adopted by the vote of a majority of the
directors present or represented. In the case of a tie, the chairman is entitled to cast the deciding vote.
Directors are elected at the annual ordinary general shareholders’ meeting to serve one-year renewable terms, as
determined by the general shareholders’ meeting. The general shareholders’ meeting also determines the number
of directors that will constitute the board and their compensation. The general shareholders’ meeting may dismiss
all or any one member of the board of directors at any time, with or without cause, by resolution passed by a
simple majority vote, irrespective of the number of Shares represented at the meeting.
Under the Company’s articles of association 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,
32
the direct issuance of Shares or upon the exercise of options, rights convertible into Shares, or similar
instruments convertible or exchangeable into Shares, issued for the purpose of compensation or incentive
of the Beneficiaries or in relation thereto (which the board of directors shall be authorized to issue upon
such terms and conditions as it deems fit).
The 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 the number of members of the Board of Directors be increased to
ten (10) by appointing Mr. Yves Speeckaert to the Board of Directors, and that all of the current members of the
Board of Directors be reappointed, each to hold office until the next annual general shareholders’ meeting that
will be convened to decide on the Company’s 2017 annual accounts.
Name
Position Principal Occupation
Roberto Bonatti (1)
Carlos Condorelli
Director President of San Faustin
Director Director of Tenaris and Ternium
Roberto Monti
Director
Gianfelice Mario Rocca (1)
Director
Member of the board of directors of
YPF SA
Chairman of the board of directors of
San Faustin
Chairman and chief executive officer of
Tenaris
Paolo Rocca (1)
Director
Director Chairman of SAI Consultores
Jaime Serra Puche
Alberto Valsecchi
Director Director of Tenaris
Amadeo Vázquez y Vázquez Director Director of Tenaris
Guillermo Vogel
Director Vice chairman of Tamsa
Years as
Director
Age at
December 31,
2016
14
10
12
14
15
14
9
14
14
67
65
77
68
64
65
72
74
66
___________
(1) Paolo Rocca and Gianfelice Rocca are brothers, and Roberto Bonatti is Paolo and Gianfelice Rocca’s first cousin.
Roberto Bonatti. Mr. Bonatti is a member of the Company’s board of directors. He is a grandson of Agostino
Rocca, founder of the Techint group, a group of companies controlled by San Faustin. Throughout his career in
the Techint group he has been involved specifically in the engineering and construction and corporate sectors. He
was first employed by the Techint group in 1976, as deputy resident engineer in Venezuela. In 1984, he became
a director of San Faustin, and since 2001 he has served as its president. In addition, Mr. Bonatti currently serves
as president of Sadma Uruguay S.A. He is also a member of the board of directors of Ternium. Mr. Bonatti is an
Italian citizen.
Carlos Condorelli. Mr. Condorelli is a member of the Company’s board of directors. He served as our chief
financial officer from October 2002 until September 2007. He is also a board member of Ternium. He began his
career within the Techint group in 1975 as an analyst in the accounting and administration department of Siderar
S.A.I.C., or Siderar. He has held several positions within Tenaris and other Techint group companies, including
finance and administration director of Tamsa and president of the board of directors of Empresa Distribuidora La
Plata S.A., or Edelap, an Argentine utilities company. Mr. Condorelli is an Argentine citizen.
Roberto Monti. Mr. Monti is a member of the Company’s board of directors. He is a member of the board of
directors of YPF SA. 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
33
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.
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. 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,
Rotoplas 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.
Guillermo Vogel. Mr. Vogel is a member of the Company’s board of directors and holds the position of Vice
President of Finance. 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.
Director Liability
Each director must act in the interest of the Company, and in accordance with applicable laws, regulations, and
the Company’s articles of association. Directors are also bound by a general duty of care owed to the Company.
Under Luxembourg law, a director may be liable to the Company for any damage caused by management errors,
such as wrongful acts committed during the execution of his or her mandate, and to the Company, its shareholders
and third parties in the event that the Company, its shareholders or third parties suffer a loss due to an infringement
of either the Luxembourg law on commercial companies or the Company’s articles of association.
Under Luxembourg law, any director having a conflict of interest in respect of a transaction submitted for approval
to the board of directors may not take part in the deliberations concerning such transaction and must inform the
board of such conflict and cause a record of his statement to be included in the minutes of the meeting. Subject to
certain exceptions, transactions in which any directors may have had an interest conflicting with that of the
Company must be reported at the next general shareholders’ meeting following any such transaction.
A director will not be liable for acts committed pursuant to a board resolution if, notwithstanding his or her
presence at the board meeting at which such resolution was adopted, such director advised the board of directors
that he or she opposed the resolution and caused a record of such opposition to be included in the minutes of the
meeting.
34
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.
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 4, 2016, 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 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
35
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.
Senior Management
Our current senior management as of the date of this annual report consists of:
Name
Position
Age at
December 31, 2016
Paolo Rocca
Edgardo Carlos
Gabriel Casanova
Vincenzo Crapanzano (1)
Alejandro Lammertyn
Paola Mazzoleni
Marcelo Ramos
Germán Curá
Sergio de la Maza
Renato Catallini
Javier Martínez Alvarez
Gabriel Podskubka
Michele Della Briotta
__________
Chairman and Chief Executive Officer
Chief Financial Officer
Supply Chain Director
Industrial Director
Planning Director
Human Resources Director
Technology Director
North American Area Manager
Central American Area Manager
Brazilian Area Manager
Southern Cone Area Manager
Eastern Hemisphere Area Manager
European Area Manager
64
50
58
64
51
40
53
54
60
50
50
43
44
(1)
Effective as of April 1, 2017, Mr. Antonio Caprera will replace Mr. Vincenzo Crapanzano as industrial director.
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. 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 and since May 2016 has also assumed
responsibility over information technology. 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
36
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.
Antonio Caprera. As of April 1, 2017, Mr. Caprera will serve as Tenaris’s industrial director. He joined the
company in 1990. From 2000 to 2006 he served as quality director at Dalmine in Italy, where he later assumed
responsibilities as production director until 2012. From that year and until 2015 he served as production director
at Siderca in Argentina, after which he assumed responsibilities as global industrial coordinator based in Mexico
until March 2017. Mr. Caprera is an Italian citizen.
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
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.
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.
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.
37
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.
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 four
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.
Michele Della Briotta. Mr. Della Briotta currently serves as our European area manager, a position he assumed
in July 2016. He first joined Tenaris in 1997 and has worked in areas such as industrial planning, operations,
supply chain and commercial in Italy, Mexico, Argentina and the United States. Most recently he served as
Tenaris’s area manager for Romania. Mr. Della Briotta is an Italian citizen.
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 2016 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, 2016, 2015 and 2014, the cash compensation of directors and senior
managers amounted to $38.6 million, $28.8 million and $26 million, respectively. In addition, directors and senior
managers received 500, 540 and 567 thousand units for a total amount of $4.8 million, $5.4 million and $6.2
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
consolidated financial statements 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 regularly
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 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
38
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, 2016, appointed by the shareholders’ meeting
held on May 4, 2016, was PricewaterhouseCoopers Société Coopérative., Cabinet de révision agréé, in connection
with all of our annual accounts and consolidated financial statements.
Fees Paid to the Company’s Independent Auditor
In 2016, PwC served as the principal external auditor for the Company. Fees payable to PwC in 2016 are detailed
below.
Thousands of U.S. dollars
For the year ended
December 31, 2016
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
Total
Audit Fees
3,588
64
14
3
3,669
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.
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.
All Other Fees
Fees paid for the support in the development of training courses.
39
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 1,200,603, which represents 0.10% of
our outstanding Shares.
The following table provides information regarding share ownership by our directors and senior management:
Director or Officer
Number of Shares Held
Guillermo Vogel
Carlos Condorelli
Edgardo Carlos
Gabriel Podskubka
Total
Major Shareholders
1,125,446
67,211
4,000
3,946
1,200,603
The following table shows the beneficial ownership of the Shares by: 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), non-
affiliated public shareholders, and 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)
Directors and senior management as a group
Public
Total
__________
713,605,187
1,200,603
465,731,040
60.45%
0.10%
39.45%
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.
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, 2016. 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 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):
40
•
•
any issuance of Shares (including, without limitation, the direct issuance of Shares or upon the exercise
of options, rights convertible into shares, or similar instruments convertible or exchangeable into Shares)
against a contribution other than in cash;
any issuance of Shares (including by way of free Shares or at discount), up to an amount of 1.5% of the
issued share capital of the Company, to directors, officers, agents or employees of the Company, its direct
or indirect subsidiaries, or its affiliates (collectively, the “Beneficiaries”), including, without limitation,
the direct issuance of Shares or upon the exercise of options, rights convertible into Shares, or similar
instruments convertible or exchangeable into Shares, issued for the purpose of compensation or incentive
of the Beneficiaries or in relation thereto (which the board of directors shall be authorized to issue upon
such terms and conditions as it deems fit).
The Company’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.
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 0.10% of the Company’s outstanding shares, while the
remaining 39.45% 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.
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 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.
41
On February 22, 2017, 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, 2016, 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, 2016.
42
MANAGEMENT CERTIFICATION
We confirm, to the best of our knowledge, that:
1.
2.
3.
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, 2017
/s/ Edgardo Carlos
Chief Financial Officer
Edgardo Carlos
March 30, 2017
43
FINANCIAL INFORMATION
Consolidated Financial Statements
For the years ended December 31, 2016, 2015 and 2014
44
45
46
CONSOLIDATED INCOME STATEMENT
(all amounts in thousands of US dollars, unless otherwise stated)
Continuing operations
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Other operating income
Other operating expenses
Operating (loss) income
Finance Income
Finance Cost
Other financial results
(Loss) 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
Income (Loss) for continuing operations
Discontinued operations
Result for discontinued operations
Income (loss) for the period
Attributable to:
Owners of the parent
Non-controlling interests
Notes
1
2
3
5
5
6
6
6
7
8
28
Earnings per share attributable to the owners of the parent during the period:
Weighted average number of ordinary shares (thousands)
Continuing operations
Basic and diluted earnings (losses) per share (U.S. dollars per share)
Basic and diluted earnings (losses) per ADS (U.S. dollars per ADS) (*)
Continuing and discontinued operations
Basic and diluted earnings (losses) per share (U.S. dollars per share)
Basic and diluted earnings (losses) per ADS (U.S. dollars per ADS) (*)
(*) Each ADS equals two shares.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(all amounts in thousands of U.S. dollars)
Income (loss) for the year
Items that may be subsequently reclassified to profit or loss:
Currency translation adjustment
Change in value of cash flow hedges
Change in value of 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
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
Remeasurements of post employment benefit obligations of non-consolidated companies
Other comprehensive income (loss) for the year, net of tax
Total comprehensive income (loss) for the year
Attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive income (loss) for the year
attributable to Owners of the parent arises from
Continuing operations
Discontinued operations
Year ended December 31,
2015
2014
2016
4,293,592
(3,165,684)
1,127,908
(1,196,929)
21,127
(11,163)
(59,057)
66,204
(22,329)
(21,921)
6,903,123
(4,747,760)
2,155,363
(1,593,597)
14,603
(410,574)
165,795
34,574
(23,058)
3,076
(37,103)
71,533
34,430
(17,102)
17,328
41,411
58,739
55,298
3,441
58,739
180,387
(39,558)
140,829
(234,384)
(93,555)
19,130
(74,425)
(80,162)
5,737
(74,425)
10,141,459
(6,140,415)
4,001,044
(1,932,778)
27,855
(215,589)
1,880,532
38,211
(44,388)
39,575
1,913,930
(164,616)
1,749,314
(580,431)
1,168,883
12,293
1,181,176
1,158,517
22,659
1,181,176
1,180,537
1,180,537
1,180,537
0.01
0.02
0.05
0.09
(0.08)
(0.17)
(0.07)
(0.14)
0.97
1.94
0.98
1.96
2016
Year ended December 31,
2015
(74,425)
58,739
2014
1,181,176
37,187
(7,525)
-
(256,260)
10,699
2,486
3,473
421
(23)
33,533
(230)
(1,760)
(5,475)
(7,465)
26,068
84,807
81,702
3,105
84,807
(92,914)
(3,790)
(284)
(340,063)
14,181
(4,242)
(449)
9,490
(330,573)
(404,998)
(410,187)
5,189
(404,998)
(197,711)
(8,036)
(2,447)
(54,688)
60
400
(262,422)
1,850
(513)
(3,917)
(2,580)
(265,002)
916,174
894,929
21,245
916,174
40,291
41,411
81,702
(429,317)
19,130
(410,187)
882,636
12,293
894,929
The accompanying notes are an integral part of these Consolidated Financial Statements.
47
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(all amounts in thousands of U.S. dollars)
At December 31, 2016
At December 31, 2015
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, net
Current assets
Inventories, net
Receivables and prepayments, net
Current tax assets
Trade receivables, net
Other investments
Cash and cash equivalents
Assets of disposal group classified as held for sale
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
Notes
10
11
12
31
18
20
13
14
15
16
17
18
18
28
19
20
21 (i)
22 (ii)
19
16
21 (ii)
23 (ii)
6,001,939
1,862,827
557,031
21,572
249,719
144,613
197,003
1,563,889
124,715
140,986
954,685
1,633,142
399,737
31,542
550,657
213,617
63,257
808,694
101,197
183,887
22,756
39,668
556,834
Liabilities of disposal group classified as held for sale
28
Total liabilities
Total equity and liabilities
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.
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
286,547
223,221
750,325
231,176
61,421
748,295
136,018
222,842
8,995
134,780
503,845
9,143,943
5,743,031
14,886,974
11,713,344
152,712
11,866,056
1,266,143
1,754,775
3,020,918
14,886,974
9,034,704
4,817,154
151,417
14,003,275
11,287,417
125,655
11,413,072
859,073
1,713,036
18,094
2,590,203
14,003,275
48
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(all amounts in thousands of U.S. dollars)
Balance at December 31, 2015
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 income (loss) for the year
Total comprehensive income (loss) for the year
Acquisition of non-controlling interests
Dividends paid in cash
Balance at December 31, 2016
Attributable to owners of the parent
Share
Capital (1)
1,180,537
Legal
Reserves
118,054
Share
Premium
609,733
Currency
Translation
Adjustment
(1,006,767)
Other
Reserves (2)
(298,682)
Retained
Earnings (3)
11,110,469
Total
11,713,344
Non-
controlling
interests
152,712
Total
11,866,056
-
-
-
-
-
-
-
-
-
-
-
-
-
37,339
-
-
55,298
-
55,298
37,339
3,441
(152)
58,739
37,187
-
-
(1,781)
(7,573)
-
-
(1,781)
(209)
(1,990)
(7,573)
25
(7,548)
-
-
-
-
-
1,180,537
-
-
-
-
-
118,054
-
-
-
-
-
609,733
3,473
40,812
40,812
-
-
(965,955)
(5,054)
(14,408)
(14,408)
2
-
(313,088)
-
-
55,298
-
(507,631)
10,658,136
(1,581)
26,404
81,702
2
(507,631)
11,287,417
-
(336)
3,105
(1,073)
(29,089)
125,655
(1,581)
26,068
84,807
(1,071)
(536,720)
11,413,072
(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, 2016 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.
49
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Cont.)
(all amounts in thousands of U.S. dollars)
Attributable to owners of the parent
Balance at December 31, 2014
(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
Balance at December 31, 2015
Balance at December 31, 2013
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 of non-controlling interests
Dividends paid in cash
Balance at December 31, 2014
Share
Capital (1)
1,180,537
Legal
Reserves
118,054
Share
Premium
609,733
Currency
Translation
Adjustment
(658,284)
Other
Reserves
(2)
(317,799)
-
-
-
-
-
-
-
-
-
1,180,537
Share
Capital
(1)
1,180,537
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
118,054
-
-
-
-
-
-
-
-
-
-
(255,569)
-
-
(92,914)
(348,483)
(348,483)
-
-
-
-
10,213
12,484
(4,239)
18,458
18,458
659
-
609,733
(1,006,767)
(298,682)
Attributable to owners of the parent
Legal
Reserves
118,054
Share
Premium
609,733
Currency
Translation
Adjustment
(406,744)
Other
Reserves
(2)
(305,758)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(196,852)
-
-
-
-
1,503
(9,694)
(54,688)
(251,540)
(251,540)
-
-
(3,857)
(12,048)
(12,048)
7
-
1,180,537
118,054
609,733
(658,284)
(317,799)
Retained
Earnings
11,721,873
(80,162)
-
-
-
-
-
(80,162)
-
(531,242)
11,110,469
Retained
Earnings
11,094,598
1,158,517
-
-
-
-
-
1,158,517
-
(531,242)
11,721,873
Total
12,654,114
(80,162)
(255,569)
10,213
12,484
(97,153)
(330,025)
(410,187)
659
(531,242)
11,713,344
Total
12,290,420
1,158,517
(196,852)
1,503
(9,694)
(58,545)
(263,588)
894,929
7
(531,242)
12,654,114
Non-
controlling
interests
152,200
5,737
(691)
(274)
417
-
(548)
5,189
(1,727)
(2,950)
152,712
Non-
controlling
interests
179,446
22,659
(859)
(166)
(389)
-
(1,414)
21,245
(152)
(48,339)
152,200
Total
12,806,314
(74,425)
(256,260)
9,939
12,901
(97,153)
(330,573)
(404,998)
(1,068)
(534,192)
11,866,056
Total
12,469,866
1,181,176
(197,711)
1,337
(10,083)
(58,545)
(265,002)
916,174
(145)
(579,581)
12,806,314
(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 and 2014 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.
The accompanying notes are an integral part of these Consolidated Financial Statements.
50
CONSOLIDATED STATEMENT OF CASH FLOWS
(all amounts in thousands of U.S. dollars)
Cash flows from operating activities
Income (loss) 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
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
Increase (decrease) in cash and cash equivalents
Movement in cash and cash equivalents
At the beginning of the year
Effect of exchange rate changes
Increase (decrease) in cash and cash equivalents
At December 31,
Cash and cash equivalents
Cash and bank deposits
Bank overdrafts
Notes
10 & 11
5
27(ii)
7
27(iii)
27(i)
Year ended December 31,
2015
2016
2014
58,739
(74,425)
1,181,176
662,412
-
(128,079)
(71,533)
(40,404)
15,597
348,199
18,634
863,565
658,778
400,314
(91,080)
39,558
(1,975)
(20,678)
1,373,985
(69,473)
2,215,004
615,629
205,849
79,062
164,616
(37,192)
(4,982)
(72,066)
(88,025)
2,044,067
10 & 11
(786,873)
(1,131,519)
(1,089,373)
12
26
12 c
12
9
27(iv)
19
50,989
(17,108)
-
(42,394)
49,461
(4,400)
-
(22,322)
(63,390)
(1,380)
(28,060)
(21,450)
23,609
20,674
652,755
(98,348)
10,090
20,674
(695,566)
(1,773,582)
11,156
17,735
(611,049)
(1,785,811)
(507,631)
(29,089)
(1,071)
1,180,727
(1,295,560)
(652,624)
(531,242)
(2,950)
(1,068)
2,064,218
(2,063,992)
(535,034)
(531,242)
(48,339)
(145)
3,046,837
(2,890,717)
(423,606)
112,593
(93,612)
(165,350)
286,198
(211)
112,593
398,580
416,445
(36,635)
(93,612)
286,198
598,145
(16,350)
(165,350)
416,445
At December 31,
2015
286,547
(349)
286,198
2016
399,900
(1,320)
398,580
2014
417,645
(1,200)
416,445
(*) Mainly related to the renewal of short-term facilities carried out during the years 2016, 2015 and 2014.
The accompanying notes are an integral part of these Consolidated Financial Statements.
51
INDEX TO THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
I GENERAL INFORMATION
IV OTHER NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
1 Segment information
II ACCOUNTING POLICIES (“AP”)
2 Cost of sales
A Basis of presentation
B Group accounting
C Segment information
3 Selling, general and administrative expenses
4 Labor costs (included in Cost of sales and in Selling, general and
administrative expenses)
5 Other operating income and expenses
D Foreign currency translation
6 Financial results
E Property, plant and equipment
7 Equity in earnings (losses) of non-consolidated companies
F
G
Intangible assets
8
Income tax
Impairment of non-financial assets
9 Dividends distribution
H Other investments
I
Inventories
J Trade and other receivables
10 Property, plant and equipment, net
11
12
Intangible assets, net
Investments in non-consolidated companies
K Cash and cash equivalents
13 Receivables - non current
L Equity
M Borrowings
14
Inventories
15 Receivables and prepayments
N Current and Deferred income tax
16 Current tax assets and liabilities
O Employee benefits
P Provisions
Q Trade payables
17 Trade receivables
18 Cash and cash equivalents and Other investments
19 Borrowings
R Revenue recognition
20 Deferred income tax
S Cost of sales and sales expenses
21 Other liabilities
T Earnings per share
U Financial instruments
22 Non-current allowances and provisions
23 Current allowances and provisions
24 Derivative financial instruments
III FINANCIAL RISK MANAGEMENT
26 Acquisition of subsidiaries and non-consolidated companies
25 Contingencies, commitments and restrictions on the distribution of
profits
A Financial Risk Factors
28 Net assets of disposal group classified as held for sale
27 Cash flow disclosures
B Category of Financial Instruments and
Classification Within the Fair Value
Hierarchy
C Fair value estimation
D Accounting for derivative financial
instruments and hedging activities
29 Related party transactions
30 Principal subsidiaries
31 Nationalization of Venezuelan Subsidiaries
32 Fees paid to the Company's principal accountant
33 Subsequent event
52
I. GENERAL INFORMATION
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 30 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 22, 2017.
II. ACCOUNTING POLICIES
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, financial assets and liabilities (including derivative instruments) at fair value through profit or loss
and plan assets measured at fair value. 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.
Following the sale of the steel electric conduit business in North America, known as Republic Conduit, the results
of the mentioned business are presented as discontinued operations in accordance with IFRS 5 "Non-current Assets
Held for Sale and Discontinued Operations". Consequently, all amounts related to discontinued operations within
each line item of the Consolidated Income Statement are reclassified into discontinued operations. The Consolidated
Statement of Cash Flows includes the cash flows for continuing and discontinued operations, cash flows from
discontinued operations and earnings per share are disclosed separately in note 28, as well as additional information
detailing net assets of disposal group classified as held for sale and discontinued operations.
The preparation of Consolidated Financial Statements in conformity with IFRS requires management to make certain
accounting estimates and assumptions that might affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the reporting dates, and the reported amounts of revenues and
expenses during the reporting years. Actual results may differ from these estimates.
(1)
New and amended standards 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.
53
A
(1)
Basis of presentation (Cont.)
New and amended standards not yet adopted and relevant for Tenaris (Cont.)
These standards are not effective for the financial year beginning January 1, 2016 and have not been early adopted.
These standards were endorsed by the EU.
The Company's management is currently assessing the potential impact that the application of these standards may
have on the Company's financial condition or results of operations. The management does not expect these standards
to have a significant impact on the classification and measurement of its assets and liabilities.
Others accounting pronouncements issued during 2016 and as of the date of these Consolidated Financial Statements
have no material effect on the Company’s financial condition or result of operations.
(2)
New and amended standards adopted for Tenaris
The Amendment to IAS 1, “Presentation of financial statements” on the disclosure initiative, has been applied on
the year starting January 1, 2016, with no significant impact on the Company’s Consolidated Financial Statements.
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 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 intercompany 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 intercompany transactions are generated.
These are included in the Consolidated Income Statement under Other financial results.
54
B
Group accounting (Cont.)
(2)
Non-consolidated companies
Non-consolidated companies are all entities in which Tenaris has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in 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’s 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, 2016, Tenaris holds 11.46% of Ternium S.A (“Ternium”)’s common stock. The following factors
and circumstances evidence that Tenaris has significant influence (as defined by IAS 28, “Investments in associates
companies and Joint Ventures”) over Ternium, and as a result the Company’s investment in Ternium has been
accounted for under the equity method:
Both the Company and Ternium are under the indirect common control of San Faustin S.A.;
Four out of eight members of Ternium’s Board of Directors (including Ternium’s chairman) are also members
of the Company’s Board of Directors;
Under the shareholders’ agreement by and between the Company and Techint Holdings S.à r.l, a wholly owned
subsidiary of San Faustin S.A. and Ternium’s main shareholder, dated January 9, 2006, Techint Holdings S.à
r.l, is required to take actions within its power to cause (a) one of the members of Ternium’s Board of Directors
to be nominated by the Company and (b) any director nominated by the Company to be only removed from
Ternium’s Board of Directors pursuant to previous written instructions of the Company.
At December 31, 2016, Tenaris holds through its Brazilian subsidiary Confab Industrial S.A. (“Confab”), 5.2% of
the shares with voting rights and 3.08% of Siderúrgicas de Minas Gerais S.A. Usiminas (“Usiminas”) 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’ 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).
In April and May 2016 Tenaris’s subsidiary Confab subscribed, in the aggregate, to 1.3 million preferred shares
(BRL1.28 per share) for a total amount of BRL1.6 million (approximately $0.5 million) and 11.5 million ordinary
shares (BRL5.00 per share) for a total amount of BRL57.5 (approximately $16.6 million). The preferred and ordinary
shares were issued on June 3, 2016 and July 19, 2016, respectively. Consequently as of December 31, 2016 Tenaris
owns 36.5 million ordinary shares and 1.3 million preferred shares of Usiminas.
Tenaris carries its investment in Ternium and Usiminas under the equity method, with no additional goodwill or
intangible assets recognized. 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. At December 31, 2016, 2015 and 2014, no
impairment provisions were recorded on Tenaris’s investment in Ternium while in 2014 and 2015, impairment
charges were recorded on Tenaris’s investment in Usiminas. See Note 7 and Note 12.
55
C
Segment information
The Company is organized in 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 are made through local subsidiaries. Corporate general and
administrative expenses have been allocated to the Tubes segment.
Others includes all other business activities and operating segments that are not required to be separately reported,
including the production and selling of sucker rods, industrial equipment, coiled tubing, energy and raw materials
that exceed internal requirements.
Tenaris’s Chief Operating Decision Maker (CEO) holds monthly meetings with senior management, in which
operating and financial performance information is reviewed, including financial information that differs from IFRS
principally as follows:
The use of direct cost methodology to calculate the inventories, while under IFRS it is at full cost, 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 Asia Pacific. For purposes of reporting geographical information, net sales are allocated to geographical
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) “The effects of changes in foreign exchange rates” 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’s 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:
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. dollar as reference
currency;
Significant level of integration of the local operations within Tenaris’s international global distribution network;
Net financial assets and liabilities are mainly received and maintained in U.S. dollars;
The exchange rate of certain legal currencies has long-been affected by recurring and severe economic crises.
56
D
Foreign currency translation (Cont.)
(2)
Transactions in currencies other than the 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 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.
(3)
Translation of financial information in currencies other than the functional currency
Results of operations for subsidiaries whose functional currencies are not the U.S. dollar are translated into U.S.
dollars at the average exchange rates for each quarter of the year. Financial statement positions are translated at the
end-of-year exchange rates. Translation differences are recognized in a separate component of equity as currency
translation adjustments. In the case of a sale or other disposal of any of such subsidiaries, any accumulated translation
difference would be recognized in income as a gain or loss from the sale.
E
Property, plant and equipment
Property, plant and equipment are recognized at historical acquisition or construction cost less accumulated
depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition
of the items. Property, plant and equipment acquired through acquisitions accounted for as business combinations
have been valued initially at the fair market value of the assets acquired.
Major overhaul and rebuilding expenditures are capitalized as property, plant and equipment only when it is probable
that future economic benefits associated with the item will flow to the group and the investment enhances the
condition of assets beyond its original condition. The carrying amount of the replaced part is derecognized. Ordinary
maintenance expenses on manufacturing properties are recorded as cost of products sold in the year in which they
are incurred.
Borrowing costs that are attributable to the acquisition or construction of certain capital assets are capitalized as part
of the cost of the asset, in accordance with IAS 23(R) “Borrowing Costs”. Assets for which borrowing costs are
capitalized are those that require a substantial period of time to prepare for their intended use.
Depreciation method is reviewed at each year end. Depreciation is calculated using the straight-line method to
depreciate the cost of each asset to its residual value over its estimated useful life, as follows:
Land
Buildings and improvements
Plant and production equipment
Vehicles, furniture and fixtures, and other equipment
No Depreciation
30-50 years
10-40 years
4-10 years
The 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 2016, 2015 and 2014.
57
E
Property, plant and equipment (Cont.)
Tenaris depreciates each significant part of an item of property, plant and equipment for its different production
facilities that (i) can be properly identified as an independent component with a cost that is significant in relation to
the total cost of the item, and (ii) has a useful operating life that is different from another significant part of that
same item of property, plant and equipment.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of assets and are
recognized under Other operating income or Other operating expenses in the Consolidated Income Statement.
F
Intangible assets
(1)
Goodwill
Goodwill represents the excess of the acquisition cost over the fair value of Tenaris’s share of net identifiable assets
acquired as part of business combinations determined mainly by independent valuations. Goodwill is tested annually
for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not
reversed. Goodwill is included 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.
Management’s re-estimation of assets useful lives, performed in accordance with IAS 38 “Intangible Assets”, did
not materially affect depreciation expenses for 2016, 2015 and 2014.
(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. Amortization charges
are mainly classified as Selling, general and administrative expenses in the Consolidated Income Statement.
The balance of acquired trademarks that have indefinite useful lives according to external appraisal amounts to $86.7
million at December 31, 2016 and 2015, 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, did not materially affect
depreciation expenses for 2016, 2015 and 2014.
(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 2016, 2015 and 2014 totaled $68.6 million, $89.0 million and $106.9 million,
respectively.
F
Intangible assets
(5)
Customer relationships
In accordance with IFRS 3 "Business Combinations" and IAS 38, Tenaris has recognized the value of customer
relationships separately from goodwill attributable to the acquisition of Maverick and Hydril groups.
58
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.
In 2015 the Company reviewed the useful life of Prudential’s customer relationships, related to Maverick acquisition,
and decided to reduce the remaining amortization period from 5 years to 2 years.
As of December 2016 the residual value of Maverick and Hydril customer relationships amount to $308 million and
$17 million and the residual useful life is 4 years and 1 year respectively.
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.
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’s cash flow projections and the business condition in terms of competitive and economic factors,
such as the cost of raw materials, oil and gas prices, competitive environment, capital expenditure programs for
Tenaris’s customers and the evolution of the rig count.
An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its 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.
59
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 “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, and 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, goods in process,
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.
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. In
addition, 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 at 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.
60
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, 2016, 2015 and 2014 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 (iii)).
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 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.
61
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 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 fair value of 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.
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 was 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.
62
O
Employee benefits (Cont.)
(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’s 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 “Employee Benefits”.
As of December 31, 2016 and 2015, the outstanding liability corresponding to the Program amounts to $78.7 million
and $84.0 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, 2016 and 2015, is $92.9 million and $105.3 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’s 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 information available to management as of the date of preparation of the financial
statements, and take into consideration Tenaris’s litigation and settlement strategies. These estimates are primarily
constructed with the assistance of legal counsel. As the scope of liabilities become better defined, there may be
changes in the estimates of future costs which could have a material adverse effect on its results of operations,
financial condition and cash flows.
If Tenaris expects to be reimbursed for an accrued expense, as would be the case for an expense or loss covered
under an insurance contract, and reimbursement is considered virtually certain, the expected reimbursement is
recognized as a receivable.
Q
Trade payables
Trade payables are recognized initially at fair value, generally the nominal invoice amount.
R
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in
the ordinary course of Tenaris’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts
and after eliminating sales within the group.
Tenaris’s products and services are sold based upon purchase orders, contracts or upon other persuasive evidence of
an arrangement with customers, including that the sales price is known or determinable. Sales are recognized as
revenue upon delivery, when neither continuing managerial involvement nor effective control over the products is
retained by Tenaris and when collection is reasonably assured. Delivery is defined by the transfer of risk 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.
63
R
Revenue recognition (Cont.)
The percentage of total sales that were generated from bill and hold arrangements for products located in Tenaris’s
storage facilities that have not been shipped to customers amounted to 2.8%, 3.0% and 1.2% as of December 31,
2016, 2015 and 2014, 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:
Construction contracts (mainly applicable to Tenaris Brazilian subsidiaries and amounted to 37 million, 0.86%
of total sales). The revenue recognition of the contracts follows the IAS 11 ”Construction Contracts" 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’s right to receive payment is established.
S
Cost of sales and sales expenses
Cost of sales and sales expenses are recognized in the Consolidated Income Statement on the accrual basis of
accounting.
Commissions, freight and other selling expenses, including shipping and handling costs, are recorded in Selling,
general and administrative expenses in the Consolidated Income Statement.
T
Earnings per share
Earnings per share are calculated by dividing the income attributable to owners of the parent by the daily weighted
average number of common shares outstanding during the year.
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’s non
derivative financial instruments are classified into the following categories:
Financial instruments at fair value through profit and loss: comprise mainly Other Investments 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 31).
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.
Accounting for derivative financial instruments and hedging activities is included within the Section III, Financial
Risk Management.
64
III. FINANCIAL RISK MANAGEMENT
The multinational nature of Tenaris’s operations and customer base exposes the Company to a variety of risks,
mainly related to market risks (including the effects of changes in foreign currency exchange rates and interest rates),
credit risk and capital market risk. In order to manage the volatility related to these exposures, the management
evaluates exposures on a consolidated basis, taking advantage of logical exposure netting. The Company or its
subsidiaries may then enter into various derivative transactions in order to prevent potential adverse impacts on
Tenaris’s 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 2016.
A. Financial Risk Factors
(i)
Capital Risk Management
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 0.07 as of December 31, 2016 and 0.08 as of December 31, 2015. The
Company does not have to comply with regulatory capital adequacy requirements.
(ii)
Foreign exchange risk
Tenaris manufactures and sells its products in a number of countries throughout the world and consequently is
exposed to foreign exchange rate risk. Since the Company’s functional currency is the U.S. dollar the purpose of
Tenaris’s foreign currency hedging program is mainly to reduce the risk caused by changes in the exchange rates of
other currencies against the U.S. dollar.
Tenaris’s exposure to currency fluctuations is reviewed on a periodic consolidated basis. A number of derivative
transactions are performed in order to achieve an efficient coverage in the absence of operative or natural hedges.
Almost all of these transactions are forward exchange rates contracts (see Note 24 Derivative financial instruments).
Tenaris does not enter into derivative financial instruments for trading or other speculative purposes, other than non-
material investments in structured products.
Because certain subsidiaries have functional currencies other than the U.S. dollar, the results of hedging activities,
reported in accordance with IFRS, may not reflect entirely the management’s assessment of its foreign exchange
risk hedging program. Intercompany balances between Tenaris’s subsidiaries may generate financial gains (losses)
to the extent that functional currencies differ.
The value of Tenaris’s financial assets and liabilities is subject to changes arising out of the variation of foreign
currency exchange rates. The following table provides a breakdown of Tenaris’s main financial assets and liabilities
(including foreign exchange derivative contracts) which impact the Company’s profit and loss as of December 31,
2016 and 2015:
All amounts Long / (Short) in thousands of U.S. dollars
Currency Exposure / Functional currency
Argentine Peso / U.S. Dollar
Euro / U.S. Dollar
U.S. Dollar / Brazilian Real
As of December 31,
2016
(60,204)
(406,814)
125,880
2015
(73,399)
(334,831)
66,826
65
A. Financial Risk Factors (Cont.)
(ii)
Foreign exchange risk (Cont.)
The main relevant exposures correspond to:
Argentine Peso / U.S. dollar
As of December 31, 2016 and 2015 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 $0.6 million and $0.7 million
as of December 31, 2016 and 2015, respectively.
Euro / U.S. dollar
As of December 31, 2016 and 2015, 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 $4.1 million and $3.3 million as of December 31, 2016 and
2015, respectively, which would have been to a large extent offset by changes in currency translation adjustment
included in Tenaris’s net equity position.
U.S. dollar / Brazilian Real
As of December 31, 2016 consisting primarily of Cash and cash equivalent and Other investments denominated
in U.S. dollar at subsidiaries which functional currency is the Brazilian real. A change of 1% in the BRL/USD
exchange rate would generate a pre-tax gain / loss of $1.3 million and $0.7 million in December 31, 2016 and
2015, respectively (including a gain / loss of $0.5 million in 2016 and $0.7 million in 2015 due to foreign
exchange derivative contracts entered to preserve the U.S. dollar value of trade receivables and cash
denominated in Brazilian Real), which would have been to a large extent offset by changes in currency
translation adjustment included in Tenaris’s net equity position.
Considering the balances held as of December 31, 2016 on financial assets and liabilities exposed to foreign
exchange rate fluctuations, Tenaris estimates that the impact of a simultaneous 1% appreciation / depreciation
movement in the levels of foreign currencies exchange rates relative to the U.S. dollar, would be a pre-tax gain / loss
of $6.6 million (including a loss / gain of $4.0 million due to foreign exchange derivative contracts), which would
be partially offset by changes to Tenaris’s net equity position of $4.2 million. For balances held as of December 31,
2015, 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 $5.1 million (including a loss / gain of $5.3 million due to
foreign exchange derivative contracts), which would have been partially offset by changes to Tenaris’s net equity
position of $3.9 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.
The following table summarizes the proportions of variable-rate and fixed-rate debt as of each year end.
Fixed rate
Variable rate
Total (*)
As of December 31,
2016
Amount in thousands
of U.S. dollars
820,600
19,636
840,236
%
98%
2%
2015
Amount in thousands
of U.S. dollars
954,681
16,835
971,516
%
98%
2%
(*) As of December 31, 2016 approximately 66% 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 59% of
the total outstanding debt balance as of December 31, 2015.
The Company estimates that, if market interest rates applicable to Tenaris’s borrowings had been 100 basis points
higher, then the additional pre-tax loss would have been $8.8 million in 2016 and $10.8 million in 2015.
66
A. Financial Risk Factors (Cont.)
(iv)
Credit risk
Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit
exposures to customers, including outstanding receivables and committed transactions. The Company also actively
monitors the creditworthiness of its treasury, derivative and insurance counterparties in order to minimize its credit
risk.
There is no significant concentration of credit risk from customers. No single customer comprised more than 10%
of Tenaris’s net sales in 2016, 2015 and 2014.
Tenaris’s credit policies related to sales of products and services are designed to identify customers with acceptable
credit history and to allow Tenaris to require the use of credit insurance, letters of credit and other instruments
designed to minimize credit risks whenever deemed necessary. Tenaris maintains allowances for impairment for
potential credit losses (See Section II J).
As of December 31, 2016 and 2015 trade receivables amount to $954,7 million and $1,135.1 million respectively.
Trade receivables have guarantees under credit insurance of $222.1 million and $325.1 million, letter of credit and
other bank guarantees of $117.8 million and $20.5 million, and other guarantees of $15.6 million and $7.9 million
as of December 31, 2016 and 2015 respectively.
As of December 31, 2016 and 2015 past due trade receivables amounted to $249.0 million and $333.8 million,
respectively. Out of those amounts $83.1 million and $84.9 million are guaranteed trade receivables while $85.7
million and $101.5 million are included in the allowance for doubtful accounts. Both 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 82% of Tenaris’s liquid financial assets correspond to Investment Grade-rated instruments as of
December 31, 2016, in comparison with approximately 92% as of December 31, 2015.
(vi)
Liquidity risk
Tenaris financing strategy aims to maintain adequate financial resources and access to additional liquidity. During
2016, 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 16% of total
assets at the end of 2016 compared to 19% at the end of 2015.
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, 2016 and 2015, 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, 2016 and 2015, U.S. dollar denominated
liquid assets represented approximately 95% and 87% of total liquid financial assets respectively.
67
A. Financial Risk Factors (Cont.)
(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.
B. Category of Financial Instruments and Classification Within the Fair Value Hierarchy
Accounting policies for financial instruments have been applied to classify as either: loans and receivables, held-to-
maturity, available-for-sale, or fair value through profit and loss. For financial instruments that are measured in the
statement of financial position at fair value, IFRS 13 requires a disclosure of fair value measurements by level
according to the following fair value measurement hierarchy:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
The following tables present the financial instruments by category and levels as of December 31, 2016 and 2015.
December 31, 2016
Assets
Cash and cash equivalents
Cash at banks
Liquidity funds
Short – term investments
Other investments
Fixed Income (time-deposit, zero
cupon bonds, commercial papers)
Non - U.S. Sovereign Bills
Certificates of Deposits
Commercial Papers
Other notes
Bonds and other fixed Income
U.S. government securities
Non - U.S. government securities
Corporates securities
Mortgage- and Asset-backed securities
Fund Investments
Other Investments Non- current
Bonds and other fixed Income
Other Investments
Trade receivables
Receivables C and NC
Foreign exchange derivatives contracts
Other receivables
Other receivables (non-Financial)
Available for sale assets (*)
Total
Liabilities
Borrowings C and NC
Trade payables
Other liabilities
Foreign exchange derivatives contracts
Other liabilities (non-Financial)
Total
Carrying
Amount
399,737
92,730
215,807
91,200
1,633,142
782,029
41,370
525,068
34,890
180,701
841,638
216,732
88,805
462,625
73,476
9,475
249,719
248,049
1,670
954,685
321,718
2,759
176,990
141,969
21,572
840,236
556,834
183,887
42,635
141,252
Measurement Categories
At Fair Value
Loans &
Receivables
Held to
Maturity
Available
for sale
Assets at fair
value through
profit and loss
Level 1 Level 2 Level 3
307,007
307,007
-
-
215,807
91,200
1,387,111
215,807
91,200
607,866
-
-
-
-
779,245
-
-
-
-
-
782,029
41,370
525,068
34,890
180,701
595,607
216,732
56,161
249,238
73,476
9,475
1,670
-
1,670
-
2,759
2,759
-
-
-
1,698,547
-
-
42,635
42,635
-
42,635
-
-
-
-
-
-
-
-
-
-
-
76,260
41,370
705,769
-
- 525,068
34,890
-
- 180,701
73,476
-
-
-
-
73,476
522,131
216,732
56,161
249,238
9,475
-
-
-
-
-
-
-
-
-
914,873
-
1,670
-
-
-
- 1,670
-
-
-
2,759
-
2,759
-
-
-
-
- 21,572
23,242
782,004
-
-
-
-
-
-
-
-
42,635
42,635
-
42,635
-
-
-
-
-
-
92,730
92,730
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
954,685
176,990
-
176,990
-
-
1,224,405
840,236
556,834
-
-
-
1,397,070
-
-
-
-
246,031
-
-
-
-
-
246,031
-
32,644
213,387
-
-
248,049
248,049
-
-
-
-
-
-
-
494,080
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,572
21,572
-
-
-
-
-
-
68
B. Category of Financial Instruments and Classification Within the Fair Value Hierarchy (Cont.)
December 31, 2015
Assets
Cash and cash equivalents
Cash at banks
Liquidity funds
Short – term investments
Other investments Current
Fixed Income (time-deposit, zero
cupon bonds, commercial papers)
Non - U.S. Sovereign Bills
Certificates of Deposits
Commercial Papers
Other notes
Bonds and other fixed Income
U.S. government securities
Non - U.S. government securities
Corporates securities
Mortgage- and Asset-backed securities
Structured Notes
Fund Investments
Other Investments Non- current
Bonds and other fixed Income
Other Investments
Trade receivables
Receivables C and NC
Foreing exchange derivatives contracts
Other receivables
Other receivables (non-Financial)
Available for sale assets (*)
Total
Liabilities
Borrowings C and NC
Trade payables
Other liabilities
Foreign exchange derivatives contracts
Other liabilities
Other liabilities (non-Financial)
Total
Carrying
Amount
286,547
101,019
81,735
103,793
2,140,862
877,436
189,973
489,248
29,954
168,261
1,203,695
249,124
92,975
726,511
82,839
52,246
59,731
394,746
393,084
1,662
1,135,129
369,410
18,248
131,896
219,266
21,572
971,516
503,845
222,842
34,541
14,869
173,432
Measurement Categories
At Fair Value
Loans &
Receivables
Held to
Maturity
Available
for sale
Assets at fair
value through
profit and loss
Level 1
Level 2
Level 3
101,019
101,019
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,135,129
131,896
-
131,896
-
-
1,368,044
971,516
503,845
14,869
-
14,869
-
1,490,230
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
393,084
393,084
-
-
-
-
-
-
-
393,084
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
185,528
185,528
-
-
81,735
103,793
2,140,862
81,735
103,793
1,348,268
-
-
-
-
792,594
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,572
21,572
-
-
-
-
-
-
-
877,436
189,973
489,248
29,954
168,261
1,203,695
249,124
92,975
726,511
82,839
52,246
59,731
1,662
-
1,662
-
18,248
18,248
-
-
-
2,346,300
-
-
34,541
34,541
-
-
34,541
219,927
189,973
657,509
-
- 489,248
29,954
-
- 168,261
135,085
1,068,610
249,124
92,975
726,511
-
-
-
-
-
82,839
52,246
59,731
-
-
-
-
-
-
-
-
-
1,533,796
-
-
-
-
-
1,662
-
1,662
-
-
-
-
-
-
-
- 21,572
23,234
18,248
18,248
810,842
-
-
-
-
-
-
-
-
-
34,541
34,541
-
-
34,541
-
-
-
-
-
-
-
(*) For further detail regarding Available for sale assets, see Note 31.
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’s
interest in Venezuelan companies under process of nationalization (see Note 31).
69
B. Category of Financial Instruments and Classification Within the Fair Value Hierarchy (Cont.)
The following table presents the changes in Level 3 assets and liabilities:
At the beginning of the period
Currency translation adjustment and others
At the end of the year
C. Fair value estimation
Year ended December 31,
2015
2016
Assets / Liabilities
23,234
8
23,242
23,111
123
23,234
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’s investments are designated as held to maturity and measured at amortized cost. Tenaris estimates
that the fair value of these financial assets is 100.8% and 99% of its carrying amount including interests accrued as
of December 31, 2016 and 2015 respectively.
The fair value of all outstanding derivatives is determined using specific pricing models that include inputs that are
observable in the market or can be derived from or corroborated by observable data. The fair value of forward foreign
exchange contracts is calculated as the net present value of the estimated future cash flows in each currency, based
on observable yield curves, converted into U.S. dollars at the spot rate of the valuation date.
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 99.7% of its carrying amount
including interests accrued in 2016 as compared with 99% in 2015. Fair values were calculated using standard
valuation techniques for floating rate instruments and comparable market rates for discounting flows.
70
D. 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 as the offsetting losses and gains on the hedged item. The
gain or loss relating to the ineffective portion is recognized immediately in the income statement. The fair value of
Tenaris’s derivative financial instruments (assets or liabilities) continues to be reflected 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, 2016 and 2015, the effective portion of
designated cash flow hedges which is included in “Other Reserves” in equity amounts to $4.7 million debit and
$2.8 million credit respectively (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.
71
IV. OTHER NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In the notes all amounts are shown in thousands of U.S. dollars, unless otherwise stated)
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, 2016
IFRS - Net Sales
Management View - Operating income
· Differences in cost of sales and others
· Differences in depreciation and amortization
IFRS - Operating (loss) income
Financial income (expense), net
(Loss) 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
(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
(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
· 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
4,015,491
19,630
(118,381)
27,640
(71,111)
278,101
18,817
(6,962)
199
12,054
751,854
642,896
33,108
14,213
Tubes
Other
6,443,814
685,870
(228,948)
(319,293)
137,629
459,309
27,884
(880)
1,162
28,166
1,088,901
638,456
41,412
14,857
Tubes
Other
9,581,615
2,022,429
(35,463)
(121,289)
1,865,677
559,844
10,568
4,080
207
14,855
1,051,148
593,671
36,989
15,976
Total continuing
operations
Total discontinued
operations
4,293,592
38,447
(125,343)
27,839
(59,057)
21,954
(37,103)
71,533
34,430
784,962
657,109
234,911
62,298
3,540
-
65,838
(88)
65,750
-
65,750
1,911
5,303
Total continuing
operations
Total discontinued
operations
6,903,123
713,754
(229,828)
(318,131)
165,795
14,592
180,387
(39,558)
140,829
1,130,313
653,313
197,630
38,547
(8,914)
-
29,633
(382)
29,251
-
29,251
1,206
5,465
Total continuing
operations
Total discontinued
operations
10,141,459
2,032,997
(31,383)
(121,082)
1,880,532
33,398
1,913,930
(164,616)
1,749,314
1,088,137
609,647
196,503
17,167
1,117
-
18,284
(361)
17,923
-
17,923
1,236
5,982
Transactions between segments, which were eliminated in consolidation, are mainly related to sales of scrap, energy, surplus raw
materials and others from the Other segment to the Tubes segment for $47,939, $57,468 and $233,863 in 2016, 2015 and 2014,
respectively.
Net income under Management view amounted to $96.1 million, while under IFRS amounted to $58.7 million income. 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.
72
1
Segment information (Cont.)
Geographical information
North
America
(all amounts in thousands of
U.S. dollars)
Year ended December 31, 2016
1,320,297
Net sales
7,467,842
Total assets
Trade receivables
229,390
Property, plant and equipment, net 3,652,032
646,545
Capital expenditures
381,811
Depreciation and amortization
Year ended December 31, 2015
2,668,724
Net sales
8,625,806
Total assets
Trade receivables
339,499
Property, plant and equipment, net 3,207,661
822,396
Capital expenditures
Depreciation and amortization
385,189
Year ended December 31, 2014
4,782,113
Net sales
9,433,050
Total assets
709,294
Trade receivables
Property, plant and equipment, net 2,903,848
609,016
Capital expenditures
339,203
Depreciation and amortization
South
America
Europe
Middle East
& Africa
Asia Pacific
Unallocated
(*)
Total
continuing
operations
Total
discontinued
operations
1,210,527
2,803,848
204,746
1,237,391
59,780
128,458
2,132,221
2,931,297
396,834
1,269,995
168,140
125,754
2,124,607
3,340,973
554,542
1,303,162
338,995
120,905
565,173 1,055,994
593,649
308,919
106,941
24,166
11,053
1,925,784
161,291
847,318
35,270
113,875
728,815 1,096,688
429,317
137,278
86,181
36,867
9,912
1,877,429
181,084
907,466
82,344
112,742
979,042 1,843,778
598,175
340,880
60,354
10,891
10,154
1,857,285
259,115
683,283
111,232
119,226
141,601
482,132
50,339
158,257
19,201
21,912
276,675
423,479
52,494
155,299
20,566
19,716
411,919
498,694
74,993
158,995
18,003
20,159
-
578,603
-
-
-
-
-
512,217
-
-
-
-
4,293,592
13,851,858
954,685
6,001,939
784,962
657,109
6,903,123
14,799,545
1,107,189
5,626,602
1,130,313
653,313
665,202
- 10,141,459
16,393,379
1,938,824
5,109,642
1,088,137
609,647
-
-
-
-
234,911
151,417
33,620
41,470
1,911
5,303
197,630
87,429
27,940
45,656
1,206
5,465
196,503
117,299
24,570
49,915
1,236
5,982
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
(24.8%); “South America” comprises principally Argentina (16.5%), Brazil and Colombia; “Europe” comprises
principally Italy, Norway and Romania; “Middle East and Africa” comprises principally Kuwait, Nigeria, Egypt and
Saudi Arabia and; “Asia Pacific” comprises principally China, Japan and Indonesia.
(*) Includes Investments in non-consolidated companies and Available for sale assets for $21.6 million in 2016,
2015 and 2014 (see Note 12 and 31).
73
2
Cost of sales
(all amounts in thousands of U.S. dollars)
Inventories at the beginning of the year
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 (*)
From discontinued operations
Year ended December 31,
2015
2014
2016
1,843,467
2,779,869
2,702,647
1,528,532
-
199,210
658,975
376,965
27,244
122,553
32,765
16,693
89,575
3,052,512
(1,593,708
)
(136,587)
3,165,684
1,934,209
-
298,470
947,997
377,596
24,100
184,053
68,669
21,523
92,059
3,948,676
(1,843,467
)
(137,318)
4,747,760
3,944,283
4,338
453,818
1,204,720
366,932
17,324
217,694
4,704
20,024
130,845
6,364,682
(2,779,869
)
(147,045)
6,140,415
(*) Includes 29.8 million related to discontinued operations.
For the year ended December 2016 and 2015, labor cost includes approximately $35 million and $104 million
respectively of severance indemnities related to the adjustment of the workforce to market conditions.
3
Selling, general and administrative expenses
(all amounts in thousands of U.S. dollars)
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
From discontinued operations
Year ended December 31,
2015
2014
2016
123,653
441,355
16,965
241,238
243,401
30,841
(12,573)
67,724
76,563
1,229,167
(32,238)
1,196,929
158,541
579,360
18,543
238,539
351,657
19,672
36,788
129,018
92,157
1,624,275
(30,678)
1,593,597
178,700
594,660
20,197
211,176
598,138
35,557
21,704
165,675
138,145
1,963,952
(31,174)
1,932,778
For the year ended December 2016 and 2015, labor cost includes approximately $38 million and $73 million
respectively of severance indemnities related to the adjustment of the workforce to market conditions.
4
Labor costs (included in Cost of sales and in Selling, general and administrative expenses)
(all amounts in thousands of U.S. dollars)
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
From discontinued operations
Year ended December 31,
2015
2016
2014
1,062,535
1,504,918
1,743,253
10,758
10,563
16,474
1,100,330
(28,306)
1,072,024
13,286
14,813
(5,660)
1,527,357
(24,665)
1,502,692
17,431
18,645
20,051
1,799,380
(23,233)
1,776,147
At the year-end, the number of employees was 19,399 in 2016, 21,741 in 2015 and 27,816 in 2014.
74
4
Labor costs (included in Cost of sales and in Selling, general and administrative expenses) (Cont.)
The following table shows the geographical distribution of the employees:
Country
2016
2015
2014
Argentina
Mexico
Brazil
USA
Italy
Romania
Canada
Indonesia
Colombia
Japan
Other
From discontinued operations
5
Other operating income and expenses
(all amounts in thousands of U.S. dollars)
Other operating income
Net income from other sales
Net rents
Other
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
From discontinued operations
Impairment charge
4,755
4,968
1,166
1,636
1,979
1,631
473
509
750
458
1,074
19,399
(323)
19,076
5,388
5,101
2,050
2,190
2,030
1,624
546
532
636
508
1,136
21,741
(292)
21,449
6,421
5,518
3,835
3,549
2,352
1,725
1,225
677
614
588
1,312
27,816
(267)
27,549
Year ended December 31,
2015
2014
2016
16,275
4,852
-
21,127
9,534
10
57
-
432
1,378
11,411
(248)
11,163
7,480
6,462
661
14,603
9,052
1
94
400,314
1,114
-
410,575
(1)
410,574
8,843
4,041
14,971
27,855
9,961
(760)
203
205,849
336
-
215,589
-
215,589
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.
Tenaris’s main source of revenue is the sale of products and services to the oil and gas industry and the level of such
sales is sensitive to international oil and gas prices and their impact on drilling activities.
For purposes of assessing key assumptions, Tenaris uses external sources of information and management judgment
based on past experience.
The main key assumptions, used in estimating the value in use are discount rate, growth rate and competitive and
economic factors applied to determine Tenaris’s cash flow projections, such as the cost of raw materials, oil and gas
prices, competitive environment, capital expenditure programs for Tenaris’s customers and the evolution of the rig
count.
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 2016, the main discount rates used were in a
range between 9.1% and 10.9%.
75
5
Other operating income and expenses (Cont.)
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, a further deterioration of the
business, competitive and economic factors, such as the oil and gas prices and the evolution of the rig count.
From the CGUs with significant amount of goodwill assigned in comparison to the total amount of goodwill, Tenaris
has determined that the CGU for which a reasonable possible change in a key assumption would cause the CGUs´
carrying amount to exceed its recoverable amount was OCTG USA.
In OCTG USA, the recoverable amount calculated based on value in use exceed carrying value by $154.6 million
as of December 31, 2016. The following changes in key assumptions, at CGU OCTG - USA, assuming unchanged
values for the other assumptions, would cause the recoverable amount to be equal to the respective carrying value
as of the impairment test:
Increase in the discount rate
Decrease of the growth rate
Decrease of the cash flow projections
117 Bps
-1.6%
-17.2%
In 2015 and 2014, as a result of the deterioration of business conditions, the Company recorded impairment charges
on its welded pipe assets of $400.3 and $205.8 respectively.
6
Financial results
(all amounts in thousands of U.S. dollars)
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
From discontinued operations
Year ended December 31,
2015
2016
60,405
-
5,799
-
66,204
(22,329)
(2,146)
(31,310)
11,447
(22,009)
21,866
88
21,954
39,516
-
(4,942)
-
34,574
(23,058)
(13,301)
30,468
(14,473)
2,694
14,210
382
14,592
2014
34,582
4,992
(1,478)
115
38,211
(44,388)
50,298
(4,733)
(6,351)
39,214
33,037
361
33,398
During 2015 Tenaris has derecognized all its fixed income financial instruments categorized as available for sale.
Year ended December 31,
2015
(10,674)
-
(28,884)
(39,558)
2016
71,533
-
-
71,533
2014
(24,696)
21,302
(161,222)
(164,616)
7
Equity in earnings (losses) of non-consolidated companies
(all amounts in thousands of U.S. dollars)
From non-consolidated companies
Gain on equity interest (see Note 26)
Impairment loss on non-consolidated companies (see Note 12)
76
8
Income tax
(all amounts in thousands of U.S. dollars)
Current tax
Deferred tax
From discontinued operations
Year ended December 31,
2015
2016
2014
174,410
(132,969)
41,441
(24,339)
17,102
164,562
79,943
244,505
(10,121)
234,384
695,136
(109,075)
586,061
(5,630)
580,431
The tax on Tenaris’s 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)
Income before income tax
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 (**)
Accrual / Utilization of previously unrecognized tax losses (***)
Tax charge
2016
Year ended December 31,
2015
140,829
(71,588)
149,632
6,436
151,615
(1,711)
234,384
34,430
(91,628)
51,062
4,720
105,758
(52,810)
17,102
2014
1,749,314
307,193
132,442
3,249
138,925
(1,378)
580,431
(*)
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 Mexican, Colombia and Argentinian), 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.
(***) It includes a deferred tax income of approximately $45 million booked in the last quarter of 2016 related to a capital loss generated from
the dissolution of some companies which effects can be carried forward and used to offset any future capital gains in the United States.
9
Dividends distribution
On November 3, 2016, the Company’s Board of Directors approved the payment of an interim dividend of $0.13
per share ($0.26 per ADS), or approximately $153 million, paid on November 23, 2016, with an ex-dividend date
of November 21, 2016.
On May 4, 2016 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 25, 2015 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 25, 2016. In the aggregate, the interim dividend paid in November 2015 and the balance paid in May
2016 amounted to approximately $531.2 million.
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.
77
10
Property, plant and equipment, net
Year ended December 31, 2016
Cost
Values at the beginning of the year
Translation differences
Additions (*)
Disposals / Consumptions
Transfer to assets held for sale
Transfers / Reclassifications
Values at the end of the year
Depreciation and impairment
Accumulated at the beginning of the year
Translation differences
Depreciation charge
Transfers / Reclassifications
Transfer to assets held for sale
Disposals / Consumptions
Accumulated at the end of the year
At December 31, 2016
Land,
building and
improvements
Plant and
production
equipment
Vehicles,
furniture
and
fixtures
Work in
progress
Spare
parts and
equipment
Total
1,766,103
10,483
572
(5,774)
(34,849)
100,079
1,836,614
455,499
2,240
46,150
2,856
(8,552)
(3,064)
495,129
1,341,485
8,419,792
(2,284)
1,445
(22,306)
(61,380)
356,420
8,691,687
5,432,715
(6,087)
324,886
(6,761)
(47,928)
(21,228)
5,675,597
3,016,090
366,972 1,217,682
2,604
750,075
(4,852)
(1,407)
(474,063)
372,989 1,490,039
3,716
747
(11,037)
(1,103)
13,694
32,651 11,803,200
(290)
14,229
757,495
4,656
(46,463)
(2,494)
(98,916)
(177)
(2,230)
1,640
35,986 12,427,315
-
228,966
-
2,953
-
22,361
-
(333)
-
(966)
-
(8,872)
244,109
-
128,880 1,490,039
13,762
(358)
533
(3,396)
-
-
10,541
25,445
6,130,942
(1,252)
393,930
(7,634)
(57,446)
(33,164)
6,425,376
6,001,939
Year ended December 31, 2015
Cost
Values at the beginning of the year
Translation differences
Additions (*)
Disposals / Consumptions
Transfers / Reclassifications
Values at the end of the year
Depreciation and impairment
Accumulated at the beginning of the year
Translation differences
Depreciation charge
Transfers / Reclassifications
Disposals / Consumptions
Accumulated at the end of the year
At December 31, 2015
Land,
building and
improvements
Plant and
production
equipment
Vehicles,
furniture
and
fixtures
1,633,797
(28,711)
13,065
(1,892)
149,844
1,766,103
418,210
(8,956)
45,644
2,474
(1,873)
455,499
1,310,604
8,233,902
(250,470)
16,064
(55,452)
475,748
8,419,792
5,301,765
(135,538)
325,241
(4,114)
(54,639)
5,432,715
2,987,077
359,554
(9,382)
2,022
(8,940)
23,718
366,972
216,982
(7,528)
24,313
1,987
(6,788)
228,966
138,006
Work in
progress
846,538
(10,352)
1,036,818
(5,691)
(649,631)
1,217,682
-
-
-
-
-
-
1,217,682
Spare parts
and
equipment
38,075
(1,919)
(2,246)
(285)
(974)
32,651
15,352
(1,093)
941
(1,485)
47
13,762
18,889
Total
11,111,866
(300,834)
1,065,723
(72,260)
(1,295)
11,803,200
5,952,309
(153,115)
396,139
(1,138)
(63,253)
6,130,942
5,672,258
Property, plant and equipment include capitalized interests for net amounts at December 31, 2016 and 2015 of $25.4 million and
$15.5 million, respectively. The average capitalization interest rates applied were 1.28% during 2016 and 1.53% during 2015.
(*) The increase is mainly due to progress in the construction of the greenfield seamless facility in Bay City, Texas.
78
11
Intangible assets, net
Year ended December 31, 2016
Cost
Values at the beginning of the year
Translation differences
Additions
Transfers / Reclassifications
Transfer to assets held for sale
Disposals
Values at the end of the year
Amortization and impairment
Accumulated at the beginning of the
year
Translation differences
Amortization charge
Transfer to assets held for sale
Transfers / Reclassifications
Disposals
Accumulated at the end of the year
At December 31, 2016
Year ended December 31, 2015
Cost
Values at the beginning of the year
Translation differences
Additions
Transfers / Reclassifications
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)
Transfers / Reclassifications
Accumulated at the end of the year
At December 31, 2015
(*) Includes Proprietary Technology.
Information
system
projects
Licenses,
patents and
trademarks (*)
Goodwill
Customer
relationships
Total
524,869
2,264
28,730
(546)
(836)
(151)
554,330
335,532
1,325
72,632
(718)
(245)
(153)
408,373
145,957
494,662
(29)
648
(222)
(32,600)
(840)
461,619
2,170,709
4,671
-
-
(85,123)
-
2,090,257
2,059,946 5,250,186
6,906
29,378
(768)
(119,559)
(991)
2,058,946 5,165,152
-
-
-
(1,000)
-
364,412
-
30,633
(32,600)
(153)
-
362,292
99,327
836,939
-
-
(39,347)
-
-
797,592
1,292,665
-
165,217
(1,000)
-
-
1,569,851 3,106,734
1,325
268,482
(73,665)
(398)
(153)
1,734,068 3,302,325
324,878 1,862,827
Information
system
projects
Licenses,
patents and
trademarks (*)
Goodwill
Customer
relationships
Total
471,935
(12,127)
65,022
95
(56)
524,869
283,679
(7,454)
59,342
-
(35)
335,532
189,337
494,014
(127)
774
1,028
(1,027)
494,662
2,182,004
(11,295)
-
-
-
2,170,709
2,059,946 5,207,899
- (23,549)
65,796
-
1,123
-
-
(1,083)
2,059,946 5,250,186
332,823
-
30,588
-
1,001
364,412
130,250
436,625
-
-
400,314
-
836,939
1,333,770
1,397,142 2,450,269
(7,454)
-
262,639
172,709
- 400,314
-
966
1,569,851 3,106,734
490,095 2,143,452
The geographical allocation of goodwill for the year ended December 31, 2016 was $1,168.4 million for North
America, $121.7 million for South America, $1.8 million for Europe and $0.7 million for Middle East & Africa.
The carrying amount of goodwill allocated by CGU, as of December 31, 2016, was as follows:
(All amounts in million US dollar)
As of December 31, 2016
CGU
OCTG (USA)
Tamsa (Hydril and other)
Siderca (Hydril and other)
Hydril
Coiled Tubing
Socotherm
Other
Total
Maverick
Acquisition
225
-
-
-
-
-
-
225
Tubes Segment
Hydril
Acquisition
-
346
265
309
-
-
-
920
Other
-
19
93
-
-
28
4
144
Other Segment
Maverick
Acquisition
-
-
-
-
4
-
-
4
Total
225
365
358
309
4
28
4
1,293
79
12
Investments in non-consolidated companies
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 (a)
Additions
Decrease / increase in equity reserves
At the end of the period
Related to Ternium
The principal non-consolidated companies are:
Company
a) Ternium (*)
b) Usiminas (**)
Others
Country of incorporation
Luxembourg
Brazil
-
Year ended December 31,
2016
490,645
3,473
71,533
-
(20,674)
17,108
(5,054)
557,031
2015
643,630
(92,914)
(10,674)
(28,884)
(20,674)
4,400
(4,239)
490,645
% ownership at
December 31,
2015
11.46%
2.5%
-
2016
11.46%
3.08%
-
Value at December 31,
2016
491,285
61,904
3,842
557,031
2015
449,375
36,109
5,161
490,645
(*) Including treasury shares.
(**)At December 31, 2016 and 2015 the voting rights were 5.2% and 5.0% respectively.
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’s main suppliers of round steel bars and flat steel products for its pipes
business.
At December 31, 2016, the closing price of Ternium’s ADSs as quoted on the New York Stock Exchange was $24.15
per ADS, giving Tenaris’s ownership stake a market value of approximately $554.8 million (Level 1). At December
31, 2016, the carrying value of Tenaris’s ownership stake in Ternium, based on Ternium’s IFRS financial statements,
was approximately $491.3 million. See Section II.B.2.
The Company reviews periodically the recoverability of its investment in Ternium. 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. 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 11.2%
Summarized selected financial information of Ternium, 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 income for the year attributable to owners of the parent
Total comprehensive income (loss) for the year, net of tax, attributable to owners of the parent
80
Ternium
2016
5,622,556
2,700,314
8,322,870
1,324,785
1,831,492
3,156,277
2015
5,480,389
2,582,204
8,062,593
1,558,979
1,700,617
3,259,596
775,295
769,849
7,223,975
1,839,585
595,644
534,827
7,877,449
1,400,177
8,127
(457,750)
12
Investments in non-consolidated companies (Cont.)
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’s principal supplier of flat steel in Brazil for its pipes and industrial equipment businesses.
As of December 31, 2016 the closing price of the Usiminas’ ordinary and preferred shares, as quoted on the
BM&FBovespa Stock Exchange, was BRL8.26 ($2.53) and BRL4.1 ($1.26), respectively, giving Tenaris’s
ownership stake a market value of approximately $94.1 million (Level 1). As that date, the carrying value of
Tenaris’s ownership stake in Usiminas was approximately $61.9 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.
During 2015 and 2014 the Company recorded an impairment charge of $28.9 million and $161.2 million
respectively.
Summarized selected financial information of 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 for the year attributable to owners of the parent
c) Techgen, S.A. de C.V. (“Techgen”)
Usiminas
2016
6,085,811
1,970,015
8,055,826
2,856,883
537,646
3,394,529
2015
5,343,038
1,765,733
7,108,771
2,117,536
1,151,383
3,268,919
508,083
405,880
2,442,596
150,999
(166,153)
3,115,551
70,801
(1,053,806)
Techgen is a Mexican natural gas-fired combined cycle electric power plant in the Pesquería area of the State of
Nuevo León, Mexico. The company started producing energy on December 1st, 2016 and is fully operational, with
a power capacity of between 850 and 900 megawatts. As of December 31, 2016, Tenaris held 22% of Techgen’s
share capital, and its affiliates Ternium and Tecpetrol International S.A. (a wholly-owned subsidiary of San Faustin
S.A., the controlling shareholder of both Tenaris and Ternium) held 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 August 1, 2016 and ending on July 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, 2016, Tenaris’s exposure under these
agreements amounted to $61.3 million and $5.3 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 and has been 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, 2016, the loan agreement has
been fully disbursed for $800 million, as a result, the amount guaranteed by Tenaris was approximately $176 million.
During 2016 the shareholders of Techgen made additional investments in Techgen, in term of subsidiary loans,
which in case of Tenaris amounted to $42.4 million. As of December 31, 2016 these loans amount to $86.2 million.
81
Year ended December 31,
2016
2015
913
7,202
32,769
91,419
13,876
19,520
32,217
197,916
(913)
197,003
1,113
11,485
25,660
62,675
14,719
70,509
35,515
221,676
(1,112)
220,564
Year ended December 31,
2016
653,482
375,822
160,284
451,777
162,766
1,804,131
(240,242)
1,563,889
2015
741,437
407,126
277,184
503,692
143,228
2,072,667
(229,200)
1,843,467
Year ended December 31,
2016
2015
28,278
3,052
10,458
16,088
9,350
24,742
2,759
36,320
131,047
(6,332)
124,715
29,463
3,498
10,951
27,823
7,053
14,249
18,155
44,736
155,928
(7,082)
148,846
Year ended December 31,
2016
61,552
79,434
140,986
2015
60,730
127,450
188,180
13
Receivables – non current
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
Finished goods
Goods in process
Raw materials
Supplies
Goods in transit
Allowance for obsolescence (see Note 23 (i))
15
Receivables and prepayments
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))
16
Current tax assets and liabilities
Current tax assets
V.A.T. credits
Prepaid taxes
82
16
Current tax assets and liabilities (Cont.)
Current tax liabilities
Income tax liabilities
V.A.T. liabilities
Other taxes
17
Trade receivables
Current accounts
Receivables from related parties
Allowance for doubtful accounts (see Note 23 (i))
The following table sets forth details of the aging of trade receivables:
Year ended December 31,
2016
55,841
11,065
34,291
101,197
2015
46,600
24,661
64,757
136,018
Year ended December 31,
2016
1,026,026
14,383
1,040,409
(85,724)
954,685
2015
1,216,126
20,483
1,236,609
(101,480)
1,135,129
At December 31, 2016
Guaranteed
Not guaranteed
Guaranteed and not guaranteed
Allowance for doubtful accounts
Net Value
At December 31, 2015
Guaranteed
Not guaranteed
Guaranteed and not guaranteed
Allowance for doubtful accounts
Net Value
Trade
Receivables
Not Due
Past due
1 - 180 days
> 180 days
355,508
684,901
1,040,409
(85,724)
954,685
353,537
883,072
1,236,609
(101,480)
1,135,129
272,393
518,984
791,377
(62)
791,315
268,606
634,250
902,856
-
902,856
32,241
87,379
119,620
(67)
119,553
33,706
152,173
185,879
(1,664)
184,215
50,874
78,538
129,412
(85,595)
43,817
51,225
96,649
147,874
(99,816)
48,058
Trade receivables are mainly denominated in U.S. dollars.
18
Cash and cash equivalents and Other investments
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
Year ended December 31,
2016
2015
92,730
215,807
91,200
399,737
101,019
81,735
103,793
286,547
782,029
841,638
9,475
1,633,142
877,436
1,203,695
59,731
2,140,862
248,049
1,670
249,719
393,084
1,662
394,746
83
19
Borrowings
Non-current
Bank borrowings
Finance lease liabilities
Costs of issue of debt
Current
Bank borrowings and other loans including related companies
Bank overdrafts
Finance lease liabilities
Costs of issue of debt
Total Borrowings
The maturity of borrowings is as follows:
Year ended December 31,
2016
2015
31,544
35
(37)
31,542
807,252
1,320
130
(8)
808,694
840,236
223,050
171
-
223,221
747,704
349
371
(129)
748,295
971,516
At December 31, 2016
Financial lease
Other borrowings
Total borrowings
Interest to be accrued (*)
Total
At December 31, 2015
Financial lease
Other borrowings
Total borrowings
1 year or
less
1 - 2
years
2 – 3
years
3 - 4
years
4 - 5
years
Over 5
years
Total
130
808,564
808,694
6,461
815,155
35
1,198
1,233
1,172
2,405
-
3,739
3,739
-
3,360
3,360
-
3,632
3,632
-
19,578
19,578
165
840,071
840,236
1,161
4,900
1,142
4,502
1,116
4,748
237
19,815
11,289
851,525
1 year or
less
1 - 2
years
2 – 3
years
3 - 4
years
4 - 5
years
Over 5
years
Total
371
747,924
748,295
138
201,152
201,290
29
1,261
1,290
4
1,285
1,289
-
880
880
-
18,472
18,472
542
970,974
971,516
Interest to be accrued (*)
Total
1,152
749,447
1,050
202,340
1,031
2,321
1,010
2,299
990
1,870
1,046
19,518
6,279
977,795
(*) Includes the effect of hedge accounting.
Significant borrowings include:
Disbursement date
2016
2015
2016
Borrower
Tamsa
TuboCaribe
Siderca
Type
Bank loans
Bank loan
Bank loans
Original & Outstanding
391
200
198
Final maturity
2017
Jan-17
2017
In million of USD
As of December 31, 2016, 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, 2016 and 2015 (considering hedge accounting where applicable).
Total borrowings
2016
1.97%
2015
1.52%
84
19
Borrowings (Cont.)
Breakdown of long-term borrowings by currency and rate is as follows:
Non-current borrowings
Currency
USD
EUR
Others
Total non-current borrowings
Interest rates
Fixed
Fixed
Variable
Breakdown of short-term borrowings by currency and rate is as follows:
Year ended December 31,
2016
19,461
10,701
1,380
31,542
2015
219,778
2,922
521
223,221
Current borrowings
Currency
USD
USD
EUR
EUR
MXN
ARS
ARS
Others
Others
Total current borrowings
20
Deferred income tax
Variable
Fixed
Variable
Fixed
Fixed
Fixed
Variable
Variable
Fixed
Interest rates
Year ended December 31,
2016
2015
17,081
200,448
99
841
391,318
197,637
1,041
35
194
808,694
16,046
2,482
66
1,047
614,916
113,326
37
165
210
748,295
Deferred income taxes are calculated in full on temporary differences under the liability method using the tax rate
of each country.
The evolution of deferred tax assets and liabilities during the year are as follows:
Deferred tax liabilities
At the beginning of the year
Translation differences
Charged directly to Other Comprehensive Income
Transfer to assets held for sale
Income statement credit
At December 31, 2016
Fixed
assets
299,139
(540)
-
(5,724)
(29,819)
263,056
Inventories
42,516
-
-
(5,625)
36,891
Fixed assets
Inventories
Intangible
and Other (*)
549,557
44
(40)
(34,848)
514,713
Intangible and
Other (*)
At the beginning of the year
Translation differences / reclassifications
Charged directly to Other Comprehensive Income
Income statement (credit) / charge
At December 31, 2015
346,385
(28,343)
-
(18,903)
299,139
44,234
-
-
(1,718)
42,516
482,446
11,154
3,999
51,958
549,557
(*) Includes the effect of currency translation on tax base explained in Note 8.
Total
891,212
(496)
(40)
(5,724)
(70,292)
814,660
Total
873,065
(17,189)
3,999
31,337
891,212
85
20
Deferred income tax (Cont.)
Deferred tax assets
At the beginning of the year
Translation differences
Transfer to assets held for sale
Charged directly to Other Comprehensive Income
Income statement charge / (credit)
Provisions
and
allowances
(32,425)
(3,123)
-
-
2,272
Inventories
(107,378)
(1,347)
275
-
14,274
At December 31, 2016
(33,276)
(94,176)
Tax losses
(*)
(99,394)
(2,741)
-
-
(97,191)
(199,326
)
Other
Total
(102,396)
14
753
1,823
17,968
(341,593)
(7,197)
1,028
1,823
(62,677)
(81,838)
(408,616)
(*) As of December 31, 2016, the recognized deferred tax assets on tax losses amount to $199.3 million and the net unrecognized deferred tax
assets amount to $47.2 million.
At the beginning of the year
Translation differences / reclassifications
Charged directly to Other Comprehensive Income
Income statement (credit) / charge
At December 31, 2015
Provisions
and
allowances
(45,336)
24,411
Inventories
(189,709)
4,049
-
-
(11,500)
(32,425)
78,282
(107,378)
Tax
losses
Other
Total
(41,652)
6,988
-
(64,730)
(99,394)
(150,497)
1,020
527
46,554
(102,396)
(427,194)
36,468
527
48,606
(341,593)
The recovery analysis of deferred tax assets and deferred tax liabilities is as follows:
Deferred tax assets to be recovered after 12 months
Deferred tax liabilities to be recovered after 12 months
Year ended December 31,
2016
(226,431)
761,039
2015
(109,025)
843,022
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:
Deferred tax assets
Deferred tax liabilities
The movement in the net deferred income tax liability account is as follows:
At the beginning of the year
Translation differences
Charged directly to Other Comprehensive Income
Income statement credit (debit)
Transfer to assets held for sale
At the end of the period
86
Year ended December
31,
2016
(144,613)
550,657
406,044
2015
(200,706)
750,325
549,619
Year ended December
31,
2016
549,619
(7,693)
1,783
(132,969)
(4,696)
406,044
2015
445,871
19,279
4,526
79,943
-
549,619
21
(i)
Other liabilities
Other liabilities – Non-current
Post-employment benefits
Other-long term benefits
Miscellaneous
Post-employment benefits
Unfunded
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
Year ended December
31,
2016
125,161
66,714
21,742
213,617
2015
135,880
78,830
16,466
231,176
Year ended December
31,
2016
107,601
4,625
6,371
24
(4,501)
(2,204)
(13,921)
(1,766)
96,229
2015
126,733
5,918
6,164
(128)
(9,743)
(8,418)
(16,062)
3,137
107,601
(*) For 2016 a loss of $0.6 million is attributable to demographic assumptions and a gain of $5.1 million to financial assumptions.
For 2015 a gain of $9.1 and $0.6 million is attributable to demographic and financial assumptions, respectively.
The principal actuarial assumptions used were as follows:
Discount rate
Rate of compensation increase
Year ended December 31,
2016
1% - 7%
0% - 3%
2015
2% - 7%
0% - 3%
As of December 31, 2016, an increase / (decrease) of 1% in the discount rate assumption would have generated a
(decrease) / increase on the defined benefit obligation of $7.1 million and $8.2 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 $4.2 million and $3.7 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:
Present value of funded obligations
Fair value of plan assets
Liability (*)
Year ended December
31,
2016
159,612
(132,913)
26,699
2015
153,974
(128,321)
25,653
(*) In 2016 and 2015, $2.2 million and $2.6 million corresponding to an overfunded plan were reclassified within other non-
current assets, respectively.
87
21
(i)
Other liabilities (Cont.)
Other liabilities – Non-current (Cont.)
The movement in the present value of funded obligations is as follows:
At the beginning of the year
Translation differences
Current service cost
Interest cost
Remeasurements (*)
Benefits paid
At the end of the year
Year ended December 31,
2016
153,974
384
162
6,403
7,753
(9,064)
159,612
2015
183,085
(18,507)
1,155
6,725
(6,124)
(12,360)
153,974
(*) For 2016 a gain of $0.9 million is attributable to demographic assumptions and a loss of $8.7 million to financial assumptions.
For 2015 a gain of $1.1 and $5.0 million is attributable to demographic and financial assumptions, respectively.
The movement in the fair value of plan assets is as follows:
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
Year ended December 31,
2016
(128,321)
(7,022)
(3,022)
365
(4,374)
9,064
397
(132,913)
2015
(147,991)
(5,021)
1,686
15,651
(5,066)
12,360
60
(128,321)
The major categories of plan assets as a percentage of total plan assets are as follows:
Equity instruments
Debt instruments
Others
The principal actuarial assumptions used were as follows:
Discount rate
Rate of compensation increase
Year ended December 31,
2015
2016
52.4%
43.9%
3.7%
52.3%
44.3%
3.4%
Year ended December 31,
2015
4%
0 % - 2 %
2016
4%
0 % - 3 %
88
21
(i)
Other liabilities (Cont.)
Other liabilities – Non-current (Cont.)
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, 2016, an increase / (decrease) of 1% in the discount rate assumption would have generated a
(decrease) / increase on the defined benefit obligation of $18.5 million and $22.8 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 $1.7 million and $1.6 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 2017 amount approximately to $6 million.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the
previous period.
Year ended December
31,
2016
125,991
135
42,635
15,126
183,887
2015
173,528
351
34,445
14,518
222,842
Year ended December
31,
2016
2015
(1,112)
199
(913)
(1,696)
584
(1,112)
Year ended December
31,
2016
2015
61,421
3,296
6,794
(1,932)
(6,322)
63,257
70,714
(20,725)
9,390
6,562
(4,520)
61,421
(ii)
Other liabilities – current
Payroll and social security payable
Liabilities with related parties
Derivative financial instruments
Miscellaneous
22
(i)
Non-current allowances and provisions
Deducted from non-current receivables
Values at the beginning of the year
Translation differences
Values at the end of the year
(ii)
Liabilities
Values at the beginning of the year
Translation differences
Additional provisions
Reclassifications
Used
Values at the end of the year
89
23
(i)
Current allowances and provisions
Deducted from assets
Year ended December 31, 2016
Values at the beginning of the year
Translation differences
Reversals / (additional) allowances
Transfer to held for sale
Used
At December 31, 2016
Allowance for
doubtful accounts -
Trade receivables
Allowance for other
doubtful accounts -
Other receivables
Allowance for
inventory
obsolescence
(101,480)
(841)
12,573
20
4,004
(85,724)
(7,082)
75
(432)
-
1,107
(6,332)
(229,200)
(2,715)
(32,765)
896
23,542
(240,242)
Year ended December 31, 2015
Values at the beginning of the year
Translation differences
Additional allowances
Used
At December 31, 2015
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)
(7,992)
1,732
(1,114)
292
(7,082)
(193,540)
10,056
(68,669)
22,953
(229,200)
(ii)
Liabilities
Year ended December 31, 2016
Values at the beginning of the year
Translation differences
Additional allowances
Reclassifications
Used
At December 31, 2016
Year ended December 31, 2015
Values at the beginning of the year
Translation differences
Additional allowances
Reclassifications
Used
At December 31, 2015
Sales risks
6,290
189
16,266
(22)
(8,838)
13,885
Sales risks
Other claims and
contingencies
2,705
(86)
7,791
1,954
(3,493)
8,871
Other claims and
contingencies
7,205
(517)
8,540
47
(8,985)
6,290
13,175
(973)
1,743
(6,610)
(4,630)
2,705
Total
8,995
103
24,057
1,932
(12,331)
22,756
Total
20,380
(1,490)
10,283
(6,563)
(13,615)
8,995
90
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:
Foreign exchange derivatives contracts
Contracts with positive fair values
Foreign exchange derivatives contracts
Contracts with negative fair values
Total
Year ended December
31,
2016
2,759
2,759
(42,635)
(42,635)
(39,876)
2015
18,248
18,248
(34,541)
(34,541)
(16,293)
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
2016 and 2015, were as follows:
Purchase currency Sell currency
MXN
USD
EUR
USD
JPY
USD
USD
ARS
USD
USD
Others
Total
USD
MXN
USD
EUR
USD
KWD
ARS
USD
BRL
GBP
Term
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
Fair Value
Hedge Accounting Reserve
2016
(35,165)
694
(360)
(33)
(179)
(2,447)
(748)
318
(1,581)
-
(375)
(39,876)
2015
(24,364)
14,466
331
957
(24)
28
-
(8,639)
402
85
465
(16,293)
2016
2015
9
(2,280)
-
(1,435)
73
(1,016)
-
(93)
-
-
-
(4,742)
320
(21)
-
(819)
-
28
-
3,175
-
-
100
2,783
Following is a summary of the hedge reserve evolution:
Equity Reserve
Dec-14
Movements
2015
Equity Reserve
Dec-15
Movements
2016
Equity Reserve
Dec-16
Foreign Exchange
Total Cash flow Hedge
(7,916)
(7,916)
10,699
10,699
2,783
2,783
(7,525)
(7,525)
(4,742)
(4,742)
Tenaris estimates that the cash flow hedge reserve at December 31, 2016 will be recycled to the Consolidated Income
Statement during 2017.
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25
(i)
Contingencies, commitments and restrictions on the distribution of profits
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’s results of
operations, financial condition, net worth and cash flows.
Set forth below is a description of Tenaris’s material ongoing legal proceedings:
Tax assessment in Italy
Dalmine, 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 EUR295 million (approximately $310.9 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 $9.5 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 Dalmine’s 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, Dalmine 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 Dalmine. Dalmine appealed the assessment with
the first-instance tax court in Milan. On January 27, 2016, the first-instance tax court rejected Dalmine’s appeal.
This first-instance ruling, which held that Dalmine is required to pay an amount of EUR223 million
(approximately $235.1 million), including principal interest and penalties, contradicts the first and second-
instance tax court rulings in connection with the 2007 assessment. Dalmine obtained the suspension of the
interim payment that would have been due, based on the first-instance decision, through the filing with the tax
authorities of a bank guarantee, and appealed the January 2016 ruling with the second-instance tax court.
Tenaris continues to believe that Dalmine has correctly applied the relevant legal provisions and based on,
among other things, the tax court decisions on the 2007 assessment and the opinion of legal counsel, 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.
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25
(i)
Contingencies, commitments and restrictions on the distribution of profits (Cont.)
Contingencies (Cont.)
CSN claims relating to the January 2012 acquisition of Usiminas shares (Cont.)
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 first instance court decision with the
Sao Paulo court of appeals. On February 8, 2017, the court of appeals issued its decision on the merits and
maintained the understanding of the first instance court, holding that Confab and the other defendants did not
have the obligation to launch a tender offer. The decision of the court of appeals has not yet been published,
and CSN may still file a motion for clarification and/or appeal to the Superior Court of Justice or the Federal
Supreme Court.
Separately, on November 10, 2014, CSN filed a 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.
In this complaint, CSN sought to reverse a February 2012 decision by the CVM, which had determined that
the above mentioned acquisition did not trigger any tender offer requirement. On December 2, 2016, CVM
rendered its decision on this complaint, reaffirming its previous decision from 2012 and rejecting all the new
allegations presented by CSN.
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 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 continues to believe that all of CSN's claims and allegations are groundless and without merit, as
confirmed by several opinions of Brazilian legal counsel, the decisions issued by CVM in February 2012 and
December 2016, and the first and second instance court decisions referred to above. Accordingly, no provision
was recorded in these Consolidated Financial Statements
Veracel Celulose Accident Litigation
On September 21, 2007, an accident occurred in the premises of Veracel Celulose S.A. (“Veracel”) in
connection with a rupture in one of the tanks used in an evaporation system manufactured by Confab. The
Veracel accident allegedly resulted in material damages to Veracel. Itaú Seguros S.A. (“Itaú”), Veracel’s
insurer at the time of the Veracel accident, initiated a lawsuit against Confab seeking reimbursement of
damages paid to Veracel in connection with the Veracel accident. Veracel initiated a second lawsuit against
Confab seeking reimbursement of the amount paid as insurance deductible in connection with the Veracel
accident and other amounts not covered by insurance. Itaú and Veracel claim that the Veracel accident was
caused by failures and defects attributable to the evaporation system manufactured by Confab. Confab believes
that the Veracel accident was caused by the improper handling by Veracel’s personnel of the equipment
supplied by Confab in violation of Confab’s instructions. The two lawsuits have been consolidated, and are
now being considered by the 6th Civil Court of São Caetano do Sul; however, each lawsuit will be adjudicated
through a separate ruling. Both proceedings are currently at evidentiary stage.
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25
(i)
Contingencies, commitments and restrictions on the distribution of profits (Cont.)
Contingencies (Cont.)
Veracel Celulose Accident Litigation (Cont.)
On March 10, 2016, a court-appointed expert issued its report on certain technical matters concerning the
Veracel accident. Based upon a technical opinion received from a third-party expert, in August 2016, Confab
filed its objections to the expert’s report. Other parties have also filed their observations and/or opinions
concerning the experts’ report, which are currently subject to the court examination. As of December 31, 2016,
the estimated amount of Itaú’s claim is approximately BRL 74.5 million (approximately $22.9 million), and
the estimated amount of Veracel’s claim is approximately BRL 47.7 million (approximately $14.6 million),
for an aggregate amount BRL 122.2 million ($37.5 million). The final result of this claim depends largely on
the court’s evaluation of technical matters arising from the expert’s opinion and objections presented by
Confab. No provision has been recorded in these Consolidated Financial Statements.
Petroamazonas Penalties
On January 22, 2016, Petroamazonas (“PAM”), an Ecuadorian state-owned oil company, imposed penalties to
the Company’s Uruguayan subsidiary, Tenaris Global Services S.A. (“TGS”), for its alleged failure to comply
with delivery terms under a pipe supply agreement. The penalties amount to approximately $ 22.5 million as
of the date hereof. Tenaris believes, based on the advice of counsel, that PAM has no legal basis to impose the
penalties and that TGS has meritorious defenses against PAM. However, in light of the prevailing political
circumstances in Ecuador, the Company cannot predict the outcome of a claim against a state-owned company
and it is not possible to estimate the amount or range of loss in case of an unfavorable outcome.
Ongoing investigation
The Company has learned that Italian and Swiss authorities are investigating whether certain payments were
made from accounts of entities presumably associated with affiliates of the Company to accounts controlled
by an individual allegedly related with officers of Petróleo Brasileiro S.A. and whether any such payments
were intended to benefit Confab Industrial S.A., a Brazilian subsidiary of the Company. Any such payments
could violate certain applicable laws, including the U.S. Foreign Corrupt Practices Act. The Company had
previously reviewed certain of these matters in connection with an investigation by the Brazilian authorities
related to “Operation Lava Jato” and the Audit Committee of the Company’s Board of Directors has engaged
external counsel in connection with a review of the alleged payments and related matters. In addition, the
Company has voluntarily notified the U.S. Securities and Exchange Commission and the U.S. Department of
Justice. The Company intends to share the results of this review with the appropriate authorities, and to
cooperate with any investigations that may be conducted by such authorities. At this time, the Company cannot
predict the outcome of these matters or estimate the range of potential loss or extent of risk, if any, to the
Company’s business that may result from resolution of these matters.
(ii)
Commitments
Set forth is a description of Tenaris’s 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 January 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 the company is temporarily allowed to purchase steel
volumes in accordance with its needs. As of December 31, 2016, the estimated aggregate contract amount
through December 31, 2017, calculated at current prices, is approximately $423 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 $175.8 million related to the investment plan to expand
Tenaris’s U.S. operations with the construction of a state-of-the-art seamless pipe mill in Bay City, Texas. As
of December 31, 2016 approximately $1.349 million had already been invested.
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25
Contingencies, commitments and restrictions on the distribution of profits (Cont.)
(iii)
Restrictions to the distribution of profits and payment of dividends
As of December 31, 2016, 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, 2016
Total equity in accordance with Luxembourg law
1,180,537
118,054
609,733
17,493,01
2
19,401,33
6
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, 2016, 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, 2016, distributable amount under Luxembourg law totals $18.1 billion, as detailed below:
(all amounts in thousands of U.S. dollars)
Retained earnings at December 31, 2015 under Luxembourg law
Other income and expenses for the year ended December 31, 2016
Dividends approved
Retained earnings at December 31, 2016 under Luxembourg law
Share premium
Distributable amount at December 31, 2016 under Luxembourg law
26
Acquisition of subsidiaries and non-consolidated companies
18,024,20
4
(23,561)
(507,631)
17,493,01
2
609,733
18,102,74
5
In September 2014, Tenaris completed the acquisition of the 100% of Socotherm Brasil S.A.(“Socotherm”). 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. Tenaris accounted for this transaction as a step-
acquisition and consequently remeasured to fair value its ownership interest in Socotherm held before the
acquisition. As a result, Tenaris recorded in “Equity in earnings (losses) of non-consolidated companies” a gain of
approximately $21.3 million.
95
27
Cash flow disclosures
(i)
(ii)
(iii)
Changes in working capital
Inventories
Receivables and prepayments and Current tax assets
Trade receivables
Other liabilities
Customer advances
Trade payables
Income tax accruals less payments
Tax accrued
Taxes paid
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
Year ended December 31,
2015
936,402
60,009
828,265
(123,904)
1,171
(327,958)
1,373,985
2016
244,720
70,874
146,824
(79,046)
(95,112)
59,939
348,199
2014
(72,883)
(31,061)
20,886
(61,636)
76,383
(3,755)
(72,066)
41,441
(169,520)
(128,079)
244,505
(335,585)
(91,080)
586,061
(506,999)
79,062
(43,872)
22,326
(18,858)
(40,404)
399,900
(1,320)
398,580
(11,517)
28,238
(18,696)
(1,975)
286,547
(349)
286,198
6,174
31,306
(74,672)
(37,192)
417,645
(1,200)
416,445
As of December 31, 2016, 2015 and 2014, the components of the line item “other, including currency translation
adjustment” are immaterial to net cash provided by operating activities.
28
Net assets of disposal group classified as held for sale
On December 15, 2016, Tenaris entered into an agreement with Nucor Corporation (NC) pursuant to which it has
sold to NC the steel electric conduit business in North America, known as Republic Conduit for an amount of $332.4
million. The agreement was subject to U.S. antitrust clearance and other customary conditions and was closed during
January 2017.
The transaction was reported as a discontinued operation due to the relevance of such business on the total net
income of segment “Other”.
Analysis of the result of discontinued operations:
(all amounts in thousands of US dollars, unless otherwise stated)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Other operating expenses
Operating income
Other financial results
Income before income tax
Income tax
Income for continuing operations
Earnings per share attributable to discontinued operations:
Weighted average number of ordinary shares (thousands)
Discontinued operations:
Basic and diluted earnings per share (U.S. dollars per share)
Basic and diluted earnings per ADS (U.S. dollars per ADS) (*)
96
2014
196,503
(147,045)
49,458
(31,174)
Year ended December 31,
2015
197,630
(137,318)
60,312
(30,678)
(1)
29,633
(382)
29,251
(10,121)
19,130
2016
234,911
(136,587)
98,324
(32,238)
(248)
65,838
(88)
65,750
(24,339)
41,411
18,284
(361)
17,923
(5,630)
12,293
-
1,180,537
1,180,537 1,180,537
0.04
0.07
0.02
0.03
0.01
0.02
28
Net assets of disposal group classified as held for sale (Cont.)
Summarized cash flow information is as follows:
Cash at the beginning
Cash at the end
Increase (decrease) in cash
Provided by operating activities
Used in investing activities
Used in financing activities
2016
15,343
18,820
3,477
24,535
(1,058)
(20,000)
2015
13,848
15,343
1,495
42,701
(1,206)
(40,000)
2014
18,790
13,848
(4,942)
8,294
(1,236)
(12,000)
These amounts were estimated only for disclosure purposes, as cash flows from discontinued operations were not
managed separately from other cash flows.
On January 20, 2017, the sale was completed and Tenaris estimates a net profit after bank fees and other related
expenses of approximately $189.2 million.
Current and non-current assets and liabilities of disposal group
ASSETS
Non-current assets
Property, plant and equipment, net
Intangible assets, net (*)
Current assets
Inventories, net
Receivables and prepayments, net
Trade receivables, net
Cash and cash equivalents
Total assets of disposal group classified as held for sale
LIABILITIES
Non-current liabilities
Deferred tax liabilities
Other liabilities
Current liabilities
Current tax liabilities
Other liabilities
Trade payables
Total liabilities of disposal group classified as held for sale
(*) Includes $45.8 million of goodwill
29
Related party transactions
As of December 31, 2016:
At December 31, 2016
41,470
45,894
29,819
451
33,620
163
4,696
680
4,100
1,668
6,950
87,364
64,053
151,417
5,376
12,718
18,094
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, 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 voting rights in San Faustin sufficient to control San Faustin.
No person or group of persons controls RP STAK.
Based on the information most recently available to the Company, Tenaris’s directors and senior management as a
group owned 0.10% of the Company’s outstanding shares.
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29
Related party transactions (Cont.)
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”. The following transactions were carried out with related parties:
(all amounts in thousands of U.S. dollars)
(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
(all amounts in thousands of U.S. dollars)
(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
Directors’ and senior management compensation
Year ended December 31,
2015
2014
2016
21,174
32,613
9,542
2,948
66,277
24,019
87,663
10,154
4,010
125,846
33,342
103,377
10,932
3,264
150,915
67,048
20,150
11,528
53,530
152,256
260,280
35,153
16,153
78,805
390,391
302,144
44,185
27,304
90,652
464,285
At December 31,
2016
2015
117,187
13,357
(21,314)
(12,708)
96,522
73,412
23,995
(20,000)
(19,655)
57,752
During the years ended December 31, 2016, 2015 and 2014, the cash compensation of Directors and Senior managers
amounted to $38.6 million, $28.8 million and $26 million respectively. In addition, Directors and Senior managers
received 500, 540 and 567 thousand units for a total amount of $4.8 million, $5.4 million and $6.2 million
respectively in connection with the Employee retention and long term incentive program mentioned in Note O (2).
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30
Principal subsidiaries
The following is a list of Tenaris’s principal subsidiaries and its direct and indirect percentage of ownership of each
controlled company at December 31, 2016.
Company
Country of
Organization
Main activity
Canada
Brazil
Argentina
USA
Italy
USA
Japan
Canada
Argentina
Romania
Indonesia
Madeira
Mexico
USA
ALGOMA TUBES INC.
CONFAB INDUSTRIAL S.A. and subsidiaries
SIDERCA S.A.I.C. and subsidiaries (except
detailed)
HYDRIL COMPANY and subsidiaries (except
detailed) (a)
DALMINE S.p.A.
MAVERICK TUBE CORPORATION and
subsidiaries (except detailed)
NKKTUBES
PRUDENTIAL STEEL ULC
SIAT SOCIEDAD ANONIMA
S.C. SILCOTUB S.A.
PT SEAMLESS PIPE INDONESIA JAYA
TALTA - TRADING E MARKETING
SOCIEDADE UNIPESSOAL LDA.
TUBOS DE ACERO DE MEXICO S.A.
TENARIS BAY CITY, INC.
TENARIS GLOBAL SERVICES (CANADA)
INC.
TENARIS INVESTMENTS S.àr.l.
TENARIS INVESTMENTS SWITZERLAND
AG and subsidiaries (except detailed)
TENARIS GLOBAL SERVICES (UK) LTD
TENARIS GLOBAL SERVICES (U.S.A.)
CORPORATION
TENARIS FINANCIAL SERVICES S.A.
TENARIS GLOBAL SERVICES S.A. and
subsidiaries (b)
TENARIS INVESTMENTS S.àr.l.
LUXEMBURG, Zug Branch
TENARIS TUBOCARIBE LTDA.
Colombia
(*) All percentages rounded.
Manufacturing of seamless steel pipes
Manufacturing of welded steel pipes
and capital goods
Manufacturing of seamless steel pipes
Manufacture and marketing of premium
connections
Manufacturing of seamless steel pipes
Manufacturing of welded steel pipes
Manufacturing of seamless steel pipes
Manufacturing of welded steel pipes
Manufacturing of welded and seamless
steel pipes
Manufacturing of seamless steel pipes
Manufacturing of seamless steel
products
Percentage of
ownership at
December 31, (*)
2015
100%
2016
100%
2014
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
99%
100%
99%
100%
51%
100%
100%
51%
100%
100%
51%
100%
100%
100%
100%
100%
100%
100%
77%
77%
77%
Trading and holding Company
Manufacturing of seamless steel pipes
Manufacturing of seamless steel pipes
100%
100%
100%
100%
100%
100%
100%
100%
100%
Canada
Luxembourg
Marketing of steel products
Holding company
100%
100%
100%
100%
100%
100%
Switzerland
United
Kingdom
USA
Uruguay
Uruguay
Switzerland
Holding company
100%
100%
100%
Marketing of steel products
100%
100%
100%
Marketing of steel products
Financial company
Holding company and marketing of
steel products
Holding company and financial
services
Manufacturing of welded and seamless
steel pipes
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
(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 2016, 2015 and 2014.
(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
99
31
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”).
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. in connection with these
nationalizations.
On January 29, 2016, the tribunal released its award on the arbitration proceeding concerning the nationalization of
Matesi. The award upheld Tenaris’s 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 will apply at the rate of 9% per annum.
On March 14, 2016, Venezuela requested the rectification of the award pursuant to article 49(2) of the ICSID
Convention and ICSID Arbitration Rule 49. The tribunal denied Venezuela’s request on June 24, 2016, ordering
Venezuela to reimburse Tenaris and Talta for their costs. On September 21, 2016, Venezuela submitted a request
for annulment of the award as well as the stay of enforcement of the award in accordance with the ICSID Convention
and Arbitration Rules. The annulment request was registered on September 29, 2016, and the ad hoc committee that
will hear Venezuela’s request was constituted on December 27, 2016. The parties are in the process of exchanging
briefs. A hearing is scheduled to be held in the first quarter of 2017 regarding Tenaris’s and Talta’s opposition to
Venezuela’s request to continue stay enforcement of the award. Following that hearing, there will be a further
exchange of briefs and an oral hearing on Venezuela’s annulment request, currently proposed to be held in the last
quarter of 2017.
Concerning the arbitration proceeding relating to the nationalization of Tenaris’s shareholdings in Tavsa and
Comsigua, on December 12, 2016, the tribunal issued its award upholding Tenaris’s and Talta’s claim that
Venezuela had expropriated their investments in Tavsa and Comsigua in violation of the bilateral investment treaties
entered into by Venezuela with the Belgium-Luxembourg Economic Union and Portugal. The award granted
compensation in the amount of $137 million and ordered Venezuela to reimburse Tenaris and Talta $3.3 million in
legal fees and ICSID administrative costs. In addition, Venezuela was ordered to pay interest from April 30, 2008
until the day of effective payment at a rate equivalent to LIBOR + 4% per annum, which as of December 31, 2016
amounted $76 million. The deadline for filing a request for annulment of the award expires on April 11, 2017.
Based on the facts and circumstances described above and following the guidance set forth by IAS 27R, the
Company ceased consolidating the results of operations and cash flows of the Venezuelan Companies as from June
30, 2009, and classified its investments in the Venezuelan Companies as financial assets based on the definitions
contained in paragraphs 11(c)(i) and 13 of IAS 32.
The Company classified its interests in the Venezuelan Companies as available-for-sale investments since
management believes they do not fulfil the requirements for classification within any of the remaining categories
provided by IAS 39 and such classification is the most appropriate accounting treatment applicable to non-voluntary
dispositions of assets.
Tenaris or its subsidiaries have net receivables with the Venezuelan Companies as of December 31, 2016, for a total
amount of approximately $27 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.
100
32
Fees paid to the Company's principal accountant
Total fees accrued for professional services rendered by PwC Network firms to Tenaris S.A. and its subsidiaries are
detailed as follows:
(all amounts in thousands of U.S. dollars)
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
Total
33
Subsequent event
Annual Dividend Proposal
2016
2014
Year ended December 31,
2015
4,372
78
25
15
4,490
3,588
64
14
3
3,669
5,231
142
89
35
5,497
On February 22, 2017 the Company’s Board of Directors proposed, for the approval of the Annual General
Shareholders' meeting to be held on May 3, 2017, the payment of an annual dividend of $0.41 per share ($0.82 per
ADS), or approximately $484 million, which includes the interim dividend of $0.13 per share ($0.26 per ADS) or
approximately $153 million, paid on November 23, 2016. If the annual dividend is approved by the shareholders, a
dividend of $0.28 per share ($0.56 per ADS), or approximately $331 million will be paid on May 24, 2017, with an
ex-dividend date of May 22, 2017. These Consolidated Financial Statements do not reflect this dividend payable.
/s/ Edgardo Carlos
Chief Financial Officer
Edgardo Carlos
101
Tenaris S.A. Annual Accounts (Luxembourg GAAP)
As at December 31, 2016
102
103
104
Tenaris S.A.
Balance sheet as at December 31, 2016
(expressed in United States Dollars)
ASSETS
Fixed assets
C.
III. Financial assets
1.
Shares in affiliated undertakings
Current assets
D.
II. Debtors
2.
Amounts owed by affiliated undertakings
a) becoming due and payable within one year
Other debtors
a) becoming due and payable within one year
4.
IV. Cash at bank and in hand
Total assets
CAPITAL, RESERVES AND LIABILITIES
Capital and reserves
Subscribed capital
Share premium account
A.
I.
II.
IV. Reserves
1.
V.
VI. Loss for the financial year
Interim dividends
VII.
Legal reserve
Profit brought forward
C.
6.
8.
Creditors
Amounts owed to affiliated undertakings
a) becoming due and payable within one year
b) becoming due and payable after more than one year
Other creditors
c) Other creditors
i) becoming due and payable within one year
Total capital, reserves and liabilities
Note(s)
2016
USD
2015
USD
4
19,416,584,381
19,416,584,381
19,955,026,411
19,955,026,411
10
1,431
4,305,445
186,161
4,459,865
4,647,457
19,421,231,838
85,725
551,150
4,942,320
19,959,968,731
5
5
5&6
5&8
1,180,536,830
609,732,757
1,180,536,830
609,732,757
118,053,683
17,670,043,441
(23,560,717)
(153,469,788)
19,401,336,206
118,053,683
20,718,019,221
(2,516,734,206)
(177,080,525)
19,932,527,760
10
10
4,386,749
9,427,992
7,035,793
18,460,359
6,080,891
19,895,632
19,421,231,838
1,944,819
27,440,971
19,959,968,731
The accompanying notes are an integral part of these annual accounts
105
Tenaris S.A.
Profit and loss account for the year ended December 31, 2016
(expressed in United States Dollars)
8. Other operating expenses
11. Other interest receivable and similar income
a) derived from affiliated undertakings
b) other interest and similar income
14.
13. Value adjustments in respect of financial assets
and of investments held as current assets
Interest payable and similar expenses
a) concerning affiliated undertakings
b) other interest and similar expenses
15. Tax on profit or loss
16. Loss after taxation
17. Other taxes not shown under items 1 to 16
18. Loss for the period
Note
2016
USD
2015
USD
11
(22,604,137)
(22,982,837)
251,660
-
-
(1,123,858)
(77,552)
-
(23,553,887)
(6,830)
(23,560,717)
70,835
6,653
(2,493,111,324)
(713,713)
(125)
(3,626)
(2,516,734,137)
(69)
(2,516,734,206)
4
9
9
.
The accompanying notes are an integral part of these annual accounts
106
Tenaris S.A.
Notes to the audited annual accounts
Note 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’s 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.
Note 2 – Presentation of the comparative financial data
The comparative figures for the financial year ended December 31, 2015 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, 2016.
Note 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.
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 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 financial assets in accordance with
Luxembourg regulations.
In case of other than a temporary decline in respect of the financial 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.
107
Tenaris S.A.
Notes to the audited annual accounts
Note 3 – Summary of significant accounting policies (Cont.)
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 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 Creditors
Creditors are stated at nominal value.
Note 4 – Financial 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 in
Liquidation, 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 S.à r.l 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:
Gross book value - opening balance
Decreases for the financial year (a)
Gross book value - closing balance
USD
22,894,317,755
(538,442,030)
22,355,875,725
Accumulated value adjustments - opening balance
Allocations for the financial year
Accumulated value adjustments - closing balance
(2,939,291,344)
-
(2,939,291,344)
Net book value - closing balance
Net book value - opening balance
19,416,584,381
19,955,026,411
(a) On December 7, 2010, Tenaris entered into a master credit agreement with Tenaris Investments pursuant to which,
upon request from Tenaris, Tenaris Investments may, but shall not be required to, from time to time make loans to
Tenaris. Any loan under the master credit agreement may be repaid or prepaid from time to time through a reduction
of the capital of Tenaris Investments by an amount equivalent to the amount of the loan then outstanding (including
accrued interest). As a result of reductions in the capital of Tenaris Investments made during the financial year ended
December 31, 2016, in connection with cancellations of loans to Tenaris, the value of the participation of Tenaris in
Tenaris Investments decreased by USD 538.4 million.
As of December 31, 2016 Tenaris Investments reported an equity of USD 20.2 billion and a profit for the financial
year of USD 0.8 billion.
108
Tenaris S.A.
Notes to the audited annual accounts
Note 5 – Capital and reserves
Item
Subscribed
capital
Share
premium
Legal
reserve
Retained
earnings
Interim
dividend
Capital and
reserves
USD
Balance at the beginning of the
financial year
Loss for the financial year
Dividend paid (1)
Interim Dividend (2)
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
-
-
-
-
-
-
-
-
-
(23,560,717)
-
(23,560,717)
(531,241,574)
177,080,525
(354,161,049)
-
(153,469,788)
(153,469,788)
1,180,536,830
609,732,757
118,053,683
17,646,482,724
(153,469,788)
19,401,336,206
(1)
(2)
As approved by the ordinary shareholders’ meeting held on May 4, 2016.
As approved by the board of directors’ meeting held on November 3, 2016.
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, 2016 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.
Note 6 – Legal reserve
In accordance with Luxembourg law, the Company is required to set aside a minimum of 5% of its annual net
profit for each financial year to a legal reserve. This requirement ceases to be necessary once the balance on the
legal reserve has reached 10% of the issued share capital. The Company’s reserve has already reached this 10%.
If the legal reserve later falls below the 10% threshold, at least 5% of net profits again must be allocated toward
the reserve. The legal reserve is not available for distribution to the shareholders.
Note 7 – Distributable amounts
Dividends may be paid by Tenaris upon the ordinary shareholders’ meeting approval to the extent distributable
retained earnings exist.
At December 31, 2016, profit brought forward after deduction of the loss and the interim dividend for the financial
year of Tenaris under Luxembourg law totaled approximately USD 17.5 billion.
The share premium amounting to USD 0.6 billion can also be reimbursed.
Note 8 – Interim dividend paid
In November 2016, the Company paid an interim dividend of USD 153.5 million based on the board of
directors’ decision of November 3, 2016 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.
Note 9 – Taxes
For the financial year ended December 31, 2016 the Company did not realize any profits subject to tax in
Luxembourg. The Company is liable to the minimum Net Wealth Tax.
109
Tenaris S.A.
Notes to the audited annual accounts
Note 10 – Balances with affiliated undertakings
Within a
year
USD
After more
than one year
and within
five years
USD
After more
than five
years
Total at
December 31,
2016
Total at
December 31,
2015
USD
USD
USD
-
1,431
1,431
-
-
-
-
-
-
-
1,431
1,431
4,304,708
737
4,305,445
1,300,000
1,284,868
119,982
100,000
900,000
680,580
-
-
1,319
4,386,749
6,788,102
-
179,600
372,188
260,663
-
-
-
-
7,600,553
890,775
-
278,815
79,969
577,880
-
-
-
-
1,827,439
8,978,877
1,284,868
578,397
552,157
1,738,543
680,580
-
-
1,319
13,814,741
14,809,044
1,425,235
609,913
482,368
1,550,104
-
6,514,874
103,740
874
25,496,152
2016
USD
20,921,590
968,333
714,214
22,604,137
2015
USD
21,241,982
1,025,000
715,855
22,982,837
Assets
Debtors
Tenaris Solutions AG in Liquidation
Others
Total
Creditors
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
Confab Industrial S.A.
Tenaris Solutions AG in Liquidation
SIAT Sociedad Anónima
Others
Total
Note 11 – Other operating charges
Services and fees
Board of directors' accrued fees
Others
Note 12 – Parent Company
Tenaris’s controlling shareholders as of December 31, 2016 were as follows:
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, 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’s directors and senior management as
a group owned 0.10% of the Company’s outstanding shares.
110
Tenaris S.A.
Notes to the audited annual accounts
Note 13 – Subsequent event
Annual Dividend Proposal
On February 22, 2017 the Company’s board of directors proposed, for the approval of the annual general
shareholders' meeting to be held on May 3, 2017, the payment of an annual dividend of USD 0.41 per share (USD
0.82 per ADS) or approximately USD 484.0 million, which includes the interim dividend of USD 0.13 per share
(USD 0.26 per ADS), or approximately USD 153.5 million, paid in November 2016. If the annual dividend is
approved by the shareholders, a dividend of USD 0.28 per share (USD 0.56 per ADS), or approximately USD
330.5 million will be paid on May 24, 2017, with an ex-dividend date of May 22, 2017. These annual accounts do
not reflect this dividend payable.
/s/ Edgardo Carlos
Chief Financial Officer
Edgardo Carlos
111
EXHIBIT I – ALTERNATIVE PERFORMANCE MEASURES
EBITDA, Earnings before interest, tax, depreciation and amortization.
EBITDA provides an analysis of the operating results excluding depreciation and amortization and impairments,
as they are non-cash variables which can vary substantially from company to company depending on accounting
policies and the accounting value of the assets. EBITDA is an approximation to pre-tax operating cash flow and
reflects cash generation before working capital variation. EBITDA is widely used by investors when evaluating
businesses (multiples valuation), as well as by rating agencies and creditors to evaluate the level of debt,
comparing EBITDA with net debt.
EBITDA is calculated in the following manner:
EBITDA = Operating results + Depreciation and amortization + Impairment charges/(reversals).
Millions of U.S. dollars
For the year ended December 31,
2016
2015
Operating (loss) income
Depreciation and amortization
Depreciation and amortization from discontinued operations
Impairment
EBITDA
(59)
662
(5)
-
598
166
659
(5)
400
1,219
Net cash/(debt) position
This is the net balance of cash and cash equivalents, other current investments and fixed income investments
held to maturity less total borrowings. It provides a summary of the financial solvency and liquidity of the
company. Net cash / (debt) is widely used by investors and rating agencies and creditors to assess the company’s
leverage, financial strength, flexibility and risks.
Net cash/(debt) position is calculated in the following manner:
Net cash/(debt) = Cash and cash equivalents + Other investments (Current) + Fixed income investments held to
maturity – Borrowings (Current and Non-current).
Millions of U.S. dollars
Cash and cash equivalents
Other current investments
Non-current fixed income investments held to maturity
Borrowings -current and non current-
Net cash position
At December 31,
2016
2015
400
1,633
248
(840)
1,441
287
2,141
393
(972)
1,849
112
Free Cash Flow
Free cash flow is a measure of financial performance, calculated as operating cash flow less capital expenditures.
FCF represents the cash that a company is able to generate after spending the money required to maintain or
expand its asset base.
Free cash flow is calculated in the following manner:
Free cash flow = Net cash (used in) provided by operating activities – Capital expenditures.
Millions of U.S. dollars
Net cash provided by operating activities
Capital expenditures
Free cash flow
For the year ended December 31,
2016
2015
864
(787)
77
2,215
(1,132)
1,083
113
INVESTOR INFORMATION
Investor Relations Director
Giovanni Sardagna
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
General Inquiries
investors@tenaris.com
Stock Information
New York Stock Exchange (TS)
Mercato Telematico Azionario (TEN)
Mercado de Valores de Buenos Aires (TS)
Bolsa Mexicana de Valores, S.A.B. de C.V. (TS)
ADS Depositary Bank
Deutsche Bank
CUSIP No. 88031M019
Internet
www.tenaris.com
114