Indicate
by check mark whether the registrant files or will file annual reports under cover Form 20-F or 40-F.
Indicate by check mark
whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission
pursuant to Rule 12G3-2(b) under the Securities Exchange Act of 1934.
If “Yes”
is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-__.
The attached material is being furnished to
the Securities and Exchange Commission pursuant to Rule 13a-16 and Form 6-K under the Securities Exchange Act of 1934, as amended.
This report contains Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018.
NOTES TO THE CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
1
|
General information
|
2
|
Accounting policies and basis of presentation
|
3
|
Segment information
|
4
|
Cost of sales
|
5
|
Selling, general and administrative expenses
|
6
|
Financial results
|
7
|
Dividend distribution
|
8
|
Property, plant and equipment, net
|
9
|
Intangible assets, net
|
10
|
Cash and cash equivalents and other investments
|
11
|
Derivative financial instruments
|
12
|
Contingencies, commitments and restrictions to the distribution of profits
|
13
|
Investments in non-consolidated companies
|
14
|
Discontinued operations
|
15
|
Related party transactions
|
16
|
Category of financial instruments and classification within the fair value hierarchy
|
17
|
Nationalization of Venezuelan Subsidiaries
|
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
NOTES TO THE CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(In the notes all amounts are shown in
U.S. dollars, unless otherwise stated)
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 Condensed Interim Financial Statements
to "Tenaris" refer to Tenaris S.A. and its consolidated subsidiaries. A list of the principal Company’s subsidiaries
is included in Note 30 to the Company’s audited Consolidated Financial Statements for the year ended December 31, 2017.
The Company’s shares trade on the
Buenos Aires Stock Exchange, the Italian Stock Exchange and the Mexican Stock Exchange; the Company’s American Depositary
Securities (“ADS”) trade on the New York Stock Exchange.
These Consolidated Condensed Interim Financial
Statements were approved for issuance by the Company’s Board of Directors on August 1, 2018.
|
2
|
Accounting policies and basis of presentation
|
These Consolidated Condensed Interim Financial
Statements have been prepared in accordance with IAS 34, “Interim Financial Reporting”. The accounting policies used
in the preparation of these Consolidated Condensed Interim Financial Statements are consistent with those used in the audited Consolidated
Financial Statements for the year ended December 31, 2017 except for the adoption of new and amended standards as set out below.
These Consolidated Condensed Interim Financial Statements should be read in conjunction with the audited Consolidated Financial
Statements for the year ended December 31, 2017, which have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”) and in conformity
with IFRS as adopted by the European Union (“EU”).
The preparation of Consolidated Condensed
Interim Financial Statements in conformity with IFRS requires management to make certain accounting estimates and assumptions that
might affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance
sheet dates, and the reported amounts of revenues and expenses for the reported periods. Actual results may differ from these estimates.
Material inter-company transactions, balances
and unrealized gains (losses) on transactions between Tenaris’s subsidiaries have been eliminated in consolidation. However,
since the functional currency of some subsidiaries is its respective local currency, some financial gains (losses) arising from
inter-company transactions are generated. These are included in the Consolidated Condensed Interim Income Statement under
Other
financial results
.
There were no changes in valuation techniques
during the period and there have been no changes in any risk management policies since the year ended December 31, 2017.
Whenever necessary, certain comparative
amounts have been reclassified to conform to changes in presentation in the current period.
Accounting pronouncements applicable
as from January 1, 2018 and relevant for Tenaris
IFRS 9, “Financial instruments”
Tenaris
has adopted IFRS 9 “
Financial instruments”
from 1 January 2018 which resulted
in changes in accounting policies and adjustments to the amounts recognized in the financial statements. In accordance with the
transition provisions in IFRS 9, Tenaris has adopted the new rules using the retrospective approach, meaning that the cumulative
impact of the adoption was recognized in the opening retained earnings and other reserves of the current period as of January 1,
2018 and that comparatives were not restated.
The new impairment model requires recognition
of impairment provisions based on expected credit losses rather than on incurred credit losses. The impact of this change was a
decrease of $6.4 million in the allowance for doubtful accounts.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
|
2
|
Accounting policies and basis of presentation (Cont.)
|
Accounting pronouncements applicable
as from January 1, 2018 and relevant for Tenaris (Cont.)
IFRS 9, “Financial instruments”
(Cont.)
The measurement category and the carrying
amount of financial assets and liabilities in accordance with IAS 39 and IFRS 9 at January 1, 2018 are compared as follows:
Financial Assets
|
|
FVPL
|
|
Held to
maturity
|
|
Amortized cost
(loans & receivables
2017)
|
|
FVOCI
(Available for
sale 2017)
|
Closing balance December 31, 2017 - IAS 39
|
|
|
1,163,808
|
|
|
|
344,336
|
|
|
|
1,541,724
|
|
|
|
21,572
|
|
Reclassified bonds and other fixed income from HTM to FVOCI
|
|
|
-
|
|
|
|
(344,336
|
)
|
|
|
-
|
|
|
|
344,336
|
|
Reclassified fixed income from FVPL to amortized cost
|
|
|
(550,646
|
)
|
|
|
-
|
|
|
|
550,646
|
|
|
|
-
|
|
Reclassified bonds and other fixed income from FVPL to FVOCI
|
|
|
(153,702
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
153,702
|
|
Opening balance January 1, 2018 - IFRS 9
|
|
|
459,460
|
|
|
|
-
|
|
|
|
2,092,370
|
|
|
|
519,610
|
|
|
|
Effect on
other reserves
|
|
Effect on
retained earnings
|
Opening balance January 1, 2018 - IAS 39
|
|
|
(320,569
|
)
|
|
|
10,718,853
|
|
Reclassify investments from HTM to FVOCI
|
|
|
3,126
|
|
|
|
-
|
|
Reclassify investments from FVPL to FVOCI
|
|
|
(352
|
)
|
|
|
352
|
|
Opening balance January 1, 2018 - IFRS 9
|
|
|
(317,795
|
)
|
|
|
10,719,205
|
|
Since January 1, 2018 the Company classifies
its financial instruments in the following measurement categories:
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 included in finance income using the effective interest rate method.
Fair value through other comprehensive
income (“FVOCI”): 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. Exchange gains and losses and impairments related to the financial assets are immediately recognized in
the consolidated income statement.
Fair value through profit and loss (“FVPL”):
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.
The classification depends on the Company’s
business model for managing the financial assets and contractual terms of the cash flows.
IFRS 15, “Revenue from contracts
with customers”
The group has adopted IFRS 15 “Revenue
from contracts with customers” from January 1 2018, which resulted in changes in accounting policies and adjustments to the
amounts recognized in the financial statements. The policy sets out the requirements in accounting for revenue arising from contracts
with customers and is based on the principle that revenue is recognized when control of a good or service is transferred to the
customer. In accordance with the transition provisions in IFRS 15, the group has adopted the new rules using the modified retrospective
approach, meaning that the cumulative impact of the adoption was recognized in retained earnings as of January 1, 2018 and that
comparatives were not restated.
The impact of the adoption as of January
1, 2018 on the aggregate of revenues, cost of sales and selling expenses was a decrease of $ 0.7 million net.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
|
2
|
Accounting policies and basis of presentation (Cont.)
|
New
and amended standards not yet adopted and relevant for Tenaris
In January 2016, the IASB issued IFRS 16,
"Leases". The new standard will result in almost all leases recognized on the balance sheet, as the distinction between
operating and finance leases is removed. IFRS 16 must be applied on annual periods beginning on or after January 1, 2019.
This
standard was endorsed by the EU.
The Company's management is currently assessing
the potential impact that the application of this standard may have on the Company's financial condition or results of operations.
None of the accounting pronouncements issued
after December 31, 2017 and as of the date of these Consolidated Condensed Interim Financial Statements has a material effect on
the Company’s financial condition or result of operations.
Reportable operating segment
(All
amounts in millions of U.S. dollars)
Six-month period ended June 30, 2018
|
|
Tubes
|
|
Other
|
|
Continuing
operations
|
|
Discontinued
operations
|
IFRS - Net Sales
|
|
|
3,452
|
|
|
|
203
|
|
|
|
3,655
|
|
|
|
-
|
|
Management view - operating income
|
|
|
290
|
|
|
|
35
|
|
|
|
325
|
|
|
|
-
|
|
Difference in cost of sales
|
|
|
103
|
|
|
|
3
|
|
|
|
106
|
|
|
|
-
|
|
Direct cost and others
|
|
|
97
|
|
|
|
3
|
|
|
|
100
|
|
|
|
-
|
|
Absorption
|
|
|
6
|
|
|
|
-
|
|
|
|
6
|
|
|
|
-
|
|
Differences in depreciation and amortization
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
-
|
|
Differences in selling, general and administrative expenses
|
|
|
-
|
|
|
|
6
|
|
|
|
6
|
|
|
|
-
|
|
IFRS - operating income
|
|
|
391
|
|
|
|
44
|
|
|
|
435
|
|
|
|
-
|
|
Financial income (expense), net
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
-
|
|
Income before equity in earnings of non-consolidated companies and income tax
|
|
|
|
|
|
|
|
|
|
|
466
|
|
|
|
-
|
|
Equity in earnings of non-consolidated companies
|
|
|
|
|
|
|
|
|
|
|
87
|
|
|
|
-
|
|
Income before income tax
|
|
|
|
|
|
|
|
|
|
|
553
|
|
|
|
-
|
|
Capital expenditures
|
|
|
194
|
|
|
|
2
|
|
|
|
196
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
274
|
|
|
|
8
|
|
|
|
282
|
|
|
|
-
|
|
Six-month period ended June 30, 2017
|
|
Tubes
|
|
Other
|
|
Continuing
operations
|
|
Discontinued
operations
|
IFRS - Net Sales
|
|
|
2,260
|
|
|
|
137
|
|
|
|
2,397
|
|
|
|
12
|
|
Management view - operating income
|
|
|
(28
|
)
|
|
|
12
|
|
|
|
(16
|
)
|
|
|
3
|
|
Difference in cost of sales
|
|
|
92
|
|
|
|
(1
|
)
|
|
|
91
|
|
|
|
(1
|
)
|
Direct cost and others
|
|
|
67
|
|
|
|
(2
|
)
|
|
|
65
|
|
|
|
(1
|
)
|
Absorption
|
|
|
25
|
|
|
|
1
|
|
|
|
26
|
|
|
|
-
|
|
Differences in Depreciation and Amortization
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
-
|
|
Differences in Selling, general and administrative expenses
|
|
|
13
|
|
|
|
-
|
|
|
|
13
|
|
|
|
-
|
|
Differences in Other operating income (expenses), net
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
IFRS - operating income
|
|
|
76
|
|
|
|
11
|
|
|
|
87
|
|
|
|
2
|
|
Financial income (expense), net
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
-
|
|
Income before equity in earnings of non-consolidated companies and income tax
|
|
|
|
|
|
|
|
|
|
|
67
|
|
|
|
2
|
|
Equity in earnings of non-consolidated companies
|
|
|
|
|
|
|
|
|
|
|
65
|
|
|
|
-
|
|
Income before income tax
|
|
|
|
|
|
|
|
|
|
|
132
|
|
|
|
2
|
|
Capital expenditures
|
|
|
289
|
|
|
|
5
|
|
|
|
294
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
304
|
|
|
|
7
|
|
|
|
311
|
|
|
|
-
|
|
In the
six-month period ended June 30, 2018 and 2017, 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 $26 and $25
million respectively. 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
and changes on the valuation of inventories according to cost estimation internally defined.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
|
3
|
Segment information (Cont.)
|
Geographical information
(all amounts in thousands of U.S. dollars)
|
|
North
America
|
|
South
America
|
|
Europe
|
|
Middle East
& Africa
|
|
Asia
Pacific
|
|
Total
continuing
operations
|
|
Total
discontinued
operations
|
Six-month period ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
1,690,341
|
|
|
|
679,178
|
|
|
|
380,838
|
|
|
|
763,002
|
|
|
|
141,360
|
|
|
|
3,654,719
|
|
|
|
-
|
|
Capital expenditures
|
|
|
110,708
|
|
|
|
40,049
|
|
|
|
41,613
|
|
|
|
808
|
|
|
|
2,553
|
|
|
|
195,731
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
166,903
|
|
|
|
55,277
|
|
|
|
44,077
|
|
|
|
5,217
|
|
|
|
10,729
|
|
|
|
282,203
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six-month period ended June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
1,061,010
|
|
|
|
505,220
|
|
|
|
257,230
|
|
|
|
469,841
|
|
|
|
103,363
|
|
|
|
2,396,664
|
|
|
|
11,899
|
|
Capital expenditures
|
|
|
238,140
|
|
|
|
32,445
|
|
|
|
16,005
|
|
|
|
5,188
|
|
|
|
1,883
|
|
|
|
293,661
|
|
|
|
145
|
|
Depreciation and amortization
|
|
|
179,057
|
|
|
|
62,745
|
|
|
|
51,574
|
|
|
|
6,204
|
|
|
|
11,486
|
|
|
|
311,066
|
|
|
|
-
|
|
Allocation of net sales to geographical
information is based on customer location. Allocation of depreciation and amortization is based on the geographical location of
the underlying assets.
There are no revenues from external customers
attributable to the Company’s country of incorporation (Luxembourg). For geographical information purposes, “North
America” comprises Canada, Mexico and the USA; “South America” comprises principally Argentina, Brazil and Colombia;
“Europe” comprises principally Italy and Romania; “Middle East and Africa” comprises principally Egypt,
Kazakhstan, Nigeria and Saudi Arabia and; “Asia Pacific” comprises principally China, Japan, Indonesia and Thailand.
|
|
Six-month period ended June 30,
|
(all amounts in thousands of U.S. dollars)
|
|
2018
|
|
2017
|
|
|
(Unaudited)
|
Inventories at the beginning of the period
|
|
|
2,368,304
|
|
|
|
1,563,889
|
|
|
|
|
|
|
|
|
|
|
Plus: Charges of the period
|
|
|
|
|
|
|
|
|
Raw materials, energy, consumables and other
|
|
|
1,686,567
|
|
|
|
1,329,052
|
|
Services and fees
|
|
|
143,862
|
|
|
|
115,251
|
|
Labor cost
|
|
|
439,051
|
|
|
|
361,198
|
|
Depreciation of property, plant and equipment
|
|
|
217,179
|
|
|
|
183,741
|
|
Amortization of intangible assets
|
|
|
4,770
|
|
|
|
11,503
|
|
Maintenance expenses
|
|
|
100,810
|
|
|
|
75,540
|
|
Allowance for obsolescence
|
|
|
14,921
|
|
|
|
(8,319
|
)
|
Taxes
|
|
|
16,497
|
|
|
|
8,924
|
|
Other
|
|
|
70,174
|
|
|
|
45,029
|
|
|
|
|
2,693,831
|
|
|
|
2,121,919
|
|
Less: Inventories at the end of the period
|
|
|
(2,530,072
|
)
|
|
|
(1,988,820
|
)
|
From discontinued operations
|
|
|
-
|
|
|
|
(7,403
|
)
|
|
|
|
2,532,063
|
|
|
|
1,689,585
|
|
|
5
|
Selling, general and administrative expenses
|
|
|
Six-month period ended June 30,
|
(all amounts in thousands of U.S. dollars)
|
|
2018
|
|
2017
|
|
|
(Unaudited)
|
Services and fees
|
|
|
64,458
|
|
|
|
69,476
|
|
Labor cost
|
|
|
239,563
|
|
|
|
221,689
|
|
Depreciation of property, plant and equipment
|
|
|
8,430
|
|
|
|
8,942
|
|
Amortization of intangible assets
|
|
|
51,824
|
|
|
|
106,880
|
|
Commissions, freight and other selling expenses
|
|
|
236,131
|
|
|
|
153,638
|
|
Provisions for contingencies
|
|
|
9,395
|
|
|
|
3,181
|
|
Allowances for doubtful accounts
|
|
|
(6,661
|
)
|
|
|
(4,738
|
)
|
Taxes
|
|
|
33,568
|
|
|
|
23,424
|
|
Other
|
|
|
50,500
|
|
|
|
41,112
|
|
|
|
|
687,208
|
|
|
|
623,604
|
|
From discontinued operations
|
|
|
-
|
|
|
|
(2,041
|
)
|
|
|
|
687,208
|
|
|
|
621,563
|
|
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
(all amounts in thousands of U.S. dollars)
|
|
Six-month period ended June 30,
|
|
|
2018
|
|
2017
|
|
|
(Unaudited)
|
Interest Income
|
|
|
21,208
|
|
|
|
25,684
|
|
Net result on changes in FV of financial assets at FVTPL
|
|
|
(2,226
|
)
|
|
|
(1,698
|
)
|
Finance Income
|
|
|
18,982
|
|
|
|
23,986
|
|
Finance Cost
|
|
|
(20,596
|
)
|
|
|
(11,958
|
)
|
Net foreign exchange transactions results (*)
|
|
|
28,070
|
|
|
|
(33,057
|
)
|
Foreign exchange derivatives contracts results
|
|
|
4,891
|
|
|
|
(6,384
|
)
|
Other
|
|
|
(644
|
)
|
|
|
7,350
|
|
Other Financial results
|
|
|
32,317
|
|
|
|
(32,091
|
)
|
Net Financial results
|
|
|
30,703
|
|
|
|
(20,063
|
)
|
From discontinued operations
|
|
|
-
|
|
|
|
9
|
|
|
|
|
30,703
|
|
|
|
(20,054
|
)
|
(*)The six-month
period ended June 2018 includes 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 a decrease in currency translation adjustment
reserve from an Italian subsidiary. Also includes the positive impact from Argentinian peso depreciation against the U.S. dollar
on Peso denominated financial, trade, social and fiscal payables at certain Argentinian subsidiaries which functional currency
is the U.S. dollar. The six-month period ended 2017 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 an increase
in currency translation adjustment reserve from an Italian subsidiary
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 in 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 $484.0 million.
On May 3, 2017, 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 in November 23, 2016 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 24, 2017. In the aggregate, the interim dividend paid in November 2016 and the balance paid in
May 2017 amounted to approximately $484.0 million.
|
8
|
Property, plant and equipment, net
|
(all amounts in thousands of U.S. dollars)
|
|
2018
|
|
2017
|
|
|
(Unaudited)
|
Six-month period ended June 30,
|
|
|
|
|
Opening net book amount
|
|
|
6,229,143
|
|
|
|
6,001,939
|
|
Currency translation adjustment
|
|
|
(42,303
|
)
|
|
|
40,807
|
|
Additions (*)
|
|
|
177,583
|
|
|
|
275,690
|
|
Disposals
|
|
|
(1,908
|
)
|
|
|
(2,100
|
)
|
Transfers
|
|
|
2,939
|
|
|
|
689
|
|
Depreciation charge
|
|
|
(225,609
|
)
|
|
|
(192,683
|
)
|
At June 30,
|
|
|
6,139,845
|
|
|
|
6,124,342
|
|
(*)
Mainly due to the progress in the construction of the greenfield seamless facility in Bay City, Texas.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
(all amounts in thousands of U.S. dollars)
|
|
2018
|
|
2017
|
|
|
(Unaudited)
|
Six-month period ended June 30,
|
|
|
|
|
Opening net book amount
|
|
|
1,660,859
|
|
|
|
1,862,827
|
|
Currency translation adjustment
|
|
|
(4,631
|
)
|
|
|
562
|
|
Additions
|
|
|
18,148
|
|
|
|
17,971
|
|
Disposals
|
|
|
(800
|
)
|
|
|
(602
|
)
|
Transfers
|
|
|
(2,939
|
)
|
|
|
(689
|
)
|
Amortization charge
|
|
|
(56,594
|
)
|
|
|
(118,383
|
)
|
At June 30,
|
|
|
1,614,043
|
|
|
|
1,761,686
|
|
|
10
|
Cash and cash equivalents and other investments
|
(all amounts in thousands of U.S. dollars)
|
|
At June 30,
|
|
At December 31,
|
|
|
2018
|
|
2017
|
Cash and cash equivalents
|
|
(Unaudited)
|
Cash at banks
|
|
|
115,445
|
|
|
|
150,948
|
|
Liquidity funds
|
|
|
216,167
|
|
|
|
66,033
|
|
Short – term investments
|
|
|
96,348
|
|
|
|
113,240
|
|
|
|
|
427,960
|
|
|
|
330,221
|
|
|
|
|
|
|
|
|
|
|
Other investments - current
|
|
|
|
|
|
|
|
|
Bonds and other fixed Income
|
|
|
407,995
|
|
|
|
754,800
|
|
Fixed Income (time-deposit, zero coupon bonds, commercial papers)
|
|
|
322,245
|
|
|
|
437,406
|
|
Others
|
|
|
-
|
|
|
|
100
|
|
|
|
|
730,240
|
|
|
|
1,192,306
|
|
Other investments - non-current
|
|
|
|
|
|
|
|
|
Bonds and other fixed Income
|
|
|
172,605
|
|
|
|
123,498
|
|
Fixed Income (time-deposit, zero coupon bonds, commercial papers)
|
|
|
20,008
|
|
|
|
-
|
|
Others
|
|
|
4,545
|
|
|
|
4,837
|
|
|
|
|
197,158
|
|
|
|
128,335
|
|
|
11
|
Derivative financial instruments
|
(all amounts in thousands of U.S. dollars)
|
|
At June 30,
|
|
At December 31,
|
|
|
2018
|
|
2017
|
Assets
|
|
(Unaudited)
|
Derivatives hedging borrowings and investments
|
|
|
862
|
|
|
|
2,036
|
|
Other Derivatives
|
|
|
1,622
|
|
|
|
6,195
|
|
|
|
|
2,484
|
|
|
|
8,231
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Derivatives hedging borrowings and investments
|
|
|
88,668
|
|
|
|
34,770
|
|
Other Derivatives
|
|
|
2,947
|
|
|
|
5,029
|
|
|
|
|
91,615
|
|
|
|
39,799
|
|
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
|
12
|
Contingencies, commitments and restrictions to the distribution of profits
|
Contingencies
Tenaris is from time to time subject to
various claims, lawsuits and other legal proceedings, including customer claims, in which third parties are seeking payment for
alleged damages, reimbursement for losses, or indemnity. 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 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.
The Company believes that the aggregate
provisions recorded for potential losses in these Consolidated Condensed Interim Financial Statements 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.
Below is a summary description of Tenaris’s
material legal proceedings which are outstanding as of the date of these Consolidated Condensed Interim Financial Statements. 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
|
In 2013, Confab Industrial S.A.
(“Confab”), a Brazilian subsidiary of the Company, was notified of a lawsuit filed in Brazil by Companhia Siderúrgica
Nacional (CSN) and various entities affiliated with CSN against Confab and the other entities that acquired a participation in
Usiminas’ control group in January 2012.
The CSN lawsuit alleges that,
under applicable Brazilian laws and rules, the acquirers were required to launch a tag-along tender offer to all non-controlling
holders of Usiminas’ ordinary shares for a price per share equal to 80% of the price per share paid in such acquisition,
or BRL28.8, and seeks an order to compel the acquirers to launch an offer at that price plus interest. If so ordered, the offer
would need to be made to 182,609,851 ordinary shares of Usiminas not belonging to Usiminas’ control group, and Confab would
have a 17.9% share in that offer.
On September 23, 2013, the first
instance court 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. If CSN’s appeal is granted, the Superior Court of Justice will also review admissibility, and,
if declared admissible, will 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.
Tenaris continues to believe
that all of CSN’s claims and allegations are groundless and without merit, as confirmed by several opinions of Brazilian
legal counsel, 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.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
|
12
|
Contingencies, commitments and restrictions to the distribution of profits (Cont.)
|
Contingencies (Cont.)
|
§
|
Veracel celulose accident litigation
|
On September 21, 2007, an accident
occurred in the premises of Veracel Celulose S.A. (“Veracel”) in connection with a rupture in one of the tanks used
in an evaporation system manufactured by Confab. The Veracel accident allegedly resulted in material damages to Veracel. Itaú
Seguros S.A. (“Itaú”), Veracel’s insurer at the time of the Veracel accident, initiated a lawsuit against
Confab seeking reimbursement of damages paid to Veracel in connection with the Veracel accident. Veracel initiated a second lawsuit
against Confab seeking reimbursement of the amount paid as insurance deductible with respect to the Veracel accident and other
amounts not covered by insurance. Itaú and Veracel claim that the Veracel accident was caused by failures and defects attributable
to the evaporation system manufactured by Confab. Confab believes that the Veracel accident was caused by the improper handling
by Veracel’s personnel of the equipment supplied by Confab in violation of Confab’s instructions. The two lawsuits
have been consolidated and are now being considered by the 6th Civil Court of São Caetano do Sul; however, each lawsuit
will be adjudicated through a separate ruling. Evidentiary stage for both proceedings has been closed but such decision has been
appealed by Confab as explained below.
On March 10, 2016, a court-appointed
expert issued its report on certain technical matters concerning the Veracel accident. Based upon a technical opinion received
from a third-party expert, in August 2016, Confab filed its objections to the expert’s report. In November 2017, the court
appointed expert filed a second report reaffirming its opinion and stating that the opinion of Confab’s appointed expert
was incorrect. In April and May 2018, the parties filed their observations and/or opinions concerning the expert’s second
report. On April 17, 2018, the court closed the evidentiary stage, a decision that was appealed by Confab on May 16, 2018. Approximately
54% of the amounts claimed by Itaú and Veracel are attributable to alleged lost profits, and the contract between Confab
and Veracel expressly provided that Confab would not be liable for damages arising from loss profits. As of June 30, 2018, the
estimated amount of Itaú’s claim was approximately BRL86.2 million (approximately $22.4 million), and the estimated
amount of Veracel’s claim is approximately BRL54.7 million (approximately $14.2 million), for an aggregate amount BRL140.9
million (approximately $36.6 million). The final result of this claim depends largely on the court’s evaluation of technical
matters arising from the expert’s opinion and the objections presented by Confab.
The Company has learned that
Italian and Swiss authorities are investigating whether certain payments were made from accounts of entities presumably associated
with affiliates of the Company to accounts controlled by an individual allegedly related with officers of Petróleo Brasileiro
S.A. and whether any such payments were intended to benefit Confab. Any such payments could violate certain applicable laws, including
the U.S. Foreign Corrupt Practices Act. The Company had previously reviewed certain of these matters in connection with an investigation
by the Brazilian authorities related to “Operation Lava Jato” and the Audit Committee of the Company’s Board
of Directors has engaged external counsel in connection with a review of the alleged payments and related matters. In addition,
the Company has voluntarily notified the U.S. Securities and Exchange Commission and the U.S. Department of Justice. The Company
intends to share the results of this review with the appropriate authorities, and to cooperate with any investigations that may
be conducted by such authorities. At this time, the Company cannot predict the outcome of these matters or estimate the range of
potential loss or extent of risk, if any, to the Company’s business that may result from resolution of these matters.
|
§
|
Petroamazonas penalties
|
On January 22, 2016, Petroamazonas
(“PAM”), an Ecuadorian state-owned oil company, imposed penalties to the Company’s Uruguayan subsidiary, Tenaris
Global Services S.A. (“TGS”), for its alleged failure to comply with delivery terms under a pipe supply agreement.
The penalties amount to approximately $22.5 million as of the date hereof. On June 27, 2018, TGS initiated arbitration proceedings
against PAM before the Quito Chamber of Commerce Arbitration Center seeking reimbursement of the penalty amounts plus interest.
Tenaris believes, based on the advice of counsel, that PAM had no legal basis to impose the penalties and that TGS has meritorious
defenses against PAM. However, in light of the prevailing political circumstances in Ecuador, the Company cannot predict the outcome
of a claim against a state-owned company and it is not possible to estimate the amount or range of loss in case of an unfavorable
outcome.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
|
12
|
Contingencies, commitments and restrictions to the distribution of profits (Cont.)
|
Contingencies (Cont.)
|
§
|
Contractor claim for additional costs
|
Tenaris Bay City Inc. (“Tenaris
Bay City”), a U.S. subsidiary of the Company, received claims from a contractor for alleged additional costs in the construction
of a project located in the Bay City area for a total amount in excess of $90 million. On June 30, 2017, the contractor filed a
demand for arbitration of these claims. An arbitral panel was selected and a scheduling order issued. The parties have already
submitted statements of claim and responses to the other party’s claim. The discovery process is currently underway. The
final trial hearing on this matter is scheduled for February 2019. 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.
|
§
|
Investigation concerning
currency exchange declarations
|
Siderca S.A.I.C, an Argentine
subsidiary of the Company (“Siderca”), and some of its current and former directors and employees, were subject to
an administrative criminal proceeding before a criminal court concerning alleged inaccurate information included in 15 currency
exchange declarations related to the trading of foreign currency between August and October 2008 in connection with exports of
goods for a total amount of $268.8 million. On July 13, 2018, the criminal court acquitted all defendants, including Siderca.
|
§
|
Claim for differences
on gas supply prices
|
On July 7, 2016, Siderca was
notified of a claim initiated by an Argentine state-owned company for an amount of $25.4 million, allegedly owed as a result of
differences in the price paid for gas supplied to Siderca during three months in 2013. Tenaris believes, based on the advice of
counsel, that it has meritorious defenses against a substantial part of this claim, although Siderca may be required to pay part
of the claimed amount.
|
§
|
Tax assessment in Mexico
|
In August 2017, Tubos de Acero
de México S.A (“Tamsa”) and Servicios Generales Tenaris Tamsa S.A (“Segeta”), two Mexican subsidiaries
of the Company, were informed that the Mexican tax authorities had determined that the tax deductions associated with certain purchases
of scrap made by the companies during 2013 failed to comply with applicable requirements and, accordingly, should be rejected.
Tamsa and Segeta filed their respective responses and complaints against the determination and provided additional information
evidencing compliance with applicable requirements for the challenged tax deductions. As of June 30, 2018, the estimated exposure
under these proceedings, including principal, interest and penalties, amounted to MXN4,117 million (approximately $207.3 million).
No final decision has yet been issued on this matter. Tenaris believes, based on the advice of counsel, that it is unlikely that
the ultimate resolution of this tax assessment will result in a material obligation.
Commitments and other purchase orders
Set forth is a description of Tenaris’s
main outstanding commitments:
|
§
|
A Tenaris company entered into a contract
with supplier Voest Alpine Grobblech Gmb pursuant to which it committed to purchase carbon steel for a total amount of approximately
$29.7 million to use for manufacturing pipes related to the Zohr gas field project.
|
|
§
|
A Tenaris company entered into a contract
with Transportadora de Gas del Norte S.A. for the service of natural gas transportation to the facilities of Siderca S.A.I.C.,
an Argentine subsidiary of Tenaris. As of June 30, 2018, the aggregate commitment to take or pay the committed volumes for a 9-year
term totalled approximately $47.4 million.
|
|
§
|
Several Tenaris companies entered into
a contract with Praxair S.A. for the service of oxygen and nitrogen supply. As of June 30, 2018, the aggregate commitment to take
or pay the committed volumes for a 14-year term totalled approximately $55.3 million.
|
|
§
|
Several Tenaris companies entered into
a contract with Graftech for the supply of graphite electrodes. As of June 30, 2018, the aggregate commitment to take or pay the
committed volumes totalled approximately $66.3 million.
|
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
|
12
|
Contingencies, commitments and restrictions to the distribution of profits (Cont.)
|
Commitments and other purchase orders
(Cont.)
|
§
|
A Tenaris 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 Tenaris company 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 Tenaris company 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 Tenaris company will benefit from the proceeds of such sale.
|
|
§
|
A Tenaris company entered into a contract
with Vale International S.A. for the supply of iron ore, for which it is committed to purchase at least 70% of its annual iron
ore needs, up to 770 thousand tons of pellets annually. The contract expires on December 31, 2020. The aggregate commitment amounts
to approximately $229 million.
|
Restrictions to the distribution
of profits and payment of dividends
As of December 31, 2017, equity as defined
under Luxembourg law and regulations consisted of:
(all amounts in thousands of U.S. dollars)
|
|
|
Share capital
|
|
|
1,180,537
|
|
Legal reserve
|
|
|
118,054
|
|
Share premium
|
|
|
609,733
|
|
Retained earnings including net income for the year ended December 31, 2017
|
|
|
16,956,761
|
|
Total equity in accordance with Luxembourg law
|
|
|
18,865,085
|
|
At least 5% of the Company’s net
income per year, as calculated in accordance with Luxembourg law and regulations, must be allocated to the creation of a legal
reserve equivalent to 10% of the Company’s share capital. As of June 30, 2018, this reserve is fully allocated and additional
allocations to the reserve are not required under Luxembourg law. Dividends may not be paid out of the legal reserve.
The Company may pay dividends to the extent,
among other conditions, that it has distributable retained earnings calculated in accordance with Luxembourg law and regulations.
At December 31, 2017, distributable amount
under Luxembourg law totals $17.6 billion, as detailed below:
(all amounts in thousands of U.S. dollars)
|
|
|
Retained earnings at December 31, 2016 under Luxembourg law
|
|
|
17,493,013
|
|
Other income and expenses for the year ended December 31, 2017
|
|
|
(52,232
|
)
|
Dividends approved
|
|
|
(484,020
|
)
|
Retained earnings at December 31, 2017 under Luxembourg law
|
|
|
16,956,761
|
|
Share premium
|
|
|
609,733
|
|
Distributable amount at December 31, 2017 under Luxembourg law
|
|
|
17,566,494
|
|
|
13
|
Investments in non-consolidated companies
|
This note supplements and should be read
in conjunction with Note 12 to the Company’s audited Consolidated Financial Statements for the year ended December 31, 2017.
Ternium
S.A. (“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 June 30, 2018, the closing price of
Ternium’s ADSs as quoted on the New York Stock Exchange was $34.82 per ADS, giving Tenaris’s ownership stake a market
value of approximately $799.9 million. At June 30, 2018, the carrying value of Tenaris’s ownership stake in Ternium, based
on Ternium’s IFRS financial statements, was approximately $592.6 million.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
|
13
|
Investments in non-consolidated companies (Cont.)
|
Usiminas is a Brazilian producer of high
quality flat steel products used in the energy, automotive and other industries and Tenaris’s principal supplier of flat
steel in Brazil for its pipes and industrial equipment businesses.
In 2014, a conflict arose between the T/T
Group (comprising Confab and Ternium’s subsidiaries Ternium Investments, Ternium Argentina and Prosid Investments) and Nippon
Steel & Sumitomo Metal Corporation (“NSSMC”) with respect to the governance of Usiminas, including with respect
to the rules applicable to the appointment of senior managers, the application of the shareholders’ agreement in matters
involving fiduciary duties, and generally with respect to Usiminas’ business strategy.
On February 8, 2018, Ternium Investments
resolved the dispute with NSSMC, and on April 10, 2018, the T/T Group entities (including Confab), the NSSMC Group and Previdência
Usiminas entered into a new shareholders’ agreement for Usiminas, amending and restating the previously existing shareholders
agreement (the “New SHA”). Usiminas’ control group now holds, in the aggregate, 483.6 million ordinary shares
bound to the New SHA, representing approximately 68.6% of Usiminas’ voting capital, with the T/T Group holding 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 NSSMC Group holding approximately 45.9% of the total shares held by the control group; and Previdência Usiminas
holding the remaining 7% of the total shares held by the control group.
The New SHA reflects the agreed-upon corporate
governance rules for Usiminas, including, among others, an alternation mechanism for the nomination of each of the chief executive
officer and the chairman of the board of directors, as well as a mechanism for the nomination of other members of Usiminas’
executive board. The New SHA also incorporates an exit mechanism consisting of a buy-and-sell procedure, exercisable at any time
during the term of the New SHA after the fourth-and-a-half-year anniversary from the May 2018 election of Usiminas’ executive
board. Such exit mechanism shall apply with respect to shares held by the NSSMC Group and the T/T Group, and would allow either
Ternium or NSSMC to purchase all or a majority of the Usiminas shares held by the other shareholder group.
In connection with the execution of the
New SHA, the Ternium entities and Confab amended and restated their separate shareholders’ agreement governing their respective
rights and obligations as members of the T/T Group to include provisions relating to the exit mechanism and generally to conform
such separate shareholders’ agreement to the other provisions of the New SHA.
As of June 30, 2018, the closing price
of the Usiminas’ ordinary and preferred shares, as quoted on the B3, was BRL11.23 ($2.91) and BRL7.32 ($1.90), respectively,
giving Tenaris’s ownership stake a market value of approximately $108.8 million. As that date, the carrying value of Tenaris’s
ownership stake in Usiminas was approximately $64.5 million.
|
c)
|
Techgen, S.A. de C.V. (“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.
The company started producing energy on December 1, 2016 and is fully operational, with a power capacity of 900 megawatts. As of
June 30, 2018, Tenaris held 22% of Techgen’s share capital, and its affiliates, Ternium and Tecpetrol International S.A.
(a wholly-owned subsidiary of San Faustin S.A., the controlling shareholder of both Tenaris and Ternium), held 48% and 30% respectively.
Techgen is a party to transportation capacity
agreements for a purchasing capacity of 150,000 MMBtu/Gas per day starting on August 1, 2016 and ending on July 31, 2036, and a
party to a contract for the purchase of power generation equipment and other services related to the equipment. As of June 30,
2018, Tenaris’s exposure under these agreements amounted to $56.6 million and $1.8 million respectively.
Tenaris
issued a corporate guarantee covering 22% of the obligations of Techgen under a syndicated loan agreement between Techgen and several
banks. The loan agreement amounted to $680 million and has been used in the construction of the facility. The main covenants under
the corporate guarantee are Tenaris’s commitment to maintain its participation in Techgen or the right to purchase at least
22% of Techgen’s firm energy, and compliance with a maximum permitted leverage ratio. As of June 30, 2018, the loan agreement
had been fully disbursed and, as a result, the amount guaranteed by Tenaris was approximately $149.6 million. During 2018 the shareholders
of Techgen made additional investments, in Techgen, in form of subordinated loans, which in case of Tenaris amounted to $3.5 million.
In the same period, there were repayments of these loans for $5.5 million. As of June 30, 2018, the aggregate outstanding principal
amount under these loans was $91.3 million.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
|
14
|
Discontinued operations
|
On December 15, 2016, Tenaris entered into
an agreement with Nucor Corporation (NC) pursuant to which it has sold to NC the steel electric conduit business in North America,
known as Republic Conduit for an amount of $328 million (net of transaction costs). The sale was completed on 19 January 2017,
with effect from 20 January 2017. The result of this transaction was an after-tax gain of $89.7 million, calculated as the net
proceeds of the sale less the book value of net assets held for sale, the corresponding tax effect and related expenses.
In addition, the financial performance
of the conduit business relative to the 19 days of January 2017 showed a gain of $1.8 million.
|
|
|
|
|
2017
|
Income from discontinued operations
|
|
|
1,848
|
|
After tax gain on the sale of Conduit
|
|
|
89,694
|
|
Net Income for discontinued operations
|
|
|
91,542
|
|
For further information regarding this
transaction please refer to Note 28 of our Consolidated Financial Statements as of 31 December 2017.
|
15
|
Related party transactions
|
As of June 30, 2018:
|
§
|
San Faustin S.A., a Luxembourg
société
anonyme
(“San Faustin”), owned 713,605,187 shares in the Company, representing 60.45% of the Company’s capital
and voting rights.
|
|
§
|
San Faustin owned all of its shares in
the Company through its wholly-owned subsidiary Techint Holdings S.à r.l., a Luxembourg
société à
responsabilité limitée
(“Techint”), who is the holder of record of the above-mentioned Tenaris shares.
|
|
§
|
Rocca & Partners Stichting Administratiekantoor
Aandelen San Faustin, a Dutch private foundation (
Stichting
) (“RP STAK”) held voting shares in San Faustin sufficient
to control San Faustin.
|
|
§
|
No person or group of persons controls
RP STAK.
|
Based on the information most recently
available to the Company, Tenaris’s directors and senior management as a group owned 0.08% of the Company’s outstanding
shares.
Transactions and balances disclosed as
with “non-consolidated parties” are those with companies over which Tenaris exerts significant influence or joint control
in accordance with IFRS, but does not have control. All other transactions and balances with related parties which are not non-consolidated
parties and which are not consolidated are disclosed as “Other”.
The following transactions were carried
out with related parties:
|
(all amounts in thousands of U.S. dollars)
|
|
Six-month period ended June 30,
|
|
|
|
2018
|
|
2017
|
(i)
|
Transactions
|
|
(Unaudited)
|
|
(a) Sales of goods and services
|
|
|
|
|
|
Sales of goods to non-consolidated parties
|
|
|
13,540
|
|
|
|
16,251
|
|
|
Sales of goods to other related parties
|
|
|
65,453
|
|
|
|
18,382
|
|
|
Sales of services to non-consolidated parties
|
|
|
3,886
|
|
|
|
5,739
|
|
|
Sales of services to other related parties
|
|
|
3,214
|
|
|
|
1,648
|
|
|
|
|
|
86,093
|
|
|
|
42,020
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Purchases of goods and services
|
|
|
|
|
|
|
|
|
|
Purchases of goods to non-consolidated parties
|
|
|
109,334
|
|
|
|
106,301
|
|
|
Purchases of goods to other related parties
|
|
|
50,859
|
|
|
|
6,801
|
|
|
Purchases of services to non-consolidated parties
|
|
|
5,039
|
|
|
|
5,653
|
|
|
Purchases of services to other related parties
|
|
|
25,020
|
|
|
|
25,024
|
|
|
|
|
|
190,252
|
|
|
|
143,779
|
|
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
|
15
|
Related party transactions (Cont.)
|
|
(all amounts in thousands of U.S. dollars)
|
|
At June 30,
|
|
At December 31,
|
|
|
|
2018
|
|
2017
|
(ii)
|
Period-end balances
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Arising from sales / purchases of goods / services / others
|
|
|
|
|
|
|
|
|
|
Receivables from non-consolidated parties
|
|
|
113,696
|
|
|
|
117,853
|
|
|
Receivables from other related parties
|
|
|
25,891
|
|
|
|
50,815
|
|
|
Payables to non-consolidated parties
|
|
|
(32,376
|
)
|
|
|
(49,354
|
)
|
|
Payables to other related parties
|
|
|
(22,552
|
)
|
|
|
(14,475
|
)
|
|
|
|
|
84,659
|
|
|
|
104,839
|
|
|
16
|
Category of financial instruments and classification within the fair value hierarchy
|
The following table illustrates the three
hierarchical levels for valuing financial instruments at fair value and those measured at amortized cost as of June 30, 2018.
|
|
|
|
Measurement Categories
|
|
At Fair Value
|
June 30, 2018
|
|
Carrying
amount
|
|
Amortized
Cost
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
427,960
|
|
|
|
211,793
|
|
|
|
216,167
|
|
|
|
216,167
|
|
|
|
-
|
|
|
|
-
|
|
Cash at banks
|
|
|
115,445
|
|
|
|
115,445
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Liquidity funds
|
|
|
216,167
|
|
|
|
-
|
|
|
|
216,167
|
|
|
|
216,167
|
|
|
|
-
|
|
|
|
-
|
|
Short – term investments
|
|
|
96,348
|
|
|
|
96,348
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other investments
|
|
|
730,240
|
|
|
|
322,245
|
|
|
|
407,995
|
|
|
|
361,873
|
|
|
|
46,122
|
|
|
|
-
|
|
Fixed income (time-deposit, zero coupon bonds, commercial papers)
|
|
|
322,245
|
|
|
|
322,245
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Certificates of deposits
|
|
|
201,589
|
|
|
|
201,589
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial papers
|
|
|
19,861
|
|
|
|
19,861
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other notes
|
|
|
100,795
|
|
|
|
100,795
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Bonds and other fixed income
|
|
|
407,995
|
|
|
|
-
|
|
|
|
407,995
|
|
|
|
361,873
|
|
|
|
46,122
|
|
|
|
-
|
|
U.S. government securities
|
|
|
23,520
|
|
|
|
-
|
|
|
|
23,520
|
|
|
|
23,520
|
|
|
|
-
|
|
|
|
-
|
|
Non - U.S. government securities
|
|
|
134,015
|
|
|
|
-
|
|
|
|
134,015
|
|
|
|
134,015
|
|
|
|
-
|
|
|
|
-
|
|
Corporates securities
|
|
|
204,338
|
|
|
|
-
|
|
|
|
204,338
|
|
|
|
204,338
|
|
|
|
-
|
|
|
|
-
|
|
Structured notes
|
|
|
46,122
|
|
|
|
-
|
|
|
|
46,122
|
|
|
|
-
|
|
|
|
46,122
|
|
|
|
-
|
|
Derivative financial instruments
|
|
|
2,484
|
|
|
|
-
|
|
|
|
2,484
|
|
|
|
-
|
|
|
|
2,484
|
|
|
|
-
|
|
Other Investments Non- current
|
|
|
197,158
|
|
|
|
20,008
|
|
|
|
177,150
|
|
|
|
172,605
|
|
|
|
-
|
|
|
|
4,545
|
|
Bonds and other fixed income
|
|
|
172,605
|
|
|
|
-
|
|
|
|
172,605
|
|
|
|
172,605
|
|
|
|
-
|
|
|
|
-
|
|
Fixed income (time-deposit, zero coupon bonds, commercial papers)
|
|
|
20,008
|
|
|
|
20,008
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other investments
|
|
|
4,545
|
|
|
|
-
|
|
|
|
4,545
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,545
|
|
Trade receivables
|
|
|
1,536,323
|
|
|
|
1,536,323
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Receivables C and NC
|
|
|
298,010
|
|
|
|
166,043
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other receivables
|
|
|
166,043
|
|
|
|
166,043
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other receivables (non-financial)
|
|
|
131,967
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Available for sale assets (*)
|
|
|
21,572
|
|
|
|
-
|
|
|
|
21,572
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,572
|
|
Total
|
|
|
|
|
|
|
2,256,412
|
|
|
|
825,368
|
|
|
|
750,645
|
|
|
|
48,606
|
|
|
|
26,117
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings C and NC
|
|
|
840,495
|
|
|
|
840,495
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Trade payables
|
|
|
812,972
|
|
|
|
812,972
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Derivative financial instruments
|
|
|
91,615
|
|
|
|
-
|
|
|
|
91,615
|
|
|
|
-
|
|
|
|
91,615
|
|
|
|
-
|
|
Total
|
|
|
|
|
|
|
1,653,467
|
|
|
|
91,615
|
|
|
|
-
|
|
|
|
91,615
|
|
|
|
-
|
|
(*) For further
detail regarding Available for sale assets, see Note 17.
There were no transfers between Levels
during the period.
The fair value of financial instruments
traded in active markets is based on quoted market prices at the reporting date. A market is regarded as active if quoted prices
are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and
those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price
used for financial assets held by Tenaris is the current bid price. These instruments are included in Level 1 and comprise primarily
corporate and sovereign debt securities.
The fair value of financial instruments
that are not traded in an active market (such as certain debt securities, certificates of deposits with original maturity of more
than three months, forward and interest rate derivative instruments) is determined by using valuation techniques which maximize
the use of observable market data when available and rely as little as possible on entity specific estimates. If all significant
inputs required to value an instrument are observable, the instrument is included in Level 2. Tenaris values its assets and liabilities
included in this level using bid prices, interest rate curves, broker quotations, current exchange rates, forward rates and implied
volatilities obtained from market contributors as of the valuation date.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2018
|
|
16
|
Category of financial instruments and classification within the fair value hierarchy
(Cont.)
|
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.
If one or more of the significant inputs
are not based on observable market data, the instruments are included in Level 3. Tenaris values its assets and liabilities in
this level using observable market inputs and management assumptions which reflect the Company’s best estimate on how market
participants would price the asset or liability at measurement date. Main balances included in this level correspond to Available
for sale assets related to Tenaris’s interest in Venezuelan companies under process of nationalization (see Note 17).
Borrowings
are comprised primarily of fixed rate debt and variable rate debt with a short term portion where interest has already been fixed.
They are classified under other financial liabilities and measured at their amortized cost. Tenaris estimates that the fair value
of its main financial liabilities is approximately 99.2% of its carrying amount including interests accrued as of June 30, 2018
as compare with 99.4% as of December 31, 2017. Fair values were calculated using standard valuation techniques for floating rate
instruments and comparable market rates for discounting flows.
|
17
|
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”). Between August 2011 and July 2012, Tenaris and its wholly-owned subsidiary Talta - Trading
e Marketing Sociedade Unipessoal Lda (“Talta”) initiated two arbitration proceedings against Venezuela before the ICSID
in Washington D.C., seeking adequate and effective compensation for the expropriation of their investments in the Venezuelan Companies.
On January 29, 2016, the tribunal in the first arbitration proceeding released its award upholding 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, which as of June 30, 2018, amounted to $41 million.
On December 12, 2016, the tribunal in the
second arbitration proceeding issued its award upholding Tenaris’s and Talta’s claim that Venezuela had expropriated
their investments in Tavsa and Comsigua in violation of the bilateral investment treaties entered into by Venezuela with the Belgium-Luxembourg
Economic Union and Portugal. The award granted compensation in the amount of $137 million and ordered Venezuela to reimburse Tenaris
and Talta $3.3 million in legal fees and ICSID administrative costs. In addition, Venezuela was ordered to pay interest from April
30, 2008 until the day of effective payment at a rate equivalent to LIBOR + 4% per annum, which as of June 30, 2018, amounted to
$94.6 million.
Venezuela submitted requests for annulment
of the awards in accordance with the ICSID Convention and Arbitration Rules. Annulment requests are pending final resolution by
the ad-hoc committees.
On June 8, 2018, Tenaris and Talta
filed two actions in federal court in the District of Columbia to recognize and enforce the awards. Tenaris and Talta are in the
process of effecting service on Venezuela in accordance with US law.
For further information on the nationalization
of the Venezuelan subsidiaries, see note 31 “Nationalization of Venezuelan Subsidiaries” to our audited consolidated
financial statements for the year ended December 31, 2017.
Edgardo Carlos
Chief Financial
Officer
20