Tenaris S.a. · MIL:TEN
Tenaris — Investor Day (May 2005)
31 slides from Tenaris's investor day presentation, May 3, 2005
Slide 1: Investor Day 2005
Investor Day 2005 Paolo Rocca Chairman and CEO May 3, 2005
Slide 2: Disclaimer
Disclaimer This presentation contains “forward-looking statements.” Forward-looking statements are based on management’s current views and assumptions and involve known and unknown risks that could cause actual results, performance or events to differ materially from those expressed or implied by th
Slide 3: A key player in the global energy industry
A key player in the global energy industry • Leading global supplier of seamless pipes Revenues by segment (2004) to the oil and gas industry with manufacturing Other Energy operations worldwide 10% 2% Welded 8% • Leading supplier of welded pipes for South America’s oil and gas infrastructure • Inno
Slide 4: Leader in OCTG sector
Leader in OCTG sector World seamless OCTG production • Leading consolidator in the seamless pipes 2004 market share industry Japan 9% Tenaris 18% Eastern Europe & • Focusing on sales of high-end products direct CIS 20% to end-user customer base China Others 22% 4% • Comprehensive range of high quali
Slide 5: Positioned to serve the needs of demanding markets worldwide
Positioned to serve the needs of demanding markets worldwide Investor Day 2005 Tenaris May 3, 2005 5
Slide 6: Core seamless pipe business is global
Core seamless pipe business is global Distribution of production capacity Distribution of sales volume (2004) (3.3 million tons) (2.7 million tons) South America 14% South America North America 27% North America 28% 31% Far East & Oceania 16% Far East & Oceania 8% Middle East & Africa Europe 16% 26%
Slide 7: Growing oil demand not matched by additional supply capacity
Growing oil demand not matched by additional supply capacity Mln b/d 90 14 85 12 80 10 75 8 70 6 65 4 60 2 55 50 - 1974 1979 1984 1989 1994 1999 2004 World oil demand Spare capacity (RHS) Source: EIA, BP Statistical review of World Energy and Spears estimates Investor Day 2005 Tenaris May 3, 2005 7
Slide 8: Constraints to supply growth
Constraints to supply growth Point to multi-year period of higher investment in all parts of the industry • Since 1985 production has exceeded the discovery of new reserves every year • Decline rates for older reservoirs are accelerating • Long lead-time required to develop new reservoirs • New expl
Slide 9: E&P spending expected to grow
E&P spending expected to grow In US$ billion 210 8% 190 R= C AG 170 % 11 150 8% 130 = 4% CAGR 110 90 70 50 2000 2001 2002 2003 2004 2005E 2006E 2007E 2008E 2009E 2010E Source: IFP / IEA Investor Day 2005 Tenaris May 3, 2005 9
Slide 10: Investments will increasingly be in difficult operating environments
Investments will increasingly be in difficult operating environments Production trend towards non-conventional sources 2003 Oil & Gas production 2010 Oil & Gas production Tight Gas Acid Sour 3% 0% LNG Acid Sour Arctic 6% Tight Gas 3% 4% 0% Deepwater LNG 3% 10% Heavy oil 7% Arctic 6% Deepwater 14% He
Slide 11: Responding to the needs of the industry
Responding to the needs of the industry And enhancing competitive differentiation • Investing in global industrial structure to increase capacity in high value products, reduce costs and secure raw material supply • Increasing investment in R&D to develop new products • Investing in finishing facili
Slide 12: Adding value to our sales and winning customer loyalty
Adding value to our sales and winning customer loyalty High-end tubes (% of total sold) Tubes with value added service (% of total sold) % % 40 30 38 36 25 34 20 32 30 15 28 26 10 24 5 22 20 0 2001 2002 2003 2004 2005E 2001 2002 2003 2004 2005E Investor Day 2005 Tenaris May 3, 2005 12
Slide 13: Setting new industry standards in premium connections
Setting new industry standards in premium connections • Statoil’s Snøhvit project in the Barents Sea is the first field worldwide where all casing and tubing will be dope-free • TenarisBlue® Dopeless™ is increasingly seen as the thread and coupled connection of choice for its environmental and opera
Slide 14: At the forefront of industry developments
At the forefront of industry developments • Caspian (Karachaganak, Kashagan, Tengizchevroil) • Gas production for LNG and regional grids (Qatar, Egypt, Nigeria, Australia) • Saudi Aramco expanding production • West African deepwater • Norwegian offshore • Mexico – rig count has doubled in last three
Slide 15: Line pipe for deepwater operations
Line pipe for deepwater operations • Steel catenary and top tension risers Deepwater operations projected to grow Oil production (‘000 b/d) 9,000 • Heavy wall line pipe 8,000 7,000 • Advanced welding and automated end-sizing 6,000 5,000 4,000 • Double jointing, bends, and coating 3,000 2,000 • Suppl
Slide 16: Canadian oil sands
Canadian oil sands • Investing in AlgomaTubes, Canada’s only Oil sands production projected to grow seamless pipe mill Oil production (‘000 b/d) 4,500 • Unique package of premium connections 4,000 to meet demanding SAGD operational requirements 3,500 3,000 • Temperature: 210-350 C Pressure: 285-500
Slide 17: Investing to reduce costs and expand industrial structure
Investing to reduce costs and expand industrial structure • USD60m in Matesi reduces exposure to high scrap prices and gives access to competitive Venezuelan iron ore and natural gas • USD140m in Dalmine power plant will reduce energy cost and secure supply • USD42m (+USD32m debt) in Silcotub adds c
Slide 18: Seamless pipe margins are growing
Seamless pipe margins are growing US$ 1,800 800 Rig USD/b s bl 1,600 700 1,400 1,200 600 1,000 500 800 600 400 400 300 200 0 200 2000FY 2001FY 2002FY 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 Margin per ton (RHS) Price per ton Cost per ton Investor Day 2005 Tenaris May 3, 2005 18
Slide 19: Operating results improving
Operating results improving US$ Million 2001 2002 2003 2004 1Q 2005 Net Sales 3,174 3,219 3,180 4,136 1,453 Seamless 2,496 2,244 2,376 3,273 1,105 Welded 433 580 351 348 160 Energy 113 210 333 418 144 Others 132 185 120 97 43 1 EBITDA 644 667 602 899 458 EBITDA margin 20% 21% 19% 22% 31% Net income
Slide 20: Liquidity of shares increasing
Liquidity of shares increasing Average daily trading Millions of US$ 30 25 20 15 10 5 0 2003 2004 1 Q 2005 New York Milan Buenos Aires Mexico Investor Day 2005 Tenaris May 3, 2005 20
Slide 21: Summary
Summary • Global leader in a consolidated industry segment • Well positioned to benefit from extended energy cycle • Investing in R&D and industrial structure • Operating results transformed Investor Day 2005 Tenaris May 3, 2005 21
Slide 22: Investor Day 2005 - Carlos Condorelli, CFO
Investor Day 2005 Carlos Condorelli Chief Financial Officer May 3, 2005
Slide 23: Strong balance sheet
Strong balance sheet Indebtedness (Million US$) Firm value US$ 7,921 As of March 31, 2005 Net debt 649 649 Cash & Cash Equivalents 477 Financial Debt 1,126 Net Debt 649 Net Debt / Equity 22.9% Balance Sheet (Million US$) Market Cap (1) 7,272 As of March 31, 2005 Current Assets 3,233 Current Liabilit
Slide 24: Financial indicators
Financial indicators FY 2003 FY 2004 1Q 2005 Million US$ % Million US$ % Million US$ % EBITDA (1) 602 19% 899 22% 458 31% Shareholders Equity 1,841 2,496 2,830 Market Capitalization (2) 3,891 5,795 7,272 Firm Value (FV) (3) 4,339 6,623 7,921 FV/EBITDA 7.2 7.4 Interest Coverage (EBITDA/Interest) 18.2
Slide 25: Corporate organization
Corporate organization Tenaris Manufacturing Services & Investment & R&D & Procurement Centres Trading Financial Technology AlgomaTubes Tenaris Global Tenaris Tenaris Exiros (Canada) Services Investments Connections (Uruguay) Dalmine (Uruguay) (Ireland) (Netherlands) (Italy) Procurement Commercial N
Slide 26: Cost of debt
Cost of debt FY 2003 FY 2004 1Q 2005 Million US$ Million US$ Million US$ Interest expenses (33.1) (46.9) (12.4) BHP 0.0 7.0 0.8 ARS NDF 0.7 3.2 3.2 Adjusted interest expenses (32.4) (36.7) (8.5) Average Total Debt (775) (1,046) (1,193) Cost of debt 4.2% 3.5% 2.8% (1) • In 2004 net interest expenses
Slide 27: Currency exposure management
Currency exposure management • Policy is to hedge consolidated exposure to currencies other than the USD • Tenaris maintains a short position in emerging markets currencies • Tenaris uses forex hedges to lock in expected margin on major projects • The functional currencies of our subsidiaries are th
Slide 28: Working capital
Working capital Millions of US$ 2003 2004 1Q 2005 Inventories (152) (411) (91) Trade receivables 4 (271) (194) Trade payables & customer advances (10) 181 85 BHP/ Fintecna 0 (117) 66 Others 50 (3) (9) Changes in Working Capital (107) (621) (143) • Increase in inventories reflects higher raw material
Slide 29: Income tax position
Income tax position FY 2004 1Q 2005 Million US$ Million US$ Income (loss) before income tax and equity in 819.3 363.9 earnings (losses) of associated companies Fintecna (126) Income (loss) before income tax and equity in 693.2 363.9 earnings (losses) of associated companies adjusted Income tax (curr
Slide 30: Reinvesting cash flow in growth and dividends
Reinvesting cash flow in growth and dividends Million US$ 600 500 400 300 200 100 0 2002 2003 2004 Acquisitions Capex Dividends Investor Day 2005 Tenaris May 3, 2005 30
Slide 31: Investor Day 2005 Tenaris May 3, 2005
Investor Day 2005 Tenaris May 3, 2005 31