Annual Report
2020
Certain defined terms
Cautionary statement concerning forward-looking statements
Unless otherwise specified or if the context so requires:
This annual report and any other oral or written statements made by
•
References in this annual report to “the Company” are exclusively to
us to the public may contain “forward-looking statements” under
Tenaris S.A., a Luxembourg société anonyme.
applicable securities laws. Forward-looking statements are based on
•
References in this annual report to “Tenaris”, “we”, “us” or “our” are
management’s current views and assumptions and are provided to
to Tenaris S.A. and its consolidated subsidiaries. See “II. Accounting
allow potential investors the opportunity to understand management’s
Policies A. Basis of presentation” and “II. Accounting Policies B. Group
beliefs and opinions in respect of the future so that they may use
accounting” to our audited consolidated financial statements included
such beliefs and opinions as one factor in evaluating an investment.
in this annual report.
Forward-looking statements involve known and unknown risks that
•
References in this annual report to “San Faustin” are to San Faustin S.A., a
could cause actual results, performance or events to differ materially
Luxembourg société anonyme and the Company’s controlling shareholder.
from those expressed or implied by those statements.
•
•
“shares” refers to ordinary shares, par value $1.00, of the Company.
“ADSs” refers to the American Depositary Shares, which are evidenced
We use words and terms such as “aim”, “will likely result”, “will
by American Depositary Receipts, and represent two shares each.
continue”, “contemplate”, “seek to”, “future”, “objective”, “goal”,
•
“OCTG” refers to oil country tubular goods. See “Information on
“should”, “will pursue”, “anticipate”, “estimate”, “expect”,
Tenaris – Business Overview – Our Products”.
“project”, “intend”, “plan”, “believe” and words and terms of similar
•
“tons” refers to metric tons; one metric ton is equal to 1,000
substance to identify forward-looking statements, but they are not
•
•
•
•
•
kilograms, 2,204.62 pounds, or 1.102 U.S. (short) tons.
the only way we identify such statements. This annual report contains
“billion” refers to one thousand million, or 1,000,000,000.
forward-looking statements, including with respect to certain of our
“U.S. dollars”, “US$”, “USD” or “$” each refers to the United States dollar.
plans and current goals and expectations relating to Tenaris’s future
“EUR” refers to the Euro.
“BRL” refers to the Brazilian real.
“ARS” refers to the Argentine peso.
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
Presentation of certain financial and other information
to the risks related to our business discussed under “Principal Risks
ACCOUNTING PRINCIPLES
and Uncertainties”, other factors could cause actual results to differ
materially from those described in the forward-looking statements.
We prepare our consolidated financial statements in accordance with
These factors include, but are not limited to:
International Financial Reporting Standards (“IFRS”), as issued by the
International Accounting Standards Board (“IASB”), and in accordance
•
our ability to implement our business strategy or to grow through
with IFRS, as adopted by the European Union. Additionally, this annual
acquisitions, joint ventures and other investments;
report includes certain non-IFRS alternative performance measures
such as EBITDA, Net cash/debt position and Free Cash Flow. See
•
•
the competitive environment in our business and our industry;
the impact of climate change legislations and increasing regulatory
Exhibit I for more details on these alternative performance measures.
requirements aimed at lowering greenhouse gas emissions and severe
weather conditions worldwide;
We publish consolidated financial statements presented in increments
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our ability to price our products and services in accordance with our
of a thousand U.S. dollars. This annual report includes our audited
strategy;
consolidated financial statements for the years ended December 31,
•
our ability to absorb cost increases and to secure supplies of essential
2020, 2019 and 2018.
raw materials and energy;
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our ability to adjust fixed and semi-fixed costs to fluctuations in
ROUNDING
product demand;
Certain monetary amounts, percentages and other figures included
•
trends in the levels of investment in oil and gas exploration and
in this annual report have been subject to rounding adjustments.
drilling worldwide;
Accordingly, figures shown as totals in certain tables may not be the
•
the impact of a novel strain of coronavirus (“COVID-19”) crisis and
arithmetic aggregation of the figures that precede them, and figures
other pandemics on the world’s economy, the energy sector in general,
expressed as percentages in the text may not total 100% or, as
or our business and operations;
applicable, when aggregated may not be the arithmetic aggregation of
•
general macroeconomic, political, social and public health conditions
the percentages that precede them.
and developments in the countries in which we operate or distribute
pipes; and
OUR INTERNET WEBSITE IS NOT PART OF THIS ANNUAL REPORT
•
changes to applicable laws and regulations, including the imposition
We maintain an Internet website at www.tenaris.com. Information
of tariffs or quotas or other trade barriers.
contained in or otherwise accessible through our Internet website is not
a part of this annual report. All references in this annual report to this
By their nature, certain disclosures relating to these and other risks are
Internet site are inactive textual references to these URLs, or “uniform
only estimates and could be materially different from what actually occurs
resource locators” and are for informational reference only. We assume
in the future. As a result, actual future gains or losses or other occurrences
no responsibility for the information contained on our Internet website.
or developments that may affect our financial condition and results of
INDUSTRY DATA
operations could differ materially from those that have been estimated.
You should not place undue reliance on forward-looking statements,
Unless otherwise indicated, industry data and statistics (including
which speak only as of the date of this annual report. Except as required
historical information, estimates or forecasts) in this annual report
by law, we are not under any obligation, and expressly disclaim any
are contained in or derived from internal or industry sources believed
obligation to, update or alter any forward-looking statements, whether
by Tenaris to be reliable. Industry data and statistics are inherently
as a result of new information, future events or otherwise.
predictive and are not necessarily reflective of actual industry
conditions. Such statistics are based on market research, which itself is
based on sampling and subjective judgments by both the researchers
and the respondents, including judgments about what types of
products and transactions should be included in the relevant market.
In addition, the value of comparisons of statistics for different markets
is limited by many factors, including that (i) the markets are defined
differently, (ii) the underlying information was gathered by different
methods and (iii) different assumptions were applied in compiling the
data. Such data and statistics have not been independently verified,
and the Company makes no representation as to the accuracy or
completeness of such data or any assumptions relied upon therein.
3.
Index
05.
Leading indicators
06.
Letter from the Chairman
08.
Company profile
09.
Consolidated Management Report
09.
Information on Tenaris
26.
28.
45.
71.
79.
84.
85.
108.
111.
113.
114.
114.
Tenaris in numbers
Principal Risks and Uncertainties
Operating and Financial Review and Prospects
Quantitative and Qualitative Disclosure
about Market Risk
Outstanding Legal Proceedings
Recent Developments
Corporate Governance Statement
Related Party Transactions
Dividends
Employees
Diversity
Non-financial Information
115.
Management certification
117.
Financial information
117.
227.
Consolidated Financial Statements
Annual Accounts (Luxembourg GAAP)
245.
Exhibit I – Alternative performance measures
247.
Investor information
Annual Report 4.
Tenaris 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 (loss) income
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)
(Losses) Earnings per share
(Losses) Earnings per ADS
Dividends per share (5)
Dividends per ADS (5)
ADS Stock price at year-end
Number of employees (4)
2020
2019
2018
5.
1,918
480
2,398
1,914
268
2,182
2,600
671
3,271
2,629
671
3,300
5,147
7,294
(663)
638
(642)
1,520
193
832
1,372
731
1,528
350
2694
877
3,571
2,798
799
3,597
7,659
872
1,536
874
611
349
13,716
14,843
14,251
619
1,085
2,270
11,446
822
980
2,657
12,186
539
485
2,376
11,875
1,180,537
1,180,537
1,180,537
(0.54)
(1.07)
0.07
0.14
15.95
0.63
1.26
0.41
0.82
0.74
1.48
0.41
0.82
22.62
21.32
19,028
23,200
22,967
1. Defined as operating income plus depreciation, amortization and impairment charges/(reversals).
3. Each ADS represents two shares.
Impairment charge in 2020 represents a charge of $622 million to the carrying value of goodwill of
the CGUs OCTG USA, IPSCO and Coiled Tubing in the amounts of $225 million, $357 million and
$4 million respectively, and the carrying value of fixed assets of the CGU Rods USA in the amount of
$36 million. EBITDA in 2020 includes severance charges of $142 million. If these charges were not
included 2020 EBITDA would have been $780 million. See Exhibit I.
2. Defined as Cash and cash equivalents + Other investments (Current and Non-Current) + / -
Derivatives hedging borrowings and investments–Borrowings (Current and Non-Current). See Exhibit.
4. As of December 31.
5. Proposed or paid in respect of the year.
Annual Report
6.
Letter from the Chairman
Dear Shareholders,
2020 was a particular year which has left an indelible mark on the world. The pandemic is reshaping societal
expectations and changing established paradigms. But it is still too early to understand the full extent of the
transformation that it will bring. The energy transition is also accelerating. We, as a company, wish to maintain
flexibility as we redefine our strategy and actions to meet the new realities.
At Tenaris, we opened the year by concluding the acquisition of IPSCO and with the expectation that U.S. drilling
activity would soon start to recover after a year-long decline. Instead, shortly thereafter, everything changed as the
pandemic spread rapidly around the world. From one day to the next, demand for our products and services began to
shrink and our way of working changed. Global oil demand collapsed and oil prices with it, even becoming negative at
one point. In the U.S., drilling activity plunged precipitously and we had to close most of our newly acquired facilities.
The challenges involved every aspect of our business and affected all our employees. We had to adopt new safety
protocols to assure the safety of all persons entering our plants and offices, to halt production while minimizing labor
cost inefficiencies as demand plummeted, to provide support for the medical systems in many of our communities, to
find new ways of meeting customer commitments, to change the way we work and communicate, all while implementing
an intense restructuring program to ensure the financial stability and long-term sustainability of our company.
We responded rapidly and have been disciplined in implementing our objectives. I would like to give a special thanks
to all our employees for the way they adapted to the circumstances and their contribution to our efforts in what has
been an extraordinarily difficult year.
Our focus was on establishing a safe working environment at our plants and offices and adapting to an environment
where employees could work from home. With the pandemic affecting the lives of all our employees and their families,
we worked hard to maintain good levels of engagement and promote wellbeing, as well as adapting our training
programs to the changed circumstances.
Since the start of the pandemic, we have had a total of 2,400 persons affected by the virus among employees and
contractors, an infection rate of a little over 10%. Currently, we have less than 100 active cases and we still have 550
people in the “at risk” category who are prevented from coming to work. At the same time, despite the constantly
changing production schedules at our plants, we maintained the improvements we made over the past years in our
physical safety indicators.
To reinforce the medical systems and infrastructure in our communities, particularly in Latin America, we quickly
deployed a dedicated $6 million fund. Leveraging our global procurement structure, we deployed to source and
deliver ventilators, Intensive Care Unit (“ICU”) equipment units, and Personal Protection Equipment (“PPE”) items to
medical units and were instrumental in the deployment of four new field hospitals in our diverse communities.
Our employees were quick to show solidarity and initiative. At the onset of the pandemic, in Bergamo, which was then
the epicenter of the contagion in Europe, they worked tirelessly to produce oxygen cylinders for the local hospitals,
while in Campana they designed and produced 80,000 face shields for medical staff and first responders in the local
community using one of our finishing lines.
In addition to maintaining service quality in a rapidly changing environment, we reinforced our Rig Direct® customer
programs by integrating digital initiatives aimed at simplifying operational and administrative processes and making
them more reliable. In the USA, for example, two thirds of call-outs made by our Rig Direct® customers are now
made through our Rig Direct® portal and several are starting to use our PipeTracer® system to perform digital tallies.
We will continue to deepen these digital integration initiatives to reinforce service differentiation and customer loyalty.
To secure the financial stability of the company, we implemented a detailed plan to reduce our fixed cost structure
by 25%, by the end of 2020, and to generate cash through reducing inventories, managing receivables closely and
reducing investments. We have met or exceeded our targets, generating $1.3 billion in free cash flow for the year, which
includes a $1.1 billion reduction in working capital. If we exclude impairment and restructuring charges, our net
income for the year would have been positive.
Tenaris In the fourth quarter, we ended the year with a higher EBITDA margin than we had at the end of 2019, despite a
35% drop in revenues year on year. With these results, a strong balance sheet and a brighter outlook ahead, we are
proposing to reinstate the annual dividend at 50% of the level it was prior to the pandemic.
As drilling activity in North America picks up, we are strengthening our position in the U.S. and Canadian markets, building
on our Rig Direct® service proposition, and taking advantage of the market opportunities offered by consolidation in the
shale sector and the competitive environment. We are preparing to operate Bay City at full capacity and to restart the Koppel
steel shop and Ambridge seamless pipe mill together with their associated finishing facilities later this year. Meanwhile,
we are proceeding with a $72 million investment to increase our domestic production capabilities by integrating seamless,
premium and welded pipe production at our mill in Sault Ste. Marie after closing the Prudential mill in Calgary.
7.
In offshore markets, we have strengthened our position through the introduction of BlueDock® connectors in the
Gulf of Mexico and Guyana, while, in Brazil, we are also successfully introducing our seamless pipe products to
complement our welded pipe and connector solutions in the Brazilian pre-salt market.
In Argentina, the implementation of a new Plan Gas aimed at reducing the level of gas imports is helping to reactivate
activity in the Vaca Muerta shale play, while, in Colombia, we are strengthening our Rig Direct® programs with
Ecopetrol and other operators with digital integration initiatives.
In the Middle East, we are supplying the casing for the expansion of the North Field in Qatar, which will supply the
gas for the recently sanctioned Qatar LNG expansion. These products will include our Dopeless® technology, which
is now firmly established in this market. Although demand in the Middle East during 2021 will be affected by ongoing
destocking in key markets, we continue to consolidate our position in the U.A.E. with investments in a premium
threading facility which will begin operating in 2022.
In China, we established a joint venture with state-owned Baogang Baotou Steel, a large integrated steel maker in Inner
Mongolia which supplies casing and tubing to China’s onshore oil and gas fields. The joint venture, in which we have a
60% shareholding, will install a premium threading facility, with an initial annual capacity of 45 thousand tons, to thread
TenarisHydril premium connections on Baogang’s pipe. The new facility is expected to start operations at the end of 2021.
Decarbonization has become a major issue for all the world and, in particular, for our industry. In February, our Board
of Directors approved a medium-term target to reduce the carbon emissions intensity of our operations by 30% from
a 2018 baseline and the introduction of an internal carbon price of $80 per ton to accelerate the investments and
changes necessary to achieve this target and our long-term objective of eventually reaching carbon neutrality. We will
continue to add transparency to this program, which will be followed on a quarterly basis in our Board. This will
become an ever more important part of our agenda in the coming years.
Moreover, our customers, as they pursue their own decarbonization initiatives, are looking more closely at the carbon
footprint of their supply chains, particularly for steel products. With our new medium-term reduction target, we
expect to maintain or enhance the competitive differentiation we consider that we have today on this ground.
We are also positioning ourselves in new segments associated with the energy transition, developing our product and
service portfolio for these applications. Although our sales for low carbon energy applications are marginal today, they
will increase over time. Today, we are active participants in projects for building the new infrastructure for hydrogen
mobility, as suppliers of large, high pressure vessels for hydrogen filling stations particularly in Europe and California,
and we have recently been selected to supply the pipe for the main pipeline in the pioneering Northern Lights CO2
transportation and storage project in Norway.
As the world’s economy recovers from the worst effects of the pandemic, Tenaris, with its solid financial position and
extensive global agenda, is well positioned for the new challenges ahead. I would like to thank our employees again for
their contributions over the past year, as well as our customers, suppliers and shareholders for their continued support.
March 29, 2021
/s/ Paolo Rocca
Paolo Rocca
Annual Report Company profile
8.
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T
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.
9.
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A
Information
on Tenaris
The Company
Our holding company’s legal and commercial
name is Tenaris S.A. The Company was
established as a société anonyme organized under
the laws of the Grand Duchy of Luxembourg on
December 17, 2001. The Company’s registered
office is located at 26 Boulevard Royal, 4th Floor,
L-2449, 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
and other related businesses. For information on
the Company’s subsidiaries, see note 31 “Principal
subsidiaries” to our audited consolidated financial
statements included in this annual report.
Our shares are traded on the Italian Stock
Exchange and the Mexican Stock Exchange; the
Company’s American Depositary Shares (“ADS”)
trade on the New York Stock Exchange (“NYSE”).
Overview
We are the leading manufacturer of pipes and
related services for the world's energy industry
and certain other industrial applications. Our
manufacturing system integrates steelmaking,
pipe rolling and forming, heat treatment,
threading and finishing across 16 countries.
We also have a research and development
(“R&D”) network focused on enhancing our
product portfolio and improving our production
processes. Our team, based in more than 30
countries worldwide, is united by a passion for
excellence in everything we do.
Through our integrated, worldwide network of
seamless and welded manufacturing facilities, service
centers and R&D centers, we work with customers
to meet their needs, upholding the highest standards
of safety, quality and performance.
Our mission is to deliver value to our customers
through product and process innovation,
manufacturing excellence, supply chain integration,
technical assistance and customer service, aiming
to reduce risk and costs, increase flexibility and
improve time-to-market. Wherever we operate, we
are committed to safety and minimizing our impact
on the environment, providing opportunities for
our people, and contributing to the sustainable
development of our communities.
History and Development of Tenaris
Tenaris began with the formation of Siderca
S.A.I.C. (“Siderca”), the sole Argentine producer
of seamless steel pipe products, by San Faustin’s
predecessor in Argentina in 1948. We acquired Siat
S.A., 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 the date of this annual
report, our investments include controlling interest
in several manufacturing companies:
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Tubos de Acero de México S.A. (“Tamsa”), the sole
Mexican producer of seamless steel pipe products;
Dalmine S.p.A. (“Dalmine”), a leading Italian
producer of seamless steel pipe products;
Confab Industrial S.A. (“Confab”), the leading
Brazilian producer of welded steel pipe products;
NKKTubes K.K. (“NKKTubes”), a leading
Japanese producer of seamless steel pipe products;
Algoma Tubes Inc. (“AlgomaTubes”), the sole
Canadian producer of seamless steel pipe products;
S.C. Silcotub S.A. (“Silcotub”), a leading Romanian
producer of seamless steel pipe products;
10.
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Maverick Tube Corporation (“Maverick”), a U.S.
producer of welded steel pipe products;
Prudential Steel Ltd. (“Prudential”), a welded pipe
mill that produced OCTG, and line pipe products
in Canada;
Tenaris Tubocaribe Ltda. (“Tubocaribe”), a
welded mill producing OCTG products including
finishing of welded and seamless pipes, line pipe
products and couplings in Colombia;
Hydril Company (“Hydril”), a North American
manufacturer of premium connection products for
oil and gas drilling production;
PT Seamless Pipe Indonesia Jaya (“SPIJ”), an
Indonesian OCTG processing business with heat
treatment and premium connection threading
facilities;
Tenaris Qingdao Steel Pipes Ltd. (“Tenaris
Qingdao”), a Chinese producer of premium joints
and couplings;
Pipe Coaters Nigeria Ltd. (“Pipe Coaters”) the
leading company in the Nigerian coating industry;
Tenaris Bay City Inc. (“Tenaris Bay City”), a state-
of-the-art seamless pipe mill in Bay City, Texas;
Saudi Steel Pipe Company (“SSPC”), a Saudi
producer of welded steel pipe products;
IPSCO Tubulars Inc. (“IPSCO”) a North American
manufacturer of seamless and welded steel pipes; and
sucker rod businesses, in various countries.
We also own strategic interest in:
Ternium S.A. (“Ternium”), one of the leading flat
steel producers of the Americas with operating
facilities in Mexico, Brazil, Argentina, Colombia,
the southern United States and Central America;
Usinas Siderúrgicas de Minas Gerais S.A.
(“Usiminas”), a Brazilian producer of high quality
flat steel products used in the energy, automotive
and other industries; and
Techgen S.A. de C.V. (“Techgen”), an electric
power plant in Mexico.
In 2019, we entered into a joint venture with PAO
Severstal (“Severstal”) to build and operate a
welded pipe mill to manufacture OCTG products
in Surgut, Western Siberia. Construction activities
for the welded pipe mill have been put on hold
while the joint venture partners assess changes
in the relevant markets and the competitive
environment to determine whether adjustments
or changes to the project could be necessary. Our
share in the joint venture is 49%.
In 2020, we also entered into a joint venture with
Inner Mongolia Baotou Steel Union Co., Ltd.
(“Baotou Steel”) to build a premium connection
threading facility to finish steel pipe products
produced by our joint venture partner in Baotou,
China, for sale in the domestic market.
Tenaris’s Prudential facility, located in Calgary,
Alberta, was closed down in 2020, and the pipe
manufacturing operations of seamless, welded and
premium products in Canada will be consolidated
at our AlgomaTubes facility located in Sault Ste.
Maire, Ontario with an additional investment of
$72 million. This repositioning of the industrial
activities, which is estimated to be completed
by the end of 2021, is expected to strengthen
the competitiveness and increase the domestic
production capabilities for the Canadian market.
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.
For information on Tenaris’s principal capital
expenditures and divestitures, see “Information
on Tenaris – Business Overview – Capital
Expenditure Program”.
Tenaris 11.
Business Overview
Our business strategy is to consolidate our
position as a leading global supplier of integrated
product and service solutions to the energy and
other industries by:
pursuing strategic investment opportunities in
order to further strengthen our presence in local
and global markets;
expanding our comprehensive range of products
and developing new products designed to meet
the needs of customers operating in challenging
environments, including low carbon energy
applications, such as hydrogen and carbon capture
and storage;
enhancing our offering of technical, digital and
supply chain integration services designed to
enable customers to optimize well planning and
integrity, simplify operations and reduce overall
operating costs; and
securing an adequate supply of production inputs
and reducing the manufacturing costs of our
core products.
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. For example:
In January 2019, we acquired a 47.79% interest
in SSPC, a welded steel pipes producer located in
Saudi Arabia.
In February 2019, we entered into a joint venture
with Severstal to build and operate welded pipe
plant in West Siberia, Russian Federation. As
indicated above, construction activities for that
plant have been put on hold.
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In January 2020, we acquired IPSCO, a North
American manufacturer of seamless and welded
steel pipes, from PAO TMK (“TMK”), with facilities
located mainly in the midwestern and northeastern
regions of the United States, and a steel shop
in Koppel, Pennsylvania. For more information
on IPSCO’ acquisition see note 32 “Business
combinations – Acquisition of IPSCO Tubulars,
Inc.” to our audited consolidated financial statements
included in this annual report.
In December 2020 we entered into a joint venture
with Baotou Steel to build a premium connection
threading facility to finish steel pipes produced by our
joint venture partner in Baotou, China, for sale to the
domestic market.
Our track record on companies’ acquisitions is
described above (see “History and Development
of Tenaris”).
Expanding our range of products
We have developed an extensive range of high-
value products suitable for most of our customers’
operations using our network of specialized R&D
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 challenging environments, including those
for low-carbon applications associated with the
energy transition.
Enhancing our offering of technical, digital and
supply chain integration services - Rig Direct® -
and extending their global deployment
We continue to enhance our offering of 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, complemented by technical
Annual Report
12.
advice and assistance on the selection of materials
and their use in the field, in markets like Mexico
and Argentina. In response to changes in market
conditions and the increased focus of customers
on reducing costs and improving the efficiency of
their operations, the extent and deployment of our
Rig Direct® services has been extended throughout
North America and in other markets around the
world (e.g., North Sea, Romania, Indonesia and,
most recently, the United Arab Emirates) and
now include digital and more extensive supply
chain integration services. Through the provision
of Rig Direct® services, we seek to integrate our
operations with those of our customers using
digital technologies to shorten the supply chain
and simplify operational and administrative
processes, as well as technical services for well
planning and well integrity, to reduce costs,
improve safety and minimize environmental
impact. They are also intended to differentiate us
from our competitors and further strengthen our
relationships with customers worldwide through
long-term agreements.
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 and, in the future, reduce the
carbon emissions intensity of our operations
over the long term. We aim to achieve a vertically
integrated value chain for our production. To this
end, we purchase most of our supplies through
Exiros, a specialized procurement company the
ownership of which we share with Ternium.
Exiros offers us integral procurement solutions,
supplier sourcing activities; category organized
purchasing; suppliers’ performance administration;
and inventory management. In addition, through
IPSCO’s acquisition, we have secured a steel shop in
Koppel, Pennsylvania, which is our first steel shop in
the United States and provides vertical integration
through domestic production of a significant part
of our steel bar needs in the United States.
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 most of
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 OCTG used in drilling
operations, and for other industrial applications
with production processes that consist in the
Tenaris 13.
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 casing, tubing
and line pipe products used in drilling and
transportation activities. Demand for steel pipe
products from the energy 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 such wells. As the energy
transition advances, demand is also expected to
grow in low-carbon energy applications such as
geothermal, hydrogen and carbon capture and
storage. 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.
The “Others” segment 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, heat exchangers, utility
conduits for buildings and the sale of energy and
raw materials that exceed internal requirements.
For more information on our business segments,
see “II C. Accounting Policies – Segment
information” to our audited consolidated financial
statements included in this annual report.
Our Products
Our principal finished products are seamless
and welded steel casing and tubing, line pipe and
various other mechanical and structural steel
pipes for different uses. Casing and tubing are also
known as oil country tubular goods (“OCTG”).
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 more 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.
In addition to oil and gas applications, many
of our products can also be used in low-carbon
energy applications, such as geothermal, hydrogen
and carbon capture and storage.
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.
Annual Report 14.
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 have marketed 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 the United States and, since our acquisition
of IPSCO in January 2020, we now own the “Ultra”
and “TORQ” ranges of premium connections, which
are used mainly in U.S. onshore applications.
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 and industrial equipment of
various specifications and diverse applications,
including liquid and gas storage equipment. In
addition, we produce shell and tube heat exchangers
for various applications, and we sell energy and raw
materials that exceed our internal requirements.
Production Process and Facilities
We operate relatively low-cost production facilities,
which we believe is the result of:
•
•
state-of-the-art, strategically located plants;
favorable access to high quality raw materials,
energy and labor at competitive costs;
•
•
•
•
operating history of more than 60 years, which
translates into solid industrial know-how;
constant benchmarking and best-practices sharing
among the different facilities;
increasing specialization of each of our facilities in
specific product ranges; and
extensive use of digital technologies in our
production processes.
Our seamless pipes production facilities are located
in North and South America, Europe and Asia
and our welded pipes production facilities are
located in North and South America and in Saudi
Arabia. In addition, we have tubular accessories
facilities, such as sucker rods, in Argentina, Brazil,
Mexico, Romania, and the United States. We
produce couplings in Argentina, China, Colombia,
Indonesia, Mexico and Romania, and pipe fittings
in Mexico. In addition to our pipe threading and
finishing facilities at our integrated pipe production
facilities, we have pipe threading facilities for
steel pipes manufactured in accordance with the
specifications of the American Petroleum Institute
(“API”), and premium joints in the United States,
Canada, China, Ecuador, Kazakhstan, Indonesia,
Nigeria, the United Kingdom, Saudi Arabia and
until recently in Denmark.
The following table shows our aggregate installed
production capacity of seamless and welded steel
pipes and steel bars at the dates indicated as well
as the aggregate actual production volumes for the
periods indicated.
In 2020, our production capacity for steel bars,
seamless and welded pipes increased mainly as a
result of IPSCO’s acquisition. Capacity of welded
tubes in 2019 increased compared to 2018, due to
the acquisition of a controlling interest in SSPC.
Tenaris Thousands of tons
AT OR FOR THE YEAR ENDED DECEMBER 31
2020
2019
2018
15.
STEEL BARS
Effective Capacity (annual) (1)
Actual Production
TUBES – SEAMLESS
Effective Capacity (annual) (1)
Actual Production
TUBES – WELDED
Effective Capacity (annual) (1)
Actual Production
4,485
1,749
3,985
2,835
3,935
3,167
4,680
1,914
3,780
268
4,300
2,629
2,980
671
4,300
2,798
2,620
799
1. Effective annual production capacity is calculated based on standard productivity of production
lines, theoretical product mix allocations, the maximum number of possible working shifts and a
continued flow of supplies to the production process.
Competition
The global market for steel pipe products is highly
competitive. Seamless steel pipe products, which are
used extensively in the energy industry particularly
for offshore, high pressure, high stress, corrosive
and other complex applications, are produced
in specialized mills using round steel billets and
specially produced ingots. Welded steel pipe
products are produced in mills which process steel
coils and plates into steel pipes. Steel companies
that manufacture steel coils and other steel
products but do not operate specialized seamless
steel mills are generally not competitors in the
market for seamless steel pipe products, although
they often produce welded steel pipes or sell steel
coils and plates used to produce welded steel pipes.
The production of steel pipe products following
the stringent requirements of major oil and
gas companies operating in offshore and other
complex operations requires the development
of specific skills and significant investments in
manufacturing facilities. By contrast, steel pipe
products for standard applications can be produced
in most seamless pipe mills worldwide and
sometimes compete with welded pipe products for
such applications including OCTG applications.
Welded pipe, however, is not generally considered
a satisfactory substitute for seamless steel pipe in
high-pressure or high-stress applications.
Over the past decade, substantial investments have
been made, especially in China but also in other
regions around the world, to increase production
capacity of seamless steel pipe products.
Production capacity for more specialized product
grades has also increased. With the downturn
between 2014 and 2016 in the price of oil and
demand for tubes for oil and gas drilling, the
overcapacity in steel pipe and seamless steel pipe
production worldwide became acute, extending
beyond commodity grades. This situation has
been accentuated by the more recent COVID-19
induced collapse in demand and the prospect of
Annual Report
16.
an accelerated energy transition. The competitive
environment is, as a result, intense, and we expect
that this can only continue without substantial
capacity reductions. Effective competitive
differentiation and industry consolidation will be
key factors for Tenaris.
•
Our principal competitors in steel pipe markets
worldwide are described below.
Vallourec S.A. (“Vallourec”), a French company,
has mills in Brazil, China, Germany and the
United States. Vallourec has a strong presence
in the European market for seamless pipes for
industrial use and a significant market share in
the international market with customers primarily
in Europe, the United States, Brazil, China, the
Middle East and Africa. Vallourec is an important
competitor in the international OCTG market,
particularly for high-value premium joint products,
where it operates a technology partnership for
VAM® premium connections with Nippon Steel
& Sumitomo Metal Corporation (“NSSMC”).
Prior to the collapse in oil prices in 2014 to 2016,
Vallourec increased its production capacity by
building mills in Brazil (jointly with NSSMC)
and Youngstown, Ohio, acquiring three tubular
businesses in the United States and Saudi Arabia,
and concluding an agreement with a Chinese
seamless steel producer, Tianda Oil Pipe Company
(“Tianda”) to distribute products from Tianda in
markets outside China. In early 2016, in response
to accumulating losses, Vallourec announced
a $1 billion capital increase, more than half of
which was provided by a French government fund
and NSSMC, who each agreed to increase their
equity participation to 15%. At the same time, an
industrial restructuring program was announced
under which Vallourec reduced capacity in Europe,
closing its rolling mills in France, combined its
operations in Brazil with that of the new mill held
with NSSMC, acquired a majority position in
Tianda and bought out the remaining minority
interest, and strengthened its cooperation with
NSSMC for the development and testing of
premium connection products and technology.
Despite this restructuring program, Vallourec’s
losses continued and its equity position has
turned negative. Vallourec has recently announced
a further financial restructuring, in which its
current shareholders will be severely diluted and
its creditors, including private equity investors,
will assume effective control. This restructuring is
expected to be completed in June 2021. Under this
restructuring, NSSMC will exit its investment in
the Brazilian mill and have its position in Vallourec
diluted to around 3%.
Japanese players NSSMC and, to a lesser extent,
JFE Holdings Inc. (“JFE”) together enjoy a
significant share of the international market, having
established strong positions in markets in the Far
East and the Middle East. They are internationally
recognized for their supply of high-alloy grade
pipe products. In recent years, NSSMC increased
its capacity to serve international markets through
the construction with Vallourec of a new seamless
pipe mill in Brazil, and further strengthened its ties
with Vallourec through participating in Vallourec’s
2016 capital increase and combining their respective
Brazilian operations. As part of the latest financial
restructuring of Vallourec, NSSMC will relinquish
its participation in the Brazilian operation and cede
its reference shareholder position in Vallourec.
In recent years, TMK, a Russian company, has led
the consolidation of the Russian steel pipe industry,
invested to modernize and expand its production
capacity in Russia and expanded internationally
through acquisitions into Eastern Europe and the
United States. TMK also expanded in the Middle
East through the acquisition of a controlling interest
in Gulf International Pipe Industry LLC (“Gulf
International Pipe”), a welded pipe producer in
Oman. More recently, however, TMK adopted a
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Tenaris 17.
•
•
strategy of monetizing its international assets by
reducing its participation in Gulf International Pipe
and selling IPSCO to Tenaris.
Over the past two decades, Chinese producers
increased production capacity substantially and
strongly increased their exports of steel pipe
products around the world. Due to unfair trading
practices, many countries, including the United
States, the European Union, Canada, Mexico
and Colombia, have imposed anti-dumping
restrictions on Chinese imports to those regions.
In 2009, the largest Chinese producer of seamless
steel pipes, Tianjin Pipe (Group) Corporation
Limited (“TPCO”), announced a plan to build
a new seamless pipe facility in the United States
in Corpus Christi, Texas; heat treatment and
pipe finishing facilities have been constructed but
steelmaking and hot rolling facilities have not been
completed. As part of a financial restructuring, a
51% shareholding in TPCO was sold to Shanghai
Electric Group. Although producers from China
compete primarily in the “commodity” sector of
the market, several of these producers, including
Baosteel Group (“Baosteel”) and TPCO, have
developed and are selling more sophisticated
products, particularly in the domestic market.
The tubes and pipes business in the United
States and Canada has experienced significant
consolidation over the years, while new players
have also emerged. Following the acquisitions of
Maverick and Hydril by Tenaris and the earlier
acquisition of North Star Steel by Vallourec,
U.S. Steel Corporation acquired Lone Star
Steel Technologies. In 2008, Evraz Group S.A.
(“Evraz”) and TMK, two Russian companies,
acquired IPSCO’s Tubular division, with Evraz
retaining IPSCO’s operations in Canada and TMK
acquiring IPSCO’s operations in the United States.
Subsequently, Tenaris constructed a greenfield
seamless pipe mill at Bay City, Texas and acquired
IPSCO from TMK in January 2020, becoming the
leading seamless pipe producer in the U.S., while
US Steel integrated its seamless pipe business by
building an electric arc furnace (“EAF”) steel shop
in Fairfield, Alabama, which started up in late
2020. At the same time, many new players have
built, or announced plans to build, pipe mills in the
United States. These include, in addition to TPCO,
Boomerang LLC, a company formed by a former
Maverick executive that opened a welded pipe mill
in Liberty, Texas, in 2010; Benteler International
A.G. (“Benteler”), a European seamless pipe
producer that built a new seamless pipe mill in
Louisiana, which opened in September 2015;
and a plethora of welded pipe mills established
by subsidiaries of foreign pipe producers, such
as SeAH Steel (“SeAH”), of Korea and JSW
Group (“JSW”), of India. North American pipe
producers are largely focused on supplying the
U.S. and Canadian markets, where they have their
production facilities. In Canada, Tenaris recently
closed its Prudential welded pipe mill in Calgary
and announced an investment plan to concentrate
production of seamless and welded pipes at its
seamless pipe mill in Sault Ste Marie, Ontario.
Korean welded pipe producers, who have a limited
domestic market, have expanded capacity in recent
years and targeted the U.S. market for standard
applications. They have gained a significant market
position, despite the application of anti-dumping
duties for unfair trading practices and being subject
to Section 232 quotas. One of them, SeAH, has
acquired and built local welded pipe production
facilities in the U.S.
Tubos Reunidos S.A. (“Tubos Reunidos”) of
Spain, Benteler International A.G. of Germany
and Voest Alpine A.G. of Austria each have a
significant presence in the European market for
seamless steel pipes for industrial applications,
while the latter also has a relevant presence in the
U.S. and international OCTG markets, and in
2016, Tubos Reunidos opened an OCTG threading
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•
Annual Report 18.
•
facility targeting international markets. In 2006,
ArcelorMittal S.A. (“ArcelorMittal”) created a
tubes division through several acquisitions and
has mills in North America, Eastern Europe,
Venezuela, Algeria and South Africa and has built
a seamless pipe mill in Saudi Arabia.
In the Middle East, particularly in Saudi Arabia,
which has implemented policies to encourage local
production for its oil and gas industry, several pipe
mills have been established, including a seamless
pipe mill built by Jubail Energy Services Company
(“JESCO”), a company established with majority
participation from a state-backed industrial
development company, and a seamless pipe mill
originally built by a joint venture of ArcelorMittal
and local shareholders (“AMTJ”). These local
players have been strengthening their capabilities
and are taking an increasing share of the pipes
supplied to Saudi Arabian Oil Company (“Saudi
Aramco”) as well as exporting to other countries
in the Middle East and the rest of the world. In
January 2019, Tenaris acquired a controlling
47.79% participation in SSPC, a local welded
pipe producer. In December 2020, the controlling
shareholder of JESCO announced that it had
signed an agreement to sell its 72% participation
in JESCO to AMTJ. This transaction would be
part of AMTJ’s proposed acquisition of 100%
of JESCO.
Producers of steel pipe products can maintain
strong competitive positions in markets where
they have their pipe manufacturing facilities due
to logistical and other advantages that permit
them to offer value-added services and maintain
strong relationships with domestic customers,
particularly in the oil and gas sectors. Our
subsidiaries have established strong ties with major
consumers of steel pipe products in their home
markets, reinforced by Rig Direct® services, as
discussed above.
Capital Expenditure Program
During 2020, our capital expenditures, including
investments at our plants and information systems
(“IT”), amounted to $193 million, compared to
$350 million in 2019 and $349 million in 2018. Of
all capital expenditures made during 2020, $168
million were invested in tangible assets, compared
to $314 million in 2019 and $318 million in 2018.
In 2020, we focused on enhancing automation
and digitalization of our industrial processes,
improvements on safety and environmental issues,
product differentiation, and competitiveness.
The major highlights of our capital spending
program during 2020 included:
investments in our automation three year
global plan covering all of our industrial
system worldwide; new equipment and related
infrastructure to improve safety conditions at
our entire industrial system;
the revamping of the electric energy (“EE”)
substation and the upgrade of non-destructive test
(“NDT”) inspection technology in heat treatments
and ultrasonic test (“UT”) line at our Campana
facility in Argentina;
a new corrosion laboratory and the installation
of a new 43/71 mega volt ampere (“MVA”)
transformer in substation 21 at our Veracruz
facility in Mexico;
general improvements of McCarty premium plant
in Houston, Texas, including the revamping of
phosphate process, new lathes, new automatic
handling, full revamping of level 2 and pipe
traceability implementation;
completion of construction of logistic yards in
Houston, Texas.;
the increase of capacity in the steel shop at our
Calarasi plant, Romania; and
improvements in thermal coating line and
the revamping of the edge press in the large
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•
•
•
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•
Tenaris 19.
outside diameter (“LOD”) facility in
Pindamonhangaba, Brazil.
Capital expenditures in 2021 are expected to
remain in line with the level of 2020 including the
completion of certain main projects started in
2020. Some ongoing investments include:
•
•
•
•
•
the revamping of the steel shop at our Koppel
facility in the United States;
the industrial transformation of AlgomaTubes
in Canada (new ERW forming and premium
threading lines);
a new premium threading plant in China in joint
venture with Baotou Steel;
a new yard and service center in Abu Dhabi; and
initial actions to achieve the medium term target
of reducing carbon emissions intensity by 30%.
In addition to capital expenditures at our plants, we
have invested in digital information systems. Despite
the crisis in the oil industry and the pandemic, we
have ensured the connectivity of those of our people
who have transitioned to remote working. Our
focus has been on our industrial system through
the execution of the Integrated Scheduling System
Project which has been transforming the way we
operate and make decisions, and on our commercial
relationships through the integration with our
customer/vendors which has enabled us to be faster,
more flexible and more efficient.
Additionally, we have continued strengthening
the protection of our information with our
cybersecurity project and are integrating the
former IPSCO operations with our systems.
Product Quality Standards
Our steel products (tubular products, accessories
and sucker rods) are manufactured in accordance
with the specifications of the API, the American
Society for Testing and Materials (“ASTM”), the
International Standardization Organization (“ISO”),
the Japan Industrial Standards (“JIS”), and European
Standards (“EN”), among other standards. The
products must also satisfy our proprietary standards
as well as our customers’ requirements. We maintain
an extensive quality assurance and control program
to ensure that our products and services continue to
satisfy proprietary and industry standards and are
competitive from a product quality standpoint with
products offered by our competitors.
We currently maintain, for all our manufacturing
facilities and services centers, a Quality Management
System Certified to ISO 9001 by Lloyd’s Register
Quality Assurance and API product licenses granted
by API, which are requirements for selling to the
major oil and gas companies, which have rigorous
quality standards. In addition, the majority of our
testing laboratories are certified to ISO 17025. Our
Quality Management System (“QMS”), based on
the ISO 9001 and API Q1 specifications, assures
that products and services comply with customer
requirements from the acquisition of raw materials
to the delivery of the final product and services.
The QMS is designed to ensure the reliability and
improvement of the product and the manufacturing
operations processes as well as the associated
services. Additionally, we are in the process of
certifying the QMS to API Q2 at some locations, a
certification specifically developed for companies
which offer services in the oil and gas industry.
Investments in information systems and other
intangible assets totaled $26 million in 2020,
compared to $36 million in 2019 and $32 million
in 2018.
All of our mills involved in the manufacturing of
material for the automotive market are certified
according to the standard IATF 16949 by Lloyd’s
Register Quality Assurance.
Annual Report 20.
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.
•
•
•
•
welded pipes for oil and gas and other applications;
sucker rods;
coiled tubing and
coatings.
R&D activities are carried out primarily at our
global R&D network with its main office in
Amsterdam, the Netherlands and specialized
research and testing facilities located in Campana,
Argentina, in Veracruz, Mexico, and Dalmine,
Italy. Additionally, we have a Technology Center
in Houston, Texas, where we develop our original
TenarisHydril Wedge technology. 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 R&D currently being undertaken are
focused on the increasingly challenging energy
markets and include:
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, heat treatment, non-destructive testing
and finishing processes 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, through the
use of patents, trade secrets, trademarks and
other intellectual property tools that allow us to
differentiate ourselves from our competitors.
We spent $41.8 million in R&D in 2020, compared
to $61.1 million in 2019 and $63.4 million in 2018.
Capitalized costs were not material for the years
2020, 2019 and 2018.
•
•
•
•
•
•
proprietary premium joint products (OCTG)
including Dopeless® technology;
proprietary steels for various applications (oil
and gas drilling and transportation, hydrogen
transportation and storage, carbon dioxide
transportation and injection, automotive, etc.);
heavy-wall deepwater line pipe, risers and welding
technology;
tubes and components for the automotive industry
and other mechanical applications;
large vessels for hydrogen storage and refueling
stations;
tubes for boilers;
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. Environmental requirements vary from one
Tenaris 21.
jurisdiction to another adding complexity to the
operations of global companies, such as Tenaris.
The Paris Agreement, adopted at the 2015 United
Nations Climate Conference, sets out the global
framework to limit the rising temperature of the
planet and to strengthen the countries’ ability to
deal with the effects of climate change. If there is
no meaningful progress in lowering emissions in
the years ahead, there is an increased likelihood
of abrupt policy interventions as governments
attempt to meet the goals of the Paris Agreement
by adopting policy, legal, technology and market
changes in the transition to a low-carbon global
economy. For more information on risks related
to climate change regulation, see “Principal Risks
and Uncertainties - Risks Relating to Our Industry
– Climate change legislation and increasing
regulatory requirements could reduce demand for
our products and services and result in unexpected
capital expenditures and costs, and negatively
affect our reputation.”
The ultimate impact of complying with applicable
environmental regulation is not always clearly
known or determinable because certain laws
and regulations have been evolving in the past
years or are under constant review by competent
authorities. The expenditures required to comply
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, in 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. For more
information on risks related to compliance with
environmental regulation and product liability,
see “Principal Risks and Uncertainties - Risks
Relating to Our Business– The cost of complying
with environmental regulations and potential
environmental and product liabilities may increase
our operating costs and negatively impact our
business, financial condition, results of operations
and prospects.”
Compliance with applicable environmental laws
and regulations is of utmost importance to the
Company and a significant factor in our industry
and business. We have not been subject to any
significant penalty for any material environmental
violation of applicable environmental laws
and regulations 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.
Insurance
We carry property damage, general liability and
certain other insurance coverage in line with
industry practice. However, we do not carry business
interruption insurance. Our current general liability
coverage includes third party, employers, sudden
and accidental seepage and pollution and product
liability, up to a limit of $300 million. Our current
property insurance has indemnification caps up to
$250 million for direct damage, depending on the
different plants; and a deductible of $100 million.
Organizational Structure and Subsidiaries
We conduct all our operations through subsidiaries.
The following table shows the principal subsidiaries
of the Company and its direct and indirect
ownership in each subsidiary as of December 31,
2020, 2019 and 2018.
Annual Report 22.
Company
Country of
Incorporation
Main activity
Algoma Tubes Inc.
Confab Industrial S.A. and subsidiaries
Canada
Brazil
Manufacturing of seamless steel pipes
Manufacturing of welded steel pipes
Dalmine S.p.A.
Hydril Company and subsidiaries (except detailed) (a)
IPSCO Tubulars Inc. and subsidiaries
Italy
USA
USA
and capital goods
Manufacturing of seamless steel pipes
Manufacture and marketing of
premium connections
Percentage of ownership
at December 31 (*)
2020
2019
2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Manufacturing of welded and seamless
100%
NA
NA
steel pipes
Kazakhstan Pipe Threaders Limited Liability Partnership
Kazakhstan
Threading of premium products
Maverick Tube Corporation and subsidiaries
NKKTubes
P.T. Seamless Pipe Indonesia Jaya
Prudential Steel Ltd. (b)
S.C. Silcotub S.A.
Saudi Steel Pipe Co.
Siat Sociedad Anónima
USA
Japan
Indonesia
Canada
Romania
Manufacturing of welded steel pipes
Manufacturing of seamless steel pipes
Manufacturing of seamless steel products
Manufacturing of welded steel pipes
Manufacturing of seamless steel pipes
Saudi Arabia
Manufacturing of welded steel pipes
Argentina
Manufacturing of welded and seamless
steel pipes
100%
100%
51%
89%
100%
100%
48%
100%
100%
100%
51%
89%
100%
100%
48%
100%
100%
100%
51%
89%
100%
100%
NA
100%
Siderca Siderca Sociedad Anónima Industrial
Argentina
Manufacturing of seamless steel pipes
100%
100%
100%
y Comercial and subsidiaries
Talta - Trading E Marketing Sociedade Unipessoal Lda.
Portugal
Holding Company
Tenaris Bay City, Inc.
Tenaris Connections Bv
USA
Manufacturing of seamless steel pipes
Netherlands
Development, management and
Tenaris Financial Services S.A.
Tenaris Global Services (Canada) Inc.
Tenaris Global Services (U.S.A.) Corporation
Uruguay
Canada
USA
licensing of intellectual property
Financial company
Marketing of steel products
Marketing of steel products
Tenaris Global Services (UK) Ltd
United Kingdom
Holding company and marketing of
steel products
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Tenaris Global Services S.A. and subsidiaries (except
Uruguay
Holding company and marketing of
100%
100%
100%
detailed) (c)
steel products
Tenaris Investments (NL) B.V. and subsidiaries
Netherlands
Holding company
Tenaris Investments S.à r.l.
Tenaris Tubocaribe Ltda.
Luxembourg
Holding company
Colombia
Manufacturing of welded and seamless
100%
100%
100%
100%
100%
100%
NA
100%
100%
steel pipes
Tubos de Acero de Mexico, S.A.
Mexico
Manufacturing of seamless steel pipes
100%
100%
100%
(*) All percentages rounded.
(a) Tenaris Investments S.a.r.l. holds 100% of Hydril's subsidiaries shares except for Technical
Drilling & Production Services Nigeria. Ltd where it held 80% for 2019 and 2018.
(b) Prudential Steel Ltd. has been closed down and the pipe manufacturing operations of seamless,
welded and premium products in Canada will be consolidated at the facility of Algoma Tubes Inc.
(c) Tenaris holds 97.5% of Tenaris Supply Chain S.A. and 40% of Tubular Technical Services Ltd. and
Pipe Coaters Nigeria Ltd., 49% of Amaja Tubular Services Limited, 49% of Tubular Services Angola
Lda and 60% of Tenaris Baogang Baotou Steel Pipes Ltd.
Tenaris
23.
Other Investments
Ternium
We have a significant investment in Ternium, a
Luxembourg company controlled by San Faustin,
whose securities are listed on the NYSE. As of
December 31, 2020, the Company held 11.46% of
Ternium’s share capital (including treasury shares).
The Company is a party to a shareholders’
agreement with Techint Holdings S.à.r.l. (“Techint
Holdings”), a wholly owned subsidiary of San
Faustin and Ternium’s main shareholder, dated
January 9, 2006, pursuant to which Techint
Holdings is required to take actions within its
power to cause one of the members of Ternium’s
board of directors to be nominated by the
Company and any directors nominated by
the Company to be removed only pursuant to
previous written instructions from the Company.
The Company and Techint Holdings also agreed
to cause any vacancies on Ternium’s board of
directors to be filled with new directors nominated
by either the Company or Techint Holdings, as
applicable. The shareholders’ agreement will
remain in effect so long as each of the parties holds
at least 5% of the shares of Ternium or until it
is terminated by either the Company or Techint
Holdings pursuant to its terms. Carlos Condorelli
was nominated by the Company as a director of
Ternium pursuant to this shareholders’ agreement.
Usiminas
At December 31, 2020, Tenaris held, through
its Brazilian subsidiary Confab, 36.5 million
ordinary shares and 1.3 million preferred shares
of Usiminas, representing 5.19% of its shares with
voting rights and 3.07% of its total share capital.
Confab’s acquisition of the Usiminas shares was
part of a larger transaction performed on January
16, 2012, pursuant to which Tenaris’s affiliate
Ternium (through certain of its subsidiaries)
and Confab acquired a large block of Usiminas
ordinary shares and joined Usiminas’ existing
control group. Subsequently, in 2016, Ternium and
Confab subscribed to additional ordinary shares
and to preferred shares.
At December 31, 2020, the Usiminas control group
held, in the aggregate, 483.6 million ordinary
shares bound to the Usiminas shareholders’
agreement, representing approximately 68.6%
of Usiminas’ voting capital. The Usiminas
control group, which is bound by a long-term
shareholders’ agreement that governs the rights
and obligations of Usiminas’ control group
members, is currently composed of three
sub-groups: the T/T Group, comprising Confab
and certain Ternium entities; the NSC Group,
comprising Nippon Steel Corporation (“NSC”),
Metal One Corporation and Mitsubishi
Corporation; and Usiminas’ pension fund
Previdência Usiminas. The T/T Group holds
approximately 47.1% of the total shares held
by the control group (39.5% corresponding
to the Ternium entities and the other 7.6%
corresponding to Confab); the NSC Group holds
approximately 45.9% of the total shares held by
the control group; and Previdência Usiminas holds
the remaining 7%.
The corporate governance rules reflected in the
Usiminas shareholders’ agreement include, among
others, an alternation mechanism for the nomination
of each of the chief executive officer (“CEO”)
and the chairperson of the board of directors of
Annual Report 24.
Usiminas, as well as a mechanism for the nomination
of other members of Usiminas’ executive board.
The Usiminas shareholders’ agreement also provides
for an exit mechanism consisting of a buy-and-sell
procedure, exercisable at any time after November
16, 2022, and applicable with respect to shares held
by NSC and the T/T Group, which would allow
either Ternium or NSC to purchase all or a majority
of the Usiminas’ shares held by the other shareholder.
Confab and the Ternium entities party to the
Usiminas shareholders’ agreement have a separate
shareholders agreement governing their respective
rights and obligations as members of the T/T
Group. Such separate agreement includes, among
others, provisions granting Confab certain
rights relating to the T/T Group’s nomination
of Usiminas’ officers and directors under the
Usiminas shareholders’ agreement. Those
circumstances evidence that Tenaris has significant
influence over Usiminas, and consequently, Tenaris
accounts for its investment in Usiminas under the
equity method (as defined by IAS 28).
Techgen
Techgen is a Mexican joint venture company
owned 48% by Ternium, 30% by Tecpetrol and
22% by Tenaris. Techgen operates a natural
gas-fired combined cycle electric power plant in
the Pesquería area of the State of Nuevo León,
Mexico. Tenaris, Ternium and Tecpetrol are
parties to a shareholders’ agreement relating to
the governance of Techgen.
In 2019, Techgen entered into a $640 million
syndicated loan agreement with several banks to
refinance an existing loan, resulting in the release
of certain corporate guarantee issued by Techgen’s
shareholders, including Tenaris.
Techgen’s obligations under the current facility,
which is “non-recourse” on the sponsors, are
guaranteed by a Mexican security trust covering
Techgen’s shares, assets and accounts as well as
Techgen’s affiliates rights under certain contracts.
In March 2021, the Mexican Congress approved a
significant reform to the energy market in Mexico,
which could negatively affect Techgen’s operations
and our energy requirements in Mexico. For
more information on the risks associated with the
energy reform in Mexico, see “Principal Risks and
Uncertainties – Risks Relating to Our Business –
Adverse economic or political conditions in the
countries where we operate or sell our products
and services may decrease our sales or disrupt our
manufacturing operations, thereby adversely affecting
our revenues, profitability and financial condition”.
Global Pipe Company (“GPC”)
Global Pipe Company (“GPC”) is a joint venture
company, established in 2010 and located in Jubail,
Saudi Arabia, which manufactures LSAW pipes.
Tenaris, through its subsidiary SSPC, currently
owns 35% of the share capital of GPC. Through
the shareholders agreement, SSPC is entitled to
choose one of the five members of the board of
directors of GPC. In addition, SSPC has the ability
to block any shareholder resolution.
TenarisSeverstal
In 2019, Tenaris entered into an agreement with
Severstal to build a welded pipe plant to produce
OCTG products in the Surgut area, West Siberia,
Russian Federation. Tenaris holds a 49% interest
in the company, while Severstal owns the remaining
51%. The plant, which is estimated to require a
total investment of $280 million is planned to have
an annual production capacity of 300,000 tons.
Tenaris 25.
During 2019, we invested $19.6 million in the
project. In 2020, the parties completed all the
engineering to get the construction permit but
on-site activities faced some delays due to the
COVID-19 pandemic. Therefore, no additional
contributions were made during 2020.
In March 2021, the joint venture parties put on
hold the construction activities, while they assess
the impact of the changes in the relevant markets
and competitive environment and determine
whether any adjustments or changes to the project
could be necessary.
Tenaris Baogang Baotou Steel Pipes Ltd. (“Tenaris
Baotou”)
In 2020, Tenaris entered into a joint venture with
Baotou Steel to build a premium connection
threading facility to finish steel pipes produced
by our joint venture partner in Baotou, China, for
sale to the domestic market. Under the agreement,
Tenaris will hold 60% of shares in the new joint-
venture company, while Baotou Steel will own the
remaining 40%.
The plant, which is estimated to require a total
investment of $32.6 million, is planned to have a
total annual production capacity of 70,000 tons.
An initial investment of $29.8 million, which will
enable the facility to produce 45,000 tons annually,
is estimated to be completed during 2021 and to
start operations at the end of the year. During
2020, Tenaris contributed approximately $2.3
million in the project.
Annual Report
NET SALES
EARNINGS (LOSSES)
PER SHARE
NET SALES BY
BUSINESS SEGMENT
NET SALES BY
GEOGRAPHIC AREA
PERSONNEL EMPLOYED
PER COUNTRY
TUBES SALES
BY MARKET
TUBES
94%
OTHER
6%
EUROPE
13%
MIDDLE EAST
& AFRICA
24%
COLOMBIA
INDONESIA
4%
3%
ASIA
PACIFIC
6%
CANADA
3%
ROMANIA
8%
JAPAN
2%
OTHER
7%
INDUSTRIAL
AND OTHER
8%
HYDROCARBON
PROCESSING
AND POWER
GENERATION
8%
D
S
U
1.0
0.8
0.6
0.4
0.74
0.63
0.46
7,659
7,294
5,289
5,147
4,294
4,000
Tenaris in numbers
3,000
-0.2
0.05
0
0.2
-0.4
1,000
0
-0.6
-0.8
-0.54
2016 2017
2018
2019
2020
2016 2017
2018
2019
2020
Trend information
Leading indicators
SOUTH
AMERICA
15%
NORTH
AMERICA
42%
ITALY
11%
BRAZIL
7%
MEXICO
24%
USA
8%
ARGENTINA
23%
OIL & GAS
84%
EARNINGS (LOSSES)
NET SALES BY
LOST TIME ACCIDENTS INDEX
TUBES SALES
NET SALES BY
NET SALES BY
PER SHARE
BUSINESS SEGMENT
BY MARKET
GEOGRAPHIC AREA
GEOGRAPHIC AREA
NET SALES BY
NET SALES BY
RETURN ON EQUITY
PERSONNEL EMPLOYED
PERSONNEL EMPLOYED
BUSINESS SEGMENT
GEOGRAPHIC AREA
PER COUNTRY
PER COUNTRY
EBITDA MARGIN
NET SALES BY
PERSONNEL EMPLOYED
TUBES SALES
TUBES SALES
GEOGRAPHIC AREA
PER COUNTRY
BY MARKET
BY MARKET
PERSONNEL EMPLOYED
TUBES SALES
PER COUNTRY
BY MARKET
TUBES SALES
BY MARKET
2016 2017
2018
2019
2020
2016 2017
2018
2019
2020
2016 2017
0
2018
2019
2016 2017
2020
2018
2019
NET SALES
EARNINGS (LOSSES)
PER SHARE
NET SALES
26.
NET SALES
NET SALES BY
BUSINESS SEGMENT
0.05
4,294
7,000
6,000
5,289
5,000
4,000
3,000
2,000
1,000
N
O
I
L
D
S
U
L
I
M
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
S
G
I
R
1400
1200
1000
800
600
400
200
0
D
S
U
1.0
0.8
0.6
0.4
0.2
0
-0.2
-0.4
-0.6
-0.8
S
G
I
R
2500
2000
1500
1000
500
7,659
7,294
5,289
4,294
5,147
0.74
0.63
0.46
-0.54
RIG COUNT INTERNATIONAL
RIG COUNT USA AND CANADA
53
203
699
32
187
41
196
711
769
31
244
824
43
178
604
261
960
219
857
269
813
166
471
128
391
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
N
O
I
L
L
I
M
D
S
U
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
S
G
I
R
1400
1200
1000
800
600
400
200
0
TUBES
94%
N
O
I
L
L
I
M
D
S
U
9,000
8,000
7,659
NET SALES
RIG COUNT INTERNATIONAL
NET SALES BY
EARNINGS (LOSSES)
EARNINGS (LOSSES)
GEOGRAPHIC AREA
PER SHARE
PER SHARE
OIL
GAS
OTHER
6%
S
G
R
I
EUROPE
13%
MISC
MIDDLE EAST
& AFRICA
24%
NET SALES
EARNINGS (LOSSES)
RIG COUNT USA AND CANADA
PERSONNEL EMPLOYED
NET SALES BY
NET SALES BY
PER SHARE
PER COUNTRY
BUSINESS SEGMENT
BUSINESS SEGMENT
GAS
TUBES
94%
COLOMBIA
4%
OTHER
6%
TUBES
94%
OIL
ASIA
PACIFIC
6%
S
G
R
I
2500
7,659
0.74
7,294
0.63
2000
INDONESIA
3%
N
O
I
L
L
I
M
CANADA
D
S
3%
U
D
S
U
ROMANIA
9,000
8%
8,000
1.0
0.8
0.6
0.4
0.2
4,294
0
7,000
6,000
5,000
4,000
3,000
7,659
0.74
7,294
0.63
0.46
5,147
5,289
0.05
1500
5,147
1000
500
261
960
269
-0.2
813
-0.4
-0.6
2,000
166
1,000
471
USA
8%
219
857
128
391
N
O
I
L
L
I
M
D
S
D
U
S
U
9,000
1.0
8,000
0.8
41
7,000
0.6
196
6,000
0.46
0.4
5,000
711
0.2
4,000
0
3,000
-0.2
2,000
-0.4
1,000
-0.6
0
-0.8
31
244
0.63
32
0.74
187
824
769
4,294
0.05
43
0.46
5,289
178
604
-0.54
SOUTH
AMERICA
2016
2017
15%
2016 2017
2018
2018
2016 2017
2019
2019
2016 2017
2020
2020
2018
2018
-0.54
NORTH
AMERICA
2019
42%
2019
2020
2020
0
ITALY
2016
11%
-0.8
BRAZIL
2016 2017
2018
7%
2017
2018
2016 2017
2019
MEXICO
2019
2018
2020
24%
2020
2019
7,294
7,659
7,294
5,289
5,147
4,294
53
203
699
0.05
JAPAN
2%
OTHER
7%
EUROPE
OTHER
N
S
13%
6%
R
S
O
U
T
I
N
L
O
L
E
H
I
M
D
N
C
R
A
C
E
M
A
P
/
I
D
S
U
TUBES
EUROPE
INDUSTRIAL
94%
13%
AND OTHER
8%
MIDDLE EAST
& AFRICA
24%
OTHER
INDONESIA
6%
3%
TUBES
94%
COLOMBIA
EUROPE
INDONESIA
4%
13%
3%
MIDDLE EAST
HYDROCARBON
& AFRICA
PROCESSING
24%
AND POWER
GENERATION
ASIA
8%
PACIFIC
6%
CANADA
ASIA
%
3%
PACIFIC
6%
ROMANIA
20
8%
4
3.5
3
2.5
2
1.5
1
1.0
0.8
0.6
0.4
2.3
0.2
0
-0.2
0.46
2.4
0.05
1.8
0.74
0.63
1.1
1.1
CANADA
3%
ROMANIA
8%
30
25
20
15
10
15
10
5
0
Source: Baker Hughes
Source: Baker Hughes
RIG COUNT INTERNATIONAL
LOST TIME ACCIDENTS INDEX
RIG COUNT INTERNATIONAL
RIG COUNT USA AND CANADA
RETURN ON EQUITY
RIG COUNT INTERNATIONAL
RIG COUNT USA AND CANADA
RIG COUNT INTERNATIONAL
LOST TIME ACCIDENTS INDEX
EBITDA MARGIN
RIG COUNT USA AND CANADA
LOST TIME ACCIDENTS INDEX
RETURN ON EQUITY
LOST TIME ACCIDENTS INDEX
RIG COUNT USA AND CANADA
RETURN ON EQUITY
EBITDA MARGIN
LOST TIME ACCIDENTS INDEX
RETURN ON EQUITY
EBITDA MARGIN
N
O
I
L
L
I
M
R
E
P
S
R
U
O
H
N
A
M
/
S
T
N
E
D
C
C
A
I
S
G
R
I
1400
4
1200
31
31
244
1000
41
32
244
53
41
32
187
203
2.4
824
769
699
196
800
2.3
600
711
43
187
196
824
769
178
711
1.8
604
400
200
1.1
1.1
3.5
53
3
203
2.5
699
2
1.5
1
0.5
0
2016
0
2016 2017
2016
2018
2017
2019
2018
2017
2020
2019
2018
2020
2019
2020
MISC
OIL
OIL
GAS
GAS
MISC
OIL
GAS
OIL
OIL
GAS
GAS
GAS
S
G
R
I
I
1400
S
G
R
1200
2500
1000
2000
800
1500
600
53
203
699
32
187
41
196
711
769
261
960
261
960
1000
400
269
813
200
500
0
219
269
857
166
471
813
128
391
2018
2016 2017 2018 2019
2019
2018
2016
2016
2017
2017
2018
2020
2017
%
20
15
10
5
0
166
471
-5
-10
2016
N
O
I
L
L
I
M
R
E
P
S
R
U
O
H
N
A
M
/
S
T
N
E
D
C
C
A
I
31
244
824
219
857
2019
2020
2019
4
3.5
43
3
178
2.5
2
604
1.5
1
128
391
0.5
0
2020
2020
S
G
R
I
1400
%
1200
30
1000
25
800
20
2.3
600
15
400
10
200
5
/
S
T
N
E
S
D
G
I
C
R
C
A
N
O
I
L
L
I
M
R
E
P
S
R
U
O
H
N
A
M
2500
4
I
3.5
53
2000
3
203
1500
2.5
2.4
699
2
1000
1.5
1
500
0.5
31
244
32
187
41
196
2.3
711
2.4
769
824
261
1.8
960
269
813
1.1
1.8
1.1
166
471
43
178
604
219
857
1.1
0
0
2016 2017
0
2016
2018
2017
2017
2016
2020
2019
2019
2016 2017
2019
2018
2016 2017 2018 2019 2020
2019
2018
2018
2020
%
20
15
10
5
0
-5
1.1
128
391
-10
2020
2020
N
O
I
L
L
I
M
R
E
P
S
R
U
O
H
N
A
M
%
/
S
T
N
E
D
C
C
A
I
4
20
3.5
15
3
2.5
10
2
5
1.5
0
1
166
0.5
-5
471
S
G
R
I
2500
2000
1500
1000
500
%
30
25
20
15
1.1
1.1
10
2.3
2.4
261
960
269
813
1.8
219
857
0
-10
2016
2016 2017 2018 2019
2016 2017
2019
2017
2018
2020
2020
2016 2017 2018 2019
2018
2019
128
391
5
0
2020
2020
N
O
I
L
L
I
M
R
E
P
S
R
U
O
H
N
A
M
/
S
T
N
E
D
C
C
A
I
4
3.5
3
2.5
2
1.5
1
0.5
%
%
20
30
15
25
10
20
2.3
5
15
0
10
-5
5
2.4
1.8
1.1
1.1
0
-10
0
2016 2017
2016 2017 2018 2019 2020
2016 2017 2018 2019
2016 2017 2018 2019 2020
COLOMBIA
JAPAN
MIDDLE EAST
OTHER
JAPAN
EUROPE
4%
2%
& AFRICA
6%
INDUSTRIAL
2%
AND OTHER
13%
24%
OTHER
7%
8%
ASIA
OTHER
PACIFIC
%
7%
6%
COLOMBIA
MIDDLE EAST
4%
INDONESIA
INDUSTRIAL
AND OTHER
3%
8%
CANADA
HYDROCARBON
& AFRICA
PROCESSING
24%
AND POWER
3%
GENERATION
HYDROCARBON
PROCESSING
AND POWER
OTHER
ASIA
GENERATION
7%
PACIFIC
8%
6%
8%
ROMANIA
8%
8%
CANADA
3%
ROMANIA
8%
JAPAN
COLOMBIA
JAPAN
2%
INDONESIA
INDUSTRIAL
4%
AND OTHER
3%
HYDROCARBON
2%
PROCESSING
INDUSTRIAL
AND OTHER
8%
AND POWER
OTHER
GENERATION
7%
8%
HYDROCARBON
PROCESSING
AND POWER
GENERATION
8%
RETURN ON EQUITY
EBITDA MARGIN
EBITDA MARGIN
%
%
20
15
10
5
0
-5
-10
30
25
20
15
10
5
0
%
30
25
20
15
10
5
0
2018
2019
2020
2020
2016 2017 2018 2019
2016 2017 2018 2019 2020
2020
2016 2017 2018 2019 2020
ARGENTINA
23%
-0.4
OIL & GAS
-0.6
84%
-0.8
0.5
-0.54
SOUTH
0
AMERICA
2020
15%
SOUTH
AMERICA
2016 2017
2018
15%
NORTH
AMERICA
2019
2020
42%
2016 2017
2019
2018
USA
-5
8%
NORTH
-10
ITALY
AMERICA
11%
42%
USA
8%
SOUTH
AMERICA
MEXICO
ITALY
BRAZIL
15%
2016 2017 2018 2019
24%
11%
7%
BRAZIL
7%
ARGENTINA
23%
MEXICO
2020
24%
ARGENTINA
OIL & GAS
5
23%
84%
NORTH
SOUTH
84%
AMERICA
0
AMERICA
ITALY
42%
15%
11%
-0.54
2020
BRAZIL
7%
NORTH
MEXICO
AMERICA
24%
42%
2016 2017 2018 2019 2020
ITALY
11%
BRAZIL
7%
MEXICO
24%
USA
OIL & GAS
8%
ARGENTINA
23%
USA
8%
OIL & GAS
84%
ARGENTINA
23%
OIL & GAS
84%
OIL
GAS
MISC
OIL
GAS
OIL
GAS
OIL
MISC
GAS
MISC
OIL
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
N
O
I
L
L
I
M
D
S
U
9,000
8,000
7,000
6,000
5,000
2,000
1400
D
S
U
1200
1.0
0.8
1000
0.6
800
0.4
5,147
0.2
600
0
400
-0.2
-0.4
200
-0.6
0
-0.8
2020
S
G
R
I
2500
2000
43
1500
178
604
1000
500
Tenaris
TUBES SALES
PERSONNEL EMPLOYED
NET SALES BY
NET SALES BY
PER COUNTRY
GEOGRAPHIC AREA
BY MARKET
BUSINESS SEGMENT
COLOMBIA
EUROPE
INDUSTRIAL
OTHER
INDONESIA
4%
TUBES
13%
AND OTHER
6%
3%
94%
8%
CANADA
3%
JAPAN
MIDDLE EAST
HYDROCARBON
2%
OTHER
& AFRICA
PROCESSING
6%
24%
AND POWER
OTHER
GENERATION
7%
8%
ROMANIA
8%
TUBES SALES
BY MARKET
PERSONNEL EMPLOYED
NET SALES BY
PER COUNTRY
GEOGRAPHIC AREA
TUBES SALES
27.
PERSONNEL EMPLOYED
BY MARKET
PER COUNTRY
TUBES SALES
BY MARKET
INDUSTRIAL
EUROPE
AND OTHER
13%
8%
ASIA
PACIFIC
6%
INDONESIA
3%
CANADA
3%
ROMANIA
8%
COLOMBIA
HYDROCARBON
4%
MIDDLE EAST
PROCESSING
& AFRICA
AND POWER
24%
GENERATION
8%
ASIA
PACIFIC
6%
JAPAN
2%
OTHER
7%
COLOMBIA
INDUSTRIAL
INDONESIA
4%
AND OTHER
3%
8%
CANADA
3%
JAPAN
HYDROCARBON
2%
PROCESSING
AND POWER
GENERATION
OTHER
7%
8%
INDUSTRIAL
AND OTHER
8%
HYDROCARBON
PROCESSING
AND POWER
GENERATION
8%
ROMANIA
8%
Leading indicators
NET SALES
NET SALES
EARNINGS (LOSSES)
PER SHARE
EARNINGS (LOSSES)
NET SALES BY
NET SALES
PER SHARE
BUSINESS SEGMENT
NET SALES BY
NET SALES BY
EARNINGS (LOSSES)
BUSINESS SEGMENT
GEOGRAPHIC AREA
PER SHARE
NET SALES
PERSONNEL EMPLOYED
NET SALES BY
NET SALES BY
EARNINGS (LOSSES)
GEOGRAPHIC AREA
PER COUNTRY
BUSINESS SEGMENT
PER SHARE
TUBES
94%
OTHER
6%
TUBES
94%
EUROPE
13%
MIDDLE EAST
OTHER
& AFRICA
6%
24%
ASIA
PACIFIC
6%
EUROPE
13%
TUBES
INDONESIA
94%
3%
CANADA
3%
D
S
U
ROMANIA
8%
1.0
COLOMBIA
4%
MIDDLE EAST
& AFRICA
24%
ASIA
PACIFIC
6%
JAPAN
2%
OTHER
7%
7,659
7,294
5,289
4,294
5,147
7,659
0.74
7,294
0.63
0.46
5,147
5,289
0.05
0.74
0.63
7,659
7,294
5,289
5,147
0.05
4,294
0.74
7,294
0.63
7,659
0.46
5,289
0.05
5,147
0.74
0.63
0.46
0.8
0.6
0.4
0.2
0
0.05
2016 2017
2018
2019
2020
2016 2017
2016 2017
2018
2019
2018
2020
2019
2020
2016 2017
2018
2016 2017
2019
2020
2018
2019
2020
2016 2017
2016 2017
2018
-0.54
-0.54
N
O
I
L
L
I
M
D
S
U
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
S
G
I
R
1400
1200
1000
800
600
400
200
0
N
O
I
L
L
I
M
D
S
U
D
S
U
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
1.0
0.8
0.6
0.4
0.2
4,294
0
-0.2
-0.4
-0.6
-0.8
N
O
I
L
L
I
M
D
S
U
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
D
S
U
1.0
0.8
0.6
0.4
0.2
4,294
0
-0.2
-0.4
-0.6
1,000
SOUTH
AMERICA
-0.8
0
15%
RIG COUNT INTERNATIONAL
RIG COUNT INTERNATIONAL
RIG COUNT USA AND CANADA
RIG COUNT USA AND CANADA
LOST TIME ACCIDENTS INDEX
RIG COUNT INTERNATIONAL
NET SALES
53
203
699
32
187
41
196
711
769
31
244
824
43
178
604
S
G
I
R
1400
S
G
I
R
1200
2500
53
2000
203
1500
699
1000
500
1000
800
600
400
200
0
31
244
824
261
960
43
178
604
219
857
32
187
41
196
711
769
269
813
166
471
128
391
N
O
I
L
L
I
M
R
E
P
S
R
U
O
H
/
N
A
M
S
T
N
E
D
I
C
C
A
S
G
I
R
1400
2500
4
1200
53
203
2.4
699
261
960
41
196
711
1.8
219
857
31
244
824
32
187
769
1.1
1.1
128
391
3.5
2.5
3
2
1.5
1
166
0.5
471
0
1000
800
2.3
600
269
400
813
200
0
N
O
I
L
N
L
I
O
M
I
L
S
T
N
E
D
I
C
D
C
S
U
A
L
R
I
E
M
P
S
R
U
O
H
/
N
A
M
4
9,000
3.5
8,000
S
G
I
R
%
1400
20
1200
15
1000
S
G
I
R
2500
7,000
3
43
6,000
2.5
178
604
5,000
2
4,000
1.5
3,000
1
2,000
0.5
1,000
0
0
2000
53
7,659
41
10
800
2.3
5
600
4,294
203
2.4
1500
5,289
699
1000
196
711
1.8
500
166
471
0
400
-5
200
-10
0
N
O
I
L
L
I
M
D
S
U
9,000
8,000
7,000
0.46
6,000
5,000
4,000
3,000
2,000
1,000
0
D
S
U
1.0
0.8
0.6
0.4
0.2
0
-0.2
-0.4
-0.6
-0.8
S
G
I
R
2000
1500
1000
500
OIL
GAS
MISC
OIL
OIL
GAS
GAS
MISC
OIL
OIL
GAS
GAS
MISC
OIL
OIL
GAS
GAS
MISC
OIL
GAS
-0.2
USA
8%
-0.4
ARGENTINA
23%
NORTH
AMERICA
42%
2019
2020
-0.54
SOUTH
AMERICA
15%
-0.6
ITALY
-0.8
11%
2020
2018
2019
BRAZIL
7%
2016 2017
NORTH
AMERICA
42%
MEXICO
24%
-0.54
2018
2019
2020
ITALY
11%
USA
8%
OIL & GAS
84%
ARGENTINA
23%
MEXICO
24%
SOUTH
BRAZIL
AMERICA
7%
15%
OIL & GAS
84%
NORTH
AMERICA
42%
SOUTH
AMERICA
15%
ITALY
11%
BRAZIL
7%
MEXICO
24%
NORTH
AMERICA
42%
USA
8%
ARGENTINA
23%
USA
8%
OIL & GAS
84%
ARGENTINA
23%
OIL & GAS
84%
ITALY
11%
BRAZIL
7%
MEXICO
24%
EBITDA MARGIN
PERSONNEL EMPLOYED
PER COUNTRY
TUBES SALES
BY MARKET
LOST TIME ACCIDENTS INDEX
RETURN ON EQUITY
RIG COUNT INTERNATIONAL
RIG COUNT USA AND CANADA
EBITDA MARGIN
RIG COUNT USA AND CANADA
LOST TIME ACCIDENTS INDEX
RETURN ON EQUITY
EARNINGS (LOSSES)
PER SHARE
RETURN ON EQUITY
LOST TIME ACCIDENTS INDEX
EBITDA MARGIN
NET SALES BY
BUSINESS SEGMENT
EBITDA MARGIN
RETURN ON EQUITY
NET SALES BY
GEOGRAPHIC AREA
N
O
I
L
L
I
M
R
E
P
S
R
U
O
H
N
A
M
/
S
T
N
E
D
C
C
A
I
%
%
D
S
U
20
1.0
0.8
15
0.6
10
0.4
0.2
5
0
0
-0.2
31
244
32
7,294
187
5,147
824
261
960
1.1
769
269
1.1
813
43
178
604
219
857
128
391
-0.4
-5
-0.6
-10
-0.8
S
G
R
I
30
2500
25
2000
20
1500
15
0.05
1000
10
5
500
0
4
3.5
3
0.46
2.5
2
1.5
1
166
0.5
471
0
0.74
0.63
2.3
2.4
261
960
269
813
1.8
219
857
1.1
1.1
128
391
-0.54
TUBES
94%
N
O
I
L
L
I
M
R
E
P
S
R
U
O
H
N
A
M
/
S
T
N
E
D
C
C
A
I
4
3.5
3
2.5
2
1.5
1
0.5
0
%
30
25
20
15
10
5
0
OTHER
6%
EUROPE
13%
%
20
15
10
2.3
5
0
-5
-10
2.4
1.8
1.1
1.1
%
20
15
10
5
0
-5
SOUTH
AMERICA
15%
-10
2020
%
30
25
20
15
10
5
0
MIDDLE EAST
& AFRICA
24%
ASIA
PACIFIC
6%
INDONESIA
3%
CANADA
3%
%
ROMANIA
8%
30
COLOMBIA
4%
JAPAN
2%
OTHER
7%
INDUSTRIAL
AND OTHER
8%
HYDROCARBON
PROCESSING
AND POWER
GENERATION
8%
25
20
15
10
5
0
ARGENTINA
23%
OIL & GAS
84%
BRAZIL
7%
MEXICO
24%
2016 2017 2018 2019 2020
USA
8%
NORTH
AMERICA
2016 2017 2018 2019 2020
42%
ITALY
11%
2016 2017 2018 2019
2020
2016
2017
2018
2019
2020
2016
2017
2016
2018
2017
2019
2018
2020
2019
2020
2016
2017
2016 2017
2018
2016
2018
2019
2017
2019
2020
2018
2020
2019
2020
2016 2017
2016 2017
2016 2017 2018 2019
2020
2018
2020
2019
2019
2017
2019
2018
2016
2018
2018
2017
2016
2020
2019
2020
2020
2016 2017
2019
2016 2017 2018 2019
2016 2017 2018 2019 2020
2016 2017
2018
2019
2017
2016
2018
2020
2018
2020
2020
2019
2020
2016 2017 2018 2019 2020
2019
2016 2017 2018 2019
2020
2016 2017
2018
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
Source: Baker Hughes
RIG COUNT INTERNATIONAL
RIG COUNT USA AND CANADA
LOST TIME ACCIDENTS INDEX
RETURN ON EQUITY
EBITDA MARGIN
OIL
GAS
MISC
OIL
GAS
S
G
I
R
1400
1200
1000
800
600
400
200
0
53
203
699
32
187
41
196
711
769
31
244
824
43
178
604
S
G
R
I
2500
2000
1500
1000
500
261
960
219
857
269
813
166
471
128
391
Source: Baker Hughes
Source: Baker Hughes
N
O
I
L
L
I
M
R
E
P
S
R
U
O
H
N
A
M
/
S
T
N
E
D
C
C
A
I
4
3.5
3
2.5
1.5
0.5
2
1
0
2.3
2.4
1.8
1.1
1.1
%
20
15
10
5
0
-5
-10
%
30
25
20
15
10
5
0
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016 2017
2018
2019
2020
2016 2017 2018 2019
2020
2016 2017 2018 2019 2020
Annual Report
28.
Principal risks
and uncertainties
You should carefully consider the risks and
uncertainties described below, together with all
other information contained in this annual report,
before making any investment decision. Any of
these risks and uncertainties could have a material
adverse effect on our business, revenues, financial
condition and results of operations, which could in
turn affect the price of shares and ADSs.
Risks Relating to Our Industry
Sales and profitability may fall as a result of
downturns in the international price of oil and gas
and other factors and circumstances affecting the
oil and gas industry.
We are a global steel pipe manufacturer with
a strong focus on manufacturing products and
providing related services for the oil and gas
industry. The oil and gas industry is a major
consumer of steel pipe products worldwide,
particularly for products manufactured under high
quality standards and demanding specifications.
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. The
level of exploration, development and production
activities of, and the corresponding capital spending
by, oil and gas companies, including national oil
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. Several factors, such as the supply
and demand for oil and gas, the development and
availability of new drilling technology, political
and global economic conditions, and government
regulations, affect these prices. For example,
drilling technology has allowed producers in the
United States and Canada to increase production
from their reserves of tight oil and shale gas in
response to changes in market conditions more
rapidly than in the past. In addition, government
initiatives to reduce greenhouse gas emissions
could also affect oil and gas prices; for example,
the introduction of a carbon tax, or other measures
to promote the use of renewable energy sources
or, electric vehicles, may result in incremental
production costs and require additional capital
expenditure, or even affect our competitiveness and
results of operations. When the price of oil and
gas falls, oil and gas companies generally reduce
spending on production and exploration activities
and, accordingly, make fewer purchases of steel
pipe products. Major oil-and gas-producing nations
and companies have frequently collaborated to
balance the supply (and thus the price) of oil in
the international markets. A major vehicle for
this collaboration has been the Organization of
Petroleum Exporting Countries (“OPEC”) and
many of our customers are state-owned companies
in member countries of OPEC, which has played
a significant role in trying to counter falling prices
in 2020, when the industry was hit by the effects of
the COVID-19 pandemic. For more information on
the impact of the COVID-19 pandemic and the oil
and gas crisis and OPEC measures, see “Operating
and Financial Review and Prospects – Overview
– The COVID-19 pandemic and the oil & gas
crisis and their impact on Tenaris’s operations and
financial condition” and for more information on
risks relating to climate change regulations, see
“Risks Relating to Our Industry - Climate change
legislation and increasing regulatory requirements
could reduce demand for our products and services
and result in unexpected capital expenditures and
costs, and negatively affect our reputation.”
Tenaris 29.
Climate change legislation and increasing
regulatory requirements could reduce demand for
our products and services and result in unexpected
capital expenditures and costs, and negatively
affect our reputation.
There is an increased attention on greenhouse
gas emissions and climate change from different
sectors of society. The Paris Agreement, adopted
at the 2015 United Nations Climate Conference,
sets out the global framework to limit the rising
temperature of the planet and to strengthen the
countries’ ability to deal with the effects of climate
change. If there is no meaningful progress in
lowering emissions in the years ahead, there is an
increased likelihood of abrupt policy interventions
as governments attempt to meet the goals of the
Paris Agreement (or any successor consensus)
by adopting policy, legal, technology and market
changes in the transition to a low-carbon global
economy. We provide products and services to the
oil and gas industry, which accounts, directly and
indirectly for a significant portion of greenhouse
gas emissions. Existing or future legislation and
regulations related to greenhouse gas emissions
and climate change, as well as government
initiatives to promote the use of alternative energy
sources (with many jurisdictions implementing
tax advantages and other subsidies to promote
the development of renewable energy sources,
or even requiring minimum thresholds for
power generation from renewable sources), may
significantly curtail demand for and production
of fossil fuels, such as oil and natural gas. These
initiatives, together with the growing social
awareness regarding climate change and other
environmental matters, have resulted in increased
investor and consumer demand for renewable
energy and additional compliance requirements
for fossil energy projects, which are likely to
become more stringent over time and to result in
substantial increases in costs for the oil and natural
gas industry. Furthermore, ongoing technological
developments in the renewable energy industry are
making renewable energy increasingly competitive
with fossil-fuels. If this trend continues, energy
demand could shift increasingly towards “cleaner”
sources such as hydroelectrical, solar, wind and
other renewable energies, which would, in turn,
reduce demand for oil and natural gas, thus
negatively affecting demand for our products
and services and, ultimately, our future results of
operations. In addition, adoption of new climate
change legislation in the countries in which Tenaris
operates could result in incremental compliance
costs and unexpected capital expenditures and,
eventually, affect our competitiveness and reduce
our market share. In addition, failure to respond
to shareholders’ demand for climate-related
measures and environmental standards could
harm our reputation, adversely affect the ability
or willingness of our customers or suppliers to do
business with us, erode stakeholder support and
restrict access to financial resources.
Climate change, including extreme weather
conditions, has in the past and may in the future
adversely affect our operations and financial results.
Our business has been, and in the future could
be, affected by severe weather in areas where
we operate, which could materially affect our
operations and financial results. Extreme weather
conditions such as hurricanes or flooding have in
the past resulted in, and may in the future result in,
the shutdown of our facilities, evacuation of our
employees or activity disruptions at our client’s well-
sites or in our supply chain. In addition, impacts of
climate change, such as sea level rise, coastal storm
surge, inland flooding from intense rainfall, freeze,
and hurricane-strength winds may damage our
facilities or disrupt our operations. For example, a
recent severe freeze in the United States and Mexico
Annual Report 30.
caused gas and power shortages in Texas, resulting
in additional costs and production losses. Any
such extreme weather-related events may result in
increased operating costs or decreases in revenue
which could adversely affect our financial condition,
results of operations and cash flows.
The COVID-19 pandemic significantly reduced
demand for our products and services, and could
continue to impact our financial condition, results
of operations and cash flows.
COVID-19 surfaced in China in December 2019
and subsequently spread to the rest of the world
in early 2020. The rapid expansion of the virus,
the surfacing of new strains of the SARS-CoV-2
virus in several countries, and the containment
measures adopted by governmental authorities
triggered a severe fall in global economic activity
and precipitated a serious crisis in the energy
sector. Global oil and gas demand decreased
significantly causing a collapse in prices, an acute
oversupply, a rapid build-up of excess inventories,
and the consequent drop of investments in drilling
activity by our oil and gas customers. We took
prompt action to mitigate the impact of the crisis
and to adapt our operations on a country-by-
country basis to comply with applicable rules
and requirements. We implemented a worldwide
restructuring program and cost-containment
plan aimed at preserving our financial resources
and overall liquidity position and maintaining
the continuity of our operations; we adjusted
production levels at our facilities including through
the temporary closure of certain facilities or
production lines and layoffs in several jurisdictions,
and we reduced capital expenditures and working
capital. In addition, we introduced remote work
and other work arrangements and implemented
special operations protocols in order to safeguard
the health and safety of our employees, customers
and suppliers. Although such measures proved to
be successful to mitigate the impact of the crisis
on us, if the virus continues to spread and new
preventive measures are imposed in the future, our
operations could be further affected and adversely
impact our results. In addition, although oil prices
and demand for oil products started to recover,
there remains considerable uncertainty about
the future duration and extent of the pandemic
with new and more contagious variants of the
COVID-19 virus appearing and vaccination
programs still on their early stages. In this uncertain
environment our results of operations and financial
condition could still be severely affected. For more
information on the impact of the COVID-19
pandemic and measures adopted in connection
therewith, see “Operating and Financial Review
and Prospects – Overview - The COVID-19
pandemic and the oil & gas crisis and their impact
on Tenaris’s operations and financial condition”.
Competition in the global market for steel pipe
products may cause us to lose market share and
hurt our sales and profitability.
The global market for steel pipe products is highly
competitive, with the primary competitive factors
being price, quality, service and technology. In recent
years, substantial investments have been made,
especially in China but also in the United States and
the Middle East, to increase production capacity of
seamless steel pipe products, and as a result there is
significant excess production capacity, particularly
for “commodity” or standard product grades.
Capacity for the production of more specialized
product grades has also increased. At the same time,
the high cost and long lead times required to develop
the most complex projects, particularly deepwater
projects, has led to a slowdown in new developments
in a context of low and more volatile oil prices.
Despite our efforts to develop products and services
Tenaris 31.
that differentiate us from our competitors, reduced
demand for steel pipe products from these complex
projects means that the competitive environment is
expected to remain intense in the coming years and
effective competitive differentiation will be a key
success factor. In addition, there is a risk of unfairly
traded steel pipe imports in markets in which Tenaris
produces and sells its products and, we can give
no assurance with respect to the application of
antidumping duties and tariffs or the effectiveness
of any such measures. On the other hand, because
of the global nature of our operations, we export
and import products from several countries and,
in many jurisdictions, we supplement domestic
production with imported products. Several
jurisdictions have begun to impose or expand local
content requirements. For example, in recent years
Saudi Arabia has implemented various measures
aimed at increasing local content particularly
from suppliers to state-owned companies such as
Saudi Aramco and we can expect that measures
favoring the development of local production will
increase as Saudi Arabia seeks to create employment
opportunities for its citizens and diversify its
economy away from its dependence on oil and gas
production. In addition, in July 2020, Saudi Arabia
increased import duties for the import of seamless
pipe products from 5% to 10% and for the import of
welded pipe products from 5% to 15%. If countries
impose or expand local content requirements or put
in place regulations limiting our ability to import
certain products, our competitive position could
be negatively affected. Therefore, if any of these
risks materialize, we may not continue to compete
effectively against existing or potential producers and
preserve our current shares of geographic or product
markets, and increased competition may have a
material impact on the pricing of our products and
services, which could in turn adversely affect our
revenues, profitability and financial condition.
Increases in the cost of raw materials, energy and
other costs, limitations or disruptions to the supply
of raw materials and energy, and price mismatches
between raw materials and our products may hurt
our profitability.
The manufacture of seamless steel pipe products
requires substantial amounts of steelmaking raw
materials and energy; welded steel pipe products,
in turn, are processed from steel coils and plates.
The availability and pricing of a significant portion
of the raw materials and energy we require are
subject to supply and demand conditions, which
can be volatile, and to tariffs and other government
regulations, which can affect continuity of supply
and prices. In addition, disruptions, restrictions or
limited availability of energy resources in markets
where we have significant operations could lead
to higher costs of production and eventually
to production cutbacks at our facilities in such
markets. For example, we recently suffered gas
and power shortages in Texas caused by a severe
freeze affecting the United States and Mexico,
which resulted in additional costs and production
losses. At any given time, we may be unable to
obtain an adequate supply of critical raw materials
with price and other terms acceptable to us. The
availability and prices of raw materials may also
be negatively affected by new laws and regulations,
including import controls, allocation by suppliers,
interruptions in production, accidents or natural
disasters, changes in exchange rates, worldwide
price fluctuations, and the availability and cost
of transportation. Raw material prices could also
be affected by the introduction of carbon prices
or taxes, or as a result of changes in production
processes, such as an increased use of metal scrap,
adopted by steelmaking companies seeking to
reduce gas emissions. In addition, we may not be
able to recover, partially or fully, increased costs of
raw materials and energy through increased selling
Annual Report 32.
prices for our products, or it may take an extended
period of time to do so, and limited availability
could force us to curtail production, which could
adversely affect our sales and profitability.
Our results of operations and financial conditions
could be adversely affected by low levels of
capacity utilization.
Like other manufacturers of steel-related products,
we have fixed and semi-fixed costs (e.g., labor
and other operating and maintenance costs)
that cannot adjust rapidly to fluctuations in
product demand for several reasons, including
operational constraints and regulatory restrictions.
If demand for our products falls significantly, or
if we are unable to operate due to, for example,
governmental measures or unavailability of
workforce, these costs may adversely affect our
profitability and financial condition. For example,
in response to the abrupt and steep downturn
of the oil and gas industry, resulting from the
oil crisis and the COVID-19 pandemic, we have
been required to implement cost-containment
measures and liquidity preservation initiatives,
including reduction of our operating activities
in several jurisdictions, temporary closure of
facilities in the United States and review of our
capital expenditure plans. Temporary suspensions
of operations or closure of facilities generally
lead to layoffs of employees, as was our case
during the oil crisis and the COVID-19 pandemic,
which may in turn give rise to labor conflicts
and impact operations. In addition, if demand
recovers, we may not be able to reincorporate
qualified workforce soon enough. Moreover, cost
containment measures may also affect profitability
and result in charges for asset impairments.
Risks Relating to Our Business
Adverse economic or political conditions in the
countries where we operate or sell our products
and services may decrease our sales or disrupt our
manufacturing operations, thereby adversely affecting
our revenues, profitability and financial condition.
We have significant operations in various countries,
including Argentina, Brazil, Canada, China,
Colombia, Indonesia, Italy, Japan, Mexico,
Nigeria, Romania, Saudi Arabia and the United
States, and we sell our products and services
throughout the world. Additionally, in Russia
we have formed a joint venture with Severstal
to build a welded pipe plant, the construction
of which is currently on hold. 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, social and
public health developments and changes in laws
and regulations. These developments and changes
may include, among others, nationalization,
expropriation or forced divestiture of assets;
restrictions on production, imports and exports;
travel, transportation or trade bans; 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 armed conflicts (particularly in the
Middle East and Africa); 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
(including retroactive) in the interpretation,
application or enforcement of tax laws and other
Tenaris 33.
claims or challenges; cancellation of contract
or property rights; and delays or denials of
governmental approvals. Both the likelihood of
such occurrences and their overall impact upon us
vary greatly from country to country and are not
predictable. Realization of these risks could have
an adverse impact on the results of operations and
financial condition of our subsidiaries located
in the affected country and, depending on their
materiality, on the results of operations and
financial condition of Tenaris as a whole.
Argentina and Mexico are countries in which we have
significant operations. Our business and operations
in Argentina, may be materially and adversely
affected by economic, political, social, fiscal and
regulatory developments, including the following:
•
•
Macroeconomic and political conditions in
Argentina may adversely affect our business and
operations. Increased state intervention in the
economy, along with the introduction of changes
to government policies, could have an adverse
effect on our operations and financial results.
Similarly, they could also negatively impact the
business and operations of our customers -oil
and gas companies operating in Argentina- and
consequently our revenues and profitability.
Our business and operations in Argentina may be
adversely affected by inflation or by the measures
that may be adopted by the government to address
inflation. In particular, increases in services and
labor costs could negatively affect our results
of operations. In addition, an increased level of
labor demands in response to spiraling inflation
could trigger higher levels of labor conflicts, and
eventually result in strikes or work stoppages. Any
such disruption of operations could have an adverse
effect on our operations and financial results.
•
•
Other events that may have an adverse effect on our
operations and financial results include increased
taxes, exchange controls, restrictions on capital
flows and export and import taxes or restrictions.
The Argentine Central Bank has tightened its
control on transactions that would represent capital
inflows or outflows, forcing Argentine companies
to repatriate export proceeds and limiting their
ability to transfer funds outside of Argentina.
Argentine companies are required to repatriate
export proceeds from sales of goods and services
(including U.S. dollars obtained through advance
payment and pre-financing facilities) and convert
such proceeds into Argentine pesos at the official
exchange rate. In turn, Argentine companies must
obtain prior Central Bank authorization to access
the foreign exchange market to pay for imports of
services from related parties or to make dividend
or royalty payments. Although there are currently
no material restrictions to make payments for
imports of goods, this may change in the future.
These existing controls, and any additional foreign
exchange restrictions that may be imposed in the
future, could expose us to the risk of losses arising
from fluctuations in the ARS/USD exchange rate
or affect our ability to finance our investments
and operations in Argentina, or impair our ability
to convert and transfer outside the country funds
generated by Argentine subsidiaries to pay dividends
or royalties or make other offshore payments.
In recent years, our operations in Argentina
experienced constraints in their electricity
and natural gas supply requirements on many
occasions. Shortages of energy and natural gas
in Argentina have led in the past (and could lead
in the future) to production cutbacks negatively
affecting our revenues and profitability; we could
also face increased costs when using alternative
sources of energy.
Annual Report 34.
•
•
•
In Mexico, our business could be materially
and adversely affected by economic, political,
social, fiscal and regulatory developments,
including the following:
The Mexican government exercises significant
influence over the Mexican economy and,
therefore, governmental actions concerning the
economy and state-owned enterprises could have a
significant impact on Mexico’s private sector and
on our Mexican-related operations. In addition,
changes of the United States-Mexico-Canada
Agreement (“USMCA”) from its predecessor
NAFTA Agreement, could adversely affect the
investment climate and economic activity in
Mexico, Canada and/or in the United States and
impact our results of operations and net results.
We have a growing credit exposure to Petróleos
Mexicanos S.A. de C.V. (“Pemex”), a Mexican
state-owned entity and our main customer in
Mexico. Starting in 2019 and through 2020, we
have been building a hefty balance of accounts
receivable with Pemex, which decreased slightly
in 2020, as a result of our continuous collection
efforts during the year and reduced sales.
In February 2021, the Mexican government
announced its intention to grant Pemex a
significant tax break aimed at reordering the
company’s finances. However, if we are not able
to further reduce our exposure to Pemex and
Pemex defaults on its payments, our revenues and
profitability would be adversely affected.
Our Mexican operations could also be affected by
criminal violence, primarily due to the activities
of drug cartels and related organized crime that
Mexico has experienced and may continue to
experience. The city of Veracruz, where our facility
is located, has experienced several incidents of
violence. Although the Mexican government has
implemented various security measures and has
•
•
strengthened its military and police forces,
drug-related crime continues to exist in Mexico.
Our business may be materially and adversely
affected by these activities, their possible escalation
and the violence associated with them.
In March 2021, the Mexican Congress approved a
significant reform to the energy market in Mexico.
Among other changes, the new Energy Industry
Law (“LIE”) grants priority to Mexico’s state-
owned electric power generation and distribution
company (“CFE”) over its competitors in the
supply of electric power to the Mexican market
and mandates a revision of power generation
and transaction agreements between the Federal
government and independent electric power
suppliers. In addition, the LIE eliminates
mandatory power supply auctions for energy
supplies requiring the use of CFE’s distribution
network. The new LIE, which remains subject
to implementing regulations by the competent
authorities has already been challenged in court
by affected players. There is uncertainty about
the final outcome of court review and the energy
reform could negatively affect the operations of
Techgen, the power plant in which Tenaris holds a
22% equity interest and which supplies electricity
for most of our Mexican operations. At this stage,
we cannot fully assess the effects of the energy
market reform on our operations and the Mexican
economy in general and, consequently, on the
results of operations and financial conditions of
our businesses in Mexico.
In past years, our operations in Mexico experienced
several days of union-led stoppages due to an
internal dispute within the local union. In 2020
our Mexican operations did not experience any
disruptions due to these stoppages, but we cannot
assure that such events will not cause further
disruptions in the near future.
Tenaris 35.
If we do not successfully implement our business
strategy, our ability to grow, our competitive
position and our sales and profitability may suffer.
We plan to continue implementing our business
strategy of developing integrated product and
service solutions designed to differentiate our
offerings from those of our competitors and meet
the needs of our customers for lower operational
costs and reliable performance even in the most
demanding environments, as well as continuing
to pursue strategic investment opportunities.
Any of the components of our overall business
strategy could cost more than anticipated, may
not be successfully implemented or could be
delayed or abandoned. For example, we may
fail to create sufficient differentiation in our Rig
Direct® services to compensate the added costs
of providing such services, or fail to find suitable
investment opportunities, including acquisition
targets that enable us to continue to grow and
improve our competitive position. Even if we
successfully implement our business strategy, it
may not yield the expected results. In 2020, JFE,
our partner in NKKTubes, informed Tenaris of
its decision to cease the operations of certain
facilities located at the Keihin complex in 2024,
which may result in the unavailability of steel
bars and other essential inputs or services used
in NKKTubes’ manufacturing process, thereby
affecting its operations. Although the parties will
seek a mutually acceptable solution, we cannot
predict the outcome of such discussions and the
implications to NKKTubes’ operations and results.
We could be subject to regulatory risks associated
with our international operations.
The shipment of goods and services across
international borders subjects us to extensive
trade laws and regulations. Our import and
export activities are governed by customs laws
and regulations in each of the countries where
we operate. Moreover, the European Union,
the United States and other countries control
the import and export of certain goods and
services and impose related import and export
recordkeeping and reporting obligations. Those
governments have also imposed economic
sanctions against certain countries, persons and
other entities, such as sanctions involving sales
to Iran, Syria, Venezuela, and Russia that restrict
or prohibit transactions involving such countries,
persons and entities. Similarly, we are subject to the
U.S. anti-boycott laws. These laws and regulations
are complex and frequently changing, and they
may be enacted, amended, enforced or interpreted
in a manner that could materially impact our
operations. For example, in March 2018, under
Section 232 of the Trade Expansion Act of 1962
(“Section 232”), the United States imposed a 25%
tariff on steel articles imported from all countries,
with the exemption of Canada and Mexico, as
member states of the USMCA, and imports of
steel tubes from Australia, Argentina, Brazil and
South Korea (the latter three with specific quotas
per product). The U.S. government has also
granted three successive exemptions on imports
from Italy, Mexico, Romania and Argentina, of
steel billets to be used at our Bay City mill, for
an aggregate amount of 1,250,000 tons. The
current exemption covers 405,000 tons from Italy
and Romania and is valid until August 2021.
Exemptions are granted only for a one-year term
and future requests might not be granted, thus
adversely affecting our operations or revenues.
Additionally, countries could impose or expand
local content requirements or regulations which
could limit our capacity to compete effectively,
Annual Report 36.
increase our costs and reduce our profitability. For
further information, see “Risks Relating to our
Industry – Competition in the global market for
steel pipe products may cause us to lose market
share and hurt our sales and profitability.” In
addition, failure to comply with applicable trade
regulations could also result in criminal and civil
penalties and sanctions.
Changes in applicable tax regulations and
resolutions of tax disputes could negatively affect
our financial results.
We are subject to tax laws in numerous foreign
jurisdictions where we operate. The integrated
nature of our worldwide operations can produce
conflicting claims from revenue authorities in
different countries as to the profits to be taxed in
the individual countries, including disputes relating
to transfer pricing. Most of the jurisdictions in
which we operate have double tax treaties with
foreign jurisdictions, which provide a framework
for mitigating the impact of double taxation on
our results. However, mechanisms developed to
resolve such conflicting claims are largely untried
and can be expected to be very lengthy. In recent
years, tax authorities around the world have
increased their scrutiny of company tax filings
and have become more rigid in exercising any
discretion they may have. As part of this, the
Organization for Economic Co-operation and
Development (“OECD”) has proposed a number
of tax law changes under its Base Erosion and
Profit Shifting (“BEPS”) Action Plans to address
issues of transparency, coherence and substance.
At the EU level, the European Commission
has adopted its Anti Tax Avoidance Directive
(“ATAD”), which seeks to prevent tax avoidance
by companies and to ensure that companies pay
appropriate taxes in the markets where profits
are effectively made and business is effectively
performed. Changes to tax laws and regulations
in the countries where we operate require us to
continually assess our organizational structure and
could lead to increased risk of international tax
disputes. Our interpretation and application of
the tax laws could differ from that of the relevant
governmental taxing authority, which could result
in the payment of additional taxes, penalties or
interest, negatively affecting our profitability and
financial condition.
Future acquisitions, strategic partnerships and
capital investments may not perform in accordance
with expectations or may disrupt our operations
and hurt our profits.
One element of our business strategy is to
identify and pursue growth-enhancing strategic
opportunities. As part of that strategy, we regularly
make significant capital investments and acquire
interests in, or businesses of, various companies.
For example, in January 2020, we acquired IPSCO,
a U.S. producer of seamless and welded OCTG
and line pipe products, for $1.0 billion. Consistent
with our growth strategy, we intend to continue
considering strategic acquisitions, investments
and partnerships from time to time to expand our
operations and establish a local presence in our
markets. We must necessarily base any assessment
of potential acquisitions, joint ventures and capital
investments on assumptions with respect to timing,
profitability, market and customer behavior and
other matters that may subsequently prove to be
incorrect. For example, we negotiated the terms
for the acquisition of IPSCO in early 2019 based
on assumptions made at that time, but due to the
length of the antitrust review process, we were
able to complete the acquisition only in 2020
under materially worse market circumstances.
Tenaris 37.
For more information on IPSCO’s acquisition see
note 32 “Business combinations – Acquisition of
IPSCO Tubulars, Inc.” and for information on
impairment charges on our U.S. operations see
note 5 “Impairment charge” both to our audited
consolidated financial statements included in this
annual report. Our past or future acquisitions,
significant investments and alliances may not
perform in accordance with our expectations
and could adversely affect our operations and
profitability. In addition, new demands on our
existing organization and personnel resulting
from the integration of new acquisitions could
disrupt our operations and adversely affect our
operations and profitability. Moreover, as part of
future acquisitions, we may acquire assets that
are unrelated to our business, and we may not be
able to integrate these assets or sell them under
favorable terms and conditions.
Disruptions to our manufacturing processes could
adversely affect our operations, customer service
levels and financial results.
Our steel pipe manufacturing processes depend on
the operation of critical steelmaking equipment, such
as electric arc furnaces, continuous casters, rolling
mills, heat treatment and various operations that
support them, such as our power generation facilities.
Despite the investments we make to maintain critical
production equipment, such equipment may incur
downtime as a result of unanticipated failures
or other events, such as fires, explosions, floods,
accidents and severe weather conditions.
Similarly, natural disasters or severe weather
conditions, including those related to climate
change could significantly damage our production
facilities and general infrastructure or affect the
normal course of business. For example, our
Mexican production facility located in Veracruz
is located in a region prone to earthquakes, and our
Bay City facility in Texas, United States is located in
an area prone to strong winds and hurricanes, and
occasional floods. More generally, changing weather
patterns and climatic conditions in recent years
have added to the unpredictability and frequency of
natural disasters. For more information on the risks
associated with climate-change, see “Risks Relating
to Our Business – Climate change, including
extreme weather conditions, has in the past and
may in the future adversely affect our operations
and financial results”.
Our operations may also be adversely affected
as a result of work stoppages or other labor
conflicts. In past years, our operations in Mexico
experienced several days of union-led stoppages
due to an internal dispute within the local union.
Although in 2020 our Mexican operations did not
experience any disruptions due to these stoppages,
we cannot assure that such events will not cause
further disruptions in the near future. In addition, in
some of the countries in which we have significant
production facilities (e.g., Argentina and Brazil),
significant inflationary pressures and higher
tax burdens, increase labor demands and could
eventually generate higher levels of labor conflicts,
which could also trigger operational disruptions.
In addition, some of our facilities or production
lines have been closed or shutdown as a result of
the cost containment measures adopted to respond
to the recent economic crisis or in response to
governmental regulations to prevent the effects
of the COVID-19 pandemic or due to the
unavailability of workforce. For more information
on the status of our operations see “Operating
and Financial Review and Prospects – Overview –
The COVID-19 pandemic and the oil & gas crisis
and their impact on Tenaris’s operations and
financial condition.”
Annual Report 38.
Some of the previously described emergency
situations could result in damage to property, delays
in production or shipments and, in extreme cases,
death or injury to persons. Any of the foregoing
could create liability for Tenaris. To the extent that
lost production or delays in shipments cannot be
compensated for by unaffected facilities, such events
could have an adverse effect on our profitability and
financial condition. Additionally, we do not carry
business interruption insurance, and the insurance
we maintain for property damage and general
liability may not be adequate or available to protect
us under such events, its coverage may be limited, or
the amount of our insurance may be less than the
related loss. For more information on our insurance
coverage see. “Information on Tenaris – B. Business
overview – Insurance”.
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.
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.
On December 31, 2020, we had $1,086 million
in goodwill corresponding mainly ($920 million)
to the acquisition of Hydril in 2007. In addition,
we recognized goodwill for approximately $357
million in connection with our acquisition of
IPSCO. As a result of the severe deterioration of
business conditions and in light of the presence
of impairment indicators for its U.S. operations,
Tenaris recorded impairment charges as of
March 31, 2020, for an aggregate amount of
approximately $622 million. For more information
on impairment charges on our U.S. operations
see note 5 “Impairment charge” to our audited
consolidated financial statements included in this
annual report.
Our results of operations and financial condition
could be adversely affected by movements in
exchange rates.
As a global company we manufacture and sell
products in a number of countries throughout the
world and a portion of our business is carried out
in currencies other than the U.S. dollar, which is the
Company’s functional and presentation currency.
As a result, we are exposed to foreign exchange
rate risk. Changes in currency values and foreign
exchange regulations could adversely affect our
financial condition and results of operations. For
information on our foreign exchange rate risk,
please see “Quantitative and Qualitative Disclosure
About Market Risk – Foreign Exchange Rate Risk”.
If we do not comply with laws and regulations
designed to combat corruption in countries in
which we sell our products, we could become
subject to governmental investigations, fines,
penalties or other sanctions and to private lawsuits
and our sales and profitability could suffer.
We operate globally and conduct business in
certain countries known to experience high levels
of 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,
Tenaris 39.
representatives, affiliates, or other persons may
take actions that violate applicable laws and
regulations that generally prohibit the making
of improper payments, including 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 (“FCPA”). Investigations by
government authorities may occupy considerable
management time and attention and result in
significant expenditures, fines, penalties or
other sanctions, as well as private lawsuits. For
information on matters related to an ongoing
investigation in connection with certain allegedly
improper payments in Brazil, please refer to
“Outstanding Legal Proceedings”.
The cost of complying with environmental
regulations and potential environmental and
product liabilities may increase our operating
costs and negatively impact our business, financial
condition, results of operations and prospects.
We are subject to a wide range of local, state,
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. Additionally, international environmental
requirements vary. While standards in the
European Union, Canada, and Japan are generally
comparable to U.S. standards, other nations,
particularly developing nations, including
China, have substantially fewer or less rigorous
requirements that may give competitors in such
nations a competitive advantage. It is possible that
any international agreement to regulate emissions
may provide exemptions and lesser standards for
developing nations. In such case, we may be at a
competitive disadvantage relative to competitors
having more or all of their production in such
developing nations.
Environmental laws and regulations may, in some
cases, impose strict liability rendering a person
liable for damages to natural resources or threats
to public health and safety without regard to
negligence or fault. Some environmental laws
provide for joint and several strict liability for
remediation of spills and releases of hazardous
substances. These laws and regulations may
expose us to liability for the conduct of or
conditions caused by others or for acts that were
in compliance with all applicable laws at the time
they were performed.
Compliance with applicable requirements and
the adoption of new requirements could have
a material adverse effect on our consolidated
financial condition, results of operations or cash
flows. The costs and ultimate impact of complying
with environmental laws and regulations are
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 as
a result of potential violations of environmental
laws could have a material adverse effect on our
financial condition and profitability. While we
incur and will continue to incur expenditures to
Annual Report 40.
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.
for the automotive industry subject us to potential
product liability risks that could extend to being
held liable for the costs of the recall of automobiles
sold by car manufacturers and their distributors.
Our oil and gas casing, tubing and line pipe
products are sold primarily for use in oil and gas
drilling, gathering, transportation, processing
and power generation facilities, which are subject
to inherent risks, 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.
Any of these hazards and risks can result in
environmental liabilities, personal injury claims and
property damage from the release of hydrocarbons.
Defects in specialty tubing products could result
in death, personal injury, property damage,
environmental pollution, damage to equipment
and facilities or loss of production.
We normally warrant the oilfield products and
specialty tubing products we sell or distribute in
accordance with customer specifications, but as we
pursue our business strategy of providing customers
with additional services, such as Rig Direct®, we
may be required to warrant that the goods we sell
and services we provide are fit for their intended
purpose. Actual or claimed defects in our products
may give rise to claims against us for losses suffered
by our customers and expose us to claims for
damages. The insurance we maintain will not be
available in cases of gross negligence or willful
misconduct, in other cases may not be adequate
or available to protect us in the event of a claim,
its coverage may be limited, canceled or otherwise
terminated, or the amount of our insurance may be
less than the related impact on enterprise value after
a loss. Similarly, our sales of tubes and components
Limitations on our ability to protect our
intellectual property rights, including our trade
secrets, could cause a loss in revenue and any
competitive advantage we hold.
Some of our products or services, and the processes
we use to produce or provide them, have been granted
patent protection, have patent applications pending,
or are trade secrets. Our business may be adversely
affected if our patents are unenforceable, the claims
allowed under our patents are not sufficient to protect
our technology, our patent applications are denied or
our trade secrets are not adequately protected. Our
competitors may be able to independently develop
technology that is similar to ours without infringing
on our patents or gaining access to our trade secrets,
which could adversely affect our financial condition,
results of operations and cash flows.
Cyberattacks could have a material adverse impact
on our business and results of operation.
We rely heavily on information systems to conduct
our business. Although we devote significant
resources to protect our systems and data, we
have experienced and will continue to experience
varying degrees of cyber incidents in the normal
conduct of our business, which may occasionally
include sophisticated cybersecurity threats such
as unauthorized access to data and systems,
loss or destruction of data, computer viruses or
other malicious code, phishing, spoofing and/
or cyberattacks. These threats often arise from
numerous sources, not all of which are within
our control, such as fraud or malice from third
Tenaris 41.
parties, including fraud involving business email
compromises, failures of computer servers or
other accidental technological failures, electrical
or telecommunication outages or other damage to
our property or assets. Cyber-attack attempts, such
as ransomware, phishing, spoofing and whaling,
increased in 2020 in the context of the COVID-19
pandemic, primarily due to a significant expansion
of remote work practices among our employees,
customers and suppliers. For example, in 2020, we
suffered four spoofing attempts with no impact
on results. In this context, we deployed additional
controls to upgrade monitoring, detection and
response capabilities against hacking, malware
infection, cybersecurity compromise and other
risks. Given the rapidly evolving nature of cyber
threats, there can be no assurance that the systems
we have designed to prevent or limit the effects of
cyber incidents or attacks will be adequate, and
such incidents or attacks could have a material
adverse impact on our systems. While we attempt
to mitigate these risks, we remain vulnerable to
additional known or unknown threats, including
theft, misplacement or loss of data, programming
errors, employee errors and/or dishonest behavior
that could potentially lead to the compromising
of sensitive information, improper use of our
systems or networks, as well as unauthorized
access, use, disclosure, modification or destruction
of such information, systems and/or networks. If
our systems for protecting against cybersecurity
risks are circumvented or breached, this could also
result in disruptions to our business operations
(including but not limited to, defective products
or production downtimes), access to our financial
reporting systems, the loss of access to critical
data or systems, misuse or corruption of critical
data and proprietary information (including our
intellectual property and customer data), as well as
damage to our reputation with our customers and
the market, failure to meet customer requirements,
customer dissatisfaction and/or other financial costs
and losses. In addition, given that cybersecurity
threats continue to evolve, we will be required to
devote additional resources in the future to enhance
our protective measures or to investigate and/
or remediate any cybersecurity vulnerabilities.
Moreover, any investigation of a cyberattack
would take time before completion, during which
we would not necessarily know the extent of the
actual or potential harm or how best to remediate
it, and certain errors or actions could be repeated or
compounded before duly discovered and remediated
(all or any of which could further increase the costs
and consequences arising out of such cyberattack).
Risks Relating to the Structure of the Company
The Company’s dividend payments depend on
the results of operations and financial condition
of its subsidiaries and could be affected by legal,
contractual or other limitations or tax changes.
The Company is a holding company and conducts
all its operations through subsidiaries. Dividends
or other intercompany transfers of funds from
those subsidiaries are the Company’s primary
source of funds to pay its expenses, debt service
and dividends and to repurchase shares or ADSs.
The ability of the Company’s subsidiaries to pay
dividends and make other payments to us will
depend on their results of operations and financial
condition and could be restricted by applicable
corporate and other laws and regulations,
including those imposing foreign exchange
controls or restrictions on the repatriation of
capital or the making of dividend payments, and
agreements and commitments of such subsidiaries.
If earnings and cash flows of the Company’s
operating subsidiaries are substantially reduced,
including as a result of deteriorating market
conditions, the Company may not be in a position
Annual Report 42.
to meet its operational needs or to pay dividends.
For information concerning potential restrictions
on our ability to collect dividends from certain
subsidiaries, see “Risks Relating to Our Business
– Adverse economic or political conditions in the
countries where we operate or sell our products
and services may decrease our sales or disrupt
our manufacturing operations, thereby adversely
affecting our revenues, profitability and financial
condition”, and “Recent Developments – Annual
Dividend Proposal”.
The Company’s ability to pay dividends to
shareholders is subject to legal and other
requirements and restrictions in effect at the
holding company level. For example, the Company
may only pay dividends out of net profits, retained
earnings and distributable reserves and premiums,
each as defined and calculated in accordance with
Luxembourg law and regulations.
The Company’s controlling shareholder may be
able to take actions that do not reflect the will or
best interests of other shareholders.
As of the date of this annual report, San Faustin
beneficially owned 60.45% of our outstanding
voting shares. Rocca & Partners Stichting
Administratiekantoor Aandelen San Faustin (“RP
STAK”), holds voting rights in San Faustin sufficient
to control San Faustin. As a result, RP STAK is
indirectly able to elect a substantial majority of the
members of the Company’s board of directors and
has the power to determine the outcome of most
actions requiring shareholder approval, including,
subject to the requirements of Luxembourg law,
the payment of dividends. The decisions of the
controlling shareholder may not reflect the will or
best interest of other shareholders. In addition,
the Company’s articles of association permit the
Company’s board of directors to waive, limit
or suppress preemptive rights in certain cases.
Accordingly, the Company’s controlling shareholder
may cause its board of directors to approve in
certain cases an issuance of shares for consideration
without preemptive rights, thereby diluting the
minority interest in the Company. See “Risks
Relating to shares and ADSs – Holders of shares
and ADSs in the United States may not be able to
exercise preemptive rights in certain cases”.
Risks Relating to shares and ADSs
Holders of shares or ADSs may not have access to
as much information about us as they would in the
case of a domestic issuer.
There may be less publicly available information
about us than is regularly published by or about
U.S. domestic issuers. Also, corporate and securities
regulations governing Luxembourg companies
may not be as extensive as those in effect in other
jurisdictions and U.S. securities regulations applicable
to foreign private issuers, such as the Company, differ
in certain respects from those applicable to U.S.
domestic issuers. Furthermore, IFRS, the accounting
standards in accordance with which we prepare our
consolidated financial statements, differ in certain
material aspects from local GAAP.
Holders of ADSs may not be able to exercise, or
may encounter difficulties in the exercise of, certain
rights afforded to shareholders.
Certain shareholders’ rights under Luxembourg
law, including the rights to participate and vote
at general meetings of shareholders, to include
items on the agenda for the general meetings of
shareholders, to receive dividends and distributions,
to bring actions, to examine our books and
records and to exercise appraisal rights may not
be available to holders of ADSs, or may be subject
to restrictions and special procedures for their
Tenaris 43.
exercise, as holders of ADSs only have those
rights that are expressly granted to them in the
deposit agreement. Deutsche Bank Trust Company
Americas, as depositary under the ADS deposit
agreement, or the Depositary, through its custodian
agent, is the registered shareholder of the deposited
shares underlying the ADSs, and therefore only the
Depositary can exercise the shareholders’ rights in
connection with the deposited shares. For example,
if we make a distribution in the form of securities,
the Depositary is allowed, at its discretion, to sell
the right to acquire those securities on your behalf
and instead distribute the net proceeds to you. Also,
under certain circumstances, such as our failure to
provide the Depositary with properly completed
voting instructions on a timely basis, you may not
be able to vote at general meetings of shareholders
by giving instructions to the Depositary. If the
Depositary does not receive voting instructions
from the holder of ADSs by the prescribed deadline,
or the instructions are not in proper form, then
the Depositary shall deem such holder of ADSs
to have instructed the Depositary to vote the
underlying shares represented by ADSs in favor of
any proposals or recommendations of the Company
(including any recommendation by the Company
to vote such underlying shares on any given issue in
accordance with the majority shareholder vote on
that issue), for which purposes the Depositary shall
issue a proxy to a person appointed by the Company
to vote such underlying shares represented by ADSs
in favor of any proposals or recommendations of
the Company. Under the ADS deposit agreement,
no instruction shall be deemed given and no proxy
shall be given with respect to any matter as to which
the Company informs the Depositary that (i) it does
not wish such proxy given, (ii) it has knowledge that
substantial opposition exists with respect to the
action to be taken at the meeting, or (iii) the matter
materially and adversely affects the rights of the
holders of ADSs.
Holders of shares and ADSs in the United States
may not be able to exercise preemptive rights in
certain cases.
Pursuant to Luxembourg corporate law, existing
shareholders of the Company are generally entitled
to preferential subscription rights (preemptive
rights) in the event of capital increases and issues
of shares against cash contributions. Under the
Company’s articles of association, the board of
directors has been authorized to waive, limit or
suppress such preemptive subscription rights.
Notwithstanding the waiver of any preemptive
subscription rights, any issuance of shares for cash
within the limits of the authorized share capital
shall be subject to the preemptive subscription rights
of existing shareholders, except (i) 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; and (ii) 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 (or, 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).
Holders of ADSs in the United States may, in
any event, not be able to exercise any preemptive
rights, if granted, for shares underlying their ADSs
unless additional shares and ADSs are registered
under the U.S. Securities Act of 1933, as amended
(“Securities Act”), with respect to those rights, or
Annual Report 44.
an exemption from the registration requirements
of the Securities Act is available. We intend to
evaluate, at the time of any rights offering, the
costs and potential liabilities associated with
the exercise by holders of shares and ADSs of
the preemptive rights for shares, and any other
factors we consider appropriate at the time, and
then to make a decision as to whether to register
additional shares. We may decide not to register
any additional shares, requiring a sale by the
Depositary of the holders’ rights and a distribution
of the proceeds thereof. Should the Depositary
not be permitted or otherwise be unable to sell
preemptive rights, the rights may be allowed to
lapse with no consideration to be received by the
holders of the ADSs.
It may be difficult to enforce judgments against us
outside Luxembourg.
The Company is a société anonyme organized
under the laws of Luxembourg, and most of
its assets are located in other jurisdictions.
Furthermore, most of the Company’s directors
and officers named in this annual report reside in
different jurisdictions. As a result, investors may
not be able to effect service of process upon us
or our directors or officers. Investors may also
not be able to enforce against us or our directors
or officers in the investors’ domestic courts,
judgments predicated upon the civil liability
provisions of the domestic laws of the investors’
home countries. Likewise, it may be difficult for
investors not domiciled in Luxembourg to bring an
original action in a Luxembourg court predicated
upon the civil liability provisions of other securities
laws, including U.S. federal securities laws, against
the Company, its directors and officers. There is
also uncertainty with regard to the enforceability
of original actions of civil liabilities predicated
upon the civil liability provisions of securities
laws, including U.S. federal securities laws, outside
the jurisdiction where such judgments have been
rendered; and enforceability will be subject to
compliance with procedural requirements under
applicable local law, including the condition that
the judgment does not violate the public policy
of the applicable jurisdiction.
Tenaris 45.
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 in accordance with IFRS
as adopted by the European Union.
Certain information contained in this discussion
and analysis and presented elsewhere in this annual
report, including information with respect to
our plans and strategy for our business, includes
forward-looking statements that involve risks
and uncertainties. See “Cautionary Statement
Concerning Forward-Looking Statements”. In
evaluating this discussion and analysis, you should
specifically consider the various risk factors
identified in “Principal Risks and Uncertainties”,
other risk factors identified elsewhere in this
annual report and other factors that could cause
results to differ materially from those expressed
in such forward-looking statements.
Overview
We are a leading global manufacturer and supplier
of steel pipe products and related services for the
energy industry and other industries.
We are a leading global manufacturer and supplier
of steel pipe products and related services for
the world’s energy industry as well as for other
industrial applications. Our customers include
many of the world’s leading oil and gas companies,
engineering companies engaged in constructing
oil and gas gathering and processing and power
facilities, and industrial companies operating in
a range of industries. 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 Tubes 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, before
recovering to around $80 per barrel in the third
quarter of 2018, but subsequently fell 40% in
the fourth quarter of 2018 before recovering in
2019. Prices fell again to historically low levels
in the wake of the COVID-19 pandemic and the
accompanying collapse in global oil consumption,
but began to recover in the fourth quarter of
2020. North American natural gas prices (Henry
Hub), which were around $4 per million BTU in
2014, also briefly fell below $2 per million BTU
at the beginning of 2016, before recovering to
average levels of $3 per million BTU, again falling
back below $2 per million BTU in 2019 and are
currently closer to $3 per million BTU.
In 2020, worldwide drilling activity, as represented
in the number of active drilling rigs published
Annual Report 46.
by Baker Hughes, reflecting the collapse in oil
consumption and prices in the wake of the
COVID-19 pandemic, decreased 38% compared to
the level of 2019. In the United States, the rig count
in 2020 decreased by 54%, with an average of 433
active rigs, falling to a record low below 250 rigs
in July and ending the year on a rising trend with
more than 350 active rigs. In Canada, the rig count
in 2020 declined by 33% compared to 2019, while
in the rest of the world, it fell 25%, falling more
gradually through the year.
Prior to the 2014 downturn in oil prices, a growing
proportion of exploration and production spending
by oil and gas companies had 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. The success,
however, of shale drilling operators, with their
inherently short investment cycles, in adapting to
lower oil and gas costs and increasing production,
and the increasing share of oil produced in shale
plays as a proportion of global supply, has led to a
slowdown in new developments of complex offshore
projects with long investment lead times in a context
of low and more volatile oil prices, consequently
affecting the level of product differentiation.
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. Over the past decade, substantial
investments have been made, especially in China
but also in other regions around the world, to
increase production capacity of seamless steel pipe
products. Production capacity for more specialized
product grades has also increased. With the
downturn between 2014 and 2016 in the price of oil
and demand for tubes for oil and gas drilling, the
overcapacity in steel pipe and seamless steel pipe
production worldwide became acute, extending
beyond commodity grades. This situation has
been accentuated by the more recent COVID-19
induced collapse in demand and the prospect of
an accelerated energy transition. The competitive
environment is, as a result, intense, and we expect
that this can only continue without substantial
capacity reductions. Effective competitive
differentiation will be a key factor for Tenaris.
In addition, there is an increased risk of unfairly
traded steel pipe imports in markets in which we
produce and sell our products. In September 2014,
the United States imposed anti-dumping duties on
OCTG imports from various countries, including
South Korea. Despite the duties imposed, imports
from South Korea continued at a very high level.
As a result, U.S. domestic producers have requested
successive reviews of South Korea’s exports, which
are ongoing. At the same time South Korean
producers have appealed the duties imposed.
Similarly, in Canada, the Canada Border Services
Agency introduced anti-dumping duties on OCTG
imports from South Korea and other countries in
April 2015.
During 2018, in addition to anti-dumping duties,
the U.S. government introduced tariffs and quotas
pursuant Section 232 on the imports of steel
products, including steel pipes, with the objective
of strengthening domestic production capacity
utilization and investment. Quotas were imposed
on the imports of steel products from South Korea,
Brazil and Argentina, while 25% tariffs were
imposed on imports from most other countries,
Tenaris 47.
except Australia. The proportion of the OCTG
market supplied by imports has declined from
around 60% prior to the imposition of tariffs
and quotas to around 40% at the end of 2020.
This included, as a direct result of the fixed quota
imposed on the imports of steel pipes from South
Korea, that South Korean imports halved in 2019
compared to prior levels, but they have continued
through 2020, despite the collapse in demand.
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, 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 plates 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 decreased during 2019. As a
reference, prices for hot rolled coils, HRC Midwest
USA Mill, published by CRU, averaged $632 per
metric ton in 2020 and $670 per metric ton in 2019.
However, prices increased sharply in the last months
of 2020, reaching $931 per metric ton in December,
$1,278 per metric ton in February and continue to
increase as of the date of this annual report.
The COVID-19 pandemic and the oil & gas crisis
and their impact on Tenaris’s operations and
financial condition
A novel strain of coronavirus (“SARS-CoV-2”)
surfaced in China in December 2019 and
subsequently spread to the rest of the world in
early 2020. In March 2020, the World Health
Organization declared COVID-19, the disease
caused by the SARS-CoV-2 virus, a global
pandemic. In response to the COVID-19 outbreak,
countries have taken different measures in relation
to prevention and containment. For example, several
countries introduced bans on business activities or
locked down cities or countries, including countries
where Tenaris has operations (such as Argentina,
China, Colombia, Italy, Mexico, Saudi Arabia and
the United States). The rapid expansion of the virus,
the surfacing of new strains of the virus in several
countries, and the measures taken to contain it
triggered a severe fall in global economic activity
and precipitated a serious crisis in the energy sector.
While the extent of the effects of COVID-19 on
the global economy and oil demand were still
unclear, in March 2020, the members of OPEC+
(OPEC plus other major oil producers including
Russia) did not agree to extend their agreement to
cut oil production and Saudi Arabia launched a
wave of additional supply on the market triggering
a collapse in oil prices below $30 per barrel. This
exacerbated what soon became clear was an
unprecedented situation of oversupply, caused
primarily by the sudden and dramatic fall in oil
consumption consequent to the measures taken
to contain the spread of the virus around the
world. Although OPEC+ subsequently reached
an agreement to cut production by as much as
9.7 million barrels per day, the situation of acute
oversupply continued, causing oil prices to hit
record lows. By the end of trading on April 20,
2020, the West Texas Intermediate (“WTI”) forward
price for delivery in May, which had to be closed
out the following day, fell to a negative value for
the first time in history, as oil storage facilities were
completely committed, and producers were forced
to pay buyers to take their barrels. Since then,
the price of oil has been recovering and currently
Annual Report 48.
stands above the level of $55 per barrel, bolstered
by the actions to cut production taken by OPEC+
and the recovery of oil demand, as the global
economy, especially industrial production, recovers
and COVID-19 vaccination programs begin. With
consumption exceeding production, excess oil
inventories built up in the first half of 2020 are
being gradually reduced. The worldwide demand
for oil, which stood at 100 million barrels per day in
December 2019, fell to around 75-80 million barrels
per day in April 2020 before recovering to around
94 million barrels per day in December 2020. Drilling
activity in the United States and Canada, where it
was most affected, has begun to recover but remains
well below the level it was prior to the pandemic,
while, in the rest of the world, any recovery will take
longer following the reductions in investment plans
made by oil and gas companies in response to the
pandemic. There remains considerable uncertainty
about the future duration and extent of the
pandemic with new and more contagious variants of
the COVID-19 virus appearing and the vaccination
programs still in their early stages.
Status of our operations
Although restrictions imposed in connection with
the COVID-19 pandemic have been lifted in some
countries where Tenaris operates, it is currently not
possible to predict whether such measures will be
relaxed further, reinstated or made more stringent.
In addition, Tenaris has adjusted production levels
at its facilities, which are operating with reduced
volumes in line with market demand, and may
undertake additional adjustments.
In order to safeguard the health and safety of
its employees, customers and suppliers, Tenaris
has taken preventive measures, including
remote working for the majority of professional
employees, restricting onsite access to essential
operational personnel, keeping personnel
levels at a minimum, implementing a special
operations protocol to ensure social distancing
and providing medical assistance and supplies to
onsite employees. As of the date of this annual
report, remote work and other work arrangements
have not materially adversely affected Tenaris’s
ability to conduct operations. In addition, these
alternative working arrangements have not
adversely affected our financial reporting systems,
internal control over financial reporting or
disclosure controls and procedures.
Risks associated with the COVID-19 pandemic and the
oil & gas crisis
The COVID-19 pandemic and the ongoing oil
& gas crisis poses the following main risks and
challenges to Tenaris:
Global oil demand may fail to recover its former
level or even decrease further in the future, driving
down prices even more or keeping them at very
low levels, which would exert downward pressure
on sales and margins of oil and gas companies,
leading to further reductions and even generalized
suspension of drilling activities (in the United
States or elsewhere) and, as a result, materially
adversely affecting our sales and financial position.
Tenaris or its employees, contractors, suppliers,
customers and other business partners may be
prevented from conducting certain business
activities for a prolonged or indefinite period of
time. In addition, employees in some or all of
our facilities, or those of our contracts, suppliers,
customers or other business partners, may refuse to
work due to health concerns while the COVID-19
outbreak is ongoing, If that happens, the continuity
of our future operations may be severely affected.
A continuing spread of COVID-19 and new strains of
the virus may affect the availability and price of raw
materials, energy and other inputs used by Tenaris
in its operations. Any such disruption or increased
prices could adversely affect Tenaris’s profitability.
•
•
•
Tenaris 49.
Mitigating actions
In order to mitigate the impact of expected lower
sales, starting from the first quarter 2020, Tenaris
implemented a worldwide restructuring program
and cost containment plan aimed at preserving its
financial resources and overall liquidity position
and maintaining the continuity of its operations.
These actions included:
adjusting the level of our operations and workforce
around the world, including through the temporary
closure of certain facilities or production lines;
introducing efficiency and productivity improvements
throughout Tenaris’s industrial system;
reducing our fixed cost structure, including
through pay reductions for senior management and
board members, as well as R&D expenses, for a
total annual savings of approximately $230 million
on a yearly basis;
reducing capital expenditures by $157 million in
comparison to 2019 levels;
reducing working capital, especially inventories, in
accordance with the expected levels of activity; and
increasing our focus on managing customer credit
conditions.
•
•
•
•
•
•
As of the date of this annual report, these
restructuring and cost containment initiatives
are largely complete and the principal objectives
have been achieved; some residual actions are
still ongoing.
As part of these liquidity preservation initiatives,
on June 2, 2020, the Annual Shareholders Meeting
approved a proposal that no further dividends be
distributed in respect of fiscal year 2019 beyond the
interim dividend of approximately $153 million
already paid in November 2019. However, as
quarterly results started to recover, on November
4, 2020, the Company’s board of directors
approved the payment of an interim dividend of
$0.07 per share ($0.14 per ADS), or approximately
$83 million, which was paid on November 25,
2020. On February 24, 2021, the Company’s board
of directors approved a proposal for the payment
of an interim dividend. If the annual dividend is
approved by the shareholders, a dividend of
$0.14 per share ($0.28 per ADS), or approximately
$165 million will be paid on May 26, 2021, with an
ex-dividend date of May 24, 2021.
As of the date of this annual report, our capital and
financial resources, and overall liquidity position,
have not been materially affected by the COVID-19
pandemic. Tenaris has in place non-committed
credit facilities and management believes Tenaris
has adequate access to credit markets. In addition,
Tenaris has a net cash position of approximately
$1,085 million as of the end of December 2020 and
a manageable debt amortization schedule.
Considering our financial position and the funds
provided by operating activities, management
believes that we have sufficient resources to satisfy
our current working capital needs, service our
debt and address short-term changes in business
conditions for the next 12 months.
Considering the global situation, the Company has
renegotiated and continues to renegotiate existing
contractual obligations with its counterparties to
modify its commitments in light of the decrease
in activity.
Management does not expect to disclose or incur
in any material COVID-19-related contingency,
and it considers its allowance for doubtful accounts
sufficient to cover risks that could arise from credits
with customers in accordance with IFRS 9.
Annual Report 50.
Summary of results
Our sales and results in 2020 were severely affected
by the COVID-19 pandemic, the measures taken
around the world to contain it, the impact this had
on global oil demand which caused a collapse in
prices and rapid build-up of excess inventories,
and the consequent drop in investments in drilling
activity by our oil and gas customers. While sales
held up relatively well in the Eastern Hemisphere
regions, they plunged, along with drilling
activity, in the Americas, where, in Argentina for
example, drilling activity was halted for several
months. Overall, sales declined 29% year on year
and EBITDA, which included $142 million of
restructuring charges fell 53% to $638 million,
reflecting the lower absorption of fixed costs
as well as lower sales, while we met our target
for a reduction in our fixed cost structure of
$230 million annualized by the end of the year.
For the year, we recorded a net loss attributable to
owners of the parent company of $634 million,
or ($1.07) per ADS. This included an impairment
charge of $622 million on the carrying value of
goodwill and other assets in the United States,
mainly related to the former IPSCO business and
our welded pipe operations.
Cash flow provided by operating activities amounted
to $1.5 billion during 2020, as we exceeded our
target for reductions in working capital. Capital
expenditures were also reduced in line with our target
of $193 million in 2020, compared to the $350 million
invested in 2019. Free cash flow, which amounted to
$1.3 billion (26% of revenues) in 2020, exceeded the
$1.2 billion (16%) we generated in 2019.
Our financial position at December 31, 2020
amounted to a net cash position of $1.1 billion
($1.7 billion of liquid assets less $0.6 billion
of debt), after having paid $1.0 billion for the
acquisition of IPSCO in January 2020.
Climate change
The Company’s board of directors approved
a medium-term target to reduce the carbon
emissions intensity rate of its operations by 2030
by 30%, compared to its level in 2018, considering
scope 1, 2 and 3 emissions. We aim to achieve this
target by using a higher proportion of recycled
steel scrap in the metallic mix, investments to
increase energy efficiency and the use of renewable
energy for part of our energy requirements.
This target forms part of a broader long-term
objective of reaching carbon neutrality. Our
ability to achieve this objective will depend on
the development of emerging technologies and
market and regulatory conditions, including
carbon pricing and customer support. To further
this objective, we plan to actively pursue the
development of technologies involving the use
of hydrogen and carbon capture, with partners,
including our affiliated company Tenova, and
participate in pilot projects such as the one
we recently announced to use hydrogen in our
Dalmine steel shop in Italy.
To accelerate the fulfilment of these targets, we will
implement the use of an internal carbon price at a
minimum of $80/ton for evaluating investments and
more generally in our operations.
The Company’s board of directors nominated
its Vice-Chairman, Germán Curá, to oversee
the development and implementation of the
Company’s strategy for addressing climate change
going forward.
Tenaris Outlook
With vaccination programs starting to be rolled
out in many countries, economic activity is
recovering in many sectors, though lockdowns are
still being implemented to contain the spread of
new and more infectious variants of the original
COVID-19 strain. Global oil consumption is
increasing along with industrial production and
mobility, while OPEC+ countries continue to
contain production levels and Saudi Arabia is
implementing an additional production cut during
February and March. Oil prices have returned to
levels where selective investment activity could
move forward and natural gas prices have also
increased following temporary market shortages
due to weather events and production outages.
Drilling activity in the United States and Canada
has risen over the past three months, as it has in
Latin America, and may continue to rise further
through the year. In the Eastern Hemisphere,
drilling activity may be close to bottoming out but
we do not expect any significant recovery this year.
In this still uncertain environment, we anticipate
a gradual recovery in sales through most of the
year. In the first quarter, however, our EBITDA
will be impacted by approximately $20 million
in additional costs and production losses in the
United States and Mexico associated to this
month’s Texas gas and power shortages. After a
first quarter EBITDA similar to that of the fourth
quarter 2020, from the second quarter, EBITDA
is expected to increase with margins stabilizing
around 20% as price increases compensate for
higher raw material costs.
Functional and presentation currency
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.
51.
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 may consider
exposure to fluctuation in the exchange rate versus
the U.S. dollar;
prices of their critical raw materials and inputs are
priced and settled in U.S. dollars;
transaction and operational environment and the
cash flow of these operations have the U.S. dollars
as reference currency;
significant level of integration of local operations
within Tenaris’s international global distribution
network;
net financial assets and liabilities are mainly
received and maintained in U.S. dollars; and
the exchange rate of certain legal currencies
has long been affected by recurring and severe
economic crises.
Critical Accounting Estimates
This discussion and analysis of our financial
condition and results of operations are based on our
audited consolidated financial statements, which
have been prepared in accordance with IFRS.
The preparation of our audited consolidated
financial statements and related disclosures
in conformity with IFRS requires us to make
estimates and assumptions that might affect the
reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities and
the reported amounts of revenue and expenses.
Annual Report 52.
Management evaluates its accounting estimates
and assumptions, including those related to
accounting for business combinations; impairment
of long-lived tangible and intangible assets; assets
useful lives; deferred income tax; obsolescence of
inventory; doubtful accounts; post-employment
benefits; and loss contingencies, and revises them
when appropriate. Management bases its estimates
on historical experience and on various other
assumptions it believes to be reasonable under the
circumstances. These estimates form the basis for
making judgments about the carrying values of
assets and liabilities that are not readily apparent
from other sources. Although management
believes that these estimates and assumptions
are reasonable, they are based upon information
available at the time they are made. Actual results
may differ significantly from these estimates under
different assumptions or conditions.
Our most critical accounting estimates are those
that are most important to the portrayal of our
financial condition and results of operations, and
which require us to make our most difficult and
subjective judgments, often as a result of the need
to make estimates of matters that are inherently
uncertain. Our most critical accounting estimates
and judgments are the following:
Accounting for business combinations
To account for our business combinations we use
the acquisition method, which requires the acquired
assets and assumed liabilities to be recorded at their
respective fair value as of the acquisition date. The
determination of fair values of assets acquired,
liabilities and contingent liabilities assumed and
determination of useful lives, requires us to make
estimates and use valuation techniques, including
the use of independent valuators, when market
value is not readily available. 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 income statement.
Impairment and recoverability of goodwill and
other assets
Long-lived assets including identifiable intangible
assets are reviewed for impairment at the lowest
level for which there are separately identifiable
cash flows, or cash generating units (“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 or
depreciation are reviewed for impairment whenever
events or changes in circumstances indicate that
the carrying amount may not be recoverable.
Intangible assets with indefinite useful lives,
including goodwill, are subject to at least an annual
impairment test. If events or circumstances indicate
that the carrying amount value may be impaired,
impairment tests are performed more frequently.
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, capital
expenditure programs for Tenaris’s customers and
the evolution of the rig count.
Tenaris 53.
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 of disposal. 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
of disposal, its value in use or zero.
For purposes of calculating the fair value less costs
of disposal, 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.
In March 2020, as a result of the deterioration of
business conditions and in light of the presence of
impairment indicators for its assets in the United
States, Tenaris wrote down goodwill and other
long lived assets recording an impairment charge
of approximately $622 million, impacting the
carrying value of the goodwill associated with the
CGUs OCTG USA, IPSCO and Coiled Tubing in
the amount of $225 million, $357 million and
$4 million respectively, and the carrying value
of fixed assets of the CGU Rods USA for
$36 million. Out of the total amount,
$582 million was allocated to the Tubes segment.
No impairment charges were recorded for the
years 2019 and 2018. For more information on
impairment and recoverability of goodwill and other
assets, see “II. Accounting Policies H. Impairment
of non-financial assets” to our audited consolidated
financial statements included in this annual report.
For information on impairment charges on our U.S.
operations, see note 5 “Impairment Charge” to our
audited consolidated financial statements included
in this annual report.
Reassessment of Property, Plant and Equipment
Assets Useful Lives
Property, plant and equipment are stated at directly
attributable historical acquisition or construction
cost less accumulated depreciation and impairment
losses, if any. Property, plant and equipment
acquired through acquisitions accounted for as
business combinations are valued initially at fair
market value of the assets acquired. Depreciation of
the cost of the asset (apart from land, which is not
depreciated) to its residual value over its estimated
useful life, is done using the straight line method.
The depreciation method is reviewed at each year
end. Estimating useful lives for depreciation is
particularly difficult as the service lives of assets
are also impacted by maintenance and changes in
technology, and our ability to adapt technological
innovation to the existing asset base. In accordance
with IAS 16, “Property, Plant and Equipment”,
the depreciation method, the residual value and
the useful life of an asset must be reviewed at least
at each financial year-end, and, if expectations
differ from previous estimates, the change must
be treated as a change in an accounting estimate.
Annual Report 54.
Management’s re-estimation of assets useful lives,
performed in accordance with IAS 16, “Property,
Plant and Equipment”, resulted in additional
depreciation expenses for 2020 of $45.0 million and
did not materially affect depreciation expenses for
2019 and 2018. However, if management’s estimates
prove incorrect, the carrying value of plant and
equipment and its useful lives may be required to
be reduced from amounts currently recorded. Any
such reductions may materially affect asset values
and results of operations.
Reassessment of Useful Lives of Customer
Relationships
In accordance with IFRS 3, “Business
Combinations”and IAS 38, “Intangible Assets”
Tenaris has recognized the value of customer
relationships separately from goodwill attributable
to the acquisition of Maverick and Hydril groups,
as well as the more recent acquisition of SSPC
and IPSCO.
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 initial expected useful life of
approximately 14 years for Maverick, 10 years for
Hydril, 9 years for SSPC and 3 years for IPSCO.
In 2018 the Company reviewed the useful life
of Maverick Tubes’ customer relationships and
decided to reduce the remaining useful life from 2
years to zero, consequently a higher amortization
charge of approximately $109 million was
recorded in the Consolidated Income Statement
under Selling, general and administrative expenses
for the year ended December 31, 2018.
As of December 31, 2020, the net book value of
IPSCO’s customer relationships amounted to $51.3
million with a residual useful life of 2 years and
SSPC’s customer relationships amounted to $63.8
million, with a residual useful life of 7 years, while
Maverick’s and Hydril’s customer relationships are
fully amortized.
Management’s re-estimation of assets useful lives,
performed in accordance with IAS 38, did not
materially affect amortization expenses for 2020
and 2019.
Allowance for Obsolescence of Supplies and Spare
Parts and Slow-Moving Inventory
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, utilities, freights and other
direct costs and related production overhead costs,
and it excludes borrowing costs. The allocation of
fixed production costs, including depreciation and
amortization charges, is based on the normal level of
production capacity. Inventories cost is mainly based
on the FIFO method. 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 as of year-end are
valued based on the supplier’s invoice cost.
Tenaris establishes an allowance for obsolete
or slow-moving inventories 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
Tenaris 55.
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, aging
and consumption patterns.
Allowances for Doubtful Accounts
Trade and other receivables are recognized initially
at fair value that corresponds to the amount of
consideration that is unconditional unless they
contain significant financing components. The
Company holds trade receivables with the objective
of collecting the contractual cash flows and
therefore measures them subsequently at amortized
cost using the effective interest method. Due to
the short-term nature, their carrying amount is
considered to be the same as their fair value.
Tenaris applies the IFRS 9 “Financial Instruments”
simplified approach to measure expected credit
losses, which uses a lifetime expected loss
allowance for all trade receivables. To measure the
expected credit losses, trade receivables have been
grouped based on shared credit risk characteristics
and the days past due. The expected loss rates
are based on the payment profiles of sales over
a period of three years and the corresponding
historical credit losses experienced within this
period. The expected loss allowance also reflects
current and forward-looking information on
macroeconomic factors affecting the ability of
each customer to settle the receivables.
depreciable fixed assets and inventories, depreciation
on property, plant and equipment, valuation of
inventories, provisions for pension plans and fair
value adjustments of assets acquired in business
combinations. 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.
Management periodically evaluates positions
taken in tax returns with respect to situations
in which applicable tax regulation is subject to
interpretation and considers whether it is probable
that a tax authority would accept an uncertain
tax treatment. The Company measures its tax
balances either based on the most likely amount
or the expected value, depending on which method
provides a better prediction of the resolution of
the uncertainty.
Deferred tax assets are recognized to the extent
that 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.
Deferred income tax
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 consolidated financial
statements. The principal temporary differences
arise from the effect of currency translation on
Deferred tax liabilities and assets are not
recognized for temporary differences between the
carrying amount and tax basis of investments in
foreign operations where the company is able to
control the timing of the reversal of the temporary
differences and it is probable that the differences
will not reverse in the foreseeable future.
Annual Report 56.
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to offset current
tax assets and liabilities and when the deferred
tax balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset where
the entity has a legally enforceable right to offset and
intends either to settle on a net basis, or to realize the
asset and settle the liability simultaneously.
Deferred tax assets and liabilities are re-measured
if tax rates change. These amounts are charged or
credited to the Consolidated Income Statement or to
the item Other comprehensive income for the year
in the Consolidated Statement of Comprehensive
Income, depending on the account to which the
original amount was charged or credited.
Post-employment benefits
The Company estimates at each year-end the
provision necessary to meet its post-employment
obligations in accordance with the advice from
independent actuaries. The calculation of post-
employment and other employee obligations
requires the application of various assumptions.
The main assumptions for post employment and
other employee obligations include discount rates,
compensation growth rates, pension growth rates
and life expectancy. Changes in the assumptions
could give rise to adjustments in the results and
liabilities recorded and might have an impact
on the post employment and other employee
obligations recognized in the future.
Contingencies
We are from time to time subject to various claims,
lawsuits and other legal proceedings, including
customer, employee, tax and environmental-related
claims, in which third parties are seeking payment
for alleged damages, reimbursement for losses,
or indemnity. Management with the assistance
of legal counsel periodically reviews the status
of each significant matter and assesses potential
financial exposure. Our potential liability with
respect to such claims, lawsuits and other legal
proceedings cannot be estimated with certainty.
Some of these claims, lawsuits and other legal
proceedings involve highly complex issues, and
often these issues are subject to substantial
uncertainties and, therefore, the probability of
loss and an estimation of damages are difficult
to ascertain. Accordingly, with respect to a
large portion of such claims, lawsuits and other
legal proceedings, Tenaris is unable to make a
reliable estimate of the expected financial effect
that will result from ultimate resolution of the
proceeding. In those cases, Tenaris has not accrued
a provision for the potential outcome of these
cases. If a potential loss from a claim, lawsuit or
other 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 consolidated
financial statements and take into consideration
litigation and settlement strategies. In a limited
number of ongoing cases, Tenaris was able to
make a reliable estimate of the expected loss or
range of probable loss and has accrued a provision
for such loss but believes that publication of this
information on a case-by-case basis would seriously
prejudice Tenaris’s position in the ongoing
legal proceedings or in any related settlement
discussions. Accordingly, in these cases, the
Company has disclosed information with respect to
the nature of the contingency but has not disclosed
its estimate of the range of potential loss.
These estimates are primarily constructed with
the assistance of legal counsel, and management
believes that the aggregate provisions recorded
Tenaris 57.
for potential losses in the consolidated financial
statements are adequate based upon currently
available information. However, if management’s
estimates prove incorrect, current reserves could
be inadequate and we could incur a charge to
earnings which could have a material adverse effect
on our results of operations, financial condition,
net worth and cash flows. As the scope of liabilities
becomes better defined, there may be changes in
the estimates of future costs which could have a
material adverse effect on our results of operations,
financial condition, net worth and cash flows.
Internal control over financial reporting
Management is responsible for establishing and
maintaining adequate internal control over financial
reporting. Our 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 financial statements for external
purposes in accordance with IFRS.
In addition, under the Company’s articles
of association, as supplemented by the audit
committee’s charter, the audit committee assists
the board of directors in fulfilling its oversight
responsibilities relating to the effectiveness of
the Company’s systems of internal control, risk
management and internal audit over financial
reporting. In particular, the audit committee is
required to review the scope and results of the
activities of the Company’s external auditors
and the internal audit function relating to the
Company’s internal control over financial
reporting, and obtain reports on significant
findings and recommendations; and is also
required to assess, at least annually at the time the
annual accounts are approved, the effectiveness of
the Company’s systems of internal control and risk
management over financial reporting.
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 (2013) issued by the Committee
of Sponsoring Organizations of the Treadway
Commission.
On February 19, 2021, 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, 2020, 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, 2020.
Annual Report 58.
Results of Operations
Thousands of U.S. dollars (except number of shares and per share amounts)
FOR THE YEAR ENDED DECEMBER 31
2020
2019
2018
Selected consolidated income statement data
CONTINUING OPERATIONS
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Impairment charge (1)
Other operating income (expenses), net
Operating (loss) income
Finance income
Finance cost
Other financial results
5,146,734
7,294,055
7,658,588
(4,087,317)
(5,107,495)
(5,279,300)
1,059,417
2,186,560
2,379,288
(1,119,227)
(1,365,974)
(1,509,976)
(622,402)
–
–
19,141
11,805
2,501
(663,071)
832,391
871,813
18,387
47,997
39,856
(27,014)
(56,368)
(43,381)
(36,942)
14,667
34,386
(Loss) income before equity in earnings of non-consolidated companies
(728,066)
851,674
909,113
and income tax
Equity in earnings of non-consolidated companies
(Loss) income before income tax
Income tax
(Loss) income for the year for continuing operations
(LOSS) INCOME ATTRIBUTABLE TO (2)
Owners of the parent
Non-controlling interests
(Loss) income for the year (2)
Depreciation and amortization
Weighted average number of shares outstanding
Basic and diluted (losses) earnings per share
Dividends per share (3)
(1) Impairment charge in 2020 represents a charge of $622 million to the carrying value of goodwill of the
CGUs OCTG USA, IPSCO and Coiled Tubing in the amounts of $225 million, $357 million and $4 million
respectively, and the carrying value of fixed assets of the CGU Rods USA in the amount of $36 million.
(2) 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.
(3) Dividends per share correspond to the dividends proposed or paid in respect of the year.
108,799
82,036
193,994
(619,267)
933,710
1,103,107
(23,150)
(202,452)
(229,207)
(642,417)
731,258
873,900
(634,418)
742,686
876,063
(7,999)
(11,428)
(2,163)
(642,417)
731,258
873,900
(678,806)
(539,521)
(664,357)
1,180,536,830
1,180,536,830
1,180,536,830
(0.54)
0.07
0.63
0.41
0.74
0.41
Tenaris
Thousands of U.S. dollars (except number of shares)
AT DECEMBER 31
Selected consolidated financial position data
Current assets
Property, plant and equipment, net
Other non-current assets
Total assets
Current liabilities
Non-current borrowings
Deferred tax liabilities
Other non-current liabilities
Total liabilities
59.
2020
2019
2018
4,287,672
5,670,607
5,464,192
6,193,181
6,090,017
6,063,908
3,235,336
3,082,367
2,723,199
13,716,189
14,842,991
14,251,299
1,166,475
1,780,457
1,718,363
315,739
254,801
532,701
40,880
336,982
498,300
29,187
379,039
249,218
2,269,716
2,656,619
2,375,807
Capital and reserves attributable to the owners of the parent
11,262,888
11,988,958
11,782,882
Non-controlling interests
Total equity
183,585
197,414
92,610
11,446,473
12,186,372
11,875,492
Total liabilities and equity
13,716,189
14,842,991
14,251,299
Share capital
Number of shares outstanding
1,180,537
1,180,537
1,180,537
1,180,536,830
1,180,536,830
1,180,536,830
Annual Report
60.
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
2020
2019
2018
CONTINUING OPERATIONS
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Impairment charge
Other operating income (expenses), net
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 of non-consolidated companies
(Loss) income before income tax
Income tax
(Loss) income for the year for continuing operations
(LOSS) INCOME ATTRIBUTABLE TO
Owners of the parent
Non-controlling interests
100.0
(79.4)
20.6
(21.7)
(12.1)
0.4
(12.9)
0.4
(0.5)
(1.1)
(14.1)
2.1
(12.0)
(0.4)
(12.5)
100.0
(70.0)
30.0
(18.7)
–
0.2
11.4
0.7
(0.6)
0.2
11.7
1.1
12.8
(2.8)
10.0
100.0
(68.9)
31.1
(19.7)
–
0.0
11.4
0.5
(0.5)
0.4
11.9
2.5
14.4
(3.0)
11.4
(12.3)
(0.2)
10.2
(0.2)
11.4
(0.0)
Tenaris
Fiscal year ended December 31, 2020,
compared to fiscal year ended December 31, 2019
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
2020
2019
Tubes
Others
Total
4,844
303
5,147
94%
6%
100%
6,870
424
7,294
94%
6%
100%
61.
Increase /
(Decrease)
(29%)
(29%)
(29%)
Tubes
The following table indicates, for our Tubes
business segment, sales volumes of seamless and
welded pipes for the periods indicated below:
Thousands of tons
FOR THE YEAR ENDED DECEMBER 31
Seamless
Welded
Total
2020
2019
1,918
480
2,398
2,600
671
3,271
Increase /
(Decrease)
(26%)
(28%)
(27%)
Annual Report
62.
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
NET SALES
North America
South America
Europe
Middle East & Africa
Asia Pacific
Total net sales
Operating (loss) income
Operating (loss) income (% of sales)
2020
2019
Increase /
(Decrease)
2,108
3,307
660
566
1,194
315
4,844
(616)
(12.7%)
1,240
641
1,337
345
6,870
755
11.0%
(36%)
(47%)
(12%)
(11%)
(9%)
(29%)
(182%)
Tenaris 63.
Net sales of tubular products and services
decreased 29% to $4,844 million in 2020,
compared to $6,870 million in 2019, reflecting
a 27% decline in volumes and a 4% decrease in
average selling prices. In North America, we had
lower volumes and prices across the region where
activity was severely affected by the downturn in
oil prices and the pandemic. In South America
we also had lower volumes and prices across the
region where activity was severely affected by the
downturn in oil prices and the pandemic, except in
Brazil where offshore drilling activity continued.
In Europe, while sales of OCTG in the North Sea
and line pipe for downstream processing remained
stable, sales of mechanical and other products
declined. In the Middle East & Africa, while sales
in Saudi Arabia declined, they were compensated
by higher OCTG sales in the rest of the Middle
East. Line pipe for deepwater product in West
Africa and downstream projects through the region
declined. In Asia Pacific, our sales declined mainly
driven by lower sales in Thailand.
Operating income from tubular products and
services amounted to a loss of $616 million in
2020, compared to a gain of $755 million in 2019.
In addition to the decline in sales following the
drop in drilling activity, our results were negatively
impacted by lower absorption of fixed costs and
the inefficiencies related to the low level of capacity
utilization since March 2020. Additionally, Tubes
operating income was affected by $139 million of
severance charges, by an impairment charge of
$582 million, reflecting the difficult business
conditions generated by COVID-19 pandemic,
with the collapse in oil demand and prices and
the impact on drilling activity and on the demand
for steel pipe products and by $138 million higher
depreciation and amortization charge mainly
related to the incorporation of the IPSCO facilities
and the accelerated depreciation of the Prudential
facility after the decision to close it and consolidate
our Canadian pipe manufacturing operations at
our facility in Sault Ste. Marie, Ontario.
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
Net sales
Operating (loss) income
Operating (loss) income (% of sales)
2020
2019
303
(47)
(15.6%)
424
77
18.2%
Increase /
(Decrease)
(29%)
(161%)
Annual Report 64.
Net sales of other products and services declined
29% from $424 million in 2019 to $303 million in
2020, mainly due to lower sales of energy related
products, i.e., sucker rods and coiled tubing.
Operating results from other products and
services amounted to a loss of $47 million in 2020,
compared to a gain of $77 million in 2019. Others
segment in 2020 includes impairment charges
for $40 million, as well as charges for leaving
indemnities amounting to $4 million. Additionally,
results in 2020 were negatively impacted by lower
absorption of fixed costs and the inefficiencies
related to the low level of capacity utilization since
March 2020.
Selling, general and administrative expenses or
SG&A, amounted to $1,119 million (21.7% of
net sales), compared to $1,366 million (18.7%) in
2019. SG&A during 2020 included $61 million of
leaving indemnities. The $247 million reduction in
SG&A was mainly due to lower freights and other
selling expenses ($131 million) and fixed and other
costs ($167 million), net of higher depreciation and
amortization ($51 million) related mainly to the
incorporation of IPSCO.
Financial results amounted to a loss of $65 million
in 2020, compared to a gain of $19 million in 2019.
The loss in 2020 corresponds to a net finance cost
of $9 million, reflecting a lower net cash position
and lower yields on the position and $55 million
a foreign exchange loss net of derivative results,
mainly due to a 9% EUR appreciation on EUR
denominated intercompany liabilities at subsidiaries
whose functional currency is the U.S. dollar
and a 29% Brazilian Real depreciation on USD
denominated intercompany liabilities at subsidiaries
in Brazil whose functional currency is the Brazilian
Real, both results are to a large extent offset by
changes to our currency translation reserve.
Equity in earnings of non-consolidated companies
generated a gain of $109 million in 2020, compared
to $82 million in 2019. These results were mainly
derived from our equity investment in Ternium,
Techgen and Usiminas.
Income tax charge amounted to $23 million in
2020, compared to $202 million in 2019. The lower
charge in 2020 is explained by deferred tax gains
arising from losses since the COVID-19 outbreak
around March 2020.
Net results for continuing operations amounted to
a loss of $642 million in 2020, compared to a gain
of $731 million in 2019. The lower results reflect a
worse operating environment, include impairment
and severance charges, worse financial results,
partially compensated by a higher contribution
from our non-consolidated investments, mainly
Ternium and lower taxes.
Tenaris 65.
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 three years:
Millions of U.S. dollars
FOR THE YEAR ENDED DECEMBER 31
Net cash provided by operating activities
Net cash (used in) provided by investing activities
Net cash used in financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of year (excluding overdrafts)
Effect of exchange rate changes
(Decrease) increase 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 investments
Derivatives hedging borrowings and investments
Current borrowings
Non-current borrowings
Net cash at the end of the year
2020
2019
2018
1,520
(2,092)
(375)
(947)
1,554
(22)
(947)
585
585
0
872
239
8
(303)
(316)
1,085
1,528
(40)
(354)
1,134
427
(6)
1,134
1,554
1,554
0
210
18
19
(781)
(41)
980
611
399
(900)
109
330
(13)
109
427
427
2
488
114
(6)
(510)
(29)
485
Annual Report 66.
Our financing strategy aims to maintain adequate
financial resources and access to additional
liquidity. During 2020 cash flow provided by
operating activities amounted to $1,520 million
(including a decrease in working capital of
$1,059 million), our capital expenditures amounted
to $193 million, and we paid dividends amounting
to $83 million. At the end of the year, we had a net
cash position of $1,085 million, compared to
$980 million 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 and
to service our debt in the future twelve months and
to address short-term changes in business conditions.
For more information see “Operating and Financial
Review and Prospects – Overview – The COVID-19
pandemic and the oil & gas crisis and their impact on
Tenaris’s operations and financial condition.”
We have a conservative approach to the
management of our liquidity, which consists of (i)
cash and cash equivalents (cash in banks, liquidity
funds and investments with a maturity of less than
three months at the date of purchase), and (ii)
other investments (fixed income securities, time
deposits, and fund investments).
At December 31, 2020, liquid financial assets as
a whole (comprising cash and cash equivalents
and other investments) were 12% of total assets
compared to 12% at the end of 2019.
We hold investments primarily 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, 2020,
and December 31, 2019, U.S. dollar denominated
liquid assets represented 95% of total liquid
financial assets.
Tenaris Fiscal year ended December 31, 2020,
compared to fiscal year ended December 31, 2019
Operating activities
Net cash provided by operations during 2020 was
$1,520 million, compared to $1,528 million during
2019. This decrease was mainly attributable to
a $1,059 million decrease in working capital in
2020, while in 2019 the decrease in working capital
amounted to $523 million, offset by an impairment
charge of $622 million in 2020. The annual
variation in working capital was mainly attributed
to a decrease of $829 million in inventories,
compared to a decrease of $311 million in 2019.
For more information on cash flow disclosures and
changes to working capital, see note 28 “Cash flow
disclosures” to our audited consolidated financial
statements included in this annual report.
Investing activities
Net cash used in investing activities was
$2,092 million in 2020, compared to a net cash
used in investing activities of $40 million in
2019. We increased our financial investments by
$887 million in 2020 compared to a reduction of
$390 million in 2019. Additionally, during 2020 we
spent $1,025 million in acquisition of subsidiaries.
Financing activities
Net cash used in financing activities, including
dividends paid, proceeds and repayments of
borrowings and acquisitions of non-controlling
interests, was $375 million in 2020, compared to
$354 million in 2019.
During 2020 we had net repayments from
borrowings of $239 million, while in 2019 we had
net proceeds from borrowings of $174 million.
67.
Dividends paid during 2020 amounted to $83 million
and during 2019 amounted to $484 million.
Our total liabilities to total assets ratio was
0.17:1 as of December 31, 2020 and 0.18:1 as of
December 31, 2019.
Principal Sources of Funding
During 2020, we funded our operations with
operating cash flows, bank financing and available
liquid financial assets. Short-term bank borrowings
were used as needed throughout the year.
Financial liabilities
During 2020 borrowings decreased by $203 million
to $619 million at December 31, 2020, from
$822 million at December 31, 2019.
Borrowings consist mainly of bank loans. As
of December 31, 2020, U.S. dollar-denominated
borrowings plus borrowings denominated in other
currencies swapped to the U.S. dollar represented
82% of total borrowings.
For further information about our financial debt,
please see note 20 “Borrowings” to our audited
consolidated financial statements included in this
annual report.
Annual Report 68.
The following table shows the composition of our
financial debt at December 31, 2020, 2019 and 2018:
Millions of U.S. dollars
Bank borrowings
Bank overdrafts
Total borrowings
Our weighted average interest rates before tax
(considering hedge accounting), amounted to
2.51% at December 31, 2020 and to 3.18% at
December 31, 2019.
2020
2019
2018
619
0
619
822
0
822
537
2
539
Tenaris The maturity of our financial debt is as follows:
69.
Millions of U.S. dollars
AT DECEMBER 31, 2020
Borrowings
Interests to be accrued (*)
Total
(*) Includes the effect of hedge accounting.
1 year
or less
303
10
313
1-2
years
104
5
109
2-3
years
208
1
209
3-4
years
4
0
4
4-5
years
Over
5 years
–
–
–
–
–
–
Total
619
16
635
Our current borrowings to total borrowings ratio
amounted to 0.49:1 as of December 31, 2020
and to 0.95:1 as December 31, 2019. Our liquid
financial assets exceeded our total borrowings, we
had a net cash position (cash and cash equivalents,
other current and non-current investments,
derivatives hedging borrowings and investments,
less total borrowings) of $1,085 million at
December 31, 2020, compared to $980 million
at December 31, 2019.
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 25 “Derivative
financial instruments” to our audited consolidated
financial statements included in this annual report.
For information regarding the extent to which
borrowings are at fixed rates, please see “Quantitative
and Qualitative Disclosure About Market Risk”.
Annual Report
70.
Significant borrowings
Our most significant borrowings as of December 31,
2020 were as follows:
Millions of U.S. dollars
Disbursement date
Borrower
Type
2020
2020
2020
2020
2020
2020
Maverick
Maverick
Tamsa
Tamsa
Tamsa
SSPC
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Multiple Banks
As of December 31, 2020, Tenaris was in
compliance with all of its covenants under its
significant borrowings, including financial
covenants on leverage ratio.
Original
& Outstanding
Final Maturity
50
75
60
80
60
81
2021
2022
2023
2023
2023
2021 - 2024
Tenaris
Quantitative and Qualitative
Disclosure about Market Risk
The multinational nature of our operations and
customer base expose us to a variety of risks,
including the effects of changes in foreign currency
exchange rates, interest rates and commodity
prices. In order to reduce the impact related to
these exposures, management evaluates exposures
on a consolidated basis to take advantage
of natural exposure netting. For the residual
exposures, we may enter into various derivative
transactions in order to reduce potential adverse
effects on our financial performance. Such
derivative transactions are executed in accordance
with internal policies and hedging practices. We do
not enter into derivative financial instruments for
In millions of U.S. dollars
EXPECTED MATURITY DATE
trading or other speculative purposes, other than
non-material investments in structured products.
71.
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, 2020 and 2019
which included fixed and variable interest rate
obligations, detailed by maturity date:
AT DECEMBER 31, 2020
2021
2022
2023
2024
2025
Thereafter
Total (1)
NON-CURRENT DEBT
Fixed rate
Variable rate
CURRENT DEBT
Fixed rate
Variable rate
In millions of U.S. dollars
–
–
197
107
303
29
75
–
–
104
8
200
–
–
208
4
–
–
–
4
–
–
–
–
–
–
–
–
–
–
41
275
197
107
619
AT DECEMBER 31, 2019
2020
2021
2022
2023
2024
Thereafter
Total (1)
EXPECTED MATURITY DATE
NON-CURRENT DEBT
Fixed rate
Variable rate
CURRENT DEBT
Fixed rate
Variable rate
–
–
728
53
781
16
1
–
–
17
23
0
–
–
24
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40
1
728
53
822
(1) As most borrowings are based on short-term fixed rates, or variable rates that approximate market rates, with interest rate
resetting every 3 to 6 months, the fair value of the borrowings approximates its carrying amount and is not disclosed separately.
Annual Report
72.
Our weighted average interest rates before tax
(considering hedge accounting), amounted to
2.51% at December 31, 2020 and to 3.18% at
December 31, 2019.
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.
Our financial liabilities (other than trade payables
and derivative financial instruments) consist
mainly of bank loans. As of December 31, 2020,
U.S. dollar denominated financial debt plus debt
denominated in other currencies swapped to the
U.S. dollar represented 82% of total financial debt.
For further information about our financial debt,
please see note 20 “Borrowings” to our audited
consolidated financial statements included in this
annual report.
Interest Rate Risk
Fluctuations in market interest rates create a
degree of risk by affecting the amount of our
interest payments. At December 31, 2020, we had
variable interest rate debt of $382 million and fixed
rate debt of $237 million ($197 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
Most of our revenues are determined or influenced
by the U.S. dollar. In addition, a relevant part of
our costs corresponds 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 $44 million in 2020,
compared to $49 million in 2019.
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
Tenaris 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, 2020.
All amounts in millions of U.S. dollars
CURRENCY EXPOSURE / FUNCTIONAL CURRENCY
Long / (Short) Position
Argentine Peso / U.S. dollar
Euro / U.S. dollar
Saudi Arabian Riyal / U.S. dollar
(40)
(291)
(126)
The main relevant exposures as of December 31,
2020 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 Saudi Arabian
Riyal-denominated financial and trade payables.
The Saudi Arabian Riyal is tied to the dollar.
Foreign Currency Derivative Contracts
The net fair value of our foreign currency derivative
contracts amounted to an asset of $8.2 million at
December 31, 2020 and an asset of $18.1 million
at December 31, 2019. For further detail on our
foreign currency derivative contracts, please
see note 25 “Derivative financial instruments –
Foreign exchange derivative contracts and hedge
accounting” to our audited consolidated financial
statements included in this annual report.
73.
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 and non-derivative financial liabilities
(leasing liabilities denominated in Japanese Yen)
to 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. Similarly, the effective portion
of the foreign exchange result on the designated
leasing liability is recognized 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. The lease liability is recognized on the
balance sheet at each period end at the exchange
rate as of the end of each month.
At December 31, 2020, the effective portion of
designated cash flow hedges, included in other
reserves in shareholders’ equity amounted to a
debit of $4.8 million.
Annual Report 74.
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 2020.
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.
Trend Information
Principal Factors Affecting Oil and Gas Prices and
Demand for Steel Pipes from the Global Oil and
Gas Industry.
Sales to the oil and gas industry worldwide
represent a high percentage of our total sales, and
demand for steel pipes from the global oil and gas
industry is a significant factor affecting the general
level of volumes and prices for our products.
Downward pressures on oil and gas prices usually
result in lower oil and gas drilling activity and
investment throughout the oil and gas industry
with consequently lower demand for our steel
pipe products and, in some circumstances, upward
pressures can result in higher demand from our oil
and gas customers.
Whereas oil prices are similar in most parts of the
world because oil is a fully tradable commodity,
gas prices are influenced by regional factors.
In North America, where gas production is
extensively developed and there is an extensive
regional pipeline system, these factors include
available gas storage capacity and seasonal weather
patterns, particularly winter temperatures in the
United States. Liquefied natural gas (“LNG”)
prices were traditionally established in relation to
international oil prices, particularly in the largest
LNG markets in Asia. However, as the market for
LNG becomes more global and the U.S. becomes a
relevant source of LNG, LNG prices are now being
set increasingly in relation to gas prices prevailing
at regional gas hubs.
International oil prices depend on diverse
factors. On the supply side, major oil-and-gas-
producing nations and companies have frequently
collaborated to balance the supply (and thus the
price) of oil in the international markets. A major
vehicle for this collaboration has been OPEC, and
more recently what has become known as OPEC+,
which includes OPEC members, plus Russia and
certain other countries. Many of our customers
are state-owned companies in member countries
of OPEC and OPEC+. Another factor that has
affected the international price level of oil is the
political and socioeconomic conditions of oil-
producing countries, such as Libya, Nigeria and
Venezuela and the persistence of geo-political and
armed conflicts affecting the Middle East region,
which is home to a substantial proportion of the
world’s known oil reserves.
On the demand side, economic conditions and the
level of oil inventories have traditionally played a role
Tenaris in oil prices and will continue to do so. Increasingly,
however, the rate of substitution of oil and gas by
alternative, cleaner fuel sources such as renewables,
as well as policies adopted by governments and
financing entities worldwide to accelerate the energy
transition and by oil and gas companies to adapt
their strategies to the energy transition, will also play
a significant role in oil prices.
Another factor affecting oil and gas prices has
been the ability of producers in the United States
and Canada to rapidly increase production from
their reserves of tight oil and shale gas in response
to changes in market conditions. Production from
U.S. tight oil reserves has grown in recent years to
represent over 10% of global liquids production,
and production from shale gas plays has converted
the United States into a net exporter of natural gas
and a significant player in the LNG market.
Following three years of relatively stable oil prices
of around $100 per barrel, prices started to decline
in the middle of 2014 as the rate of U.S. production
increase began to exceed the increase in global
demand and OPEC confirmed at its November
2014 meeting that it would not cut production to
balance demand. As a consequence, prices reached
levels below $30 per barrel in January 2016. Prices
then recovered to around $80 per barrel during
2018 once OPEC and other producers agreed to
cut production levels to accelerate the market
rebalancing process. By this time, OPEC and other
producers had lifted their production cuts and
U.S. oil production was increasing at a rate greater
than the increase in global demand. Oil prices
declined 40% in the fourth quarter of 2018 before
partially recovering in 2019. In 2020, the COVID-19
pandemic caused a sudden and precipitous drop
in global oil demand and oil prices collapsed even
entering negative territory at one point. Since then,
prices have recovered to around $60/bbl along
with the recovery in demand and actions by OPEC
member countries and other producers (principally
Russia) to cut production levels.
75.
The 2014 collapse in oil prices, led oil and gas
operators to substantially reduce their exploration
and production investments. This, in turn, resulted
in a severe contraction in demand and pressure on
pricing for steel pipes used in oil and gas drilling and
associated operations. During 2017, however, oil
and gas operators in North America, who were very
successful in reducing production costs in their shale
plays, increased investments in response to more
favorable market conditions, and U.S. operators
continued to do so in 2018. However, from 2019,
operators have been reducing investment in the
shales as they reacted to financial market pressures in
order to achieve positive cash flow returns. With the
collapse of oil prices in March 2020 and continuing
pressure from financial markets to generate positive
free cash flows, oil and gas operators around the
world have made further substantial reductions in
their exploration and production investments, and
they now stand at a level around 40% of the average
of the 2012-14 period.
Since the development of the prolific Marcellus
shale gas play, North American gas prices have
remained at low levels compared to previous
decades. Over the past three years, average prices
have fluctuated in the range of $2.00-3.00 per
million BTU, significantly below prices in many
other major gas-consuming regions. For several
years, production increases, primarily from
productive shale gas deposits, have exceeded
demand increases, reducing the need for imports,
to the extent that, in 2017, the U.S. became a
net exporter of natural gas. Low prices have
encouraged investment in gas consuming industrial
facilities and LNG export facilities as well as
switching from coal to gas for electric power
Annual Report 76.
production, particularly with the adoption of new
regulations which could force the retirement of
older coal-based generating units. With continuing
investments in LNG export facilities, the U.S. has
become a major global LNG exporter.
America, declined. Although drilling activity
in Latin America has since begun to recover, in
the Eastern Hemisphere it continued to decline
through January 2021, though it is expected to
recover later this year.
LNG prices increasingly reflect supply and demand
conditions in Asia, the major LNG consuming
region. Prices show seasonal fluctuations,
increasing in the North Asian winter period and
declining in the summer months in accordance with
demand patterns. As new capacity, particularly
from Australia and the United States, has entered
the market in the past three years, prices declined
in 2019. With the onset of the pandemic prices
reached record lows below $3 per million BTU.
In January 2021, however, the combination of a
cold Asian winter and supply outages led to a spike
in spot prices which exceeded $20 per million BTU,
which has since dissipated.
Drilling activity in the United States and Canada,
following several years of high activity, fell sharply
through 2015 and the first half of 2016 before
beginning a recovery which ended at the end of
2018. Drilling activity declined throughout 2019
in response to a fall in oil prices at the end of
2018 and financial market pressures to produce
positive cash flow returns. This decline turned
into a collapse with the onset of the COVID-19
pandemic in 2020, but a recovery is now underway.
Despite lower prices, production levels today are
higher than before the 2014 collapse in oil prices
but rig counts are much lower, reflecting the strong
productivity gains made by the U.S. oil and gas
drilling industry. In the rest of the world, drilling
activity began to decline in the second half of 2014,
continued to decline during 2015, 2016 and 2017
before a gradual recovery in the second half of
2018 and 2019. With the onset of the COVID-19
pandemic, drilling activity, particularly in Latin
Prior to the 2014 downturn in oil prices, a growing
proportion of exploration and production spending
by oil and gas companies had 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.
The success, however, of shale drilling operators,
with their inherently short investment cycles, in
adapting to lower oil and gas costs and increasing
production, led to a slowdown in new developments
of complex offshore projects with long investment
lead times in a context of low and more volatile oil
prices, consequently affecting the level of product
differentiation.
In addition, the increasing cost competitiveness
and use of alternative renewable sources of energy
will limit growth in demand for oil and gas and
put downward pressure on oil and gas prices in the
longer term. This trend will accelerate if carbon
taxes or carbon pricing instruments resulting in high
prices for carbon emissions are implemented around
the world. In 2020, during the pandemic, there has
been an increase in the number of commitments
to reduce carbon emissions from governments and
public companies, including those operating in the oil
and gas industry, and increased calls on governments
and financial entities to introduce regulations and
policies to accelerate the energy transition away
from fossil fuels to cleaner sources of energy. Major
oil and gas companies have been adapting their
strategies to address the energy transition and some
are even setting out commitments to significantly
reduce production as early as 2030. On the other
Tenaris hand, the energy transition will create new markets
for the use of our products and services including in
the transportation and storage of hydrogen and for
carbon capture and sequestration systems.
The tables below show the annual average number
of active oil and gas drilling rigs, or rig count, in the
United States, Canada, International (worldwide
other than the United States and Canada and
excluding Iran, Sudan, onshore China, Russia
and Syria) and Worldwide, as published by Baker
Hughes, for the years indicated and the percentage
increase or decrease over the previous year. Baker
Hughes, a leading oil service company, has published
its rig counts on a monthly basis since 1975 as a
general indicator of activity in the oil and gas sector.
77.
RIG COUNT
International (*)
Canada
United States
Worldwide
2020
2019
2018
2017
2016
825
1,098
89
433
134
943
1,347
2,175
988
191
1,032
2,211
948
207
875
955
128
510
2,029
1,593
(*) International rig count excludes Iran, Sudan, onshore China, Russia and Syria (discontinued in February 2013).
PERCENTAGE INCREASE (DECREASE) OVER THE PREVIOUS YEAR
2020
2019
2018
2017
International (*)
Canada
United States
Worldwide
(25%)
(33%)
(54%)
(38%)
11%
(30%)
(9%)
(2%)
4%
(7%)
18%
9%
(1%)
62%
72%
27%
(*) International rig count excludes Iran, Sudan, onshore China, Russia and Syria (discontinued in February 2013).
Off-Balance Sheet Arrangements
As of December 31, 2020, Tenaris had the
following financial commitments, consisting of
guarantees in connection to its participation in the
non-consolidated company Techgen:
•
On February 13, 2019, Techgen entered into a
$640 million syndicated loan agreement with
several banks to refinance an existing loan,
resulting in the release of certain corporate
guarantee issued by Techgen’s shareholders to
secure the replaced facility.
Techgen’s obligations under the current facility,
which is “non-recourse” on the sponsors, are
guaranteed by a Mexican security trust covering
Techgen’s shares, assets and accounts as well as
Techgen’s affiliates rights under certain contracts. In
addition, Techgen’s collection and payment accounts
not subject to the trust have been pledged in favor
of the lenders under the new loan agreement, and
certain direct agreements –customary for these type
of transactions– have been entered into with third
parties and affiliates, including in connection with
the agreements for the sale of energy produced
Annual Report 78.
by the project and the agreements for the provision
of gas and long-term maintenance services to
Techgen. The commercial terms and conditions
governing the purchase by Tamsa, of 22% of the
energy generated by the project remain unchanged.
related to the equipment, and an agreement for
the purchase of clean energy certificates. As of
December 31, 2020, Tenaris’s exposure under
these agreements amounted to $48.8 million,
$0.9 million and $17.6 million respectively.
Under the loan agreement, Techgen is committed
to maintain a debt service reserve account
covering debt service becoming due during two
consecutive quarters; such account is funded by
stand-by letters of credit issued for the account of
Techgen’s sponsors in proportion to their respective
participations in Techgen. Accordingly, the
Company and its subsidiary based in Switzerland,
Tenaris Investments Switzerland AG, applied for
stand-by letters of credit covering 22% of the debt
service coverage ratio, which as of December 31,
2020 amounted to $9.8 million.
•
Techgen entered into certain transportation
capacity agreements, a contract for the purchase
of power generation equipment and other services
•
SSPC and the other three owners of GPC have
issued corporate guarantees to secure repayment
of loan agreements entered into by GPC, with the
Saudi Investment Development Fund, the Saudi
British Bank, the National Commercial Bank and
Banque Saudi Fransi to finance GPC’s capital
expenditures and working capital. As of December
31, 2020, SSPC’s exposure under the guarantees
amounted to $131.5 million.
In addition, we have various off-balance
sheet commitments, as described in note 26
“Contingencies, commitments and restrictions on
the distribution of profits – (ii) Commitments and
guarantees” to our audited consolidated financial
statements included in this annual report.
Tenaris Outstanding
Legal
Proceedings
Tenaris is from time to time subject to various
claims, lawsuits and other legal proceedings,
including customer, employee, tax and
environmental-related claims, in which third
parties are seeking payment for alleged damages,
reimbursement for losses, or indemnity.
Management with the assistance of legal counsel
periodically reviews the status of each significant
matter and assesses potential financial exposure.
Some of these claims, lawsuits and other legal
proceedings involve highly complex issues, and
often these issues are subject to substantial
uncertainties and, therefore, the probability of
loss and an estimation of damages are difficult
to ascertain. Accordingly, with respect to a large
portion of such claims, lawsuits and other legal
proceedings, Tenaris is unable to make a reliable
estimate of the expected financial effect that will
result from ultimate resolution of the proceeding.
In those cases, Tenaris has not accrued a provision
for the potential outcome of these cases.
If a potential loss from a claim, lawsuit or other
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 consolidated
financial statements and take into consideration
litigation and settlement strategies. In a limited
number of ongoing cases, Tenaris was able to
make a reliable estimate of the expected loss or
range of probable loss and has accrued a provision
for such loss but believes that publication of
this information on a case-by-case basis would
seriously prejudice Tenaris’s position in the
ongoing legal proceedings or in any related
settlement discussions. Accordingly, in these
cases, the Company has disclosed information with
respect to the nature of the contingency but has not
disclosed its estimate of the range of potential loss.
79.
The Company believes that the aggregate
provisions recorded for potential losses in its
consolidated financial statements (see notes 23
“Non-current allowances and provisions” and 24
“Current allowances and provisions” to our audited
consolidated financial statements included in this
annual report) 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.
Material Legal Proceedings
Below is a summary description of Tenaris’s material
legal proceedings for the year ended December 31,
2020. In addition, Tenaris is subject to other legal
proceedings, none of which is believed to be material.
CSN claims relating to the January 2012
acquisition of Usiminas shares
Confab, a Brazilian subsidiary of the Company, is
one of the defendants in a lawsuit filed in Brazil
by Companhia Siderúrgica Nacional (“CSN”) and
various entities affiliated with CSN against Confab
and several Ternium subsidiaries that acquired
a participation in Usiminas’ control group in
January 2012. The CSN lawsuit alleges that, under
applicable Brazilian laws and rules, the acquirers
were required to launch a tag-along tender offer to
all non-controlling holders of Usiminas’ ordinary
shares for a price per share equal to 80% of the
price per share paid in such acquisition, or BRL28.8,
and seeks an order to compel the acquirers to
Annual Report 80.
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
dismissed the CSN lawsuit, and on February
8, 2017, the court of appeals maintained the
understanding of the first instance court. On March
6, 2017, CSN filed a motion for clarification against
the decision of the Court of Appeals of São Paulo,
which was rejected on July 19, 2017. On August 18,
2017, CSN filed an appeal to the Superior Court
of Justice seeking the review and reversal of the
decision issued by the Court of Appeals. On March
5, 2018, the court of appeals ruled that CSN’s
appeal did not meet the requirements for submission
to the Superior Court of Justice and rejected the
appeal. On May 8, 2018, CSN appealed against such
ruling and on January 22, 2019, the court of appeals
rejected it and ordered that the case be submitted
to the Superior Court of Justice. On September 10,
2019, the Superior Court of Justice declared CSN’s
appeal admissible. The Superior Court of Justice
will review the case and then render a decision
on the merits. The Superior Court of Justice is
restricted to the analysis of alleged violations to
federal laws and cannot assess matters of fact.
The Company 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, two decisions issued by the
Brazilian securities regulator (“CVM”) in February
2012 and December 2016, and the first and second
instance court decisions referred to above.
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 and then replaced by Chubb
Seguros Brasil S/A (“Chubb”), 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 with respect to the
Veracel accident and other amounts not covered
by insurance. Itaú and Veracel claimed 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 were consolidated
and are considered by the 6th Civil Court of São
Caetano do Sul. However, each lawsuit will be
adjudicated separately.
On September 28, 2018 Confab and Chubb
entered into a settlement agreement pursuant to
which on October 9, 2018, Confab paid an amount
of approximately $3.5 million to Chubb, without
assuming any liability for the accident or the claim.
On October 10, 2018, Confab was notified that the
court had issued rulings for both lawsuits. Both
decisions were unfavorable to Confab:
Tenaris 81.
•
•
With respect to Chubb’s claim, on October 9,
2018, Confab paid an amount of approximately
BRL13.1 million (approximately $3.5 million at
historical exchange rate), including interest, fees
and expenses, settling the Chubb claim in full.
With respect to Veracel’s claim, Confab was ordered
to pay the insurance deductible and other concepts
not covered by insurance, currently estimated to
amount to BRL69.9 million (approximately
$13.5 million) including interest, fees and expenses.
Both parties filed motions for clarification against
the court’s decision, which were partially granted.
Although the contract between Confab and Veracel
expressly provided that Confab would not be liable
for damages arising from lost profits, the court
award would appear to include BRL59.9 million
(approximately $11.5 million) of damages arising
therefrom. Confab has additional defense arguments
in respect of a claim for lost profits. On December
18, 2018, Confab filed an appeal against the first
instance court decision, and on April 30, 2019,
Veracel filed its response to the appeal. At this stage
the Company cannot predict the outcome of the
claim or the amount or range of loss in case of
an unfavorable outcome.
Ongoing investigation
The Company is aware that Brazilian, Italian and
Swiss authorities have been investigating whether
certain payments were made prior to 2014 from
accounts of entities presumably associated with
affiliates of the Company to accounts allegedly
linked to individuals related to Petróleo Brasileiro
S.A. (“Petrobras”) and whether any such payments
were intended to benefit the Company’s Brazilian
subsidiary Confab. 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 did not uncover any information
that corroborated allegations of involvement in
these alleged payments by the Company or its
subsidiaries. Furthermore, the Company became
aware that a Petrobras internal investigation
commission reviewed certain contracts with
Confab and concluded that they had not found
evidence that Petrobras had benefitted Confab or
had misused applicable local content rules.
The audit committee of the Company’s board of
directors engaged external counsel in connection
with the Company’s review of these matters. In
addition, the Company voluntarily notified the
U.S. Securities and Exchange Commission (“SEC”)
and the U.S. Department of Justice (“DOJ”) in
October 2016.
In July 2019, the Company learned that the public
prosecutors’ office of Milan, Italy, had completed a
preliminary investigation into the alleged payments
and had included in the investigation, among other
persons, the Company’s Chairman and Chief
Executive Officer, two other board members,
Gianfelice Rocca and Roberto Bonatti, and the
Company’s controlling shareholder, San Faustin.
The Company is not a party to the proceedings.
In February 2020, the Company learned that the
magistrate overseeing the investigation decided
to move the case to trial. The Company’s outside
counsel had previously reviewed the Italian
prosecutors’ investigative file and has informed the
Board that neither that file nor this magistrate’s
decision sets forth evidence of involvement by any
of the three directors in the alleged wrongdoing.
Accordingly, the board of directors concluded
Annual Report 82.
that no particular action was warranted at that
time, other than inviting the referred board
members to continue discharging their respective
responsibilities with the full support of the board
of directors. As of the date of this annual report,
the trial has not yet started.
In June 2020, the Company learned that the
Brazilian public prosecutors’ office requested the
indictment of several individuals, including three
executives or former executives of Confab and
a former agent of Confab, charging them with
the alleged crimes of corruption in relation to
contracts executed between 2007 and 2010, and
money laundering in relation to payments between
2009 and 2013. Neither the Company nor Confab
is a party to the proceedings.
The Company continues to respond to
requests from and otherwise cooperate with
the appropriate authorities. The Company has
engaged in discussions with the SEC and the DOJ
towards a potential resolution of the investigation.
There are no assurances that the discussions with
the SEC or the DOJ will result in a final resolution
of the investigation or, if a resolution is achieved,
the timing, scope and terms of any such resolution.
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 the
resolution of these matters.
Putative class actions
Following the Company’s November 27, 2018
announcement that its Chairman and CEO Paolo
Rocca had been included in an Argentine court
investigation known as the Notebooks Case
(a decision subsequently reversed by a higher
court), two putative class action complaints were
filed in the U.S. District Court for the Eastern
District of New York. On April 29, 2019, the
court consolidated the complaints into a single
case, captioned “In re Tenaris S.A. Securities
Litigation”, and appointed lead plaintiffs and
lead counsel. On July 19, 2019, the lead plaintiffs
filed an amended complaint purportedly on
behalf of purchasers of Tenaris securities during
the putative class period of May 1, 2014 through
December 5, 2018. The individual defendants
named in the complaint are Tenaris’s Chairman
and CEO and Tenaris’s former CFO. The
complaint alleges that during the class period, the
Company and the individual defendants inflated
the Tenaris share price by failing to disclose that
the nationalization proceeds received by Ternium
(in which the Company held an 11.46% stake)
when Sidor was expropriated by Venezuela were
received or expedited as a result of allegedly
improper payments made to Argentine officials.
The complaint does not specify the damages that
plaintiff is seeking. On October 9, 2020, the court
granted in part and denied in part the defendants’
motions to dismiss. The court partially granted
and partially denied the motion to dismiss the
claims against the Company and its Chairman and
CEO. In addition, the court granted the motions
to dismiss as to all claims against San Faustin,
Techint, and Tenaris’s former CFO. The case will
now proceed based on the claims that survived
the motion to dismiss. Management believes the
Company has meritorious defenses to these claims;
however, at this stage Tenaris cannot predict the
outcome of the claim or the amount or range of
loss in case of an unfavorable outcome.
Investigation concerning alleged price
overcharges in Brazil
In 2018, two Brazilian subsidiaries of the Company
were notified of formal charges arising from
a review by the Tribunal de Contas da Uniao
(“TCU”) for alleged price overcharges on goods
Tenaris 83.
supplied to Petróleo Brasileiro S.A. - Petrobras
under a supply contract. Both companies have
already filed their defenses. On September 28, 2020,
TCU’s technical unit, advised TCU that the alleged
overprice should be reduced from BRL9 million
(approximately $1.7 million) to BRL401 thousand
(approximately $77 thousand), and further stated
that because of its immateriality, the alleged
overcharge should not give rise to any penalties or
indemnification obligations and acknowledged
that any potential penalties would be barred as
a result of the applicable statute of limitations.
On November 19, 2020 the Public Prosecutor’s
Office filed an opinion supporting the TCU’s
technical unit’s views. As of the date of this annual
report, TCU’s final judgment is pending. The
estimated amount of this claim is BRL30.6 million
(approximately $5.9 million). The Company
believes, based on the advice of counsel and
external consultants, that the prices charged under
the Petrobras contract do not result in overprices
and that it is unlikely that the ultimate resolution
of this matter will result in a material obligation.
Administrative proceeding concerning Brazilian
tax credits
Confab is a party to an administrative proceeding
concerning the recognition and transfer of tax
credits for an amount allegedly exceeding the
amount that Confab would have been entitled
to recognize and / or transfer. The proceeding
resulted in the imposition of a fine against Confab
representing approximately 75% of the allegedly
undue credits, which was appealed by Confab.
On January 21, 2019, Confab was notified of an
administrative decision denying Confab’s appeal,
thereby upholding the tax determination and
the fine against Confab. On January 28, 2019,
Confab challenged such administrative decision
and is currently awaiting a resolution. In case
of an unfavorable resolution, Confab may still
appeal before the courts. The estimated amount
of this claim is BRL57.2 million (approximately
$11 million). At this stage, the Company cannot
predict the outcome of this claim.
U.S. patent infringement litigation
Tenaris Coiled Tubes, LLC (“TCT”), a U.S.
subsidiary of the Company, was sued on 2017 by
its competitor Global Tubing, alleging violations
to certain intellectual property regulations and
seeking a declaration that certain Global Tubing
products do not infringe patents held by TCT. TCT
filed a counterclaim seeking declaration that certain
Global Tubing products infringe patents held by
TCT, and Global Tubing responded alleging that
such patents should be invalidated. On December
13, 2019, Global Tubing filed an amended
complaint (including the Company as defendant)
and alleging that TCT and the Company misled
the patent office in order to monopolize the coiled
tubing market for quench and tempered products.
The trial is set for August 2021. At this time, it is
not possible to predict the outcome of this matter
or estimate the range of potential losses that may
result from the resolution of this claim.
Tax assessment from Italian tax authorities
The Company’s Italian subsidiary, Dalmine,
received on December 27, 2019, a tax assessment
from the Italian tax authorities related to fiscal
year 2014. As of December 31, 2020, the claim
amounted to approximately EUR25.7 million
(approximately $31.6 million), comprising
EUR20.7 million (approximately $25.5 million)
in principal and EUR5.0 million (approximately
$6.1 million) in interest and penalties. In the
report for a tax audit conducted in 2019, the
Italian tax inspectors indicated that they also
intend to bring claims for fiscal year 2015 with
respect to the same matters; as of December 31,
2020, these additional claims would amount to
Annual Report Recent
developments
84.
approximately EUR10.5 million (approximately
$12.9 million), comprising EUR8.1 million
(approximately $10.0 million) in principal
and EUR2.4 million (approximately $2.9 million)
in interest and penalties. The claims mainly refer
to the compensation for certain intercompany
transactions involving Dalmine in connection
with sales of products and R&D activities.
On July 27, 2020, Dalmine filed a first-instance
appeal before the Milan tax court against the
2014 tax assessment. Based on the advice of
counsel, the Company believes that it is unlikely
that the ultimate resolution of these matters will
result in a material obligation.
Annual Dividend Proposal
On February 24, 2021, the Company’s board of
directors proposed, for the approval of the annual
general shareholders’ meeting scheduled be held on
May 3, 2021, the payment of an annual dividend of
$0.21 per share ($0.42 per ADS), or approximately
$248 million, which includes the interim
dividend of $0.07 per share ($0.14 per ADS) or
approximately $83 million, paid on November 25,
2020. If the annual dividend is approved by the
shareholders, a dividend of $0.14 per share
($0.28 per ADS), or approximately $165 million
will be paid on May 26, 2021, with an ex-dividend
date of May 24, 2021.
Product liability litigation
The Company’s recently acquired U.S. subsidiary,
IPSCO, or its subsidiaries, are parties to several
product liability claims, which may result in
damages for an aggregate amount estimated at
approximately $17.6 million. This includes a
lawsuit alleging product liability and negligent
misrepresentation in which the plaintiff alleges
that defects in certain casing provided by IPSCO
resulted in three well failures causing damages
for an amount of approximately $15 million.
Although at this time the Company cannot predict
the outcome of any of these matters, the Company
believes that provisions have been recorded in
an amount sufficient to cover potential exposure
under these claims.
Tenaris Corporate
Governance
Statement
The Company’s corporate governance practices are
governed by Luxembourg Law (including among
others, the Luxembourg Law of August 10, 1915
on commercial companies (the “Luxembourg
Company Law”), the Luxembourg Law of
January 11, 2008, on transparency requirements
for issuers, as amended (which transposes EU
Directive 2004/109 of the European Parliament
and of the Council of December 15, 2004), the
Luxembourg Law of August 1, 2019 (amending
the Luxembourg Law of May 24, 2011) (the
“Shareholders’ Rights Law”) on the exercise of
certain rights of shareholders in general meetings
of listed companies, which transposes EU Directive
2017/828 of the European Parliament and of the
Council of May 17, 2017 (amending Directive
2007/36/EC) regarding the encouragement of long-
term shareholder engagement in listed companies
within the Member States of the European
Union and the Luxembourg law of July 23, 2016,
concerning the audit profession (the “Audit
Reform Law”)) , and by the Company’s articles
of association. As a Luxembourg company listed
on the New York Stock Exchange (the NYSE),
the Bolsa Mexicana de Valores, S.A. de C.V. (the
Mexican Stock Exchange) and Borsa Italiana
S.p.A. (the Italian Stock Exchange), the Company
is required to comply with some, but not all,
of the corporate governance standards of these
exchanges. The Company, however, believes that
the Company’s 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 are traded, please
visit our website at: https://www.tenaris.com/en/
corporate-governance-practices/
85.
The Company has adopted a code of conduct
incorporating guidelines and standards of integrity
and transparency applicable to all of our directors,
officers and employees. As far as the nature of
each relation permits, principles detailed in the
code of conduct also apply to relations with
our contractors, subcontractors, suppliers and
associated persons. In addition, we have adopted
a supplementary code of ethics, which applies
specifically to our principal executive officer,
principal financial officer, principal accounting
officer or controller, or persons performing similar
functions and is intended to supplement the
Company’s code of conduct. The text of our code
of conduct and code of ethics is posted on our
Internet website at: https://www.tenaris.com/en/
sustainability/governance-and-ethics/
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 and the
Company’s articles of association. 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
Annual Report 86.
in Luxembourg and by issuing a press release
informing of the calling of such meeting. In case
the Company’s 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 the Company’s 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 of the
votes validly cast, irrespective of the number of
shares present or represented. 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 share capital is represented
at the meeting. If a quorum is not reached at
the first extraordinary shareholders’ meeting, a
second extraordinary shareholders’ meeting may
be convened in accordance with the Company’s
articles of association and applicable law and
such second extraordinary general shareholders’
meeting shall validly deliberate regardless of the
number of shares represented. In both cases, the
Luxembourg Company 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.
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 but may be reappointed
or removed at any time, with or without cause, by
the general shareholders’ meeting, 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 shall have the right to 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 elected to fill
a vacancy shall expire at the end of the term of
office of the replaced director.
The next Company’s annual general shareholders’
meeting, that will consider, among other matters
our Consolidated Financial Statements and Annual
Accounts included in this annual report, will
take place in the Company’s registered office in
Luxembourg, on Monday, May 3, 2021, at 3:30
P.M., Central European Time.
The articles of association provide that the annual
general shareholder’s meetings shall meet in
Tenaris Luxembourg within six months from the end of
the previous financial year at the date, place and
hour indicated in the convenience notice. The
rights of the shareholders attending the meetings
are governed by the Shareholders’ Rights Law.
Holders of shares deposited in fungible securities
accounts have the same rights and obligations as
holders of shares recorded in the Company’s share
register. However, in order to be able to participate
in and vote at shareholders’ meetings of the
Company, the former must submit, prior to the
relevant meeting, reasonably satisfactory evidence
to the Company as to the number of shares held
on the applicable record date for such meeting.
For as long as the shares or the other securities
of the Company are listed on a regulated market
within the European Union, participation in a
shareholders’ general meeting shall inter alia be
subject to the relevant shareholder holding shares
of the Company on the fourteenth day midnight
Central European Time prior to the meeting
(unless otherwise provided for by applicable law).
Holders of ADSs only have those rights that are
expressly granted to them in the deposit agreement.
Holders of record of our ADRs as of the relevant
ADR holders’ record date set for any given general
shareholders’ meeting are entitled to instruct the
Depositary as to the exercise of the voting rights in
respect of the shares underlying such holder’s ADRs
at such meeting. Holders of ADRs maintaining
non-certificated positions must follow voting
instructions given by their broker or custodian bank.
at the Company’s website at https://ir.tenaris.com/
investor-relations in accordance with applicable
laws and regulations, and will be timely filed by the
Company with the applicable authorities.
87.
Access to Corporate Records
Luxembourg law and the Company’s articles of
association do not generally provide for shareholder
access to corporate records. Shareholders may
inspect the annual accounts and auditors’ reports
at our registered office during the fifteen-day period
prior to a general shareholders’ meeting.
Appraisal Rights
In the event the Company’s shareholders approve:
•
•
•
•
•
•
the delisting of the shares from all stock exchanges
where the shares are listed at that time,
a merger in which the Company is not the
surviving entity (unless the shares or other equity
securities of such entity are listed on the New York
or London stock exchanges),
a sale, lease, exchange or other disposition of all or
substantially all of the Company’s assets,
an amendment of our articles of association that
has the effect of materially changing the Company’s
corporate purpose,
the relocation of the Company’s domicile outside
of the Grand Duchy of Luxembourg, or
amendments to the Company’s articles of
association that restrict the rights of the
Company’s shareholders;
The notice to the annual general shareholders
meeting to be held on May 3, 2021, and the
Shareholder Meeting Brochure and Proxy Statement
for the meeting, describing the procedures voting at
the meetings applicable to shareholders is available
Dissenting or absent shareholders have the right
to have their shares repurchased by the Company
at (i) the average market value of the shares over
the 90 calendar days preceding the applicable
shareholders’ meeting or (ii) in the event that the
Annual Report 88.
shares are not traded on a regulated market, the
amount that results from applying the proportion
of the Company’s equity that the shares being sold
represent over the Company’s net worth as of the
date of the applicable shareholders’ meeting.
Dissenting or absent shareholders must present their
claim within one month following the date of the
shareholders’ meeting and supply the Company with
evidence of their shareholding at the time of such
meeting. The Company must (to the extent permitted
by applicable laws and regulations and in compliance
therewith) repurchase its shares within six months
following the date of the shareholders’ meeting.
If delisting from one or more, but not all, of the stock
exchanges where the shares are listed is approved in
the shareholders’ meeting, only dissenting or absent
shareholders with shares held through participants in
the local clearing system for that market or markets
can exercise this appraisal right if:
•
•
they held the shares as of the date of the
announcement by the Company of its intention
to delist or as of the date of publication of the
first convening notice for the general shareholders’
meeting that approved the delisting; and
they present their claim within one month following
the date of the general shareholders’ meeting and
supply evidence of their shareholding as of the date
of the Company’s announcement or the publication
of the first convening notice to the meeting.
In the event a shareholder exercises its appraisal
rights, applicable Luxembourg law provisions
shall apply.
after allowing for the payment of all debts and
expenses will be paid out to the holders of the
shares in proportion to their respective holdings.
Transferability and Form
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 shares.
The shares are issuable in registered form only.
The ownership of registered shares is evidenced
by the inscription of the name of the shareholder,
the number of shares held by such shareholder and
the amount paid on each share in the Company’s
share register. In addition, the Company’s shares
may be held through fungible securities accounts
with financial institutions or other professional
depositaries.
Shares held through fungible securities accounts
may be transferred in accordance with customary
procedures for the transfer of securities in book-
entry form. Shares that are not held through
fungible securities accounts may be transferred by
a written statement of transfer signed by both the
transferor and the transferee or their respective
duly appointed attorney-in-fact and recorded
in the Company’s share register. The transfer of
shares may also be made in accordance with the
provisions of Article 1690 of the Luxembourg Civil
Code. As evidence of the transfer of registered
shares, the Company may also accept any
correspondence or other documents evidencing the
agreement between transferor and transferee as to
the transfer of registered shares.
Distribution of Assets on Winding-Up
In the event of the Company’s liquidation,
dissolution or winding-up, the net assets remaining
Repurchase of Company shares
The Company may repurchase its own shares in
the cases and subject to the conditions set by the
Tenaris 89.
Luxembourg Company Law and, in the case of
acquisitions of shares or ADSs made through a stock
exchange in which shares or ADSs are traded, with
any applicable laws and regulations of such market.
Limitation on Securities Ownership
There are no limitations currently imposed by
Luxembourg law or the articles of association on
the rights of the Company’s non-resident or foreign
shareholders to hold or vote the Company’s shares.
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 twelve 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. In 2020, the Company’s
board of directors met thirteen times. 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.
The Company’s articles of association provide
that the board of directors of the Company may
within the limits of applicable law, (a) delegate
to one or more persons, whether or not members
of the board of directors, the powers necessary
to carry out its decisions and to provide day-to-
day management (except for approval of material
transactions with related parties, which may not
be delegated and shall be approved by the board
of directors prior opinion of the audit committee),
(b) confer to one or more persons, whether or not
members of the board of directors the powers
deemed to be appropriate for the general technical
administrative and commercial management of
the Company, (c) constitute an audit committee
formed by directors, determining its function and
authority, and (d) constitute any other committee,
whose members may or may not be members of the
board of directors and determine their functions
and authority. On June 3, 2020, the board of
directors appointed the Company’s chief executive
officer as administrateur délégué and delegated to
him the power to manage the Company’s affairs
within the ordinary course of business, to the full
extent permitted by Luxembourg law, to direct and
supervise the business activities of the Company’s
subsidiaries and to represent the Company in
relation to such matters.
Annual Report 90.
On June 2, 2020, the Company’s annual general
shareholders’ meeting appointed Mr. Simon Ayat
to the board of directors and re-appointed
Mr. Roberto Bonatti, Mr. Carlos Condorelli,
Mr. Germán Curá, Mr. Roberto Monti,
Mr. Gianfelice Mario Rocca, Mr. Paolo Rocca,
Mr. Jaime José Serra Puche, Mr. Yves Speeckaert,
Ms. Mónica Tiuba, Mr. Amadeo Vázquez y
Vázquez and Mr. Guillermo Vogel, as members
of its board of directors, each board member to
serve until the next annual shareholders’ meeting
that will be convened to decide on the Company’s
2020 annual accounts. The board of directors
subsequently reappointed Paolo Rocca as chairman
and chief executive officer and Guillermo Vogel and
Germán Curá as vice-chairmen of the Company. The
following table sets forth the name of the Company’s
current directors, their respective positions on the
board, their principal occupation, their years of
service as board members and their age.
Name
Position
Principal Occupation
Years as
Board Member
Age at
December 31, 2020
Mr. Simon Ayat
Mr. Roberto Bonatti (1)
Mr. Carlos Condorelli
Mr. Germán Curá
Mr. Roberto Monti
Mr. Gianfelice Mario Rocca (1)
Mr. Paolo Rocca (1)
Mr. Jaime José Serra Puche
Mr. Yves Speeckaert
Ms. Mónica Tiuba
Mr. Amadeo Vázquez y Vázquez
Mr. Guillermo Vogel
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director of Tenaris
President of San Faustin
Director of Tenaris and Ternium
Director and Vice Chairman of the Board of Tenaris
Director of YPF S.A.
Chairman of the board of directors of San Faustin
Chairman and Chief Executive Officer of Tenaris
Chairman of S.A.I. Derecho & Economía
Director of Tenaris
Director of Tenaris and Chairperson of Tenaris Audit Committee
Director of Tenaris
Director and Vice Chairman of the Board of Tenaris
1
18
14
3
16
18
19
18
4
3
18
18
66
71
69
58
81
72
68
69
60
42
78
70
(1) Paolo Rocca and Gianfelice Mario Rocca are brothers, and Roberto Bonatti is Paolo and Gianfelice Mario Rocca’s first cousin.
Tenaris
Simon Ayat
Mr. Ayat is a member of the
Company’s board of directors.
He served as Schlumberger’s executive
vice president and chief financial
officer from 2007 until early 2020
and he is currently a senior strategic
advisor to the chief executive officer
of Schlumberger. Mr. Ayat has held
several financial and operational
positions in Schlumberger, where he
commenced his career in 1982. He
was based in Paris, Houston and
Dallas, as well as in the Middle East
and Far East regions, serving as group
treasurer, controller, Geomarket
manager for Indonesia and drilling
regional vice president for Asia
Pacific. Mr. Ayat is also a member
of the board of directors of Liberty
Oilfied Services, a leading provider
of hydraulic fracturing and wireline
services to E&P companies in North
America, and Eurasia Drilling
Company, the largest provider of
drilling services in Russia. He is a
French and Lebanese citizen.
91.
Germán Curá
Mr. Curá is a member of the
Company’s board of directors
and also holds the position of Vice
Chairman of the Board. He served
as president of our operations in
North America until May 2, 2018,
a position held since 2006. He was
first employed by 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 subsidiary, 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 global business unit
and Tenaris commercial director. He
was also a member of the board of
directors of API and currently serves as
a member of the board of directors of
the American Iron and Steel Institute
(“AISI”) and of Alussa Energy LLC.
He is a marine engineer from the
Instituto Tecnológico de Buenos Aires
and an MBA graduated from the
Massachusetts Institute of Technology.
Mr. Curá is an U.S. citizen.
Roberto Bonatti
Mr. Bonatti is a member of the
Company’s board of directors.
He is a grandson of Agostino Rocca,
founder of the Techint Group,
a group of companies controlled
by San Faustin. Throughout his
career in the Techint Group he has
been involved specifically in the
engineering and construction and
corporate sectors. He was first
employed by the Techint Group
in 1976, as deputy resident engineer
in Venezuela. In 1984, he became
a director of San Faustin, and from
2001 until 2020 he has served as its
president. 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 the Company’s chief
financial officer from October 2002
until September 2007. He is also a
board member of Ternium. He has
held several positions within Tenaris,
including also the chief financial
officer position in some of the
principal Tenaris Group companies
and member of the Company’s audit
committee between November 1,
2017 and May 2, 2018. He also served
as president of the board of directors
of Empresa Distribuidora La Plata S.A.
(“Edelap”), an Argentine utilities
company. Mr. Condorelli is an
Argentine citizen.
Annual Report 92.
Roberto Monti
Mr. Monti is a member of the
Company’s board of directors and of
its audit committee. He is a member
of the board of directors of YPF
S.A. 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 chairman of the board of
directors of San Faustin, member of
the board of directors of Ternium,
president of the Humanitas Group
and president of the board of
directors of Tenova S.p.A. Moreover,
in Italy, he is member of the board
of Bocconi University, of the
advisory board of Politecnico di
Milano. At international level, he
is member of the Harvard Business
School Advisory Board and member
of the European Round Table of
Industrialists (“ERT”). 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 and a director
and President of San Faustin. He is
a member of the executive committee
of the World Steel Association.
Mr. Rocca is an Italian citizen.
Jaime José Serra Puche
Mr. Serra Puche is a member of
the Company’s board of directors
and of its audit committee. He is
the chairman of SAI Derecho &
Economia, a Mexican consulting
firm, and a member of the board of
directors of the Mexico Fund, Grupo
Vitro, and chairman of the board of
BBVA Bancomer. Mr. Serra Puche
served as Mexico’s Undersecretary
of Revenue, Secretary of Trade
and Industry, and Secretary of
Finance. He led the negotiation
and implementation of NAFTA.
Mr. Serra Puche is a Mexican citizen.
Yves Speeckaert
Mr. Speeckaert is a member of
the Company’s board of directors.
He served as director of KPMG
Consulting in London, United
Kingdom and Sao Paulo, Brazil,
where he led various high-profile
engagements in the telecom, energy
and agri-business industries. He was
also director of structured finance
of Banca Intesa-Sanpaolo (London).
Since 2010 he is a Luxembourg-based
independent director of regulated
investment funds (mostly private
equity, RE, and UCITS funds,
as well as impact funds) and he
is a member of the board of directors
of several industrial holdings.
He is also active in carbon offsetting
and climate change mitigation
strategies with funds, governments
and corporations particularly as
related to corporate environmental
and social responsibility (“ESR”).
He is a member of the Luxembourg
Institute of Administrators (“ILA”).
He holds an MBA from the University
of California at Berkeley and a B.A.
in Philosophy from the University
of Louvain and is a contributing
and active member of the Alumni
association of UC Berkeley.
Mr. Speeckaert is a Belgian citizen.
Tenaris 93.
Amadeo Vázquez y Vázquez
Mr. Vázquez y Vázquez is a member
of the Company’s board of directors
and of its audit committee. He is
a member of the advisory board
of the Fundación de Investigaciones
Económicas Latinoamericanas and
member of the Asociación Empresaria
Argentina. He is a business consultant
and previously 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,
chairman of the board of directors
of Telecom Argentina S.A. until
April 2007 and independent alternate
director of Gas Natural Ban, S.A, of
Grupo Gas Natural Fenosa until April
2018. He is also independent alternate
director of Naturgy BAN S.A, a gas
distribution company in Argentina.
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 also holds the position of vice
chairman of the Board. He is the
chairman of G Collado SAB de C.V.
and Exportaciones IM Promoción
S.A. de C.V., and served as president
of Cámara Nacional de la Industria
del Hierro y el Acero (“CANACERO”)
until April 16, 2018, where he is
currently a member of the Executive
Commission. Mr. Vogel is also a
member of the board of directors of
each of Techint, S.A. de C.V., Alfa S.A.
de C.V., Banco Santander (México)
S.A, the Universidad Panamericana
– IPADE, Corporación Mexicana de
Inversiones de Capital S.A., Innovare
R&D S.A. de C.V. 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.
Mónica Tiuba
Ms. Tiuba is a member of Tenaris’s
board of directors and chairperson of
the audit committee. She is a Brazilian
qualified lawyer and accountant with
20 years of professional experience in
Brazil and Luxembourg. She started
her career at Barbosa, Mussnich &
Aragão law firm in Rio de Janeiro,
Brazil, where she practiced corporate
law, M&A and tax litigation. She
worked in EY and PwC, in the Brazil
and Luxembourg offices, advising
multinational clients, private equity
houses and family offices. She gained
banking experience working as
international senior wealth planner
at Banque Edmond de Rothschild,
in Luxembourg. She currently serves
as member of the board of directors
of Investing for Development SICAV,
a Luxembourg social impact fund
and is a member of its Forest and
Climate Change Fund. She holds
a Master of Laws in International
and Comparative Law at the Vrije
Universiteit Brussel, a specialization
in EU tax law from Leiden University
and a Master of Laws in international
taxation from Vienna University of
Economics. Ms. Tiuba is a Brazilian
and Luxembourgish citizen.
Annual Report 94.
Board members Ayat, Monti, Serra Puche,
Speeckaert, Tiuba, Vázquez y Vázquez qualify
as independent directors under the U.S. Securities
Exchange Act Rule 10A-3(b)(1) and the Company’s
articles of association.
Directors’ Liability
Each director must act in the interest of the
Company, 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 the Luxembourg Company Law, directors
may be liable to the Company in accordance with
the general law for the execution of their mandate
and for any misconduct in the management of
the Company’s affairs. Directors are jointly and
severally liable towards either the Company or
any third parties from damages resulting from the
violation of the Luxembourg Company Law or the
Company’s articles of association. Directors shall
be discharged from such liability in the case of a
violation to which they were not a party provided
no misconduct is attributable to them and such
violation has been reported to the first general
meeting of shareholders after they have acquired
knowledge thereof.
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.
An action may also be brought against the directors
on behalf of the Company by shareholders who,
at the general meeting which decided to discharge
such directors or members, owned voting securities
representing at least ten percent of the votes
attaching to all such securities.
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, any such discharge will not release the
directors from liability for any damage caused by
unrevealed acts of mismanagement or unrevealed
breaches of the Luxembourg Company Law or the
Company’s articles of association, nor will it release
directors from liability for any personal loss of the
shareholders independent and separate from losses
suffered by the Company due to a breach either
revealed or unrevealed of the Luxembourg Company
Law or the Company’s articles of association.
Under Luxembourg law, unless the decision
of the board of directors relates to ordinary
business entered into under normal conditions,
any director having a direct or indirect financial
interest conflicting with that of the Company in a
transaction which has to be considered by the board
of directors, must advise the board thereof and
cause a record of her/his statement to be included
in the minutes of the meeting and may not take part
in the deliberations. At the next following general
meeting, before any other resolution is put to vote, a
special report must be made on any transactions in
which any of the directors may have had an interest
conflicting with that of the Company.
Tenaris 95.
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,
the majority of whom must qualify as independent
directors, provided, however, that the composition
and membership of the audit committee shall
satisfy such requirements as are applicable to, and
mandatory for, audit committees of issuers such
as the Company under any law, rule or regulation
applicable to the Company (including, without
limitation, the applicable laws, rules and regulations
of such regulated market or markets).
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.
Ms. Mónica Tiuba and Mr. Amadeo Vázquez
y Vázquez, who were appointed to the audit
committee by the Company´s board of directors
on June 3, 2020. As of the date of this annual
report, all members of the audit committee qualify
as independent directors both for purposes of the
U.S. Securities Exchange Act Rule 10A-3(b)(1), and
under the Company’s articles of association. The
board of directors of the Company has determined
that Ms. Tiuba qualifies an “audit committee
financial expert” under applicable SEC rules and
has competence in accounting or auditing matters,
as required by applicable Luxembourg law. In
addition, the membership of the audit committee
as a whole has sufficient relevant knowledge of
the business and financial experience to properly
discharge its functions.
The audit committee operates under a charter
which has been amended and restated by the board
of directors on October 31, 2018, to implement
adequate procedures to discharge the audit
committee’s duties and responsibilities under
applicable law, including the Audit Reform Law. The
audit committee assists the board of directors in its
oversight responsibilities relating to (i) the integrity
of the Company’s financial statements; (ii) the
effectiveness of the Company’s systems of internal
control, risk management and internal audit over
financial reporting; and (iii) the independence and
performance of the Company’s external auditors.
The audit committee also performs other duties
entrusted to it by the Company’s board of directors
or required to be performed by it under applicable
laws and regulations.
The audit committee of the Company’s board
of directors currently consists of four members:
Mr. Roberto Monti, Mr. Jaime José Serra Puche,
In addition, the audit committee is required by
the Company’s articles of association to review
“material transactions”, as such term is defined
Annual Report 96.
under the Company’s articles of association and
audit committee’s charter, between the Company
or its subsidiaries and “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 is
only required to review 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 (i) with an
individual value equal to or greater than $10
million, or (ii) with an individual value lower
than $10 million, when the aggregate sum – as
reflected in the financial statements of the four
fiscal quarters of the Company preceding the date
of determination- of any series of transactions for
such lower value that can be deemed to be parts of
a unique or single transaction (but excluding any
transactions that were reviewed and approved by
Company’s audit committee or board of directors,
as applicable, or the independent members of
the board of directors of any of its subsidiaries)
exceeds 1.5% of the Company’s consolidated net
sales made in the fiscal year preceding the year on
which the determination is made;
any corporate reorganization transaction
(including a merger, spin-off or bulk transfer of a
business) affecting the Company for the benefit of,
or involving, a related party; and
• any corporate reorganization transaction (including
a merger, spin-off or bulk transfer of a business) not
reviewed and approved by the independent members
of the board of directors of any of the Company’s
direct or indirect subsidiaries, affecting any of the
Company’s direct or indirect subsidiaries for the
benefit of, or involving, a related party.
A “related party” is, in relation to the Company or
its direct or indirect subsidiaries, any of the following
persons: (i) a member of the board of directors
of the Company or of the board of directors or
other governing body of any of the Company’s
subsidiaries; (ii) any company or person that controls
directly or indirectly the Company or is a member
of the board of directors or other governing body
of an entity that controls directly or indirectly the
Company; (iii) any entity that directly or indirectly
controls or is under common control with the
Company (other than the Company’s subsidiaries);
(iv) any entity directly or indirectly controlled by any
member of the board of directors of the Company, or
of the board of directors or other governing body of
any subsidiary of the Company; and (v) any spouses,
parents, siblings or relatives up to the third degree of,
and any person that shares a home with, any person
referred to in (i) or (ii).
The audit committee has the power (to the
maximum extent permitted by applicable laws) to
request that the Company or relevant subsidiary
promptly provide all information necessary for the
audit committee to assess the material transactions
with related parties that it is required to review.
A material related party transaction shall not be
entered into without prior review by the Company’s
audit committee and subsequent approval by the
board of directors unless (i) the circumstances
underlying the proposed transaction justify that
Tenaris 97.
it be entered into before the time it can actually
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 board of directors does not approve it.
The audit committee has the authority to conduct
any investigation appropriate to the fulfillment
of its responsibilities and has direct access to the
Company’s external auditors as well as anyone in
the Company and, subject to applicable laws and
regulations, its subsidiaries. In addition, the audit
committee may engage, at the Company’s expense,
independent counsel and other internal or external
advisors to review, investigate or otherwise advise
on, any matter as the committee may determine
to be necessary to carry out its purposes and
responsibilities.
In addition, the Company has established at
management-level a critical risk committee
(“CRC”) that assists the Company’s board of
directors, the audit committee and the Chief
Executive Officer in connection with the
monitoring, assessment and review of risks to
which Tenaris is exposed and in the oversight
of the risk management framework and
processes, with a focus on critical risks (including
cybersecurity, environmental, health and safety,
product liability, intellectual property, financial
reporting and regulatory risks), the development
of mitigating actions, and the monitoring
of action plans. The critical risk committee
periodically reports to the board of directors, the
audit committee and the Chief Executive Officer
on its activities.
More recently, the CRC has focused its attention
on the preventive measures and mitigating actions
in response to the COVID-19 outbreak and global
economic crisis and on preventive measures to
protect the Company from potential cyberattacks.
Annual Report 98.
Senior management
Our current senior management as of the date
of this annual report consists of:
Name
Position
Age at
December 31, 2020
Chairman and Chief Executive Officer
68
Mr. Paolo Rocca
Ms. Alicia Móndolo
Mr. Antonio Caprera
Chief Financial Officer
Chief Industrial Officer
Mr. Gabriel Casanova
Chief Supply Chain Officer
Mr. Alejandro Lammertyn
Chief Digital and Information Officer
Ms. Paola Mazzoleni
Mr. Marcelo Ramos
Chief Human Resources Officer
Chief Technology Officer
Mr. Vicente Manjarrez
President, Andean
Mr. Luca Zanotti
President, United States
Mr. Sergio de la Maza
Mr. Ricardo Prosperi
Mr. Renato Catallini
President, Mexico
President, Canada
President, Brazil
Mr. Javier Martínez Alvarez
President, Southern Cone
Mr. Gabriel Podskubka
President, Eastern Hemisphere
Mr. Michele Della Briotta
President, Europe
62
60
62
55
44
57
42
53
64
58
54
54
47
48
Tenaris
Paolo Rocca
Mr. Rocca is the Chairman of the
Company’s board of directors and
our Chief Executive Officer. He
is a grandson of Agostino Rocca.
He is also the chairman of the
board of directors of Ternium
and a director and President of
San Faustin. He is a member of the
executive committee of the World
Steel Association. Mr. Rocca is an
Italian citizen.
Alicia Móndolo
Ms. Móndolo currently serves as
our Chief Financial Officer, a
position she assumed in August 2019.
Ms. Móndolo joined the Techint
Group in 1984 and has more than
35 years of experience in accounting
and reporting, audit and finance.
From 2010 to 2016, she served as
Chief Audit Executive of Tenaris.
Previously and from 2016 to 2019,
she served as financial officer in
several companies in the Techint
Group. Ms. Móndolo is an Argentine
and Italian citizen.
99.
Antonio Caprera
Mr. Caprera currently serves as our
Chief Industrial Officer, a position
he assumed in April 2017. 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.
Gabriel Casanova
Mr. Casanova currently serves as
our Chief Supply Chain Officer,
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.
Alejandro Lammertyn
Mr. Lammertyn currently serves as
our Chief Digital and Information
Officer. He has served as our
Chief Planning and Commercial
Coordination Officer since 2013 and
assumed additional responsibility for
digital strategy and implementation
in January 2019. Mr. Lammertyn
began his career with Tenaris
in 1990. Previously, he served as
assistant to the chief executive officer
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 Chief Human Resources Officer,
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 Tenaris’ Global
Trainee Program and then served
as the regional head in Italy of
Tenaris University. Ms. Mazzoleni
was appointed as human resources
director in Romania in 2008, in Italy
in 2012 and in the United States
in 2014. Ms. Mazzoleni is an
Italian citizen.
Annual Report 100.
Marcelo Ramos
Mr. Ramos currently serves as our
Chief Technology Officer, with
responsibility over technology
and quality. Previously he served
as corporate quality director and
managing director of NKKTubes.
He joined the Techint Group in
1987 and has held various positions
within Tenaris. He assumed his
current position in April 2010,
when the quality and technology
departments were combined.
Mr. Ramos is an Argentine citizen.
Vicente Manjarrez
Mr. Manjarrez is currently president
of our operations in the Andean
Region, Central America and the
Caribbean, based in Colombia.
He began his career at our Tamsa
mill in Veracruz, Mexico in 2003 as
part of the maintenance team and
eventually adopted a leading role in
the expansion of the plant in 2009 as
manager of the new rolling mill. In
2015 he moved to Romania to lead the
technical sales team before returning
to Colombia to take on the role of
senior commercial director in 2017.
Mr. Manjarrez is a Mexican citizen.
Luca Zanotti
Mr. Zanotti currently serves as
president of our operations in the
United States. In 2002, he joined
Exiros, the procurement company
for the Techint Group, as planning
and administration director. He was
later promoted to raw materials
director and in July 2007 became
managing director of Exiros, a
position he held until 2010. He
served as regional manager Europe,
and managing director of Dalmine
from 2011 to 2015, when he assumed
his current position. Before joining
the Techint Group, he was a senior
manager at A.T. Kearney in Milan,
where he worked from 1998 to 2002,
and prior to that he held various
business development positions in
the Far East for Lovato Electric.
Mr. Zanotti is an Italian citizen.
Sergio de la Maza
Mr. de la Maza currently serves
as our president, Mexico and also
serves as managing director and
executive vice-president of Tamsa.
He first joined Tamsa in 1980. From
1983 to 1988, Mr. de la Maza worked
in several positions in Tamsa. 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 2003. Mr. de la Maza is
a Mexican citizen.
Ricardo Prosperi
Mr. Prosperi currently serves as
president of our operations in
Canada. He joined the Techint
Group in 1985, working in the
Siderar planning department. From
1985 to 1998, Mr. Prosperi held
several positions in Siderar before
becoming the exports general
manager of Sidor. He later went
on to be the commercial director in
Siderar. After a period as president
of Ternium Sidor in Venezuela and
then International Area Manager for
Ternium, he joined Tenaris in 2010,
where he has served as president
of our operations in the Andean
Region, Central America and the
Caribbean, based in Colombia.
Mr. Prosperi is an Argentine citizen.
Renato Catallini
Mr. Catallini currently serves as
president of our operations in Brazil,
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
International, TransCanada Pipelines
and TotalFinaElf, among others.
Mr. Catallini is an Argentine and
Italian citizen.
Tenaris 101.
Michele Della Briotta
Mr. Della Briotta currently serves
as president of our operations in
Europe, 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.
Javier Martínez Álvarez
Mr. Martínez Álvarez currently
serves as president of our operations
in the Southern Cone, 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
president of our operations in the
Eastern Hemisphere, 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.
Annual Report 102.
Directors’ and senior management compensation
The compensation payable to the members
of the Company’s board of directors for their
performance of their services to the Company
is determined at the annual ordinary general
shareholders’ meeting. The general meeting of
shareholders held on June 2, 2020, approved
the compensation paid to directors for the
performance of their duties during the fiscal year
2020 and resolved that (i) each director receive a
fixed compensation for an amount of $97,750;
(ii) each director who is also a member of the
Company’s audit committee receives an additional
fee of $46,750; and (iii) the chairperson of the
Company’s audit committee receives an additional
fee of $8,500. No variable compensation has been
paid or shall be payable to directors for services
rendered during the year 2020 and no long-term
incentive or pension plan is available to directors.
The compensation paid to the Company’s
managing director or chief executive officer is
determined by the board of directors. The cash
compensation paid or payable to chief executive
officer for the performance of his duties during
the year 2020 amounts to $5.6 million, of which
$3 million corresponds to fixed compensation and
$2.6 million corresponds to variable compensation.
No long-term incentive or pension plan is awarded
to the chief executive officer.
The aggregate cash compensation paid to all
directors and senior managers of the Company
for the year 2020 amounted to $27.4 million.
This amount includes cash benefits paid to certain
senior managers in connection with pre-existing
retirement plans. In addition, senior managers
received for the year 2020, 522,000 units for a
total amount of $5.0 million in connection with
the employee retention and long-term incentive
program described in note II.P.3 “Employee
benefits - Other long-term benefits” to our audited
consolidated financial statements included in this
annual report.
The Luxembourg Parliament enacted the
Luxembourg Law of August 1, 2019 (amending the
Luxembourg Law of May 24, 2011) on the exercise
of certain rights of shareholders in general meetings
of listed companies, which transposes EU Directive
2017/828 of the European Parliament and of the
Council of May 17, 2017 (amending Directive
2007/36/EC) regarding the encouragement of long-
term shareholder engagement in listed companies
within the Member States of the European Union.
The Shareholders’ Rights Law requires EU listed
companies to adopt a Compensation Policy setting
forth the principles and guidelines for purposes
of determining the compensation payable to the
members of the Company’s board of directors and
the managing director or chief executive officer
and annual Compensation Reports describing the
annual compensation paid to directors and the chief
executive officer for the performance of their duties.
The Company’s board of directors approved,
at its meeting held on April 29, 2020, the
Compensation Policy of the Company, which was
submitted to an advisory non-binding vote at the
shareholders meeting held on June 2, 2020, and
approved by majority vote. The Compensation
Policy is available on the Company’s website and
will be submitted to the non-binding vote of
the shareholders every four years, to the extent
required by Luxembourg law, or in the event of
a material amendment thereto.
Tenaris 103.
In addition, on March 29, 2021, the Company’s
board of directors approved the 2020 Compensation
Report, which is available on the Company’s website
and will be submitted to the non-binding vote of
the shareholders at the next general meeting of
shareholders scheduled to be held on May 3, 2021.
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 the
Company’s 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 for reasonable cause by the general
shareholders’ meeting at any time. Luxembourg
law does not allow directors to serve concurrently
as external auditors. As part of their duties,
auditors report directly to the audit committee.
Pursuant to its charter, the Company’s audit
committee is responsible for, among other things,
the oversight of the independence and performance
of the Company’s external auditors. The audit
committee is also responsible to consider and make
recommendations to the board of directors, to
be put to shareholders for approval at the annual
general meeting of shareholders, regarding the
appointment, re-appointment or removal of
the Company’s external auditors. In addition,
the audit committee is responsible to review the
appropriateness and provision of permitted non-
audit fees and to review and approve any fees
(whether for audit, audit-related and non-audit
services) payable to the Company’s external
auditors. On a yearly basis, in the performance of
its functions, the audit committee considers the
appointment of the Company’s external auditors
and reviews, together with management and the
external auditor, the audit plan, audit related
services and other non-audit services. The audit
committee requests the board of diretors to submit
the audit committee’s recommendation for the
appointment of the Company’s external auditor
for each fiscal year and the payment of applicable
fees, for final approval by the general shareholders’
meeting. The general shareholders’ meeting regularly
approves such audit fees and authorizes the audit
committee to approve any increase or reallocation
of audit fees as may be necessary, appropriate or
desirable under the circumstances. No services
outside the scope of the audit committee’s approval
can be undertaken by the external auditor.
The shareholders’ meeting held on June 2, 2020,
re-appointed PwC Luxembourg as the Company’s
independent approved statutory auditor for the fiscal
year ended December 31, 2020. At the next annual
general shareholders’ meeting scheduled to be
held on May 3, 2021, it will be proposed that PwC
Luxembourg be re-appointed as the Company’s
Annual Report 104.
independent approved statutory auditors for the
fiscal year ending December 31, 2021.
subsidiaries included in annual reports filed with
the respective regulators.
Fees Paid to the Company’s External Auditor
In 2020 and 2019, PwC Luxembourg served as
the principal external auditor for the Company.
Fees accrued to PwC Luxembourg and other PwC
member firms for the years ended December 31,
2020 and December 31, 2019 are detailed below.
Thousands of U.S. dollars
FOR THE YEAR ENDED DECEMBER 31
2020
2019
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
Total
3,781
3,846
134
102
–
50
7
1
4,017
3,904
Audit Fees
Audit fees were paid for professional services
rendered by the external 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 in connection with the Company’s filings
with the U.S. Securities and Exchange Commission
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, the statutory financial statements
of the Company and its subsidiaries and are not
reported under the audit fee item above. This item
includes, among others, fees for attestation services
on financial information of the Company and its
Tax Fees
Tax fees paid for tax compliance and tax advice
professional services.
All Other Fees
Consisted primarily of fees paid for services
provided in connection with training courses to
Tenaris employees.
Audit Committee’s Pre-approval Policies
and Procedures
The Company’s audit committee is responsible
for, among other things, the oversight of the
Company’s external auditors. The audit committee
has adopted in its charter a policy of pre-approval
of audit and permissible non-audit services
provided by its external auditors.
Under the charter, the audit committee makes its
recommendations to the shareholders’ meeting
concerning the continuing appointment or
termination of the Company’s external auditors.
On a yearly basis, the audit committee reviews
together with management and the external
auditor, the audit plan, audit related services
and other non-audit services and approves,
ad-referendum of the general shareholders’
meeting, the related fees. Any changes to the
approved fees must be reviewed and approved by the
audit committee. The general shareholders’ meeting
normally approves such audit fees and authorizes
the audit committee to approve any increase or
reallocation of such audit fees as may be necessary,
appropriate or desirable under the circumstances.
The audit committee delegates to its Chairperson
the authority to consider and approve, on behalf of
the audit committee, additional non-audit services
Tenaris that were not recognized at the time of engagement,
which must be reported to the other members of
the audit committee at its next meeting. No services
outside the scope of the audit committee’s approval
can be undertaken by the external auditor.
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 921,603,
which represents 0.08% of our outstanding shares.
The following table provides information
regarding share ownership by our directors and
senior management:
Director or Officer
Guillermo Vogel
Carlos Condorelli
Gabriel Podskubka
Total
Number of
Shares Held
850,446
67,211
3,946
921,603
Major shareholders
The following table shows the beneficial ownership
of our securities (in the form of shares or ADSs) by
(1) the Company’s major shareholders (persons or
entities that have notified the Company of holdings
in excess of 5% of the Company’s share capital),
non-affiliated public shareholders, and (2) the
Company’s directors and senior management as a
group. The information below is based on the most
recent information provided to the Company.
105.
Identity of Person or Group
Number
Percent
San Faustin (1)
Directors and senior
management as a group
Public
Total
713,605,187
60.45%
921,603
466,010,040
0.08%
39.47%
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 private foundation located in the Netherlands 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 later date result in a change of control
of the Company.
Annual Report
106.
Information required under the Luxembourg Law
on takeovers of May 19, 2006
The Company is a public limited liability company
(société anonyme) organized under the laws of
Luxembourg. Its object and purpose, as set forth
in Article 2 of its articles of association, is the
taking of interests, in any form, in corporations
or other business entities, and the administration,
management, control and development thereof.
The Company is registered under the number B85
203 in the Luxembourg Régistre de Commerce et
des Sociétés.
The Company’s authorized share capital is fixed by
the Company’s articles of association as amended
from time to time with the approval of shareholders
at an extraordinary general shareholder’s meeting.
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. There were 1,180,536,830 shares
issued as of the date of this annual report. All
issued shares are fully paid.
The Company’s articles of association authorize
the board of directors, or any delegate(s) duly
appointed by the board of directors, to issue shares
within the limits of the authorized share capital
against contributions in cash, contributions in kind
or by way of available reserves, at such time and
on such terms and conditions, including the issue
price, as the board of directors, or its delegate(s),
may in its or in their discretion resolve.
The Company’s extraordinary shareholders’
meeting held on June 2, 2020 approved the
renewal for an additional five-year period of the
authorization granted to the board of directors
to waive, suppress or limit any preemptive
subscription rights of shareholders provided for by
law to the extent it deems such waiver, suppression
or limitation advisable for any issue or issues of
shares within the authorized share capital; and
have waived any preemptive subscription rights
provided for by law and related procedures. The
validity period of such authorization will expire
on June 12, 2025. 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
preemptive 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; and
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, including, without limitation, the
direct issuance of shares or upon the exercise of
Tenaris 107.
options, rights convertible into shares, or similar
instruments convertible or exchangeable into
shares, issued for the purpose of compensation or
incentive for any such persons 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. The shares are issued in
registered form only.
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 0.08% of the Company’s outstanding shares,
while the remaining 39.47% are publicly traded.
The Company’s shares trade on the Italian 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. The Company’s articles of
association do not contain any provision that would
have the effect of delaying, deferring or preventing a
change in control of the Company and that would
operate only with respect to a merger, acquisition
or corporate restructuring involving the Company
or any of its subsidiaries. In addition, 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. There are
no agreements between the Company and members
of its board of directors or employees providing for
compensation if they resign or are made redundant
without reason, or if their employment ceases
following a change in control of the Company.
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”.
Annual Report Related party
transactions
108.
Tenaris is a party to several related party
transactions as described in Note 29 “Related
party transactions” to our Consolidated Financial
Statements included in this annual report. Material
related party transactions are subject to the review
of the audit committee of the Company’s board
of directors and the requirements of Luxembourg
law. For further details on the approval process
for related party transactions, see “Corporate
Governance – Audit Committee”.
Purchases of Steel Products and Raw Materials
In the ordinary course of business, we purchase
round steel bars, flat steel products and other
raw materials from Ternium or its subsidiaries.
These purchases are made on similar terms and
conditions as sales made by these companies to
unrelated third parties. These transactions include:
•
•
•
Purchases of round steel bars made under a
long-term agreement, for use in our seamless steel
pipe operations in Mexico, which amounted to
$51 million in 2019 and $102 million in 2018.
Purchases of flat steel products for use in the
production of welded pipes and accessories, which
amounted to $13 million in 2020, $20 million in
2019 and $38 million in 2018.
Purchases of scrap and other raw materials for
use in the production of seamless pipes, which
amounted to $2 million in 2020, $4 million in 2019
and $2 million in 2018.
In the ordinary course of business, we purchase
flat steel products for use in our welded steel pipe
operations, from Usiminas. These purchases,
which are made on similar terms and conditions
as sales made by this company to unrelated third
parties, amounted to $20 million in 2020,
$59 million in 2019 and $68 million in 2018.
Sales of Raw Materials
In the ordinary course of business, we sell raw
materials and other production inputs to Ternium
or its subsidiaries. These sales are made on similar
terms and conditions as purchases made by these
companies from unrelated third parties. These
transactions include:
•
•
Sales of ferrous scrap, and other raw materials,
which amounted to $15 million in 2020,
$17 million in 2019 and $11 million in 2018.
Sales of steam and operational services from our
Argentine electric power generating facility in San
Nicolás. These sales amounted to $1 million in 2019
and $13 million in 2018. On January 29, 2019, the
electric power generation facility was shut down.
Purchase Agency Services and Sales of Materials
Exiros B.V. (“Exiros”), in which we have 50% share
ownership and Ternium has the remaining 50%
share ownership, provides purchase agency services
and raw materials and other products to various
companies controlled by or under the significant
influence of San Faustin. Pursuant to the Exiros
shareholders’ agreement, Tenaris recognizes
Exiros’ assets, liabilities, revenue and expenses
in relation to its interest in the joint operation.
Exiros’ total sales to companies controlled by San
Faustin totaled $9 million in 2020, $16 million in
2019 and $16 million in 2018.
Tenaris 109.
Supply of Electric Energy
Techgen, which is currently owned 48% by
Ternium, 30% by Tecpetrol and 22% by Tenaris,
operates an electric power plant in Pesquería,
Mexico. Techgen became fully operational on
December 1, 2016. Ternium and Tenaris currently
contract 78% and 22%, respectively, of Techgen’s
power capacity. Techgen sells to third parties
on behalf of Tenaris the unused electricity that
Tenaris purchased from Techgen.
San Faustin holds significant but non-controlling
interests in Litoral Gas and Energy Consulting
Services and also held significant but non-controlling
interests in TGN until October 2019.
Tecpetrol supplies Siderca with natural gas
requirements under market conditions and according
to local regulations. Tecpetrol’s sales to Tenaris
amounted to $12 million in 2020, $49 million in 2019
and $95 million in 2018.
Techgen net sales of electricity to Tenaris
amounted to $48 million in 2020, $40 million in
2019 and $36 million in 2018.
Supply of Natural Gas
We are party to contracts with Tecpetrol, TGN,
Litoral Gas and Energy Consulting Services
relating to the supply of natural gas to our
operations in Argentina. Tecpetrol is a company
controlled by San Faustin, engaged in oil and
gas exploration and production and has rights
to various oil and gas fields in Argentina and
elsewhere in Latin America. TGN, a company in
which San Faustin has joint control since October
2019, operates two major pipelines in Argentina
connecting the major gas basins of Neuquén
and Noroeste-Bolivia to the major consumption
centers in Argentina, Litoral Gas is a company that
holds the regional license for gas and distribution
in the Province of Santa Fe and in the northeastern
section of the Province of Buenos Aires. Energy
Consulting Services is a company engaged in
energy and management consulting, representing
one of the major natural gas traders in Argentina.
TGN charges Siderca a price to transport its
natural gas supplies that is equivalent on a
comparable basis to prices paid by other industrial
users. The Argentine government regulates the
general framework under which TGN operates
and prices its services. TGN’s sales to Tenaris
amounted to $3 million in 2020, $4 million in 2019
and $8 million in 2018.
Litoral Gas’s sales to Tenaris totaled $1 million in
2019 and $3 million in 2018.
Energy Consulting Services’s sales to Tenaris
totaled $2 million in 2018.
Provision of Engineering and Labor Services
Tenaris contracts with certain companies controlled
by San Faustin specialized in supplying engineering
services and non-specialist manual labor services,
such as industrial cleaning, general maintenance,
handling of by-products and construction services.
Fees accrued for these services in the aggregate
amounted to $13 million in 2020, $47 million in
2019 and $33 million in 2018.
Annual Report 110.
Sales of Steel Pipes and Sucker Rods
In the ordinary course of business, we sell steel
pipes, sucker rods and related services to other
companies controlled or under the significant
influence of San Faustin. These sales, which are
made principally to companies involved in the
construction of gas pipelines and to Tecpetrol
and joint ventures in which Tecpetrol participates,
for its oil and gas drilling operations, are made
on similar terms and conditions as sales to
unrelated third parties. Our sales of steel pipes
and sucker rods as well as logistical and certain
other services to other companies controlled
or under significant influence of San Faustin
amounted to $22 million in 2020, $66 million
in 2019 and $129 million in 2018.
Sales of Other Products and Services
We provide information technology services to
companies controlled by San Faustin. Sales of these
services amounted to $2 million per year in 2020,
2019 and 2018.
Administrative Services, Legal and Other support
services
Finma S.A. (“Finma”), Arhsa S.A. (“Arhsa”) and
Techinst S.A. (“Techinst”) a group of companies
controlled by San Faustin in which the Company
has a 33% share ownership and other affiliates of
San Faustin have the remaining share ownership,
provide administrative, and legal support services
to San Faustin’s affiliates in Argentina, including
Tenaris. During 2018 Arhsa merged with Finma,
with Finma continuing to render the services
previously provided by Arhsa. Fees accrued for
these services amounted to $7 million in 2020,
$9 million in 2019 and $10 million in 2018.
On January 1, 2021 Techinst merged with Finma.
Loans to Related Parties
Tenaris financed the construction and operation
of Techgen’s Pesquería project primarily in
the form of subordinated loans to Techgen.
Outstanding principal amount of loans to Techgen
as of December 31, 2020, amounted to $58 million;
as of December 31, 2019, amounted to $58 million
and as of December 31, 2018, amounted to
$99 million. These loans generated interest gains
in favor of Tenaris in an amount of $3 million in
2020, $4 million in 2019 and $5 million in 2018.
Other Transactions
We entered into various contracts with Tenova
(and subsidiaries), a company controlled by San
Faustin, for the provision of furnaces, spare parts,
accessories and related services for our facilities.
Supplies received amounted to $2 million in 2019
and $9 million in 2018.
In addition, in the ordinary course of business, from
time to time, we carry out other transactions and
enter into other arrangements with other related
parties, none of which are considered to be material.
Tenaris Dividends
Subject to applicable law, all shares (including
shares underlying ADSs) are entitled to participate
equally in dividends when, as and if declared
by the shareholders at the annual general
shareholders’ meeting, out of funds legally
available for such purposes.
shares or other assets, only to such registered holder,
or otherwise in accordance with such registered
holder’s instructions, and, as provided by Article
21 of the Company’s articles of association, that
payment shall release the Company from any and all
obligations for such payment.
111.
The Company does not have, and has no current
plans to establish, a formal dividend policy
governing the amount and payment of dividends
or other distributions. Dividends may be lawfully
declared and paid if the Company’s profits
and distributable reserves are sufficient under
Luxembourg law. The amount and payment of
dividends must be determined by a majority vote
at a general shareholders’ meeting, generally, but
not necessarily, based on the recommendation of
the Company’s board of directors. Under Article
21 of the Company’s articles of association, the
board of directors has the power to distribute
interim dividends out of profits, share premium
or any other available reserves, in accordance with
applicable law, but payment of such dividends
must be finally approved by the Company’s general
shareholders’ meeting.
As provided by Article 21 of the Company’s articles
of association, dividends or other distributions
declared by the general meeting as well as interim
dividends or other distributions declared by the board
of directors will be distributed at the times and places
determined by the board of directors. The Company
will make any and all dividend payments and any
other distributions in respect of shares registered
in the name of any securities settlement system or
operator of such a system or in the name of any
financial institution or other professional depositary
of securities or any other depositary, whether in cash,
The Company conducts and will continue to conduct
its operations through subsidiaries and, accordingly,
its main source of cash to pay dividends, among
other possible sources, will be the dividends received
from its subsidiaries. For further information see
“Principal Risks and Uncertainties –Risks Relating
to the Structure of the Company – As a holding
company, the Company’s ability to pay cash
dividends depends on the results of operations and
financial condition of its subsidiaries and could be
restricted by legal, contractual or other limitations”.
Under Luxembourg law, claims for dividends will
lapse in favor of the Company five years after the
date such dividends are declared. However, the
Company may elect to pay a declared dividend
after such period. Declared and unpaid dividends
held by the Company for the account of its
shareholders do not bear interest.
Pursuant to Luxembourg law, at least 5% of
our net profits per year must be allocated to the
creation of a legal reserve until such reserve has
reached an amount equal to 10% of our issued
share capital. If the legal reserve later falls below
the 10% threshold, at least 5% (or such lower
amount required to reach the 10% threshold) of
net profits again must be allocated toward the
reserve. As of December 31, 2020, the Company’s
legal reserve represented 10% of its share capital.
The legal reserve is not available for distribution.
Annual Report 112.
The following table shows the dividends approved
by the Company’s shareholders in the last five years:
Shareholders’
meeting date
May 4, 2016
May 3, 2017
May 2, 2018
May 6, 2019
June 2, 2020
Approved dividend
Dividend payment date
Amount (USD million)
Per share (USD)
Per ADS (USD)
Interim Dividend
Dividend Balance
531
484
484
484
153
0.45
0.41
0.41
0.41
0.14
0.90
0.82
0.82
0.82
0.28
November 2015
November 2016
November 2017
November 2018
November 2019
May 2016
May 2017
May 2018
May 2019
N/A
On June 2, 2020, the Annual Shareholders Meeting
approved a proposal that no further dividends be
distributed in respect of fiscal year 2019 beyond the
interim dividend of approximately $153 million
already paid in November 2019. However, as
quarterly results started to recover, on November
4, 2020, the Company’s board of directors
approved the payment of an interim dividend of
$0.07 per share ($0.14 per ADS), or approximately
$83 million, which was paid on November 25,
2020. On February 24, 2021, the Company’s board
of directors proposed, for the approval of the
annual general shareholders’ meeting scheduled
to be held on May 3, 2021, the payment of an
annual dividend of $0.21 per share ($0.42 per
ADS), or approximately $248 million, which
includes the interim dividend, paid on November
25, 2020. If the annual dividend is approved by
the shareholders, a dividend of $0.14 per share
($0.28 per ADS), or approximately $165 million
will be paid on May 26, 2021, with an ex-dividend
date of May 24, 2021. For more information,
see “Recent Developments – Annual Dividend
Proposal”.
Tenaris Employees
The following table shows the number of persons
employed by Tenaris as of December 31:
113.
AT DECEMBER 31
2020
2019
2018
Mexico
Argentina
Italy
USA
Romania
Brazil
Colombia
Canada
Indonesia
Japan
Other Countries
4,501
5,370
4,376
2,039
1,596
1,552
1,360
746
561
521
399
5,405
2,144
2,255
1,815
1,360
1,040
772
616
400
5,595
5,427
2,155
2,382
1,852
1,287
1,082
1,030
554
399
1,377
19,028
2,023
1,204
23,200
22,967
In order to mitigate the impact of expected
lower sales, caused by the COVID-19 pandemic
and the oil and gas crisis, Tenaris implemented
a worldwide restructuring program and cost
containment plan aimed at preserving its financial
resources and overall liquidity position and
maintaining the continuity of its operations.
The actions included, among others: adjusting the
level of our operations and workforce around the
world -including the temporary closure of certain
facilities or production lines- and reducing our
fixed cost structure, including pay reductions for
senior management and board members.
Approximately two-thirds of our employees are
unionized. In all the countries we have presence,
we operate in full respect of the institutional rules
and local norms, generating recognized agreements
among all the parties involved. We forge our
relations with the unions based on the premise of an
open dialogue and a rich interchange of proposals.
Annual Report Diversity
Non-financial
Information
Tenaris is committed to building a culture of
transparency and integrity, based on ethical behavior
and compliance with the law. We believe this is
essential for the sustainability of our activities.
As of 2016 we formalized an integrated risk-based
methodology to better identify, evaluate and
prioritize the sustainability challenges that can
impact our ability to achieve our goals and our
relationship with our stakeholders.
The non-financial information required by
article 1730-1 of the Luxembourg Company Law
and articles 68 and 68bis of the Luxembourg
law of December 19, 2002 on the commercial
and companies register and on the accounting
records and annual accounts and undertakings,
as amended, has been published under the name
of “Sustainability Report” as of the date of this
annual report and is available on www.tenaris.com
https://ir.tenaris.com/financial-and-sustainability-
reports/reports
114.
Tenaris embraces diversity in all its forms, on the
understanding that diverse points of view and
perspectives contribute to the rational solution
of problems and the effective accomplishment of
goals. Diversity based on ethnicity, gender, creed,
race and nationality is part of Tenaris’s DNA and
constitutes an important differentiation aspect of
our uniqueness as a global enterprise. Tenaris, as a
global organization that draws its workforce from
diverse cultures and backgrounds, values cultural
and geographic adaptability among its employees.
The Company’s Code of Conduct prohibits
unlawful discrimination in employment
relationship and grants all persons the right to
apply for a position in Tenaris or to be considered
for a new position in accordance with opening
requirements and merit criteria, without any
arbitrary discrimination. All employees, at every
level, must cooperate to maintain a respectful
environment should there be personal differences.
Similarly, the Company’s Human Resources Policy
promotes equal opportunity and provides that
hiring, promotion, transfer and other employment
decisions will be adopted without regard to race,
color, religion, gender, age, disability, national
origin or sexual orientation. Compensation in
Tenaris is strictly based on each employee’s duties
and personal performance, competencies and
behavior. In addition, Tenaris conducts periodic
employees’ opinion surveys to have updated
information on how our employees perceive the
equal opportunities culture and management’s
commitment with diversity and respect for the
value of human, cultural and lifestyle differences.
Finally, Tenaris has organized local diversity
committees in all regions working on specific
regional objectives on diversity.
Tenaris Management
certification
We confirm, to the best of our knowledge, that:
115.
1.
2.
3.
the consolidated financial statements prepared in conformity with International
Financial Reporting Standards (“IFRS”), as issued by the International Accounting
Standards Board and in accordance with IFRS 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 29, 2021
/s/ Alicia Móndolo
Chief Financial Officer
Alicia Móndolo
March 29, 2021
Annual Report 116.
Tenaris Tenaris S.A.
Consolidated
Financial Statements
For the years ended December 31, 2020, 2019 and 2018
117.
Annual Report 118.
Tenaris Audit report
Audit report
To the Shareholders of
Audit report
Tenaris S.A.
To the Shareholders of
To the Shareholders of
Tenaris S.A.
Tenaris S.A.
Report on the audit of the consolidated financial statements
Report on the audit of the consolidated financial statements
Report on the audit of the consolidated financial statements
Our opinion
119.
Our opinion
Our opinion
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”) as
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
at 31 December 2020, and of its consolidated financial performance and its consolidated cash
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
IFRS as adopted by the European Union.
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Board of Directors (the “Audit Committee”).
Our opinion is consistent with our additional report to the Audit Committee of the Company’s Board
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
of Directors (the “Audit Committee”).
Board of Directors (the “Audit Committee”).
What we have audited
The Group’s consolidated financial statements comprise:
What we have audited
What we have audited
•
•
•
•
•
•
The Group’s consolidated financial statements comprise:
The Group’s consolidated financial statements comprise:
the consolidated statement of financial position as at 31 December 2019;
the consolidated income statement for the year then ended;
the consolidated income statement for the year then ended;
•
the consolidated statement of financial position as at 31 December 2019;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
•
the consolidated income statement for the year then ended;
the consolidated statement of financial position as at 31 December 2020;
the consolidated statement of changes in equity for the year then ended;
•
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
•
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include a summary of significant
•
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
•
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
accounting policies.
Basis for opinion
We conducted our audit in accordance with the EU Regulation No 537/2014, the Law of
23 July 2016 on the audit profession (Law of 23 July 2016) and with International Standards on
Auditing (ISAs) as issued by the International Auditing and Assurance Standards Board (IAASB)
and as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier”
(CSSF). Our responsibilities under the EU Regulation No 537/2014, the Law of 23 July 2016 and
ISAs as adopted for Luxembourg by the CSSF are further described in the “Responsibilities of the
“Réviseur d’entreprises agréé” for the audit of the consolidated financial statements” section of our
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
We are independent of the Group in accordance with the International Code of Ethics for
Professional Accountants,
the
International Ethics Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by
the CSSF together with the ethical requirements that are relevant to our audit of the consolidated
financial statements. We have fulfilled our other ethical responsibilities under those ethical
requirements.
Independence Standards,
International
issued by
including
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PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
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89
89
89
Annual Report
120.
Audit report
To the Shareholders of
Audit report
Tenaris S.A.
To the best of our knowledge and belief, we declare that we have not provided non-audit services
To the Shareholders of
that are prohibited under Article 5(1) of the EU Regulation No 537/2014.
Tenaris S.A.
Report on the audit of the consolidated financial statements
The non-audit services that we have provided to the Company and its controlled undertakings, if
applicable, for the year ended 31 December 2020, are disclosed in Note 30 to the consolidated
Report on the audit of the consolidated financial statements
financial statements.
Our opinion
What we have audited
Our opinion
Key audit matters
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
Key audit matters are those matters that, in our professional judgment, were of most significance in
flows for the year then ended in accordance with International Financial Reporting Standards
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
our audit of the consolidated financial statements of the current period. These matters were
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
addressed in the context of our audit of the consolidated financial statements as a whole, and in
flows for the year then ended in accordance with International Financial Reporting Standards
IFRS as adopted by the European Union.
forming our opinion thereon, and we do not provide a separate opinion on these matters.
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
Key audit matter
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Board of Directors (the “Audit Committee”).
How our audit addressed the key audit
matter
The Group’s consolidated financial statements comprise:
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Board of Directors (the “Audit Committee”).
Business combinations - Acquisition of IPSCO
Tubulars Inc.
What we have audited
We evaluated and tested controls in place
relating to the acquisition accounting, including
the control over management’s valuation of the
identified intangible assets.
On January 2, 2020, Tenaris acquired 100% of
The Group’s consolidated financial statements comprise:
the shares of IPSCO, a U.S. manufacturer of
for a net
from PAO TMK
steel pipes,
•
consideration of USD 1,029 million. The
•
acquisition was accounted for as a business
•
combination.
•
•
The acquisition resulted in 170 million USD of
•
identified intangible assets being recorded.
the consolidated statement of financial position as at 31 December 2019;
the consolidated income statement for the year then ended;
Moreover, we obtained and read the purchase
the consolidated statement of financial position as at 31 December 2019;
the consolidated statement of comprehensive income for the year then ended;
agreement.
the consolidated income statement for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
In addition, we assessed
the methodology
the consolidated statement of cash flows for the year then ended; and
the consolidated statement of changes in equity for the year then ended;
adopted by management for calculating the fair
the notes to the consolidated financial statements, which include a summary of significant
the consolidated statement of cash flows for the year then ended; and
value of the net assets acquired, in particular for
accounting policies.
the notes to the consolidated financial statements, which include a summary of significant
the identified intangible assets, which included:
accounting policies.
•
•
•
•
•
•
The acquisition of IPSCO was important to our
audit as it involved significant judgements and
assumptions in determining the fair value of the
net assets acquired, including the identified
intangible assets.
The disclosures related
this matter are
included in Note 32 to the consolidated financial
statements.
to
• evaluating the appropriateness of the valuation
methods,
• testing the completeness and accuracy of data
provided by management,
• review of the reasonableness of significant
assumptions
specialized
skill and
Professionals with
knowledge were used to assist in the evaluation
of the Company’s cash flow projections included
in the purchase price allocation report prepared
by a third party expert.
finally assessed
in
We
disclosures
statements.
the adequacy of
the
financial
the consolidated
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T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)
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89
90
89
Tenaris
121.
Audit report
To the Shareholders of
Audit report
Tenaris S.A.
Our opinion
Report on the audit of the consolidated financial statements
We evaluated and tested controls in place over
the analysis of impairment indicators on long
lived assets, review of assumptions used and
discounted cash flow calculations.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
Recoverability of long-lived assets
To the Shareholders of
Tenaris S.A.
The Group’s balance sheet includes goodwill
(USD 1,086 million) and other long lived assets
(USD 6,193 million Property, plant & equipment
Report on the audit of the consolidated financial statements
In addition, we challenged
impairment
and USD 343 million of Intangible assets). The
indicators analysis memorandum and the cash
Group is required to test the amount of goodwill
Our opinion
and other indefinite life intangible assets for
flow projections included in the impairment test
impairment at least annually. Other long-lived
prepared by Management. Our audit procedures
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
assets are tested in case of impairment triggers.
included, among others, the involvement of
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
professionals with
and
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
During the year, Management has tested for
knowledge to assist us in evaluating certain
flows for the year then ended in accordance with International Financial Reporting Standards
impairment
cash generating units
assumptions and the valuation methodology
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
(“CGUs”) containing goodwill and indefinite life
used by the Group.
IFRS as adopted by the European Union.
intangibles and
impairment
indicators were
We furthermore assessed the reasonableness
identified. As a result, an
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
of other data used by:
impairment charge of approximately USD 622
Board of Directors (the “Audit Committee”).
million was recorded, out of which USD 225
million and USD 357 million related to OCTG -
What we have audited
USA and IPSCO goodwill balances.
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Board of Directors (the “Audit Committee”).
• comparing them to external and historical data,
when available, such as analyst reports and
evolution of rig counts, and by
The Group’s consolidated financial statements comprise:
What we have audited
those where
specialized
those
skill
the
focused our audit effort on
The Group’s consolidated financial statements comprise:
the consolidated statement of financial position as at 31 December 2019;
We
the U.S.
the consolidated income statement for the year then ended;
• analyzing sensitivities in the valuation model,
seamless and welded tubes businesses (OCTG
•
the consolidated statement of financial position as at 31 December 2019;
evaluating whether a
reasonably possible
the consolidated statement of comprehensive income for the year then ended;
– USA, Bay City and IPSCO) due to their
•
the consolidated income statement for the year then ended;
change in assumptions could cause the carrying
the consolidated statement of changes in equity for the year then ended;
significance, the sensitivity of the US operations
•
the consolidated statement of comprehensive income for the year then ended;
amount to exceed its recoverable amount.
the consolidated statement of cash flows for the year then ended; and
to the deep reduction in oil and gas prices and
•
the consolidated statement of changes in equity for the year then ended;
the notes to the consolidated financial statements, which include a summary of significant
subsequent drop in drilling activity and the
•
the consolidated statement of cash flows for the year then ended; and
We also compared actual cash flow results with
accounting policies.
effects derived
the acquisition and
•
the notes to the consolidated financial statements, which include a summary of significant
previous forecasts. We finally assessed the
integration of
the other US
accounting policies.
adequacy of the disclosures in the consolidated
businesses.
financial statements.
IPSCO over
from
•
•
•
•
•
•
it
involved significant
The impairment test was important to our audit
judgements and
as
assumptions
the
recoverable amounts of the CGUs and required
significant audit effort.
the assessment of
in
to
Due
the conditions described above,
Management prepared different scenarios for
OCTG – USA, Bay City and IPSCO CGUs to
determine their recoverable amounts.
The disclosures related
this matter are
included in Notes II.H, 5, 10 and 11 to the
consolidated financial statements.
to
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PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
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Annual Report
Audit report
To the Shareholders of
Audit report
Other information
Tenaris S.A.
122.
Our opinion
Report on the audit of the consolidated financial statements
The Board of Directors is responsible for the other information. The other information comprises the
To the Shareholders of
information stated in the annual report including the consolidated management report and the
Tenaris S.A.
Corporate Governance Statement but does not include the consolidated financial statements and
our audit report thereon.
Report on the audit of the consolidated financial statements
Our opinion on the consolidated financial statements does not cover the other information and we
do not express any form of assurance conclusion thereon.
Our opinion
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
In connection with our audit of the consolidated financial statements, our responsibility is to read
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
the other information identified above and, in doing so, consider whether the other information is
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
materially inconsistent with the consolidated financial statements or our knowledge obtained in the
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
audit, or otherwise appears to be materially misstated. If, based on the work we have performed,
flows for the year then ended in accordance with International Financial Reporting Standards
we conclude that there is a material misstatement of this other information, we are required to
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
report that fact. We have nothing to report in this regard.
IFRS as adopted by the European Union.
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Board of Directors (the “Audit Committee”).
Responsibilities of the Board of Directors and those charged with governance for the
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
consolidated financial statements
Board of Directors (the “Audit Committee”).
What we have audited
•
•
•
•
•
•
The Group’s consolidated financial statements comprise:
The Board of Directors is responsible for the preparation and fair presentation of the consolidated
What we have audited
financial statements in accordance with IFRSs as issued by the IASB and in accordance with IFRS
as adopted by the European Union, and for such internal control as the Board of Directors
The Group’s consolidated financial statements comprise:
the consolidated statement of financial position as at 31 December 2019;
determines is necessary to enable the preparation of consolidated financial statements that are
the consolidated income statement for the year then ended;
free from material misstatement, whether due to fraud or error.
•
the consolidated statement of financial position as at 31 December 2019;
the consolidated statement of comprehensive income for the year then ended;
•
the consolidated income statement for the year then ended;
the consolidated statement of changes in equity for the year then ended;
In preparing the consolidated financial statements, the Board of Directors is responsible for
•
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of cash flows for the year then ended; and
assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters
•
the consolidated statement of changes in equity for the year then ended;
the notes to the consolidated financial statements, which include a summary of significant
related to going concern and using the going concern basis of accounting unless the Board of
•
the consolidated statement of cash flows for the year then ended; and
accounting policies.
Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative
•
the notes to the consolidated financial statements, which include a summary of significant
but to do so.
accounting policies.
Those charged with governance are responsible for overseeing the Group’s financial reporting
process.
Responsibilities of the “Réviseur d’entreprises agréé” for the audit of the consolidated
financial statements
The objectives of our audit are to obtain reasonable assurance about whether the consolidated
financial statements as a whole are free from material misstatement, whether due to fraud or error,
and to issue an audit report that includes our opinion. Reasonable assurance is a high level of
the
assurance, but
EU Regulation No 537/2014, the Law of 23 July 2016 and with ISAs as issued by the IAASB and
as adopted for Luxembourg by the CSSF will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these consolidated financial statements.
that an audit conducted
is not a guarantee
in accordance with
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
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89
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89
Tenaris
123.
Audit report
Our opinion
As part of an audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016
To the Shareholders of
Audit report
and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and
Tenaris S.A.
maintain professional scepticism throughout the audit. We also:
To the Shareholders of
Tenaris S.A.
•
identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting
intentional omissions,
misrepresentations, or the override of internal control;
Report on the audit of the consolidated financial statements
fraud may
Report on the audit of the consolidated financial statements
involve collusion,
from error, as
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
• obtain an understanding of internal control relevant to the audit in order to design audit
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
flows for the year then ended in accordance with International Financial Reporting Standards
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
opinion on the effectiveness of the Group’s internal control;
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
flows for the year then ended in accordance with International Financial Reporting Standards
IFRS as adopted by the European Union.
• evaluate the appropriateness of accounting policies used and the reasonableness of accounting
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Board of Directors (the “Audit Committee”).
estimates and related disclosures made by the Board of Directors;
Our opinion
forgery,
The Group’s consolidated financial statements comprise:
What we have audited
The Group’s consolidated financial statements comprise:
• conclude on the appropriateness of the Board of Directors’ use of the going concern basis of
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
Board of Directors (the “Audit Committee”).
related to events or conditions that may cast significant doubt on the Group’s ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our audit report to the related disclosures in the consolidated financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
the consolidated statement of financial position as at 31 December 2019;
audit evidence obtained up to the date of our audit report. However, future events or conditions
the consolidated income statement for the year then ended;
may cause the Group to cease to continue as a going concern;
•
the consolidated statement of financial position as at 31 December 2019;
the consolidated statement of comprehensive income for the year then ended;
•
the consolidated income statement for the year then ended;
the consolidated statement of changes in equity for the year then ended;
• evaluate the overall presentation, structure and content of the consolidated financial statements,
•
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of cash flows for the year then ended; and
including the disclosures, and whether the consolidated financial statements represent the
•
the consolidated statement of changes in equity for the year then ended;
the notes to the consolidated financial statements, which include a summary of significant
underlying transactions and events in a manner that achieves fair presentation;
•
the consolidated statement of cash flows for the year then ended; and
accounting policies.
•
the notes to the consolidated financial statements, which include a summary of significant
• obtain sufficient appropriate audit evidence regarding the financial information of the entities
accounting policies.
and business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the Group
audit. We remain solely responsible for our audit opinion.
What we have audited
•
•
•
•
•
•
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89
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Annual Report
Audit report
We communicate with those charged with governance regarding, among other matters, the
To the Shareholders of
Audit report
planned scope and timing of the audit and significant audit findings, including any significant
Tenaris S.A.
deficiencies in internal control that we identify during our audit.
To the Shareholders of
Tenaris S.A.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and communicate to them all relationships
and other matters that may reasonably be thought to bear on our independence, and where
Report on the audit of the consolidated financial statements
applicable, actions taken to eliminate threats or safeguards applied.
Report on the audit of the consolidated financial statements
Our opinion
124.
What we have audited
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
Our opinion
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the consolidated financial statements of the current
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
period and are therefore the key audit matters. We describe these matters in our audit report
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
unless law or regulation precludes public disclosure about the matter.
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
Report on other legal and regulatory requirements
IFRS as adopted by the European Union.
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Board of Directors (the “Audit Committee”).
The consolidated management report is consistent with the consolidated financial statements and
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
has been prepared in accordance with applicable legal requirements.
Board of Directors (the “Audit Committee”).
The Corporate Governance Statement is included in the consolidated management report. The
What we have audited
information required by Article 68ter Paragraph (1) Letters c) and d) of the Law of 19 December
2002 on the commercial and companies register and on the accounting records and annual
The Group’s consolidated financial statements comprise:
the consolidated statement of financial position as at 31 December 2019;
accounts of undertakings, as amended, is consistent with the consolidated financial statements and
the consolidated income statement for the year then ended;
has been prepared in accordance with applicable legal requirements.
•
the consolidated statement of financial position as at 31 December 2019;
the consolidated statement of comprehensive income for the year then ended;
•
the consolidated income statement for the year then ended;
We have been appointed as “Réviseur d’Entreprises Agréé” by the General Meeting of the
the consolidated statement of changes in equity for the year then ended;
•
the consolidated statement of comprehensive income for the year then ended;
Shareholders on 2 June 2020 and the duration of our uninterrupted engagement, including
the consolidated statement of cash flows for the year then ended; and
•
the consolidated statement of changes in equity for the year then ended;
previous renewals and reappointments, is 19 years.
the notes to the consolidated financial statements, which include a summary of significant
•
the consolidated statement of cash flows for the year then ended; and
accounting policies.
•
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
The Group’s consolidated financial statements comprise:
•
•
•
•
•
•
Luxembourg, 29 March 2021
PricewaterhouseCoopers, Société coopérative
Represented by
@esig
@esig
Fabrice Goffin
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
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Tenaris
125.
Consolidated Income Statement
All amounts in thousands of U.S. dollars, unless otherwise stated
YEAR ENDED DECEMBER 31
Notes
2020
2019
2018
CONTINUING OPERATIONS
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Impairment charge
Other operating income
Other operating expenses
Operating (loss) income
Finance income
Finance cost
Other financial results
1
2
3
5
6
6
7
7
7
5,146,734
7,294,055
7,658,588
(4,087,317)
(5,107,495)
(5,279,300)
1,059,417
2,186,560
2,379,288
(1,119,227)
(1,365,974)
(1,509,976)
(622,402)
33,393
(14,252)
(663,071)
18,387
(27,014)
(56,368)
–
–
23,004
(11,199)
832,391
47,997
(43,381)
14,667
851,674
15,059
(12,558)
871,813
39,856
(36,942)
34,386
909,113
(Loss) income before equity in earnings of non-consolidated companies
(728,066)
and income tax
Equity in earnings of non-consolidated companies
13
108,799
82,036
193,994
(Loss) income before income tax
(619,267)
933,710
1,103,107
Income tax
(Loss) income for the year
ATTRIBUTABLE TO
Owners of the parent
Non-controlling interests
8
(23,150)
(202,452)
(229,207)
(642,417)
731,258
873,900
(634,418)
(7,999)
742,686
(11,428)
(642,417)
731,258
876,063
(2,163)
873,900
EARNINGS PER SHARE ATTRIBUTABLE TO THE OWNERS
OF THE PARENT DURING THE YEAR
Weighted average number of ordinary shares (thousands)
1,180,537
1,180,537
1,180,537
CONTINUING OPERATIONS
Basic and diluted (losses) earnings per share (U.S. dollars per share)
Basic and diluted (losses) earnings per ADS (U.S. dollars per ADS) (*)
(*) Each ADS equals two shares.
The accompanying notes are an integral part of these Consolidated Financial Statements.
(0.54)
(1.07)
0.63
1.26
0.74
1.48
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
Consolidated Statement of Comprehensive Income
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
2020
2019
2018
(Loss) income for the year
(642,417)
731,258
873,900
126.
ITEMS THAT MAY BE SUBSEQUENTLY RECLASSIFIED TO PROFIT OR LOSS
Currency translation adjustment
Change in value of cash flow hedges and instruments at fair value
Income tax relating to components of other comprehensive income
From participation in non consolidated companies:
Currency translation adjustment (*)
Changes in the fair value of derivatives held as cash flow hedges and others
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 (loss) income for the year, net of tax
Total comprehensive (loss) income for the year
ATTRIBUTABLE TO
Owners of the parent
Non-controlling interests
(*) For 2018 and 2019 Tenaris recognized its share over the effects on the adoption of IAS 29, “Financial Reporting in
Hyperinflationary Economies” by Ternium in other comprehensive income as a currency translation adjustment. In 2020
Ternium changed the functional currency of its Argentine subsidiary to U.S. dollar and IAS 29 is no longer applicable.
The accompanying notes are an integral part of these Consolidated Financial Statements.
31,172
(9,832)
2,376
(31,977)
792
(7,469)
(4,971)
770
634
(3,567)
(11,036)
(653,453)
(643,435)
(10,018)
(27,294)
3,039
(707)
(10,781)
812
(96,916)
(6,701)
34
1,848
(132)
(34,931)
(101,867)
(9,272)
1,545
(9,878)
(17,605)
(52,536)
678,722
690,095
(11,373)
7,963
(1,932)
(3,855)
2,176
(99,691)
774,209
776,713
(2,504)
774,209
(653,453)
678,722
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
Consolidated Statement of Financial Position
All amounts in thousands of U.S. dollars
AT DECEMBER 31
Notes
2020
2019
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment, net
Intangible assets, net
Right-of-use assets, net
Investments in non-consolidated companies
Other investments
Deferred tax assets
Receivables, net
CURRENT ASSETS
Inventories, net
Receivables and prepayments, net
Current tax assets
Trade receivables, net
Derivative financial instruments
Other investments
Cash and cash equivalents
Total assets
EQUITY
Capital and reserves attributable to owners of the parent
Non-controlling interests
Total equity
LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Lease liabilities
Deferred tax liabilities
Other liabilities
Provisions
CURRENT LIABILITIES
Borrowings
Lease liabilities
Derivative financial instruments
Current tax liabilities
Other liabilities
Provisions
Customer advances
Trade payables
Total liabilities
Total equity and liabilities
10
11
12
13
19
21
14
15
16
17
18
25
19
19
20
12
21
22
(i)
23
20
12
25
17
22
(ii)
24
(ii)
6,193,181
1,429,056
241,953
957,352
247,082
205,590
154,303
1,636,673
77,849
136,384
968,148
11,449
872,488
584,681
315,739
213,848
254,801
245,635
73,218
303,268
43,495
3,217
90,593
202,826
12,279
48,692
127.
9,172,384
9,428,517
6,090,017
1,561,559
233,126
879,965
24,934
225,680
157,103
2,265,880
104,575
167,388
1,348,160
19,929
210,376
4,287,672
1,554,299
5,670,607
13,716,189
14,842,991
11,262,888
183,585
11,446,473
11,988,958
197,414
12,186,372
1,103,241
876,162
40,880
192,318
336,982
251,383
54,599
781,272
37,849
1,814
127,625
176,264
17,017
82,729
462,105
1,166,475
555,887
1,780,457
2,269,716
13,716,189
2,656,619
14,842,991
Contingencies, commitments and restrictions on the distribution of profits are disclosed in note 26.
The accompanying notes are an integral part of these Consolidated Financial Statements.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
Consolidated Statement of Changes in Equity
All amounts in thousands of U.S. dollars
ATTRIBUTABLE TO OWNERS OF THE PARENT
Total
Share
Capital (1)
Legal
Reserves
Share
Premium
Currency
Translation
Adjustment
Other
Reserves (2)
Retained
Earnings (3)
Total
Non-
controlling
Interests
Balance at December 31, 2019
1,180,537
118,054
609,733
(957,246)
(336,902)
11,374,782
11,988,958
197,414
12,186,372
128.
(Loss) for the year
–
–
–
–
–
(634,418)
(634,418)
(7,999)
(642,417)
Currency translation adjustment
Remeasurements of post employment benefit
obligations, net of taxes
Change in value of instruments at fair value through
other comprehensive income and cash flow hedges,
net of taxes
From other comprehensive income of
non-consolidated companies
Other comprehensive (loss) income for the year
Total comprehensive (loss) income for the year
Acquisition and other changes in
non-controlling interests (4)
Dividends paid in cash
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30,849
–
–
30,849
(4,664)
428
(4,236)
323
35
31,172
(4,201)
(5,079)
–
(5,079)
(2,377)
(7,456)
–
–
(31,977)
1,426
–
(30,551)
–
(30,551)
–
–
–
–
–
–
–
–
(1,128)
(8,317)
428
(9,017)
(2,019)
(11,036)
(1,128)
(8,317)
(633,990)
(643,435)
(10,018)
(653,453)
–
–
2
–
2
1,490
1,492
–
(82,637)
(82,637)
(5,301)
(87,938)
Balance at December 31, 2020
1,180,537
118,054
609,733
(958,374)
(345,217)
10,658,155
11,262,888
183,585
11,446,473
(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, 2020 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 interests that do not result in a loss of control, the
remeasurement of post-employment benefit obligations, the changes in value of cash flow hedges and the changes in financial
instruments measured at fair value through other comprehensive income.
(3) The restrictions to the distribution of profits and payment of dividends according to Luxembourg Law are disclosed in note 26 (iii).
(4) Mainly related to the agreement for the construction of Tenaris Baogang Baotou Steel Pipes Ltd. See note 34.
The accompanying notes are an integral part of these Consolidated Financial Statements.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
Consolidated Statement of Changes in Equity (cont.)
All amounts in thousands of U.S. dollars
ATTRIBUTABLE TO OWNERS OF THE PARENT
Total
Share
Capital (1)
Legal
Reserves
Share
Premium
Currency
Translation
Adjustment
Other
Reserves (2)
Retained
Earnings
Total
Non-
controlling
Interests
1,180,537
118,054
609,733
(919,248)
(322,310)
11,116,116
11,782,882
92,610
11,875,492
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(27,217)
–
–
–
(7,132)
–
1,605
742,686
742,686
(11,428)
731,258
–
–
–
(27,217)
(77)
(27,294)
(7,132)
(595)
(7,727)
1,605
727
2,332
129.
–
–
(10,781)
(9,066)
–
(19,847)
–
(19,847)
–
–
–
–
–
(37,998)
(14,593)
–
(52,591)
55
(52,536)
–
(37,998)
(14,593)
742,686
690,095
(11,373)
678,722
–
–
–
–
1
–
1
117,984
117,985
–
(484,020)
(484,020)
(1,807)
(485,827)
Balance at December 31, 2018
Income (loss) for the year
Currency translation adjustment
Remeasurements of post employment benefit
obligations, net of taxes
Change in value of instruments at fair value
through other comprehensive income and cash flow
hedges, net of taxes
From other comprehensive income of
non-consolidated companies
Other comprehensive (loss) income for the year
Total comprehensive (loss) income for the year
Acquisition and other changes in
non-controlling interests (3)
Dividends paid in cash
Balance at December 31, 2019
1,180,537
118,054
609,733
(957,246)
(336,902)
11,374,782
11,988,958
197,414
12,186,372
Balance at December 31, 2017
1,180,537
118,054
609,733
(824,423)
(320,569)
10,718,853
11,482,185
98,785
11,580,970
Changes in accounting policies (Section II AP)
–
–
–
–
2,786
5,220
8,006
12
8,018
Balance at December 31, 2017 restated
1,180,537
118,054
609,733
(824,423)
(317,783)
10,724,073
11,490,191
98,797
11,588,988
Income (loss) for the year
–
–
–
–
–
876,063
876,063
(2,163)
873,900
Currency translation adjustment
Remeasurements of post employment benefit
obligations, net of taxes
Change in value of instruments at fair value
through other comprehensive income and cash flow
hedges, net of taxes
From other comprehensive income of
non-consolidated companies
Other comprehensive (loss) for the year
Total comprehensive income (loss) for the year
Acquisition and other changes in
non-controlling interests
Dividends paid in cash
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(96,673)
–
–
–
6,135
–
–
(96,673)
(243)
(96,916)
6,135
(104)
6,031
(6,673)
–
(6,673)
6
–
(6,667)
(2,139)
–
–
1,848
(3,987)
–
(2,139)
–
–
–
–
–
(94,825)
(4,525)
–
(99,350)
(341)
(99,691)
–
(94,825)
(4,525)
876,063
776,713
(2,504)
774,209
–
–
–
–
(2)
–
(2)
(22)
(24)
–
(484,020)
(484,020)
(3,661)
(487,681)
Balance at December 31, 2018
1,180,537
118,054
609,733
(919,248)
(322,310)
11,116,116
11,782,882
92,610
11,875,492
(1) The Company has an authorized share capital of a single class of 2.5 billion shares having a
(3) Mainly related to Saudi Steel Pipe Company (“SSPC”) acquisition. See note 32.
nominal value of $1.00 per share. As of December 31, 2019 and 2018 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 interests 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.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
Consolidated Statement of Cash Flows
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss) income for the year
ADJUSTMENTS FOR:
Depreciation and amortization
Impairment charge
Income tax accruals less payments
Equity in earnings of non-consolidated companies
Interest accruals less payments, net
Changes in provisions
Changes in working capital
Currency translation adjustment and others
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
130.
Notes
2020
2019
2018
(642,417)
731,258
873,900
10, 11 & 12
5
28 (ii)
13
28 (iii)
678,806
622,402
(117,214)
(108,799)
(538)
(13,175)
28 (i)
1,059,135
42,183
539,521
664,357
–
–
(193,417)
(82,036)
(4,381)
2,739
523,109
11,146
58,494
(193,994)
6,151
(8,396)
(737,952)
(51,758)
610,802
1,520,383
1,527,939
Changes in advance to suppliers of property, plant and equipment
(1,031)
3,820
4,851
10 & 11
(193,322)
(350,174)
(349,473)
Acquisition of subsidiaries, net of cash acquired
Investment in companies under cost method
Additions to associated companies
Loan to non-consolidated companies
Repayment of loan by 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) provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid
Dividends paid to non-controlling interest in subsidiaries
Changes in non-controlling interests
Payments of lease liabilities
Proceeds from borrowings
Repayments of borrowings
Net cash used in financing activities
(Decrease) increase in cash and cash equivalents
MOVEMENT IN CASH AND CASH EQUIVALENTS
At the beginning of the year
Effect of exchange rate changes
(Decrease) increase in cash and cash equivalents
At December 31,
CASH AND CASH EQUIVALENTS
Cash and bank deposits
Bank overdrafts
The accompanying notes are an integral part of these Consolidated Financial Statements.
33
13c
13c
13
9
12
32
(1,025,367)
(132,845)
–
–
–
–
14,394
278
(887,216)
(2,092,264)
–
–
–
(2,933)
(19,610)
–
(14,740)
40,470
2,091
28,974
389,815
(40,392)
9,370
6,010
25,722
717,368
399,108
(82,637)
(5,301)
2
(48,553)
658,156
(484,020)
(484,020)
(1,872)
1
(41,530)
(3,498)
(24)
–
1,332,716
1,019,302
(896,986)
(1,159,053)
(1,432,202)
(375,319)
(353,758)
(900,442)
(947,200)
1,133,789
109,468
1,554,275
(22,492)
(947,200)
584,583
426,717
(6,231)
1,133,789
1,554,275
584,681
1,554,299
20
(98)
(24)
584,583
1,554,275
330,090
(12,841)
109,468
426,717
428,361
(1,644)
426,717
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
Index to the notes to the
Consolidated Financial Statements
I.
General Information
IV.
Other notes to the Consolidated Financial Statements
II.
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
Accounting policies (“AP”)
Basis of presentation
Group accounting
Segment information
Foreign currency translation
Property, plant and equipment
Intangible assets
Right-of-use assets and lease liabilities
Impairment of non-financial assets
Other investments
Inventories
Trade and other receivables
Cash and cash equivalents
M.
Equity
Borrowings
1.
2.
3.
Segment information
Cost of sales
Selling, general and administrative expenses
4.
Labor costs (included in Cost of sales and in Selling,
general and administrative expenses)
Impairment charge
Other operating income and expenses
Financial results
Income tax
Dividends distribution
5.
6.
7.
8.
9.
10.
Property, plant and equipment, net
11.
Intangible assets, net
12.
Right-of-use assets, net and lease liabilities
13.
Investments in non-consolidated companies
14.
Receivables - non current
15.
Inventories, net
131.
N.
O.
P.
Q.
R.
S.
T.
U.
V.
Current and deferred income tax
16.
Receivables and prepayments, net
Employee benefits
Provisions
Trade and other payables
Revenue recognition
17.
Current tax assets and liabilities
18.
Trade receivables, net
19.
Cash and cash equivalents and other investments
20.
Borrowings
Cost of sales and other selling expenses
21.
Deferred income tax
Earnings per share
Financial instruments
22.
Other liabilities
23.
Non-current allowances and provisions
24.
Current allowances and provisions
25.
Derivative financial instruments
III.
Financial risk management
26.
Contingencies, commitments and restrictions on the
A.
B.
C.
D.
Financial Risk Factors
distribution of profits
Category of financial instruments and
27.
Foreign exchange control measures in Argentina
classification within the fair value hierarchy
28.
Cash flow disclosures
Fair value estimation
29.
Related party transactions
Accounting for derivative financial instruments
30.
Fees paid to the Company’s principal accountant
and hedging activities
31.
Principal subsidiaries
32.
Business combinations
33.
Agreement to build a welded pipe plant in West Siberia
34.
Agreement to build a steel pipe premium connection
threading plant in Baotou
35.
Closure of facilities at JFE’s Keihin steel complex
36.
Closure of Prudential Steel LTD
37.
Cancellation of title deed in Saudi Steel Pipe Company
38.
Nationalization of Venezuelan Subsidiaries
39.
The COVID-19 pandemic and the oil & gas crisis and their
impact on Tenaris’s operations and financial condition
40.
Subsequent event
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
I. General information
II. Accounting policies
132.
Tenaris S.A. (the “Company”) was established
as a public limited liability company (société
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 the Company and
its consolidated subsidiaries. A list of the principal
Company’s subsidiaries is included in note 31 to
these Consolidated Financial Statements.
The Company’s shares trade on the Italian Stock
Exchange and the Mexican Stock Exchange;
the Company’s American Depositary Securities
(“ADS”) trade on the New York Stock Exchange.
These Consolidated Financial Statements were
approved for issuance by the Company’s Board of
Directors on February 24, 2021.
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 in accordance with IFRS as adopted
by the European Union, under the historical cost
convention, as modified by the revaluation of
certain financial assets and liabilities (including
derivative instruments) and plan assets 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.
The preparation of Consolidated Financial
Statements in conformity with IFRS requires
management to make certain accounting estimates
and assumptions that might affect among others, the
reported amounts of assets, liabilities, contingent
assets and liabilities, revenues and expenses. Actual
results may differ from these estimates. The main
areas involving significant estimates or judgements
are: impairment of goodwill and long-lived assets
(note II.H); income taxes (note II.O); obsolescence of
inventory (note II.J); loss contingencies (note II.Q);
allowance for trade receivables (note II.K); defined
benefit obligations (note II.P); business combinations
(notes II.B, IV.32); useful lives of property, plant and
equipment and other long-lived assets (notes II.E, II.F,
II.H); property title ownership restriction (note 37).
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 133.
During the period there were no material changes in
the significant accounting estimates.
Management has reviewed the Company’s
exposure to the effects of the oil and gas crisis and
the COVID-19 pandemic and their impact over
its business, financial position and performance,
monitoring the recognition of deferred tax assets,
and their recoverability, impairment testing,
financial risk management -in particular credit and
liquidity risks- and the adequacy of its provisions
for contingent liabilities. In the twelve-month
period ended December 31, 2020, management
conducted impairment tests and recorded
impairment charges over certain long-lived assets.
Refer to notes 5 and 39 for further information on
impairment of assets and the impact of the oil and
gas crisis and the COVID-19 pandemic.
1. Accounting pronouncements applicable as
from January 1, 2020 and relevant for Tenaris
IFRS 16 “Leases”, “COVID-19 - Related Rent
Concessions”
The Company chose not to adopt the optional
amendment to IFRS 16 “Leases”, “COVID-19 -
Related Rent Concessions”. An assessment was
conducted and the Company concluded that the
impact was not material.
Other accounting pronouncements that became
effective during 2020 have no material effect on
the Company’s financial condition or results of
operations.
B. Group accounting
1. Subsidiaries and transactions with
non-controlling interests
Subsidiaries are all entities over which Tenaris
has control. Tenaris controls an entity when it is
exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to
affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on
which control is exercised by the Company and are
no longer consolidated from the date control ceases.
The acquisition 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 transferred, 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.
Contingent consideration is classified either as
equity or as a financial liability. Amounts classified
as a financial liability are subsequently remeasured
to fair value with changes in fair value recognized
in profit or loss.
If the business combination is achieved in stages,
the acquisition date carrying value of the acquirer’s
previously held equity interest in the acquiree is
remeasured to fair value at the acquisition date. Any
gains or losses arising from such remeasurement are
recognized in profit or loss.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 134.
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.
When the Company ceases to have control or
significant influence, any retained interest in the
entity is remeasured to its fair value, with the
change in carrying amount recognized in profit or
loss. The fair value is the initial carrying amount
for the purposes of subsequently accounting for
the retained interest as an associate, joint venture
or financial asset. In addition, any amounts
previously recognized in other comprehensive
income in respect of that entity are accounted for
as if the group had directly disposed of the related
assets or liabilities. This may mean that amounts
previously recognized in other comprehensive
income are reclassified to profit or loss.
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.
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.
Under the equity method of accounting, the
investments are initially recognized at cost and
adjusted thereafter to recognize Tenaris’s share of
the post-acquisition profits or losses of the investee
in profit or loss, and Tenaris’s share of movements
in other comprehensive income of the investee in
other comprehensive income. Dividends received
or receivable from associates and joint ventures are
recognized as a reduction in the carrying amount
of the investment.
If material, 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 of non-consolidated companies.
The Company’s pro-rata share of changes in
other comprehensive income is recognized in the
Consolidated Statement of Comprehensive Income.
Ternium
At December 31, 2020, Tenaris held 11.46% of
Ternium S.A (“Ternium”)’s common stock. The
following factors and circumstances evidence that
Tenaris has significant influence (as defined by
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
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.
(“San Faustin”);
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 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.
Usiminas
At December 31, 2020, Tenaris held, through
its Brazilian subsidiary Confab Industrial S.A.
(“Confab”), 36.5 million ordinary shares and
1.3 million preferred shares of Usinas Siderúrgicas
de Minas Gerais S.A. - Usiminas (“Usiminas”),
representing 5.19% of its shares with voting rights
and 3.07% of its total share capital.
Confab’s acquisition of the Usiminas shares was
part of a larger transaction performed on January
16, 2012, pursuant to which Tenaris’s affiliate
Ternium (through certain of its subsidiaries)
and Confab acquired a large block of Usiminas
ordinary shares and joined Usiminas’ existing
control group. Subsequently, in 2016, Ternium
and Confab subscribed to additional ordinary
shares and to preferred shares.
135.
At December 31, 2020, the Usiminas control group
held, in the aggregate, 483.6 million ordinary
shares bound to the Usiminas shareholders’
agreement, representing approximately 68.6% of
Usiminas’ voting capital. The Usiminas control
group, which is bound by a long-term shareholders’
agreement that governs the rights and obligations
of Usiminas’ control group members, is currently
composed of three sub-groups: the T/T Group,
comprising Confab and certain Ternium entities;
the NSC Group, comprising Nippon Steel
Corporation (“NSC”), Metal One Corporation and
Mitsubishi Corporation; and Usiminas’ pension
fund Previdência Usiminas. The T/T Group holds
approximately 47.1% of the total shares held by
the control group (39.5% corresponding to the
Ternium entities and the other 7.6% corresponding
to Confab); the NSC Group holds approximately
45.9% of the total shares held by the control group;
and Previdência Usiminas holds the remaining 7%.
The corporate governance rules reflected in
the Usiminas shareholders agreement include,
among others, an alternation mechanism for
the nomination of each of the Chief Executive
Officer (“CEO”) and the Chairman of the board
of directors of Usiminas, as well as a mechanism
for the nomination of other members of Usiminas’
executive board. The Usiminas shareholders
agreement also provides for an exit mechanism
consisting of a buy-and-sell procedure—exercisable
at any time after November 16, 2022 and applicable
with respect to shares held by NSC and the T/T
Group—, which would allow either Ternium or
NSC to purchase all or a majority of the Usiminas
shares held by the other shareholder.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
136.
Confab and the Ternium entities party to the
Usiminas shareholders agreement have a separate
shareholders agreement governing their respective
rights and obligations as members of the T/T
Group. Such separate agreement includes, among
others, provisions granting Confab certain rights
relating to the T/T Group’s nomination of
Usiminas’ officers and directors under the Usiminas
shareholders agreement. Those circumstances
evidence that Tenaris has significant influence over
Usiminas, and consequently, Tenaris accounts for
its investment in Usiminas under the equity method
(as defined by IAS 28).
Techgen
Techgen S.A. de C.V. (“Techgen”), which operates
an electric power plant in Mexico, is a joint venture
company owned 48% by Ternium, 30% by Tecpetrol
International S.A. (“Tecpetrol”) and 22% by Tenaris.
Tenaris, Ternium and Tecpetrol are parties to a
shareholders’ agreement relating to the governance of
Techgen. The Company, Ternium and Tecpetrol are
under the indirect common control of San Faustin;
consequently, Tenaris accounts its interest in Techgen
under the equity method (as defined by IAS 28).
Global Pipe Company
Global Pipe Company (“GPC”) is a Saudi-German
joint venture, established in 2010 and located
in Jubail, Saudi Arabia, which manufactures
LSAW pipes. Tenaris, through its subsidiary
Saudi Steel Pipe Company (“SSPC”), currently
owns 35% of the share capital of GPC. Through
the shareholders agreement, SSPC is entitled to
choose one of the five members of the Board of
Directors of GPC. In addition, SSPC has the ability
to block any shareholder resolution. Based on the
facts stated above, the Company has determined
that it has significant influence over this entity
and accounts for its investment in GPC under the
equity method (as defined by IAS 28).
Tenaris carries its investments in non consolidated
companies 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. At December 31, 2020, 2019 and 2018,
no impairment provisions were recorded in any of
the aforementioned investments. See note 13.
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
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
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, utility conduits for buildings, heat
exchangers, energy and raw materials that exceed
internal requirements.
Tenaris’s Chief Operating Decision Maker
(“CODM”) 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:
D. Foreign currency translation
137.
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:
•
•
•
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, if any.
Tenaris presents 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.
•
•
•
•
•
•
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 may consider
exposure to fluctuation in the exchange rate versus
the U.S. dollar;
Prices of their critical raw materials and inputs are
priced and / or 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.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
138.
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.
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 year-end 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.
Goodwill and fair value adjustments arising from
the acquisition of a foreign operation are treated as
assets and liabilities of the foreign operation and
translated at the closing rate.
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 Company
and the investment enhances the condition of assets
beyond its original condition. The carrying amount
of the replaced part is derecognized. Maintenance
expenses on manufacturing properties are recorded
as cost of products sold in the year in which they
are incurred.
Cost may also include transfers from equity of
any gains or losses on qualifying cash flow hedges
of foreign currency purchases of property, plant
and equipment.
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”.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 Assets for which borrowing costs are capitalized
are those that require a substantial period of time
to prepare for their intended use.
of assets and are recognized under Other operating
income or Other operating expenses in the
Consolidated Income Statement.
139.
The 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. An asset’s carrying amount is
written down immediately to its recoverable
amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
Management’s re-estimation of assets useful lives,
performed in accordance with IAS 16, “Property,
Plant and Equipment”, resulted in additional
depreciation expenses for 2020 of $45 million and
did not materially affect depreciation expenses for
2019 and 2018.
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
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 at least 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 cash generating unit (“CGU”) or
group of CGUs 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 and comply with the
recognition criteria of IAS 38, “Intangible Assets”.
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.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 140.
Management’s re-estimation of assets useful lives,
performed in accordance with IAS 38, resulted in
additional amortization expenses for 2020 of
$11.1 million and did not materially affect
amortization expenses for 2019 and 2018.
Income Statement as incurred. Research and
development expenditures included in Cost of
sales for the years 2020, 2019 and 2018 totaled
$41.8 million, $61.1 million and $63.4 million,
respectively.
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, 2020, 2019 and 2018, and are 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 amortization expenses for 2020,
2019 and 2018.
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
Capitalized costs were not material for the years
2020, 2019 and 2018.
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 Tube
Corporation (“Maverick”) and Hydril Company
(“Hydril”) groups, as well as the more recent
acquisitions of Saudi Steel Pipes (“SSPC”) and
Ipsco Tubulars Inc. (“IPSCO”).
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 initial expected useful life of
approximately 14 years for Maverick, 10 years for
Hydril, 9 years for SSPC and 3 years for IPSCO.
In 2018 the Company reviewed the useful life of
Maverick’s Tubes customer relationships and
decided to reduce the remaining useful life from
2 years to zero, consequently a higher amortization
charge of approximately $109 million was recorded
in the Consolidated Income Statement under
Selling, general and administrative expenses for the
year ended December 31, 2018.
As of December 31, 2020 the net book value
of IPSCO’s customer relationship amounts
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
141.
to $51.3 with a residual life of 2 years, SSPC’s
customer relationship amounts to $63.8 million, with
a residual useful life of 7 years, while Maverick’s and
Hydril’s customer relationships are fully amortized.
Management’s re-estimation of assets useful lives,
performed in accordance with IAS 38, did not
materially affect amortization expenses for 2020
and 2019.
G. Right-of-use assets and lease liabilities
Leases are recognized as a right-of-use asset and
a corresponding liability at the date at which the
leased asset is available for use by the group. Each
lease payment is allocated between the liability and
finance cost. The finance cost is charged to profit
or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining
balance of the liability for each period. The right-
of-use asset is depreciated over the lease term on a
straight-line basis.
Lease liabilities include the net present value of i)
fixed payments, less any lease incentives receivable,
ii) variable lease payments that are based on an index
or a rate, iii) amounts expected to be payable by the
lessee under residual value guarantees, iv) the exercise
price of a purchase option if the lessee is reasonably
certain to exercise that option, and v) payments of
penalties for terminating the lease, if the lease term
reflects the lessee exercising that option.
Right-of-use assets are measured at cost
comprising the amount of the initial measurement
of lease liability, any lease payments made at or
before the commencement date less any lease
incentives received and any initial direct costs
incurred by the lessee.
Payments associated with short-term leases and
leases of low-value assets are recognized on a
straight-line basis as expenses in profit or loss.
Short-term leases are leases with a lease term of
12 months or less.
In determining the lease term, management considers
all facts and circumstances that create an economic
incentive to exercise an extension option, or not
exercise a termination option. Extension options (or
periods after termination options) are only included
in the lease term if the lease is reasonably certain to
be extended (or not terminated).
H. 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 (CGU). Most of the Company’s
principal subsidiaries that constitute a CGU have
a single main production facility and, accordingly,
each of such subsidiaries represents the lowest
level of asset aggregation that generates largely
independent cash inflows.
The lease payments are discounted using the interest
rate implicit in the lease. If that rate cannot be
determined, the lessee’s incremental borrowing rate
is used, being the rate that the lessee would have to
pay to borrow the funds necessary to obtain an asset
of similar value in a similar economic environment
with similar terms and conditions.
Assets that are subject to amortization or
depreciation are reviewed for impairment
whenever events or changes in circumstances
indicate that the carrying amount may not be
recoverable. Intangible assets with indefinite useful
lives, including goodwill, are subject to at least an
annual impairment test. Or more frequently
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
142.
if events or circumstances indicate that the
carrying amount value may be impaired.
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, 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 of disposal. 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
of disposal, its value in use or zero.
For purposes of calculating the fair value less costs
of disposal, 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. For more
information on impairment charges see note 5.
I. 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 held not for trading have been
categorized as financial assets “at fair value
through other comprehensive income” (“FVOCI”).
They are carried at fair value and interest income
from these financial assets is included in finance
income using the effective interest rate method.
Unrealized gains or losses are recorded as a fair
value adjustment in the Consolidated Statement
of Comprehensive Income and transferred to
the Consolidated Income Statement when the
financial asset is sold. Exchange gains and losses
and impairments related to the financial assets
are immediately recognized in the Consolidated
Income Statement. FVOCI instruments with
maturities greater than 12 months after the balance
sheet date are included in non-current assets.
Other investments in financial instruments and
time deposits are categorized as financial assets
“at fair value through profit or loss” (“FVPL”)
because such investments are held for trading 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.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 143.
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.
J. 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, utilities, freights and other
direct costs and related production overhead costs,
and it excludes borrowing costs. The allocation of
fixed production costs, including depreciation and
amortization charges, is based on the normal level of
production capacity. Inventories cost is mainly based
on the FIFO method. 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 as of year-end are
valued based on the supplier’s invoice cost.
Tenaris establishes an allowance for obsolete or
slow-moving inventories 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, aging and consumption patterns.
K. Trade and other receivables
Trade and other receivables are recognized initially
at fair value that corresponds to the amount of
consideration that is unconditional unless they
contain significant financing components. The
Company holds trade receivables with the objective
to collect the contractual cash flows and therefore
measures them subsequently at amortized cost
using the effective interest method. Due to the
short-term nature, their carrying amount is
considered to be the same as their fair value.
Tenaris applies the IFRS 9 “Financial Instruments”
simplified approach to measure expected credit
losses, which uses a lifetime expected loss
allowance for all trade receivables. To measure the
expected credit losses, trade receivables have been
grouped based on shared credit risk characteristics
and the days past due. The expected loss rates
are based on the payment profiles of sales over
a period of three years and the corresponding
historical credit losses experienced within this
period. The expected loss allowance also reflects
current and forward-looking information on
macroeconomic factors affecting the ability of
each customer to settle the receivables.
L. 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.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
144.
In the Consolidated Statement of Financial Position,
bank overdrafts are included in Borrowings in
current liabilities.
Dividends may be paid by the Company to the
extent that it has distributable retained earnings,
calculated in accordance with Luxembourg law.
See note 26 (iii).
For the purposes of the Consolidated Statement
of Cash Flows, Cash and cash equivalents includes
overdrafts.
M. 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, 2020,
2019 and 2018 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.
N. Borrowings
Borrowings are recognized initially at fair value
net of transaction costs incurred and subsequently
measured at amortized cost. Any difference
between the proceeds (net of transaction costs)
and the redemption amount is recognized in profit
or loss over the period of the borrowings using the
effective interest method.
O. Current and Deferred income tax
The income tax expense or credit for the period
is the tax payable on the current period’s taxable
income based on the applicable income tax rate
for each jurisdiction adjusted by changes in
deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
Tax is recognized in the Consolidated Income
Statement, except for tax items recognized in other
comprehensive income or directly in equity.
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
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 145.
between the tax bases of assets and liabilities and
their carrying amounts in the financial statements.
The temporary differences arise mainly from
the effect of currency translation on depreciable
fixed assets and inventories, depreciation on
property, plant and equipment, valuation of
inventories, provisions for pension plans and fair
value adjustments of assets acquired in business
combinations. 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.
Management periodically evaluates positions
taken in tax returns with respect to situations
in which applicable tax regulation is subject to
interpretation and considers whether it is probable
that a taxation authority will accept an uncertain
tax treatment. The Company measures its tax
balances either based on the most likely amount
or the expected value, depending on which method
provides a better prediction of the resolution of
the uncertainty.
Deferred tax assets are recognized to the extent
that 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.
Deferred tax liabilities and assets are not recognized
for temporary differences between the carrying
amount and tax basis of investments in foreign
operations where the company is able to control the
timing of the reversal of the temporary differences
and it is probable that the differences will not
reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to offset current
tax assets and liabilities and when the deferred
tax balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset where
the entity has a legally enforceable right to offset and
intends either to settle on a net basis, or to realize the
asset and settle the liability simultaneously.
Deferred tax assets and liabilities are re-measured
if tax rates change. These amounts are charged or
credited to the Consolidated Income Statement or to
the item Other comprehensive income for the year
in the Consolidated Statement of Comprehensive
Income, depending on the account to which the
original amount was charged or credited.
P. Employee benefits
1. Short-term obligations
Liabilities for wages and salaries are recognized in
respect of employees’ services up to the end of the
reporting period and are measured at the amounts
expected to be paid when the liabilities are settled.
The liabilities are presented as current employee
benefit obligations in the balance sheet.
2. 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.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 146.
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.
Remeasurement 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
expenses 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. As of December 31, 2020 the outstanding
liability for this plan amounts to $36.9 million.
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. As of December 31, 2020 the outstanding
liability for this plan amounts to $17.3 million.
•
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
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 147.
money market funds. Additionally, an unfunded
postretirement health and life plan is present that
offers limited medical and life insurance benefits
to the retirees, frozen to new participants. As of
December 31, 2020 the outstanding liability for
these plans amounts to $13.6 million.
•
Funded retirement benefit plans held in Canada for
salary and hourly employees hired prior to 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.
As of December 31, 2020 the outstanding liability
for this plan amounts to $10.6 million.
3. 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. Until 2017 units
were vested ratably over a period of four years
and were mandatorily redeemed by the Company
ten years after grant date, with the option of an
early redemption at seven years after the grant
date. Since 2018 units are vested ratably over the
same period and are mandatorily redeemed by
the Company seven years after grant date. The
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, 2020 and 2019, the
outstanding liability corresponding to the Program
amounts to $82.4 million and $99.0 million,
respectively. The total value of the units granted
(vested and unvested) to date under the program,
considering the number of units and the book
value per share as of December 31, 2020 and 2019,
is $108.7 million and $119.9 million, respectively.
4. Termination benefits
Termination benefits are payable when
employment is terminated by Tenaris before the
normal retirement date, or when an employee
accepts voluntary redundancy in exchange for
these benefits. Tenaris recognizes termination
benefits at the earlier of the following dates: (a)
when it can no longer withdraw the offer of those
benefits; and (b) when the costs for a restructuring
that is within the scope of IAS 37 and involves the
payment of terminations benefits. In the case of
an offer made to encourage voluntary redundancy,
the termination benefits are measured based on the
number of employees expected to accept the offer.
5. Other compensation obligations
Employee entitlements to annual leave, long-
service leave, sick leave and other bonuses and
compensations obligations are accrued as earned.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 148.
Compensation to employees in the event of
dismissal is charged to income in the year in which
it becomes payable.
Q. 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 reliably 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.
This note should be read in conjunction with note 26.
R. Trade and other payables
Trade and other payables are recognized initially at
fair value, generally the nominal invoice amount and
subsequently measured at amortized cost. They are
presented as current liabilities unless payment is not
due within twelve months after the reporting period.
Due to the short-term nature their carrying amounts
are considered to be the same as their fair value.
S. Revenue recognition
Revenue comprises the fair value of the
consideration received or receivable for the sale of
goods and rendering of services in the ordinary
course of Tenaris’s activities. The revenue
recognized by the Company is measured at the
transaction price of the consideration received or
receivable to which the Company is entitled to,
reduced by estimated returns and other customer
credits, such as discounts and volume rebates,
based on the expected value to be realized and
after eliminating sales within the group.
Revenue is recognized at a point in time or over
time from sales when control has been transferred
and there is no unfulfilled performance obligation
that could affect the acceptance of the product
by the customer. The control is transferred upon
delivery. Delivery occurs when the products have
been shipped to the specific location, the risks of
obsolescence and loss have been transferred and
either the customer has accepted the product in
accordance with the sales contract, the acceptance
provisions have lapsed or the Company has
objective evidence that all criteria for acceptance
have been satisfied, including all performance
obligations. These conditions are determined and
analyzed on a contract by contract basis to ensure
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 that all performance obligations are fulfilled. In
particular, Tenaris verifies customer acceptance of
the goods, the satisfaction of delivery terms and
any other applicable condition.
For bill and hold transactions revenue is recognized
only to the extent that (a) the reason for the bill and
hold arrangement must be substantive (for example,
the customer has requested the arrangement); (b)
the products have been specifically identified and
are ready for delivery; (c) the Company does not
have the ability to use the product or to direct it to
another customer; (d) the usual payment terms apply.
The Company’s contracts with customers do
not provide any material variable consideration,
other than discounts, rebates and right of return.
Discounts and rebates are recognized based on the
most likely value and rights of return are based on
expected value considering past experience and
contract conditions.
Where the contracts include multiple performance
obligations, the transaction price is allocated to
each performance obligation based on the stand-
alone selling prices. Where these are not directly
observable, they are estimated based on the
expected cost plus margin.
There are no judgements applied by management
that significantly affect the determination of
timing of satisfaction of performance obligations,
nor the transaction price and amounts allocated to
different performance obligations.
Pipe Management Services. This comprises mainly
preparation of the pipes ready to be run, delivery
to the customer, storage services and rig return.
149.
Field Services. Comprises field technical support
and running assistance.
These services are rendered in connection to
the sales of goods and are attached to contracts
with customers for the sale of goods. A significant
portion of service revenue is recognized in the
same period as the goods sold. There are no
distinct uncertainties in the revenues and cash
flows of the goods sold and services rendered
as they are included in the same contract, have
the same counterparty and are subject to the
same conditions.
Revenue from providing services is recognized
over time in the accounting period in which the
services are rendered. The following inputs and
outputs methods are applied to recognize revenue
considering the nature of service:
Storage services, the Company provides storage
services in owned or third-party warehouses,
subject to a variable fee to be invoiced. This fee is
determined based on the time that the customer
maintains the material in the warehouse and the
amount of the material stored. In the majority of
cases, to quantify the amount to be invoiced in any
given month, the monthly average fee of storage
per ton is multiplied by the monthly average stock
stored (in tons).
Tenaris provides services related to goods sold,
which represent a non-material portion of sales
revenue and mainly include:
Freights, the Company recognized the revenue on
a pro rata bases considering the units delivered and
time elapsed.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 150.
Field services, the revenue is recognized considering
output methods, in particular surveys of service
completion provided by the customer.
The Company does not expect to have any
contracts where the period between the transfer of
the promised goods or services to the customer and
payment by the customer exceeds one year. As a
consequence, considering that the contracts do not
include any significant financing component, the
Company does not adjust any of the transaction
prices for the time value of money. For this reason,
the Company is also applying the practical
expedient not to disclose details on transaction
prices allocated to the remaining performance
obligations as of the end of the reporting period.
Tenaris only provides standard quality warranties
assuring that the goods sold will function as
expected or are fit for their intended purpose,
with no incremental service to the customer.
Accordingly, warranties do not constitute a
separate performance obligation.
Other revenues earned by Tenaris are recognized
on the following basis:
T. Cost of sales and other selling expenses
Cost of sales and other selling expenses are
recognized in the Consolidated Income Statement
on the accrual basis of accounting.
Commissions, freights and other selling expenses,
including shipping and handling costs, are
recorded in Selling, general and administrative
expenses in the Consolidated Income Statement.
U. 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.
There are no dilutive potential ordinary shares.
V. 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.
•
•
•
Interest income: on the effective yield basis.
Dividend income from investments in other
companies: when Tenaris’s right to receive payment
is established.
Construction contracts revenues is recognized in
accordance with the stage of the project completion.
The Company classifies its financial instruments
according to the following measurement categories:
•
•
those to be measured subsequently at fair value
(either through OCI or through profit or loss), and
those to be measured at amortised cost.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 The classification depends on the Company’s
business model for managing the financial assets
and contractual terms of the cash flows.
Financial assets are recognized on their settlement
date. Financial assets are derecognized when the
rights to receive cash flows from the financial
assets have expired or have been transferred and
the Company has transferred substantially all the
risks and rewards of ownership.
At initial recognition, the Company measures a
financial asset at its fair value plus, in the case
of a financial asset not at fair value through
profit or loss, transaction costs that are directly
attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried
at fair value through profit or loss are expenses in
profit or loss.
Subsequent measurement of debt instruments
depends on the Company’s business model
for managing the asset and the cash flow
characteristics of the asset. There are three
measurement categories into which the Company
classifies its debt instruments:
included in finance income using the effective
interest rate method.
151.
Exchange gains and losses and impairments related
to the financial assets are immediately recognized
in the Consolidated Income Statement.
Fair value through other comprehensive income:
Assets that are held for collection of contractual
cash flows and for selling the financial assets, where
the assets’ cash flows represent solely payments of
principal and interest. Interest income from these
financial assets is included in finance income using
the effective interest rate method. Unrealized gains
or losses are recorded as a fair value adjustment
in the Consolidated Statement of Comprehensive
Income and transferred to the Consolidated Income
Statement when the financial asset is sold.
Fair value through profit and loss: Assets that do
not meet the criteria for amortized cost or FVOCI.
Changes in fair value of financial instruments
at FVPL are immediately recognized in the
Consolidated Income Statement.
For equity instruments, these are subsequently
measured at fair value.
Amortized Cost: Assets that are held for collection
of contractual cash flows where those cash flows
represent solely payments of principal and interest.
Interest income from these financial assets is
Accounting for derivative financial instruments
and hedging activities is included within the
Section III, Financial Risk Management.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 III. Financial risk management
152.
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, management
evaluates exposures on a consolidated basis, taking
advantage of 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.
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 0.05 as of
December 31, 2020 and 0.06 as of December 31,
2019. 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 and consolidated basis.
A number of derivative transactions are performed
in order to achieve an efficient coverage in the
absence of operative or natural hedges. Almost all
of these transactions are forward exchange rates
contracts. See note 25.
Tenaris does not enter into derivative financial
instruments for trading or other speculative
purposes, other than non-material investments in
structured products.
In the case of subsidiaries with 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 from 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, 2020 and 2019.
All amounts Long / (Short) in thousands of U.S.dollars
AS OF DECEMBER 31
2020
2019
CURRENCY EXPOSURE / FUNCTIONAL CURRENCY
Argentine Peso / U.S. dollar
(39,561)
(95,811)
Euro / U.S. dollar
(291,362)
(103,518)
Saudi Arabian Riyal / U.S. dollar
(125,789)
(107,582)
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
153.
The main relevant exposures correspond to:
•
•
Argentine Peso / U.S. dollar
As of December 31, 2020 and 2019 consisting
primarily of Argentine Peso-denominated
financial, trade, social and fiscal payables at
certain Argentine subsidiaries whose 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 $0.4 million and $1.0 million
as of December 31, 2020 and 2019 respectively.
Euro / U.S. dollar
As of December 31, 2020 and 2019, consisting
primarily of Euro-denominated intercompany
liabilities at certain subsidiaries whose 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 $2.9 million and $1.0 million
as of December 31, 2020 and 2019, respectively,
which would have been to a large extent offset
by changes in currency translation adjustment
included in Tenaris’s net equity position.
•
Saudi Arabian Riyal / U. S. Dollar
As of December 31, 2020 and 2019 consisting
primarily of Saudi Arabian Riyal-denominated
financial and trade payables. The Saudi Arabian
Riyal is tied to the dollar.
Considering the balances held as of December
31, 2020 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
$5.1 million (including a loss / gain of $1.0 million
due to foreign exchange derivative contracts),
which would be partially offset by changes to
Tenaris’s net equity position of $2.3 million.
For balances held as of December 31, 2019,
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 $4.6 million (including a
loss / gain of $4.9 million due to foreign exchange
derivative contracts), which would have been
partially offset by changes to Tenaris’s net equity
position of $0.6 million.
The Company entered into foreign exchange
derivative contracts to mitigate the exposure to
fluctuations in exchange rates.
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.
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.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 154.
The following table summarizes the proportions of
variable-rate and fixed-rate debt as of each year end.
AS OF DECEMBER 31
Fixed rate (*)
Variable rate
Total
(*) Out of the $237 million fixed rate borrowings, $197 million are short-term.
Amount in
thousands of
U.S. dollars
237,320
381,687
619,007
2020
Percentage
38%
62%
Amount in
thousands of
U.S. dollars
768,002
54,150
822,152
2019
Percentage
93%
7%
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 $7.1 million in 2020 and
$7.7 million in 2019.
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 2020, 2019
and 2018.
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.K.
As of December 31, 2020 and 2019 trade
receivables amounted to $968.1 million and
$1,348.2 million respectively. Trade receivables
have guarantees under credit insurance of
$134.9 million and $178.7 million, letter of
credit and other bank guarantees of $47.8 million
and $55.2 million, and other guarantees of
$8.8 million and $0.6 million as of December 31,
2020 and 2019 respectively.
As of December 31, 2020 and 2019, overdue
trade receivables amounted to $195.9 million
and $242.7 million, respectively. As of December
31, 2020 and 2019, overdue guaranteed trade
receivables amounted to $20.7 million and
$28.7 million; and the allowance for doubtful
accounts amounted to $53.7 million and
$48.8 million respectively. 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
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
155.
securities. Counterparties for derivatives and cash
transactions are limited to high credit quality
financial institutions, normally investment grade.
Approximately 88% of Tenaris’s liquid financial
assets corresponded to Investment Grade-rated
instruments as of December 31, 2020, in
comparison with approximately 96% as of
December 31, 2019.
VI. Liquidity risk
Tenaris financing strategy aims to maintain
adequate financial resources and access to
additional liquidity. During 2020, 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
12% of total assets at the end of 2020 and 2019.
Tenaris has a conservative approach to the
management of its liquidity, which consists of i)
cash and cash equivalents (cash in banks, liquidity
funds and investments with a maturity of less than
three months at the date of purchase), and ii) other
investments (fixed income securities, time deposits,
and fund investments).
Tenaris holds primarily investments in money
market funds and variable or fixed-rate securities
from investment grade issuers. As of December
31, 2020 and 2019, 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, 2020 and 2019, U.S.
dollar denominated liquid assets plus investments
denominated in other currencies hedged to the U.S.
dollar represented approximately 95% of total
liquid financial assets.
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
As mentioned in note II.A, the Company
classifies its financial instruments in the following
measurement categories: amortized cost, fair
value through other comprehensive income and
fair value through profit and loss. For financial
instruments that are measured in the statement
of financial position at fair value, IFRS 13, “Fair
value measurement” 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).
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
156.
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, 2020 and 2019.
All amounts in thousands of U.S. dollars
DECEMBER 31, 2020
MEASUREMENT CATEGORIES
AT FAIR VALUE
Carrying
Amount
Amortized
Cost
FVOCI
FVPL
Level 1
Level 2
Level 3
ASSETS
CASH AND CASH EQUIVALENTS
OTHER INVESTMENTS
584,681
872,488
486,498
763,697
–
98,183
98,183
108,791
–
108,791
Fixed Income (time-deposit, zero coupon bonds,
763,697
763,697
–
–
commercial papers)
U.S. Sovereign Bills
Non - U.S. Sovereign Bills
Certificates of deposits
Commercial papers
Other notes
Bonds and other fixed income
Non - U.S. government securities
Corporates securities
DERIVATIVE FINANCIAL INSTRUMENTS
OTHER INVESTMENTS NON-CURRENT
Bonds and other fixed income
Other Investments
TRADE RECEIVABLES
RECEIVABLES C AND NC (*)
Other receivables
Other receivables (non-financial)
Total
LIABILITIES
BORROWINGS C AND NC
TRADE PAYABLES
FINANCE LEASE LIABILITIES C AND NC
DERIVATIVE FINANCIAL INSTRUMENTS
Total
97,982
14,586
222,132
268,737
160,260
108,791
20,219
88,572
11,449
247,082
239,422
7,660
968,148
232,152
138,989
93,163
619,007
462,105
257,343
3,217
(*) Includes balances related to interest in our Venezuelan companies. See note 38.
97,982
14,586
222,132
268,737
160,260
–
–
–
–
–
–
–
968,148
90,330
90,330
–
–
–
–
–
–
108,791
20,219
88,572
–
–
–
–
–
–
–
–
–
–
–
–
–
–
108,791
20,219
88,572
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11,449
–
11,449
239,422
7,660
239,422
239,422
–
239,422
–
–
48,659
48,659
–
7,660
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,660
–
7,660
–
48,659
48,659
–
2,308,673
396,872
117,292
446,396
11,449
56,319
619,007
462,105
257,343
–
1,338,455
–
–
–
–
–
–
–
–
3,217
3,217
–
–
–
–
–
–
–
–
3,217
3,217
–
–
–
–
–
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
157.
All amounts in thousands of U.S. dollars
DECEMBER 31, 2019
MEASUREMENT CATEGORIES
AT FAIR VALUE
Carrying
Amount
Amortized
Cost
FVOCI
FVPL
Level 1
Level 2
Level 3
1,554,299
387,602
–
1,166,697
1,166,697
ASSETS
CASH AND CASH EQUIVALENTS
OTHER INVESTMENTS
Fixed Income (time-deposit, zero coupon bonds,
commercial papers)
Certificates of Deposits
Commercial Papers
Other notes
Bonds and other fixed income
U.S. government securities
Non - U.S. government securities
Corporates securities
DERIVATIVE FINANCIAL INSTRUMENTS
OTHER INVESTMENTS NON-CURRENT
Bonds and other fixed income
Other Investments
TRADE RECEIVABLES
RECEIVABLES C AND NC (*)
Other receivables
Other receivables (non-financial)
Total
LIABILITIES
BORROWINGS C AND NC
TRADE PAYABLES
FINANCE LEASE LIABILITIES C AND NC
DERIVATIVE FINANCIAL INSTRUMENTS
Total
210,376
65,874
20,637
4,993
40,244
144,502
10,211
28,637
105,654
19,929
24,934
18,012
6,922
65,874
65,874
20,637
4,993
40,244
–
–
–
–
–
–
–
–
1,348,160
1,348,160
93,239
93,239
–
261,678
141,898
119,780
822,152
555,887
230,167
1,814
(*) Includes balances related to interest in our Venezuelan companies. See note 38.
144,502
–
–
–
–
144,502
10,211
28,637
105,654
–
18,012
18,012
–
–
48,659
48,659
–
–
–
–
–
–
–
–
–
–
19,929
6,922
–
6,922
–
–
–
–
134,990
–
–
–
–
134,990
10,211
19,125
105,654
–
9,512
–
–
–
–
9,512
–
9,512
–
–
–
–
–
–
–
–
–
–
–
–
–
19,929
18,012
18,012
–
–
–
–
–
–
–
–
–
–
–
–
6,922
–
6,922
–
48,659
48,659
–
1,894,875
211,173
1,193,548
1,319,699
29,441
55,581
822,152
555,887
230,167
–
1,608,206
–
–
–
–
–
–
–
–
1,814
1,814
–
–
–
–
–
–
–
–
1,814
1,814
–
–
–
–
–
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
158.
There were no transfers between levels during
the year.
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 the Company interest in
Venezuelan companies. See note 38.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 The following table presents the changes in Level 3
assets:
All amounts in thousands of U.S. dollars
159.
YEAR ENDED DECEMBER 31
At the beginning of the year
(Decrease) / Addition
Increase due to business combinations
Currency translation adjustment and others
At the end of the year
Assets / Liabilities
2020
2019
55,581
(3,604)
3,915
427
56,319
52,985
2,933
–
(337)
55,581
C. Fair value estimation
Financial assets or liabilities classified 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.
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 classified under other financial
liabilities and measured at their amortized cost.
Tenaris estimates that the fair value of its main
financial liabilities is approximately 100.0% of
its carrying amount (including interests accrued)
in 2020 and 2019. Fair values were calculated
using standard valuation techniques for floating
rate instruments and comparable market rates for
discounting flows.
The carrying amount of investments valuated at
amortized cost approximates its fair value.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
160.
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 and non
derivative financial liabilities (leasing liabilities
denominated in Japanese Yen) as hedges of
particular risks associated with recognized
assets or liabilities or highly probable forecast
transactions. These 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. Similarly
the effective portion of the foreign exchange result
on the designated leasing liability 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 lease liability will be
recognized on the balance sheet at each period end
at the exchange rate as of the end of each month.
The full fair value of a hedging derivative and the
leasing liability 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 hedging instrument are highly
effective in offsetting changes in the fair value or
cash flow of hedged items. At December 31, 2020
and 2019, the effective portion of designated cash
flow hedges which is included in Other Reserves
in equity amounted to $4.8 million debit and
$2.6 million credit respectively. See note 25.
The fair values of various derivative instruments
used for hedging purposes and the movements of
the hedging reserve included within Other Reserves
in equity are disclosed in note 25.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 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.C, the Segment
Information is disclosed as follows:
Reportable operating segments
All amounts in million U.S. dollar
YEAR ENDED DECEMBER 31, 2020
IFRS - Net Sales
MANAGEMENT VIEW - operating (loss)
Difference in cost of sales
Differences in depreciation and amortization
Differences in selling, general and administrative expenses
Differences in other operating income (expenses), net
IFRS - operating (loss)
Financial income (expense), net
(Loss) before equity in earnings of non-consolidated companies and income tax
Equity in earnings of non-consolidated companies
(Loss) before income tax
Capital expenditures
Depreciation and amortization
161.
Tubes
Other
Total
4,844
(277)
(138)
1
(2)
(200)
(616)
303
(50)
4
(1)
–
–
(47)
189
661
4
18
5,147
(327)
(134)
–
(2)
(200)
(663)
(65)
(728)
109
(619)
193
679
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
162.
All amounts in millions of U.S. dollars
YEAR ENDED DECEMBER 31, 2019
IFRS - Net Sales
MANAGEMENT VIEW - operating income
Difference in cost of sales
Differences in depreciation and amortization
Differences in selling, general and administrative expenses
Differences in other operating income (expenses), net
IFRS - operating income
Financial income (expense), net
Income before equity in earnings of non-consolidated companies and income tax
Equity in earnings of non-consolidated companies
Income before income tax
Capital expenditures
Depreciation and amortization
Tubes
Other
Total
6,870
857
(105)
(1)
(1)
6
756
424
73
3
–
1
–
77
338
523
12
17
7,294
930
(102)
(1)
–
6
833
19
852
82
934
350
540
YEAR ENDED DECEMBER 31, 2018
Tubes
Other
Total
IFRS - Net Sales
MANAGEMENT VIEW - operating income
Difference in cost of sales
Differences in depreciation and amortization
Differences in selling, general and administrative expenses
IFRS - operating income
Financial income (expense), net
Income before equity in earnings of non-consolidated companies and income tax
Equity in earnings of non-consolidated companies
Income before income tax
Capital expenditures
Depreciation and amortization
7,233
426
7,659
702
112
(34)
(2)
778
346
645
81
7
–
6
94
3
19
783
119
(34)
4
872
37
909
194
1,103
349
664
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 $16.9, $36.2 and $52.4 million in 2020, 2019 and 2018, respectively.
There are no material differences between IFRS and management view in total revenues and by
reportable segments.
The main differences between operating income under IFRS view and the management view are
mainly related to the cost of goods sold and other timing differences. See Section II.C - Segment
Information. The main difference in Other operating income (expenses), net is attributable to the
impairment of the goodwill, which residual value in the management view differs from IFRS.
In addition to the amounts reconciled above, the main differences in net income arise from the
impact of functional currencies on financial result, deferred income taxes as well as the result of
investment in non-consolidated companies.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
Geographical information
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31, 2020
Net sales
Total assets
Trade receivables
Property, plant and
equipment, net
Capital expenditures
Depreciation and amortization
YEAR ENDED DECEMBER 31, 2018
Net sales
Total assets
Trade receivables
Property, plant and
equipment, net
Capital expenditures
Depreciation and amortization
YEAR ENDED DECEMBER 31, 2018
Net sales
Total assets
Trade receivables
Property, plant and
equipment, net
Capital expenditures
Depreciation and amortization
North
America
South
America
Europe
Middle East
& Africa
Asia
Pacific
Unallocated
(*)
Total
163.
2,179,949
8,071,574
411,692
115,972
3,971,101
1,050,619
71,531
408,546
63,111
106,827
776,235
642,793
1,227,532
1,868,458
1,461,738
139,427
823,057
39,691
84,518
804,559
210,194
242,939
10,452
44,259
3,429,911
7,885,120
612,809
1,391,288
2,227,044
176,173
3,771,570
1,129,260
169,390
276,046
113,999
105,308
738,880
1,382,172
2,282,775
149,321
816,721
55,169
82,400
958,424
319,406
254,858
4,578
42,520
3,611,509
7,971,311
791,190
1,462,044
2,489,522
280,801
3,859,060
1,133,113
196,220
441,705
68,603
108,558
724,733
1,559,988
1,913,589
215,202
848,178
77,467
82,769
588,746
383,358
94,040
2,047
10,389
320,225
552,508
90,863
105,465
8,537
34,656
351,804
609,663
90,451
117,608
7,038
33,247
300,314
482,563
66,815
129,517
5,136
20,936
–
5,146,734
957,352
13,716,189
–
–
–
–
968,148
6,193,181
193,322
678,806
–
7,294,055
879,965
14,842,991
–
–
–
–
1,348,160
6,090,017
350,174
539,521
–
7,658,588
805,568
14,251,299
–
–
–
–
1,737,366
6,063,908
349,473
664,357
(*) For 2020, 2019 and 2018 includes Investments in non-consolidated companies. See note 13.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
164.
There are no revenues from external customers
attributable to the Company’s country of
incorporation (Luxembourg).
Tubes segment revenues by market:
In millions of U.S. dollars
The principal countries from which the Company
derives its revenues are USA (26%), Mexico,
Argentina, Canada, Saudi Arabia, Brazil and Italy.
Revenue is mainly recognized at a point in time
to direct customers, when control has been
transferred and there is no unfulfilled performance
obligation that could affect the acceptance of
the product by the customer. Revenues related to
governmental institutions represents approximately
24%, 21% and 15% in 2020, 2019 and 2018
respectively.
REVENUES TUBES
2020
2019
2018
Oil and Gas
4,073
5,757
6,042
Hydrocarbon Processing
371
534
602
and Power Generation
Industrial and Other
Total
400
579
589
4,844
6,870
7,233
At December 31, 2020, 2019 and 2018, the
Company recognized contract liabilities related to
customer advances in the amount of $48.7, $82.7
and $62.7 million, respectively. These amounts
related to years 2019 and 2018 were reclassified
to revenues during the subsequent year. In these
periods, no significant adjustment in revenues were
performed related to performance obligations
previously satisfied.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 2. Cost of sales
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
INVENTORIES AT THE BEGINNING OF THE YEAR
Increase in inventory due to business combinations
PLUS: CHARGES OF THE YEAR
Raw materials, energy, consumables and other
Services and fees
Labor cost (*)
Depreciation of property, plant and equipment
Amortization of intangible assets
Depreciation of right-of-use assets
Maintenance expenses
Allowance for obsolescence
Taxes
Other
LESS: INVENTORIES AT THE END OF THE YEAR
(*) For the year ended December 2020, 2019 and 2018, labor cost includes approximately
$81.3 million, $17.2 million and $15.0 million respectively of severance indemnities related
to the adjustment of the workforce to market conditions.
165.
2020
2019
2018
2,265,880
2,524,341
2,368,304
199,589
52,966
–
1,545,688
2,709,629
3,400,396
154,976
757,359
503,725
8,121
40,127
107,764
35,809
45,162
59,790
222,415
870,261
428,791
5,948
28,727
284,758
29,138
100,738
115,663
275,130
855,040
432,497
8,220
–
185,782
25,457
133,308
119,507
3,458,110
4,849,034
5,435,337
(1,636,673)
(2,265,880)
(2,524,341)
4,087,317
5,107,495
5,279,300
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 166.
3. Selling, general and administrative expenses
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Services and fees
Labor cost (*)
Depreciation of property, plant and equipment
Amortization of intangible assets
Depreciation of right-of-use assets
Commissions, freight and other selling expenses
Provisions for contingencies
Allowances for doubtful accounts
Taxes
Other
(*) For the year ended December 2020, 2019 and 2018, labor cost includes approximately
$61.2 million, $7.4 million and $10.2 million respectively of severance indemnities related to
the adjustment of the workforce to market conditions.
2020
2019
2018
115,883
444,436
26,814
82,355
17,664
310,815
11,957
4,644
63,234
41,425
153,773
481,854
18,524
41,967
15,564
441,442
28,565
(16,256)
110,876
89,665
128,090
470,928
16,968
206,672
–
491,555
23,498
1,751
71,110
99,404
1,119,227
1,365,974
1,509,976
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 4. Labor costs (included in Cost of sales and in
Selling, general and administrative expenses)
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
167.
2020
2019
2018
Wages, salaries and social security costs
1,036,211
1,274,474
1,250,783
Severance indemnities
Defined contribution plans
Pension benefits - defined benefit plans
Employee retention and long term incentive program
142,458
12,442
11,097
(413)
24,637
12,663
18,207
22,134
25,225
13,217
15,390
21,353
1,201,795
1,352,115
1,325,968
The following table shows the geographical
distribution of the employees:
COUNTRY
Mexico
Argentina
Italy
USA
Romania
Brazil
Colombia
Canada
Indonesia
Japan
Other
2020
2019
2018
4,501
4,376
2,039
1,596
1,552
1,360
746
561
521
399
5,370
5,405
2,144
2,255
1,815
1,360
1,040
772
616
400
5,595
5,427
2,155
2,382
1,852
1,287
1,082
1,030
554
399
1,377
19,028
2,023
23,200
1,204
22,967
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 168.
5. Impairment charge
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.
A decline during the first months of 2020 in oil
prices and futures resulted in reductions in Tenaris
customers’ investments. Drilling activity and
demand of products and services, particularly in
North America, also declined. Selling prices of
products in North America were also affected by
low levels of consumption caused by the spread of
COVID-19 pandemic. For more information on
these effects, refer to note 39.
The Company conducts regular 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 (or higher if the period
can be justified) 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% taking into account among others,
mainly the historical inflation rate.
The main key assumptions used in estimating
the value in use are discount rate, growth rate
and competitive and economic factors applied to
determine cash flow projections, such as oil and
gas prices, average number of active oil and gas
drilling rigs (rig count) and raw material costs.
•
•
•
•
•
For purposes of assessing key assumptions,
to estimate discounted future cash flows, the
Company uses external sources of information and
management judgment based on past experience.
Management has determined the value of each of
the key assumptions as follows:
Discount rate: based on the applicable weighted
average cost of capital (“WACC”), which is
considered to be a good indicator of capital cost,
taking into account the industry, country and size
of the business. For each CGU where assets are
allocated, a specific WACC was determined taking
into account the industry, country and size of the
business. In 2020, the main discount rates used
were in a range between 8.0% and 13.6%.
Growth rate: considers mainly the inflation impact
on prices and costs, 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. In 2020,
a nominal growth rate of 2% was considered.
Oil and gas prices: based on industry analysts’
reports and management’s expectations of market
development respectively.
Rig count: based on information published by
Baker Hughes and management’s expectations.
Raw material costs: based on industry analysts’
reports and management’s expectations.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
169.
An increase of 100 Bps in the discount rate, a
decline of 100 Bps in the growth rate or a decline
of 5% in the cash flow projections, would have
generated an additional impairment as showed in
the below table.
All amounts in millions of U.S. dollars
+100Bps
Discount rate
-100Bps
Growth rate
-5%
Cash flows
OCTG - USA
IPSCO
Coiled Tubing
Rods - USA
(60)
(117)
(12)
(5)
(43)
(77)
(6)
(3)
(16)
(41)
(5)
(2)
In March, 2020, as a result of the deterioration of
business conditions and in light of the presence of
impairment indicators for its assets in the United
States, the Company decided to write down the
goodwill and other long lived assets recording an
impairment charge of approximately $622 million,
impacting the carrying value of goodwill of the
CGUs OCTG-USA, IPSCO and Coiled Tubing
for $225 million, $357 million and $4 million
respectively, and the carrying value of fixed assets
of the CGU Rods-USA for $36 million. Out of
the total amount, $582 million were allocated to
the Tubes segment. No impairment charges were
recorded for the years 2019 and 2018.
All amounts in millions of U.S. dollars
Assets before
impairment
Impairment
Assets after
impairment
OCTG - USA
IPSCO
Coiled Tubing
Rods - USA
544
1,169
108
73
225
357
4
36
319
812
104
37
The main factors that could result in additional
impairment charges in future periods would be an
increase in the discount rate or a decrease in growth
rate used in the Company’s cash flow projections,
a deterioration of the business, competitive and
economic factors, such as a decrease in oil and gas
prices, and the evolution of the rig count.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 170.
6. Other operating income and expenses
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
OTHER OPERATING INCOME
Net income from other sales
Net rents
Other
Recovery on allowance for doubtful receivables
OTHER OPERATING EXPENSES
Contributions to welfare projects and non-profits organizations
Allowance for doubtful receivables
2020
2019
2018
9,891
5,501
18,001
–
33,393
12,989
1,263
14,252
8,651
5,089
8,025
1,239
3,604
4,909
6,546
–
23,004
15,059
11,199
–
11,199
11,379
1,179
12,558
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
7. Financial results
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Interest Income
Net result on changes in FV of financial assets at FVTPL
Impairment result on financial assets at FVTOCI
Finance Income (*)
Finance Cost
Net foreign exchange transactions results (**)
Foreign exchange derivatives contracts results (***)
Other
Other financial results
Net financial results
171.
2020
2019
2018
21,625
48,061
–
(3,238)
18,387
(64)
–
42,244
(2,388)
–
47,997
39,856
(27,014)
(43,381)
(36,942)
(74,422)
19,644
(1,590)
(56,368)
27,868
(11,616)
(1,585)
14,667
28,845
6,576
(1,035)
34,386
(64,995)
19,283
37,300
(*) Finance Income: In 2020, 2019 and 2018 includes $6.5, $7.6 and $3.6 million of interest
related to instruments carried at FVPL, respectively.
(**) Net foreign exchange transactions results: In 2020 mainly includes the negative impact from
Euro appreciation against the U.S. dollar on Euro denominated intercompany liabilities in
subsidiaries with functional currency U.S. dollar, largely offset by the currency translation
adjustment reserve from our Italian subsidiary, together with the negative impact from Brazilian
Real depreciation against the U.S. dollar on U.S. dollar denominated intercompany liabilities in
subsidiaries with functional currency Brazilian Real, largely offset by the currency translation
adjustment reserve from our Brazilian subsidiaries. Also includes the negative result from the
Mexican peso depreciation against the U.S. dollar on peso denominated trade, social, fiscal and
financial positions at Mexican subsidiaries with functional currency U.S. dollar.
In 2019 mainly includes the result from the Argentine peso depreciation against the U.S. dollar
on peso denominated financial, trade, social and fiscal payables and receivables at Argentine
subsidiaries with functional currency U.S. dollar.
In 2018 mainly includes the result from the Argentine peso depreciation against the U.S. dollar on
peso denominated financial, trade, social and fiscal payables and receivables at Argentine
subsidiaries with functional currency U.S. dollar, together with the positive impact from Euro
depreciation against the U.S. dollar on Euro denominated intercompany liabilities in subsidiaries
with functional currency U.S. dollar, largely offset by the currency translation adjustment reserve
from our Italian subsidiary.
(***) Foreign exchange derivatives contracts results: In 2020 includes mainly gain on derivatives covering
net receivables in Mexican peso, Brazilian real and Canadian dollar and net payables in Euro.
In 2019 includes mainly losses on derivatives covering net payables in Argentine peso and Euro
and net receivables in Canadian dollar.
In 2018 includes mainly gain on derivatives covering net receivables in Canadian dollar.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
172.
8. Income tax
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Current tax
Deferred tax
Tax charge
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
YEAR ENDED DECEMBER 31
(Loss) Income before income tax
Less Impairment charges (non deductible)
Income before income tax without impairment charges
Tax calculated at the tax rate in each country
Effect of currency translation on tax base
Changes in the tax rates
Utilization of previously unrecognized tax losses
Tax revaluation, withholding tax and others
Tax charge
2020
2019
2018
(121,048)
(299,692)
97,898
97,240
(343,104)
113,897
(23,150)
(202,452)
(229,207)
2020
2019
2018
(619,267)
933,710
1,103,107
622,402
3,135
21,052
(72,936)
(958)
98
–
–
933,710
1,103,107
(186,752)
(53,296)
13
547
(207,422)
(77,552)
(1,824)
–
29,594
37,036
57,591
(23,150)
(202,452)
(229,207)
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 Effect of currency translation on tax base,
Tenaris applies the liability method to recognize
deferred income tax on temporary differences
between the tax bases of assets / liabilities and
their carrying amounts in the financial statements.
By application of this method, Tenaris recognizes
gains and losses on deferred income tax due to the
effect of the change in the value on the tax bases
in subsidiaries (mainly Argentina and Mexico),
which have a functional currency different than
their local currency. These gains and losses are
required by IFRS even though the revalued /
devalued tax bases of the relevant assets will
not result in any deduction / obligation for tax
purposes in future periods.
Tax revaluation, withholding tax and others,
includes a net tax income of $61 million,
$66 million and $65 million for 2020, 2019 and 2018
respectively related to the tax revaluation regimes in
Argentina and Mexico. It also includes a charge of
$10 million, $34 million and $26 million for 2020,
2019 and 2018 respectively related to withholding
taxes for intra-group international operations.
173.
9. Dividends distribution
On November 4, 2020, the Company’s Board
of Directors approved the payment of an interim
dividend of $0.07 per share ($0.14 per ADS),
or approximately $82.6 million, payable on
November 25, 2020, with an ex-dividend date
of November 23, 2020.
On June 2, 2020, the Company’s Shareholders
approved that, as a consequence of liquidity
preservation initiatives, no further dividends
be distributed in respect of fiscal year 2019
beyond the interim dividend of approximately
$153 million already paid in November 2019.
On May 6, 2019, the Company’s Shareholders
approved an annual dividend in the amount of
$0.41 per share ($0.82 per ADS). The amount
approved included the interim dividend previously
paid on November 21, 2018 in the amount of
$0.13 per share ($0.26 per ADS). The balance,
amounting to $0.28 per share ($0.56 per ADS),
was paid on May 22, 2019. In the aggregate,
the interim dividend paid in November 2018
and the balance paid in May 2019 amounted
to approximately $484 million.
On May 2, 2018, the Company’s Shareholders
approved an annual dividend in the amount of
$0.41 per share ($0.82 per ADS). The amount
approved included the interim dividend previously
paid on November 22, 2017 in the amount of
$0.13 per share ($0.26 per ADS). The balance,
amounting to $0.28 per share ($0.56 per ADS),
was paid on May 23, 2018. In the aggregate,
the interim dividend paid in November 2017
and the balance paid in May 2018 amounted
to approximately $484 million.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
174.
10. Property, plant and equipment, net
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31, 2020
COST
Values at the beginning of the year
Currency translation adjustment
Increase due to business combinations (*)
Additions
Transfers / Reclassifications
Disposals / Consumptions
Land
and civil
buildings
Industrial buildings,
plant and production
equipment
Vehicles,
furniture and
fixtures
Work in
progress
Spare
parts and
equipment
Total
799,139
12,468,813
399,724
108,308
60,602
13,836,586
(545)
39,622
1,451
5,881
(5,964)
72,650
440,366
1,524
157,473
(61,281)
443
7,195
620
15,586
(8,811)
(2,095)
16,255
157,315
(176,589)
(968)
(162)
–
6,845
–
(5,392)
70,291
503,438
167,755
2,351
(82,416)
Values at the end of the year
839,584
13,079,545
414,757
102,226
61,893
14,498,005
DEPRECIATION AND IMPAIRMENT
Accumulated at the beginning of the year
Currency translation adjustment
Depreciation charge
Impairment charge (See note 5)
Transfers / Reclassifications
Disposals / Consumptions
121,468
(288)
11,368
–
(1)
(89)
7,302,135
56,560
492,973
36,000
349
(57,897)
322,966
405
26,198
–
(475)
(6,848)
Accumulated at the end of the year
132,458
7,830,120
342,246
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,746,569
56,677
530,539
36,000
(127)
(64,834)
8,304,824
At December 31, 2020
707,126
5,249,425
72,511
102,226
61,893
6,193,181
(*) Related to IPSCO acquisition. See note 32.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31, 2019
Land
and civil
buildings
Industrial buildings,
plant and production
equipment
Vehicles,
furniture and
fixtures
Work in
progress
Spare
parts and
equipment
Total
175.
12,121,569
377,260
127,378
63,197
13,421,982
COST
Values at the beginning of the year
Currency translation adjustment
Increase due to business combinations (**)
Additions
Transfers / Reclassifications
Disposals / Consumptions
732,578
(1,611)
59,468
16
8,723
(35)
(38,961)
115,908
1,178
296,272
(27,153)
(1,615)
1,733
1,107
28,349
(7,110)
Values at the end of the year
799,139
12,468,813
399,724
DEPRECIATION AND IMPAIRMENT
Accumulated at the beginning of the year
Currency translation adjustment
Depreciation charge
Transfers / Reclassifications
Disposals / Consumptions
110,914
(420)
11,409
(362)
(73)
6,936,900
310,260
(24,973)
415,826
(38)
(25,580)
(1,485)
20,080
–
(5,889)
Accumulated at the end of the year
121,468
7,302,135
322,966
(864)
1,630
299,412
(317,128)
(2,120)
108,308
–
–
–
–
–
–
(256)
–
12,202
(11,984)
(2,557)
(43,307)
178,739
313,915
4,232
(38,975)
60,602
13,836,586
–
–
–
–
–
–
7,358,074
(26,878)
447,315
(400)
(31,542)
7,746,569
At December 31, 2019
677,671
5,166,678
76,758
108,308
60,602
6,090,017
(**) Related to SSPC acquisition. See note 32.
Property, plant and equipment include capitalized
interests for net amounts at December 31, 2020
and 2019 of $33.6 million and $35.4 million,
respectively. There were no interest capitalized
during 2020 and 2019.
The carrying amounts of assets pledged as security
for current and non-current borrowings are
immaterial for the years 2020 and 2019.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
176.
11. Intangible assets, net
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31, 2020
COST
Values at the beginning of the year
Currency translation adjustment
Increase due to business combinations (**)
Additions
Transfers / Reclassifications
Disposals
Values at the end of the year
AMORTIZATION AND IMPAIRMENT
Accumulated at the beginning of the year
Currency translation adjustment
Amortization charge
Impairment charge (See note 5)
Transfers / Reclassifications
Disposals
Information
system
projects
Licenses,
patents and
trademarks (*)
Goodwill
Customer
relationships
Total
604,870
463,742
2,117,837
2,140,051
5,326,500
1,108
11,563
24,965
(1,393)
(3,761)
220
87,000
602
–
(1,064)
(5,058)
357,183
–
–
–
–
71,100
–
–
–
(3,730)
526,846
25,567
(1,393)
(4,825)
637,352
550,500
2,469,962
2,211,151
5,868,965
536,337
890
42,931
–
931
(3,730)
373,772
797,592
2,057,240
3,764,941
(1)
8,760
–
–
–
–
–
586,402
–
–
–
38,785
–
–
–
889
90,476
586,402
931
(3,730)
Accumulated at the end of the year
577,359
382,531
1,383,994
2,096,025
4,439,909
At December 31, 2020
59,993
167,969
1,085,968
115,126
1,429,056
(*) Includes Proprietary Technology.
(**) Related to IPSCO acquisition. See note 32.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31, 2019
COST
Values at the beginning of the year
Currency translation adjustment
Increase due to business combinations (***)
Additions
Transfers / Reclassifications
Disposals
Values at the end of the year
AMORTIZATION AND IMPAIRMENT
Accumulated at the beginning of the year
Currency translation adjustment
Amortization charge
Disposals
177.
Information
system
projects
Licenses,
patents and
trademarks (*)
Goodwill
Customer
relationships
Total
580,622
464,571
2,085,936
2,058,859
5,189,988
(1,917)
405
35,487
(4,665)
(5,062)
(70)
–
772
–
(1,531)
(968)
32,869
–
–
–
–
81,192
–
–
–
(2,955)
114,466
36,259
(4,665)
(6,593)
604,870
463,742
2,117,837
2,140,051
5,326,500
513,984
372,746
797,592
2,038,981
3,724,023
(1,734)
28,937
(4,850)
–
719
(413)
–
–
–
–
18,259
–
(1,734)
47,915
(5,263)
Accumulated at the end of the year
536,337
373,772
797,592
2,057,240
3,764,941
At December 31, 2019
68,533
89,970
1,320,245
82,811
1,561,559
(*) Includes Proprietary Technology.
(***) Related to SSPC acquisition. See note 32.
The geographical allocation of goodwill for the
year ended December 31, 2020 was $939.2 million
for North America, $111.1 million for South
America, $33.7 million for Middle East & Africa
and $2.0 million for Europe.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
178.
The carrying amount of goodwill allocated by
CGU, as of December 31, 2020, was as follows:
All amounts in millions of U.S. dollars
As of December 31, 2020
CGU
Tamsa (Hydril and other)
Siderca (Hydril and other)
Hydril
Other
Total
Tubes Segment
Hydril
Acquisition
Other
Total
346
265
309
–
920
19
93
–
54
365
358
309
54
166
1,086
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
12. Right-of-use assets, net and lease liabilities
179.
Right of use assets evolution
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31, 2020
COST
Opening net book amount
Currency translation adjustment
Increase due to business combinations (*)
Additions
Transfers / Reclassifications
Disposals
At December 31, 2020
DEPRECIATION
Accumulated at the beginning of the year
Currency translation adjustment
Depreciation charge
Transfers / Reclassifications
Disposals / Consumptions
Accumulated at the end of the year
Land
and Civil
Buildings
Industrial Buildings,
Plant and Production
Equipment
Vehicles,
furniture and
fixtures
Total
36,137
(839)
3,461
11,534
439
(8,800)
41,932
8,330
(92)
13,200
(2,876)
(3,420)
15,142
225,389
14,194
275,720
746
13,730
42,573
(458)
(8,622)
273,358
30,581
145
37,671
1,702
(2,106)
67,993
530
7,556
5,034
136
(8,835)
18,615
3,683
190
6,920
1,291
(3,267)
8,817
437
24,747
59,141
117
(26,257)
333,905
42,594
243
57,791
117
(8,793)
91,952
At December 31, 2020
26,790
205,365
9,798
241,953
(*) Related to IPSCO acquisition. See note 32.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
180.
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31, 2019
COST
Opening net book amount
Currency translation adjustment
Increase due to business combinations (**)
Additions
Transfers / Reclassifications
Disposals
At December 31, 2019
DEPRECIATION
Accumulated at the beginning of the year
Currency translation adjustment
Depreciation charge
Transfers / Reclassifications
Disposals
Accumulated at the end of the year
Land
and Civil
Buildings
Industrial Buildings,
Plant and Production
Equipment
Vehicles,
furniture and
fixtures
Total
27,713
(88)
229
9,292
–
(1,009)
36,137
–
(3)
8,514
–
(181)
8,330
202,352
8,335
238,400
6
2,038
24,985
496
(4,488)
8
–
7,165
(496)
(818)
(74)
2,267
41,442
–
(6,315)
225,389
14,194
275,720
–
3
31,869
(62)
(1,229)
30,581
–
8
3,908
62
(295)
3,683
–
8
44,291
–
(1,705)
42,594
At December 31, 2019
27,807
194,808
10,511
233,126
(**) Related to SSPC acquisition.
Depreciation of right-of-use assets is mainly
included in Tubes segment.
The initial cost of right-of-use assets consists of
the initial lease liability plus lease payments made
in 2018 of approximately $4 million.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
Lease liability evolution
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
2020
2019
Opening net book amount
Increase due to
business combinations
Translation differences
Additions
Cancellations
Repayments (*)
Interest accrued
230,167
26,046
7,656
58,536
(17,529)
(51,666)
4,133
234,149
2,267
2,690
36,957
(4,688)
(43,974)
2,766
At December 31
257,343
230,167
(*) Repayments include capital and interest.
13. Investments in non-consolidated companies
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
At the beginning of the year
Translation differences
Equity in earnings of non-consolidated companies
Increase due to business combinations
Dividends and distributions declared (*)
Additions
Decrease / increase in equity reserves and others
At the end of the year
181.
The amount of remaining payments with maturity
less than 1 year, between 2 and 5 years and more
than 5 years is approximately 16.9%, 40.5% and
42.6% of the total remaining payments, respectively.
Expenses related to short-term leases and low
value leases (included in cost of sales and selling,
general and administrative expenses) for the year
2020 amounted to $1.7 million and $3.2 million
respectively and for the year 2019 amounted to
$15.1 million and $1.3 million respectively. Expenses
related to variable leases (included in cost of sales
and selling, general and administrative expenses)
were not material for the years 2020 and 2019.
2020
2019
879,965
(31,977)
108,799
–
(861)
–
1,426
957,352
805,568
(10,781)
82,036
20,635
(28,037)
19,610
(9,066)
879,965
(*) Related to Ternium and Usiminas. During 2020 and 2019 $0.3 million and $29.0 million respectively were collected.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
182.
The principal non-consolidated companies are:
Company
Country of incorporation
% ownership at December 31,
Value at December 31,
a) Ternium (*)
b) Usiminas (**)
c) Techgen
Luxembourg
Brazil
Mexico
d) Global Pipe Company
Saudi Arabia
Others
–
(*) Including treasury shares.
(**) At December 31, 2020 and 2019 the voting rights were 5.19%.
2020
2019
2020
2019
11.46%
3.07%
22.00%
35.00%
–
11.46%
3.07%
22.00%
35.00%
–
830,028
751,105
65,144
19,536
23,421
19,223
74,593
9,888
22,550
21,829
957,352
879,965
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
a) Ternium
Ternium, is a steel producer with production
facilities in Mexico, Argentina, Brazil, 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, 2020, the closing price of
Ternium’s ADSs as quoted on the New York Stock
Exchange was $29.08 per ADS, giving Tenaris’s
ownership stake a market value of approximately
$668 million. At December 31, 2020, the carrying
All amounts in thousands of U.S. dollars
value of Tenaris’s ownership stake in Ternium,
based on Ternium’s IFRS Financial Statements,
was approximately $830 million.
183.
As of December 31, 2020, the Company concluded
that the carrying amount does not exceed the
recoverable value of the investment.
Summarized selected financial information of
Ternium, including the aggregated amounts of
assets, liabilities, revenues and profit or loss is
as follows:
TERNIUM
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Equity
Revenues
Gross profit
Net income for the year attributable to owners of the parent
Total comprehensive income for the year, net of tax, attributable to owners of the parent
2020
2019
8,289,460
4,566,775
8,757,320
4,178,213
12,856,235
12,935,533
2,559,485
1,853,597
3,452,535
1,768,125
4,413,082
5,220,660
8,443,153
7,714,873
8,735,435
10,192,818
1,635,512
1,740,378
778,468
666,667
564,269
445,473
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 184.
b) Usiminas
Usiminas is a Brazilian producer of high quality
flat steel products used in the energy, automotive
and other industries.
Tenaris’s ownership stake a market value of
approximately $113.8 million. As of that date,
the carrying value of Tenaris’s ownership stake in
Usiminas was approximately $65.1 million.
As of December 31, 2020, the closing price of the
Usiminas’ ordinary and preferred shares, as quoted
on the B3 - Brasil Bolsa Balcão S.A, was BRL15.69
($3.02) and BRL14.61 ($2.81), respectively, giving
Summarized selected financial information of
Usiminas, including the aggregated amounts of
assets, liabilities, revenues and profit or loss is
as follows:
All amounts in thousands of U.S. dollars
USIMINAS
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Equity
Revenues
Gross profit
Net income for the year attributable to owners of the parent
2020
2019
3,487,317
2,276,368
4,335,662
2,198,449
5,763,685
6,534,111
1,661,605
1,955,395
861,912
716,930
2,523,517
2,672,325
3,240,168
3,861,786
3,132,949
3,790,206
624,199
106,361
478,141
52,779
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
185.
c) Techgen
Techgen is a Mexican company that operates a
natural gas-fired combined cycle electric power
plant in the Pesquería area of the State of Nuevo
León, Mexico, and started producing energy on
December 1, 2016, with a power capacity of 900
megawatts. As of December 31, 2020, Tenaris held
22% of Techgen’s share capital, and its affiliates,
Ternium and Tecpetrol (both controlled by San
Faustin), held 48% and 30% respectively. As of
December 31, 2020, the carrying value of Tenaris’s
ownership stake in Techgen was approximately
$19.5 million.
Techgen entered into certain transportation
capacity agreements, a contract for the purchase
of power generation equipment and other services
related to the equipment, and an agreement for
the purchase of clean energy certificates. As of
December 31, 2020, Tenaris’s exposure under
these agreements amounted to $48.8 million,
$0.9 million and $17.6 million respectively.
During 2019, Techgen repaid certain
subordinated loans to Techgen’s sponsors; the
portion corresponding to Tenaris amounted
to $40.5 million. As of December 31, 2020, the
aggregate outstanding principal amount under
these subordinated loans was $58.1 million.
Techgen is a party to a $640 million syndicated
loan agreement, which is “non-recourse” on the
sponsors. Techgen’s obligations thereunder are
guaranteed by a Mexican security trust (covering
shares, assets, accounts and contract rights),
account pledges and certain direct agreements
–customary for these type of transactions–. The
commercial terms and conditions governing the
purchase of 22% of the energy generated by
Techgen, by the Company’s Mexican subsidiary,
Tamsa, remain substantially unchanged.
Under the loan agreement, Techgen is committed
to maintain a debt service reserve account covering
debt service becoming due during two consecutive
quarters; such account is funded by stand-by letters
of credit issued for the account of Techgen’s sponsors
in proportion to their respective participations in
Techgen. Accordingly, the Company and its Swiss
subsidiary, Tenaris Investments Switzerland AG,
applied for stand-by letters of credit covering 22% of
the debt service coverage ratio, which as of the date
hereof amounts to $9.8 million.
d) GPC
GPC is a Saudi-German joint venture, established
in 2010 and located in Jubail, Saudi Arabia, which
manufactures LSAW pipes. Tenaris, through its
subsidiary SSPC, currently owns 35% of the share
capital of GPC. As of December 31, 2020, the
carrying value of Tenaris’s ownership stake in
GPC was approximately $23.4 million.
SSPC and the other three owners of GPC have
issued corporate guarantees to secure repayment
of loan agreements entered into by GPC, with the
Saudi Investment Development Fund, the Saudi
British Bank, the National Commercial Bank and
Banque Saudi Fransi to finance GPC’s capital
expenditures and working capital. As of December
31, 2020, SSPC’s exposure under the guarantees
amounted to $131.5 million.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
186.
14. Receivables – non current
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Employee advances and loans
Tax credits
Receivables from related parties
Legal deposits
Advances to suppliers and other advances
Receivable Venezuelan subsidiaries
Others
15. Inventories, net
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Finished goods
Goods in process
Raw materials
Supplies
Goods in transit
Allowance for obsolescence, see note 24 (i)
2020
2019
4,563
18,046
62,790
8,600
4,803
48,659
6,842
6,008
20,065
59,999
12,378
3,772
48,659
6,222
154,303
157,103
2020
2019
691,922
417,097
143,558
488,802
158,929
968,329
612,888
221,954
486,411
194,015
1,900,308
2,483,597
(263,635)
(217,717)
1,636,673
2,265,880
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 16. Receivables and prepayments, net
187.
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
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
Miscellaneous
Allowance for other doubtful accounts, see note 24 (i)
17. Current tax assets and liabilities
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
CURRENT TAX ASSETS
V.A.T. credits
Prepaid taxes
CURRENT TAX LIABILITIES
Income tax liabilities
V.A.T. liabilities
Other taxes
2020
2019
26,457
3,075
4,672
14,661
2,723
16,217
13,961
81,766
(3,917)
77,849
30,579
1,867
8,189
17,180
670
19,837
31,145
109,467
(4,892)
104,575
2020
2019
106,293
30,091
136,384
27,616
9,933
53,044
90,593
112,161
55,227
167,388
64,994
9,953
52,678
127,625
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
188.
18. Trade receivables, net
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Current accounts
Receivables from related parties
Allowance for doubtful accounts, see note 24 (i)
2020
2019
1,017,663
1,387,494
4,161
9,448
1,021,824
1,396,942
(53,676)
(48,782)
968,148
1,348,160
The following table sets forth details of the aging
of trade receivables:
All amounts in thousands of U.S. dollars
AT DECEMBER 31, 2020
Trade Receivables
Not Due
Past due
1 - 180 days
> 180 days
Guaranteed
Not guaranteed
Guaranteed and not guaranteed
Expected loss rate
Allowance for doubtful accounts
Nominative allowances for doubtful accounts
Net Value
AT DECEMBER 31, 2019
Guaranteed
Not guaranteed
Guaranteed and not guaranteed
Expected loss rate
Allowance for doubtful accounts
Nominative allowances for doubtful accounts
191,514
830,310
1,021,824
0.07%
(721)
(52,955)
968,148
234,427
1,162,515
1,396,942
0.09%
(1,294)
(47,488)
170,796
655,132
825,928
0.04%
(321)
(718)
18,778
116,802
135,580
0.23%
(331)
(1,011)
824,889
134,238
205,764
948,449
1,154,213
0.04%
(529)
–
26,899
157,960
184,859
0.24%
(455)
(1,922)
Net Value
1,348,160
1,153,684
182,482
1,940
58,376
60,316
0.72%
(69)
(51,226)
9,021
1,764
56,106
57,870
0.57%
(310)
(45,566)
11,994
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 Trade receivables are mainly denominated in
U.S. dollars.
189.
19. Cash and cash equivalents and other investments
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
CASH AND CASH EQUIVALENTS
Cash at banks
Liquidity funds
Short – term investments
OTHER INVESTMENTS - CURRENT
Fixed Income (time-deposit, zero coupon bonds, commercial papers)
Bonds and other fixed Income
OTHER INVESTMENTS - NON-CURRENT
Bonds and other fixed Income
Others
20. Borrowings
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
NON-CURRENT
Bank borrowings
Costs of issue of debt
CURRENT
Bank borrowings
Bank overdrafts
Costs of issue of debt
Total Borrowings
2020
2019
117,807
98,183
368,691
118,314
1,166,697
269,288
584,681
1,554,299
763,697
108,791
872,488
239,422
7,660
247,082
65,874
144,502
210,376
18,012
6,922
24,934
2020
2019
315,884
(145)
315,739
40,896
(16)
40,880
303,170
781,258
98
–
303,268
619,007
24
(10)
781,272
822,152
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
190.
The maturity of borrowings is as follows:
All amounts in thousands of U.S. dollars
AT DECEMBER 31, 2020
1 year or less
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
Over 5 years
Total
Borrowings
Total borrowings
Interest to be accrued (*)
Total
AT DECEMBER 31, 2019
Borrowings
Total borrowings
Interest to be accrued (*)
Total
(*)
Includes the effect of hedge accounting.
303,268
303,268
9,829
313,097
781,272
781,272
11,370
792,642
104,147
104,147
5,068
109,215
17,307
17,307
1,045
18,352
207,595
207,595
1,014
208,609
23,573
23,573
117
23,690
3,997
3,997
22
4,019
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
619,007
619,007
15,933
634,940
822,152
822,152
12,532
834,684
Significant borrowings include:
In million of U.S. dollars
Disbursement date
Borrower
Type
Original &
Outstanding
Final
maturity
2020
2020
2020
2020
2020
2020
Maverick
Maverick
Tamsa
Tamsa
Tamsa
SSPC
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Multiple Banks
50
75
60
80
60
81
2021
2022
2023
2023
2023
2021 - 2024
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
191.
As of December 31, 2020, 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, 2020 and 2019, considering hedge
accounting where applicable.
2020
2019
Total borrowings
2.51%
3.18%
Breakdown of long-term borrowings by currency
and rate is as follows:
Non-current borrowings
All amounts in thousands of U.S. dollars
Currency
Interest rates
Year ended December 31
USD
USD
SAR
EUR
EUR
Total non-current borrowings
Variable
Fixed
Fixed
Fixed
Variable
2020
274,600
17,936
20,902
1,828
473
315,739
2019
–
18,370
16,106
5,108
1,296
40,880
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
192.
Breakdown of short-term borrowings by currency
and rate is as follows:
Current borrowings
All amounts in thousands of U.S. dollars
Currency
Interest rates
Year ended December 31
USD
USD
EUR
EUR
MXN
ARS
SAR
SAR
Others
Total current borrowings
Borrowings evolution
All amounts in thousands of U.S. dollars
Year ended December 31, 2020
At the beginning of the year
Translation differences
Proceeds and repayments, net
Interests accrued less payments
Reclassifications
Increase due to business combinations
Overdrafts variation
At the end of the year
Variable
Fixed
Variable
Fixed
Fixed
Fixed
Variable
Fixed
Variable
2020
2019
67,823
2,322
1,015
3,886
17,092
274,799
80
3,772
147,997
424,964
3,699
37,776
38,750
–
86
35,666
24,797
16
303,268
781,272
Non current
Current
40,880
266
781,272
(487)
234,455
(478,913)
426
(12,940)
52,652
–
(12,016)
12,940
398
74
315,739
303,268
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
21. Deferred income tax
Deferred income taxes are calculated in full on
temporary differences under the liability method
using the tax rate of each country.
The evolution of deferred tax assets and liabilities
during the year are as follows:
Deferred tax liabilities
All amounts in thousands of U.S. dollars
At the beginning of the year
Translation differences
Increase due to business combinations
Charged directly to other comprehensive income
Income statement charge / (credit)
At December 31, 2020
At the beginning of the year
Translation differences
Increase due to business combinations
Charged to other comprehensive income
Income statement charge / (credit)
At December 31, 2019
193.
Total
788,797
1,897
132,703
(1,194)
(78,740)
Fixed
assets
651,339
1,644
89,306
–
(39,874)
702,415
Inventories
Intangible
and Other
19,396
–
–
–
(4,141)
15,255
118,062
253
43,397
(1,194)
(34,725)
125,793
843,463
710,995
25,048
46,532
782,575
(347)
5,621
–
(64,930)
651,339
–
–
–
(5,652)
19,396
(4)
11,209
423
59,902
118,062
(351)
16,830
423
(10,680)
788,797
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
194.
Deferred tax assets
All amounts in thousands of U.S. dollars
At the beginning of the year
Translation differences
Increase due to business combinations
Charged to other comprehensive income
Income statement charge / (credit)
At December 31, 2020
At the beginning of the year
Translation differences
Increase due to business combinations
Charged to other comprehensive income
Income statement charge / (credit)
At December 31, 2019
Provisions and
allowances
Inventories
Tax losses
Other
Total
(19,653)
(93,404)
(382,832)
(181,606)
(677,495)
1,804
(7,452)
–
4,093
513
(24,580)
–
31,534
1,996
(33,598)
–
(65,715)
644
(34,974)
(1,952)
10,930
4,957
(100,604)
(1,952)
(19,158)
(21,208)
(85,937)
(480,149)
(206,958)
(794,252)
(16,116)
362
(1,160)
–
(2,739)
(19,653)
(86,585)
(396,257)
(86,184)
(585,142)
306
(1,413)
–
(5,712)
497
(1,172)
–
286
(2,238)
(1,261)
1,451
(5,983)
(1,261)
14,100
(92,209)
(86,560)
(93,404)
(382,832)
(181,606)
(677,495)
In 2019 the effect of the adoption of IFRS 16 has
been recognized as “Other” both for deferred tax
assets and liabilities.
Deferred tax assets related to taxable losses of
Tenaris subsidiaries are recognized to the extent it
is considered probable that future taxable profits
will be available against which such losses can be
utilized in the foreseeable future. This amount
includes $438.8 million related to U.S. subsidiaries
mainly due to the recognition of accelerated fiscal
depreciations, as well as the amounts related to
the acquisition of IPSCO. The U.S. subsidiaries
have incurred in fiscal losses in the past years. The
remaining balance mainly corresponds to Tenaris’s
Colombian, Japanese, Canadian and Saudi Arabian
subsidiaries. These subsidiaries have incurred in
fiscal losses in the past one or two years. Tenaris
has concluded that these deferred tax assets will be
recoverable based on the business plans and budgets.
The expiration dates of the recognized tax losses
in less than 1 year, between 2 and 5 years and in
more than 5 years is approximately 0%, 1.7% and
98.3% respectively.
As of December 31, 2020, the net unrecognized
deferred tax assets amounted to $173.7 million.
The expiration dates of the unrecognized tax
losses less than 1 year, between 2 and 5 years and
more than 5 years is approximately 4.6%, 17.1%
and 78.3% respectively.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
The estimated recovery analysis of deferred tax
assets and deferred tax liabilities is as follows:
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Deferred tax assets to be recovered after 12 months
Deferred tax liabilities to be settled after 12 months
195.
2020
2019
(640,603)
840,892
(538,274)
766,852
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:
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Deferred tax assets
Deferred tax liabilities
The movement in the net deferred income tax
liability account is as follows:
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
At the beginning of the year
Translation differences
Increase due to business combinations
Charged to other comprehensive income
Income statement (credit)
At the end of the year
2020
2019
(205,590)
254,801
49,211
(225,680)
336,982
111,302
2020
2019
111,302
197,433
6,854
32,099
(3,146)
(97,898)
49,211
1,100
10,847
(838)
(97,240)
111,302
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 196.
22. Other liabilities
I. Other liabilities – Non current
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Post-employment benefits
Other-long term benefits
Miscellaneous
Post-employment benefits
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Unfunded
Funded
Unfunded
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Values at the beginning of the year
Current service cost
Interest cost
Curtailments and settlements
Remeasurements (*)
Translation differences
Increase due to business combinations
Benefits paid from the plan
Other
At the end of the year
(*) For 2020 a loss of $1.6 million is attributable to demographic assumptions and a gain
of $3.8 million to financial assumptions. For 2019 a loss of $1.3 million is attributable
to demographic assumptions and a loss of $5.7 million to financial assumptions.
2020
2019
136,811
64,928
43,896
144,993
85,473
20,917
245,635
251,383
2020
2019
115,774
21,037
136,811
125,573
19,420
144,993
2020
2019
125,573
4,796
6,496
(1,237)
(2,230)
(415)
1,566
(22,955)
4,180
115,774
97,318
7,978
5,526
–
7,010
(1,567)
15,660
(9,328)
2,976
125,573
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 The actuarial assumptions for the most
relevant plans were as follows:
YEAR ENDED DECEMBER 31
Discount rate
Rate of compensation increase
197.
2020
2019
1% - 7%
0% - 3%
1% - 7%
0% - 3%
As of December 31, 2020, an increase / (decrease)
of 1% in the discount rate assumption of the main
plans would have generated a (decrease) / increase
on the defined benefit obligation of $6.0 million and
$7.2 million respectively, and an increase / (decrease)
of 1% in the rate of compensation assumption of
the main plans would have generated an increase /
(decrease) impact on the defined benefit obligation
of $3.1 million and $2.8 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:
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Present value of funded obligations
Fair value of plan assets
Liability (*)
(*) In 2020 and 2019, $2.1 million and $4.2 million corresponding to a plan with a surplus balance
were reclassified within other non-current assets, respectively.
2020
2019
176,309
(157,335)
18,974
160,412
(145,160)
15,252
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 198.
The movement in the present value of funded
obligations is as follows:
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
At the beginning of the year
Translation differences
Current service cost
Interest cost
Remeasurements (*)
Benefits paid
Other
At the end of the year
(*) For 2020 a loss of $3.7 million is attributable to demographic assumptions and a loss of
$14.3 million to financial assumptions.
For 2019 a loss of $0.4 million is attributable to demographic assumptions and a loss of
$12.4 million to financial assumptions.
The movement in the fair value of plan assets
is as follows:
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
At the beginning of the year
Translation differences
Return on plan assets
Remeasurements
Contributions paid to the plan
Benefits paid from the plan
Other
At the end of the year
2020
2019
160,412
146,885
2,148
850
5,009
18,025
(9,266)
(869)
4,542
721
5,754
12,769
(10,259)
–
176,309
160,412
2020
2019
(145,160)
(132,438)
(1,729)
(4,411)
(10,396)
(5,017)
9,266
112
(4,137)
(5,018)
(10,507)
(3,589)
10,259
270
(157,335)
(145,160)
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 The major categories of plan assets as a percentage
of total plan assets are as follows:
199.
YEAR ENDED DECEMBER 31
Equity instruments
Debt instruments
Others
The actuarial assumptions for the most relevant
plans were as follows:
YEAR ENDED DECEMBER 31
Discount rate
Rate of compensation increase
2020
2019
49.3%
46.8%
3.9%
49.0%
47.0%
4.0%
2020
2019
1 % - 3 %
0 % - 3 %
3 % - 4 %
0 % - 3 %
The expected return on plan assets is determined
by considering the expected returns available on
the assets underlying the current investment policy.
Expected return on plan assets is determined based
on long-term, prospective rates of return as of the
end of the reporting period.
As of December 31, 2020, an increase / (decrease)
of 1% in the discount rate assumption of the main
plans would have generated a (decrease) / increase on
the defined benefit obligation of $19.7 million and
$24.2 million respectively, and an increase / (decrease)
of 1% in the compensation rate assumption of
the main plans would have generated an increase
/ (decrease) on the defined benefit obligation of
$1.9 million and $1.7 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.
The employer contributions expected to be paid for
the year 2021 amounts approximately to $2.8 million.
The methods and types of assumptions used in
preparing the sensitivity analyses did not change
compared to the previous period.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 200.
II. Other liabilities – current
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Payroll and social security payable
Miscellaneous
23. Non-current allowances and provisions
Liabilities
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Values at the beginning of the year
Translation differences
Increase due to business combinations
Additional provisions
Reclassifications
Used
Values at the end of the year
2020
2019
175,175
27,651
202,826
153,009
23,255
176,264
2020
2018
54,599
(5,739)
26,542
478
557
(3,219)
73,218
36,089
(1,571)
–
19,904
5,641
(5,464)
54,599
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 201.
24. Current allowances and provisions
I. Deducted from assets
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31, 2020
Values at the beginning of the year
Translation differences
Increase due to business combinations
(Additional) allowances
Used
At December 31, 2020
YEAR ENDED DECEMBER 31, 2019
Values at the beginning of the year
Translation differences
Increase due to business combinations
(Additional) / reversals allowances
Used
At December 31, 2019
Allowance for doubtful
accounts - Trade receivables
Allowance for other doubtful
accounts - Other receivables
Allowance for
inventory obsolescence
(48,782)
(37)
(1,930)
(4,644)
1,717
(53,676)
(66,535)
9
(1,788)
16,256
3,276
(48,782)
(4,892)
801
–
(1,263)
1,437
(3,917)
(6,784)
88
–
1,239
565
(4,892)
(217,717)
1,560
(76,776)
(35,809)
65,107
(263,635)
(209,796)
794
(10,761)
(29,138)
31,184
(217,717)
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 202.
II. Liabilities
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31, 2020
Values at the beginning of the year
Translation differences
Increase due to business combinations
Additional provisions
Reclassifications
Used
At December 31, 2020
YEAR ENDED DECEMBER 31, 2019
Values at the beginning of the year
Translation differences
Increase due to business combinations
Additional / (reversals) provisions
Reclassifications
Used
At December 31, 2019
(*) Other claims and contingencies mainly include lawsuits and other legal proceedings, including
employee, tax and environmental-related claims.
Sales risks
Other claims and
contingencies (*)
5,867
(5)
116
9,728
–
(13,911)
1,795
6,814
(28)
505
11,880
–
(13,304)
5,867
11,150
(975)
398
1,751
(557)
(1,283)
10,484
17,469
(570)
8,000
(3,219)
(5,641)
(4,889)
11,150
Total
17,017
(980)
514
11,479
(557)
(15,194)
12,279
24,283
(598)
8,505
8,661
(5,641)
(18,193)
17,017
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
25. Derivative financial instruments
Net fair values of derivative financial instruments
The net fair values of derivative financial
instruments, in accordance with IFRS 13, are:
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Derivatives hedging borrowings and investments
Other Derivatives
Contracts with positive fair values
Derivatives hedging borrowings and investments
Other Derivatives
Contracts with negative fair values
Total
203.
2020
2019
10,119
1,330
11,449
(2,250)
(967)
(3,217)
8,232
19,000
929
19,929
–
(1,814)
(1,814)
18,115
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 204.
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 31, 2020 and 2019 were
as follows:
All amounts in thousands of U.S. dollars
Purchase currency
Sell currency
USD
MXN
EUR
USD
USD
BRL
USD
KWD
CAD
COP
CNY
MXN
USD
USD
EUR
JPY
USD
JPY
USD
USD
USD
USD
Others
Total
Term
2021
2021
2021
2021
2021
2021
2030
2021
2021
2021
2021
2021
Following is a summary of the hedge
reserve evolution:
All amounts in thousands of U.S. dollars
Fair Value
Hedge Accounting Reserve
2020
2019
9,838
(5)
(1,969)
543
–
412
94
(246)
–
–
(482)
47
8,232
18,999
(576)
–
588
(190)
(234)
–
103
(200)
(345)
(167)
137
2020
156
–
5
–
–
85
(4,958)
(59)
–
–
–
–
2019
404
–
–
–
–
–
2,149
38
–
–
–
–
18,115
(4,771)
2,591
Equity Reserve
Dec-18
Movements
2019
Equity Reserve
Dec-19
Movements
2020
Equity Reserve
Dec-20
Foreign Exchange
Total Cash flow Hedge
(916)
(916)
3,507
3,507
2,591
2,591
(7,362)
(7,362)
(4,771)
(4,771)
Tenaris estimates that the cash flow hedge reserve
corresponding to derivatives instruments at December
31, 2020 will be recycled to the Consolidated Income
Statement during 2021. For information on hedge
accounting reserve, see Section III.D.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 205.
26. Contingencies, commitments and restrictions
on the distribution of profits
I. Contingencies
Tenaris is from time to time subject to various
claims, lawsuits and other legal proceedings,
including customer, employee, tax and
environmental-related claims, in which third
parties are seeking payment for alleged damages,
reimbursement for losses, or indemnity.
Management with the assistance of legal counsel
periodically reviews the status of each significant
matter and assesses potential financial exposure.
Some of these claims, lawsuits and other legal
proceedings involve highly complex issues, and
often these issues are subject to substantial
uncertainties and, therefore, the probability of
loss and an estimation of damages are difficult
to ascertain. Accordingly, with respect to a large
portion of such claims, lawsuits and other legal
proceedings, the Company is unable to make a
reliable estimate of the expected financial effect
that will result from ultimate resolution of the
proceeding. In those cases, the Company has not
accrued a provision for the potential outcome of
these cases.
If a potential loss from a claim, lawsuit or other
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. In a limited number of
ongoing cases, the Company was able to make
a reliable estimate of the expected loss or range
of probable loss and has accrued a provision for
such loss but believes that publication of this
information on a case-by-case basis would seriously
prejudice the Tenaris’s position in the ongoing
legal proceedings or in any related settlement
discussions. Accordingly, in these cases, the
Company has disclosed information with respect to
the nature of the contingency but has not disclosed
its estimate of the range of potential loss.
The Company believes that the aggregate provisions
recorded for potential losses in these Consolidated
Financial Statements are adequate based upon
currently available information. However, if
management’s estimates prove incorrect, current
reserves could be inadequate and the Company
could incur a charge to earnings which could have a
material adverse effect on its results of operations,
financial condition, net worth and cash flows.
Below is a summary description of Tenaris’s material
legal proceedings which are outstanding as of the
date of these Consolidated Financial Statements.
In addition, the Company is subject to other legal
proceedings, none of which is believed to be material.
CSN claims relating to the January 2012 acquisition
of Usiminas shares
Confab, a Brazilian subsidiary of the Company, is
one of the defendants in a lawsuit filed in Brazil
by Companhia Siderúrgica Nacional (“CSN”) and
various entities affiliated with CSN against Confab
and several Ternium subsidiaries that acquired
a participation in Usiminas’ control group in
January 2012.
The CSN lawsuit alleges that, under applicable
Brazilian laws and rules, the acquirers were required
to launch a tag-along tender offer to all non-
controlling holders of Usiminas’ ordinary shares for
a price per share equal to 80% of the price per share
paid in such acquisition, or BRL28.8, and seeks an
order to compel the acquirers to launch an offer at
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 206.
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
dismissed the CSN lawsuit, and on February 8, 2017,
the court of appeals maintained the understanding
of the first instance court. On March 6, 2017, CSN
filed a motion for clarification against the decision
of the Court of Appeals of São Paulo, which was
rejected on July 19, 2017. On August 18, 2017, CSN
filed an appeal to the Superior Court of Justice
seeking the review and reversal of the decision
issued by the Court of Appeals. On March 5, 2018,
the court of appeals ruled that CSN’s appeal did
not meet the requirements for submission to the
Superior Court of Justice and rejected the appeal.
On May 8, 2018, CSN appealed against such ruling
and on January 22, 2019, the court of appeals
rejected it and ordered that the case be submitted
to the Superior Court of Justice. On September 10,
2019, the Superior Court of Justice declared CSN’s
appeal admissible. The Superior Court of Justice
will review the case and then render a decision
on the merits. The Superior Court of Justice is
restricted to the analysis of alleged violations to
federal laws and cannot assess matters of fact.
The Company 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, two decisions issued by the
Brazilian securities regulator (“CVM”) in February
2012 and December 2016, and the first and second
instance court decisions referred to above.
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 and then replaced by Chubb Seguros Brasil
S/A (“Chubb”), 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 with respect to the Veracel accident
and other amounts not covered by insurance. Itaú
and Veracel claimed 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
were consolidated and are considered by the 6th
Civil Court of São Caetano do Sul. However, each
lawsuit will be adjudicated separately.
On September 28, 2018 Confab and Chubb entered
into a settlement agreement pursuant to which
on October 9, 2018, Confab paid an amount of
approximately $3.5 million to Chubb, without
assuming any liability for the accident or the claim.
On October 10, 2018, Confab was notified that the
court had issued rulings for both lawsuits. Both
decisions were unfavorable to Confab:
•
With respect to Chubb’s claim, on October 9,
2018, Confab paid an amount of approximately
BRL13.1 million (approximately $3.5 million at
historical exchange rate), including interest, fees
and expenses, settling the Chubb claim in full.
•
With respect to Veracel’s claim, Confab was ordered
to pay the insurance deductible and other concepts
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
not covered by insurance, currently estimated to
amount to BRL69.9 million (approximately $13.5
million) including interest, fees and expenses. Both
parties filed motions for clarification against the
court’s decision, which were partially granted.
Although the contract between Confab and Veracel
expressly provided that Confab would not be
liable for damages arising from lost profits, the
court award would appear to include BRL59.9
million (approximately $11.5 million) of damages
arising therefrom. Confab has additional defense
arguments in respect of a claim for lost profits. On
December 18, 2018, Confab filed an appeal against
the first instance court decision, and on April 30,
2019, Veracel filed its response to the appeal. At
this stage the Company cannot predict the outcome
of the claim or the amount or range of loss in case
of an unfavorable outcome.
Ongoing investigation
The Company is aware that Brazilian, Italian and
Swiss authorities have been investigating whether
certain payments were made prior to 2014 from
accounts of entities presumably associated with
affiliates of the Company to accounts allegedly
linked to individuals related to Petróleo Brasileiro
S.A. (“Petrobras”) and whether any such payments
were intended to benefit the Company’s Brazilian
subsidiary Confab. 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 did not uncover any information
that corroborated allegations of involvement in
these alleged payments by the Company or its
subsidiaries. Furthermore, the Company became
aware that a Petrobras internal investigation
commission reviewed certain contracts with
Confab and concluded that they had not found
evidence that Petrobras had benefitted Confab or
had misused applicable local content rules.
207.
The Audit Committee of the Company's Board of
Directors engaged external counsel in connection
with the Company’s review of these matters. In
addition, the Company voluntarily notified the
U.S. Securities and Exchange Commission (“SEC”)
and the U.S. Department of Justice (“DOJ”) in
October 2016.
In July 2019, the Company learned that the public
prosecutors’ office of Milan, Italy, had completed
a preliminary investigation into the alleged
payments and had included in the investigation,
among other persons, the Company’s Chairman
and Chief Executive Officer, two other board
members, Gianfelice Rocca and Roberto Bonatti,
and the Company’s controlling shareholder,
San Faustin. The Company is not a party to the
proceedings. In February 2020, the Company
learned that the magistrate overseeing the
investigation decided to move the case to trial.
The Company’s outside counsel had previously
reviewed the Italian prosecutors’ investigative file
and has informed the Board that neither that file
nor this magistrate’s decision sets forth evidence
of involvement by any of the three directors in
the alleged wrongdoing. Accordingly, the Board
concluded that no particular action was warranted
at that time, other than inviting the referred board
members to continue discharging their respective
responsibilities with the full support of the Board.
The trial has not yet started.
In June 2020, the Company learned that the
Brazilian public prosecutors’ office requested the
indictment of several individuals, including three
executives or former executives of Confab and
a former agent of Confab, charging them with
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
208.
the alleged crimes of corruption in relation to
contracts executed between 2007 and 2010, and
money laundering in relation to payments between
2009 and 2013. Neither the Company nor Confab
is a party to the proceedings.
The Company continues to respond to
requests from and otherwise cooperate with
the appropriate authorities. The Company has
engaged in discussions with the SEC and the DOJ
towards a potential resolution of the investigation.
There are no assurances that the discussions with
the SEC or the DOJ will result in a final resolution
of the investigation or, if a resolution is achieved,
the timing, scope and terms of any such resolution.
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 the
resolution of these matters.
Putative class actions
Following the Company’s November 27, 2018
announcement that its Chairman and CEO Paolo
Rocca had been included in an Argentine court
investigation known as the Notebooks Case
(a decision subsequently reversed by a higher
court), two putative class action complaints were
filed in the U.S. District Court for the Eastern
District of New York. On April 29, 2019, the
court consolidated the complaints into a single
case, captioned “In re Tenaris S.A. Securities
Litigation”, and appointed lead plaintiffs and
lead counsel. On July 19, 2019, the lead plaintiffs
filed an amended complaint purportedly on
behalf of purchasers of Tenaris securities during
the putative class period of May 1, 2014 through
December 5, 2018. The individual defendants
named in the complaint are Tenaris’s Chairman
and CEO and Tenaris’s former CFO. The
complaint alleges that during the class period, the
Company and the individual defendants inflated
the Tenaris share price by failing to disclose that
the nationalization proceeds received by Ternium
(in which the Company held an 11.46% stake)
when Sidor was expropriated by Venezuela were
received or expedited as a result of allegedly
improper payments made to Argentine officials.
The complaint does not specify the damages that
plaintiff is seeking. On October 9, 2020, the court
granted in part and denied in part the defendants’
motions to dismiss. The court partially granted
and partially denied the motion to dismiss the
claims against the Company and its Chairman and
CEO. In addition, the court granted the motions
to dismiss as to all claims against San Faustin,
Techint, and Tenaris’s former CFO. The case will
now proceed based on the claims that survived
the motion to dismiss. Management believes the
Company has meritorious defenses to these claims;
however, at this stage Tenaris cannot predict the
outcome of the claim or the amount or range of
loss in case of an unfavorable outcome.
Investigation concerning alleged price overcharges
in Brazil
In 2018, two Brazilian subsidiaries of the Company
were notified of formal charges arising from
a review by the Tribunal de Contas da Uniao
(“TCU”) for alleged price overcharges on goods
supplied to Petróleo Brasileiro S.A. - Petrobras
under a supply contract. Both companies have
already filed their defenses. On September 28, 2020,
TCU’s technical unit, advised TCU that the alleged
overprice should be reduced from BRL9 million
(approximately $1.7 million) to BRL401 thousand
(approximately $77 thousand), and further stated
that because of its immateriality, the alleged
overcharge should not give rise to any penalties or
indemnification obligations and acknowledged
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
209.
that any potential penalties would be barred as a
result of the applicable statute of limitations. On
November 19, 2020 the Public Prosecutor’s Office
filed an opinion supporting the TCU’s technical
unit’s views. TCU’s final judgment is pending. The
estimated amount of this claim is BRL30.6 million
(approximately $5.9 million). The Company
believes, based on the advice of counsel and
external consultants, that the prices charged under
the Petrobras contract do not result in overprices
and that it is unlikely that the ultimate resolution
of this matter will result in a material obligation.
Administrative proceeding concerning Brazilian
tax credits
Confab is a party to an administrative proceeding
concerning the recognition and transfer of tax
credits for an amount allegedly exceeding the
amount that Confab would have been entitled
to recognize and / or transfer. The proceeding
resulted in the imposition of a fine against Confab
representing approximately 75% of the allegedly
undue credits, which was appealed by Confab.
On January 21, 2019, Confab was notified of an
administrative decision denying Confab’s appeal,
thereby upholding the tax determination and
the fine against Confab. On January 28, 2019,
Confab challenged such administrative decision
and is currently awaiting a resolution. In case
of an unfavorable resolution, Confab may still
appeal before the courts. The estimated amount
of this claim is BRL57.2 million (approximately
$11 million). At this stage, the Company cannot
predict the outcome of this claim.
U.S. Patent infringement litigation
Tenaris Coiled Tubes, LLC (“TCT”), a U.S.
subsidiary of the Company, was sued on 2017 by
its competitor Global Tubing, alleging violations
to certain intellectual property regulations and
seeking a declaration that certain Global Tubing
products do not infringe patents held by TCT.
TCT filed a counterclaim seeking declaration that
certain Global Tubing products infringe patents
held by TCT, and Global Tubing responded
alleging that such patents should be invalidated.
On December 13, 2019, Global Tubing filed an
amended complaint (including the Company
as defendant) and alleging that TCT and the
Company misled the patent office in order to
monopolize the coiled tubing market for quench
and tempered products. The trial is set for August
2021. At this time, it is not possible to predict the
outcome of this matter or estimate the range of
potential losses that may result from the resolution
of this claim.
Tax assessment from Italian tax authorities
The Company’s Italian subsidiary, Dalmine,
received on December 27, 2019, a tax assessment
from the Italian tax authorities related to fiscal
year 2014. As of December 31, 2020, the claim
amounted to approximately EUR25.7 million
(approximately $31.6 million), comprising
EUR20.7 million (approximately $25.5 million)
in principal and EUR5.0 million (approximately
$6.1 million) in interest and penalties. In the report
for a tax audit conducted in 2019, the Italian tax
inspectors indicated that they also intend to bring
claims for fiscal year 2015 with respect to the same
matters; as of December 31, 2020, these additional
claims would amount to approximately EUR10.5
million (approximately $12.9 million), comprising
EUR8.1 million (approximately $10.0 million)
in principal and EUR2.4 million (approximately
$2.9 million) in interest and penalties. The claims
mainly refer to the compensation for certain
intercompany transactions involving Dalmine
in connection with sales of products and R&D
activities. On July 27, 2020, Dalmine filed a first-
instance appeal before the Milan tax court against
the 2014 tax assessment. Based on the advice of
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 210.
counsel, the Company believes that it is unlikely
that the ultimate resolution of these matters will
result in a material obligation.
Product liability litigation
The Company’s recently acquired U.S. subsidiary,
IPSCO, or its subsidiaries, are parties to several
product liability claims, which may result in
damages for an aggregate amount estimated at
approximately $17.6 million. This includes a
lawsuit alleging product liability and negligent
misrepresentation in which the plaintiff alleges
that defects in certain casing provided by IPSCO
resulted in three well failures causing damages
for an amount of approximately $15 million.
Although at this time the Company cannot predict
the outcome of any of these matters, the Company
believes that provisions have been recorded in
an amount sufficient to cover potential exposure
under these claims.
II. Commitments and guarantees
Set forth is a description of the Tenaris’s main
outstanding commitments:
•
•
An Argentine subsidiary of the Company entered
into a contract with Transportadora de Gas
del Norte S.A. for the service of natural gas
transportation to its facilities. As of December 31,
2020, the aggregate commitment to take or pay
the committed volumes for an original 9-year term
totalled approximately $16.8 million.
Several of the Company’s subsidiaries entered
into a contract with Praxair S.A. for the service of
oxygen and nitrogen supply. As of December 31,
2020, the aggregate commitment to take or pay the
committed volumes for an original 14-year term
totalled approximately $31 million.
•
•
•
•
Several of the Company’s subsidiaries entered into
a contract with Graftech for the supply of graphite
electrodes. As of December 31, 2020, the aggregate
commitment to take or pay the committed volumes
totalled approximately $10.9 million.
A subsidiary of the Company entered into a
25-year contract (effective as of December 1,
2016, through December 1, 2041) with Techgen
for the supply of 197 MW (which represents
22% of Techgen’s capacity). Monthly payments
are determined on the basis of capacity charges,
operation costs, back-up power charges, and
transmission charges. As of the seventh contract
year (as long as Techgen’s existing or replacing
bank facility has been repaid in full), the
Company’s subsidiary has the right to suspend
or early terminate the contract if the rate payable
under the agreement is higher than the rate
charged by the Comisión Federal de Electricidad
(“CFE”) or its successors. The Company’s
subsidiary may instruct Techgen to sell to any
affiliate, to CFE, or to any other third party all
or any part of unused contracted energy under
the agreement and the Company’s subsidiary will
benefit from the proceeds of such sale.
A subsidiary of the Company entered into a
contract with Air Liquide Mexico, S. de R.L de
C.V. for the supply of argon gas. As of December
31, 2020, the aggregate commitment totalled
approximately $19 million.
Tenaris Bay City, a U.S. subsidiary of the
Company, is a party to a contract with Nucor
Steel Memphis Inc. under which it is committed to
purchase on a monthly basis a specified minimum
volume of steel bars, at prices subject to quarterly
adjustments. The contract will become effective
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 211.
upon delivery of the first purchase order, which
has not yet occurred, and will remain in force
for a 3 year term. As of December 31, 2020, the
estimated aggregate contract amount calculated
at current prices, is approximately $113.4 million.
The contract gives Tenaris Bay City the right to
temporarily reduce the quantities to be purchased
thereunder to 75% of the agreed-upon minimum
volume in cases of material adverse changes in
prevailing economic or market conditions.
•
In connection with the closing of the acquisition of
IPSCO, a U.S. subsidiary of the Company, entered
into a 6-year master distribution agreement (the
“MDA”) with PAO TMK (“TMK”) whereby, since
January 2, 2020, Tenaris is the exclusive distributor
of TMK’s OCTG and line pipe products in United
States and Canada. At the end of the MDA’s
6-years term, TMK will have the option to extend
the duration of its term for an additional 12 month
period. Under the MDA, the Company is required
to purchase specified minimum volumes of TMK-
manufactured OCTG and line pipe products,
based on the aggregate market demand for the
relevant product category in the United States in
the relevant year. In light of the adverse scenario
of declining oil and gas prices and unprecedented
oversupply in the oil market, Tenaris and TMK
have agreed to certain accommodations relating to
the MDA’s minimum annual purchase requirement
for 2020 to minimize the negative impact of the
crisis on both parties. Because of this, no penalties
will be applied for year 2020. As of December
31, 2020, the Company’s commitment under the
MDA for the remainder of its 6-year term totalled
approximately $498.3 million.
In addition, Tenaris (i) applied for stand-by letters
of credit as well as corporate guarantees covering
certain obligations of Techgen as described in note
13 (c), (ii) issued corporate guarantees securing
certain obligations of GPC, as described in note
13 (d); and (iii) issued performance guarantees
mainly related to long term commercial contracts
with several customers and parent companies for
approximately $2.5 billion as of December 31, 2020.
III. Restrictions to the distribution of profits and
payment of dividends
In accordance with Luxembourg Law, the Company
is required to transfer a minimum of 5% of its net
profit for each financial year to a legal reserve until
such reserve equals 10% of the issued share capital.
As of December 31, 2020, 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.
27. Foreign exchange control measures
in Argentina
Beginning in September 2019, the Argentine
government has imposed and continues to impose
significant restrictions on foreign exchange
transactions. The main currently applicable
measures are described below:
•
Foreign currency proceeds derived from exports
of goods must be sold into the Argentine foreign
exchange market and converted into Argentine
pesos within 60 days from shipment date (if made
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 212.
to related parties) or 180 days from shipment date
(if made to unrelated parties), or within 5 days of
collection, if collected earlier.
•
Access to the Argentine foreign exchange market to
make dividend payments generally requires prior
Argentine Central Bank approval.
•
•
•
•
•
Foreign currency proceeds from exports of services
must be sold into the Argentine foreign exchange
market and converted into Argentine pesos within
5 business days of collection.
Access to the Argentine foreign exchange market
to pay for imports of services rendered by related
parties (including royalties) is subject to Argentine
Central Bank approval.
Access to the Argentine foreign exchange market to
pay for imports of goods and services provided by
third parties requires the importer not to have more
than $100,000 deposited in any foreign account. In
addition, it will have to declare it has not accessed
the market to purchase bonds and sell them for
foreign currency for a period of 90 days prior to the
required payment of imports, and will not do so
for a period of 90 days after the Argentine Central
Bank provides the foreign currency.
Access to the Argentine foreign exchange market
to pay debt service (principal and interests) for
financial debts with related parties requires prior
Argentine Central Bank approval, unless such
debts are obtained and sold into the Argentine
foreign exchange market and converted into
Argentine pesos after October 2, 2020 and carry an
average life of no less than 2 years.
Debts with foreign creditors larger than $1 million
maturing between October 15, 2020 and March 31,
2021 will need to be refinanced in at least 60% of
outstanding principal and for a minimum period
of 2 years.
When required, Argentine Central Bank approvals
are granted on a very restricted basis.
Tenaris’s Argentine subsidiaries continue to have
access to the official foreign currency markets for
their foreign exchange transactions. Therefore,
assets and liabilities denominated in foreign
currency as of December 31, 2020, have been
valued at the prevailing official exchange rates.
Tenaris’s financial position in Argentine peso as
of December 31, 2020, amounted to a net short
exposure of approximately $39.6 million. As
of December 31, 2020, the total net equity of
Argentine subsidiaries represented approximately
8% of the total equity of Tenaris and the sales
performed by Argentine subsidiaries during the
year ended on December 31, 2020 amounted
approximately to 12% of Tenaris’s total sales.
Management continues to monitor closely the
evolution of the main variables affecting its
business, identifying the potential impact thereof
on its financial and economic situation and
determining the appropriate course of action in
each case. The Company’s Consolidated Financial
Statements should be read taking into account
these circumstances.
As the context of volatility and uncertainty remains
in place as of the issue date of these Consolidated
Financial Statements, additional Argentine Central
Bank regulations that could be imposed in the future
could further restrict our Argentine subsidiary’s
ability to access the official foreign exchange market.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 28. Cash flow disclosures
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
(I) CHANGES IN WORKING CAPITAL
Inventories
Receivables and prepayments and current tax assets
Trade receivables
Other liabilities
Customer advances
Trade payables
(II) INCOME TAX ACCRUALS LESS PAYMENTS
Tax accrued
Taxes paid
(III) INTEREST ACCRUALS LESS PAYMENTS, NET
Interest accrued
Interest received
Interest paid
213.
2020
2019
2018
828,796
74,877
409,163
(34,871)
(34,388)
(184,442)
1,059,135
23,150
(140,364)
311,459
(34,368)
428,326
(18,295)
16,844
(180,857)
523,109
202,452
(395,869)
(117,214)
(193,417)
8,627
19,613
(28,778)
(538)
(4,616)
30,890
(30,655)
(4,381)
(176,443)
30,144
(517,579)
(22,984)
5,976
(57,066)
(737,952)
229,207
(170,713)
58,494
(2,914)
40,613
(31,548)
6,151
29. Related party transactions
As of December 31, 2020:
•
•
San Faustin owned 713,605,187 shares in the
Company, representing 60.45% of the Company’s
capital and voting rights.
San Faustin owned all of its shares in the
Company through its wholly-owned subsidiary
Techint Holdings S.à.r.l., a Luxembourg société à
responsabilité limitée (“Techint”), who is the holder
of record of the above-mentioned Tenaris shares.
•
Rocca & Partners Stichting Administratiekantoor
Aandelen San Faustin, a private foundation located
in the Netherlands (Stichting) (“RP STAK”) held
voting 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 0.08% of the
Company’s outstanding shares.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
214.
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
YEAR ENDED DECEMBER 31
I. TRANSACTIONS
A. SALES OF GOODS AND SERVICES
Sales of goods to non-consolidated parties
Sales of goods to other related parties
Sales of services to non-consolidated parties
Sales of services to other related parties
B. PURCHASES OF GOODS AND SERVICES
Purchases of goods to non-consolidated parties
Purchases of goods to other related parties
Purchases of services to non-consolidated parties
Purchases of services to other related parties
All amounts in thousands of U.S. dollars
AT DECEMBER 31
II. PERIOD-END BALANCES
A. ARISING FROM SALES / PURCHASES OF GOODS / SERVICES
Receivables from non-consolidated parties
Receivables from other related parties
Payables to non-consolidated parties
Payables to other related parties
B. FINANCIAL DEBT
Finance lease liabilities from non-consolidated parties
Finance lease liabilities from other related parties
2020
2019
2018
20,183
18,243
5,829
5,049
49,304
84,485
12,892
6,979
18,133
20,577
69,972
5,620
4,386
23,709
131,548
7,641
5,647
100,555
168,545
174,588
51,765
9,404
54,514
245,186
106,624
9,556
46,179
122,489
290,271
407,545
2020
2019
78,721
4,447
(24,914)
(2,310)
55,944
(2,042)
(810)
(2,852)
78,884
10,400
(19,100)
(7,048)
63,136
(2,064)
–
(2,064)
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
In addition to the tables above, the Company
issued various guarantees in favor of Techgen and
GPC; for further details, please see note 13 (c and
d) and note 26 (ii). No other material guarantees
were issued in favor of other related parties.
Directors’ and senior management compensation
During the years ended December 31, 2020, 2019
and 2018, the cash compensation of Directors
and Senior managers amounted to $27.4 million,
$33.7 million and $33.7 million respectively. These
amounts include cash benefits paid to certain
senior managers in connection with the pre-existing
retirement plans. In addition, Directors and Senior
managers received 522, 468 and 558 thousand units
for a total amount of $5.0 million, $4.8 million
and $5.6 million respectively in connection with
the Employee retention and long term incentive
program mentioned in note II.P.3 Employee benefits
– Other long term benefits.
215.
30. Fees paid to the Company’s principal accountant
Total fees accrued for professional services rendered
by PwC Network firms to Tenaris S.A. and its
subsidiaries are detailed as follows:
All amounts in thousands of U.S. dollars
YEAR ENDED DECEMBER 31
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
Total
2020
2019
2018
3,781
3,846
3,841
134
102
–
50
7
1
43
–
7
4,017
3,904
3,891
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 216.
31. 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, 2020.
Company
Country of
Incorporation
Main activity
Percentage of ownership
at December 31 (*)
2020
2019
2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Algoma Tubes Inc.
Confab Industrial S.A. and subsidiaries
Canada
Brazil
Manufacturing of seamless steel pipes
Manufacturing of welded steel pipes and
Dalmine S.p.A.
Hydril Company and subsidiaries (except detailed) (a)
IPSCO Tubulars Inc. and subsidiaries
Italy
USA
USA
capital goods
Manufacturing of seamless steel pipes
Manufacture and marketing of premium
connections
Manufacturing of welded and seamless
100%
NA
NA
steel pipes
Kazakhstan Pipe Threaders Limited Liability Partnership
Kazakhstan
Threading of premium products
Maverick Tube Corporation and subsidiaries
NKKTubes
USA
Japan
Manufacturing of welded steel pipes
Manufacturing of seamless steel pipes
P.T. Seamless Pipe Indonesia Jaya
Indonesia
Manufacturing of seamless steel products
Prudential Steel Ltd. (b)
S.C. Silcotub S.A.
Saudi Steel Pipe Co.
Siat Sociedad Anónima
Canada
Romania
Manufacturing of welded steel pipes
Manufacturing of seamless steel pipes
Saudi Arabia
Manufacturing of welded steel pipes
Argentina
Manufacturing of welded and seamless
steel pipes
100%
100%
51%
89%
100%
100%
48%
100%
100%
100%
51%
89%
100%
100%
48%
100%
100%
100%
51%
89%
100%
100%
NA
100%
Siderca Sociedad Anónima Industrial
Argentina
Manufacturing of seamless steel pipes
100%
100%
100%
y Comercial and subsidiaries
(*) All percentages rounded.
(a) Tenaris Investments S.a.r.l. holds 100% of Hydril's subsidiaries shares except for Technical
Drilling & Production Services Nigeria. Ltd where it held 80% for 2019 and 2018.
(b) See note 36.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
Company
Country of
Incorporation
Main activity
Percentage of ownership
at December 31 (*)
217.
2020
2019
2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Talta - Trading e Marketing Sociedade Unipessoal Lda.
Portugal
Holding Company
Tenaris Bay City, Inc.
Tenaris Connections BV
USA
Manufacturing of seamless steel pipes
Netherlands
Development, management and licensing
Tenaris Financial Services S.A.
Tenaris Global Services (Canada) Inc.
Tenaris Global Services (U.S.A.) Corporation
Tenaris Global Services (UK) Ltd
Tenaris Global Services S.A. and subsidiaries
(except detailed) (c)
Uruguay
Canada
USA
United
Kingdom
Uruguay
of intellectual property
Financial company
Marketing of steel products
Marketing of steel products
Holding company and marketing of steel
products
Holding company and marketing of steel
100%
100%
100%
products
Tenaris Investments (NL) B.V. and subsidiaries
Netherlands
Holding company
Tenaris Investments S.à r.l.
Tenaris Tubocaribe Ltda.
Luxembourg
Holding company
Colombia
Manufacturing of welded and seamless
100%
100%
100%
100%
100%
100%
NA
100%
100%
steel pipes
Tubos de Acero de Mexico S.A.
Mexico
Manufacturing of seamless steel pipes
100%
100%
100%
(*) All percentages rounded.
(c) Tenaris holds 97.5% of Tenaris Supply Chain S.A. and 40% of Tubular Technical Services Ltd.
and Pipe Coaters Nigeria Ltd., 49% of Amaja Tubular Services Limited, 49% of Tubular
Services Angola Lda and 60% of Tenaris Baogang Baotou Steel Pipes Ltd.
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
218.
32. Business combinations
Acquisition of IPSCO Tubulars, Inc.
Acquisition and price determination
On January 2, 2020, Tenaris acquired 100% of the
shares of IPSCO, a U.S. manufacturer of steel pipes,
from PAO TMK (“TMK”). The acquisition price
was determined on a cash-free, debt-free basis, and
the amount paid in cash at the closing, following
contractual adjustments for cash, indebtedness,
working capital and certain other items as
estimated by the seller as of the closing date, was
$1,067 million. The final acquisition price was
subject to a contractual true-up adjustment based
on actual amounts of cash, indebtedness, working
capital and certain other items as of the closing
date. On June 25, 2020 Tenaris and PAO TMK
signed a Letter Agreement in which they settled
the discussions regarding certain adjustments
on the transaction price. The parties finally
determined the closing price in an amount equal
to $1,029 million, which is less than the closing
price paid by an amount equal to $38.5 million.
This amount was collected on July 2, 2020 and this
agreement implies that all disputes relating to the
closing statement were resolved.
IPSCO’s facilities are located mainly in the
midwestern and northeastern regions of the country.
IPSCO’s steel shop in Koppel, Pennsylvania, is
Tenaris’s first in the United States, providing vertical
integration through domestic production of a
relevant part of its steel bar needs. The Ambridge,
Pennsylvania, mill adds a second seamless
manufacturing facility and complements Tenaris’s
seamless plant in Bay City, Texas. Given the abrupt
and steep decline in market demand in 2020, all of
IPSCO’s facilities were temporarily closed but some
of them are expected to resume operations during
the 2021 as market continues to improve.
In connection with the closing of the transaction,
subsidiaries of Tenaris and TMK entered into a
6-year master distribution agreement (the “MDA”)
for more information see note 26 (ii).
The Company has begun consolidating IPSCO’s
balances and results of operations as from January
2, 2020. The acquired business contributed
revenues for $186.7 million, mainly assigned to
Tubes segment, with a minor contribution to the
Company’s margin for the period starting January
2, 2020 and ending December 31, 2020.
Fair value of net assets acquired
The application of the purchase method requires
certain estimates and assumptions, mainly
concerning the determination of the fair values of
the acquired intangible assets and property, plant
and equipment as well as the liabilities assumed at
the date of the acquisition, including the timing
and amounts of cash flow projections, the revenue
growth rates, the customer attrition rates and the
discount rate. The fair values determined at the
acquisition date are based mainly on discounted
cash flows and other valuation techniques.
The purchase price allocation was carried out with
the assistance of a third-party expert. Following
IFRS 3, during the period ended December 31, 2020,
the Company continued reviewing the allocation
and, based on new information related to events or
circumstances existing at the acquisition date, made
certain adjustments over the value of the identifiable
assets acquired such as inventory, property, plant and
equipment, other liabilities and deferred tax assets.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
The allocation of the fair values determined for the
assets and liabilities arising from the acquisition is
as follows:
FAIR VALUE OF ACQUIRED ASSETS AND LIABILITIES:
USD million
Property, Plant and Equipment
Intangible assets
Working capital
Cash and Cash Equivalents
Borrowings
Provisions
Other assets and liabilities, net
Net assets acquired
503
170
138
4
(53)
(27)
(63)
672
Tenaris acquired total assets and liabilities shown
above, for approximately $1,029 million. As a result
of the acquisition, Tenaris recognized goodwill for
approximately $357 million. The goodwill is not
deductible for tax purposes.
The goodwill generated by the acquisition
is mainly attributable to the synergy created
following the integration between Tenaris and
IPSCO, which is expected to enhance Tenaris’s
position as well as its local manufacturing presence
in the U.S. market, and also expand its product
range and services capabilities.
After the conclusion of the preliminary purchase
price allocation determination and as a consequence
of the unprecedented decline in oil prices and other
changes in circumstances, the goodwill mentioned
above was impaired, for more information see note 5.
Acquisition-related costs of $9.7 million were
included in general and administrative expenses
($9.4 and $0.3 in 2019 and 2020 respectively).
For contingent liabilities related to the acquisition
see note 26 (i).
219.
Acquisition of Saudi Steel Pipe Company
Acquisition and price determination
On January 21, 2019, Tenaris acquired 47.79% of the
shares of SSPC, a welded steel pipes producer listed
on the Saudi stock market, for a total amount of
SAR530 million (approximately $141 million). The
amount was paid with Tenaris cash in hand. SSPC’s
facilities are located in the Eastern Province of the
Kingdom of Saudi Arabia and have a manufacturing
capacity of 360,000 tons per year. SSP started its
operations in 1980 and serves energy industrial and
commercial segments, is qualified to supply products
with major national oil companies in the region.
Upon closing of the acquisition, four Tenaris’s
nominees were appointed as new members of the
SSPC’s board of directors and a Tenaris senior
executive was appointed as managing director and
chief executive officer of SSPC. Such appointment
was ratified at the shareholders meeting of SSPC
held on May 7, 2019, where the shareholders
also approved the reappointment of the Tenaris’s
nominees until June 6, 2022.
The Company has begun consolidating SSPC’s
balances and results of operations as from
January 21, 2019.
a) Fair value of net assets acquired
The application of the purchase method requires
certain estimates and assumptions specially
concerning the determination of the fair values
of the acquired intangible assets and property,
plant and equipment as well as the liabilities
assumed at the date of the acquisition. The fair
values determined at the acquisition date are
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
220.
based mainly on discounted cash flows and other
valuation techniques.
The allocation of the fair values determined for the
assets and liabilities arising from the acquisition is
as follows:
FAIR VALUE OF ACQUIRED ASSETS AND LIABILITIES:
SAR million
USD million
Property, Plant and Equipment
Customer relationship
Investment in associated
Working capital
Cash and Cash Equivalents
Other Receivables
Borrowings
Employees end of service benefits
Deferred Tax Liabilities
Net assets acquired
671
305
77
167
32
11
(304)
(59)
(47)
853
179
81
21
45
9
3
(81)
(16)
(13)
228
Tenaris acquired 47.79% of total assets
and liabilities shown above, approximately
$109 million. As of the result of the acquisition, the
Company recognized a Goodwill of approximately
$32.9 million. Tenaris has chosen to recognize the
non-controlling interest at the proportionate share
of the acquiree’s net identifiable assets.
The acquired business contributed revenues for
$170.6 million with a minor contribution to
Tenaris’s margin for the period starting January
21, 2019 and ending December 31, 2019.
33. Agreement to build a welded pipe plant in
West Siberia
In 2019, Tenaris entered into an agreement
with Severstal to build a welded pipe plant to
produce OCTG products in the Surgut area, West
Siberia, Russian Federation. Tenaris holds a 49%
interest in the company, while Severstal owns the
remaining 51%. The plant, which is estimated
to require a total investment of $280 million is
planned to have an annual production capacity
of 300,000 tons.
If the acquisition had occurred on January 1, 2019,
consolidated revenue and profit after tax would
have not changed significantly.
The purchase price allocation has been done with
the assistance of a third party expert.
During 2019, we invested $19.6 million in the
project. In 2020, the parties completed all the
engineering to get the construction permit but
on-site activities faced some delays due to the
COVID-19 pandemic. Therefore, no additional
contributions were made during 2020.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
In March 2021, the joint venture parties put on
hold the construction activities, while they assess
the impact of the changes in the relevant markets
and competitive environment and determine
whether any adjustments or changes to the project
could be necessary.
Keihin facilities may result in the unavailability
of steel bars and other essential inputs or services
used in NKKTubes’ manufacturing process, thereby
affecting its operations. Tenaris and JFE have
agreed to engage in discussions to seek mutually
acceptable solutions.
221.
34. Agreement to build a steel pipe premium
36. Closure of Prudential Steel LTD
connection threading plant in Baotou
In 2020, Tenaris entered into an agreement with
Inner Mongolia Baotou Steel Union Co. Ltd. to
build a steel pipe premium connection threading
plant to produce OCTG products in Baotou, China.
Under the agreement, Tenaris owns 60% of shares
in the new company, while Inner Mongolia Baotou
Steel Union Co. Ltd. holds the remaining 40%.
The Company began consolidating balances and
results of operations in December 2020. The plant,
which is estimated to require a total investment
of $32.6 million and a 1-year construction period,
is planned to have an annual production capacity
of 70 thousand tons. During 2020, the Company
contributed $2.3 million to the project.
35. Closure of facilities at JFE’s Keihin steel complex
Tenaris’s seamless pipe manufacturing facility
in Asia, operated by NKKTubes, is located in
Kawasaki, Japan, in the Keihin steel complex
owned by JFE Holdings Inc. (“JFE”). Steel bars and
other essential inputs and services for NKKTubes
are supplied under a long-term agreement by
JFE, which retains a 49% interest in NKKTubes.
On March 27, 2020, JFE informed Tenaris of its
decision to permanently cease as from JFE’s fiscal
year ending March 2024 the operations of certain of
its steel manufacturing facilities and other facilities
located at the Keihin complex. The closure of JFE’s
Tenaris’s facility of Prudential Steel LTD, located in
Calgary, Alberta, has been closed down and the pipe
manufacturing operations of seamless, welded and
premium products in Canada will be consolidated
at Algoma Tubes Inc. in Sault Ste. Marie, Ontario
with an additional investment of $72 million. This
repositioning of the industrial activities, which will
be completed by November 2021, will strengthen
the competitiveness and increase the domestic
production capabilities for the Canadian market.
37. Cancellation of title deed in Saudi Steel
Pipe Company
The Company has recently learned through
the Ministry of Justice’s online portal that the
electronic title deeds to certain land plots of
its Saudi Arabian subsidiary SSPC had become
inactive due to cancellation by court order.
The affected land plots, with a total surface of
811,284 square meters, are located in Dammam
and were purchased from a private entity
on February 13, 2010, pursuant to a written
purchase agreement duly executed by SSPC in full
compliance with the laws of the Kingdom of Saudi
Arabia. The purchase of the land occurred before
Tenaris’s acquisition of a 47.79% interest in SSPC
in 2019. The affected plots are not part of the
production facility of SSPC, have been partially
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 222.
used as a warehouse, and have a carrying value
on Tenaris’s financial statements of $56.2 million.
As of the date hereof, neither the cancellation
nor the court order have been notified to SSPC
or otherwise been made public, and the legal
basis for the court order is unknown. SSPC is
currently assessing the effects of the court order
and the available alternatives to protect the land
and reinstate the title deeds. At this time, it is not
possible to predict the outcome of this matter.
38. 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.
Matesi
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 compounded at six-monthly rests from
the date of the award until payment in full. As of
December 31, 2020, post-award interest amounted
to approximately $83.4 million.
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 incurred in connection with
the rectification proceedings. 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. On March 24, 2017, an ad
hoc committee constituted to decide on Venezuela´s
requests rendered its decision to lift the stay of
enforcement of the award. On August 8, 2018, the
ad hoc committee rejected Venezuela’s application to
annul the award.
On June 8, 2018, Tenaris and Talta filed an action
in federal court in the District of Columbia to
recognize and enforce the award. Tenaris and Talta
effected service on Venezuela in accordance with
US law, and Venezuela failed to file an answer in
the proceeding. Tenaris and Talta then moved
for default judgment. Venezuela subsequently
appeared in the proceedings but did not oppose
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 223.
the entry of default judgment on the award.
On July 17, 2020, the Court entered judgment
recognizing the Matesi award. The judgment
orders Venezuela to pay to Tenaris and Talta an
amount of $256.2 million, including principal and
post-award interest through the judgment date,
and provides for post-judgment interest to accrue
on this sum at the U.S. federal statutory rate.
The judgment, however, may not be enforced in
the U.S. to the extent prohibited by the Venezuelan
sanctions regulations issued by the U.S. Treasury
Department’s Office of Foreign Assets Control.
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 $137.0 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, 2020 amounted to approximately
$132.4 million.
On April 11, 2017, 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.
On February 23, 2018, an ad hoc committee
constituted to decide on Venezuela’s requests
rendered its decision to lift the stay of enforcement
of the award. On December 28, 2018, the ad hoc
committee rejected Venezuela’s application to
annul the award.
On June 8, 2018, Tenaris and Talta filed an action
in federal court in the District of Columbia to
recognize and enforce the award. Tenaris and Talta
effected service on Venezuela in accordance with
US law, and Venezuela failed to file an answer in
the proceeding. Tenaris and Talta then moved
for default judgment. Venezuela subsequently
appeared in the proceedings but did not oppose
the entry of default judgment on the award. It
is expected that the Tavsa award will also be
converted into a judgment.
The judgment, however, may not be enforced in
the U.S. to the extent prohibited by the Venezuelan
sanctions regulations issued by the U.S. Treasury
Department’s Office of Foreign Assets Control.
As of December 31, 2020, Tenaris or its subsidiaries
have net receivables related to its interest in the
Venezuelan Companies for a total amount of
approximately $48.7 million. See note III.B.
39. The COVID-19 pandemic and the oil & gas
crisis and their impact on Tenaris’s operations
and financial condition
A novel strain of coronavirus (“SARS-CoV-2”)
surfaced in China in December 2019 and
subsequently spread to the rest of the world in
early 2020. In March 2020, the World Health
Organization declared COVID-19, the disease
caused by the SARS-CoV-2 virus, a global
pandemic. In response to the COVID-19 outbreak,
countries have taken different measures in relation
to prevention and containment. For example,
several countries introduced bans on business
activities or locked down cities or countries,
including countries where Tenaris has operations
(such as Argentina, China, Colombia, Italy, Mexico,
Saudi Arabia and the United States). The rapid
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 224.
expansion of the virus, the surfacing of new strains
of the virus in several countries, and the measures
taken to contain it have triggered a severe fall in
global economic activity and precipitated a serious
crisis in the energy sector.
While the extent of the effects of COVID-19 on the
global economy and oil demand were still unclear, in
March 2020, the members of OPEC+ (OPEC plus
other major oil producers including Russia) did not
agree to extend their agreement to cut oil production
and Saudi Arabia launched a wave of additional
supply on the market triggering a collapse in oil
prices below $30 per barrel. This exacerbated what
soon became clear was an unprecedented situation
of oversupply, caused primarily by the sudden and
dramatic fall in oil consumption consequent to the
measures taken to contain the spread of the virus
around the world. Although OPEC+ subsequently
reached an agreement to cut production by as
much as 9.7 million barrels per day, the situation of
acute oversupply continued, causing oil prices to
hit record lows. By the end of trading on April 20,
2020, the West Texas Intermediate (“WTI”) forward
price for delivery in May, which had to be closed
out the following day, fell to a negative value for
the first time in history, as oil storage facilities were
completely committed, and producers were forced to
pay buyers to take their barrels. Since then, the price
of oil has been recovering and currently stands above
the level of $55 per barrel, bolstered by the actions
to cut production taken by OPEC+ and the recovery
of oil demand, as the global economy, especially
industrial production, recovers and COVID-19
vaccination programs begin. With consumption
exceeding production excess oil inventories built up
in the first half of 2020 are being gradually reduced.
The worldwide demand of oil, which stood at 100
million barrels per day in December 2019, fell to
around 75-80 million barrels per day in April 2020
before recovering to around 94 million barrels per
day in December 2020. Drilling activity in the United
States and Canada, where it was most affected, has
begun to recover but remains well below the level
it was prior to the pandemic, while, in the rest of
the world, any recovery will take longer following
the reductions in investment plans made by oil and
gas companies in response to the pandemic. There
remains considerable uncertainty about the future
duration and extent of the pandemic with new
and more contagious variants of the COVID-19
virus appearing and the effectiveness of vaccination
programs still to be seen.
Status of our operations
Although restrictions imposed in connection with
the COVID-19 pandemic have been lifted in some
countries where Tenaris operates, it is currently not
possible to predict whether such measures will be
relaxed further, reinstated or made more stringent.
In addition, Tenaris has adjusted production levels
at its facilities, which are operating with reduced
volumes in line with market demand, and may
perform additional adjustments.
In order to safeguard the health and safety of
its employees, customers and suppliers, Tenaris
has taken preventive measures, including
remote working for the majority of professional
employees, restricting onsite access to essential
operational personnel, keeping personnel levels
at a minimum, implementing a special operations
protocol to ensure social distancing and providing
medical assistance and supplies to onsite
employees. As of the date of these Consolidated
Financial Statements, remote work and other
work arrangements have not materially adversely
affected Tenaris’s ability to conduct operations. In
addition, these alternative working arrangements
have not adversely affected our financial reporting
systems, internal control over financial reporting
or disclosure controls and procedures.
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 Risks associated with the COVID-19 pandemic and the
oil & gas crisis
The COVID-19 pandemic and the ongoing oil
& gas crisis poses the following main risks and
challenges to Tenaris:
Global oil demand may fail to recover its former
level or even decrease further in the future, driving
down prices even more or keeping them at very
low levels, which would exert downward pressure
on sales and margins of oil and gas companies,
leading to further reductions and even generalized
suspension of drilling activities (in the U.S. or
elsewhere) and, as a result, materially adversely
affecting our sales and financial position.
Tenaris or its employees, contractors, suppliers,
customers and other business partners may be
prevented from conducting certain business
activities for a prolonged or indefinite period of
time. In addition, employees in some or all of
our facilities, or those of our contracts, suppliers,
customers or other business partners, may refuse to
work due to health concerns while the COVID-19
outbreak is ongoing, If that happens, the continuity
of our future operations may be severely affected.
A continuing spread of COVID-19 and new strains
of the virus may affect the availability and price
of raw materials, energy and other inputs used by
Tenaris in its operations. Any such disruption or
increased prices could adversely affect Tenaris’s
profitability.
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Mitigating actions
In order to mitigate the impact of expected lower
sales, starting from the first quarter 2020, Tenaris
implemented a worldwide restructuring program
and cost containment plan aimed at preserving its
financial resources and overall liquidity position
and maintaining the continuity of its operations.
These actions included:
225.
adjusting the level of our operations and
workforce around the world, including through
the temporary closure of certain facilities or
production lines;
introducing efficiency and productivity
improvements throughout Tenaris’s industrial
system;
downsizing our fixed cost structure, including
through pay reductions for senior management and
board members, as well as R&D expenses, for a
total annual savings of approximately $230 million
on a yearly basis;
reducing capital expenditures by $157 million in
comparison to 2019 levels;
reducing working capital, especially inventories, in
accordance with the expected levels of activity; and
increasing our focus on managing customer credit
conditions.
As of the date of these Consolidated Financial
Statements, these restructuring initiatives are
largely complete and the principal objectives
have been achieved; some residual actions are
still ongoing.
As part of these liquidity preservation initiatives,
on June 2, 2020, the Annual Shareholders Meeting
approved that no further dividends be distributed
in respect of fiscal year 2019 on top of the interim
dividend of approximately $153 million already
paid in November 2019. On November 4, 2020,
the Company’s Board of Directors approved the
Annual ReportTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
40. Subsequent events
Annual Dividend Proposal
Upon approval of the Company´s annual accounts
in March 2021, the Board of Directors intends to
propose, for the approval of the Annual General
Shareholders' meeting to be held on May 3, 2021, the
payment of an annual dividend of $0.21 per share
($0.42 per ADS), or approximately $248 million,
which includes the interim dividend of $0.07 per
share ($0.14 per ADS) or approximately $83 million,
paid on November 25, 2020. If the annual dividend is
approved by the shareholders, a dividend of $0.14 per
share ($0.28 per ADS), or approximately $165 million
will be paid on May 26, 2021, with an ex-dividend
date of May 24, 2021. These Consolidated Financial
Statements do not reflect this dividend payable.
/s/ Alicia Móndolo
Chief Financial Officer
Alicia Móndolo
226.
payment of an interim dividend of $0.07 per share
($0.14 per ADS), or approximately $82.6 million,
paid on November 25, 2020.
As of the date of these Consolidated Financial
Statements, our capital and financial resources,
and overall liquidity position, have not been
materially affected by this new scenario. Tenaris
has in place non-committed credit facilities and
management believes it has adequate access to the
credit markets. In addition, Tenaris has a net cash
position of approximately $1,085 (1) million as of
the end of December 2020 and a manageable debt
amortization schedule.
Considering our financial position and the funds
provided by operating activities, management
believes that we have sufficient resources to satisfy
our current working capital needs, service our
debt and address short-term changes in business
conditions.
Considering the global situation, the Company has
renegotiated and continues to renegotiate existing
contractual obligations with its counterparties to
adapt the commitments to the decrease in activity.
Management does not expect to disclose or incur
in any material COVID-19-related contingency,
and it considers its allowance for doubtful accounts
sufficient to cover risks that could arise from credits
with customers in accordance with IFRS 9.
(1) Net cash / debt is calculated in the following manner:
Net cash= Cash and cash equivalents + Other investments
(Current and Non-Current) +/- Derivatives hedging borrowings
and investments– Borrowings (Current and Non-Current).
TenarisTenaris S.A. Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 Tenaris S.A.
Société Anonyme
Annual accounts
Audited Annual Accounts as at December 31, 2020
227.
Annual Report 228.
Tenaris Audit report
To the Shareholders of
Audit report
Tenaris S.A.
To the Shareholders of
Audit report
Tenaris S.A.
Report on the audit of the consolidated financial statements
To the Shareholders of
Tenaris S.A.
Report on the audit of the consolidated financial statements
Our opinion
229.
Our opinion
Report on the audit of the annual accounts
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
Our opinion
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
In our opinion, the accompanying annual accounts give a true and fair view of the financial position of
flows for the year then ended in accordance with International Financial Reporting Standards
Tenaris S.A. (the “Company”) as at 31 December 2020, and of the results of its operations for the year
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
then ended in accordance with Luxembourg legal and regulatory requirements relating to the
IFRS as adopted by the European Union.
preparation and presentation of the annual accounts.
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Board of Directors (the “Audit Committee”).
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Our opinion is consistent with our additional report to the Audit Committee of the Company’s Board of
Board of Directors (the “Audit Committee”).
Directors (the “Audit Committee”).
What we have audited
The Group’s consolidated financial statements comprise:
What we have audited
What we have audited
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•
•
The Company’s annual accounts comprise:
The Group’s consolidated financial statements comprise:
the consolidated statement of financial position as at 31 December 2019;
the balance sheet as at 31 December 2020;
the consolidated income statement for the year then ended;
the profit and loss account for the year then ended; and
•
the consolidated statement of financial position as at 31 December 2019;
the consolidated statement of comprehensive income for the year then ended;
•
the notes to the annual accounts, which include a summary of significant accounting policies.
•
the consolidated income statement for the year then ended;
the consolidated statement of changes in equity for the year then ended;
•
Basis for opinion
•
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of cash flows for the year then ended; and
•
•
the consolidated statement of changes in equity for the year then ended;
the notes to the consolidated financial statements, which include a summary of significant
We conducted our audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016
•
the consolidated statement of cash flows for the year then ended; and
accounting policies.
on the audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) as
•
the notes to the consolidated financial statements, which include a summary of significant
issued by the International Auditing and Assurance Standards Board (IAASB) and as adopted for
accounting policies.
Luxembourg by the “Commission de Surveillance du Secteur Financier” (CSSF). Our responsibilities
under the EU Regulation No 537/2014, the Law of 23 July 2016 and ISAs as adopted for Luxembourg
by the CSSF are further described in the “Responsibilities of the “Réviseur d’entreprises agréé” for the
audit of the annual accounts” section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Company in accordance with the International Code of Ethics for
Professional Accountants, including International Independence Standards, issued by the International
Ethics Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by the CSSF
together with the ethical requirements that are relevant to our audit of the annual accounts.
We have fulfilled our other ethical responsibilities under those ethical requirements.
To the best of our knowledge and belief, we declare that we have not provided non-audit services that
are prohibited under Article 5(1) of the EU Regulation No 537/2014.
The non-audit services that we have provided to the Company for the year ended 31 December 2020,
are disclosed in Note 10 to the annual accounts.
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
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PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
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89
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Annual Report
Audit report
To the Shareholders of
Audit report
Tenaris S.A.
Report on the audit of the consolidated financial statements
To the Shareholders of
The non-audit services rendered by PwC Network firms to the Company and its controlled
Tenaris S.A.
undertakings, for the year ended 31 December 2020, are disclosed in Note 30 to the Company’s
consolidated financial statements.
Report on the audit of the consolidated financial statements
Key audit matters
Our opinion
230.
What we have audited
How our audit addressed the key audit matter
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
included assessing
Board of Directors (the “Audit Committee”).
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
Our opinion
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the annual accounts of the current period. These matters were addressed in the context of our
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
audit of the annual accounts as a whole, and in forming our opinion thereon, and we do not provide a
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
separate opinion on these matters.
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
Key audit matter
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
Recoverability of investment in subsidiary -
Our audit approach
the
Tenaris Investments S.à r.l.
recoverable value of the investment in Tenaris
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
it with Tenaris
Investments by comparing
Board of Directors (the “Audit Committee”).
Note 4 to the annual accounts indicates that as
Investments’ net assets as obtained
its
of 31 December 2020, Tenaris S.A. holds 100%
audited annual accounts, testing the accuracy of
What we have audited
interest
the unlisted company Tenaris
in
The Group’s consolidated financial statements comprise:
the impairment charge recorded and evaluating the
Investments S.àr.l. (“Tenaris Investments”). This
appropriateness of the disclosures included in the
The Group’s consolidated financial statements comprise:
investment represents 99.99% of
total
annual accounts.
the consolidated statement of financial position as at 31 December 2019;
assets of the Company. The carrying value of
the consolidated income statement for the year then ended;
the investment amounts to 15,349 million USD.
•
the consolidated statement of financial position as at 31 December 2019;
the consolidated statement of comprehensive income for the year then ended;
•
the consolidated income statement for the year then ended;
the consolidated statement of changes in equity for the year then ended;
During the year, Management has assessed the
•
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of cash flows for the year then ended; and
recoverable value of
investment and
•
the consolidated statement of changes in equity for the year then ended;
the notes to the consolidated financial statements, which include a summary of significant
recorded an impairment charge of 2,389 million
•
the consolidated statement of cash flows for the year then ended; and
accounting policies.
USD as of 31 December 2020.
•
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
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from
the
its
We focused our audit on the recoverability of
this investment given its financial significance
over the total assets.
Other information
The Board of Directors is responsible for the other information. The other information comprises the
information stated in the annual report including the consolidated management report and the
Corporate Governance Statement but does not include the annual accounts and our audit report
thereon.
Our opinion on the annual accounts does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the annual accounts, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with
the annual accounts or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report in this regard.
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
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89
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Tenaris
231.
Audit report
To the Shareholders of
Audit report
Tenaris S.A.
To the Shareholders of
Responsibilities of the Board of Directors and those charged with governance for the annual
Tenaris S.A.
accounts
Report on the audit of the consolidated financial statements
Our opinion
What we have audited
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Board of Directors (the “Audit Committee”).
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
The Board of Directors is responsible for the preparation and fair presentation of the annual accounts
Report on the audit of the consolidated financial statements
in accordance with Luxembourg legal and regulatory requirements relating to the preparation and
presentation of the annual accounts, and for such internal control as the Board of Directors determines
Our opinion
is necessary to enable the preparation of annual accounts that are free from material misstatement,
whether due to fraud or error.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
In preparing the annual accounts, the Board of Directors is responsible for assessing the Company’s
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
flows for the year then ended in accordance with International Financial Reporting Standards
using the going concern basis of accounting unless the Board of Directors either intends to liquidate he
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
Company or to cease operations, or has no realistic alternative but to do so.
IFRS as adopted by the European Union.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Board of Directors (the “Audit Committee”).
Responsibilities of the “Réviseur d’entreprises agréé” for the audit of the annual accounts
What we have audited
The objectives of our audit are to obtain reasonable assurance about whether the annual accounts as
a whole are free from material misstatement, whether due to fraud or error, and to issue an audit report
The Group’s consolidated financial statements comprise:
the consolidated statement of financial position as at 31 December 2019;
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
the consolidated income statement for the year then ended;
that an audit conducted in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016
•
the consolidated statement of financial position as at 31 December 2019;
the consolidated statement of comprehensive income for the year then ended;
and with ISAs as issued by the IAASB and as adopted for Luxembourg by the CSSF will always detect
•
the consolidated income statement for the year then ended;
the consolidated statement of changes in equity for the year then ended;
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
•
the consolidated statement of comprehensive income for the year then ended;
material if, individually or in the aggregate, they could reasonably be expected to influence the
the consolidated statement of cash flows for the year then ended; and
•
the consolidated statement of changes in equity for the year then ended;
economic decisions of users taken on the basis of these annual accounts.
the notes to the consolidated financial statements, which include a summary of significant
•
the consolidated statement of cash flows for the year then ended; and
accounting policies.
As part of an audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016 and
•
the notes to the consolidated financial statements, which include a summary of significant
with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain
accounting policies.
professional scepticism throughout the audit. We also:
The Group’s consolidated financial statements comprise:
•
•
•
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•
•
•
identify and assess the risks of material misstatement of the annual accounts, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control;obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control;
• obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control;
• evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Board of Directors;
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
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Annual Report
Audit report
To the Shareholders of
Audit report
Tenaris S.A.
232.
Our opinion
Our opinion
Report on the audit of the consolidated financial statements
Report on the audit of the consolidated financial statements
To the Shareholders of
• conclude on the appropriateness of the Board of Directors’ use of the going concern basis of
Tenaris S.A.
accounting and, based on the audit evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the Company’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our audit report to the related disclosures in the annual accounts or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our audit report. However, future events or conditions may cause the Company to cease
to continue as a going concern;
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
• evaluate the overall presentation, structure and content of the annual accounts, including the
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
disclosures, and whether the annual accounts represent the underlying transactions and events in a
flows for the year then ended in accordance with International Financial Reporting Standards
manner that achieves fair presentation.
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
internal control that we identify during our audit.
Board of Directors (the “Audit Committee”).
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Board of Directors (the “Audit Committee”).
What we have audited
The Group’s consolidated financial statements comprise:
We also provide those charged with governance with a statement that we have complied with relevant
What we have audited
ethical requirements regarding independence, and communicate to them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
The Group’s consolidated financial statements comprise:
taken to eliminate threats or safeguards applied.
the consolidated statement of financial position as at 31 December 2019;
the consolidated income statement for the year then ended;
the consolidated statement of financial position as at 31 December 2019;
the consolidated statement of comprehensive income for the year then ended;
the consolidated income statement for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the consolidated statement of changes in equity for the year then ended;
the notes to the consolidated financial statements, which include a summary of significant
the consolidated statement of cash flows for the year then ended; and
accounting policies.
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
•
From the matters communicated with those charged with governance, we determine those matters that
•
were of most significance in the audit of the annual accounts of the current period and are therefore the
key audit matters. We describe these matters in our audit report unless law or regulation precludes
•
public disclosure about the matter.
•
•
•
Report on other legal and regulatory requirements
•
•
•
•
•
•
The consolidated management report is consistent with the annual accounts and has been prepared in
accordance with applicable legal requirements.
The Corporate Governance Statement is included in the consolidated management report. The
information required by Article 68ter Paragraph (1) Letters c) and d) of the Law of 19 December 2002
on the commercial and companies register and on the accounting records and annual accounts of
undertakings, as amended, is consistent with the annual accounts and has been prepared in
accordance with applicable legal requirements.
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)
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175
89
Tenaris
Audit report
To the Shareholders of
Audit report
Tenaris S.A.
Report on the audit of the consolidated financial statements
To the Shareholders of
We have been appointed as “Réviseur d’Entreprises Agréé” by the General Meeting of the
Tenaris S.A.
Shareholders on 2 June 2020 and the duration of our uninterrupted engagement, including previous
renewals and reappointments, is 19 years.
Report on the audit of the consolidated financial statements
Our opinion
233.
Our opinion
PricewaterhouseCoopers, Société coopérative
Represented by
@esig
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of Tenaris S.A. (the “Company”) and its subsidiaries (the “Group”)
as at 31 December 2019, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) and in accordance with
IFRS as adopted by the European Union.
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Board of Directors (the “Audit Committee”).
@esig
Fabrice Goffin
Luxembourg, 29 March 2021
Our opinion is consistent with our additional report to the Audit Committee of the Company’s
Board of Directors (the “Audit Committee”).
What we have audited
The Group’s consolidated financial statements comprise:
What we have audited
•
•
•
•
•
•
The Group’s consolidated financial statements comprise:
the consolidated statement of financial position as at 31 December 2019;
the consolidated income statement for the year then ended;
the consolidated statement of financial position as at 31 December 2019;
the consolidated statement of comprehensive income for the year then ended;
the consolidated income statement for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the consolidated statement of changes in equity for the year then ended;
the notes to the consolidated financial statements, which include a summary of significant
the consolidated statement of cash flows for the year then ended; and
accounting policies.
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
•
•
•
•
•
•
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)
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176
89
Annual Report
234.
Tenaris S.A. Balance Sheet
as at December 31, 2020
Expressed in United States Dollars
ASSETS
C. FIXED ASSETS
III. Financial assets
1. Shares in affiliated undertakings
D. CURRENT ASSETS
II. Debtors
4. Other debtors
a) becoming due and payable within one year
IV. Cash at bank and in hand
E. PREPAYMENTS
Total assets
CAPITAL, RESERVES AND LIABILITIES
A. CAPITAL AND RESERVES
I. Subscribed capital
II. Share premium account
IV. Reserves
1. Legal reserve
V. Profit brought forward
VI. Loss for the financial year
VII. Interim dividend
C. CREDITORS
6. Amounts owed to affiliated undertakings
a) becoming due and payable within one year
b) becoming due and payable after more than one year
8. Other creditors
a) Tax authorities
c) Other creditors
i) becoming due and payable within one year
Total capital, reserves and liabilities
The accompanying notes are an integral part of these annual accounts.
Note(s)
2020
2019
15,348,618,449
17,857,330,583
4
15,348,618,449
17,857,330,583
855
254,060
48,190
303,105
–
886,448
30,369
916,817
15,348,921,554
17,858,247,400
1,180,536,830
1,180,536,830
609,732,757
609,732,757
118,053,683
118,053,683
15,908,055,291
16,108,887,311
(2,418,440,700)
(47,362,232)
(82,637,578)
(153,469,788)
15,315,300,283
17,816,378,561
19,990,081
27,098,255
7,347,177
7,821,200
116,079
5,409
6,167,934
6,943,975
33,621,271
41,868,839
15,348,921,554
17,858,247,400
5
6
8
9
9
Tenaris
Tenaris S.A. Profit and loss account
for the year ended December 31, 2020
Expressed in United States Dollars
4. Other operating income
5. Other external expenses
8. Other operating expenses
11. Other interest receivable and similar income
b) other interest and similar income
Note
2020
2019
235.
1,332,639
1,077,194
(7,436,190)
(17,656,686)
(22,011,736)
(29,640,927)
10
11
2,229
238,095
13. Value adjustments in respect of financial assets and of investments held as current assets
4
(2,389,291,348)
–
14. Interest payable and similar expenses
a) concerning affiliated undertakings
b) other interest and similar expenses
16. Loss after taxation
17. Other taxes not shown under items 1 to 16
18. Loss for the financial year
The accompanying notes are an integral part of these annual accounts.
12
13
(615,926)
(414,455)
(1,372,708)
(1,957)
(2,418,434,787)
(47,356,989)
(5,913)
(5,243)
(2,418,440,700)
(47,362,232)
Annual Report
236.
Tenaris S.A. Notes to the audited annual accounts
as at December 31, 2020
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 (société 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
consolidated financial statements are available
at the registered office of the Company, 26,
Boulevard Royal – 4th floor, L-2449, Luxembourg,
Grand-Duchy of Luxembourg.
2. Presentation of the comparative financial data
In September 2019, a Grand-Ducal regulation
updated the Standard Chart of Accounts applicable
for the financial years starting as from January 1,
2020. Consequently, the figures related to other
loans, other debtors becoming due and payable after
more than one year, other operating expenses and
staff costs have been accordingly restated.
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. The main area
involving significant estimates or judgements is
impairment of financial assets (see Note 4).
3.2. Foreign currency translation
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 except for tangible and intangible
fixed assets and Shares in affiliated undertakings
which remain at the historical exchange rate on
the day of incorporation. The resulting gains or
losses are reflected in the Profit and loss account
for the financial year when they are realized. Solely
the unrealized exchange losses are recorded in the
profit and loss account. Income and expenses in
currencies other than the USD are translated into
USD at the exchange rate prevailing at the date of
each transaction.
Tenaris 3.3. Financial assets
Shares in affiliated undertakings are valued at
purchase or contribution price including the
expenses incidental thereto.
at bank and in hand are carried at historical cost
which approximates fair market value.
237.
3.6. Creditors
Creditors are stated at nominal value.
The Company conducts impairment tests on its
financial assets in accordance with Luxembourg
regulations.
4. Financial assets
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.
3.4. Debtors
Debtors are valued at their nominal value.
They are subject to value adjustments when 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 in hand mainly comprise cash at
bank and liquidity funds. Assets recorded in cash
Shares in affiliated undertakings
Tenaris holds 100% of the shares of Tenaris
Investments S.à r.l. (“Tenaris Investments”) with
registered office in Luxembourg and holds, indirectly
through this wholly-owned subsidiary, 100% of the
shares of Confab Industrial S.A., Inversiones Lucerna
Limitada, Maverick Tube Corporation, Siderca
S.A.I.C., Talta - Trading e Marketing, Sociedade
Unipessoal Lda., Tenaris Investments Switzerland
AG, Algoma Tubes Inc., Siderca International
ApS, S.C. Silcotub S.A., Management Solutions
Services Inc., Tenaris Investments (NL) B.V., Tenaris
Connections B.V. and Tenaris Financial Services S.A.,
50% of the shares of Exiros B.V. and 11.5% of the
shares of Ternium S.A.
Movements during the financial year are as follows:
Expressed in United States Dollars
Gross book value - opening balance
Decreases for the financial year (a)
Gross book value - closing balance
Accumulated value adjustments - opening balance
Allocations for the financial year (b)
Accumulated value adjustments - closing balance
Net book value - opening balance
Net book value - closing balance
20,796,621,927
(119,420,786)
20,677,201,141
(2,939,291,344)
(2,389,291,348)
(5,328,582,692)
17,857,330,583
15,348,618,449
Annual Report 238.
(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,
2020, in connection with cancellations of loans to
Tenaris, the value of the participation of Tenaris in
Tenaris Investments decreased by USD 119.4 million.
(b) In 2020, results of the Company’s subsidiaries
indirectly held through its wholly-owned
subsidiary Tenaris Investments were affected by
the COVID-19 pandemic and the adverse market
conditions reflecting the decline in oil prices and
their impact on drilling activity and on the demand
outlook for tubular products. The management of
the Company has assessed the recoverable value of
its investment and recorded an impairment charge
of USD 2.4 billion as of December 31, 2020 under
Luxembourg GAAP.
The recoverable value of the investment has been
calculated based on the net equity value of Tenaris
Investments. As of December 31, 2020 Tenaris
Investments reported a net equity of USD 15.3 billion
and a loss for the financial year of USD 3.1 billion.
5. Capital and reserves
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, 2020 was 1,180,536,830 shares with
a par value of USD 1 per share.
The board of directors is authorized until June
12, 2025, to increase the issued share capital,
through issues of shares within the limits of the
authorized capital.
Following the completion of the corporate
reorganization, and upon its conversion into
an ordinary Luxembourg holding company,
the Company recorded a special reserve for
tax purposes in a significant amount. The
Company expects that, as a result of its corporate
reorganization, its current overall tax burden
will not increase, as all or substantially all of
its dividend income will come from high income
tax jurisdictions.
Tenaris 6. Legal reserve
dividend for the financial year under Luxembourg
law totalled approximately USD 13.4 billion.
239.
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 must be allocated to the reserve.
The legal reserve is not available for distribution to
the shareholders.
7. Distributable amounts
Dividends may be paid by Tenaris upon the
ordinary shareholders’ meeting approval to the
extent distributable retained earnings exist.
At December 31, 2020, the Company’s profit brought
forward after deduction of the loss and the interim
The share premium amounting to USD 0.6 billion
can also be reimbursed.
8. Interim dividend paid
On June 2, 2020, the Company’s Shareholders
approved that, as a consequence of liquidity
preservation initiatives, no further dividends
be distributed in respect of fiscal year 2019
beyond the interim dividend of approximately
USD 153 million already paid in November 2019.
On November 25, 2020, the Company paid an
interim dividend of USD 82.6 million based on
the board of directors’ decision of November 4,
2020 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.
Annual Report 240.
9. Creditors: Amounts owed to affiliated
undertakings
Expressed in United States Dollars
CREDITORS BECOMING DUE AND PAYABLE
Siderca Sociedad Anónima Industrial y Comercial
Tenaris Investments S.à r.l.
Tenaris Solutions Uruguay S.A.
Maverick Tube Corporation
Tubos de Acero de México, S.A.
Dalmine S.p.A.
Management Solutions Services, Inc.
Tenaris Connections B.V.
Others
Total
10. Other external charges
Expressed in United States Dollars
Professional services and fees (*)
Other services and fees
Others
Within a year
After more than
one year
Total at
December 31, 2020
Total at
December 31, 2019
4,317,657
5,703,650
3,350,143
–
220,658
4,709,841
898,465
783,641
6,026
2,362,860
–
2,585,266
–
–
–
1,494,208
904,843
–
6,680,517
5,703,650
5,935,409
–
220,658
4,709,841
2,392,673
1,688,484
6,026
8,624,477
5,508,510
8,697,330
2,024,442
6,008,256
2,159,175
1,887,700
–
9,565
19,990,081
7,347,177
27,337,258
34,919,455
2020
2019
6,649,918
11,175,848
589,471
196,801
6,072,228
408,611
7,436,190
17,656,686
(*) The total fees for the financial year received by the auditor amounted 1.1 million including 22 thousand related to
statutory auditor audit-related services. In addition the company received fees for USD 96 thousand related to tax
advisory services.
Total fees accrued for professional services rendered by PwC Network firms to Tenaris S.A. and its subsidiaries are
disclosed in note 30 to the Company’s consolidated financial statements.
Tenaris
11. Other operating charges
Expressed in United States Dollars
Senior Management compensation
Board of directors’ accrued fees
Others
241.
2020
2019
18,969,996
25,744,919
1,327,762
1,713,978
1,494,996
2,401,012
22,011,736
29,640,927
12. Interest payable concerning affiliated
undertakings
Interests payable concerning affiliated undertaking
are referred to intercompany loans from Tenaris
Investments.
13. Taxes
The Company is liable to all taxes applicable to a
Luxembourg “Société Anonyme”. For the financial
year ended December 31, 2020 the Company did not
realize any profits subject to tax in Luxembourg.
holder of record of the above-mentioned
Tenaris shares.
Rocca & Partners Stichting Administratiekantoor
Aandelen San Faustin, a private foundation located
in the Netherlands (Stichting) (“RP STAK”) held
voting 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 0.08% of the
Company’s outstanding shares.
14. Parent Company
Tenaris’s controlling shareholders as of December
31, 2020 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 (“Techint”), who is the
15. Putative class actions
Following the Company’s November 27, 2018
announcement that its Chairman and CEO Paolo
Rocca had been included in an Argentine court
investigation known as the Notebooks Case (a
decision subsequently reversed by a higher court),
two putative class action complaints were filed
in the U.S. District Court for the Eastern District
of New York. On April 29, 2019, the court
consolidated the complaints into a single case,
captioned “In re Tenaris S.A. Securities Litigation”,
and appointed lead plaintiffs and lead counsel. On
July 19, 2019, the lead plaintiffs filed an amended
Annual Report
242.
complaint purportedly on behalf of purchasers of
Tenaris securities during the putative class period
of May 1, 2014 through December 5, 2018. The
individual defendants named in the complaint are
Tenaris’s Chairman and CEO and Tenaris’s former
CFO. The complaint alleges that during the class
period, the Company and the individual defendants
inflated the Tenaris share price by failing to disclose
that the nationalization proceeds received by
Ternium (in which the Company held an 11.46%
stake) when Sidor was expropriated by Venezuela
were received or expedited as a result of allegedly
improper payments made to Argentine officials.
The complaint does not specify the damages that
plaintiff is seeking. On October 9, 2020, the court
granted in part and denied in part the defendants’
motions to dismiss. The court partially granted
and partially denied the motion to dismiss the
claims against the Company and its Chairman and
CEO. In addition, the court granted the motions
to dismiss as to all claims against San Faustin,
Techint, and Tenaris’s former CFO. The case will
now proceed based on the claims that survived
the motion to dismiss. Management believes the
Company has meritorious defenses to these claims;
however, at this stage Tenaris cannot predict the
outcome of the claim or the amount or range of loss
in case of an unfavorable outcome.
16. U.S. patent infringement litigation
Tenaris Coiled Tubes, LLC (“TCT”), a U.S.
subsidiary of the Company, was sued on 2017 by
its competitor Global Tubing, alleging violations
to certain intellectual property regulations and
seeking a declaration that certain Global Tubing
products do not infringe patents held by TCT.
TCT filed a counterclaim seeking declaration that
certain Global Tubing products infringe patents
held by TCT, and Global Tubing responded
alleging that such patents should be invalidated.
On December 13, 2019, Global Tubing filed an
amended complaint (including the Company
as defendant) and alleging that TCT and the
Company misled the patent office in order to
monopolize the coiled tubing market for quench
and tempered products. The trial is set for August
2021. At this time, it is not possible to predict the
outcome of this matter or estimate the range of
potential losses that may result from the resolution
of this claim.
17. Ongoing investigation
The Company is aware that Brazilian, Italian and
Swiss authorities have been investigating whether
certain payments were made prior to 2014 from
accounts of entities presumably associated with
affiliates of the Company to accounts allegedly
linked to individuals related to Petróleo Brasileiro
S.A. (“Petrobras”) and whether any such payments
were intended to benefit the Company’s Brazilian
subsidiary Confab. 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 did not uncover any information
that corroborated allegations of involvement in
these alleged payments by the Company or its
subsidiaries. Furthermore, the Company became
aware that a Petrobras internal investigation
commission reviewed certain contracts with
Confab and concluded that they had not found
evidence that Petrobras had benefitted Confab or
had misused applicable local content rules.
Tenaris 243.
The Audit Committee of the Company's Board of
Directors engaged external counsel in connection
with the Company’s review of these matters. In
addition, the Company voluntarily notified the
U.S. Securities and Exchange Commission (“SEC”)
and the U.S. Department of Justice (“DOJ”) in
October 2016.
In July 2019, the Company learned that the public
prosecutors’ office of Milan, Italy, had completed a
preliminary investigation into the alleged payments
and had included in the investigation, among other
persons, the Company’s Chairman and Chief
Executive Officer, two other board members,
Gianfelice Rocca and Roberto Bonatti, and the
Company’s controlling shareholder, San Faustin.
The Company is not a party to the proceedings.
In February 2020, the Company learned that the
magistrate overseeing the investigation decided
to move the case to trial. The Company’s outside
counsel had previously reviewed the Italian
prosecutors’ investigative file and has informed the
Board that neither that file nor this magistrate’s
decision sets forth evidence of involvement by any
of the three directors in the alleged wrongdoing.
Accordingly, the Board concluded that no particular
action was warranted at that time, other than inviting
the referred board members to continue discharging
their respective responsibilities with the full support
of the Board. The trial has not yet started.
In June 2020, the Company learned that the
Brazilian public prosecutors’ office requested the
indictment of several individuals, including three
executives or former executives of Confab and
a former agent of Confab, charging them with
the alleged crimes of corruption in relation to
contracts executed between 2007 and 2010, and
money laundering in relation to payments between
2009 and 2013. Neither the Company nor Confab
is a party to the proceedings.
The Company continues to respond to
requests from and otherwise cooperate with
the appropriate authorities. The Company has
engaged in discussions with the SEC and the DOJ
towards a potential resolution of the investigation.
There are no assurances that the discussions with
the SEC or the DOJ will result in a final resolution
of the investigation or, if a resolution is achieved,
the timing, scope and terms of any such resolution.
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 the
resolution of these matters.
18. Off balance sheet commitments
The Company issued a guarantee covering the
funding obligations of Techgen S.A. de C.V.
(“Techgen”), an associated company of Tenaris,
under a loan agreement between Techgen and
Natixis, New York Branch, as the administrative
agent and collateral agent of various lenders.
As of December 31, 2020 and 2019, the amount
guaranteed was approximately USD 4.9 million.
19. The COVID-19 pandemic and the oil & gas
crisis and their impact on Tenaris’s operations
and financial condition
A novel strain of coronavirus (“SARS-CoV-2”)
surfaced in China in December 2019 and
subsequently spread to the rest of the world in
early 2020. In March 2020, the World Health
Organization declared COVID-19, the disease
caused by the SARS-CoV-2 virus, a global
pandemic. In response to the COVID-19 outbreak,
countries have taken different measures in relation
to prevention and containment. For example,
Annual Report 244.
several countries introduced bans on business
activities or locked down cities or countries,
including countries where the Company’s
subsidiaries have operations (such as Argentina,
China, Colombia, Italy, Mexico, Saudi Arabia
and the United States). The rapid expansion of
the virus, the surfacing of new strains of the virus
in several countries, and the measures taken to
contain it triggered a severe fall in global economic
activity and precipitated a serious crisis in the
energy sector. While the extent of the effects of
COVID-19 on the global economy and oil demand
were still unclear, in March 2020, the members of
OPEC+ (OPEC plus other major oil producers
including Russia) did not agree to extend their
agreement to cut oil production and Saudi Arabia
launched a wave of additional supply on the
market triggering a collapse in oil prices below
USD 30 per barrel. This exacerbated what soon
became clear was an unprecedented situation of
oversupply, caused primarily by the sudden and
dramatic fall in oil consumption consequent to the
measures taken to contain the spread of the virus
around the world. Since then, the price of oil has
been recovering and currently stands above the level
of USD 55 per barrel, bolstered by the actions to
cut production taken by OPEC+ and the recovery
of oil demand, as the global economy, especially
industrial production, recovers and COVID-19
vaccination programs begin. The worldwide
demand of oil, which stood at 100 million barrels
per day in December 2019, fell to around 75-80
million barrels per day in April 2020 before
recovering to around 94 million barrels per day
in December 2020. Drilling activity in the United
States and Canada, where it was most affected, has
begun to recover but remains well below the level it
was prior to the pandemic, while, in the rest of the
world, any recovery will take longer following the
reductions in investment plans made by oil and gas
companies in response to the pandemic.
There remains considerable uncertainty about
the future duration and extent of the pandemic
with new and more contagious variants of the
SARS-CoV-2 virus appearing and the effectiveness
of vaccination programs still to be seen. It is not
possible at this time to predict the magnitude of
the adverse effects that the foregoing circumstances
will have on the industry where the Company’s
subsidiaries operate, nor to reasonably estimate
the impact on the Company’s results of operations,
cash flows or financial condition.
20. Subsequent event
Annual Dividend Proposal
On February 24, 2021, the Company’s board of
directors proposed, for the approval of the annual
general shareholders’ meeting scheduled be held
on May 3, 2021, the payment of an annual
dividend of USD 0.21 per share (USD 0.42 per
ADS), or approximately USD 248 million, which
includes the interim dividend of USD 0.07 per
share (USD 0.14 per ADS) or approximately
USD 83 million, paid on November 25, 2020. If the
annual dividend is approved by the shareholders,
a dividend of USD 0.14 per share (USD 0.28 per
ADS), or approximately USD 165 million will be
paid on May 26, 2021, with an ex-dividend date
of May 24, 2021. These annual accounts do not
reflect this dividend payable.
/s/ Alicia Móndolo
Chief Financial Officer
Alicia Móndolo
Tenaris
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).
EBITDA is a non-IFRS alternative performance
measure. Operating result for the year 2020
amounted to a loss of $663 million.
245.
Millions of U.S. dollars
FOR THE YEAR ENDED DECEMBER 31
Operating (loss) income
Depreciation and amortization
Impairment charge
EBITDA
2020
2019
2018
(663)
679
622
638
832
540
–
872
664
–
1,372
1,536
Annual Report 246.
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 is calculated in the following manner:
Net cash= Cash and cash equivalents + Other
investments (Current and Non-Current) +/-
Derivatives hedging borrowings and investments –
Borrowings (Current and Non-Current).
Net cash is a non-IFRS alternative performance
measure.
Millions of U.S. dollars
AT DECEMBER 31
Cash and bank deposits
Other current investments
Non-current investments
Derivatives hedging borrowings and investments
Current borrowings
Non-current borrowings
Net cash position
2020
2019
2018
585
872
239
8
(303)
(316)
1,085
1,554
210
18
19
(781)
(41)
980
428
488
114
(6)
(510)
(29)
485
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.
Free cash flow is a non-IFRS alternative
performance measure. Net cash provided by
operating activities for the year 2020 amounted
to $1,520 million.
Millions of U.S. dollars
FOR THE YEAR ENDED DECEMBER 31
Net cash provided by operating activities
Capital expenditures
Free cash flow
2020
2019
2018
1,520
(193)
1,327
1,528
(350)
1,178
611
(349)
261
Tenaris Investor information
Investor Relations Director
Giovanni Sardagna
General inquiries
investors@tenaris.com
247.
ADS depositary bank
Deutsche Bank
CUSIP No. 88031M019
Internet
www.tenaris.com
Luxembourg Office
26 Boulevard Royal
4th Floor
L-2449 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 9925 0954
Mexico (52) 229 9891159
Stock information
New York Stock Exchange (TS)
Mercato Telematico Azionario (TEN)
Bolsa Mexicana de Valores, S.A.B. de C.V. (TS)
Annual Report www.tenaris.com