TENARIS S.A.
ANNUAL REPORT 2021
Tenaris S.A. Annual Report 2021
2
TABLE OF CONTENTS
OMPANY PROFILE ......................................................................................................................................... 3
LETTER FROM THE CHAIRMAN ........................................................................................................................ 4
CONSOLIDATED MANAGEMENT REPORT ......................................................................................................... 6
Leading Indicators ....................................................................................................................................... 9
Information on Tenaris .............................................................................................................................. 10
Principal Risks and Uncertainties .............................................................................................................. 28
Operating and Financial Review and Prospects ......................................................................................... 42
Quantitative and Qualitative Disclosure about Market Risk...................................................................... 56
Outstanding Legal Proceedings ................................................................................................................. 62
Recent Developments ................................................................................................................................ 67
Corporate Governance Statement .............................................................................................................. 68
Related Party Transactions ........................................................................................................................ 83
Dividends .............................................................................................................................................. 86
Employees .............................................................................................................................................. 87
Diversity and Inclusion .............................................................................................................................. 88
Non-financial Information ......................................................................................................................... 89
MANAGEMENT CERTIFICATION ..................................................................................................................... 90
FINANCIAL INFORMATION ............................................................................................................................. 91
Consolidated Financial Statements ............................................................................................................ 91
Annual Accounts (Luxembourg GAAP) ................................................................................................. 163
Tenaris S.A. Annual Report 2021
3
COMPANY PROFILE
Tenaris is a leading supplier of tubes and related services for the world’s energy industry and certain other
industrial applications. Our mission is to deliver value to our customers through product development,
manufacturing excellence and supply chain management. We seek to minimize risk for our customers and help
them reduce costs, increase flexibility and improve time-to-market. Our employees around the world are
committed to continuous improvement by sharing knowledge across a single global organization.
Tenaris S.A. Annual Report 2021
4
LETTER FROM THE CHAIRMAN
As I write this letter, the world of energy and steel is going through dramatic disruption, resulting from the
geopolitical turmoil caused by the Russian invasion of Ukraine and the accompanying humanitarian crisis in
Europe. Tenaris, having concluded a successful 2021, is now confronting this new reality, adapting its supply
chain and its industrial and commercial strategy to an unprecedented level of volatility and uncertainty. At the
same time, we are making contributions to support the people displaced by the war into the countries and the
communities in which we operate.
2021 was a year of recovery from the worst effects of the pandemic in terms of activity and financial results. In
2021, production, sales and margins showed sequential improvements through the year as our markets recovered
from the pandemic-induced collapse of 2020. For the year as a whole, our sales rose 27%, while our EBITDA
more than doubled, with the margin surpassing its pre-pandemic level.
Our net income also benefited from our participations in Ternium and Usiminas, reaching 16% of our sales. As
a result of these annual results and our solid financial position, we are proposing to restore our dividend
payment for the 2021 fiscal year to its pre-pandemic level.
This achievement would not have been possible without the structural measures we took in 2020 to improve our
profitability over the longer term, as well as the strategic positioning we have built up over the past years in
North America and the rest of the world. Nor would it have been possible without the extraordinary resilience
and determination of our employees. They have borne the brunt of the impact of the pandemic in their working
environment and on their families over the last two years, while adjusting to rapid changes in industrial
production, supply chain and customer requirements. It is a tribute to their professionalism that we were able to
maintain the high standards of our safety performance over the past year, even when adding 4,000 shop-floor
employees.
The United States, and more generally North America, has been at the center of our recovery, being at the
forefront of the increase in demand for our products and services, as well as our industrial reactivation.
Production at our Bay City mill has reached full capacity and we have reopened many of the facilities we had to
close when the pandemic struck, including the recently-acquired Koppel steel shop, which is supplying steel to
our Bay City and Ambridge mills.
With the cost of steel reaching record levels during the year and distributor inventory levels declining to less
than four months of consumption, U.S. spot market OCTG prices have reached their highest level since 2008.
During this period, we have strengthened our Rig Direct® service model by introducing digital integration
services and reducing working capital requirements. Today, 80% of items ordered by our U.S. Rig Direct®
customers are made using our Rig Direct® portal to integrate order management processes, and our
PipeTracer® application is being used to make digital tallies.
In Canada, we are making a major investment to integrate our seamless and welded pipe production in Sault Ste.
Marie. With this investment, we will expand the range of products we can produce domestically and improve
the sustainability of our operations in the country. The offshore market is also recovering, though at a different
pace, and that recovery is mainly taking place in Latin America: Brazil, Guyana and Mexico. In Brazil, we are
complementing our traditional supply of large-diameter welded casing to Petrobras with seamless medium-
diameter casing and seamless risers. In Guyana, we were recently awarded a 10-year contract to supply the
casing requirements, including large-diameter connectors, Dopeless® connections and pipe management
services, for the largest development in the region.
Onshore markets in Argentina and Colombia have also recovered from their pandemic lows. Recently, in
Argentina, the government issued a decree authorizing a project to build a major new gas pipeline from
Neuquen to Buenos Aires. This should enable a further expansion of gas production in the Vaca Muerta shale
formation and reduce the need for future LNG imports.
In the Middle East, the recovery is in an earlier phase, and demand for our products was affected by destocking
of excess inventories. We have won important long-term tenders for supply to major consumers in the UAE,
where we are introducing our Rig Direct® service and increasing local content. Also in Qatar, where we are
providing a full range of OCTG and line pipe, and in Kuwait. We expect our sales to this region to recover
during 2022.
Tenaris S.A. Annual Report 2021
5
Our sales of mechanical pipe also recovered during the year. Of particular note is the expansion of our sales of
tubular components for airbags, where we are currently completing the expansion of a component facility in
China. Autoliv, our main customer in this segment, recently granted us their 2021 best supplier award. We are
progressing on the road map we set out to reduce the carbon emissions intensity of our operations in line with
our 2030 target. In February, our Board approved a USD190 million investment project to build a wind farm in
Argentina, which will supply close to 50% of the electric energy requirements of our Siderca integrated
seamless pipe facilities. This is an important initiative to enhance the sustainability of our operations and secure
a source of energy supply in the country.
We are also preparing for the energy transition through developing materials and products for low-carbon
energy applications. For hydrogen applications, we are actively participating in joint industry working groups to
define standards for line pipe, and have developed and tested material chemistries that resist steel embrittlement
in high pressure applications.
Over the past year, Tenaris has recovered strongly from the impact of the pandemic on energy markets, while
strengthening its global leadership and supporting its customers in a fast-moving environment.
As we shift from one global crisis to another, I would like to thank our employees for their contributions and
commitment over the past year, as well as our customers, suppliers and shareholders for their continued support.
March 30, 2022
Paolo Rocca
Tenaris S.A. Annual Report 2021
6
CONSOLIDATED MANAGEMENT REPORT
CERTAIN DEFINED TERMS
Unless otherwise specified or if the context so requires:
x References in this annual report to “the Company” are exclusively to Tenaris S.A., a Luxembourg
société anonyme
.
x References in this annual report to “Tenaris”, “we”, “us” or “our” are to Tenaris S.A. and its
consolidated subsidiaries. See “II. Accounting Policies A. Basis of presentation” and “II. Accounting
Policies B. Group accounting” to our audited consolidated financial statements included in this annual
report.
x References in this annual report to “San Faustin” are to San Faustin S.A., a Luxembourg société
anonyme
and the Company’s controlling shareholder.
x “shares” refers to ordinary shares, par value $1.00, of the Company.
x “ADSs” refers to the American Depositary Shares, which are evidenced by American Depositary
Receipts, and represent two shares each.
x “OCTG” refers to oil country tubular goods. See “Information on
Tenaris
–
Business Overview
–
Our
Products”.
x “tons” refers to metric tons; one metric ton is equal to 1,000 kilograms, 2,204.62 pounds, or 1.102 U.S.
(short) tons.
x “billion” refers to one thousand million, or 1,000,000,000.
x “U.S. dollars”, “US$”, “USD” or “$” each refers to the United States dollar.
x “EUR” refers to the Euro.
x “ARS” refers to the Argentine peso.
x “BRL” refers to Brazilian real.
PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION
Accounting Principles
We prepare our consolidated financial statements 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. Additionally, this annual report includes certain non-IFRS
alternative performance measures such as EBITDA, Net cash/debt position and Free Cash Flow. See Exhibit I
for more details on these alternative performance measures.
We publish consolidated financial statements presented in increments of a thousand U.S. dollars. This annual
report includes our audited consolidated financial statements for the years ended December 31, 2021, 2020 and
2019.
Rounding
Certain monetary amounts, percentages and other figures included in this annual report have been subject to
rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic
aggregation of the figures that precede them, and figures expressed as percentages in the text may not total
Tenaris S.A. Annual Report 2021
7
100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede
them.
Our Internet Website is Not Part of this Annual Report
We maintain an Internet website at www.tenaris.com. Information 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 Internet site are
inactive textual references to these URLs, or “uniform resource locators” and are for informational reference
only. We assume no responsibility for the information contained on our Internet website.
This annual report has been prepared in accordance with the European Single Electronic Format (“ESEF”). This
version of the annual report is the only authoritative version, and is available on the Luxembourg Stock
Exchange website: https://www.bourse.lu/first.
Industry Data
Unless otherwise indicated, industry data and statistics (including historical information, estimates or forecasts)
in this annual report are contained in or derived from internal or industry sources believed by Tenaris to be
reliable. Industry data and statistics are inherently 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.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This annual report and any other oral or written statements made by us to the public may contain “forward-
looking statements” under applicable securities laws. Forward-looking statements are based on management’s
current views and assumptions and are provided to allow potential investors the opportunity to understand
management’s beliefs and opinions in respect of the future so that they may use such beliefs and opinions as one
factor in evaluating an investment. Forward-looking statements involve known and unknown risks that could
cause actual results, performance or events to differ materially from those expressed or implied by those
statements.
We use words and terms such as “aim”, “will likely result”, “will continue”, “contemplate”, “seek to”, “future”,
“objective”, “goal”, “should”, “will pursue”, “anticipate”, “estimate”, “expect”, “project”, “intend”, “plan”,
“believe” and words and terms of similar substance to identify forward-looking statements, but they are not the
only way we identify such statements. This annual report contains forward-looking statements, including with
respect to certain of our plans and current goals and expectations relating to Tenaris’s future financial condition
and performance. Sections of this annual report that by their nature contain forward-looking statements include,
but are not limited to, “Business Overview”, “Principal Risks and Uncertainties”, and “Operating and Financial
Review and Prospects”. In addition to the risks related to our business discussed under “Principal Risks and
Uncertainties”, other factors could cause actual results to differ materially from those described in the forward-
looking statements. These factors include, but are not limited to:
x our ability to implement our business strategy and to adapt it adequately to the energy transition or to grow
through acquisitions, joint ventures and other investments;
x our ability to price our products and services in accordance with our strategy;
x trends in the levels of investment in oil and gas exploration and drilling worldwide;
x the competitive environment in our business and our industry;
x the impact of climate change legislations, increasing regulatory requirements and extensive technology
and market changes aimed at transitioning to a lower-carbon economy and reducing greenhouse gas
(“GHG”) emissions;
Tenaris S.A. Annual Report 2021
8
x the physical risks resulting from climate change, including increased severity of extreme weather events
and long-term shifts in weather patterns;
x our ability to absorb cost increases and to secure supplies of essential raw materials and energy;
x our ability to adjust fixed and semi-fixed costs to fluctuations in product demand;
x the impact of the COVID-19 pandemic and other crises
on the world’s economy, the energy sector in
general, or our business and operations;
x general macroeconomic changes as well as, political, social, public health and other conditions and
developments in the countries in which we operate or distribute pipes including developments in
connection with the Russia-Ukraine armed conflict;
and
x changes to applicable laws and regulations, including the imposition of tariffs or quotas or other trade
barriers.
By their nature, certain disclosures relating to these and other risks are only estimates and could be materially
different from what actually occurs in the future. As a result, actual future gains or losses or other occurrences or
developments that may affect our financial condition and results of operations could differ materially from those
that have been estimated. You should not place undue reliance on forward-looking statements, which speak only
as of the date of this annual report. Except as required by law, we are not under any obligation, and expressly
disclaim any obligation to, update or alter any forward-looking statements, whether as a result of new
information, future events or otherwise.
Tenaris S.A. Annual Report 2021
9
Leading Indicators
2021
2020
2019
TUBES SALES VOLUMES (thousands of tons)
Seamless
2,514
1,918
2,600
Welded
289
480
671
Total
2,803
2,398
3,271
TUBES PRODUCTION VOLUMES (thousands of tons)
Seamless
2,736
1,914
2,629
Welded
237
268
671
Total
2,974
2,182
3,300
FINANCIAL INDICATORS (millions of $)
Net sales
6,521
5,147
7,294
Operating income (loss)
708
(663)
832
EBITDA
(1)
1,359
638
1,372
Net income (loss)
1,053
(642)
731
Cash flow from operations
119
1,520
1,528
Capital expenditures
240
193
350
BALANCE SHEET (millions of $)
Total assets
14,449
13,716
14,843
Total borrowings
331
619
822
Net cash position
(2)
700
1,085
980
Total liabilities
2,344
2,270
2,657
Shareholders’ equity including non-controlling interests
12,106
11,446
12,186
PER SHARE / ADS DATA ($ PER SHARE / PER ADS)
(3)
Number of shares outstanding
(4)
(thousands of shares)
1,180,537
1,180,537
1,180,537
Earnings (losses) per share
0.93
(0.54)
0.63
Earnings (losses) per ADS
1.86
(1.08)
1.26
Dividends per share
(5)
0.27
0.07
0.41
Dividends per ADS
(5)
0.54
0.14
0.82
ADS Stock price at year-end
20.86
15.95
22.62
Number of employees
(4)
22,776
19,028
23,200
(1)
Defined as operating income plus depreciation, amortization and impairment charges/(reversals).
Impairment charge in 2021 represents a charge of $57 million to the carrying amount of fixed assets of the CGU NKK and 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. 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 I.
(3)
Each ADS represents two shares.
(4)
As of December 31.
(5)
Paid in respect of the year.
Tenaris S.A. Annual Report 2021
10
Information on Tenaris
The Company
The Company is a
société anonyme
organized under the laws of the Grand Duchy of Luxembourg. It was
established on December
17, 2001. The Company’s registered office is located at 2
6 Boulevard Royal, 4
th
Floor,
L-2449, Luxembourg .
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 32
“Principal subsidiaries” to our audited consolidated financial state
ments 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 a 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.
In addition, we supply pipes and tubular components for non-energy applications and are focused on developing
and supplying products and services for low-carbon energy applications such as geothermal wells, waste-to-
energy (bio-energy) power plants, hydrogen storage and refueling stations, and carbon capture and
sequestration. Through our integrated, worldwide network of seamless and welded manufacturing facilities,
service centers and R&D centers, and a team of around 23,000 employees worldwide, we work with customers
to meet their needs, upholding the highest standards of safety, quality, performance and reliability.
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 environmental footprint, providing opportunities for our people, and contributing to the
sustainable development of our communities.
A. 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:
x Tubos de Acero de México S.A. (“Tamsa”), the sole Mexican producer of seamless steel pipe products;
x Dalmine S.p.A. (“Dalmine”), a leading Italian producer of seamless steel pipe products;
x Confab Industrial S.A. (“Confab”), the leading Brazilian producer of welded steel pipe products;
x NKKTubes K.K. (“NKKTubes”), a leading Japanese producer of seamless steel pipe products;
x Algoma Tubes Inc. (“AlgomaTubes”), the sole Canadian producer of seamless steel pipe products;
x S.C. Silcotub S.A. (“Silcotub”), a leading Romanian producer of seamless steel pipe products;
x Maverick Tube Corporation (“Maverick”), a U.S. producer of welded steel pipe products;
Tenaris S.A. Annual Report 2021
11
x Tenaris Tubocaribe Ltda. (“Tubocaribe”), a welded mill
producing OCTG products including finishing
of welded and seamless pipes, line pipe products and couplings in Colombia;
x Hydril Company (“Hydril”)
, a North American manufacturer of premium connection products for oil and
gas drilling production;
x PT Seamless Pipe Indonesia Jaya (“SPIJ”), an Indonesian OCTG processing business with heat treatment
and premium connection threading facilities;
x Tenaris Qingdao Steel Pipes Ltd. (“Tenaris
Qingdao”), a Chinese producer of premium joints and
couplings;
x Pipe Coaters Nigeria Ltd. (“Pipe Coaters”)
, the leading company in the Nigerian coating industry;
x Tenaris Bay City Inc. (“Tenaris Bay City”), a state
-of-the-art seamless pipe mill in Bay City, Texas;
x Saudi Steel Pipe Company (“
SSPC
”)
, a Saudi producer of welded steel pipe products;
x IPSCO Tubulars Inc. (“IPSCO”), a North American manufacturer of
seamless and welded steel pipes;
x Tenaris Baogang Bautou Steel Pipes, Ltd.
(“TBSP”), a Chinese company that owns a premium
connection threading facility in Baotou, China, in which we have a 60% interest and Inner Mongolia
Baotou Steel Union Co., Ltd. (“Baotou Steel”) has the remaining 40%;
and
x sucker rod businesses, in various countries.
We also own strategic interest in:
x 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;
x 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
x Techgen S.A. de C.V. (“Techgen”), an electric power plant in Mexico.
In 2019, we entered into a joint venture with Severstal to build and operate a welded pipe mill to manufacture
OCTG products in Surgut, Western Siberia. Our share in the joint venture is 49%. In 2020, the parties placed the
construction on-hold due to market conditions and the pandemic. The initiative may be further affected or
cancelled as a result of the recent armed conflict involving Russia and Ukraine and the designation of
Severstal’s controlling shareholder as a person subject to EU and UK sanctions. As of December 31, 2021, our
investment in the joint venture amounted to $16.8 million. We are currently assessing the amount to be written
off from this investment. For more information see “Principal Risks and Uncertainties – Risks Relating to Our
Business and Industry – The Russia-Ukraine recent armed conflict may adversely affect our operations”; and
“Recent developments – The Russia-Ukraine armed conflict and its impact on Tenaris’s operations and financial
condition”.
Tenaris’s welded Canadian facility, Prudential Steel Ltd. (“Prudential”), located in Calgary, Alberta, was closed
down in 2020, and the pipe manufacturing operations of seamless, welded and premium products in Canada is
being consolidated at our AlgomaTubes facility located in Sault Ste. Marie, Ontario with an additional
investment of $72 million. This repositioning of the industrial activities, which is estimated to be completed by
June of 2022, is expected to strengthen the competitiveness and increase the domestic production capabilities for
the Canadian market.
Tenaris’s seamless pipe manufacturing facility in Japan, located in the Keihin steel complex owned by JFE
Holdings Inc. (“JFE”), is operated by NKKTubes, a company owned 51% by Tenaris and 49% by JFE.
Following JFE’s decision to permanently cease some of its operations in the Kehin complex, where NKKTubes
is located, Tenaris and JFE engaged in discussions and ultimately determined that the project was no longer
economically sustainable. Accordingly, the parties agreed to terminate amicably their joint venture and liquidate
NKKTubes.
Tenaris S.A. Annual Report 2021
12
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 R&D centers.
Fo
r information on Tenaris’s principal capital expenditures and divestitures, see “Information on
Tenaris
–
Business Overview
–
Capital Expenditure Program”.
B. 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 and to adapt to the energy transition through reducing the carbon
emissions in our operations and on developing and supplying products and services for low-carbon energy
applications by:
x pursuing strategic investment opportunities in order to further strengthen our presence in local and global
markets;
x 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;
x 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
x securing an adequate supply of production inputs and reducing the manufacturing costs and carbon
intensity 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:
x In January 2019, we acquired a 47.79% interest in SSPC, a welded steel pipes producer located in Saudi
Arabia.
x In February 2019, we entered into a joint venture with Severstal to build and operate a welded pipe plant
in West Siberia, Russian Federation. As indicated above, the initiative was put on hold and may be
further affected or cancelled as a result of the recent armed conflict involving Russia and Ukraine and the
designation of Severstal’s controlling shareholder as a person subject to EU and UK sanctions. As of
December 31, 2021, our investment in the joint venture amounted to $16.8 million. We are currently
assessing the amount to be written off from this investment.
x 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’s
acquisition see note 33 “Business combinations – Acquisition of IPSCO Tubulars, Inc.” to our audited
consolidated financial statements included in this annual report.
x 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. The plant started operations in the first quarter of 2022.
x In February 2022, we announced an investment plan to build a wind farm in Argentina at a cost of
approximately $190 million, which would reduce Tenaris’s CO
2
emissions in that country by around
150,000 tons per year, and supply close to 50% of the energy requirements at the integrated seamless
pipe mill in Campana, Argentina. This investment is expected to be completed during 2023.
Our track record on the acquisition of companies is described above (see “History and Development of
Tenaris”).
Tenaris S.A. Annual Report 2021
13
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 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 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.
Energy transition opportunities
As suppliers of tubular products and services to the energy industry, the energy transition currently underway
provides an important opportunity to develop new products and services for potentially fast-growing segments
like hydrogen transportation and storage, carbon capture and sequestration (“CCS”) and geothermal
installations. We have developed a range of technologies that are particularly suited for use in hydrogen storage
and transportation, where we are seeing fast growth in demand for large, high-pressure vessels used in the build
out of hydrogen refueling stations for heavy-duty vehicles and buses in Europe and California. We are also
seeing increasing interest from customers for developing CCS projects.
Our Competitive Strengths
We believe our main competitive strengths include:
x 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;
x our ability to develop, design and manufacture technologically advanced products;
Tenaris S.A. Annual Report 2021
14
x
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;
x
our proximity to our customers;
x
our human resources around the world with their diverse knowledge and skills;
x
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
x
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 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.
The Tubes segment includes the production and sale of both seamless and welded steel tubular products and
related services mainly for the energy industry, particularly casing and tubing used in oil and gas drilling
operations, and line pipe used in the transportation and processing of oil and gas, but also other industrial
applications. Our production processes include the production of steel and its transformation 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. 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. Major oil and
gas companies are beginning to adapt their strategies and increase their investments in renewable energies to
address the energy transition while maintaining their capability to meet market demand for oil and gas, and
reducing the emissions from their operations. As the energy transition advances, demand for our products and
services from low-carbon energy applications, such as geothermal, hydrogen and carbon capture and storage, is
expected to increase while demand for oil and gas applications may decrease.
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.
The “Others” segment includes all other business activities and operating segments that are not required to be
separately reported, including the production and sale of sucker rods, utility conduits for buildings, coiled tubing
used in oil and gas extraction activities, oil and gas services including fracking and coiled tubing services in
Argentina, industrial equipment of various specifications and for diverse applications, heat exchangers, 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
Tenaris S.A. Annual Report 2021
15
goods (“OCTG”). We manuf
acture 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.
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 own the “Ultra” and “TORQ” ranges of
premium connections.
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, utility conduit pipes used in
buildings and construction 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:
x state-of-the-art, strategically located plants;
x favorable access to high quality raw materials, energy and labor at competitive costs;
x operating history of more than 60 years, which translates into solid industrial know-how;
x constant benchmarking and best-practices sharing among the different facilities;
x increasing specialization of each of our facilities in specific product ranges; and
x 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. We also
produce steel bars in United States, Mexico, Argentina, Italy and Romania using the scrap-based electric arc
furnace process that results in relatively low carbon emissions compared to primary steelmaking processes. In
addition, we have tubular accessories facilities, such as sucker rods, in Argentina, Brazil, Mexico, Romania, and
Tenaris S.A. Annual Report 2021
16
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 Canada, China, Ecuador,
Indonesia, Kazakhstan, Nigeria, Saudi Arabia, the United Kingdom and the United States, and we are currently
building a new premium OCTG threading facility in Abu Dhabi, U.A.E.
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 2021, our production capacity for welded pipes decreased as a result of the dismantling of our Canadian
facility and one of our U.S. facilities. Part of the equipment dismantled at our Calgary facility in Alberta is being
modernized and relocated along with new equipment to our Sault Ste. Marie facility in Ontario, as part of an
investment in a repositioning plan for our industrial activities, which is estimated to be completed in June 2022.
In 2020, our production capacity for steel bars, seamless and welded pipes increased mainly as a result of
IPSCO’s acquisition.
In 2019, our production capacity for welded tubes increased due to the acquisition of a controlling interest in
SSPC.
At or for the year ended December 31,
2021
2020
2019
Thousands of tons
Steel Bars
Effective Capacity (annual)
(1)
4,485
4,485
3,985
Actual Production
3,141
1,749
2,835
Tubes – Seamless
Effective Capacity (annual)
(1)
4,680
4,680
4,300
Actual Production
2,736
1,914
2,629
Tubes – Welded
Effective Capacity (annual)
(1)
3,155
3,780
2,980
Actual Production
237
268
671
________________________________________________________________________________
(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 an accelerated energy transition. The
competitive environment is, as a result, intense, and we expect that this can only continue without substantial
Tenaris S.A. Annual Report 2021
17
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.
x 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 Corporation (“NSC”).
Prior to the collapse in oil prices in 2014 to 2016, Vallourec increased its production capacity by
building mills in Brazil (jointly with NSC) and Youngstown, Ohio, acquiring three tubular businesses
in the United States and Saudi Arabia, and concluding an agreement with a Chinese seamless steel
producer, Tian
da 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 NSC, 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 NSC, acquired a majority
position in Tianda and bought out the remaining minority interest, and strengthened its cooperation
with NSC for the development and testing of premium connection products and technology. Despite
this restructuring program, Vallourec’s losses continued and its equity position turned negative. In June
2021, Vallourec completed a further financial restructuring, in which its former shareholders, including
NSC and Bpifrance (“BPI”), a French
state-owned investment company, were severely diluted and its
creditors, including private equity investors, assumed effective control. Under this restructuring, NSC
exited its investment in the Brazilian mill and had its position in Vallourec diluted to around 3%.
Subsequently, NSC also sold its equity interests in Vallourec’s US operations. In November 2021,
Vallourec announced that it intended to sell or close its German operations during 2022 and announced
an investment of EUR100 million in its Brazilian mills to enable the transfer of its specialized products
for oil and gas customers from Germany to Brazil.
x Japanese players NSC and, to a lesser extent, 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, NSC
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, NSC relinquished its participation in the Brazilian operation
and ceded its reference shareholder position in Vallourec.
x In recent years, TMK, a Russian company, 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
strategy of monetizing its international assets by reducing its participation in Gulf International Pipe
and selling IPSCO to Tenaris, as well as strengthening its position in its domestic market by acquiring
Chelpipe, the second Russian producer of seamless pipes in 2021.
x 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 and has now been sold on to Citic Group Corporation Ltd. (“Citic”), a state-
Tenaris S.A. Annual Report 2021
18
owned con
glomerate. 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.
x 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 United States, while U.S. Steel integrated its
seamless pipe business by building an 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.
x 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 United States.
x Tubos Reunidos S.A. (“Tubos Reunidos”) of Spain, Benteler International A.G. of Germany and Voest
Alpine A.G. (“Voest Alpine”) of Austria each have a significant presence in the European market for
seamless steel pipes for industrial applications, Voest Alpine also has a relevant presence in the U.S.
and international OCTG markets, and in 2016, Tubos Reunidos opened an OCTG threading 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.
x 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 were 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
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
early 2021, JESCO and AMTJ, who were both operating with losses, agreed to merge their operations
at the behest of the Saudi Public Investment Fund.
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.
Tenaris S.A. Annual Report 2021
19
Capital Expenditure Program
During 2021, our capital expenditures, including investments at our plants and information systems (“IT”),
amounted to $240 million, compared to $193 million in 2020 and $350 million in 2019. Of all capital
expenditures made during 2021, $214 million were invested in tangible assets, compared to $168 million in
2020 and $314 million in 2019.
In 2021, we focused on consolidating our production capabilities in North America, enhancing production
efficiency to achieve full capacity in all our industrial plants, increasing energy efficiency and increasing
product differentiation.
The major highlights of our capital spending program during 2021 included:
x efficiency improvements and industrial integrations in our plants in North America consolidating
Tenaris’s position in this area, including the industrial transformation of AlgomaTubes in Canada (new
ERW forming and premium threading lines) and the continuous casting revamping at the steel shop at
our Koppel facility in the United States;
x the construction of new plants and yards to consolidate our presence in local markets, including a new
premium threading plant in China, as part of a joint venture with Baotou Steel, and a new service
center in Abu Dhabi;
x following the differentiation strategy, new product lines for our Dopeless® 3.0 products, the increase
of coating and finishing capacity on special steels pipes and on cold drawn process at our Zalau facility
in Romania and at our Tamsa facility in Mexico;
x the revamping and upgrade of our existing lines to improve the standards of industrial efficiency and
safety, including the range extension in our Dalmine facility in Italy and our HSE continuous
improvement program (including the ongoing overhead cranes replacement);
x energy efficiency and CO
2
reduction projects to achieve the target of reducing carbon emissions
intensity, and
x offices redesign project aligning our workspace to the new way of working.
In addition to capital expenditures at our plants, we have invested in digital information systems. During 2021
our focus was on deepening the digital transformation strategy for Tenaris in the industrial, commercial and
supply chain areas, including internal process improvement; supporting the increasing demand and the
expansion in some regions as the United States and Canada, while helping the organization adapt to the new
way of working. Our industrial system is being transformed by an integrated scheduling system project and
strengthened by the cybersecurity and infrastructure program, which are being expanded to different regions.
We have also continued working on digital integration with our customers and vendors to strengthen our
relationships and improve efficiency. Furthermore, we continued with the integration of the former IPSCO
operations with our systems.
Investments in information systems and other intangible assets totaled $26 million in 2021, compared to $26
million in 2020 and $36 million in 2019.
Capital expenditures in 2022 are expected to increase significantly in respect to 2021, including new
investments and the completion of certain main projects which have already started. The investments program
includes:
x several energy saving projects and the construction of a wind farm in Argentina, in which the company
expects to invest approximately $130 million in 2022 includes with 24 turbines (with a capacity of 4.2
megawatts each) and 130 meters high metallic towers to produce 509 gigawatt hours of energy per
year. The project, with a start-up targeted for August 2023, has an expected useful life of 20 years and
involves an expected investment of $190 million;
Tenaris S.A. Annual Report 2021
20
x the consolidation of the U.S. industrial system, including the start-up of several IPSCO facilities
acquired in 2020 and the ramp up of the already existing facilities;
x the completion of the industrial integration in AlgomaTubes in Canada;
x the increase of capacity in special steel pipes in the Steel Shop in Dalmine in Italy and the necessary
upgrades on finishing areas across the Tenaris industrial system;
x the construction of new threading facilities, including a swaging line and offices in Baotou in China
and Abu Dhabi;
and
x the offices redesign project aligning our workspace to the new way of working (having completed the
first two pilots).
Product Quality Standards
Our steel products (tubular products, accessories and sucker rods) are manufactured in accordance with the
applicable specifications of the American Petroleum Instit
ute (“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 p
roprietary
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 industry standards and are
competitive from a quality standpoint in comparison with those 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 (except for the former IPSCO facilities in the
United States, that are in the process of changing the certification company to LRQA) 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 have certified the QMS
to API Q2 at some locations, a certification specifically developed for companies which offer services in the oil
and gas industry.
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.
Research and Development
R&D, of new products and processes to meet the increasingly stringent requirements of our customers is an
important aspect of our business.
R&D activities are carried out primarily at our 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
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 is focused on the growingly challenging energy markets, which are
lately characterized by increasingly efficient oil and gas activities together with growing energy transition
related initiatives. Product R&D includes:
x proprietary premium joint products (OCTG) including Dopeless® technology;
x proprietary steels for various applications (oil and gas drilling and transportation, hydrogen transportation
and storage, carbon dioxide transportation and injection, automotive, etc.);
Tenaris S.A. Annual Report 2021
21
x heavy-wall deepwater line pipe, risers and welding technology;
x tubes and components for the automotive industry and other mechanical applications;
x large vessels for hydrogen storage and refueling stations;
x tubes for boilers;
x welded pipes for oil and gas and other applications;
x sucker rods;
x coiled tubing;
x coatings;
and
x new low-carbon products and services for potentially fast-growing segments like hydrogen transportation
and storage, carbon capture, use and storage (“CCUS”) and geothermal energy.
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 hardware, algorithms and numerical modeling
applied to 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 patents, trade secrets, trademarks and other intellectual property
tools that allow us to differentiate ourselves from our competitors.
We spent $45.3 million in R&D in 2021, compared to $41.8 million in 2020 and $61.1 million in 2019.
Capitalized costs were not material for the years 2021, 2020 and 2019.
Environmental, Social and Governance (“ESG”) Regulation
We are subject to a wide range of local, provincial and national laws, regulations, permit requirements and
decrees relating to environmental, social and governance matters, including laws and regulations relating to
climate-change mitigation, use of resources, hazardous materials and radioactive materials, and air emissions,
water discharges and waste management; legislation on human rights and modern slavery; human capital,
including equal opportunity, gender and disabilities equality, working conditions, work-life balance, and labor
market access; and applicable rules on internal control and risk management, anti-corruption, business partner
relationship management and other governance issues. For more information on the Company’s governance
practices and applicable regulation, see “Corporate Governance Statement”.
ESG regulation has been evolving over the past years and is expected to continue to evolve in the future,
particularly with respect to environmental matters. 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 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. In order to achieve climate neutrality by the year 2050, the European Commission has laid out
several action plans, such as the EU climate adaptation strategy, sustainable finance policies and the raw
materials alliance. In addition, the EU Non-Financial Reporting Directive provides the legal framework for
annual disclosure of non-financial information and, more recently, the EU Taxonomy Regulation establishes a
classification system for environmentally sustainable economic activities, laying out definitions to businesses,
stakeholders and policymakers on which economic undertakings can be considered environmentally sustainable
Tenaris S.A. Annual Report 2021
22
and requiring companies to disclose, in the annual reports, how environmentally sustainable their economic
activities are.
Similarly, in response to an increasing investor focus and reliance on climate and ESG-related disclosure and
investment, the U.S. Securities and Exchange Commission (“SEC”) announced in March 2021 the creation of a
Climate and ESG Task Force to identify ESG-related misconduct and potential violations. In addition, the SEC
included, as one of its 2021 examination priorities, a greater focus on climate and ESG-related risks. In March
2022, the SEC proposed rule changes that would require registrants to include certain climate-related disclosures
in their periodic reports, including information about climate-related risks that are reasonably likely to have a
material impact on their business, results of operations, or financial condition, and certain climate-related
financial statement metrics in a note to their audited financial statements.
For more information on the impact of climate change legislations, increasing regulatory requirements and
extensive technology and market changes, see “
Principal Risks and Uncertainties
–
Risk Factors - Risks
Relating to Our Business and Industry
–
Climate change legislation and increasing regulatory requirements
aimed at transitioning to a lower-carbon economy could reduce demand for our products and services and result
in unexpected capital expenditures and c
osts, and negatively affect our reputation.”
For more information on the
steps taken by Tenaris to address climate change challenges, see “Operating and Financial Review and
Prospects
–
Overview
–
Climate Change”.
The ultimate impact of complying with ESG regulations, in particular 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 and Industry – 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 ESG regulation 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 violation of
applicable ESG regulations, including for any material violation of environmental laws and regulations in 2021,
and we are not aware of any current material legal or administrative proceedings pending against us with respect
to ESG 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.
C. 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, 2021, 2020 and 2019.
Tenaris S.A. Annual Report 2021
23
Company
Country of
Incorporation
Main activity
Percentage of ownership
at December 31, (*)
2021
2020
2019
ALGOMA TUBES INC.
Canada
Manufacturing of seamless steel pipes
100%
100%
100%
CONFAB INDUSTRIAL S.A. and
subsidiaries
Brazil
Manufacturing of welded steel pipes and capital
goods
100%
100%
100%
DALMINE S.p.A.
Italy
Manufacturing of seamless steel pipes
100%
100%
100%
HYDRIL COMPANY and subsidiaries
(except detailed) (a)
USA
Manufacture and marketing of premium
connections
100%
100%
100%
IPSCO TUBULARS INC. and subsidiaries
USA
Manufacturing of welded and seamless steel
pipes
100%
100%
NA
MAVERICK TUBE CORPORATION and
subsidiaries
USA
Manufacturing of welded steel pipes
100%
100%
100%
NKKTUBES (b)
Japan
Manufacturing of seamless steel pipes
51%
51%
51%
P.T. SEAMLESS PIPE INDONESIA JAYA
Indonesia
Manufacturing of seamless steel products
89%
89%
89%
S.C. SILCOTUB S.A.
Romania
Manufacturing of seamless steel pipes
100%
100%
100%
SAUDI STEEL PIPE CO.
Saudi Arabia
Manufacturing of welded steel pipes
48%
48%
48%
SIAT
SOCIEDAD ANONIMA
Argentina
Manufacturing of welded and seamless steel
pipes
100%
100%
100%
SIDERCA SOCIEDAD ANONIMA
INDUSTRIAL Y COMERCIAL and
subsidiaries
Argentina
Manufacturing of seamless steel pipes
100%
100%
100%
TALTA - TRADING E MARKETING
SOCIEDADE UNIPESSOAL LDA.
Portugal
Holding Company
100%
100%
100%
TENARIS BAY CITY, INC.
USA
Manufacturing of seamless steel pipes
100%
100%
100%
TENARIS CONNECTIONS BV
Netherlands
Development, management and licensing of
intellectual property
100%
100%
100%
TENARIS FINANCIAL SERVICES S.A.
Uruguay
Financial company
100%
100%
100%
TENARIS GLOBAL SERVICES
(CANADA) INC.
Canada
Marketing of steel products
100%
100%
100%
TENARIS GLOBAL SERVICES (U.S.A.)
CORPORATION
USA
Marketing of steel products
100%
100%
100%
TENARIS GLOBAL SERVICES (UK) LTD
United Kingdom
Holding company and marketing of steel
products
100%
100%
100%
TENARIS GLOBAL SERVICES S.A. and
subsidiaries (except detailed) (c)
Uruguay
Holding company and marketing of steel
products
100%
100%
100%
TENARIS INVESTMENTS (NL) B.V. and
subsidiaries
Netherlands
Holding company
100%
100%
100%
TENARIS INVESTMENTS S.àr.l.
Luxembourg
Holding company
100%
100%
100%
TENARIS TUBOCARIBE LTDA.
Colombia
Manufacturing of welded and seamless steel
pipes
100%
100%
100%
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.
(b) Tenaris and JFE agreed to terminate NKKTubes's manufacturing operations by the end of June 2022.
(c) Tenaris holds 98.4% 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.
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, 2021, 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.àr.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.
Tenaris S.A. Annual Report 2021
24
Usiminas
At December 31, 2021, 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 Usi
minas 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, 2021, 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 NSC, Metal One Corporation and
Mitsubishi Corporation; and Usiminas’ pension fund Previdênc
ia 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 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 September 2021, the Mexican president submitted to the Mexican Congress a constitutional reform proposal
of the electricity sector, which seeks to reverse the legal framework derived from the 2013 constitutional energy
reform that opened the sector to private investment. For more information on the risks associated with the
energy reform in Mexico, see “Principal Risks and Uncertainities – Risks Relating to Our Business and Industry
– 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”)
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 appointed GPC’s general manager and has the ability to block any shareholder
resolution.
Tenaris S.A. Annual Report 2021
25
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.
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 were delayed due to the COVID-19 pandemic. Therefore, no
additional contributions were made during 2020 and 2021.
The initiative may be further affected or cancelled as a result of the recent armed conflict involving Russia and
Ukraine and the designation of Severstal’s controlling shareholder as a person subject to EU and UK sanctions.
As of December 31, 2021, our investment in the joint venture amounted to $16.8 million. We are currently
assessing the amount to be written off from this investment.
For more information see “
Principal Risks and
Uncertainties
–
Risks Relating to Our Business and Industry
–
The Russia-Ukraine recent armed conflict may
adversely affect our operations”; and “
Recent developments
–
The Russia-Ukraine armed conflict and its impact
on Tenaris’s operations and financial condition”.
TBSP
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 holds 60% of shares in TBSP, while Baotou Steel owns 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 will enable the facility to produce
45,000 tons annually. The facility started operations in the first quarter of 2022. As of December 31, 2021,
Tenaris contributed approximately $17.9 million in the project.
Tenaris S.A. Annual Report 2021
26
TENARIS IN NUMBERS
Trend information
Source: Baker Hughes Source: Baker Hughes
Leading indicators
711
769
824
604
573
196
187
244
178
151
41
32
31
43
32
0
200
400
600
800
1000
1
1200
1400
2017 2018 2019 2020 2021
RIGS
OIL GAS MISC
RIG COUNT INTERNATIONAL
813
960
857
391
455
269
261
219
128
154
0
500
1000
1
1500
2000
2017 2018 2019 2020 2021
RIGS
OIL GAS
RIG COUNT USA AND CANADA
5,289
7,659
7,294
5,147
6,521
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2017 2018 2019 2020
2021
NET SALES in USD Th.
TUBES
92%
OTHER
8%
NET SALES BY
BUSINESS SEGMENT
Tenaris S.A. Annual Report 2021
27
NORTH
AMERICA
52%
MIDDLE EAST &
AFRICA
13%
SOUTH
AMERICA
20%
EUROPE
11%
ASIA
PACIFIC
4%
NET SALES BY
GEOGRAPHIC AREA
OIL & GAS
83%
HYDROCARBON
PROCESSING
AND POWER
GENERATION
7%
INDUSTRIAL
AND OTHER
10%
TUBES SALES BY MARKET
0
5
10
15
20
25
30
2017 2018 2019 2020 2021
%
EBITDA MARGIN
-10
-5
-
5
10
15
2017 2018 2019 2020 2021
%
RETURN ON EQUITY
0.46
0.74
0.63
-0.54
0.93
-1.1
-0.6
-0.1
0.4
0.9
1.4
2017 2018 2019 2020 2021
EARNINGS (LOSSES) PER
SHARE
USD
MEXICO
24%
ARGENTINA
23%
ITALY
9%
UNITED
STATES
12%
ROMANIA
8%
BRAZIL
8%
COLOMBIA
4%
CANADA
3%
INDONESIA
2%
JAPAN
2%
OTHER
COUNTRIES
5%
PERSONNEL EMPLOYED
PER COUNTRY
2.4
1.8
1.1 1.1
1.0
0
0.5
1
1.5
2
2.5
3
3.5
4
2017 2018 2019 2020 2021
LOST TIME ACCIDENTS
INDEX
ACCIDENTS
PER MILLION
MAN/HOURS
Tenaris S.A. Annual Report 2021
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 Business and 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 GHG emissions, such as the introduction of a carbon tax or carbon-pricing systems (such as
the proposed EU Carbon Border Adjustment Mechanism), the adoption of “cap-and-trade” systems (such as the
EU Emissions Trading System (“ETS”)) or other measures to promote the use of renewable energy sources or,
electric vehicles, could also affect oil and gas prices. 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 plays a significant role in trying to counter falling prices, as
was the case 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, the oil & gas industry
situation 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 Business and Industry - Climate change
legislation and increasing regulatory requirements aimed at transitioning to a lower-carbon economy could
reduce demand for our products and services and result in unexpected capital expenditures and costs, and
negatively affect our reputation.”
Climate change legislation and increasing regulatory requirements aimed at transitioning to a lower-carbon
economy 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 GHG 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. The EU ETS signaled a major EU energy policy to combat global warming based on a “cap &
trade” program, and the European Green Deal, launched in 2019, focuses on adopting the required policies and
measures aimed at reaching zero GHG emissions in Europe by 2050. Other countries are introducing or
considering similar measures or regulations which would lower emissions. 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 their environmental goals 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 GHG emissions. Existing and future
legislation and regulations related to GHG emissions (such as increased pricing of GHG emissions and
enhanced emissions-reporting obligations) and climate change, as well as government initiatives to promote the
Tenaris S.A. Annual Report 2021
29
use of alternative energy sources and substitute existing products and services with lower emissions options
(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, potentially leading to write-offs and early
retirement of existing assets. 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 more environmentally sustainable 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 operating costs (such as incremental compliance costs and increased insurance premiums) and
unexpected capital expenditures and, eventually, affect our competitiveness and reduce our market share. In
a
ddition, shifts in customer preferences and 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, negatively impact workforce management and planning,
erode stakeholder support and restrict or reduce access to financial resources.
The physical risks resulting from climate change, including extreme weather conditions and shifts in weather
patterns, have 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 and natural disasters
such as hurricanes, flooding or coastal storm surges 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. For example, the severe freeze in the United States and Mexico in early 2021, caused gas and
power shortages in Texas, resulting in additional costs and production disruptions and losses. Additionally,
chronic climate changes, such as changes in precipitation patterns and, rising of average temperatures and sea
levels may result in increased operating or capital costs due to supply shortages or damage to facilities,
increased insurance premiums or reduced availability of insurance, decreases in revenue derived from lower
sales, lower production capacity or negative impacts on workforce and write-offs and/or early retirement of
assets, all of which could adversely affect our financial condition, results of operations and cash flows. For more
information on Tenaris’s climate change initiatives, please see “Operating and Financial Review and Prospects –
Overview – Climate Change”.
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.
In 2020, the rapid expansion of the SARS-CoV-2 virus, the surfacing of new strains of the 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 mutate and spread, or new pandemics or public health crises emerge 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 have exceeded pre-COVID-19 levels, demand for oil products is
approaching pre-COVID-19 levels and demand for natural gas already exceeds them, there remains considerable
uncertainty about the future duration and extent of the pandemic with a recent surge of new and more
contagious variants of the SARS-CoV-2 virus as well as about the effectiveness of available vaccines and the
Tenaris S.A. Annual Report 2021
30
success of vaccination campaigns. 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, the oil & gas industry situation and their impact on Tenaris’s oper
ations 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. Production capacity 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 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 our 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.
Our sales may be affected as a result of antidumping and countervailing duty proceedings or by the
imposition of other import restrictions or local content requirements.
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. For example, we import OCTG
from Argentina and Mexico to complement our significant and growing production in the United States. From
time to time local producers seek the imposition of import restrictions or the initiation of antidumping or
countervailing duty proceedings. For example, on October 27, 2021, the U.S. Department of Commerce
(“DOC”) announced the initiation of antidumping duty investigations of OCTG from Argentina, Mexico, and
Russia and countervailing duty investigations of OCTG from Russia and South Korea. The investigations were
petitioned by U.S. Steel Tubular Products, Inc., a small number of other U.S. domestic welded OCTG
producers, and a steelworkers’ union. On November 22, 2021, the International Trade Commission (“ITC”)
made a preliminary determination of injury, allowing the investigations to proceed. These investigations are
currently proceeding, with final determinations by DOC and the ITC likely to occur in the second half of
2022. Although we believe that the petition, the DOC initiation and the preliminary determination of injury are
unjustified and we are vigorously challenging any claim that our imports are unfairly traded or are causing or
threatening injury to the U.S. domestic OCTG industry, we cannot predict the outcome of the investigations. On
June 30, 2021, Canada initiated an antidumping investigation on OCTG from Mexico; a full investigation was
conducted and on January 26, 2022, the Canadian International Trade Tribunal found that Mexican imports were
not injuring the Canadian OCTG industry, and terminated the inquiry without imposing any duties.
Antidumping or countervailing duty proceedings or any resulting penalties or any other form of import
restriction have in the past impeded, and may in the future restrict, our access to important export markets for
our products, thereby adversely impacting our sales or limiting our opportunities for growth. Please refer to
“Outstanding Legal Proceedings”.
In addition, 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 Arabian Oil Company (“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. Other countries, such as Brazil, Ecuador, Indonesia and Nigeria, have also put in place significant
local content requirements. 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.
Tenaris S.A. Annual Report 2021
31
Our sales may also be affected as a result of other international trade regulations.
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 that restrict or prohibit transactions involving Iran, Syria,
Venezuela and Russia or their citizens or companies. For more information on the impact on our business of the
recent sanctions on Russia as a result of the armed conflict in Ukraine, see “Risks Relating to Our Business
and
Industry - The Russia-
Ukraine recent armed conflict may adversely affect our operations”
. Similarly, we are
subject to the U.S. anti-boycott laws. Trade 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 four
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 1,550,000 tons. Exemptions are granted only for a one-year term and
future requests might not be granted, thus adversely affecting our operations or revenues. On October 31, 2021,
the United States and the EU reached an agreement whereby Section 232 tariffs were replaced with tariff-rate
quotas for steel melted and poured in Europe starting January 1, 2022, and steel products imported from the EU
for a period of two calendar years without the need to reapply, i.e., until 31 December 2023. For Tenaris in
particular, this agreement meant the ability to import 299,376 tons of billets from Italy and Romania without
paying the 25% tariff per year until 2023. On February 7, 2022, the United States and Japan announced the
replacement of the Section 232 tariffs with tariff-rate quotas for steel melted and poured in Japan starting April
1, 2022. Failure to comply with applicable trade regulations could also result in criminal and civil penalties and
sanctions.
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, in early 2021 we 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, sanctions and other trade restrictions, allocation
by suppliers, interruptions in production, accidents or natural disasters, armed conflicts, chronic climate change,
changes in exchange rates, worldwide price fluctuations, and the availability and cost of transportation. For
further information related to the impact on our business of the armed conflict in Ukraine see “Risks Relating to
Our Business and Industry - The Russia-Ukraine recent armed conflict may adversely affect our operations”.
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 carbon emissions. In addition, we may not be able to recover, partially or fully, increased costs of raw
materials and energy through increased selling 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
Tenaris S.A. Annual Report 2021
32
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 were 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. Cost containment measures may
also affect profitability and result in charges for asset impairments. In addition, if demand continues to recover,
we may not be able to retain qualified workforce or hire additional employees soon enough. Moreover, certain
consequences of climate change, such as shifts in customer preferences, stigmatization of our industry or failure
to respond to shareholders’ demand for climate
-related measures could negatively impact workforce
management and planning, adversely affecting employee attraction and retention.
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 PAO Severstal
(“Severstal”) to build a welded pipe plant, the construction of which is currently on hold and may be further
affected or cancelled as a result of the recent armed conflict involving Russia and Ukraine and the designation
of Severstal’s control
ling shareholder as a person subject to EU and UK sanctions. 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; antidumping or
countervailing duties; travel, transportation or trade bans; interruptions in the supply of essential energy inputs;
currency 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 (including the recent Ukraine-
Russia armed conflict and regional conflicts 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 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. For more information on the impact on our
business of the armed conflict in Ukraine, see “Risks Relating to our Business and Industry – The Russia-
Ukraine recent armed conflict may adversely affect our operations”.
More specifically, 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 stagnant economy, along with the introduction of
changes to government policies, including measures aimed at ensuring the sustainability of government
debt (including debt with the International Monetary Fund and other international creditors) and
reducing government spending, 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
Tenaris S.A. Annual Report 2021
33
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, currency devaluation, 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,
which is rarely granted, to access the foreign exchange market to pay for imports of services from
related parties or to make dividend or royalty payments. Access to the Argentine foreign exchange
market to pay for imports of goods and services provided by third parties is subject to several
restrictions, including payment terms that cannot be at sight or involve advance payments. As the
context of volatility and uncertainty remains in place as of the date of this annual report, additional
regulations or restrictions that could be imposed by the Argentine government could further restrict our
ability to access the official foreign exchange market, and expose us to the risk of losses arising from
fluctuations in the ARS/USD exchange rate, or produce disruptions to our operations due to lack of
imported raw materials and other inputs, or affect our ability to finance and even carry out major
investments 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. For
additional information on current Argentine exchange controls and restrictions see note 28 “Foreign
exchange control measures in Argentina” of our audited consolidated financial state
ments included in
this annual report.
- 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.
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.
- 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 built a hefty
balance of accounts receivable with Pemex; our exposure to Pemex remained high during 2021 and
early 2022. Pemex, nevertheless, continues to maintain a regular payment flow and enabling alternative
payment methods, including factoring structures. If we are not able to 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 private generation competitors in the
supply of electric power to the Mexican market and mandates a revision of power generation and
transaction agreements between the CFE 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, relaxes the requirements for the granting of clean energy certificates in favor of CFE, and
imposes serious restrictions on the renewable energy generation system through self-supply, widely
Tenaris S.A. Annual Report 2021
34
used by private companies. The new LIE was challenged in court and its application has been
suspended pursuant to the multiple constitutional review actions and injunctive measures filed by
affected players. In September 2021, President Andrés Manuel López Obrador submitted to the
Mexican Congress a constitutional reform proposal of the electricity sector, which seeks to reverse the
legal framework derived from the 2013 constitutional energy reform that opened the sector to private
investment. The congressional debate on the reform started in January 2022 and two-thirds of the votes
are required for approval. It is not certain that the constitutional reform and related amendments to the
energy market regulation will be approved. Approval of proposed changes 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 and 2021 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.
The Russia-Ukraine recent armed conflict may adversely affect our operations.
On February 24, 2022, Russia launched a military attack on Ukraine. In response, the United States, the
European Union and the United Kingdom, among other countries, have imposed a wave of sanctions against
certain Russian institutions, companies and citizens. The Russian Government has retaliated by banning airlines
from its airspace and has ordered economic counter measures, including restrictions on residents transferring
foreign currency abroad. Russia is a major supplier of oil and gas in Europe and worldwide, and Russia and
Ukraine are both major global suppliers of internationally traded steelmaking raw materials and semi-finished
steel products. As a result of the armed conflict and related sanctions, energy and commodity prices have spiked
upwards and foreign trade transactions involving Russian and Ukrainian counterparties have been severely
affected. Although it is hard to predict how energy and commodity prices will behave as the conflict unfolds,
higher prices and possible shortages of energy and raw materials used in our steelmaking operations (including
natural gas and electric energy, particularly in Europe, steel scrap, pig iron, DRI, hot briquetted iron (“HBI”),
ferroalloys, steel bars, coils and plates) would result in higher production costs and potential plant stoppages,
affecting our profitability and results of operations. As a result of the economic sanctions imposed on Russia, we
or our contractors (including shipping companies) may not be able to continue purchasing products from, or
making payments to, Ukrainian or Russian suppliers or counterparties; and we may not be able to promptly
procure such raw materials from other suppliers, or we may be required to purchase raw materials at increased
prices.
In addition, we have suspended any sales to Russian customers or purchases from Russian suppliers that would
breach applicable sanctions, and we are exploring alternatives with respect to potential relocation or closure of
our representative office in Moscow. Furthermore, we are currently assessing the amount to be written off from
our investment in the joint venture in Russia, which as of December 31, 2021 amounted to $16.8 million. For
more information on Tenaris’s operations involving Russia, see “Recent developments – The Russia-Ukraine
armed conflict and its impact on Tenaris’s operations and financial condition”.
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 consolidating our position as a leading global
supplier of integrated product and service solutions to the energy and other industries and adapting to the energy
transition through reducing the carbon emissions in our operations and developing and supplying products and
services for low-carbon energy applications, as well as continuing to pursue strategic investment opportunities.
Any of the components of our overall business strategy could cost more than anticipated (including as a result of
increasing regulatory requirements aimed at transitioning to a lower-carbon economy), 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 maintain or
improve our competitive position.
Tenaris S.A. Annual Report 2021
35
Even if we successfully implement our business strategy, it may not yield the expected results, or decisions by
our joint venture partners may frustrate our initiatives. For example, 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 and in November 2021 the parties reached a preliminary agreement to amicably terminate their joint
venture and liquidate NKKTubes by the end of June 2022; upon closure of the NKKTubes facility. Tenaris and
JFE are committed to ensuring a continued supply of tubular material, including
13 Chrome
alloy products to
international customers after NKKTubes’ closure
, and Tenaris is advancing with the investments required to
produce such materials in the rest of its industrial system. For further information on the termination of the
NKKTubes joint venture, please refer to
note 35 “Preliminary agreement to terminate NKKTubes joint venture”
of our audited consolidated financial statements included in this annual report.
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, in 2015, the Organization for
Economic Co-
operation and Development (“OECD”) 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.
Most of the countries in which we operate have already implemented those changes within their own domestic
tax legislations.
In 2019, the OECD launched a new initiative on behalf of the G20 to minimize profit shifting by working
towards a global tax framework that ensures that corporate income taxes are paid where consumption takes
place and also introduces a global standard on minimum taxation combined with new tax dispute resolution
processes. This project achieved OECD political consensus in October 2021, and the detailed principles are still
under discussion. The OECD expects that the implementation of these new principles will begin globally in
2023.
At the EU level, the European Commission adopted in 2016 its Anti-Tax Avoidance Directive (“ATAD”), later
updated, modified and expanded by ATAD 2, 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. In addition, the European Commission drafted a directive aiming to avoid the use of shell
entities (ATAD 3), which, if approved and adopted by all EU members, would become effective as from 2024.
Also, the European Commission drafted another directive to impose a global minimum taxation for
multinational companies in the Union, following OECD’s initiative. 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. Significant uncertainties remain in relation to the potential adoption of the
new regulations that might result from evolving initiatives like those launched by the OECD and the EU in
relation to international taxation that could impact negatively our financial condition, results of operations and
cash flows.
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. 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
Tenaris S.A. Annual Report 2021
36
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 our $1.0 billion
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.
For more information on IPSCO’s acquisition see note 33 “Business combinations –
Acquisition
of IPSCO Tubulars, Inc.” and for information on impairment charges on our U.S. operations in 2020 see note 5
“Impairment charge” bot
h to our audited consolidated financial statements included in this annual report.
Furthermore, 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 and in November 2021 the parties reached a preliminary
agreement to amicably terminate their joint venture and cease NKKTubes’ operations in June 2022.
Management determined that the parties’ decision to terminate the NKKTubes joint venture constituted an
impairment indicator and accordingly conducted an impairment test, recognizing a charge of approximately $57
million, impacting NKKTubes’ property, plant and equipment and intangible assets. For more information,
refer
to
note 5 “Impairment charge” and note 35
“Preliminary agreement to terminate NKKTubes joint venture”
, 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 (“EAF”), continuous casters, rol
ling 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, earthquakes, 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 and Industry – The physical risks resulting from climate
change, including extreme weather conditions and shifts in weather patterns, have 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 and 2021 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 could increase labor demands and could eventually
generate higher levels of labor conflicts, which could also trigger operational disruptions.
In addition, in response to the COVID-19 outbreak, several countries, including countries where Tenaris has
operations (such as Argentina, China, Colombia, Italy, Mexico, Saudi Arabia and the United States) took
mitigation and containment measures, including bans on business activities and closure of industrial facilities
and, accordingly, some of our facilities or production lines were closed or shutdown during 2020. Although
some facilities that were temporarily shut down in 2020 were reopened during 2021, if new preventive measures
are imposed in the future, we could be required to re-introduce temporary closure measures, which could affect
our operations and adversely impact our results. For more information on the status of our operations see
“Operating and Financial Review and Prospects – Overview – The COVID-19 pandemic, the oil & gas industry
situation and their impact on Tenaris’s operations and financial condition.”
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 S.A. Annual Report 2021
37
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. In 2020, we recognized goodwill for
approximately $357 million in connection with our acquisition of IPSCO in January 2020. As a result of the
severe deterioration of business conditions and in light of the presence of impairment indicators for our U.S.
operations, we subsequently recorded impairment charges as of March 31, 2020, for an aggregate amount of
approximately $622 million. Please refer to
note 5 “Impairment charge” to our audited consolidated financial
statements included in this annual report. As of December 31, 2021, goodwill amounted to $1,085 million
corresponding mainly ($920 million) to the acquisition of Hydril Company (“Hydril”) in 2007.
In light of the armed conflict involving Russia and Ukraine an
d the designation of Severstal’s controlling
shareholder as person subject to EU and UK sanctions, we are currently assessing the amount to be written off
from our investment in the joint venture in Russia, which as of December 31, 2021 amounted to $16.8 million.
For more information on Tenaris’s operations involving Russia, see “Recent developments – The Russia-
Ukraine armed conflict and its impact on Tenaris’s operations and financial condition”.
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 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,
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 and related discussions with regulators 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, local and international 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
Tenaris S.A. Annual Report 2021
38
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 (or more stringent than) 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 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.
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 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.
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.
Tenaris S.A. Annual Report 2021
39
Cyberattacks could have a material adverse impact on our business and results of operation.
We rely heavily on information systems to conduct our operations and digital technologies have an increasingly
significant role across our business. Although we devote significant resources to protect our systems and data
and we continually monitor external developments and available information on threats and security incidents,
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 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. Cyberattack attempts, such as ransomware, phishing, spoofing and whaling,
continued to increase throughout 2021 in the context of the COVID-19 pandemic, primarily due to a significant
expansion of remote work practices among our employees, customers and suppliers and the increasing
digitalization of work. For example, in 2021, we suffered ten cybersecurity attacks mainly consisting of
spoofing attempts; none of these attacks led to known breaches of our business-critical IT systems and, as such,
did not result in any material business impact. In response to the increase in the number and sophistication of
ransomware attacks, U.S. and EU regulatory agencies have implemented regulations to prevent victims from
making ransomware payments and to deter third parties from facilitating or processing such payments to
cyberactors. In this context, we enhanced cybersecurity controls and we implemented comprehensive processes
and procedures to monitor, detect and respond to hacking, malware infection, cybersecurity compromise and
other risks. In addition, we have launched awareness and ethical phishing campaigns aimed at protecting us
against cyberthreats and we are implementing tailored training cybersecurity programs addressed to our
executives and employees.
Given the rapidly evolving nature of cyberthreats, 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, production downtimes or loss of productivity), 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 regulatory fines and penalties (including for inadequate protection of persona data and/or failure to notify
the competent authorities for such breach), damages and harm to the environment and people, 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. Additionally, although we have considered contract insurance coverage options for
cyber risk, we do not currently maintain cybersecurity insurance, and the insurance we carry for property
damage and general liability may not be adequate or available to protect us from damages derived from
cyberthreats or coverage may be limited. 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 depends on the results of operations and financial condition of its
subsidiaries and could be restricted 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. In addition, the Company’s dividend
Tenaris S.A. Annual Report 2021
40
distributions (which are currently imputed to a special tax reserve and are therefore not subject to Luxembourg
withholding tax) may be subject to Luxembourg withholding tax if current Luxembourg tax law were to change.
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 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
and Industry
–
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”
.
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 the Company as they would in
the case of a U.S. domestic issuer.
There may be less publicly available information about the Company 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 the Company prepares its 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
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 the Company 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 to instead distribute the net proceeds to
you. Also, under certain circumstances, such as the Company’s failure to provide the Depositary with voting
Tenaris S.A. Annual Report 2021
41
materials 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). For further details, see “Corporate Governance Statement”.
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 an exemption from the
registration requirements of the Securities Act is available. The Company intends 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 considers appropriate at the time, and then to make a
decision as to whether to register additional shares. The Company 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 obtain or enforce judgments against the Company outside Luxembourg.
The Company is a société anonyme organized under the laws of the Grand Duchy of Luxembourg, and most of
its assets are located in other jurisdictions. Furthermore, most of the Company’s directors and officers reside in
other jurisdictions. As a result, investors may not be able to effect service of process upon the Company or its
directors or officers. Investors may also not be able to enforce against the Company or its 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 ir its 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 S.A. Annual Report 2021
42
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 specific
ally 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 were 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 have since recovered to
exceed pre-pandemic levels. North American natural gas prices (Henry Hub) fell below $2 per million BTU in
2019. In 2021, as demand for LNG exports from the USA increased following the pandemic and a cold
Northern hemisphere winter, prices rose to $6 per million BTU and are currently above $4 per million BTU.
In both 2020 and 2021, worldwide drilling activity, as represented in the number of active drilling rigs published
by Baker Hughes, reflecting the collapse in oil consumption and prices in the wake of the COVID-19 pandemic
and the subsequent recovery from the fourth quarter of 2020, was around 38% lower as an annual average
compared to the level of 2019, but, in January 2022, it was approximately 22% higher than the average of 2021.
The recovery in drilling activity following its pandemic-induced collapse has been led by the United States and
Canada, where the declines were steepest, whereas the international rig count fell more slowly and began to
increase later.
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. Nevertheless, cost-competitive offshore developments, like those in Brazil and Guyana,
continue to be sanctioned and developed.
Tenaris S.A. Annual Report 2021
43
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,
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.
We are also exposed to the risk that our competitors may seek to initiate anti-dumping cases against our exports.
In 2021, anti-dumping cases were initiated against our exports from Mexico in Canada and against our exports
from Mexico and Argentina in the United States. In Canada, a final determination of no injury was issued in
January 2022 in respect of our imports from Mexico. In the United States, a preliminary determination of injury
has occurred against our imports from Mexico and Argentina but a final determination is not expected before the
second half of 2022.
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, DRI, pig iron,
iron ore and ferroalloys, for use in the production of our seamless pipe products. In addition, we purchase
substantial quantities of steel coils and 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 increased during 2021, reaching all-time
highs. As a reference, prices for hot rolled coils, HRC Midwest USA Mill, published by CRU, averaged $1,734
per metric ton in 2021 and $632 per metric ton in 2020.
The COVID-19 pandemic, the oil & gas industry situation and their impact on Tenaris’s operations and
financial condition
The rapid expansion of the COVID-19 pandemic around the world 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 in the first half of 2020 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 Tenaris’s oil and gas customers. The Company took prompt action to mitigate the impact of
the crisis and to adapt Tenaris’s operations on a country-by-country basis to comply with applicable rules and
Tenaris S.A. Annual Report 2021
44
requirements and contain the effects of the global crisis. In response to the COVID-19 outbreak, several
countries, including countries where Tenaris has operations (such as Argentina, China, Colombia, Italy, Mexico,
Saudi Arabia and the United States) took mitigation and containment measures, including bans on business
activities and closure of industrial facilities. Tenaris implemented a worldwide restructuring program and cost-
containment plan aimed at preserving the financial resources and overall liquidity position and maintaining the
continuity of its operations; and adjusted production levels at its facilities including through the temporary
closure of certain facilities or production lines and layoffs in several jurisdictions, and reduced capital
expenditures and working capital. In addition, Tenaris introduced remote work and other flexible work
arrangements and implemented special operations protocols to safeguard the health, safety and wellbeing of
Tenaris’s e
mployees, customers and suppliers. Although such measures have so far proved to be successful to
mitigate the impact of the crisis on Tenaris, if the virus continues to mutate and spread or new pandemics or
public health crises emerge, and new preventive m
easures are imposed in the future, Tenaris’s operations could
be further affected and its results adversely impacted. In addition, although oil prices have exceeded pre-
COVID-19 level, demand for oil products is approaching pre-COVID-19 level and demand for natural gas
already exceeds them, there remains considerable uncertainty about the future duration and extent of the
pandemic with a recent surge of new and more contagious variants of the SARS-CoV-2 virus as well as about
the effectiveness of available vaccines and the success of vaccination campaigns. In this uncertain environment
our results of operations and financial condition could still be severely affected. Oil and natural gas prices also
exceed pre-COVID-19 levels, while oil and gas drilling activity is steadily increasing in North America and the
rest of the world and OCTG inventories are at relatively low levels in North America and are at more normal
levels in the rest of the world. Tenaris’s North American industrial facilities continue rampin
g up to meet higher
demand and some facilities -temporarily shut down during 2020- were reopened during 2021. In this context,
even with raw material, energy and logistic cost increases, Tenaris’s margins show a significant recovery
compared to 2020.
With the purpose of assessing Tenaris’s exposure to the effects of the COVID-19 pandemic and its impact on its
business, financial position and performance, management has conducted impairment tests, and is closely
monitoring the recoverability of long-lived assets and deferred taxes, financial risk management, in particular
credit and liquidity risks and the adequacy of its provisions for contingent liabilities.
Tenaris also renegotiated existing contractual obligations with its counterparties to adapt the commitments to the
decrease in activity. As a result, Tenaris is adequately complying with all main outstanding contractual
commitments and guarantees. In addition, Tenaris has not received any material government grants or public
support measures for the years 2021 and 2020, and has not received, nor provided, material arrangements on the
form of supply chain financing.
As of the date of this annual report, Tenaris’s capital and financial resources, and overall liquidity position, have
not been affected by the pandemic. Tenaris has in place non-committed credit facilities and management
believes it has adequate access to credit markets. In addition, Tenaris has a net cash position of approximately
$700
1
million as of the end of December 2021 and a manageable debt amortization schedule.
Considering Tenaris’s financial position and the funds provided by operating activities, management believes
that Tenaris has sufficient resources to satisfy its current working capital needs, service its debt and address
short-term changes in business conditions.
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.
Summary of results
In 2021, our results recovered strongly from the worst effects of the pandemic bolstered by the recovery in oil
and gas drilling activity in the Americas and the structural measures we took to improve our profitability over
the longer term. Our sales rose 27% year on year, while our EBITDA
2
more than doubled with the margin
surpassing its pre-pandemic level. At the net income level, our results benefited from an extraordinary
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).
2
EBITDA is a non-IFRS alternative performance measure—please see Exhibit 7.2 for more information on this measure.
Tenaris S.A. Annual Report 2021
45
contribution from our equity participations in Ternium and Usiminas, reflecting record prices in the flat steel
sector, which contrasts with that of 2020, which was impacted by $622 million impairment charges on the
carrying value of goodwill and other assets in the United States.
Operating cash flow for the year amounted to $119 million in 2021, compared to $1,520 million in 2020 due to
a working capital build of $1.0 billion driven by the ramp up of activity. Although in absolute amounts the build
up in working capital in 2021 was similar to the corresponding reduction in 2020, it is lower in terms of days of
sales and includes higher raw material and energy costs embedded in inventories. After capital expenditures of
$240 million and dividend payments of $319 million during the year, our net cash position declined to $700
3
million at the end of the year.
Climate change
To address climate change, Tenaris is taking steps to decarbonize its operations and is developing products and
services for use in low-carbon energy applications.
In February 2021, we set a medium-term target to reduce the carbon emissions intensity rate of our operations
by 30% by the year 2030, compared to a 2018 baseline, considering Scopes 1 and 2 emissions plus Scope 3
emissions related to raw materials, including steel purchased from third parties.
We aim to achieve this target by using a higher proportion of recycled steel scrap in the metallic mix and by
making investments to increase energy efficiency and the use of renewable energy in our energy requirements.
This medium-term target forms part of a broader objective of decarbonizing our operations and reaching carbon
neutrality. The timing will depend on the development of emerging technologies and market and regulatory
conditions, including carbon pricing and customer support. To achieve this longer-term objective, we will
actively pursue the development of technologies involving the use of hydrogen and carbon capture with
partners, such as the initiatives we have announced using hydrogen in our Dalmine steel shop in Italy, and
carbon capture and use at our Dalmine power plant.
All our steel is produced in electric arc furnaces where recycled steel scrap is used as the primary source of
metallic feedstock. We supplement the use of steel scrap with metallics such as pig iron, direct reduced iron and
ferroalloys to meet quality, productivity and material specification requirements.
Additionally, we produce our own direct reduced iron for our steel mill in Argentina using natural gas, where
the availability of steel scrap is limited.
Steel production in electric arc furnaces using a high proportion of scrap in the metallic charge usually has
substantially lower carbon emissions than steel produced using iron ore and metallurgical coal as the primary
feedstock.
Over the past year, we have made good progress towards our mid-term objective. By focusing on energy
efficiency and reducing the proportion of pig iron used in our electric furnaces, the average carbon emissions
intensity of our tubular operations has declined to 1.2 tons of CO
2
per ton of steel processed, which compares
with the 1.4 tons of CO
2
per ton of steel processed in 2018 and 1.3 tons of CO
2
per ton of steel processed in
2020. These figures employ worldsteel methodology using local emission factors for purchased electricity.
Most of the reduction in emissions intensity we have achieved to-date has been in Scope 3 emissions by
increasing the amount of scrap used and energy efficiency.
Currently, we are focusing on reducing the intensity of our Scope 2 emissions by increasing the use of
renewable energy at a number of our facilities around the world.
In this respect, our Board of Directors recently approved an investment project to build a wind farm in
Argentina at a cost of $190 million. The project would reduce our CO
2
emissions in this country by some
3
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).
Tenaris S.A. Annual Report 2021
46
150,000 tons per year, and supply close to 50% of the electricity requirements at our Siderca integrated seamless
pipe mill.
The wind farm, which is expected to be completed during 2023, will be located in an area with a highly
favorable capacity utilization factor of 58%. This should lead to a reasonable return on the investment even
when considering current Argentine wholesale energy market prices.
To accelerate the fulfilment of our targets, we have implemented an internal carbon price at a minimum of
$80/ton for evaluating investments, and more generally in our operations.
The development and implementation of our climate change strategy is reviewed by our Board of Directors on a
quarterly basis. The Board has nominated our Vice-Chairman, Germán Curá, to take particular responsibility for
this and to keep it informed of the progress made.
We are also strengthening our disclosure of climate change-related information. In 2021, we joined the Carbon
Disclosure Project (“CDP”), where we received a B rating regarding our managem
ent of climate change in
2020.
As we pursue our long-term strategy of achieving carbon neutrality in our operations, we are exploring a range
of possibilities with different partners from around the world. We know that there is no single solution, as
certain alternatives are better suited to specific sites or regions depending on local infrastructure, resources,
technologies and conditions.
We do so with the vision that, as a leader in our industry, we must be competitive in offering our customers low-
carbon products and that we have a responsibility to contribute to the development of the technologies that will
make this happen.
We also assess the future market outlook for our products with reference to the different scenarios for oil and
gas demand published by our customers, international agencies such as the International Energy Agency
(“IEA”) and expert energy market consultancies such as Rystad. We refer particularly to scenarios which are
consistent with the goals of the Paris Agreement, and those focused on the pace of adoption of new
technologies.
These assessments are used as fundamental input for evaluating our business strategy and how to address the
risks and opportunities arising from climate change.
As suppliers of tubular products and services to the energy industry, the energy transition provides an important
opportunity to develop new products and services for potentially fast-growing segments like hydrogen
transportation and storage, CCS and geothermal installations.
We are increasing our investments in R&D and our organizational focus in these areas, which are expected to
contribute a significant revenue stream to the company going forward.
We have developed a range of materials technologies that are particularly suited for use in hydrogen storage and
transportation, where we are seeing fast growth in demand for large, high-pressure vessels used in the build-out
of hydrogen refueling stations for heavy-duty vehicles and buses in Europe and California.
Outlook
The global economy has rebounded strongly this year and, with it demand for energy including oil and gas. Oil
and gas production increases have not kept pace with increases in consumption resulting in lower inventory
levels and higher prices. Prices for oil exceed pre-pandemic levels and prices for LNG reached unprecedented
levels during the fourth quarter of 2021.
Although investments in oil and gas drilling are expected to increase during 2022, from their low levels over the
past two years, the level of spending is unlikely to return to pre-pandemic levels, as the oil and gas majors and
publicly-listed U.S. shale producers prioritize capital discipline and returns to shareholders, while OPEC+
countries continue to manage production level increases.
Tenaris S.A. Annual Report 2021
47
Drilling activity is increasing around the world. Over the past year, the increase has been led by the United
States and Canada where it will continue at a lower pace. Latin America is leading the recovery in offshore
drilling activity, with rises in Brazil, Mexico and Guyana, while onshore drilling activity should step up in the
Vaca Muerta shale in Argentina if country investment conditions allow. In the Eastern Hemisphere, the more
recent recovery in drilling activity should extend further through the year, led by the Middle East.
In the first half of 2022, we anticipate further increases in sales on higher prices in North America and
shipments to an offshore pipeline in Europe. In the second quarter, we should see a significant recovery of sales
in the Middle East and Africa. Despite higher energy costs in Europe, our EBITDA
4
margin should also
continue to increase in the first half.
The global economic conditions may change as a result of the Russia-Ukraine armed conflict and the related
wave of sanctions being imposed on Russian individuals, companies and institutions. It is hard to predict how
energy and commodity prices will behave and the impact on the prices and availability of energy and
steelmaking raw materials. Accordingly, the outlook for global economic activity in general, and the outlook for
our industry and operations, in particular, may significantly change, even in the short term, as the armed conflict
unfolds. For more information on the potential risks in connection with the Russia-Ukraine conflict, see
“
Principal Risks and Uncertainties
–
Risks Relating to Our Business and Industry
–
The Russia-Ukraine recent
armed conflict may adversely affect our operations”; and for more information on the
Tenaris
’s operations
involving Russia, see “
Recent developments
–
The Russia-
Ukraine armed conflict and its impact on Tenaris’
s
operations and financial condition”.
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.
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:
x 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;
x prices of their critical raw materials and inputs are priced and settled in U.S. dollars;
x transaction and operational environment and the cash flow of these operations have the U.S. dollars as
reference currency;
x significant level of integration of local operations within Tenaris’s international global distribution
network;
x net financial assets and liabilities are mainly received and maintained in U.S. dollars; and
x the exchange rate of certain legal currencies has long been affected by recurring and severe economic
crises.
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 the Consolidated Income Statement as a gain or loss
from the sale.
4
EBITDA is a non-IFRS alternative performance measure—please see Exhibit 7.2 for more information on this measure.
Tenaris S.A. Annual Report 2021
48
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.
Management evaluates its accounting estimates and assumptions, including those related to impairment of
goodwill and long-lived assets; income taxes; obsolescence of inventory; contingencies; allowance for trade
receivables; defined benefit obligations; business combinations; useful lives of property, plant and equipment
and other long-lived assets; fair value estimation of certain financial instruments and property title ownership
restriction, 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.
For more information see “II. Accounting Policies” to our
consolidated financial statements included in this annual report.
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 15, 2022, management reported to the audit committee that it had conducted its assessment of the
effectiveness of the Company’s internal controls over financial reporting for the year ended December 31, 2021,
and that, based on management’s evaluation and considering the inherent limitations to the effectiveness of any
internal control system, it concluded that the Company’s internal controls over financial reporting were effective
as of December 31, 2021.
Tenaris S.A. Annual Report 2021
49
Results of Operations
Thousands of U.S. dollars (except number of shares and per share
amounts)
For the year ended December 31,
2021
2020
2019
Selected consolidated income statement data
Continuing operations
Net sales
6,521,207
5,146,734
7,294,055
Cost of sales
(4,611,602)
(4,087,317)
(5,107,495)
Gross profit
1,909,605
1,059,417
2,186,560
Selling, general and administrative expenses
(1,206,569)
(1,119,227)
(1,365,974)
Impairment charge
(1)
(57,075)
(622,402)
-
Other operating income (expenses), net
61,548
19,141
11,805
Operating income (loss)
707,509
(663,071)
832,391
Finance income
38,048
18,387
47,997
Finance cost
(23,677)
(27,014)
(43,381)
Other financial results
8,295
(56,368)
14,667
Income (loss) before equity in earnings of non-consolidated
companies and income tax
730,175
(728,066)
851,674
Equity in earnings of non-consolidated companies
512,591
108,799
82,036
Income (loss) before income tax
1,242,766
(619,267)
933,710
Income tax
(189,448)
(23,150)
(202,452)
Income (loss) for the year for continuing operations
1,053,318
(642,417)
731,258
Income (loss) attributable to
(2)
:
Owners of the parent
1,100,191
(634,418)
742,686
Non-controlling interests
(46,873)
(7,999)
(11,428)
Income (loss) for the year
(2)
1,053,318
(642,417)
731,258
Depreciation and amortization
(594,721)
(678,806)
(539,521)
Weighted average number of shares outstanding
1,180,536,830
1,180,536,830
1,180,536,830
Basic and diluted earnings (losses) per share
0.93
(0.54)
0.63
Dividends per share
(3)
0.27
0.07
0.41
(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 paid in respect of the year.
Tenaris S.A. Annual Report 2021
50
Thousands of U.S. dollars (except number of shares)
At December 31,
2021
2020
2019
Selected consolidated financial position data
Current assets
4,981,173
4,287,672
5,670,607
Property, plant and equipment, net
5,824,801
6,193,181
6,090,017
Other non-current assets
3,643,457
3,235,336
3,082,367
Total assets
14,449,431
13,716,189
14,842,991
Current liabilities
1,559,645
1,166,475
1,780,457
Non-current borrowings
111,432
315,739
40,880
Deferred tax liabilities
274,721
254,801
336,982
Other non-current liabilities
397,931
532,701
498,300
Total liabilities
2,343,729
2,269,716
2,656,619
Capital and reserves attributable to the owners of the parent
11,960,578
11,262,888
11,988,958
Non-controlling interests
145,124
183,585
197,414
Total equity
12,105,702
11,446,473
12,186,372
Total liabilities and equity
14,449,431
13,716,189
14,842,991
Share capital
1,180,537
1,180,537
1,180,537
Number of shares outstanding
1,180,536,830
1,180,536,830
1,180,536,830
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,
2021
2020
2019
Continuing operations
Net sales
100.0
100.0
100.0
Cost of sales
(70.7)
(79.4)
(70.0)
Gross profit
29.3
20.6
30.0
Selling, general and administrative expenses
(18.5)
(21.7)
(18.7)
Impairment charge
(0.9)
(12.1)
-
Other operating income (expenses), net
0.9
0.4
0.2
Operating income (loss)
10.8
(12.9)
11.4
Finance income
0.6
0.4
0.7
Finance cost
(0.4)
(0.5)
(0.6)
Other financial results
0.1
(1.1)
0.2
Income (loss) before equity in earnings of non-consolidated
companies and income tax
11.2
(14.1)
11.7
Equity in earnings of non-consolidated companies
7.9
2.1
1.1
Income (loss) before income tax
19.1
(12.0)
12.8
Income tax
(2.9)
(0.4)
(2.8)
Income (loss) for the year for continuing operations
16.2
(12.5)
10.0
Income (loss) attributable to:
Owners of the parent
16.9
(12.3)
10.2
Non-controlling interests
(0.7)
(0.2)
(0.2)
Fiscal Year Ended December 31, 2021, Compared to Fiscal Year Ended December 31, 2020
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,
Increase /
(Decrease)
2021
2020
Tubes
5,994
92%
4,844
94%
24%
Others
528
8%
303
6%
74%
Total
6,521
100%
5,147
100%
27%
Tenaris S.A. Annual Report 2021
51
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,
Increase /
(Decrease)
2021
2020
Seamless
2,514
1,918
31%
Welded
289
480
(40%)
Total
2,803
2,398
17%
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,
Increase /
(Decrease)
2021
2020
Net sales
- North America
3,240
2,108
54%
- South America
1,051
660
59%
- Europe
622
566
10%
- Middle East & Africa
832
1,194
(30%)
- Asia Pacific
249
315
(21%)
Total net sales
5,994
4,844
24%
Operating income (loss)
613
(616)
200%
Operating income (loss) (% of sales)
10.2%
(12.7%)
Net sales of tubular products and services increased 24% to $5,994 million in 2021, compared to $4,844 million
in 2020, reflecting a 17% increase in volumes and a 6% increase in average selling prices. In North America
sales increased 54% as there was a recovery in volumes and prices throughout the region, led by the U.S.
onshore market. In South America sales increased 59% driven by a recovery in sales in Argentina and the
Andean region partially offset by lower sales of connectors in Brazil. In Europe sales increased 10% thanks to a
strong growth in sales to the mechanical and automotive sectors partially compensated by lower sales of OCTG
products throughout the region. In the Middle East & Africa sales declined 30% as sales in U.A.E. remained
stable during the year while sales of OCTG and offshore line pipe declined in the rest of the region. In Asia
Pacific sales declined 21% due to lower sales of OCTG throughout the region.
Operating results from tubular products and services, amounted to a gain of $613 million in 2021, compared to
a loss of $616 million in 2020. Tubes operating income in 2021 is net of a $57 million impairment charge on
NKKTubes fixed assets and severance charges of $27 million, while in 2020 the operating loss includes an
impairment charge of $582 million, accelerated depreciations and amortizations of $56 million and severance
charges of $139 million. The improvement in operating results was driven by the recovery in sales (volumes and
prices), while an increase in raw material and energy costs was partially offset by an improvement in industrial
performance due to the increased levels of activity and utilization of production capacity.
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,
Increase /
(Decrease)
2021
2020
Net sales
528
303
74%
Operating income (loss)
95
(47)
300%
Operating income (loss) (% of sales)
17.9%
(15.6%)
Net sales of other products and services increased 74% from $303 million in 2020 to $528 million in 2021,
mainly due to higher sales of energy and excess raw materials and sucker rods, as well as our new oilfield
services business in Argentina which offers hydraulic fracturing and coiled tubing services.
Tenaris S.A. Annual Report 2021
52
Operating results from other products and services
, amounted to a gain of $95 million in 2021, compared to a
loss of $47 million in 2020. In 2020, Others operating income included an impairment charge of $40 million.
The increase in profitability is mainly due to the sucker rods business, our new oil services business and the sale
of excess raw materials and energy.
Selling, general and administrative expenses
, or SG&A, amounted to $1,207 million (18.5% of net sales),
compared to $1,119 million (21.7%) in 2020. During 2021 SG&A includes $16 million of leaving indemnities,
while in 2020 leaving indemnities were $61 million. The 2021 increase in SG&A is mainly due to higher selling
expenses, following the increase in sales.
Impairment charge.
In December 2021, as a result of the expected termination of our NKKTubes joint venture,
we recorded a $57 million impairment on its fixed assets. In 2020 we recorded an impairment charge of $622
million on the carrying value of goodwill and other assets in the United States.
Other operating results
amounted to a gain of $62 million in 2021, compared to a gain of $19 million in 2020.
The gain in 2021 is mainly due to a $36 million recognition of fiscal credits in Brazil and the profit from the sale
of assets.
Financial results
amounted to a gain of $23 million in 2021, compared to a loss of $65 million in 2020. The
variation is mainly explained by a $23 million improvement in net interest income, mainly due to interests from
fiscal credits in Brazil received in the second quarter, and a $64 million improvement in net foreign exchange
results, mainly related to the depreciation of the Euro, the Brazilian real and the Mexican peso in 2020. These
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 $513 million in 2021, compared to
$109 million in 2020. These results were mainly derived from our equity investment in Ternium and Usiminas,
and reflect the good dynamics at the flat steel sector derived from record high steel prices.
Income tax charge amounted to $189 million in 2021, compared to $23 million in 2020, reflecting better results
in several subsidiaries following the increase in activity in 2021.
Net income amounted to $1,053 million in 2021, compared with a net loss of $642 million in 2020. The change
in results reflects the recovery in sales (volumes and prices) following the improvement in the operating
environment, while an increase in raw material and energy costs was partially offset by an improvement in
industrial performance due to the increased levels of activity and utilization of production capacity.
Additionally, our results in 2021 were boosted by an extraordinary contribution from our equity participations,
mainly Ternium, reflecting the good dynamics in the flat steel sector derived from record high steel prices, while
2020 was impacted by a $622 million impairment on the carrying value of goodwill and other assets in the
United States.
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:
Tenaris S.A. Annual Report 2021
53
Millions of U.S. dollars
For the year ended December 31,
2021
2020
2019
Net cash provided by operating activities
119
1,520
1,528
Net cash provided by (used in) investing activities
268
(2,092)
(40)
Net cash used in financing activities
(648)
(375)
(354)
(Decrease) increase in cash and cash equivalents
(261)
(947)
1,134
Cash and cash equivalents at the beginning of year (excluding overdrafts)
585
1,554
427
Effect of exchange rate changes
(6)
(22)
(6)
(Decrease) increase in cash and cash equivalents
(261)
(947)
1,134
Cash and cash equivalents at the end of year (excluding overdrafts)
318
585
1,554
Cash and cash equivalents at the end of year (excluding overdrafts)
318
585
1,554
Bank overdrafts
0
0
0
Other current investments
398
872
210
Non-current investments
313
239
18
Derivatives hedging borrowings and investments
2
8
19
Current borrowings
(220)
(303)
(781)
Non-current borrowings
(111)
(316)
(41)
Net cash at the end of the year
700
1,085
980
Our financing strategy aims to maintain adequate financial resources and access to additional liquidity. During
2021 cash flow provided by operating activities amounted to $119 million (including an increase in working
capital of $1,046 million), our capital expenditures amounted to $240 million, and we paid dividends amounting
to $319 million. At the end of the year, we had a net cash position
5
of $700 million, compared to $1,085 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, the oil & gas industry situation 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, 2021, liquid financial assets as a whole (comprising cash and cash equivalents and other
investments) were 7% of total assets compared to 12% at the end of 2020.
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, 2021, and December 31, 2020, U.S. dollar denominated liquid assets represented 87% and 95%
respectively of total liquid financial assets.
Fiscal Year Ended December 31, 2021, Compared to Fiscal Year Ended December 31, 2020
Operating activities
Net cash provided by operations during 2021 was $119 million, compared to $1,520 million during 2020. This
decrease was mainly attributable to a $1,046 million increase in working capital in 2021, while in 2020 the
decrease in working capital amounted to $1,059 million, offset by an impairment charge of $622 million in
2020. The annual variation in working capital was mainly attributed to an increase of $1,060 million in
inventories related to the recovery in activity, compared to a decrease of $829 million in 2020. For more
information on cash flow disclosures and changes to working capital, see note 29 “Cash flow disclosures” to our
audited consolidated financial statements included in this annual report.
5
Net cash position is a non-IFRS alternative performance measure—please see Exhibit 7.2 for more information on this measure.
Tenaris S.A. Annual Report 2021
54
Investing activities
Net cash provided by investing activities was $268 million in 2021, compared to a net cash used in investing
activities of $2,092 million in 2020. We decreased our financial investments by $390 million in 2021 compared
to an increase of $887 million in 2020. 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 $648 million in 2021, compared to $375 million in 2020.
During 2021 and 2020 we had net repayments of borrowings of $277 million and $239 million respectively.
Dividends paid during 2021 amounted to $319 million and during 2020 amounted to $83 million.
Our total liabilities to total assets ratio was 0.16:1 as of December 31, 2021 and 0.17:1 as of December 31, 2020.
Principal Sources of Funding
During 2021, 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 2021 borrowings decreased by $288 million to $331 million at December 31, 2021, from $619 million at
December 31, 2020.
Borrowings consist mainly of bank loans. As of December 31, 2021, U.S. dollar-denominated borrowings plus
borrowings denominated in other currencies swapped to the U.S. dollar represented 78% 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.
The following table shows the composition of our financial debt at December 31, 2021, 2020 and 2019:
Millions of U.S. dollars
2021
2020
2019
Bank borrowings
331
619
822
Bank overdrafts
0
0
0
Total borrowings
331
619
822
Our weighted average interest rates before tax (considering hedge accounting), amounted to 2.09% at December
31, 2021 and to 2.51% at December 31, 2020.
The maturity of our financial debt is as follows:
Millions of U.S. dollars
At December 31, 2021
1 year or
less
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
Over 5
years
Total
Borrowings
220
107
4
-
-
-
331
Interest to be accrued (*)
2
1
0
-
-
-
3
Total
222
108
4
-
-
-
334
(*)
Includes the effect of hedge accounting.
Our current borrowings to total borrowings ratio amounted to 0.66:1 as of December 31, 2021 and to 0.49:1 as
December 31, 2020. Our liquid financial assets exceeded our total borrowings, we had a net cash position
6
(cash
and cash equivalents, other current and non-current investments, derivatives hedging borrowings and
investments, less total borrowings) of $700 million at December 31, 2021, compared to $1,085 million at
December 31, 2020.
6
Net cash position is a non-IFRS alternative performance measure—please see Exhibit 7.2 for more information on this measure.
Tenaris S.A. Annual Report 2021
55
As of December 31, 2021, lease liabilities amounted to approximately $117.3 million. The amount of remaining
payments with maturity less than 1 year, between 2 and 5 years and more than 5 years is approximately 29.5%,
33.6% and 36.9% of the total remaining payments, respectively.
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 a
udited consolidated financial statements included in this annual
report.
For information regarding the extent to which borrowings are at fixed rates, please see “Quantitative and
Qualitative Disclosure About Market Risk”.
Significant Borrowings
Our most significant borrowings as of December 31, 2021 were as follows:
Millions of U.S. dollars
Borrower
Type
Final
maturity
Original &
Outstanding
Disbursement date
2020
Tamsa
Bilateral
2023
20
2020
Tamsa
Bilateral
2023
80
2020-2021
SSPC
Multiple Banks
2022 - 2024
61
As of December 31, 2021, Tenaris was in compliance with all of its covenants under its significant borrowings,
including financial covenants on leverage ratio.
Tenaris S.A. Annual Report 2021
56
Quantitative and Qualitative Disclosure about Market Risk
The multinational nature of our operations and customer base expose us to a variety of risks, including the
effects of changes in foreign currency exchange rates, interest rates and commodity prices. In order to reduce the
impact related to these exposures, management evaluates exposures on a consolidated basis to take advantage of
natural exposure netting. For the residual exposures, we may enter into various derivative transactions in order
to reduce potential adverse effects on our financial performance. Such derivative transactions are executed in
accordance with internal policies and hedging practices. We do not enter into derivative financial instruments
for trading or other speculative purposes, other than non-material investments in structured products.
The following
information should be read together with section III, “Financial risk management” to our audited
consolidated financial statements included elsewhere in this annual report.
Debt Structure
The following tables provide a breakdown of our debt instruments at December 31, 2021 and 2020 which
included fixed and variable interest rate obligations, detailed by maturity date:
At December 31, 2021
Expected maturity date
2022
2023
2024
2025
2026
Thereafter
Total
(1)
(in millions of U.S. dollars)
Non-current Debt
Fixed rate
-
8
4
-
-
-
12
Variable rate
-
100
-
-
-
-
100
Current Debt
Fixed rate
175
-
-
-
-
-
175
Variable rate
44
-
-
-
-
-
44
219
107
4
-
-
-
331
At December 31, 2020
Expected maturity date
2021
2022
2023
2024
2025
Thereafter
Total
(1)
(in millions of U.S. dollars)
Non-current Debt
Fixed rate
-
29
8
4
-
-
41
Variable rate
-
75
200
-
-
-
275
Current Debt
Fixed rate
197
-
-
-
-
-
197
Variable rate
107
-
-
-
-
-
107
303
104
208
4
-
-
619
(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.
Our weighted average interest rates before tax (considering hedge accounting), amounted to 2.09% at December
31, 2021 and to 2.51% at December 31, 2020.
Our financial liabilities (other than trade payables and derivative financial instruments) consist mainly of bank
loans. As of December 31, 2021, U.S. dollar denominated financial debt plus debt denominated in other
currencies swapped to the U.S. dollar represented 78% 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, 2021, we had variable interest rate debt of $144 million and fixed rate debt of $187 million ($175
million of the fixed rate debt is short-term).
Tenaris S.A. Annual Report 2021
57
Foreign Exchange Rate Risk
We manufacture and sell our products in a number of countries throughout the world and consequently we are
exposed to foreign exchange rate risk. Since the Company’s functional currency is the U.S. dollar, the purpose
of our foreign currency hedging program is mainly to reduce the risk caused by changes in the exchange rates of
other currencies against the U.S. dollar.
Most of our revenues are determined or influenced by the U.S. dollar. In addition, 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 $46 million in 2021, compared to $44 million in 2020.
Our consolidated exposure to currency fluctuations is reviewed on a periodic basis. A number of hedging
transactions are performed in order to achieve an efficient coverage in the absence of operative or natural
hedges. Almost all of these transactions are forward exchange rate contracts.
Because certain subsidiaries have functional currencies other than the U.S. dollar, the results of hedging
activities as reported in the income statement under IFRS may not reflect entirely management’s asse
ssment 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, 2021.
All amounts in millions of U.S. dollars
Currency Exposure
Functional currency
Long / (Short) Position
Argentine Peso
U.S. dollar
(95)
Euro
U.S. dollar
12
Saudi Arabian Riyal
U.S. dollar
(78)
The main relevant exposures as of December 31, 2021 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, U.S.
dollar denominated intercompany liabilities at certain subsidiaries for which functional currency is the Euro, 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 a liability of $13 thousand at
December 31, 2021 and an asset of $8.2 million at December 31, 2020. 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.
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 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. 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.
Tenaris S.A. Annual Report 2021
58
At December 31, 2021, the effective portion of designated cash flow hedges, included in other reserves in
shareholders’ equity amounted to a credit of $1.3 million.
Concentration of credit risk
There is no significant concentration of credit from customers. No single customer comprised more than 10% of
our net sales in 2021 and 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 United States 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, such as the recent
Ukraine-Russia armed conflict, and conflicts affecting the Middle East region, which is home to a substantial
proportion of the world’s known oil reserves. See “Principal Risks and Uncertainties – Risks Relating to Our
Business and Industry – The Russia-Ukraine recent armed conflict may adversely affect our operations”.
On the demand side, economic conditions and the level of oil inventories have traditionally played a role 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
Tenaris S.A. Annual Report 2021
59
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 above their pre-pandemic level with the recovery in demand and actions by
OPEC member countries and other producers (principally Russia) to cut and then gradually increase production
levels. In addition, energy and commodity prices have spiked upwards as result of the armed conflict involving
Russia and Ukraine. Although it is hard to predict how energy and commodity prices will behave as the conflict
unfolds, higher prices are likely. For more information on the impact of the recent armed conflict in Ukraine, see
“
Principal Risks and Uncertainties
–
Risks Relating to Our Business and Industry
–
The Russia-Ukraine recent
armed conflict may adversely affect our operations”.
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 and increasing drilling efficiencies 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 reduced 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 made further substantial reductions in their exploration and production investments, to a level around
40% of the average of the 2012-14 period. Although investments have been increasing again, global spending
on exploration and production remains well below pre-pandemic levels.
Since the development of the prolific Marcellus shale gas play, North American gas prices have remained at low
levels compared to previous decades and relative to other major gas-consuming regions and global LNG prices.
For several years, production increases, primarily from productive shale gas deposits, have exceeded regional
demand increases, reducing the need for imports, to the extent that, in 2017, the United States 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 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 United States has become a major global LNG exporter,
and, over the past year, has brought more new LNG capacity to the international market than any other
producer.
LNG prices mainly reflect supply and demand conditions in Asia, the major LNG-consuming region, although
demand has been increasing in regions like Europe, which imports LNG to supplement its traditional pipeline
imports from Russia and other neighboring gas-producing regions, and South America, which imports LNG in
its winter season and to supplement hydroelectric energy when rainfall is low. 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, entered the market, prices declined
in 2019. With the pandemic, prices reached record lows below $3 per million BTU. In 2021, however, spot
LNG prices reached record highs far exceeding the oil price equivalent for its calorific value, as the combination
of cold Asian and European winters, restrained supply to Europe from Russia, South American drought
conditions and supply outages led to a spike in spot prices which exceeded $35 per million BTU at the end of
2021, which dissipated in January 2022, but has since been affected by Russia-Ukraine armed conflict. US
natural gas prices also increased during 2021 but only as high as $6 per million BTU although, at $4 per million
BTU, they remain above their pre-pandemic levels.
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
Tenaris S.A. Annual Report 2021
60
produce positive cash flow returns. This decline turned into a collapse with the onset of the COVID-19
pandemic in 2020. Since then, there has been a steady recovery through 2021 but activity remains below the
pre-pandemic level. 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. During
2021, drilling activity in Latin America recovered and a more gradual recovery in the rest of the world began.
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. Nevertheless, cost-competitive offshore developments, like those in Brazil
and Guyana, continue to be sanctioned and developed.
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, or
other regulations aimed at reducing the use of fossil fuels, are implemented around the world. In response to the
European Green Deal and the more recent UN Climate Change Conference (“COP26”) held in Glasg
ow in
2021, there has been a substantial 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. For more information on climate change regulations, see “Principal Risks and Uncertainties –
Risks Relating to Our Business and Industry - Climate change legislation and increasing regulatory
requirements aimed at transitioning to a lower-carbon economy could reduce demand for our products and
services and result in unexpected capital expenditures and costs, and negatively affect our reputation.”
On the other hand, we expect that 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. We constantly monitor the evolution of the strategies of our main customers and their scenarios for
future energy demand, considering the global objectives for addressing climate change through the reduction of
carbon emissions and national objectives to achieve carbon-neutrality. We also assess the market outlook for our
products with reference to the different scenarios for oil and gas demand published by our customers,
international agencies such as the IEA and expert energy market consultancies such as Rystad Energy, with
particular reference to scenarios that are consistent with the goals of the Paris Agreement and those focused on
technological change and the rate of adoption of new technologies. These assessments are used as fundamental
input for evaluating our business strategy and how to address the risks and opportunities arising from climate
change.
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.
Rig count
2021
2020
2019
International
(*)
755
825
1,098
Canada
132
89
134
United States
478
433
943
Worldwide
1,365
1,347
2,175
____________________________________________________________________________
(*)
International rig count excludes Iran, Sudan, onshore China, Russia and Syria (discontinued in February 2013).
Tenaris S.A. Annual Report 2021
61
Percentage increase (decrease) over the previous year
2021
2020
International
(*)
(9%)
(25%)
Canada
48%
(33%)
United States
10%
(54%)
Worldwide
1%
(38%)
______________________________________________________________
(*)
International rig count excludes Iran, Sudan, onshore China, Russia and Syria (discontinued in February 2013).
Tenaris S.A. Annual Report 2021
62
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, 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, depending on
the likelihood of occurrence, in some of such cases has accrued a provision for such loss but believes that
publication of this information on a case-by-case basis would seriously prejudice
the Company’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 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 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.
Material Legal Proceedings
Below is a summary description of Tenaris’s material legal proceedings for the year ended December 31, 2021.
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
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
Tenaris S.A. Annual Report 2021
63
declared CSN’s appeal admissible. The Superio
r 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 al
l 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:
x With respect to Chubb’s claim, the court subsequently homologated the above-mentioned settlement
and, accordingly, the claim was finalized.
x 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 BRL82 million (approximately
$14.7 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 BRL70.3 million (approximately $12.6 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. FCPA.
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 S.A. Annual Report 2021
64
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 SEC and the U.S.
Department of Justice
(“DOJ”) in October 2016.
In July 2019, the public prosecutors’ office of Milan, Italy, completed a preliminary investigation into the
alleged payments and included the Company’s Chairman and Chief Executive Officer, two other board
members, Gianfelice R
occa and Roberto Bonatti, and the Company’s controlling shareholder, San Faustin, in
the investigation. The Company is not a party to the proceedings. On March 22, 2022, upon completion of the
evidentiary phase of the trial, the acting prosecutor requested the first-instance court in Milan in charge of the
case to impose sanctions on our Chairman and Chief Executive Officer, on the other two board members, and on
San Faustin. The Company’s outside counsel in Italy has advised the Company that neither the ca
se file nor the
prosecutor’s request contain or identify any evidence of involvement in, or knowledge of, the alleged
wrongdoing by any of the three directors. The Company has also been advised that the defendants are scheduled
to present their arguments before the court on April 19, 2022, that the court may issue its decision on April 26,
2022, and that the grounds for any such decision may not be immediately available. Any decision by the first-
instance court may be appealed by either party before a higher court.
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. The proceedings are underway. 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 is now proceeding 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.
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
Tenaris S.A. Annual Report 2021
65
of an unfavorable resolution, Confab may appeal before the courts. The estimated amount of this claim is
BRL57.5 million (approximately $10.3 million). At this stage, the Company cannot predict the outcome of this
claim.
U.S. patent infringement litigation
Tena
ris Coiled Tubes, LLC (“TCT”), a U.S. subsidiary of the Company, was sued in 2017 by its competitor
Global Tubing, alleging defamatory conduct by TCT and seeking a declaration that certain Global Tubing
products do not infringe patents held by TCT. TCT subsequently counterclaimed that certain Global Tubing
products infringe patents held by TCT, Global Tubing has since sought to invalidate such patents. On December
13, 2019, Global Tubing filed an amended complaint (including the Company as defendant), alleging that TCT
and the Company misled the patent office in order to monopolize the coiled tubing market for quench and
tempered products. On March 26, 2021, a magistrate to the principal judge in the case found that Global Tubing
had established a prima facie case that TCT had misled the patent office by failing to disclose a previous attempt
to quench and temper coiled tubing. On April 9, 2021, TCT filed its objections to the magistrate’s ruling with
the principal judge in the case. On August 25, 2021, the p
rincipal judge in the case affirmed the magistrate’s
order and found possible evidence of intent to commit fraud on the patent office. Such determination is not final.
TCT is considering several avenues to challenge this decision. TCT believes that it has meritorious defenses to
this claim. Trial was expected to take place in May 2022 but is likely to be postponed. 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 mainly referred to the compensation for certain intercompany
transactions involving Dalmine in connection with sales of products and R&D activities. As of December 31,
2021, the claim amounted to approximately EUR26.5 million (approximately $30 million), comprising
EUR20.7 million (approximately $23.5 million) in principal and EUR5.8 million (approximately $6.5 million)
in interest and penalties.
On June 14, 2021, Dalmine received the tax assessment related to fiscal year 2015 with respect to the same
matters. The tax assessment confirms the preliminary determination included in the tax report issued by the tax
authority in 2019. As of December 31, 2021, these additional claims amount to approximately EUR10.3 million
(approximately $11.7 million), comprising EUR8 million (approximately $9 million) in principal and EUR2.3
million (approximately $2.7 million) in interest and penalties.
The aggregate amount claimed for fiscal years 2014 and 2015 is approximately EUR36.8 million
(approximately $41.7 million) comprising EUR28.7 million (approximately $32.5 million) in principal and
EUR8.1 million (approximately $9.2 million) in interest and penalties.
On July 27, 2020, Dalmine filed a first-instance appeal before the Milan tax court against the 2014 tax
assessment. The hearing on this appeal, originally scheduled on June 21, 2021, has been postponed to May 9,
2022. 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.
Product liability litigation
The Company’s U.S. subsidiary, IPSCO, or its subsidiaries, are parties to product liability claims, which may
result in damages for an aggregate amount estimated at approximately $15.5 million, mainly related to 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 S.A. Annual Report 2021
66
U.S. Antidumping Duty and Countervailing Duty Investigations
On October 27, 2021, the DOC announced the initiation of antidumping duty investigations of OCTG from
Argentina, Mexico, and Russia and countervailing duty investigations of OCTG from Russia and South Korea.
The investigations were initiated on the basis of a petition by U.S. Steel Tubular Products, Inc., a small number
of other U.S. domestic welded OCTG producers, and a steelworkers’ union. On November 22, 2021, the ITC
made a preliminary determination of injury, allowing the investigations to proceed. The investigations are
currently proceeding, with final determinations by DOC and the ITC likely to occur in the second half of 2022.
Tenaris, which imports OCTG from Argentina and Mexico to complement its significant and continuously
growing production in the United States, believes that the petition, the DOC initiation and the preliminary
determination of injury are unjustified and is vigorously challenging any claim that its imports are unfairly
traded or are causing or threatening injury to the U.S. domestic OCTG industry.
At this time, the Company cannot predict the outcome of this matter or estimate the potential impact, if any, that
the resolution of this matter may have on the Company’s business.
Tenaris S.A. Annual Report 2021
67
Recent Developments
The Russia-Ukraine armed conflict and its impact on Tenaris’s operations and financial condition
On February 24, 2022, Russia launched a military attack on Ukraine. In response, the United States, the
European Union and the United Kingdom have imposed a wave of sanctions against certain Russian institutions,
companies and citizens. The Russian Government has retaliated by banning airlines from its airspace and has
ordered economic counter measures, including restrictions on residents transferring foreign currency abroad.
Russia is a major supplier of oil and gas in Europe and worldwide, and Russia and Ukraine are both major
global suppliers of internationally traded steelmaking raw materials and semi-finished steel products. For
example, prior to the conflict, Russia was producing between 10-
12% of the world’s oil, s
upplying as much as
40% of the EU’s natural gas, while Russia and Ukraine combined were accounting for around 50% of
internationally traded pig iron, around 30% of internationally traded semi-finished steel products, and a large
proportion of internationally traded ferroalloys used in steelmaking.
As a result of the armed conflict and related sanctions, oil and gas prices have spiked upwards and foreign trade
transactions involving Russian and Ukrainian counterparties have been severely affected. For example, oil
prices rose to approximately $130 per barrel and European gas prices rose above $60 per million BTU in the
immediate aftermath of the invasion, but have since fallen back to around $120/bbl and $30 per million
BTU. Although it is hard to predict how energy and commodity prices will behave as the conflict unfolds,
higher prices and even shortages of energy and raw materials used in our steelmaking operations (including
natural gas and electric energy, particularly in Europe, steel scrap, pig iron, DRI, HBI, ferroalloys, steel bars,
coils and plates) are likely if there is a severe disruption in energy supplies to Europe or in foreign trade
transactions in steel making raw materials involving Russian and Ukrainian counterparties.
Our purchases of raw materials from Russia and Ukraine, used in our production process, mainly ferroalloys for
our global operations and pig iron for our European operations, amounted to approximately $34 million in 2021.
We are seeking supplies from alternative sources in response to the interruption in supplies from Ukraine and
the impact of sanctions on supplies from Russia and may be forced to pay higher prices to secure the raw
materials we require for our steelmaking operations.
Our sales to Russian customers represented approximately 0.2% of our global sales in 2021. We have suspended
sales to our Russian customers and purchases from Russian suppliers that would breach applicable sanctions. In
addition, we have a representative office in Moscow, which currently employs 10 people. Tenaris is exploring
alternatives with respect to potential relocation or closure of such office.
In light of the armed conflict involving Russia and Ukraine and the designation of Severstal’s controlling
shareholder as person subject to EU and UK sanctions, we are currently assessing the amount to be written off
from our investment in the joint venture in Russia, which as of December 31, 2021 amounted to $16.8 million.
Discontinuity of industrial equipment manufacturing in Brazil
On March 21, 2022, the Company announced its decision to reorganize the activities at its Confab
Equipamentos industrial facility in Moreira César, Pindamonhangaba, São Paulo, Brazil. The Company’s
Brazilian subsidiaries will discontinue the manufacturing of industrial equipment and will focus their activities
entirely on the production of welded products, sucker rods, coatings and accessories. The Company estimates
that this decision will not have a material effect on its financial condition and results of operations.
Tenaris S.A. Annual Report 2021
68
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 art
icles of association. As a Luxembourg
company listed on 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 its corporate
governance practices meet, in all material respects, the corporate governance standards that are generally
required for controlled companies by all of
the exchanges on which the Company’s securities trade.
For a summary of the significant ways in which the Company’s corporate governance practices differ from the
corporate governance standards required for controlled companies by the exchanges on which t
he Company’s
shares are traded, please visit our website at: https://www.tenaris.com/en/corporate-governance-practices/
The Company has adopted a general code of conduct incorporating guidelines and standards of integrity and
transparency applicable to all directors, officers and employees. As far as the nature of each relation permits, all
principles detailed in the code of conduct also apply to relations with our contractors, subcontractors, suppliers
and associated persons. In addition, the Company has adopted a code of ethics for senior financial officers,
which is intended to supplement the Company’s code of conduct, and applies specifically to the principal
executive officer, the principal financial officer, the principal accounting officer or controller, as well as persons
performing similar functions.
Our code of conduct and our code of ethics for senior financial officers are posted on our 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 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
Tenaris S.A. Annual Report 2021
69
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 o
f 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
Tuesday, May 3, 2022, at 3:30 P.M., Central European Time.
The articles of association provide the annual general shareholder’s meetings shall meet in 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. See
“Principal Risks and Uncertainties – Risk Factors – Risks Relating to shares and ADSs – Holders of ADSs may
not be able to exercise, or may encounter difficulties in the exercise of, certain rights afforded to shareholders”.
ADS holders may not attend or directly exercise voting rights in shareholders’ meetings, but holders of record of
our ADSs as of the relevant ADS 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 ADSs at such meeting. Holders of ADSs maintaining non-certificated positions must follow voting
instructions given by their broker or custodian bank.
The notice to the annual general shareholders meeting to be held on May 3, 2022, and the Shareholder Meeting
Brochure and Proxy Statement for the meeting, describing the procedures voting at the meetings applicable to
shareholders is available 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.
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:
x the delisting of the shares from all stock exchanges where the shares are listed at that time,
x 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),
x a sale, lease, exchange or other disposition of all or substantially all of the Company’s assets,
Tenaris S.A. Annual Report 2021
70
x
an amendment of our articles of association that has the effect of materially c
hanging the Company’s
corporate purpose,
x the relocation of the Company’s domicile outside of the Grand Duchy of Luxembour
g, or
x amendments to the Company’s articles of association that restrict the rights of the Company’s
shareholders;
Dissenting or absent shareholders have the right to have their shares repurchased by the Company at (i) the
average market value of the sha
res over the 90 calendar days preceding the applicable shareholders’ meeting or
(ii) in the event that the 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:
x
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 approve
d
the delisting;
and
x 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.
Distribution of Assets on Winding-Up
In the event of the Company’s liquidation, dissolution or winding-up, the net assets remaining after allowing for
the payment of all debts, charges 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.
Tenaris S.A. Annual Report 2021
71
Repurchase of Company shares
The Company may repurchase its own shares in the cases and subject to the conditions set by the 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 eleven 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. Board of directors’ meetings can be validly held by means of teleconference call, video
conference or any other means genuinely allowing for the participation, interaction and intercommunication of
the attending directors. Written decisions, signed by all the directors, are proper and valid as though they had
been taken at a meeting of the board of directors duly convened and held. In 2021, the Company’s board of
directors met ten times and adopted one unanimous written resolution. 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 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 May 3, 2021, 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.
On May 3, 2021, the Company’s annual general shareholders’ meeting re-appointed Mr. Simon Ayat, 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 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 2021 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.
Tenaris S.A. Annual Report 2021
72
Name
Position
Principal Occupation
Years as
Board
Member
Age at
December
31, 2021
Mr. Simon Ayat
Director
Director of Tenaris
2
67
Mr. Roberto Bonatti
(1)
Director
Director of San Faustin
19
72
Mr. Carlos Condorelli
Director
Director of Tenaris and Ternium
15
70
Mr. Germán Curá
Director
Director and Vice Chairman of the Board of Tenaris
4
59
Mr. Roberto Monti
Director
Director of YPF S.A.
17
82
Mr. Gianfelice Mario Rocca
(1)
Director
Chairman of the board of directors of San Faustin
19
73
Mr. Paolo Rocca
(1)
Director
Chairman and Chief Executive Officer of Tenaris
20
69
Mr. Jaime José Serra Puche
Director
Chairman of S.A.I. Derecho & Economía
19
70
Mr. Yves Speeckaert
Director
Director of Tenaris
5
61
Ms. Mónica Tiuba
Director
Director of Tenaris and Chairperson of Tenaris Audit Committee
4
43
Mr. Guillermo Vogel
Director
Director and Vice Chairman of the Board of Tenaris
19
71
(1)
Paolo Rocca and Gianfelice Mario Rocca are brothers, and Roberto Bonatti is Paolo and Gianfelice Mario
Rocca’s first cousin.
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 as senior strategic advisor to
the chief executive officer of Schlumberger until January 2022. 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 Oilfield 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.
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.
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 Freyr S.A. 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 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 and of the advisory board of Politecnico di Milano. At
Tenaris S.A. Annual Report 2021
73
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.
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 of its Forest and Climate Change Fund and she is also a member of Freyr
Battery’s board of directors and chairperson of the audit and risk committee. 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.
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 during three different periods as president of Cámara Nacional de la Industria del
Hierro y el Acero (“CANACERO”), the Steel Chamber in Mexico, where he is currently a member of the
Executive Commission. He also served as vice chairman of the board of the American Iron and Steel Institute
(“AISI”). Mr. Vogel is also a member of the board of directors of each of Techint, S.A. de C.V., Alfa S.A.B. de
C.V., Banco Santander (Mexico) S.A., the Universidad Panamericana – IPADE, Corporación Mexicana de
Inversiones de Capital S.A., Innovare R&D S.A. de C.V and Club de Industriales, A.C. In addition, he is a
member of The Trilateral Commission and member of the International Board of The Manhattan School of
Music and chairman of the US-Mexico CEO Dialogue. Mr. Vogel is a Mexican citizen.
Board members Ayat, Monti, Serra Puche, Speeckaert and Tiuba 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, and in accordance with applicable laws, regulations, and
the Company’s articles of association. Directors are also bound by a general duty of care owed to the Company.
Under the Luxembourg law of August 10, 1915, on commercial companies, as amended (the “Luxembourg
Company Law”), directors may be liable to the Company in accordance with general law for the execution of
their mandate and for any misconduct in the management of the Company’s affairs. Directors are jointly and
Tenaris S.A. Annual Report 2021
74
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.
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 at least 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:
x is not and has not been employed by us or our subsidiaries in an executive capacity for the preceding five
years;
x 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;
x 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;
x 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
x is not a spouse, parent, sibling or relative up to the third degree of any of the above persons.
The audit committee of the Company’s board of directors currently consists of three members: Mr. Roberto
Monti, Mr. Jaime José Serra Puche and Ms. Mónica Tiuba, who were appointed to the audit committee by the
Company’s board of directors on May 3, 2021. As of the date of this annual report, all members of the audit
Tenaris S.A. Annual Report 2021
75
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 qualifie
s as “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 amended and restated by the board of directors on October 8,
2021. 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.
In addition, the audit committee is required to review and, where applicable, approve material transactions
between the Company or its subsidiaries and related parties, as provided in the Company’s articles of
association, or as may be required by any law, rule or regulation applicable to the Company, in order to
determine whether their terms are consistent with the interests of the Company and all its shareholders and are
consistent with market conditions or are otherwise fair to the Company and its subsidiaries. The Company has
adopted a Related Party Transactions Policy and Procedure setting forth the revised, updated and consolidated
guidelines and processes through which the Company identifies, approves and manages related party
transactions, seeking to assure transparency and substantial and procedural fairness of such transactions, as well
as compliance with the provisions in the Company’s articles of association and the audit committee charter
relating to transactions with related parties, Luxembourg and NYSE rules relating to the approval and disclosure
of material related party transactions.
Under the Company’s articles of association, as supplemented by the Related Party Transactions Policy and
Procedure, a “related party” is any of the following persons: (i) any affiliate of the Company; (ii) any entity in
which a controlling person owns a substantial interest or over which a controlling person can exercise
significant influence; (iii) any unconsolidated entity in which the Company has significant influence; (iv) any
entity or individual having significant influence over the Company, or a close family member of any such
individual; (v) any individual or entity that is the beneficial owner of five percent (5%) or more of the shares of
the Company, including through the ownership of any securities representing shares of the Company; (vi) any
director or executive officer of any of the controlling persons, the Company or any of the subsidiaries, or a close
family member of any such director or executive officer; (vii) any entity in which a substantial interest in the
voting power is owned, directly or indirectly, by any person described in (iv), (v) or (vi) above or over which
such a person is able to exercise significant influence; or (viii) any entity that has a member of key management
in common with the Company or any of its subsidiaries (provided that key management personnel includes
persons having authority and responsibility for planning, directing and controlling the activities of an entity,
including directors and executive officers and close family members of any such individuals).
With respect to the materiality threshold for review and approval of related party transactions, the Company’s
articles of association, as supplemented by the audit committee’s charter and the Related Party Transactions
Policy and Procedure, provide that the following related party transactions, which are qualified as “Level 1”
related party transactions, are subject to review by the audit committee, which shall make a recommendation to
the board of directors as to either reject or approve the proposed related party transaction:
x any transaction between the Company or its subsidiaries with related parties (i) with an individual value
equal to or greater than $10 million, or its equivalent in other currencies, or (ii) with an individual value
lower than $10 million, or its equivalent in other currencies, when the aggregate sum reflected in the
financial statements of the four fiscal quarters 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; and
x any corporate reorganization transaction (including a merger, spin-off or bulk transfer of a business)
affecting the Company or any of its subsidiaries for the benefit of, or involving, a related party.
Tenaris S.A. Annual Report 2021
76
In addition, any related party transaction that does not qualify as a “Level 1” related party transaction, but whi
ch
has an individual value equal to or higher than such value threshold as management may from time to time
determine as material to the Company for disclosure purposes under
“Related Party Transactions”
of this annual
report, qualifies as a “Level 2” rela
ted party transaction and must be reviewed by the audit committee for
purposes of making a determination as to whether any conflicts of interest exist and whether the proposed
related party transaction is consistent with the interests of the Company and all shareholders, in order to either
reject or approve the proposed transaction. Any related party transaction that is less than such value qualifies as
a “Level 3” related party transaction and is reviewed by the Company’s related
-party transaction unit, the area
within the Company responsible for centralizing and compiling the information relating to all related party
transactions and performing the review, assessment and other procedures contemplated in the Related Party
Transactions Policy and Procedure.
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. In no event may any proposed related
party transaction be entered into or otherwise be given effect unless it has been reviewed and approved in
accordance with the Related Party Policy and Procedure. Any executed transaction that has not been duly
reviewed and approved must be promptly submitted for review in accordance with applicable procedures and, if
determined appropriate, must be ratified; if the transaction is not ratified, it must be modified to make it
acceptable for ratification or it must otherwise be immediately discontinued or rescinded.
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 a
uditors 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, invest
igate 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 preventive measures and mitigating actions in response to
the COVID-19 outbreak and the global economic crisis and potential cyberattacks. In addition, the CRC has also
worked on climate change related risks. For more information on climate change, its impact on the Company
and the Company’s response, see “Principal Risks and Uncertainties – Risks Relating to Our Business and
Industry – Climate change legislation and increasing regulatory requirements aimed at transitioning to a lower-
carbon economy could reduce demand for our products and services and result in unexpected capital
expenditures and costs, and negatively affect our reputation” and “ Principal Risks and Uncertainties – Risks
Relating to Our Business and Industry – The physical risks resulting from climate change, including extreme
weather conditions and shifts in weather patterns, have in the past and may in the future adversely affect our
operations and financial results;” and “Operating and Financial Review and Prospects – Overview – Climate
Change”.
Tenaris S.A. Annual Report 2021
77
Senior Management
Our current senior management as of the date of this annual report consists of:
Name
Position
Age at
December 31, 2021
Mr. Paolo Rocca
Chairman and Chief Executive Officer
69
Ms. Alicia Móndolo
Chief Financial Officer
63
Mr. Antonio Caprera
Chief Industrial Officer
61
Mr. Gabriel Casanova
Chief Supply Chain Officer
63
Mr. Alejandro Lammertyn
Chief Digital and Information Officer
56
Ms. Paola Mazzoleni
(1)
Chief Human Resources Officer
45
Mr. Marcelo Ramos
Chief Technology Officer
58
Mr. Vicente Manjarrez
President, Andean
43
Mr. Luca Zanotti
President, United States
54
Mr. Sergio de la Maza
President, Mexico
65
Mr. Ricardo Prosperi
President, Canada
59
Mr. Renato Catallini
President, Brazil
55
Mr. Javier Martínez Alvarez
President, Southern Cone
55
Mr. Gabriel Podskubka
President, Eastern Hemisphere
48
Mr. Michele Della Briotta
President, Europe
49
(1)
As of January 1, 2022, Paola Mazzoleni was replaced by Luis Scartascini as the new Chief Human Resources Officer
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.
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, a position
he assumed in 2020. 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, Eastern Hemisphere area manager and strategic planning director. Mr. Lammertyn is an Argentine
citizen.
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.
Tenaris S.A. Annual Report 2021
78
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.
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.
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.
Luis Scartascini. Mr. Scartascini currently serves as our Chief Human Resources Officer, a position he assumed
on January 1, 2022. After receiving a degree in industrial engineering, he started his career in Siderca in 1997
and then moved to Houston in 2003 to be part of the company’s commercial office in the United States. In 2005
he moved back to Argentina to serve as the director of the Global Trainee program before heading to Dubai in
2010 to lead the Middle Eastern Business Unit and later support the acquisition of Saudi Steel Pipes. He
returned to the United States in 2018 as commercial vice president and played a leading role in the commercial
integration of IPSCO. Mr. Scartascini is an Argentine and Italian citizen.
Tenaris S.A. Annual Report 2021
79
Directors and senior management compensation
The compensation payable to the members of the Company’s board of directors for the performance of their
services to the Company is determined at the annual ordinary general shareholders’ meeting. The general
meeting of shareholders held on May 3, 2021, approved the compensation paid to directors for the performance
of their duties during the fiscal year 2021 and resolved that (i) each director receive a fixed compensation for an
amount of $115,000; (ii) each director wh
o is also a member of the Company’s audit committee receives an
additional fee of $55,000; and (iii) the chairperson of the Company’s audit committee receives an additional fee
of $10,000. No variable compensation has been paid or shall be payable to directors for services rendered during
the year 2021 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 the chief executive officer for the performance of
his duties during the year 2021 amounts to $8.5 million, of which $3 million corresponds to fixed compensation
and $5.5 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 2021
amounted to $37.7 million. This amount includes cash benefits paid to certain senior managers in connection
with pre-existing retirement plans. In addition, directors and senior managers received for the year 2021, 382
thousand units for a total amount of $3.9 million in connection with the employee retention and long-term
incentive
program described in note II.P.3 “
Accounting Policies - Employee benefits - Other long
term benefits”
to our audited consolidated financial statements included in this annual report.
The Luxembourg 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.
In addition, on March 30, 2022, the Company’s board of directors approved the 2021 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, 2022.
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
Tenaris S.A. Annual Report 2021
80
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 t
he 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 undertak
en by the external auditor.
The shareholders’ meeting held on
May 3, 2021, re-
appointed PwC Luxembourg as the Company’s independent
approved statutory auditor for the fiscal year ended December 31, 2021. At the next annual general
shareholders’ meeting
scheduled to be held on May 3, 2022, it will be proposed that PwC Luxembourg be re-
appointed as the Company’s independent approved statutory auditors for the fiscal year ending December 31,
2022.
Fees Paid to the Company’s External Auditor
In 2021 and 2020, 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, 2021 and December 31,
2020 are detailed below.
For the year ended December 31,
Thousands of U.S. dollars
2021
2020
Audit Fees
3,804
3,781
Audit-Related Fees
220
134
Tax Fees
-
102
All Other Fees
5
-
Total
4,029
4,017
Audit Fees
Audit fees are 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 SEC or other regulatory filings.
Audit-Related Fees
Audit-related fees are typically referred to services that are reasonably related to the performance of the audit or
review of the consolidated financial statements of the Company, or the statutory financial statements of the
Company and its subsidiaries and are not reported under the audit fee item above. This item includes fees for
attestation services on financial information of the Company and its subsidiaries included in annual reports filed
with the applicable regulators.
Tax Fees
Fees paid for tax compliance and tax advice professional services.
All Other Fees
Fees paid for the support in the development of 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 policy, 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
Tenaris S.A. Annual Report 2021
81
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. 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
Number of
Shares Held
Guillermo Vogel
850,446
Carlos Condorelli
67,211
Gabriel Podskubka
3,946
Total
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.
Identity of Person or Group
Number
Percent
San Faustin
(1)
713,605,187
60.45%
Directors and senior management as a group
921,603
0.08%
Public
466,010,040
39.47%
Total
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.
Information required under the Luxembourg Law on takeovers of May 19, 2006
The Company is a société anonyme organized under the laws of the Grand Duchy of Luxembourg, registered
under the number B85 203 in the Luxembourg Régistre de Commerce et des Sociétés. 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’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
Tenaris S.A. Annual Report 2021
82
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 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.
Amendments to 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 NYSE. 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”.
Tenaris S.A. Annual Report 2021
83
Related Party Transactions
Tenaris is a party to several related party transactions as described in mote 30
“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
Ternium to unrelated third parties. These transactions include:
x Purchases of round steel bars made under a long-term agreement, for use in our seamless steel pipe
operations in Mexico, which amounted to $157 million in 2021 and $51 million in 2019.
x Purchases of flat steel products for use in the production of welded pipes and accessories, which
amounted to $32 million in 2021, $13 million in 2020 and $20 million in 2019.
x Purchases of scrap and other raw materials for use in the production of seamless pipes, which amounted
to $9 million in 2021, $2 million in 2020 and $4 million in 2019.
In the ordinary course of business, we purchase flat steel products from Usiminas for use in our welded steel
pipe operations. These purchases, which are made on similar terms and conditions as sales made by Usiminas to
unrelated third parties, amounted to $27 million in 2021, $20 million in 2020 and $59 million in 2019.
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 sales to other unrelated third parties. These
transactions include:
x Sales of ferrous scrap, and other raw materials, which amounted to $36 million in 2021, $15 million in
2020 and $17 million in 2019.
x Sales of steam and operational services from our Argentine electric power generating facility in San
Nicolás. These sales amounted to $1 million in 2019.
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 owns the remaining 50%, 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 or under the significant influence of totaled $76 million in 2021, $9
million in 2020 and $16 million in 2019.
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. Ternium and Tenaris currently contract 78% and 22%, respectively,
Tenaris S.A. Annual Report 2021
84
of Techgen’s power capacity. Techgen sells to third
parties on behalf of Tenaris the unused electricity that
Tenaris purchased from Techgen.
Techgen net sales of electricity to Tenaris amounted to $70 million in 2021, $48 million in 2020 and $40 million
in 2019.
Supply of Natural Gas
We are party to contracts with Tecpetrol, TGN and Litoral Gas 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. San Faustin holds significant but non-
controlling interests in Litoral Gas 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 $32 mil
lion in 2021, $12 million in 2020 and $49 million
in 2019.
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 $2 million in 2021, $3 million in
2020 and $4 million in 2019.
Litoral Gas’s sales to Tenaris totaled $1 million in 2019.
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 $7 million
in 2021, $13 million in 2020 and $47 million in 2019.
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 the significant influence of San Faustin amounted to $77 million in 2021, $22
million in 2020 and $66 million in 2019.
Sales of Fracking and Coiled Tubing Services
In 2021, we started to provide fracking and coiled tubing services to Tecpetrol and joint ventures in which
Tecpetrol participates, for its oil and gas drilling operations. Our sales of these services to other companies
controlled or under the significant influence of San Faustin amounted to $45 million in 2021.
Rental services to Tecpetrol related to the supply of coiled tubing services amounted to $3 million in 2021.
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 2021, 2020 and 2019.
Tenaris S.A. Annual Report 2021
85
Administrative Services, Legal and Other Support Services
Finma S.A. (“Finma”), a company controlled by San Faustin in which Tenaris has a 33% interest and other
affiliates of San Faustin own the remaining shares, provides administrative and legal support services to San
Faustin’s affiliates in Argentina, including Tenaris. During 2021 Techinst S.A., a company controlled by San
Faustin, merged with Finma, with Finma continuing to render the services previously provided by Techinst S.A.
Fees accrued for these services amounted to $10 million in 2021, $7 million in 2020 and $9 million in 2019.
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, 2021,
2020 and 2019 amounted to $58 million. These loans generated interest gains in favor of Tenaris in an amount
of $3 million in 2021 and 2020 and $4 million in 2019.
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 $1 million in 2021 and $2 million in 2019.
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 S.A. Annual Report 2021
86
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.
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 2
1 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, shares or other assets, only to such registered
holder, or otherwise in accordance wi
th 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.
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 – The Company’s dividend payments depends on the results of operations and financial condition
of its subsidiaries and could be restricted by legal, contractual or other limitations or tax changes”.
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, 2021, the Company’s legal reserve
represented 10% of its share capital. The legal reserve is not available for distribution.
The following table shows the dividends approved by the Company’s shareholders in the last five years:
Approved dividend
Dividend payment date
Shareholders’ meeting date
Amount
(USD million)
Per
share (USD)
Per ADS
(USD)
Interim
Dividend
Dividend
Balance
May 3, 2017
484
0.41
0.82
November 2016
May 2017
May 2, 2018
484
0.41
0.82
November 2017
May 2018
May 6, 2019
484
0.41
0.82
November 2018
May 2019
June 2, 2020
153
0.13
0.26
November 2019
N/A
May 3, 2021
248
0.21
0.42
November 2020
May 2021
On February 16, 2022, the Company’s board of directors proposed, for the approval of the annual general
shareholders’ meeting scheduled to be held on May 3, 2022, the payment of an annual dividend of $0.41 per
share ($0.82 per ADS), or approximately $484 million, which includes the interim dividend of $0.13 per share
($0.26 per ADS) or approximately $153 million, paid on November 24, 2021. If the annual dividend is approved
by the shareholders, a dividend of $0.28 per share ($0.56 per ADS), or approximately $331 million will be paid
on May 25, 2022, with an ex-dividend date of May 23, 2022.
Tenaris S.A. Annual Report 2021
87
Employees
The following table shows the number of persons employed by Tenaris as of December 31:
2021
2020
2019
Mexico
5,474
4,501
5,370
Argentina
5,169
4,376
5,405
USA
2,684
1,596
2,255
Italy
2,011
2,039
2,144
Brazil
1,817
1,360
1,360
Romania
1,725
1,552
1,815
Colombia
1,009
746
1,040
Canada
758
561
772
Indonesia
506
521
616
Japan
379
399
400
Other Countries
1,244
1,377
2,023
22,776
19,028
23,200
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 regulations. We forge our relations with the unions based on the
premise of an open dialogue and a rich interchange of proposals.
Tenaris is committed to leading with care, providing a flexible and agile working environment that encourages
health, safety and wellbeing, accountability, inclusion and trust, allowing employees to develop their skills and
careers while contributing to our goals.
In terms of human resources our goals are:
• to foster trust and empower employees to manage and promote change and innovation, providing them
with the training and technological resources to succeed;
• to embed sustainability values through transparent and effective processes, helping employees shape
their professional careers;
• to encourage continuous learning and feedback through concrete tools; and
• to respect and promote diversity and inclusion in all its forms, focused on gender, age, culture and
background.
The disruption and uncertainty brought by the COVID pandemic, which continues to affect countries around the
world as new variants of the virus emerge, has reset work trends. As we begin to move out of pandemic mode to
a more flexible set-up, we are focusing on restructuring relationships with the workplace and with each other as
part of our “New Way of Working”, incorporating plans to make our offices new and attractive places to interact
and feel part of the organization, reshaping our own talent management, engagement and planning strategies.
Our “New Way of Working” strategy recognizes the need for a new work-life paradigm in the context of the
many possibilities offered by hybrid work and learning, with increasing demand for new critical competencies.
Flexibility at all levels benefits the quality of people’s lives and work when focus is placed on achieving
objectives and productivity rather than hours spent in the workplace. It brings a greater sense of accountability,
as we trust people’s professional responsibility and commitment.
The ramp-up in activity, particularly at our U.S operations, in response to the recovery in demand, has led to a
substantial increase in employees during the year, with shop-floor employees increasing by 4,000 from October
2020 until the end of 2021. We reinforced health, safety and environment training to ensure all employees
received training to minimize incidents and accidents while keeping quality and productivity levels high on the
production lines. Annual training hours for shop-floor employees with less than one year of seniority came to an
average of 56 per person, three times higher than for those with over one year of seniority.
Tenaris S.A. Annual Report 2021
88
Diversity and Inclusion
The Company’s Code of Conduct prohibits unlawful discrimination in employment relationships, granting all
people the right to apply for a position in Tenaris, or to be considered for a new position based on merit, without
arbitrary discrimination. The Company’s Human Resources Policy champions equal opportunities by ensuring
that hiring, promotion, transfer, notice periods, dialogue, rights and protection, as well as other employment
decisions are taken without regard for race, color, religious belief, gender, age, disability, national origin or
sexual orientation. Compensation and remuneration are based on each person’s duties, personal perf
ormance,
competence and behavior. Tenaris pursues a policy of inclusive corporate culture and leadership, recognizing
the range of benefits brought by embracing diversity in all its aspects, from gender to nationality and age.
Specifically, we are making headway in our drive to improve the gender balance, in the knowledge that tackling
the male-dominated traditions prevalent in the steel industry will contribute positively to our performance
culture.
Tenaris S.A. Annual Report 2021
89
Non-financial Information
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, as well as the information required
pursuant to Article 8 of Regulation (EU) 2020/852 of the European Parliament and of the Council,
supplemented by Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 and Commission
Dele
gated Regulation (EU) 2021/2178 of 6 July 2021, has been published in a separate report, the “2021
Sustainability Report”, dated as of the date of this annual report and available on
www.tenaris.com
https://ir.tenaris.com/financial-and-sustainability-reports/reports
Tenaris S.A. Annual Report 2021
90
MANAGEMENT CERTIFICATION
We confirm, to the best of our knowledge, that:
1.
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;
2.
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
3.
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.
Chief Executive Officer
Paolo Rocca
March 30, 2022
Chief Financial Officer
Alicia Móndolo
March 30, 2022
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
91
FINANCIAL INFORMATION
Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)
R.C.S. Luxembourg B 65 477 - TVA LU25482518
92
Audit report
To the Shareholders of
Tenaris S.A.
Report on the audit of the consolidated financial statements
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 2021, and of its consolidated financial performance and its consolidated cash flows for
the year then ended 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.
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:
● the consolidated statement of financial position as at 31 December 2021;
● the consolidated income statement 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 notes to the consolidated financial statements, which include a summary of significant
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 the 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 the 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, including International Independence Standards, issued by the International Ethics
Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by the CSSF together with
93
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.
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 and its controlled undertakings, if
applicable, for the year ended 31 December 2021, are disclosed in Note 31 to the consolidated financial
statements.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the consolidated financial statements of the current period. These matters were addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Recoverability of long-lived assets
The Group’s balance sheet includes goodwill
(USD 1,085 million) and other long
-lived assets
(USD 5,825 million of
property, plant and
equipment and USD 288 m
illion of intangible
assets). The Group is required to test the
amount of goodwill and other indefinite life
intangible assets for impairment at least
annually. Other long
-lived assets are tested in
case of impairment triggers.
During the year, Management has tested for
impairment those cash generating units (CGUs)
containing goodwill and indefinite life
intangibles and those where impairment
indicators were identified. We focused our audit
effort on the Siderca S.A.I.C. and Tubos de
Acero de México S.A.
CGUs (respectively
“Siderca” and “Tamsa”).
The impairment tests w
ere important to our
audit as
they involved significant judgements
and assumptions in the assessment of the
recoverable amounts of the CGUs and required
significant audit effort.
The disclosures related to this matter are
included in Notes II.H, 5, 10 and 11 to the
consolidated financial statements.
We evaluated and tested controls in place over the
analysis of impairment indicators on long
-lived
assets, the review of assumptions used and the
discounted cash flow calculations.
In addition, we assessed the robustness of the
impairment indicators analysis and the cash flow
projections included in the impairment tests
prepared by Management. Our audit procedures
included, among others, the involvement of
professionals with speciali
sed skills and knowledge
to assist us in evaluating certain assumptions and
the valuation methodology used by the Group.
We assessed the reasonableness of other
assumptions
used in the cash flow projections by:
• comparing them to external and historical data,
when available, such as analyst reports and
evolution of rig counts; and by
• analyzing sensitivities in the valuation model,
evaluating whether a reasonably possible change
in assumptions could cause the carrying amount to
exceed its recoverable amount.
We also compared actual cash flow results with
previous forecasts.
94
We finally assessed the adequacy of the
disclosures in the consolidated financial
stat
ements.
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 consolidated financial statements and our audit report
thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements 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.
Responsibilities of the Board of Directors and those charged with governance for the
consolidated financial statements
The Board of Directors is responsible for the preparation and fair presentation of the consolidated
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 determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing
the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Board of Directors either intends
to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
The Board of Directors is responsible for presenting and marking up the consolidated financial
statements in compliance with the requirements set out in the Delegated Regulation 2019/815 on
European Single Electronic Format (“ESEF Regulation”).
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 assurance, but is not a guarantee that an audit conducted in
accordance with the 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
95
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.
As part of an audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016 and
with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
● 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 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 Group’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;
● conclude on the appropriateness of the Board of Directors’ use of the going concern basis of
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 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 audit evidence obtained up
to the date of our audit report. However, future events or conditions may cause the Group to cease
to continue as a going concern;
● evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation;
● obtain sufficient appropriate audit evidence regarding the financial information of the entities 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.
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
internal control that we identify during our audit.
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 applicable, actions
taken to eliminate threats or safeguards applied.
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 period and
96
are therefore the key audit matters. We describe these matters in our audit report unless law or
regulation precludes public disclosure about the matter.
We assess whether the consolidated financial statements have been prepared, in all material respects,
in compliance with the requirements laid down in the ESEF Regulation.
Report on other legal and regulatory requirements
The consolidated management report is consistent with the consolidated financial statements 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 consolidated financial statements and has been
prepared in accordance with applicable legal requirements.
We have been appointed as “Réviseur d’Entreprises Agréé” by the General Meeting of the Shareholders
on 3 May 2021 and the duration of our uninterrupted engagement, including previous renewals and
reappointments, is 20 years.
We have checked the compliance of the consolidated financial statements of the Group as at
31 December 2021 with relevant statutory requirements set out in the ESEF Regulation that are
applicable to consolidated financial statements.
For the Group it relates to the requirement that:
● the consolidated financial statements are prepared in a valid XHTML format;
● the XBRL markup of the consolidated financial statements uses the core taxonomy and the common
rules on markups specified in the ESEF Regulation.
In our opinion, the consolidated financial statements of the Group as at 31 December 2021, identified
as Tenaris AR-2021-12-31-en, have been prepared, in all material respects, in compliance with the
requirements laid down in the ESEF Regulation.
PricewaterhouseCoopers, Société coopérative
Represented by
@esig
@esig
Gilles Vanderweyen
Luxembourg, 30 March 2022
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
97
CONSOLIDATED INCOME STATEMENT
(all amounts in thousands of US dollars, unless otherwise stated)
Year ended December 31,
Notes
2021
2020
2019
Continuing operations
Net sales
1
Cost of sales
2
(4,611,602 )
(4,087,317 )
(5,107,495 )
Gross profit
Selling, general and administrative expenses
3
(1,206,569 )
(1,119,227 )
(1,365,974 )
Impairment charge
5
(57,075 )
(622,402 )
Other operating income
6
Other operating expenses
6
(6,697 )
(14,252 )
(11,199 )
Operating income (loss)
(663,071 )
Finance income
7
Finance cost
7
(23,677 )
(27,014 )
(43,381 )
Other financial results
7
(56,368 )
Income (loss) before equity in earnings of non-consolidated companies and
income tax
(728,066 )
Equity in earnings of non-consolidated companies
13
Income (loss) before income tax
(619,267 )
Income tax
8
(189,448 )
(23,150 )
(202,452 )
Income (loss) for the year
(642,417 )
Attributable to:
Owners of the parent
(634,418 )
Non-controlling interests
(46,873 )
(7,999 )
(11,428 )
(642,417 )
Earnings per share attributable to the owners of the parent during the year:
Weighted average number of ordinary shares (thousands)
Continuing operations
Basic and diluted earnings (losses) per share (U.S. dollars per share)
(0.54 )
Basic and diluted earnings (losses) per ADS (U.S. dollars per ADS) (*)
(1.07 )
(*) Each ADS equals two shares.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(all amounts in thousands of U.S. dollars)
Year ended December 31,
2021
2020
2019
Income (loss) for the year
(642,417 )
Items that may be subsequently reclassified to profit or loss:
Currency translation adjustment
(81,953 )
(27,294 )
Change in value of cash flow hedges and instruments at fair value
(1,178 )
(9,832 )
Income tax relating to components of other comprehensive income
(1,511 )
(707 )
From participation in non consolidated companies:
- Currency translation adjustment (*)
(11,085 )
(31,977 )
(10,781 )
- Changes in the fair value of derivatives held as cash flow hedges and others
(95,714 )
(7,469 )
(34,931 )
Items that will not be reclassified to profit or loss:
Remeasurements of post employment benefit obligations
(4,971 )
(9,272 )
Income tax on items that will not be reclassified
(5,137 )
Remeasurements of post employment benefit obligations of non-consolidated companies
(9,878 )
(3,567 )
(17,605 )
Other comprehensive (loss) for the year, net of tax
(82,374 )
(11,036 )
(52,536 )
Total comprehensive income (loss) for the year
(653,453 )
Attributable to:
Owners of the parent
(643,435 )
Non-controlling interests
(45,490 )
(10,018 )
(11,373 )
(653,453 )
(*) For 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
the U.S. dollar and IAS 29 is no longer applicable.
in other comprehensive income as a currency translation adjustment. In 2020 Ternium changed the functional currency of its Argentine subsidiary to
the U.S. dollar and IAS 29 is no longer applicable.
The accompanying notes are an integral part of these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
98
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(all amounts in thousands of U.S. dollars)
At December 31, 2021
At December 31, 2020
Notes
ASSETS
Non-current assets
Property, plant and equipment, net
10
Intangible assets, net
11
Right-of-use assets, net
12
Investments in non-consolidated companies
13
Other investments
19
Derivative financial instruments NCA
25
Deferred tax assets
21
Receivables, net
14
Current assets
Inventories, net
15
Receivables and prepayments, net
16
Current tax assets
17
Trade receivables, net
18
Derivative financial instruments CA
25
Other investments
19
Cash and cash equivalents
19
Total assets
EQUITY
Capital and reserves attributable to owners of the parent
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Borrowings
20
Lease liabilities
12
Deferred tax liabilities
21
Other liabilities
22 (i)
Provisions
23
Current liabilities
Borrowings
20
Lease liabilities
12
Derivative financial instruments CL
25
Current tax liabilities
17
Other liabilities
22 (ii)
Provisions
24 (ii)
Customer advances
Trade payables
Total liabilities
Total equity and liabilities
Contingencies, commitments and restrictions on the distribution of profits are disclosed in note 26 to these Consolidated Financial Statements.
The accompanying notes are an integral part of these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
99
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(all amounts in thousands of U.S. dollars)
Attributable to owners of the parent
Share
Capital (1)
Legal
Reserves
Share
Premium
Currency
Translation
Adjustment
Other
Reserves (2)
Retained
Earnings (3)
Total
Non-
controlling
interests
Total
Balance at December 31, 2020
(958,374 )
(345,217 )
Income (loss) for the year
-
-
-
-
-
(46,873 )
Currency translation adjustment
-
-
-
(81,674 )
-
-
(81,674 )
(279 )
(81,953 )
Remeasurements of post employment benefit obligations, net of taxes
-
-
-
-
(15 )
(287 )
Change in value of instruments at fair value through other
comprehensive income and cash flow hedges, net of taxes
-
-
-
-
(4,638 )
-
(4,638 )
(2,689 )
From other comprehensive income of non-consolidated companies
-
-
-
(11,085 )
-
(7,243 )
-
(7,243 )
Other comprehensive (loss) income for the year
-
-
-
(92,759 )
(15 )
(83,757 )
(82,374 )
Total comprehensive income (loss) for the year
-
-
-
(92,759 )
(45,490 )
Acquisition and other changes in non-controlling interests
(4)
-
-
-
-
-
-
-
Dividends paid in cash
-
-
-
-
-
(318,744 )
(318,744 )
(3,355 )
(322,099 )
Balance at December 31, 2021
(1,051,133 )
(336,200 )
(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, 2021 there were 1,180,536,830 shares issued. All issued shares are
fully paid.
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.
hedges and the changes in financial instruments measured at fair value through other comprehensive income.
(3) The restrictions on the distribution of profits and payment of dividends according to Luxembourg Law are disclosed in note 26 (iii) to these Consolidated Financial Statements.
(4) Mainly related to the agreement for the construction of Tenaris Baogang Baotou Steel Pipes Ltd. See note 35 to these Consolidated Financial Statements.
The accompanying notes are an integral part of these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
100
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONT.)
(all amounts in thousands of U.S. dollars)
Attributable to owners of the parent
Share
Capital (1)
Legal
Reserves
Share
Premium
Currency
Translation
Adjustment
Other
Reserves (2)
Retained
Earnings
Total
Non-
controlling
interests
Total
Balance at December 31, 2019
(957,246 )
(336,902 )
(Loss) for the year
-
-
-
-
-
(634,418 )
(634,418 )
(7,999 )
(642,417 )
Currency translation adjustment
-
-
-
-
-
Remeasurements of post employment benefit obligations, net of taxes
-
-
-
-
(4,664 )
(4,236 )
(4,201 )
Change in value of instruments at fair value through other
comprehensive income and cash flow hedges, net of taxes
-
-
-
-
(5,079 )
-
(5,079 )
(2,377 )
(7,456 )
From other comprehensive income of non-consolidated companies
-
-
-
(31,977 )
-
(30,551 )
-
(30,551 )
Other comprehensive (loss) income for the year
-
-
-
(1,128 )
(8,317 )
(9,017 )
(2,019 )
(11,036 )
Total comprehensive (loss) for the year
-
-
-
(1,128 )
(8,317 )
(633,990 )
(643,435 )
(10,018 )
(653,453 )
Acquisition and other changes in non-controlling interests
(3)
-
-
-
-
-
Dividends paid in cash
-
-
-
-
-
(82,637 )
(82,637 )
(5,301 )
(87,938 )
Balance at December 31, 2020
(958,374 )
(345,217 )
(all amounts in thousands of U.S. dollars)
Attributable to owners of the parent
Share
Capital (1)
Legal
Reserves
Share
Premium
Currency
Translation
Adjustment
Other
Reserves (2)
Retained
Earnings
Total
Non-
controlling
interests
Total
Balance at December 31, 2018
(919,248 )
(322,310 )
Income (loss) for the year
-
-
-
-
-
(11,428 )
Currency translation adjustment
-
-
-
(27,217 )
-
-
(27,217 )
(77 )
(27,294 )
Remeasurements of post employment benefit obligations, net of taxes
-
-
-
-
(7,132 )
-
(7,132 )
(595 )
(7,727 )
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
-
-
-
(10,781 )
(9,066 )
-
(19,847 )
-
(19,847 )
Other comprehensive (loss) income for the year
-
-
-
(37,998 )
(14,593 )
-
(52,591 )
(52,536 )
Total comprehensive income (loss) for the year
-
-
-
(37,998 )
(14,593 )
(11,373 )
Acquisition and other changes in non-controlling interests
(4)
-
-
-
-
-
Dividends paid in cash
-
-
-
-
-
(484,020 )
(484,020 )
(1,807 )
(485,827 )
Balance at December 31, 2019
(957,246 )
(336,902 )
(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 and 2019 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.
financial instruments measured at fair value through other comprehensive income.
(3) Mainly related to the agreement for the construction of Tenaris Baogang Baotou Steel Pipes Ltd. See note 35 to these Consolidated Financial Statements.
(4) Mainly related to Saudi Steel Pipe Company (“SSPC”) acquisition.
The accompanying notes are an integral part of these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
101
CONSOLIDATED STATEMENT OF CASH FLOWS
(all amounts in thousands of U.S. dollars)
Year ended December 31,
Notes
2021
2020
2019
Cash flows from operating activities
Income (loss) for the year
(642,417 )
Adjustments for:
Depreciation and amortization
10, 11 & 12
Impairment charge
5
Income tax accruals less payments
29(ii)
(117,214 )
(193,417 )
Equity in earnings of non-consolidated companies
13
(512,591 )
(108,799 )
(82,036 )
Interest accruals less payments, net
29(iii)
(11,363 )
(538 )
(4,381 )
Changes in provisions
23 & 24(ii)
(13,175 )
Result of sale of subsidiaries
6
(6,768 )
Changes in working capital
29(i)
(1,045,907 )
Currency translation adjustment and others
(52,393 )
Net cash provided by operating activities
Cash flows from investing activities
Capital expenditures
10 & 11
(239,518 )
(193,322 )
(350,174 )
Changes in advance to suppliers of property, plant and equipment
(5,075 )
(1,031 )
Proceeds from sale of subsidiaries, net of cash
6
Acquisition of subsidiaries, net of cash acquired
33
(1,025,367 )
(132,845 )
Investment in companies under cost method
(692 )
(2,933 )
Additions to associated companies
(19,610 )
Repayment of loan by non-consolidated companies
Proceeds from disposal of property, plant and equipment and
intangible assets
Dividends received from non-consolidated companies
13
Changes in investments in securities
(887,216 )
Net cash provided by (used in) investing activities
(2,092,264 )
(40,392 )
Cash flows from financing activities
Dividends paid
9
(318,744 )
(82,637 )
(484,020 )
Dividends paid to non-controlling interest in subsidiaries
(3,355 )
(5,301 )
(1,872 )
Changes in non-controlling interests
Payments of lease liabilities
12
(48,473 )
(48,553 )
(41,530 )
Proceeds from borrowings
Repayments of borrowings
(1,121,053 )
(896,986 )
(1,159,053 )
Net cash used in financing activities
(647,957 )
(375,319 )
(353,758 )
(Decrease) increase in cash and cash equivalents
(260,985 )
(947,200 )
Movement in cash and cash equivalents
At the beginning of the year
Effect of exchange rate changes
(5,531 )
(22,492 )
(6,231 )
(Decrease) increase in cash and cash equivalents
(260,985 )
(947,200 )
At December 31,
At December 31,
Cash and cash equivalents
2021
2020
2019
Cash and bank deposits
Bank overdrafts
20
(60 )
(98 )
(24 )
The accompanying notes are an integral part of these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
102
INDEX TO THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
I
GENERAL INFORMATION
IV
OTHER NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1
Segment information
II
ACCOUNTING POLICIES
2
Cost of sales
A
Basis of presentation
3
Selling, general and administrative expenses
B
Group accounting
4
Labor costs (included in Cost of sales and in Selling, general
and administrative expenses)
C
Segment information
5
Impairment charge
D
Foreign currency translation
6
Other operating income and expenses
E
Property, plant and equipment
7
Financial results
F
Intangible assets
8
Income tax
G
Right-of-use assets and lease liabilities
9
Dividends distribution
H
Impairment of non-financial assets
10
Property, plant and equipment, net
I
Other investments
11
Intangible assets, net
J
Inventories
12
Right-of-use assets, net and lease liabilities
K
Trade and other receivables
13
Investments in non-consolidated companies
L
Cash and cash equivalents
14
Receivables - non current
M
Equity
15
Inventories, net
N
Borrowings
16
Receivables and prepayments, net
O
Current and deferred income tax
17
Current tax assets and liabilities
P
Employee benefits
18
Trade receivables, net
Q
Provisions
19
Cash and cash equivalents and other investments
R
Trade and other payables
20
Borrowings
S
Revenue recognition
21
Deferred income tax
T
Cost of sales and other selling expenses
22
Other liabilities
U
Earnings per share
23
Non-current allowances and provisions
V
Financial instruments
24
Current allowances and provisions
25
Derivative financial instruments
III
FINANCIAL RISK MANAGEMENT
26
Contingencies, commitments and restrictions on the
distribution of profits
27
Cancellation of title deed in Saudi Steel Pipe Company
A
Financial risk factors
28
Foreign exchange control measures in Argentina
B
Category of financial instruments and
classification within the fair value hierarchy
29
Cash flow disclosures
C
Fair value estimation
30
Related party transactions
D
Accounting for derivative financial instruments
and hedging activities
31
Fees paid to the Company's principal accountant
32
Principal subsidiaries
33
Business combinations
34
Nationalization of Venezuelan subsidiaries
35
Other relevant information
36
The COVID-19 pandemic, the oil & gas industry situation and
their impact on Tenaris’s operations and financial condition
37
38
Subsequent events
Update as of March 30, 2022
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
103
I. GENERAL INFORMATION
) 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 sub
sidiaries is included in note 32 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 16, 2022.
II. ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these Consolidated Financial Statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise stated.
A Basis of presentation
The Consolidated Financial Statements of Tenaris have been prepared in accordance with International Financial
Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) and 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); contingencies (note II.Q); allowance for trade
receivables (note II.K); defined benefit obligations (note II.P); business combinations (notes II.B, IV.33); useful
lives of property, plant and equipment and other long-lived assets (notes II.E, II.F, II.H); fair value estimation of
certain financial instruments (notes III.B, IV.34) and property title ownership restriction (note IV.27). During the
period there were no material changes in the significant accounting estimates.
The Company is carefully assessing the potential impact of climate change and the energy transition on its business
in terms of the risks to its markets and its physical assets and is adapting its business strategy accordingly. These
events did not impact materially management judgements and estimates used in the preparation of these
Consolidated Financial Statements.
Management has reviewed the Company’s exposure to the effects of the COVID-19 pandemic and its impact over
its business, financial position and performance, conducting impairment tests and monitoring the recoverability of
long lived assets and deferred taxes, financial risk management, in particular credit and liquidity risks and the
adequacy of its provisions for contingent liabilities. For more information see note 36 to these Consolidated
Financial Statements.
(1) Accounting pronouncements applicable as from January 1, 2021 and relevant for Tenaris
Interest Rate Benchmark Reform – Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Leases
On August 27, 2020, the IASB published Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
of the Interest Rate Benchmark Reform. The amendments complement those issued in 2019 and focus on the effects
on financial statements when a company replaces the old interest rate benchmark with an alternative benchmark rate
as a result of the reform.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
104
A Basis of presentation (Cont.)
(1) Accounting pronouncements applicable as from January 1, 2021 and relevant for Tenaris (Cont.)
Interest Rate Benchmark Reform
–
Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Leases
(Cont.)
The amendments are effective for annual periods beginning on or after January 1, 2021, and are to be applied
retrospectively, with early adoption permitted. The adoption of these amendments did not have a material impact on
the Company’s
Consolidated Financial Statements.
Other accounting pronouncements that became effective during 2021 have no
material effect on the Company’s
financial condition or results of operations.
Certain newly published accounting standards, amendments to accounting standards and interpretations are not
mandatory for December 31, 2021 reporting periods and have not been early adopted by the Company. These
standards, amendments or interpretations are not expected to have a material impact in the current or future reporting
periods and on foreseeable future transactions.
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.
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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
105
B Group accounting (Cont.)
(2) Non-consolidated companies
Non-consolidated companies are all entities in which Tenaris has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in non-consolidated
companies (associated and joint ventures) are accounted for by the equity method of accounting and are initially
recognized at cost. The Company’s investment in non
-consolidated companies includes goodwill identified in
acquisition, net of any accumulated impairment loss.
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 are 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.
a) Ternium
At December 31, 2021, 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 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.àr.l, a wholly owned
subsidiary of San Faustin and Ternium’s main shareholder, dated January 9, 2006, Techint Holdings S.àr.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.
b) Usiminas
At December 31, 2021, 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.
At December 31, 2021, 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%.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
106
B Group accounting (Cont.)
(2) Non-consolidated companies (Cont.)
b) Usiminas (Cont.)
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 D
irectors 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.
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 Conf
ab 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).
c) 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).
d) 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 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, 2021, 2020 and 2019, no impairment provisions were recorded in any of the aforementioned
investments. See note 13 to these Consolidated Financial Statements.
C Segment information
The Company is organized in one major business segment, Tubes, which is also the reportable operating segment.
The Tubes segment includes the production and sale of both seamless and welded steel tubular products and related
services mainly for the oil and gas industry, particularly oil country tubular goods (“OCTG”) used in drilling
operations, and for other industrial applications with production processes that consist in the transformation of steel
into tubular products. Business activities included in this segment are mainly dependent on the oil and gas industry
worldwide, as this industry is a major consumer of steel pipe products, particularly OCTG used in drilling activities.
Demand for steel pipe products from the oil and gas industry has historically been volatile and depends primarily
upon the number of oil and natural gas wells being drilled, completed and reworked, and the depth and drilling
conditions of these wells. Sales are generally made to end users, with exports being done through a centrally
managed global distribution network and domestic sales are made through local subsidiaries.
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, oilfield services, energy and raw materials that exceed internal requirements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
107
C Segment information (Cont.)
Tenaris’s Chief Operating Decision Maker (“CODM”) holds month
ly meetings with senior management, in which
operating and financial performance information is reviewed, including financial information that differs from IFRS
principally as follows:
The use of direct cost methodology to calculate the inventories, while under IFRS it is at full cost, including
absorption of production overheads and depreciations;
The use of costs based on previously internally defined cost estimates, while, under IFRS, costs are calculated
at historical cost, mainly on a FIFO basis;
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
geogra
phical areas based on the customer’s location; allocation of assets, capital expenditures and associated
depreciations and amortizations are based on the geographical location of the assets.
D Foreign currency translation
(1) Functional and presentation currency
IAS 21 (revised), “The effects of changes in foreign exchange rates” defines the functional currency as the currency
of the primary economic environment in which an entity operates.
The functional and presentation currency of the Company is the U.S. dollar. The U.S. dollar is the currency that best
reflects the economic substance of the underlying events and circumstances relevant to Tenaris’s global operations.
Except for the Brazilian and Italian subsidiaries whose functional currencies are their local currencies, Tenaris
determined that the functional currency of its other subsidiaries is the U.S. dollar, based on the following principal
considerations:
Sales are mainly negotiated, denominated and settled in U.S. dollars. If priced in a currency other than the U.S.
dollar, the sales price 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.
(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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
108
D Foreign currency translation (Cont.)
(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 the Consolidated Income Statement as a gain or loss from the sale following IAS
21.
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 (revised), “Borrowing Costs”. Assets for which borrowing costs
are capitalized are those that require a substantial period of time to prepare for their intended use.
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
No Depreciation
Buildings and improvements
30-50 years
Plant and production equipment
10-40 years
Vehicles, furniture and fixtures, and other equipment
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 2021 and 2019.
Tenaris depreciates each significant part of an item of property, plant and equipment for its different production
facilities that (i) can be properly identified as an independent component with a cost that is significant in relation to
the total cost of the item, and (ii) has a useful operating life that is different from another significant part of that
same item of property, plant and equipment.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of assets and are
recognized under Other operating income or Other operating expenses in the Consolidated Income Statement.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
109
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.
Management’s re
-estimation of assets useful lives, performed in accordance with IAS 38, resulted in additional
amortization expenses for 2020 for $11.1 million and did not materially affect amortization expenses for 2021 and
2019.
(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, 2021, 2020 and 2019, 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 2021, 2020 and 2019.
(4) Research and development
Research expenditures as well as development costs that do not fulfill the criteria for capitalization are recorded as
Cost of sales in the Consolidated Income Statement as incurred. Research and development expenditures included
in Cost of sales for the years 2021, 2020 and 2019 totaled $45.3 million, $41.8 million and $61.1 million,
respectively.
Capitalized costs were not material for the years 2021, 2020 and 2019.
(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”).
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
110
F Intangible assets (Cont.)
(5) Customer relationships (Cont.)
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.
As of December 31, 2021
the net book value of IPSCO’s customer relationship
amounts to $25.7 million with a residual
useful life of 1 year
, SSPC’s customer rela
tionship amounts to $54.7 million, with a residual useful life of 6 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 affect amortization
expenses for 2021, 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.
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.
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.
In determining the lease term, management considers all facts and circumstances that create an economic incentive
to exercise an extension option or early termination, or not to 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).
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.
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.
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 are tested more frequently if events or
circumstances indicate that the carrying amount value may be impaired. In some circumstances where there have
not been significant changes to CGU assets and liabilities as well as external and internal events which could
materially alter the recoverable amount of the CGU, the impairment test is not repeated annually.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
111
H Impairment of non-financial assets (Cont.)
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
, economic and
regulatory factors, such as the cost of raw materials, oil and gas prices, 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 l
ess 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.
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.
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 to these Consolidated Financial Statements.
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.
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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
112
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.
In the Consolidated Statement of Financial Position, bank overdrafts are included in Borrowings in current liabilities.
For the purposes of the Consolidated Statement of Cash Flows, Cash and cash equivalents includes overdrafts.
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, 2021, 2020 and 2019 are 1,180,536,830
with a par value of $1.00 per share with one vote each. All issued shares are fully paid.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
113
M Equity (Cont.)
(3) Dividends distribution by the Company to shareholders
Dividends distributions are recorded in the Company’s financial statements when Company’s shareholders have the
right to receive the payment, or when interim dividends are approved by the Board of Directors in accordance with
the by-laws of the Company.
Dividends may be paid by the Company to the extent that it has distributable retained earnings, calculated in
accordance with Luxembourg law. See note 26 (iii) to these Consolidated Financial Statements.
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 inco
me 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 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 in the Consolidated Statement of
Comprehensive Income, depending on the account to which the original amount was charged or credited.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
114
P Employee benefits
(1) Short-term obligations
Liabilities for wages and salaries a
re 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.
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,
2021 the outstanding liability for this plan amounts to $37.7 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, 2021 the outstanding liability for this plan amounts to $13.5
million.
Funded retirement benefit plan held in the U.S. for the benefit of some employees hired prior a certain date,
frozen for the purposes of credited service as well as determination of final average pay for the retirement benefit
calculation. Plan assets consist primarily of investments in equities and money market funds. Additionally, an
unfunded postretirement health and life plan is present that offers limited medical and life insurance benefits to
the retirees, frozen to new participants. As of December 31, 2021 the outstanding liability for these plans
amounts to $10.6 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, 2021 the plan was overfunded and the net assets related
to this plan amounted to $4.6 million.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
115
P Employee benefits (Cont.)
(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 u
nits 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, 2021 and 2020, the outstanding liability corresponding to the Program amounts to $84.2 million
and $82.4 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, 2021 and 2020, is $99.6 million
and $108.7 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.
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 to these Consolidated Financial Statements.
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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
116
S Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and rendering of
ser
vices 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 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 an
y 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.
Tenaris provides services related to goods sold, which represent a non-material portion of sales revenue and mainly
include:
Pipe Management Services: This comprises mainly preparation of the pipes ready to be run, delivery to the customer,
storage services and rig return.
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).
Freights: the Company recognized the revenue on a pro rata basis considering the units delivered and time elapsed.
Field services: the revenue is recognized considering output methods, in particular surveys of service completion
provided by the customer.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
117
S Revenue recognition (Cont.)
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:
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.
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.
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.
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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
118
V Financial instruments (Cont.)
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:
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.
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.
Equity instruments are subsequently measured at fair value.
Accounting for derivative financial instruments and hedging activities is included within the Section III, Financial
Risk Management.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
119
III. FINANCIAL RISK MANAGEMENT
The multinational nature of Tenaris’s operations and customer base exposes the Company to a variety of risks,
mainly related to market risks (including the effects of changes in foreign currency exchange rates and interest rates),
credit risk and capital market risk. In order to manage the volatility related to these exposures, 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 0.03 as of December 31, 2021 and 0.05 as of December 31, 2020. 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 currenc
y 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 to these Consolidated Financial
Statements.
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,
2021 and 2020.
All amounts Long / (Short) in thousands of U.S. dollars
As of December 31,
Currency Exposure / Functional currency
2021
2020
Argentine Peso / U.S. dollar
(95,073)
(39,561)
Euro / U.S. dollar
12,462
(291,362)
Saudi Arabian Riyal / U.S. dollar
(77,853)
(125,789)
The main relevant exposures correspond to:
Argentine Peso / U.S. dollar
As of December 31, 2021 and 2020 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 $1 million and $0.4 million as
of December 31, 2021 and 2020 respectively.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
120
A. Financial Risk Factors (Cont.)
(ii) Foreign exchange risk (Cont.)
Euro / U.S. dollar
As of December 31, 2021, consisting primarily of U.S. dollar-denominated intercompany liabilities at certain
subsidiaries whose functional currency is the Euro, and 2020, 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 $0.1 million and $2.9 million as of
December 31, 2021 and 2020, 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, 2021 and 2020 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, 2021 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 $3.1
million (including a loss / gain of $0.5 million due to foreign exchange derivative contracts), which would
be partially offset by c
hanges to Tenaris’s net equity position of
$0.2 million. For balances held as of December 31,
2020, a simultaneous 1% favorable / unfavorable movement in the foreign currencies exchange rates relative to the
U.S. dollar, would have generated a pre-tax gain / loss of $5.1 million (including a loss / gain of $1 million due to
foreign exchange derivative contracts), which would have been partially offset by changes to Tenaris’s net equity
position of $2.3 million.
(iii) Interest rate risk
Tenaris is subject to interest rate risk on its investment portfolio and its debt. The Company uses a mix of variable
and fixed rate debt in combination with its investment portfolio strategy. The Company may choose to enter into
foreign exchange derivative contracts and / or interest rate swaps to mitigate the exposure to changes in the interest
rates.
The following table summarizes the proportions of variable-rate and fixed-rate debt as of each year end.
As of December 31,
2021
2020
Amount in thousands of
U.S. dollars
%
Amount in thousands of
U.S. dollars
%
Fixed rate (*)
187,036
57%
237,320
38%
Variable rate
143,897
43%
381,687
62%
Total
330,933
619,007
(*) Out of the $187 million fixed rate borrowings, $175.2 million are short-term.
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 $5.2 million in 2021 and $7.1 million in 2020.
(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 2021, 2020 and 2019.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
121
A. Financial Risk Factors (Cont.)
(iv) Credit risk (Cont.)
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, 2021 and 2020 trade receivables amounted to $1,299.1 million and $968.1 million respectively.
Trade receivables have guarantees under credit insurance of $175.8 million and $134.9 million, letter of credit and
other bank guarantees of $17.8 million and $47.8 million, and other guarantees of $2.2 million and $8.8 million as
of December 31, 2021 and 2020 respectively.
As of December 31, 2021 and 2020, overdue trade receivables amounted to $209.6 million and $195.9 million,
respectively. As of December 31, 2021 and 2020, overdue guaranteed trade receivables amounted to $10.6
million
and $20.7 million; and the allowance for doubtful accounts amounted to $47.1 million and $53.7 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 securities.
Counterparties for derivatives and cash transactions are limited to high credit quality financial institutions, normally
investment grade.
Approximately 77% of Tenaris’s liquid financial assets corresponded to Investment Grade-rated instruments as of
December 31, 2021, in comparison with approximately 88% as of December 31, 2020.
(vi) Liquidity risk
Tenaris financing strategy aims to maintain adequate financial resources and access to additional liquidity. During
2021, 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 7% and 12%
of total assets at the end of 2021 and 2020, respectively.
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, 2021 Tenaris holds $6 million in direct exposure to financial instruments issued
by European sovereign counterparties, while it had no exposure to such instruments at the end of 2020.
Tenaris holds its investments primarily in U.S. dollars. As of December 31, 2021 and 2020, U.S. dollar denominated
liquid assets plus investments denominated in other currencies hedged to the U.S. dollar represented approximately
87% and 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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
122
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).
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, 2021 and 2020.
(all amounts in thousands of U.S. dollars)
Carrying
amount
Measurement Categories
At Fair Value
December 31, 2021
Amortized
Cost
FVOCI
FVPL
Level 1
Level 2
Level 3
Assets
Cash and cash equivalents
318,127
212,430
-
105,697
105,697
-
-
Other investments
397,849
239,742
158,107
-
158,107
-
-
Fixed income (time-deposit, zero
coupon bonds, commercial papers)
239,742
239,742
-
-
-
-
-
Certificates of deposits
94,414
94,414
-
-
-
-
-
Commercial papers
30,062
30,062
-
-
-
-
-
Other notes
115,266
115,266
-
-
-
-
-
Bonds and other fixed income
158,107
-
158,107
-
158,107
-
-
Non - U.S. government securities
10,660
-
10,660
-
10,660
-
-
Corporates securities
147,447
-
147,447
-
147,447
-
-
Derivative financial instruments
11,315
-
-
11,315
-
11,315
-
Other Investments Non-current
320,254
-
312,619
7,635
312,619
-
7,635
Bonds and other fixed income
312,619
-
312,619
-
312,619
-
-
Other investments
7,635
-
-
7,635
-
-
7,635
Trade receivables
1,299,072
1,299,072
-
-
-
-
-
Receivables C and NC (*)
302,164
85,220
48,659
-
-
-
48,659
Other receivables
133,879
85,220
48,659
-
-
-
48,659
Other receivables (non-financial)
168,285
-
-
-
-
-
-
Total
1,836,464
519,385
124,647
576,423
11,315
56,294
Liabilities
Borrowings C and NC
330,933
330,933
-
-
-
-
-
Trade payables
845,256
845,256
-
-
-
-
-
Finance Lease Liabilities C and
NC
117,285
117,285
-
-
-
-
-
Derivative financial instruments
11,328
-
-
11,328
-
11,328
-
Total
1,293,474
-
11,328
-
11,328
-
(*) Includes balances related to interest in Venezuelan companies. See note 34 to these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
123
B. Category of financial instruments and classification within the fair value hierarchy (Cont.)
(all amounts in thousands of U.S. dollars)
Carryin
g
amount
Measurement Categories
At Fair Value
December 31, 2020
Amortized
Cost
FVOCI
FVPL
Level 1
Level 2
Level 3
Assets
Cash and cash equivalents
584,681
486,498
-
98,183
98,183
-
-
Other investments
872,488
763,697
108,791
-
108,791
-
-
Fixed income (time-deposit, zero
coupon bonds, commercial papers)
763,697
763,697
-
-
-
-
-
U.S. Sovereign Bills
97,982
97,982
-
-
-
-
-
Non - U.S. Sovereign Bills
14,586
14,586
-
-
-
-
-
Certificates of deposits
222,132
222,132
-
-
-
-
-
Commercial papers
268,737
268,737
-
-
-
-
-
Other notes
160,260
160,260
-
-
-
-
-
Bonds and other fixed income
108,791
-
108,791
-
108,791
-
-
Non - U.S. government securities
20,219
-
20,219
-
20,219
-
-
Corporates securities
88,572
-
88,572
-
88,572
-
-
Derivative financial instruments
11,449
-
-
11,449
-
11,449
-
Other Investments Non-current
247,082
-
239,422
7,660
239,422
-
7,660
Bonds and other fixed income
239,422
-
239,422
-
239,422
-
-
Other investments
7,660
-
-
7,660
-
-
7,660
Trade receivables
968,148
968,148
-
-
-
-
-
Receivables C and NC (*)
232,152
90,330
48,659
-
-
-
48,659
Other receivables
138,989
90,330
48,659
-
-
-
48,659
Other receivables (non-financial)
93,163
-
-
-
-
-
-
Total
2,308,673
396,872
117,292
446,396
11,449
56,319
Liabilities
Borrowings C and NC
619,007
619,007
-
-
-
-
-
Trade payables
462,105
462,105
-
-
-
-
-
Finance Lease Liabilities C and
NC
257,343
257,343
-
-
-
-
-
Derivative financial instruments
3,217
-
-
3,217
-
3,217
-
Total
1,338,455
-
3,217
-
3,217
-
(*) Includes balances related to interest in Venezuelan companies. See note 34 to these Consolidated Financial Statements.
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 34 to these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
124
B. Category of financial instruments and classification within the fair value hierarchy (Cont.)
The following table presents the changes in Level 3 assets:
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
At the beginning of the year
56,319
55,581
Addition / (decrease)
219
(3,604)
Increase due to business combinations
-
3,915
Currency translation adjustment and others
(244)
427
At the end of the year
56,294
56,319
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 99.6% and 100.0% of its carrying amount
(including interests accrued) in 2021 and 2020 respectively. Fair values were calculated using standard valuation
techniques for floating rate instruments and comparable market rates for discounting cash flows.
The carrying amount of investments valuated at amortized cost approximates its fair value.
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 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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
125
D. Accounting for derivative financial instruments and hedging activities (Cont.)
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, 2021 and 2020, the effective portion of designated cash flow hedges which
is included in
Other Reserves
in equity amounted to $1.3 million credit and $4.8 million debit respectively.
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 to these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
126
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 millions of U.S. dollars)
Year ended December 31, 2021
Tubes
Other
Total
IFRS - Net Sales
5,994
528
6,521
Management view - operating income
178
65
243
Difference in cost of sales
443
30
473
Differences in depreciation and amortization
-
(1)
(1)
Differences in other operating income (expenses), net
(8)
1
(8)
IFRS - operating income
613
95
708
Financial income (expense), net
23
Income before equity in earnings of non-consolidated companies and income tax
731
Equity in earnings of non-consolidated companies
513
Income before income tax
1,243
Capital expenditures
226
14
240
Depreciation and amortization
575
20
595
Year ended December 31, 2020
Tubes
Other
Total
IFRS - Net Sales
4,844
303
5,147
Management view - operating (loss)
(277)
(50)
(327)
Difference in cost of sales
(138)
4
(134)
Differences in depreciation and amortization
1
(1)
-
Differences in selling, general and administrative expenses
(2)
-
(2)
Differences in other operating income (expenses), net
(200)
-
(200)
IFRS - operating (loss)
(616)
(47)
(663)
Financial income (expense), net
(65)
(Loss) before equity in earnings of non-consolidated companies and income tax
(728)
Equity in earnings of non-consolidated companies
109
(Loss) before income tax
(619)
Capital expenditures
189
4
193
Depreciation and amortization
661
18
679
Year ended December 31, 2019
Tubes
Other
Total
IFRS - Net Sales
6,870
424
7,294
Management view - operating income
857
73
930
Difference in cost of sales
(105)
3
(102)
Differences in depreciation and amortization
(1)
-
(1)
Differences in selling, general and administrative expenses
(1)
1
-
Differences in other operating income (expenses), net
6
-
6
IFRS - operating income
756
77
833
Financial income (expense), net
19
Income before equity in earnings of non-consolidated companies and income tax
852
Equity in earnings of non-consolidated companies
82
Income before income tax
934
Capital expenditures
338
12
350
Depreciation and amortization
523
17
540
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 $45.6 million, $16.9 million and
$36.2 million in 2021, 2020 and 2019, respectively.
There are no material differences between IFRS and management view in total revenues and by reportable segments.
The differences between operating income under IFRS view and the management view are mainly related to the cost
of goods sold, reflecting the effect of raw materials prices increases on the valuation of the replacement cost
considered for management view compared to IFRS cost calculated at historical cost on a FIFO basis, and other
timing differences.
The main difference in Other operating income (expenses), net for the twelve-month period ended in December 31,
2020, is attributable to the impairment of the goodwill, which residual value in the management view differed 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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
127
1 Segment information (Cont.)
Geographical information
(all amounts in thousands of U.S.
dollars)
North
America
South
America
Europe
Middle East
& Africa
Asia
Pacific
Unallocated
(*)
Total
Year ended December 31, 2021
Net sales
3,360,345
1,311,279
742,463
857,120
250,000
-
6,521,207
Total assets
7,992,946
2,399,448
1,727,573
581,204
364,486
1,383,774
14,449,431
Trade receivables
652,483
234,800
180,515
146,125
85,149
-
1,299,072
Property, plant and equipment, net
3,805,912
984,413
742,461
221,859
70,156
-
5,824,801
Capital expenditures
106,118
63,723
43,344
6,689
19,644
-
239,518
Depreciation and amortization
307,116
125,781
89,667
41,528
30,629
-
594,721
Year ended December 31, 2020
Net sales
2,179,949
776,235
642,793
1,227,532
320,225
-
5,146,734
Total assets
8,071,574
1,868,458
1,461,738
804,559
552,508
957,352
13,716,189
Trade receivables
411,692
115,972
139,427
210,194
90,863
-
968,148
Property, plant and equipment, net
3,971,101
1,050,619
823,057
242,939
105,465
-
6,193,181
Capital expenditures
71,531
63,111
39,691
10,452
8,537
-
193,322
Depreciation and amortization
408,546
106,827
84,518
44,259
34,656
-
678,806
Year ended December 31, 2019
Net sales
3,429,911
1,391,288
738,880
1,382,172
351,804
-
7,294,055
Total assets
7,885,120
2,227,044
2,282,775
958,424
609,663
879,965
14,842,991
Trade receivables
612,809
176,173
149,321
319,406
90,451
-
1,348,160
Property, plant and equipment, net
3,771,570
1,129,260
816,721
254,858
117,608
-
6,090,017
Capital expenditures
169,390
113,999
55,169
4,578
7,038
-
350,174
Depreciation and amortization
276,046
105,308
82,400
42,520
33,247
-
539,521
(*) For 2021, 2020 and 2019 includes
Investments in non-consolidated companies
. See note 13 to these Consolidated Financial Statements.
There are no revenues from external customers attributable to the Company’s country of incorporation
(Luxembourg).
The principal countries from which the Company derives its revenues are USA (35%), Argentina, Mexico, Canada,
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 23%, 24% and 21% in 2021, 2020 and 2019
respectively.
Tubes segment revenues by market:
Revenues Tubes (in millions of U.S. dollars)
2021
2020
2019
Oil and Gas
4,944
4,073
5,757
Hydrocarbon Processing and Power Generation
444
371
534
Industrial and Other
606
400
579
Total
5,994
4,844
6,870
At December 31, 2021, 2020 and 2019, the Company recognized contract liabilities related to customer advances in
the amount of $92.4 million, $48.7 million and $82.7 million, respectively. These amounts related to years 2020 and
2019 were reclassified to revenues during the subsequent year. In these periods, no significant adjustments in
revenues were performed related to previously satisfied performance obligations.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
128
2 Cost of sales
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
2019
Inventories at the beginning of the year
1,636,673
2,265,880
2,524,341
Increase in inventory due to business combinations
-
199,589
52,966
Decrease in inventory due to sale of subsidiaries
(10,662)
-
-
Plus: Charges of the year
Raw materials, energy, consumables and other
3,841,551
1,545,688
2,709,629
Services and fees
208,472
154,976
222,415
Labor cost (*)
824,071
757,359
870,261
Depreciation of property, plant and equipment
448,843
503,725
428,791
Amortization of intangible assets
7,645
8,121
5,948
Depreciation of right-of-use assets
35,910
40,127
28,727
Maintenance expenses
129,350
107,764
284,758
Allowance for obsolescence
23,296
35,809
29,138
Taxes
40,887
45,162
100,738
Other
98,159
59,790
115,663
5,647,522
3,458,110
4,849,034
Less: Inventories at the end of the year
(2,672,593)
(1,636,673)
(2,265,880)
4,611,602
4,087,317
5,107,495
(*) For the year ended December 2021, 2020 and 2019, labor cost includes approximately $12.8 million, $81.3 million and $17.2 million
respectively of severance indemnities related to the adjustment of the workforce to market conditions.
3 Selling, general and administrative expenses
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
2019
Services and fees
115,303
115,883
153,773
Labor cost (*)
426,414
444,436
481,854
Depreciation of property, plant and equipment
22,924
26,814
18,524
Amortization of intangible assets
63,874
82,355
41,967
Depreciation of right-of-use assets
15,525
17,664
15,564
Commissions, freight and other selling expenses
415,895
310,815
441,442
Provisions for contingencies
24,998
11,957
28,565
Allowances for doubtful accounts
(4,297)
4,644
(16,256)
Taxes
78,800
63,234
110,876
Other
47,133
41,425
89,665
1,206,569
1,119,227
1,365,974
(*) For the year ended December 2021, 2020 and 2019, labor cost includes approximately $15.8 million, $61.2 million and $7.4 million
respectively of severance indemnities related to the adjustment of the workforce to market conditions.
4 Labor costs (included in Cost of sales and in Selling, general and administrative expenses)
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
2019
Wages, salaries and social security costs
1,170,562
1,036,211
1,274,474
Severance indemnities
28,625
142,458
24,637
Defined contribution plans
12,608
12,442
12,663
Pension benefits - defined benefit plans
13,353
11,097
18,207
Employee retention and long-term incentive program
25,337
(413)
22,134
1,250,485
1,201,795
1,352,115
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
129
4 Labor costs (included in Cost of sales and in Selling, general and administrative expenses) (Cont.)
The following table shows the geographical distribution of the employees:
Country
2021
2020
2019
Mexico
5,474
4,501
5,370
Argentina
5,169
4,376
5,405
USA
2,684
1,596
2,255
Italy
2,011
2,039
2,144
Brazil
1,817
1,360
1,360
Romania
1,725
1,552
1,815
Colombia
1,009
746
1,040
Canada
758
561
772
Indonesia
506
521
616
Japan
379
399
400
Other
1,244
1,377
2,023
22,776
19,028
23,200
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.
The Company conducts regular assessments of the carrying values of its assets. The recoverable value was based on
the value in use. The main key assumptions used in estimating the value in use are discount rate, growth rate and
competitive, economic and regulatory 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 and expectations. 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. In 2021, the main discount rates used were in a range
between 10.9% and 18.8%.
- Growth rate: considers mainly the inflation impact on prices and costs, the long-term evolution of the oil and gas
industry, the higher demand to offset depletion of existing fields and the Company’s expected market penetration.
In 2021, a nominal growth rate of 2% was considered.
- Oil and gas prices: based on industry analysts’ reports and management’s expectations of market development.
- 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.
In December, 2021, as a result of the expected termination of our NKKTubes joint venture, which represented an
impairment indicator for its assets, an impairment test was conducted, resulting in a charge of $57 million that totally
reduced the carrying amounts of property, plant and equipment and intangible assets. The total amount was allocated
to the Tubes segment. Remaining carrying amounts after the recognition of impairment charges amounted to $53
million mainly related to working capital.
For the year 2020 a 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 property, plant and equipment of the CGU Rods-USA for $36 million was recorded. Out of the total amount,
$582 million were allocated to the Tubes segment.
No impairment charges were recorded for the year 2019.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
130
6 Other operating income and expenses
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
2019
Other operating income
Net income from other sales
10,694
9,891
8,651
Net rents
5,314
5,501
5,089
Tax recovery in Brazilian subsidiaries (*)
35,568
8,164
-
Other (**)
16,290
9,837
8,025
Recovery on allowance for doubtful receivables
379
-
1,239
68,245
33,393
23,004
Other operating expenses
Contributions to welfare projects and non-profit organizations
6,697
12,989
11,199
Allowance for doubtful receivables
-
1,263
-
6,697
14,252
11,199
(*) On May 13, 2021, the Brazilian Supreme Court issued a final judgment which confirmed that the methodology for calculating PIS and COFINS
(Federal Social Contributions on Gross Revenues) tax claims to which taxpayers are entitled to, should exclude from its base the total output of
ICMS, calculated on a gross basis. This decision led to a recognition of approximately $53 million tax credit in Brazilian subsidiaries, out of
which $36 million were recognized in other operating income and $17 million in financial results (impacting in Finance Income and Finance
Cost). In addition the tax charge related to this gain amounted to $12 million.
(**) On November 1, 2021 the Company transferred
100% of the shares of Geneva Structural Tubes LLC (“Geneva”) to MKK USA Inc., a
subsidiary of Maruichi Steel Tube Ltd of Japan for an aggregate price of $24.3 million. The gain of this transaction ascended to approximately
$6.8 million.
7 Financial results
(all amounts in thousands of U.S. dollars)
Year ended December 31,
2021
2020
2019
Interest Income
38,048
21,625
48,061
Net result on changes in FV of financial assets at FVPL
-
-
(64)
Impairment result on financial assets at FVTOCI
-
(3,238)
-
Finance income (*)
38,048
18,387
47,997
Finance cost
(23,677)
(27,014)
(43,381)
Net foreign exchange transactions results (**)
17,287
(74,422)
27,868
Foreign exchange derivatives contracts results (***)
(7,966)
19,644
(11,616)
Other
(1,026)
(1,590)
(1,585)
Other financial results
8,295
(56,368)
14,667
Net financial results
22,666
(64,995)
19,283
(*) Finance Income:
In 2021, 2020 and 2019 includes $3.3 million, $6.5 million and $7.6 million of interest related to instruments carried at FVPL, respectively.
In 2021 also includes $18 million of non-financial interest related to PIS and COFINS taxes recovery in Brazilian subsidiaries. For more
information, see note 6 to these Consolidated Financial Statements.
(**) Net foreign exchange transactions results:
In 2021 mainly includes the result from Euro depreciation 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, together
with the result from the Argentine peso and Japanese yen depreciation against the U.S. dollar on Argentine peso and Japanese yen denominated
trade, financial, social, and fiscal payables at subsidiaries with functional currency U.S. dollar.
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.
(***) Foreign exchange derivatives contracts results:
In 2021 includes mainly losses on derivatives covering net liabilities in Euro and Japanese yen, partially offset by gains on derivatives covering
net receivables in Brazilian real.
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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
131
8 Income tax
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
2019
Current tax
(215,467)
(121,048)
(299,692)
Deferred tax
26,019
97,898
97,240
Tax charge
(189,448)
(23,150)
(202,452)
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:
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
2019
Income (loss) before income tax
1,242,766
(619,267)
933,710
Less impairment charges (non-deductible)
57,075
622,402
-
Income before income tax without impairment charges
1,299,841
3,135
933,710
Tax calculated at the tax rate in each country
(209,765)
21,052
(186,752)
Effect of currency translation on tax base
(76,043)
(72,936)
(53,296)
Changes in the tax rates
(29,881)
(958)
13
Utilization of previously unrecognized tax losses
966
98
547
Tax revaluation, withholding tax and others
125,275
29,594
37,036
Tax charges
(189,448)
(23,150)
(202,452)
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.
Changes in the tax rates includes mainly the effect of the increase in the corporate income tax rate in Argentina from
25% to 35% for fiscal years starting January 1, 2021.
Tax revaluation, withholding tax and others, includes a net tax income of $113 million, $61 million and $66 million
for 2021, 2020 and 2019 respectively related to the tax revaluation regimes in Argentina and Mexico. It also includes
a charge of $23 million, $10 million and $34 million for 2021, 2020 and 2019 respectively related to withholding
taxes for intra-group international operations.
9 Dividends distribution
On November 3, 2021, the Company’s Board of Directors approved the payment of an interim dividend of $0.13
per share ($0.26 per ADS), or approximately $153 million, payable on November 24, 2021, with an ex-dividend
date of November 22, 2021.
On May 3, 2021, the Company’s Shareholders approved an annual dividend in the amount of $0.21 per share ($0.42
per ADS) for an aggregate amount of approximately $248 million. The amount approved included the interim
dividend previously paid on November 25, 2020 in the amount of $0.07 per share ($0.14 per ADS). The balance,
amounting to $0.14 per share ($0.28 per ADS), was paid on May 26, 2021.
For the year 2019, the Company paid dividends for an aggregate amount of approximately $153 million, which
corresponded to the interim dividend in the amount of $0.13 per share ($0.26 per ADS) paid in November 2019. On
June 2, 2020, the Company’s Shareholders approved that, as a consequence of liquidity preservation initiatives, no
further dividends –beyond the interim dividend- be distributed in respect of fiscal year 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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
132
10 Property, plant and equipment, net
(all amounts in thousands of U.S. dollars)
Year ended December 31, 2021
Land
and civil
buildings
Industrial
buildings,
plant and
production
equipment
Vehicles,
furniture
and
fixtures
Work in
progress
Spare
parts and
equipment
Total
Cost
Values at the beginning of the year
839,584
13,079,545
414,757
102,226
61,893
14,498,005
Currency translation adjustment
(5,084)
(138,839)
(5,042)
(365)
(569)
(149,899)
Additions
8
15,238
1,171
192,470
4,830
213,717
Transfers / Reclassifications
2,448
148,037
17,688
(146,752)
-
21,421
Decrease due to sale of subsidiaries (*)
(200)
(4,310)
(62)
-
-
(4,572)
Disposals / Consumptions
(6,652)
(35,130)
(7,582)
(150)
(6,632)
(56,146)
Values at the end of the year
830,104
13,064,541
420,930
147,429
59,522
14,522,526
Depreciation and impairment
Accumulated at the beginning of the year
132,458
7,830,120
342,246
-
-
8,304,824
Currency translation adjustment
(1,292)
(97,236)
(4,621)
-
-
(103,149)
Depreciation charge
9,736
440,316
21,715
-
-
471,767
Impairment charge (See note 5)
-
51,470
780
-
4,421
56,671
Decrease due to sale of subsidiaries (*)
-
(567)
(53)
-
-
(620)
Disposals / Consumptions
(961)
(24,379)
(6,428)
-
-
(31,768)
Accumulated at the end of the year
139,941
8,199,724
353,639
-
4,421
8,697,725
At December 31, 2021
690,163
4,864,817
67,291
147,429
55,101
5,824,801
(all amounts in thousands of U.S. dollars)
Year ended December 31, 2020
Land and
civil
buildings
Industrial
buildings,
plant and
production
equipment
Vehicles,
furniture
and
fixtures
Work in
progress
Spare
parts and
equipment
Total
Cost
Values at the beginning of the year
799,139
12,468,813
399,724
108,308
60,602
13,836,586
Currency translation adjustment
(545)
72,650
443
(2,095)
(162)
70,291
Increase due to business combinations (**)
39,622
440,366
7,195
16,255
-
503,438
Additions
1,451
1,524
620
157,315
6,845
167,755
Transfers / Reclassifications
5,881
157,473
15,586
(176,589)
-
2,351
Disposals / Consumptions
(5,964)
(61,281)
(8,811)
(968)
(5,392)
(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
121,468
7,302,135
322,966
-
-
7,746,569
Currency translation adjustment
(288)
56,560
405
-
-
56,677
Depreciation charge
11,368
492,973
26,198
-
-
530,539
Transfers / Reclassifications
(1)
349
(475)
-
-
(127)
Impairment charge (See note 5)
-
36,000
-
-
-
36,000
Disposals / Consumptions
(89)
(57,897)
(6,848)
-
-
(64,834)
Accumulated at the end of the year
132,458
7,830,120
342,246
-
-
8,304,824
At December 31, 2020
707,126
5,249,425
72,511
102,226
61,893
6,193,181
(*) Related to Geneva sale. See note 6 to these Consolidated Financial Statements.
(**) Related to IPSCO acquisition. See note 33 to these Consolidated Financial Statements.
Property, plant and equipment include capitalized interests for net amounts at December 31, 2021 and 2020 of $32 million and
$33.6 million, respectively. There were no interests capitalized during 2021 and 2020.
Government grants recognized as a reduction of property, plant and equipment were immaterial for the years 2021 and 2020.
The carrying amounts of assets pledged as security for current and non-current borrowings were immaterial for the years 2021
and 2020.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
133
11 Intangible assets, net
(all amounts in thousands of U.S. dollars)
Year ended December 31, 2021
Information
system projects
Licenses,
patents and
trademarks (*)
Goodwill
Customer
relationships
Total
Cost
Values at the beginning of the year
637,352
550,500
2,469,962
2,211,151
5,868,965
Currency translation adjustment
(6,466)
(151)
(1,324)
-
(7,941)
Additions
22,830
2,971
-
-
25,801
Transfers / Reclassifications
(2,902)
(4,637)
-
-
(7,539)
Disposals
(659)
(1,156)
-
-
(1,815)
Values at the end of the year
650,155
547,527
2,468,638
2,211,151
5,877,471
Amortization and impairment
Accumulated at the beginning of the
year
577,359
382,531
1,383,994
2,096,025
4,439,909
Currency translation adjustment
(6,014)
-
-
-
(6,014)
Amortization charge
28,072
8,701
-
34,746
71,519
Impairment charge (See note 5)
404
-
-
-
404
Disposals
(514)
(9)
-
-
(523)
Accumulated at the end of the year
599,307
391,223
1,383,994
2,130,771
4,505,295
At December 31, 2021
50,848
156,304
1,084,644
80,380
1,372,176
(all amounts in thousands of U.S. dollars)
Year ended December 31, 2020
Information
system projects
Licenses,
patents and
trademarks (*)
Goodwill
Customer
relationships
Total
Cost
Values at the beginning of the year
604,870
463,742
2,117,837
2,140,051
5,326,500
Currency translation adjustment
1,108
220
(5,058)
-
(3,730)
Increase due to business combinations (**)
11,563
87,000
357,183
71,100
526,846
Additions
24,965
602
-
-
25,567
Transfers / Reclassifications
(1,393)
-
-
-
(1,393)
Disposals
(3,761)
(1,064)
-
-
(4,825)
Values at the end of the year
637,352
550,500
2,469,962
2,211,151
5,868,965
Amortization and impairment
Accumulated at the beginning of the year
536,337
373,772
797,592
2,057,240
3,764,941
Currency translation adjustment
890
(1)
-
-
889
Amortization charge
42,931
8,760
-
38,785
90,476
Impairment charge (See note 5)
-
-
586,402
-
586,402
Transfers / Reclassifications
931
-
-
-
931
Disposals
(3,730)
-
-
-
(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 33 to these Consolidated Financial Statements.
The geographical allocation of goodwill for the year ended December 31, 2021 was $939.2 million for North
America, $109.9 million for South America, $33.7 million for Middle East & Africa and $1.9 million for Europe.
The carrying amount of goodwill allocated by CGU, as of December 31, 2021, was as follows:
(all amounts in millions of U.S. dollars)
Tubes Segment
CGU
Hydril
Acquisition
Other
Total
Tamsa (Hydril and other)
346
19
365
Siderca (Hydril and other)
265
93
358
Hydril
309
-
309
Other
-
53
53
Total
920
165
1,085
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
134
12 Right-of-use assets, net and lease liabilities
Right of use assets evolution
(all amounts in thousands of U.S. dollars)
Year ended December 31, 2021
Land and Civil
Buildings
Industrial
Buildings, Plant
and Production
Equipment
Vehicles,
furniture and
fixtures
Total
Cost
Opening net book amount
41,932
273,358
18,615
333,905
Currency translation adjustment
(187)
(592)
(560)
(1,339)
Additions
6,010
10,127
6,189
22,326
Transfers / Reclassifications
-
(274)
277
3
Disposals (*)
(1,673)
(150,803)
(4,265)
(156,741)
At December 31, 2021
46,082
131,816
20,256
198,154
Depreciation
Accumulated at the beginning of the year
15,142
67,993
8,817
91,952
Currency translation adjustment
(37)
(177)
(260)
(474)
Depreciation charge
9,882
35,964
5,589
51,435
Transfers / Reclassifications
-
96
(93)
3
Disposals (*)
(982)
(49,149)
(3,369)
(53,500)
Accumulated at the end of the year
24,005
54,727
10,684
89,416
At December 31, 2021
22,077
77,089
9,572
108,738
(all amounts in thousands of U.S. dollars)
Year ended December 31, 2020
Land and Civil
Buildings
Industrial
Buildings, Plant
and
Production
Equipment
Vehicles,
furniture and
fixtures
Total
Cost
Opening net book amount
36,137
225,389
14,194
275,720
Currency translation adjustment
(839)
746
530
437
Increase due to business combinations
(**)
3,461
13,730
7,556
24,747
Additions
11,534
42,573
5,034
59,141
Transfers / Reclassifications
439
(458)
136
117
Disposals
(8,800)
(8,622)
(8,835)
(26,257)
At December 31, 2020
41,932
273,358
18,615
333,905
Depreciation
Accumulated at the beginning of the year
8,330
30,581
3,683
42,594
Currency translation adjustment
(92)
145
190
243
Depreciation charge
13,200
37,671
6,920
57,791
Transfers / Reclassifications
(2,876)
1,702
1,291
117
Disposals
(3,420)
(2,106)
(3,267)
(8,793)
Accumulated at the end of the year
15,142
67,993
8,817
91,952
At December 31, 2020
26,790
205,365
9,798
241,953
(*) Includes net disposals of $96.6 million related to NKKTubes lease agreement re-measurement due to joint venture termination.
(**) Related to IPSCO acquisition. See note 33 to these Consolidated Financial Statements.
Depreciation of right-of-use assets is mainly included in Tubes segment.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
135
12 Right-of-use assets, net and lease liabilities (Cont.)
Lease liability evolution
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
Opening net book amount
257,343
230,167
Increase due to business combinations
-
26,046
Translation differences
(11,350)
7,656
Additions
22,261
58,536
Cancellations (*)
(103,329)
(17,529)
Repayments (**)
(50,998)
(51,666)
Interest accrued
3,358
4,133
At December 31,
117,285
257,343
(*) Includes $95.8 million related to NKKTubes lease agreement re-measurement due to joint venture termination.
(**) Includes repayments of $48.5 million in capital and $2.5 million of interest.
The amount of remaining payments with maturity less than 1 year, between 2 and 5 years and more than 5 years is
approximately 29.5%, 33.6% and 36.9% of the total remaining payments, respectively.
Expenses related to short-term leases, leases of low value assets and variable leases (included in
cost of sales and
selling, general and administrative expenses
) were not material for the years 2021 and 2020.
13 Investments in non-consolidated companies
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
At the beginning of the year
957,352
879,965
Translation differences
(11,085)
(31,977)
Equity in earnings of non-consolidated companies
512,591
108,799
Dividends and distributions declared (*)
(78,926)
(861)
Increase in equity reserves and others
3,842
1,426
At the end of the year
1,383,774
957,352
(*) Related to Ternium and Usiminas. During 2021 and 2020 $75.9 million and $0.3 million respectively were collected.
The principal non-consolidated companies are:
% ownership at December 31,
Book value at December
31,
Company
Country of incorporation
2021
2020
2021
2020
a) Ternium (*)
Luxembourg
11.46%
11.46%
1,210,206
830,028
b) Usiminas (**)
Brazil
3.07%
3.07%
103,106
65,144
c) Techgen
Mexico
22.00%
22.00%
29,397
19,536
d) Global Pipe Company
Saudi Arabia
35.00%
35.00%
21,523
23,421
Others
-
-
-
19,542
19,223
1,383,774
957,352
(*) Including treasury shares.
(**) At December 31, 2021 and 2020 the voting rights were 5.19%.
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, 2021, the closing price of Ternium’s ADSs as quoted on the New York Stock Exchange was $43.52
per ADS, giving Tenaris’s ownership stake a market value of approximately $999.7 million. At December 31, 2021,
the carrying value of Tenaris’s ownership stake in Ternium, based on Ternium’s IFRS Financial Statements, was
approximately $1,210.2 million. The Company reviews its participation in Ternium whenever events or
circumstances indicate that the asset’s carrying amount may not be recoverable. As of December 31, 2021, the
Company concluded that the carrying amount does not exceed the recoverable value of the investment.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
136
13 Investments in non-consolidated companies (Cont.)
a) Ternium (Cont.)
Summarized selected financial information of Ternium, including the aggregated amounts of assets, liabilities,
revenues and profit or loss is as follows:
(all amounts in thousands of U.S. dollars)
Ternium
2021
2020
Non-current assets
8,491,363
8,289,460
Current assets
8,606,544
4,566,775
Total assets
17,097,907
12,856,235
Non-current liabilities
1,649,105
2,559,485
Current liabilities
3,213,764
1,853,597
Total liabilities
4,862,869
4,413,082
Total equity
12,235,038
8,443,153
Non-controlling interests
1,700,019
1,157,038
Revenues
16,090,744
8,735,435
Gross profit
6,195,674
1,635,512
Net income for the year attributable to owners of the parent
3,825,068
778,468
Total comprehensive income for the year, net of tax, attributable to owners of the parent
3,818,185
666,667
b) Usiminas
Usiminas is a Brazilian producer of high quality flat steel products used in the energy, automotive and other
industries.
As of December 31, 2021, the closing price of the Usiminas’ ordinary and preferred shares, as quoted on the B3 -
Brasil Bolsa Balcão S.A, was BRL14.51 ($2.60) and BRL15.16 ($2.72), respectively, giving Tenaris’s ownership
stake a market value of approximately $98.4 million. As of that date, the carrying value of Tenaris’s ownership stake
in Usiminas was approximately $103.1 million.
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
2021
2020
Non-current assets
3,491,103
3,487,317
Current assets
3,583,814
2,276,368
Total assets
7,074,917
5,763,685
Non-current liabilities
1,575,321
1,661,605
Current liabilities
1,134,663
861,912
Total liabilities
2,709,984
2,523,517
Total equity
4,364,933
3,240,168
Non-controlling interests
467,551
379,222
Revenues
6,269,569
3,132,949
Gross profit
2,101,336
624,199
Net income for the year attributable to owners of the parent
1,687,682
106,361
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
137
13 Investments in non-consolidated companies (Cont.)
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, 2021
, 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, 2021, the
carrying value of Tenaris’s ownership stake in
Techgen was approximately $29.4 million.
Techgen entered into certain transportation capacity agreements, equipment and other services related to the
equipment, and an agreement for the purchase of clean energy certificates. As of December 31
, 2021, Tenaris’s
exposure under these agreements amounted to $45.7 million, $0.9 million and $17.4 million respectively.
Techgen’s sponsors
granted certain subordinated loans to Techgen. As of December 31, 2021, the aggregate
outstanding principal amount under these subordinated loans was $264.2 million, of which $58.1 million correspond
to Tenaris’s contribution.
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 guarantees previously issued by Techgen’s
shareholders to secure the replaced facility.
The existing syndicated l
oan agreement 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 by the Company’s Mexican subsidiary, Tamsa, of 22% of the energy generated by Techgen
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 applied for stand-by letters of credit covering 22% of the debt service coverage ratio, which as of
December 31, 2021, amounted to $10.3 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, 2021, the carrying value of Tenaris’s ownership stake in GPC was approximately $21.5 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, 2021, SSPC’s exposure under the guarantees amounted to $115.1 million.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
138
14 Receivables – non current
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
Employee advances and loans
8,117
4,563
Tax credits (*)
53,210
18,046
Receivables from related parties
61,841
62,790
Legal deposits
9,041
8,600
Advances to suppliers and other advances
9,878
4,803
Receivable Venezuelan subsidiaries
48,659
48,659
Others
15,142
6,842
205,888
154,303
(*) Includes approximately $36 million related to PIS and COFINS (Federal Social Contributions on Gross Revenues) tax recovery on Brazilian
subsidiaries.
15 Inventories, net
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
Finished goods
1,113,011
691,922
Goods in process
707,665
417,097
Raw materials
358,552
143,558
Supplies
485,815
488,802
Goods in transit
253,324
158,929
2,918,367
1,900,308
Allowance for obsolescence, see note 24 (i)
(245,774)
(263,635)
2,672,593
1,636,673
16 Receivables and prepayments, net
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
Prepaid expenses and other receivables
38,080
26,457
Government entities
2,363
3,075
Employee advances and loans
5,974
4,672
Advances to suppliers and other advances
17,225
14,661
Government tax refunds on exports
8,419
2,723
Receivables from related parties
5,919
16,217
Others
21,502
13,961
99,482
81,766
Allowance for other doubtful accounts, see note 24 (i)
(3,206)
(3,917)
96,276
77,849
17 Current tax assets and liabilities
(all amounts in thousands of U.S. dollars)
Year ended December 31,
Current tax assets
2021
2020
Income tax assets
16,394
29,657
V.A.T. credits
176,202
106,293
Other prepaid taxes
425
434
193,021
136,384
Year ended December 31,
Current tax liabilities
2021
2020
Income tax liabilities
73,352
27,616
V.A.T. liabilities
12,955
9,933
Other taxes
57,179
53,044
143,486
90,593
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
139
18 Trade receivables, net
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
Current accounts
1,313,934
1,017,663
Receivables from related parties
32,258
4,161
1,346,192
1,021,824
Allowance for doubtful accounts, see note 24 (i)
(47,120)
(53,676)
1,299,072
968,148
The following table sets forth details of the aging of trade receivables:
(all amounts in thousands of U.S. dollars)
Trade
Receivables
Not Due
Past due
1 - 180 days
> 180 days
At December 31, 2021
Guaranteed
195,848
185,238
9,894
716
Not guaranteed
1,150,344
951,356
148,412
50,576
Guaranteed and not guaranteed
1,346,192
1,136,594
158,306
51,292
Expected loss rate
0.06%
0.04%
0.20%
0.84%
Allowances for doubtful accounts
(833)
(401)
(367)
(65)
Nominative allowances for doubtful accounts
(46,287)
-
(1,391)
(44,896)
Net Value
1,299,072
1,136,193
156,548
6,331
(all amounts in thousands of U.S. dollars)
Trade
Receivables
Not Due
Past due
1 - 180 days
> 180 days
At December 31, 2020
Guaranteed
191,514
170,796
18,778
1,940
Not guaranteed
830,310
655,132
116,802
58,376
Guaranteed and not guaranteed
1,021,824
825,928
135,580
60,316
Expected loss rate
0.07%
0.04%
0.23%
0.72%
Allowances for doubtful accounts
(721)
(321)
(331)
(69)
Nominative allowances for doubtful accounts
(52,955)
(718)
(1,011)
(51,226)
Net Value
968,148
824,889
134,238
9,021
Trade receivables are mainly denominated in U.S. dollars.
19 Cash and cash equivalents and other investments
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
Cash and cash equivalents
Cash at banks
167,455
117,807
Liquidity funds
105,697
98,183
Short – term investments
44,975
368,691
318,127
584,681
Other investments - current
Fixed income (time-deposit, zero coupon bonds, commercial papers)
239,742
763,697
Bonds and other fixed income
158,107
108,791
397,849
872,488
Other investments - non-current
Bonds and other fixed income
312,619
239,422
Others
7,635
7,660
320,254
247,082
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
140
20 Borrowings
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
Non-current
Bank borrowings
111,452
315,884
Costs of issue of debt
(20)
(145)
111,432
315,739
Current
Bank borrowings
219,566
303,170
Bank overdrafts
60
98
Costs of issue of debt
(125)
-
219,501
303,268
Total Borrowings
330,933
619,007
The maturity of borrowings is as follows:
(all amounts in thousands of U.S. dollars)
1 year or
less
1 - 2
years
2 – 3
years
3 - 4
years
4 - 5
years
Over 5
years
Total
At December 31, 2021
Borrowings
219,501
107,438
3,994
-
-
-
330,933
Total borrowings
219,501
107,438
3,994
-
-
-
330,933
Interest to be accrued (*)
2,465
560
13
-
-
-
3,038
Total
221,966
107,998
4,007
-
-
-
333,971
1 year or
less
1 - 2
years
2 – 3
years
3 - 4
years
4 - 5
years
Over 5
years
Total
At December 31, 2020
Borrowings
303,268
104,147
207,595
3,997
-
-
619,007
Total borrowings
303,268
104,147
207,595
3,997
-
-
619,007
Interest to be accrued (*)
9,829
5,068
1,014
22
-
-
15,933
Total
313,097
109,215
208,609
4,019
-
-
634,940
(*) Includes the effect of hedge accounting.
Significant borrowings include:
In millions of U.S. dollars
Disbursement date
Borrower
Type
Final maturity
Original & Outstanding
2020
Tamsa
Bilateral
2023
20
2020
Tamsa
Bilateral
2023
80
2020-2021
SSPC
Multiple Banks
2022 - 2024
61
As of December 31, 2021, 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, 2021 and 2020, considering hedge accounting where applicable.
2021
2020
Total borrowings
2.09%
2.51%
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
141
20 Borrowings (Cont.)
Breakdown of long-term borrowings by currency and rate is as follows:
Non-current borrowings
(all amounts in thousands of U.S. dollars)
Year ended December 31,
Currency
Interest rates
2021
2020
USD
Variable
99,587
274,600
USD
Fixed
-
17,936
SAR
Fixed
11,845
20,902
EUR
Fixed
-
1,828
EUR
Variable
-
473
Total non-current borrowings
111,432
315,739
Breakdown of short-term borrowings by currency and rate is as follows:
Current borrowings
(all amounts in thousands of U.S. dollars)
Year ended December 31,
Currency
Interest rates
2021
2020
USD
Variable
17,015
67,823
USD
Fixed
-
2,322
EUR
Variable
1,273
1,015
EUR
Fixed
1,706
3,886
MXN
Fixed
141,861
147,997
ARS
Fixed
8,947
3,699
SAR
Variable
26,022
37,776
SAR
Fixed
22,677
38,750
Total current borrowings
219,501
303,268
Borrowings evolution
Year ended December 31, 2021
(all amounts in thousands of U.S. dollars)
Non current
Current
At the beginning of the year
315,739
303,268
Translation differences
(48)
(2,570)
Proceeds and repayments, net
(179,647)
(103,561)
Interests accrued less payments
618
(2,828)
Reclassifications
(25,230)
25,230
Overdrafts variation
-
(38)
At the end of the year
111,432
219,501
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
142
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 is as follows:
Deferred tax liabilities
(all amounts in thousands of U.S. dollars)
Fixed assets
Inventories
Intangible
assets
and
other
Total
At the beginning of the year
702,415
15,255
125,793
843,463
Translation differences
(461)
-
(2,059)
(2,520)
Decrease due to sale of subsidiaries (*)
(637)
-
-
(637)
Charged to other comprehensive income
-
-
4,061
4,061
Income statement charge / (credit)
(31,487)
12,253
(23,449)
(42,683)
At December 31, 2021
669,830
27,508
104,346
801,684
(all amounts in thousands of U.S. dollars)
Fixed assets
Inventories
Intangible
assets and
other
Total
At the beginning of the year
651,339
19,396
118,062
788,797
Translation differences
1,644
-
253
1,897
Increase due to business combinations (**)
89,306
-
43,397
132,703
Charged to other comprehensive income
-
-
(1,194)
(1,194)
Income statement (credit)
(39,874)
(4,141)
(34,725)
(78,740)
At December 31, 2020
702,415
15,255
125,793
843,463
Deferred tax assets
(all amounts in thousands of U.S. dollars)
Provisions and
allowances
Inventories
Tax losses
Other
Total
At the beginning of the year
(21,208)
(85,937)
(480,149)
(206,958)
(794,252)
Translation differences
506
606
80
1,195
2,387
Decrease due to sale of subsidiaries (*)
-
93
-
11
104
Charged to other comprehensive income
-
-
-
2,587
2,587
Income statement charge / (credit)
(4,381)
201
(5,694)
26,538
16,664
At December 31, 2021
(25,083)
(85,037)
(485,763)
(176,627)
(772,510)
(all amounts in thousands of U.S. dollars)
Provisions and
allowances
Inventories
Tax losses
Other
Total
At the beginning of the year
(19,653)
(93,404)
(382,832)
(181,606)
(677,495)
Translation differences
1,804
513
1,996
644
4,957
Increase due to business combinations (**)
(7,452)
(24,580)
(33,598)
(34,974)
(100,604)
Charged to other comprehensive income
-
-
-
(1,952)
(1,952)
Income statement charge / (credit)
4,093
31,534
(65,715)
10,930
(19,158)
At December 31, 2020
(21,208)
(85,937)
(480,149)
(206,958)
(794,252)
(*) Related to Geneva sale. See note 6 to these Consolidated Financial Statements.
(**) Related to IPSCO acquisition. See note 33 to these Consolidated Financial Statements.
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 $461 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 in 2020. The remaining balance
mainly corresponds to Tenaris’s Canadian, Colombian 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.
Approximately 100% of the recognized tax losses have an expiration date in more than 5 years or do not expire.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
143
21 Deferred income tax (Cont.)
As of December 31, 2021, the net unrecognized deferred tax assets amounted to $173.3 million. Unrecognized tax
losses with expiration dates in less than 1 year, between 2 and 5 years and more than 5 years or without expiration
date are approximately 2.1%, 27.8% and 70.1% respectively.
The estimated analysis of recovery of deferred tax assets and settlement of deferred tax liabilities is as follows:
(all amounts in thousands of U.S. dollars)
Year ended December 31,
2021
2020
Deferred tax assets to be recovered after 12 months
(611,552)
(640,603)
Deferred tax liabilities to be settled after 12 months
782,128
840,892
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,
2021
2020
Deferred tax assets
(245,547)
(205,590)
Deferred tax liabilities
274,721
254,801
29,174
49,211
The movement in the net deferred income tax liability account is as follows:
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
At the beginning of the year
49,211
111,302
Translation differences
(133)
6,854
Increase due to business combinations
-
32,099
Decrease due to sale of subsidiaries
(533)
-
Charged to other comprehensive income
6,648
(3,146)
Income statement (credit)
(26,019)
(97,898)
At the end of the year
29,174
49,211
22 Other liabilities
(i) Other liabilities – Non current
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
Post-employment benefits
111,904
136,811
Other-long term benefits
71,345
64,928
Miscellaneous
48,432
43,896
231,681
245,635
Post-employment benefits
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
Unfunded
103,841
115,774
Funded
8,063
21,037
111,904
136,811
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
144
22 Other liabilities (Cont.)
(i) Other liabilities – Non current (Cont.)
Post-employment benefits (Cont.)
Unfunded
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
Values at the beginning of the year
115,774
125,573
Current service cost
5,728
4,796
Interest cost
5,997
6,496
Curtailments and settlements
(422)
(1,237)
Remeasurements (*)
3,174
(2,230)
Translation differences
(3,716)
(415)
Increase due to business combinations (**)
-
1,566
Benefits paid from the plan
(13,539)
(22,955)
Reclassified to current liabilities
(8,884)
-
Other
(271)
4,180
At the end of the year
103,841
115,774
(*) For 2021 a loss of $0.7 million is attributable to demographic assumptions and a loss of $2.5 million to financial assumptions. For 2020 a
loss of $1.6 million is attributable to demographic assumptions and a gain of $3.8 million to financial assumptions.
(**) Related to IPSCO acquisition. See note 33 to these Consolidated Financial Statements.
The actuarial assumptions for the most relevant plans were as follows:
Year ended December 31,
2021
2020
Discount rate
1% - 7%
1% - 7%
Rate of compensation increase
0% - 3%
0% - 3%
As of December 31, 2021, 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 $5.9 million and $6.7 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 $3.5 million and $3.2 million respectively. The
above sensitivity analyses are based on a change in discount rate and rate of compensation while holding all other
assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be
correlated.
Funded
The amounts recognized in the statement of financial position for the current annual period and the previous annual
period are as follows:
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
Present value of funded obligations
159,528
176,309
Fair value of plan assets
(160,504)
(157,335)
Liability (*)
(976)
18,974
(*) In 2021 and 2020, $9 million and $2.1 million corresponding to a plan with a surplus balance were reclassified within other non-current
assets, respectively.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
145
22 Other liabilities (Cont.)
(i) Other liabilities – Non current (Cont.)
Post-employment benefits (Cont.)
Funded (Cont.)
The movement in the present value of funded obligations is as follows:
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
At the beginning of the year
176,309
160,412
Translation differences
356
2,148
Current service cost
222
850
Interest cost
4,190
5,009
Remeasurements (*)
(7,019)
18,025
Benefits paid
(14,530)
(9,266)
Other
-
(869)
At the end of the year
159,528
176,309
(*) For 2021 a gain of $0.4 million is attributable to demographic assumptions and a gain of $6.6 million to financial assumptions. For 2020 a
loss of $3.7 million is attributable to demographic assumptions and a loss of $14.3 million to financial assumptions
The movement in the fair value of plan assets is as follows:
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
At the beginning of the year
(157,335)
(145,160)
Translation differences
(250)
(1,729)
Return on plan assets
(3,793)
(4,411)
Remeasurements
(10,817)
(10,396)
Contributions paid to the plan
(3,338)
(5,017)
Benefits paid from the plan
14,530
9,266
Other
499
112
At the end of the year
(160,504)
(157,335)
The major categories of plan assets as a percentage of total plan assets are as follows:
Year ended December 31,
2021
2020
Equity instruments
49.2%
49.3%
Debt instruments
46.7%
46.8%
Others
4.1%
3.9%
The actuarial assumptions for the most relevant plans were as follows:
Year ended December 31,
2021
2020
Discount rate
2% - 3%
1 % - 3 %
Rate of compensation increase
0% - 3%
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, 2021, 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 $14.9 million and $18.1 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 $1.5 million and $1.5 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 expected contributions for the year 2022 amount to approximately $0.8 million.
The methods and types of assumptions used in preparing the sensitivity analyses did not change compared to the
previous period.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
146
22 Other liabilities (Cont.)
(ii) Other liabilities – current
Year ended December 31,
(all amounts in thousands of U.S. dollars)
2021
2020
Payroll and social security payable
174,794
175,175
Miscellaneous
28,931
27,651
203,725
202,826
23 Non-current allowances and provisions
Liabilities
Year ended December 31,
2021
2020
(all amounts in thousands of U.S. dollars)
Values at the beginning of the year
73,218
54,599
Translation differences
(2,476)
(5,739)
Increase due to business combinations (*)
-
26,542
Additional provisions
13,896
478
Reclassifications
4,014
557
Used
(5,096)
(3,219)
Values at the end of the year
83,556
73,218
(*) Related to IPSCO acquisition. See note 33 to these Consolidated Financial Statements.
24 Current allowances and provisions
(i) Deducted from assets
Year ended December 31, 2021
Allowance for doubtful
accounts - Trade
receivables
Allowance for other
doubtful accounts -
Other
receivables
Allowance for
inventory obsolescence
(all amounts in thousands of U.S. dollars)
Values at the beginning of the year
(53,676)
(3,917)
(263,635)
Translation differences
111
227
1,877
Decrease due to sale of subsidiaries (*)
2
10
405
(Additional) / reversals allowances
4,297
379
(23,296)
Used
2,146
95
38,875
At December 31, 2021
(47,120)
(3,206)
(245,774)
Year ended December 31, 2020
Allowance for doubtful
accounts -
Trade
receivables
Allowance for other
doubtful accounts -
Other
receivables
Allowance for
inventory obsolescence
(all amounts in thousands of U.S. dollars)
Values at the beginning of the year
(48,782)
(4,892)
(217,717)
Translation differences
(37)
801
1,560
Increase due to business combinations (**)
(1,930)
-
(76,776)
(Additional) allowances
(4,644)
(1,263)
(35,809)
Used
1,717
1,437
65,107
At December 31, 2020
(53,676)
(3,917)
(263,635)
(*) Related to Geneva sale. See note 6 to these Consolidated Financial Statements.
(**) Related to IPSCO acquisition. See note 33 to these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
147
24 Current allowances and provisions (Cont.)
(ii)
Liabilities
Year ended December 31, 2021
Sales risks
Other claims and
contingencies (*)
Total
(all amounts in thousands of U.S. dollars)
Values at the beginning of the year
1,795
10,484
12,279
Translation differences
(3)
(736)
(739)
Additional provisions
3,506
7,596
11,102
Reclassifications
-
(4,014)
(4,014)
Used
(3,830)
(5,476)
(9,306)
At December 31, 2021
1,468
7,854
9,322
Year ended December 31, 2020
Sales risks
Other claims and
contingencies (*)
Total
(all amounts in thousands of U.S. dollars)
Values at the beginning of the year
5,867
11,150
17,017
Translation differences
(5)
(975)
(980)
Increase due to business combinations (**)
116
398
514
Additional provisions
9,728
1,751
11,479
Reclassifications
-
(557)
(557)
Used
(13,911)
(1,283)
(15,194)
At December 31, 2020
1,795
10,484
12,279
(*) Other claims and contingencies mainly include lawsuits and other legal proceedings, including employee, tax and environmental-related
claims.
(**) Related to IPSCO acquisition. See note 33 to these Consolidated Financial Statements.
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,
2021
2020
Derivatives hedging borrowings and investments
2,472
10,119
Other Derivatives
8,843
1,330
Contracts with positive fair values
11,315
11,449
Derivatives hedging borrowings and investments
(147)
(2,250)
Other Derivatives
(11,181)
(967)
Contracts with negative fair values
(11,328)
(3,217)
Total
(13)
8,232
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, 2021 and 2020 were as follows:
(all amounts in thousands of U.S. dollars)
Fair Value
Hedge Accounting Reserve
Purchase currency
Sell currency
Term
2021
2020
2021
2020
MXN
USD
2022
1,444
9,838
(93)
156
USD
MXN
2022
(838)
(5)
-
-
EUR
USD
2022
(7,670)
543
(7,430)
-
USD
EUR
2023
9,092
(1,969)
8,258
5
JPY
USD
2022
(269)
94
557
(4,958)
USD
BRL
2022
(1,030)
412
-
85
USD
KWD
2021
-
(246)
-
(59)
USD
CAD
2022
(246)
-
-
-
USD
GBP
2022
(55)
(49)
-
-
USD
CNY
2022
(130)
(482)
-
-
BRL
USD
2022
(238)
-
-
-
Others
2022
(73)
96
(33)
-
Total
(13)
8,232
1,259
(4,771)
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
148
25 Derivative financial instruments (Cont.)
Following is a summary of the hedge reserve evolution:
(all amounts in thousands of U.S. dollars)
Equity Reserve
Dec-19
Movements
2020
Equity Reserve
Dec-20
Movements
2021
Equity Reserve
Dec-21
Foreign Exchange
2,591
(7,362)
(4,771)
6,030
1,259
Total Cash flow Hedge
2,591
(7,362)
(4,771)
6,030
1,259
Tenaris estimates that the cash flow hedge reserve corresponding to derivatives instruments at December 31, 2021 will
be recycled to the Consolidated Income Statement during 2022 and 2023. For information on hedge accounting reserve,
see Section III.D to these Consolidated Financial Statements.
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, depending on the likelihood of
occurrence, in some of such cases 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 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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
149
26 Contingencies, commitments and restrictions on the distribution of profits (Cont.)
(i) Contingencies (Cont.)
CSN claims relating to the January 2012 acquisition of Usiminas shares (Cont.)
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:
x With respect to Chubb’s claim, the court subsequently homologated the above-mentioned settlement and,
accordingly, the claim was finalized.
x 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 BRL82 million (approximately $14.7 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 BRL70.3 million (approximately $12.6 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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
150
26 Contingencies, commitments and restrictions on the distribution of profits (Cont.)
(i) Contingencies (Cont.)
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 public prosecutors’ office of Milan, Italy, completed a preliminary investigation into the alleged
payments and included 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, in the investigation. The
Company is not a party to the proceedings. On March 22, 2022, upon completion of the evidentiary phase of the
trial, the acting prosecutor requested the first-instance court in Milan in charge of the case to impose sanctions on
our Chairman and Chief Executive Officer, on the other two board members, and on San Faustin. The Company’s
outside counsel in Italy has advised the Company that neither the case file nor the prosecutor’s request contain or
identify any evidence of involvement in, or knowledge of, the alleged wrongdoing by any of the three directors. The
Company has also been advised that the defendants are scheduled to present their arguments before the court on
April 19, 2022, that the court may issue its decision on April 26, 2022, and that the grounds for any such decision
may not be immediately available. Any decision by the first-instance court may be appealed by either party before
a higher court.
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. The proceedings are underway. 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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
151
26 Contingencies, commitments and restrictions on the distribution of profits (Cont.)
(i) Contingencies (Cont.)
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 plain
tiffs 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 Tenari
s’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 is now proceeding 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.
Administrative tax 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 appeal before the courts. The estimated amount of this claim is BRL57.5 million (approximately $10.3
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 in 2017 by its competitor Global
Tubing, alleging defamatory conduct by TCT and seeking a declaration that certain Global Tubing products do not
infringe patents held by TCT. TCT subsequently counterclaimed that certain Global Tubing products infringe patents
held by TCT, Global Tubing has since sought to invalidate such patents. On December 13, 2019, Global Tubing
filed an amended complaint (including the Company as defendant), alleging that TCT and the Company misled the
patent office in order to monopolize the coiled tubing market for quench and tempered products. On March 26, 2021,
a magistrate to the principal judge in the case found that Global Tubing had established a prima facie case that TCT
had misled the patent office by failing to disclose a previous attempt to quench and temper coiled tubing. On April
9, 2021, TCT filed its objections to the magistrate’s ruling with the principal judge in the case. On August 25, 2021,
the principal judge in the case affirmed the magistrate’s order and found possible evidence of intent to commit fraud
on the patent office. Such determination is not final. TCT is considering several avenues to challenge this decision.
TCT believes that it has meritorious defenses to this claim. Trial was expected to take place in May 2022 but is
likely to be postponed. 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.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
152
26 Contingencies, commitments and restrictions on the distribution of profits (Cont.)
(i) Contingencies (Cont.)
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 mainly referred to the compensation for certain intercompany transactions
involving Dalmine in connection with sales of products and R&D activities. As of December 31, 2021, the claim
amounted to approximately EUR26.5 million (approximately $30 million), comprising EUR20.7 million
(approximately $23.5 million) in principal and EUR5.8 million (approximately $6.5 million) in interest and
penalties.
On June 14, 2021, Dalmine received the tax assessment related to fiscal year 2015 with respect to the same matters.
The tax assessment confirms the preliminary determination included in the tax report issued by the tax authority in
2019. As of December 31, 2021, these additional claims amount to approximately EUR10.3 million (approximately
$11.7 million), comprising EUR8 million (approximately $9 million) in principal and EUR2.3 million
(approximately $2.7 million) in interest and penalties.
The aggregate amount claimed for fiscal years 2014 and 2015 is approximately EUR36.8 million (approximately
$41.7 million) comprising EUR28.7 million (approximately $32.5 million) in principal and EUR8.1 million
(approximately $9.2 million) in interest and penalties.
On July 27, 2020, Dalmine filed a first-instance appeal before the Milan tax court against the 2014 tax assessment.
The hearing on this appeal, originally scheduled on June 21, 2021, has been postponed to May 9, 2022. 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.
Product liability litigation
The Company’s U.S. subsidiary, IPSCO, or its subsidiaries, are parties to product liability claims, which may result
in damages for an aggregate amount estimated at approximately $15.5 million, mainly related to 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.
U.S. Antidumping Duty and Countervailing Duty Investigations
On October 27, 2021, the U.S. Department of Commerce (“DOC”) announced the initiation of antidumping duty
investigations of oil country tubular goods (“OCTG”) from Argentina, Mexico, and Russia and countervailing duty
investigations of OCTG from Russia and South Korea. The investigations were initiated on the basis of a petition
by U.S. Steel Tubular Products, Inc., a small number of other U.S. domestic welded OCTG producers, and a
steelworkers’ union. On November 22, 2021, the International Trade Commission (“ITC”) made a preliminary
determination of injury, allowing the investigations to proceed. The investigations are currently proceeding, with
final determinations by DOC and the ITC likely to occur in the second half of 2022.
Tenaris, which imports OCTG from Argentina and Mexico to complement its significant and continuously growing
production in the United States, believes that the petition, the DOC initiation and the preliminary determination of
injury are unjustified and is vigorously challenging any claim that its imports are unfairly traded or are causing or
threatening injury to the U.S. domestic OCTG industry.
At this time, the Company cannot predict the outcome of this matter or estimate the potential impact, if any, that the
resolution of this matter may have on the Company’s business.
(ii) Commitments and guarantees
Set forth is a description of the Tenaris’s main outstanding commitments:
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, 2021, the aggregate commitment to take or pay the committed volumes for
an original 14-year term totaled approximately $34.6 million.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
153
26 Contingencies, commitments and restrictions on the distribution of profits (Cont.)
(ii) Commitments and guarantees (Cont.)
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 Ele
ctricidad (“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 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 became effective upon delivery of the first purchase order, which occurred in April 2021,
and will remain in force for a 3-year term. As of December 31, 2021, the estimated aggregate contract amount
calculated at current prices, is approximately $150.6 million. The contract gives the subsidiary of the Company
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-year 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 recent events described in note 26 (i) to these
Consolidated Financial Statements “U.S. Antidumping Duty and Countervailing Duty Investigations”, and the
June 28, 2021 U.S. Department of Commerce’s affirmative final determinations and imposition of a final dumping
rate of 209.72% on TMK steel line pipe product imports, in February, 2022 the Company and TMK have agreed
that there shall be no minimum yearly purchase requirement for the OCTG product category for the year ending
December 31, 2022, and there shall be no minimum yearly purchase requirement for TMK line pipe products under
the MDA neither for the contract year ending December 31, 2022, nor for any subsequent contract year until
expiration of the MDA’s term. The Company and TMK have further agreed that in the event the U.S. Department
of Commerce shall either make a negative preliminary determination of dumping and injury as regards TMK’s
OCTG products or shall impose preliminary antidumping or countervailing duties or tariffs (or require a bond or
cash to cover for any such duty or tariff upon a final determination) such that the aggregate amount of duties and
tariffs on the import value of TMK’s OCTG products would not exceed 35%, then the Company and TMK will
engage in good-faith discussions and negotiations to determine and agree upon an appropriate reduced minimum
yearly purchase requirement for the OCTG product category for any the remainder of the 2022 contract year (if
any). As regards TMK steel line pipe products, the Company and TMK agreed to engage in like discussions and
negotiations in the event the dumping rate of 209.72% on TMK steel line pipe product imports is revoked or ceases
to be in effect before expiration of the MDA’s term. As of December 31, 2021, the Company’s commitment under
the MDA for the remainder of its term totaled approximately $394.4 million.
A subsidiary of the Company entered into a one-year contract, renewable for one additional year, with Ternium
México S.A. de C.V., under which it is committed to purchase on a monthly basis a specified minimum volumes
of steel bars. The contract became effective in March 2021. As of December 31, 2021, the aggregate commitment
totaled approximately $15.8 million. This commitment is expected to be terminated in March 2022.
A subsidiary of the Company entered into a contract with the supplier Voestalpine Grobblech GmbH to which it
committed to purchase carbon steel for a total amount of approximately $198.7 million to use for manufacturing
pipes related to the NFXP-QatarGas project.
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) to these Consolidated Financial Statements, (ii) issued corporate
guarantees securing certain obligations of GPC, as described in note 13 (d) to these Consolidated Financial
Statements; and (iii) issued performance guarantees mainly related to long term commercial contracts with several
customers and parent companies for approximately $3.0 billion as of December 31, 2021.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
154
26 Contingencies, commitments and restrictions on the distribution of profits (Cont.)
(iii) Restrictions on 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, 2021, 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 Cancellation of title deed in Saudi Steel Pipe Company
In early 2021, the
Company has learned through the Saudi 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, Saudi Arabia, and
were purchased from a private entity on February 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 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 by the authorities, and the legal basis for the court order is unknown. On May 4, 2021, SSPC filed a
petition with an ad-hoc newly-created special committee at the Saudi Ministry of Justice, seeking to have its title
deeds reinstated. At this time, it is not possible to predict the outcome of this matter.
28 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. Restrictions have tightened over time. 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 (if made to related parties) or 180 days (if made to
unrelated parties) from shipment date, or, if collected earlier, within five days of collection.
Foreign currency proceeds from exports of services must be sold into the Argentine foreign exchange market
and converted into Argentine pesos within five business days of collection.
Access to the Argentine foreign exchange market to pay for imports of services rendered by related parties
(including royalties) is generally 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 is subject to several restrictions, including payment terms that cannot be at sight or involve advance
payments. In particular, the importer may not have more than $100,000 deposited in any foreign account, and
will have to certify that it has not accessed the market to sell bonds for foreign currency and has not transferred
bonds abroad or made cross-border securities swaps for a period of 90 days prior to the required payment of
imports, that it will not do so for a period of 90 days after the Argentine Central Bank provides the foreign
currency, and that it will not circumvent such restrictions through transfers of funds to any shareholders holding
more than a 25% voting interest in the importer or to other entities having common directors with the importer
or its more-than-25% shareholders.
Access to the Argentine foreign exchange market to pay debt service (principal and interest) 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 $2 million maturing on or before December 31, 2021 need to be
refinanced in at least 60% of outstanding principal and for a minimum period of 2 years.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
155
28 Foreign exchange control measures in Argentina (Cont.)
Access to the Argentine foreign exchange market to make dividend payments generally requires prior
Argentine Central Bank approval.
Further restrictions have been imposed by the Argentine Securities Commission in June 2021 and in October
2021, consisting of weekly limitations on the amount of bonds that Argentine companies could sell against
foreign currency.
When required, Argentine Central Bank approvals are rarely, if ever, granted.
Tenaris’s Argentine subsidiaries continue to have access to the official foreign currency market for all imports of
goods and for acquisition of services from unrelated parties. Therefore, assets and liabilities denominated in foreign
currency as of December 31, 2021, have been valued at the prevailing official exchange rates.
Tenaris’s financial position in Argentine peso as of
December 31, 2021, amounted to a net short exposure of
approximately $95 million. As of December 31, 2021, the total net equity of Argentine subsidiaries represented
approximately 9
% of Tenaris’s total equity and the sales performed by Argentine subsidiaries during the
twelve-
month period ended on December 31, 2021 amounted approximately to 20.4
% 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 Consoli
dated 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 regulations that could be imposed by the Argentine government could further restrict our
Argentine subsidiaries’ ability to access the official foreign exchange market.
29 Cash flow disclosures
(all amounts in thousands of U.S. dollars)
Year ended December 31,
(i)
Changes in working capital
2021
2020
2019
Inventories
(1,060,465)
828,796
311,459
Receivables and prepayments and current tax assets
(75,530)
74,877
(34,368)
Trade receivables
(334,781)
409,163
428,326
Other liabilities
(2,292)
(34,871)
(18,295)
Customer advances
43,744
(34,388)
16,844
Trade payables
383,417
(184,442)
(180,857)
(1,045,907)
1,059,135
523,109
(ii)
Income tax accruals less payments
Tax accrued
189,448
23,150
202,452
Taxes paid
(153,846)
(140,364)
(395,869)
35,602
(117,214)
(193,417)
(iii)
Interest accruals less payments, net
Interest accrued
(14,371)
8,627
(4,616)
Interest received
24,567
19,613
30,890
Interest paid
(21,559)
(28,778)
(30,655)
(11,363)
(538)
(4,381)
30 Related party transactions
As of December 31, 2021:
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.àr.l., a Luxembourg société à responsabilité limitée (“Techint”), who is the holder of record of the above-
mentioned Tenaris shares.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
156
30 Related party transactions (Cont.)
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.
Transactions and balances disclosed as with “non
-
consolidated parties” a
re 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,
2021
2020
2019
(i)
Transactions
(a) Sales of goods and services
Sales of goods to non-consolidated parties
71,879
20,183
20,577
Sales of goods to other related parties
76,467
18,243
69,972
Sales of services to non-consolidated parties
4,161
5,829
5,620
Sales of services to other related parties
49,268
5,049
4,386
201,775
49,304
100,555
(b) Purchases of goods and services
Purchases of goods to non-consolidated parties
294,929
84,485
174,588
Purchases of goods to other related parties
32,453
12,892
51,765
Purchases of services to non-consolidated parties
9,763
6,979
9,404
Purchases of services to other related parties
13,806
18,133
54,514
350,951
122,489
290,271
(all amounts in thousands of U.S. dollars)
At December 31,
2021
2020
(ii)
Period-end balances
(a) Arising from sales / purchases of goods / services
Receivables from non-consolidated parties
66,896
78,721
Receivables from other related parties
33,122
4,447
Payables to non-consolidated parties
(45,092)
(24,914)
Payables to other related parties
(2,125)
(2,310)
52,801
55,944
(b) Financial debt
Finance lease liabilities from non-consolidated parties
(1,936)
(2,042)
Finance lease liabilities from other related parties
(624)
(810)
(2,560)
(2,852)
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) to these Consolidated Financial Statements. No other material
guarantees were issued in favor of other related parties.
Directors and senior management compensation
During the years ended December 31, 2021, 2020 and 2019, the cash compensation of Directors and Senior managers
amounted to $37.7 million, $27.4 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 382, 522 and 468 thousand units for a total amount of $3.9 million, $5 million and $4.8 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 to these Consolidated Financial Statements.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
157
31 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,
2021
2020
2019
Audit fees
3,804
3,781
3,846
Audit-related fees
220
134
50
Tax fees
-
102
7
All other fees
5
-
1
Total
4,029
4,017
3,904
32 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, 2021.
Company
Country of
Incorporation
Main activity
Percentage of
ownership at December
31, (*)
2021
2020
2019
ALGOMA TUBES INC.
Canada
Manufacturing of seamless steel pipes
100%
100%
100%
CONFAB INDUSTRIAL S.A. and subsidiaries
Brazil
Manufacturing of welded steel pipes and
capital goods
100%
100%
100%
DALMINE S.p.A.
Italy
Manufacturing of seamless steel pipes
100%
100%
100%
HYDRIL COMPANY and subsidiaries (except
detailed) (a)
USA
Manufacture and marketing of premium
connections
100%
100%
100%
IPSCO TUBULARS INC. and subsidiaries
USA
Manufacturing of welded and seamless
steel pipes
100%
100%
NA
MAVERICK TUBE CORPORATION and
subsidiaries
USA
Manufacturing of welded steel pipes
100%
100%
100%
NKKTUBES (b)
Japan
Manufacturing of seamless steel pipes
51%
51%
51%
P.T. SEAMLESS PIPE INDONESIA JAYA
Indonesia
Manufacturing of seamless steel products
89%
89%
89%
S.C. SILCOTUB S.A.
Romania
Manufacturing of seamless steel pipes
100%
100%
100%
SAUDI STEEL PIPE CO.
Saudi Arabia
Manufacturing of welded steel pipes
48%
48%
48%
SIAT SOCIEDAD ANONIMA
Argentina
Manufacturing of welded and seamless
steel pipes
100%
100%
100%
SIDERCA SOCIEDAD ANONIMA
INDUSTRIAL Y COMERCIAL and subsidiaries
Argentina
Manufacturing of seamless steel pipes
100%
100%
100%
TALTA - TRADING E MARKETING
SOCIEDADE UNIPESSOAL LDA.
Portugal
Holding Company
100%
100%
100%
TENARIS BAY CITY, INC.
USA
Manufacturing of seamless steel pipes
100%
100%
100%
TENARIS CONNECTIONS BV
Netherlands
Development, management and licensing
of intellectual property
100%
100%
100%
TENARIS FINANCIAL SERVICES S.A.
Uruguay
Financial company
100%
100%
100%
TENARIS GLOBAL SERVICES (CANADA)
INC.
Canada
Marketing of steel products
100%
100%
100%
TENARIS GLOBAL SERVICES (U.S.A.)
CORPORATION
USA
Marketing of steel products
100%
100%
100%
TENARIS GLOBAL SERVICES (UK) LTD
United
Kingdom
Holding company and marketing of steel
products
100%
100%
100%
TENARIS GLOBAL SERVICES S.A. and
subsidiaries (except detailed) (c)
Uruguay
Holding company and marketing of steel
products
100%
100%
100%
TENARIS INVESTMENTS (NL) B.V. and
subsidiaries
Netherlands
Holding
company
100%
100%
100%
TENARIS INVESTMENTS S.àr.l.
Luxembourg
Holding company
100%
100%
100%
TENARIS TUBOCARIBE LTDA.
Colombia
Manufacturing of welded and seamless
steel pipes
100%
100%
100%
TUBOS DE ACERO DE MEXICO, S.A.
Mexico
Manufacturing of seamless steel pipes
100%
100%
100%
(*) All percentages rounded.
(a) Tenaris Investments S.àr.l. holds 100% of Hydril's subsidiaries shares except for Technical Drilling & Production Services Nigeria. Ltd where
it held 80% for 2019.
(b) See note 35 "Preliminary agreement to terminate NKKTubes joint venture" to these Consolidated Financial Statements.
(c) Tenaris holds 98.4% 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 S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
158
33 Business combinations
Acquisition of IPSCO Tubulars, Inc.
On January 2, 2020, Tenaris acquired 100% of the shares of IPSCO, a U.S. manufacturer of steel pipes, from PAO
TMK (“TMK”). The
final 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 $1,029 million.
The Company has begun consolidating IPSCO’s balances and results of operations as from January 2,
2020.
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:
$ million
Property, Plant and Equipment
503
Intangible assets
170
Working capital
138
Cash and Cash Equivalents
4
Borrowings
(53)
Provisions
(27)
Other assets and liabilities, net
(63)
Net assets acquired
672
As a result of the acquisition, Tenaris recognized a goodwill for approximately $357 million, subsequently fully
impaired during 2020 as a consequence of the unprecedented decline in oil prices, deterioration on business
conditions and other changes in circumstances.
34 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 and obtained favorable awards, which are final and not subject to further appeals.
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 $173.1 million (including $0.3 million of legal fees), 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, 2021, post-award interest
calculated at the award rate amounted to approximately $117.4 million and, accordingly, the total amount owed by
Venezuela under the award as of December 31, 2021 was $290.5 million.
On June 8, 2018, Tenaris and Talta filed an action in federal court in the District of Columbia to recognize and
enforce the award in the United States. 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 $256.4 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. As of December 31, 2021, post-judgement interest calculated at the U.S. judgment rate
amounted to approximately $0.2 million and, accordingly, the total amount owed by Venezuela under the U.S.
judgment as of December 31, 2021 was $256.6 million. The U.S. judgment, however, may not be enforced in the
United States to the extent prohibited by the Venezuelan sanctions regulations issued by the U.S. Treasury
Department’s Office of Foreign Assets Control currently in effect.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
159
34 Nationalization of Venezuelan subsidiaries (Cont.)
Tavsa and Comsigua
On December 12, 2016, the tribunal issued its award
upholding Tenaris’s and Talta’s claim that Venezuela had
expropriated their investments in Tavsa and Comsigua in violation of the bilateral investment treaties entered into
by Venezuela with the Belgium-Luxembourg Economic Union and Portugal. The award granted compensation in
the amount of $137 million and ordered Venezuela to pay an additional amount of $76 million in pre-award interest
and 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. As of December 31, 2021, post-award interest calculated at the award rate amounted to
approximately $68.5 million and, accordingly, the total amount owed by Venezuela under the award as of December
31, 2021 was $284.8 million.
On June 8, 2018, Tenaris and Talta filed an action in federal court in the District of Columbia to recognize and
enforce the award in the United States. On August 24, 2021, the court entered judgment in favor of Tenaris and Talta
and against Venezuela in the amount of $276.9 million, with post-judgment interest accruing from the date of
judgment at the federal statutory post-judgment interest rate. On November 5, 2021, the court, in response to a
motion by Tenaris and Talta, amended the judgment amount to $280.6 million, with post-judgment interest
continuing to accrue from August 24, 2021 at the federal statutory post-judgment interest rate. As of December 31,
2021, post-judgement interest calculated at the U.S. judgment rate amounted to approximately $0.1 million and,
accordingly, the total amount owed by Venezuela under the U.S. judgment as of December 31, 2021 was $280.7
million. The U.S. judgment, however, may not be enforced in the United States to the extent prohibited by the
Venezuelan sanctions regulations issued by the U.S. Treasury Department’s Office of Foreign Assets Control
currently in effect
As of December 31, 2021, 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 to these Consolidated Financial
Statements.
35 Other relevant information
Agreement to build a welded pipe plant in West Siberia
In 2019, Tenaris entered into an agreement with PAO Severstal to build and operate a welded pipe plant with an
annual production capacity of 300,000 tons to manufacture OCTG products in Surgut, West Siberia, Russian
Federation. Tenaris holds a 49% interest in the company, while PAO Severstal owns the remaining 51%. In 2019,
Tenaris contributed with $19.6 million to the project. No additional contributions were subsequently made.
In 2020, PAO Severstal and Tenaris placed the construction on-hold due to the market conditions and the pandemic.
In December 2021, the parties decided to keep the initiative on-hold and to continue assessing the situation in the
relevant markets and the cost dynamics in order to determine the agreement’s next steps.
Agreement to build a steel pipe premium connection threading plant in Baotou
In 2020, Tenaris 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 pipes produced by our joint venture partner in Baotou,
China, for sale to the domestic market. Under the agreement, Tenaris holds 60% of shares in the new joint-venture
company, while Baotou Steel owns 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 and to start operations in early 2022. During 2020 and 2021,
Tenaris contributed respectively $2.3 million and $15.6 million in the project.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
160
35 Other relevant information (Cont.)
Preliminary agreement to terminate NKKTubes joint venture
Tenaris’s seamless pipe manufacturing facility in Japan, located in the Keihin steel complex owned by JFE Holdings
Inc. (“JFE”), is operated by NKKTubes, a company owned 51% by Tenaris and 49% by JFE. Steel bars and ot
her
essential inputs and services for NKKTubes are supplied under a long-term agreement by JFE.
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 its steel manufacturing facilities located at the Keihin complex. In light of that
development, Tenaris and JFE engaged in discussions and ultimately determined that the project was no longer
economically sustainable. Accordingly, on November 2, 2021, Tenaris and JFE agreed to terminate amicably their
joint venture and liquidate NKKTubes. The preliminary agreement provides for the closure of NKKTubes’
manufacturing operations by the end of June 2022, the termination of all agreements that allowed the operation of
the joint venture, and the allocation between the parties of the related dissolution and liquidation costs. Tenaris and
JFE continue discussing other aspects of the dissolution of the joint venture, with a view towards reaching a
definitive agreement prior to June 2022. Tenaris and JFE are also committed to ensure a continued supply of tubular
material, including
13 Chrome alloy products to international customers after NKKTubes’ closure.
Management determined that the parties’ decision to terminate the NKKTubes joint
venture constituted an
impairment indicator and accordingly conducted an impairment test, recognizing a charge of approximately $57
million, impacting NKKTubes’ property, plant and equipment and intangible assets. In addition, as of December 31
2021, the Company carries a positive currency translation adjustment reserve of approximately $140 million, out of
which $71 million corresponds to the owners of the parent. The net non-
controlling interests’ reserve amounts to
approximately $25 million. These balan
ces will be reclassified through the Company’s results in the period when
the final transaction occurs.
36 The COVID-19 pandemic, the oil & gas industry situation and their impact on Tenaris’s operations
and financial condition
The rapid expansion of the COVID-19 pandemic around the world 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 in the first half of 2020 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 Tenaris’s oil and gas customers. The Company took prompt action to mitigate the impact of the crisis
and to adapt Tenaris’s operations on a country-by-country basis to comply with applicable rules and requirements
and contain the effects of the global crisis. In response to the COVID-19 outbreak, several countries, including
countries where Tenaris has operations (such as Argentina, China, Colombia, Italy, Mexico, Saudi Arabia and the
United States) took mitigation and containment measures, including bans on business activities and closure of
industrial facilities. The Company implemented a worldwide restructuring program and cost-containment plan
aimed at preserving the financial resources and overall liquidity position and maintaining the continuity of its
operations; adjusted production levels at its facilities including through the temporary closure of certain facilities or
production lines and layoffs in several jurisdictions, and reduced capital expenditures and working capital. In
addition, the Company introduced remote work and other flexible work arrangements and implemented special
operations protocols in order to safeguard the health, safety and wellbeing of Tenaris’s employees, customers and
suppliers. Although such measures have so far proved to be successful to mitigate the impact of the crisis on Tenaris,
if new and more contagious variants of the virus prove to be resistant to available vaccines and new preventive
measures are imposed in the future, Tenaris’s operations could be further affected and its results adversely impacted.
Despite economic volatility as a result of the continuing presence and repercussions of COVID-19, as well as the
uncertainty about the future duration and extent of the pandemic, market demand for oil is approaching pre-pandemic
levels and that for natural gas already exceeds them. Oil and natural gas prices also exceed pre-COVID-19 levels,
while oil and gas drilling activity is steadily increasing in North America and the rest of the world and OCTG
inventories are at relatively low levels in North America and are at more normal levels in the rest of the world.
Tenaris’s North American industrial facilities continue ramping up to meet higher demand and some facilities -
temporary shut down during 2020- were reopened during 2021. In this context, even with raw material, energy and
logistic cost increases, Tenaris’s margins show a significant recovery compared to 2020.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
161
36 The COVID-19 pandemic, the oil & gas industry situation and their impact on Tenaris’s operations
and financial condition (Cont.)
With the purpose of assessing the Company’s exposure to the effects of the COVID-19 pandemic and its impact
over its business, financial position and performance, the management has conducted impairment tests, and is closely
monitoring the recoverability of long lived assets and deferred taxes, financial risk management, in particular credit
and liquidity risks and the adequacy of its provisions for contingent liabilities.
The Company also renegotiated existing contractual obligations with its counterparties to adapt the commitments to
the decrease in activity. As a result, Tenaris is adequately complying with all main outstanding contractual
commitments and guarantees. In addition, Tenaris has not received any material government grants or public support
measures for the years 2021 and 2020, and has not received, nor provided, material arrangements on the form of
supply chain financing.
As of the date of these Consolidated Financial Statements, Tenaris’s capital and financial resources, and overall
liquidity position, have not been affected by this scenario. Tenaris has in place non-committed credit facilities and
management believes it has adequate access to credit markets. In addition, Tenaris has a net cash position of
approximately $700
6
million as of the end of December 2021 and a manageable debt amortization schedule.
Considering Tenaris’s financial position and the funds provided by operating activities, management believes that
the Company has sufficient resources to satisfy its current working capital needs, service its debt and address short-
term changes in business conditions.
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.
37 Subsequent events
Investment to build a wind farm in Argentina
On February 16, 2022, the Board of Directors has approved an investment plan to build a wind farm in Argentina at
a cost of approximately $190 million which would reduce Tenaris’s CO
2
emissions in that country by around
150,000 tons per year, and supply close to 50% of the energy requirements at the integrated seamless pipe mill in
Campana, Argentina. This investment is expected to be completed during 2023.
Annual Dividend Proposal
Upon approval of the Company´s annual accounts in March 2022, the Board of Directors intends to propose, for the
approval of the Annual General Shareholders' meeting to be held on May 3, 2022, the payment of an annual dividend
of $0.41 per share ($0.82 per ADS), or approximately $484 million, which includes the interim dividend of $0.13
per share ($0.26 per ADS) or approximately $153 million, paid on November 24, 2021. If the annual dividend is
approved by the shareholders, a dividend of $0.28 per share ($0.56 per ADS), or approximately $331 million will
be paid on May 25, 2022, with an ex-dividend date of May 23, 2022. These Consolidated Financial Statements do
not reflect this dividend payable.
38 Update as of March 30, 2022
7
The Russia-Ukraine armed conflict and its impact on Tenaris’s operations and financial condition
On February 24, 2022, Russia launched a military attack on Ukraine. In response, the United States, the European
Union and the United Kingdom have imposed a wave of sanctions against certain Russian institutions, companies
and citizens. The Russian Government has retaliated by banning airlines from its airspace and has ordered economic
counter measures, including restrictions on residents transferring foreign currency abroad.
6
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).
7
This note was added subsequently to the approval of these Consolidated Financial Statements by the Company’s Board of Directors on
February 16, 2022.
Tenaris S.A. Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
162
38 Update as of March 30, 2022 (Cont.)
The Russia-Ukraine armed conflict and its impact on Tenaris’s operations and financial condition (Cont.)
Russia is a major supplier of oil and gas in Europe and worldwide, and Russia and Ukraine are both major global
suppliers of internationally traded steelmaking raw materials and semi-finished steel products. For example, prior
to the conflict, Russia was producing between 10-12% of the world’s oil, supplying as much as 40% of the EU’s
natural gas, while Russia and Ukraine combined were accounting for around 50% of internationally traded pig iron,
around 30% of internationally traded semi-finished steel products, and a large proportion of internationally traded
ferroalloys used in steelmaking.
As a result of the armed conflict and related sanctions, oil and gas prices have spiked upwards and foreign trade
transactions involving Russian and Ukrainian counterparties have been severely affected. For example, oil prices
rose around $130 per barrel and European gas prices rose above $60 per million BTU in the immediate aftermath of
the invasion, but have since fallen back to around $120/bbl and $30 per million BTU. Although it is hard to predict
how energy and commodity prices will behave as the conflict unfolds, higher prices and even shortages of energy
and raw materials used in our steelmaking operations (including natural gas and electric energy, particularly in
Europe, steel scrap, pig iron, DRI, HBI, ferroalloys, steel bars, coils and plates) are likely if there is a severe
disruption in energy supplies to Europe or in foreign trade transactions in steel making raw materials involving
Russian and Ukrainian counterparties.
Our purchases of raw materials from Russia and Ukraine, used in our production process, mainly ferroalloys for our
global operations and pig iron for our European operations, amounted to approximately $34 million in 2021. We are
seeking supplies from alternative sources in response to the interruption in supplies from Ukraine and the impact of
sanctions on supplies from Russia and may be forced to pay higher prices to secure the raw materials we require for
our steelmaking operations.
Our sales to Russian customers represented approximately 0.2% of our global sales in 2021. We have suspended
sales to our Russian customers and purchases from Russian suppliers that would breach applicable sanctions. In
addition, we have a representative office in Moscow, which currently employs 10 people. Tenaris is exploring
alternatives with respect to potential relocation or closure of such office.
In light of the armed conflict involving Russia and Ukraine and the designation of Severstal’s controlling shareholder
as person subject to EU and UK sanctions, we are currently assessing the amount to be written off from our
investment in the joint venture in Russia, which as of December 31, 2021 amounted to $16.8 million.
Discontinuity of industrial equipment manufacturing in Brazil
On March 21, 2022, the Company announced its decision to reorganize the activities at its Confab Equipamentos
industrial facility in Moreira César, Pindamonhangaba, São Paulo, Brazil. The Company’s Brazilian subsidiaries
will discontinue the manufacturing of industrial equipment and will focus their activities entirely on the production
of welded products, sucker rods, coatings and accessories. The Company estimates that this decision will not have
a material effect on its financial condition and results of operations.
Alicia Móndolo
Chief Financial Officer
163
Annual Accounts (Luxembourg GAAP)
As at December 31, 2021
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)
R.C.S. Luxembourg B 65 477 - TVA LU25482518
164
Audit report
To the Shareholders of
Tenaris S.A.
Report on the audit of the annual accounts
Our opinion
In our opinion, the accompanying annual accounts give a true and fair view of the financial position of
Tenaris S.A. (the “Company”) as at 31 December 2021, and of the results of its operations for the year
then ended in accordance with Luxembourg legal and regulatory requirements relating to the 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”).
What we have audited
The Company’s annual accounts comprise:
the balance sheet as at 31 December 2021;
the profit and loss account for the year then ended; and
the notes to the annual accounts, which include a summary of significant 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
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 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.
165
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 2021,
are disclosed in Note 9 to the annual accounts.
The non-audit services rendered by PwC Network firms to the Company and its controlled undertakings,
for the year ended 31 December 2021, are disclosed in Note 31 to the Company’s consolidated financial
statements.
Key audit matters
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
audit of the annual accounts as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Recoverability of investment in subsidiary -
Tenaris Investments S.à r.l.
Note 3 to the annual accounts indicates that as
of 31 December 2021, Tenaris S.A. holds 100%
interest in the unlisted company Tenaris
Investments S.à r.l. (Tenaris Investments). This
investment represents 99.99% of the total assets
of the Company. The carrying value of the
investment amounts to 14,991 million USD.
We focused our audit on the recoverability of this
investment given its financial significance over
the total assets.
Our audit approach included assessing the
recoverability of the investment in Tenaris
Investments by comparing its carrying value with
Tenaris Investments' net assets as obtained from
its audited annual accounts.
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.
166
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.
Responsibilities of the Board of Directors and those charged with governance for the annual
accounts
The Board of Directors is responsible for the preparation and fair presentation of the annual accounts 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
is necessary to enable the preparation of annual accounts that are free from material misstatement,
whether due to fraud or error.
In preparing the annual accounts, the Board of Directors is responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Board of Directors either intends to liquidate the
Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
The Board of Directors is responsible for presenting the annual accounts in compliance with the
requirements set out in the Delegated Regulation 2019/815 on European Single Electronic Format
(“ESEF Regulation”).
Responsibilities of the “Réviseur d’entreprises agréé” for the audit of the annual accounts
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
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016
and with ISAs 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 annual accounts.
As part of an audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016 and
with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
x 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;
167
x 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;
x evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Board of Directors;
x conclude on the appropriateness of the Board of Directors’ use of the going concern basis of
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;
x evaluate the overall presentation, structure and content of the annual accounts, including the
disclosures, and whether the annual accounts represent the underlying transactions and events in a
manner that achieves fair presentation.
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
internal control that we identify during our audit.
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 applicable, actions
taken to eliminate threats or safeguards applied.
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.
We assess whether the annual accounts have been prepared, in all material respects, in compliance
with the requirements laid down in the ESEF Regulation.
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
168
undertakings, as amended, is consistent with the annual accounts and has been prepared in accordance
with applicable legal requirements.
We have been appointed as “Réviseur d’Entreprises Agréé” by the General Meeting of the Shareholders
on 3 May 2021 and the duration of our uninterrupted engagement, including previous renewals and
reappointments, is 20 years.
We have checked the compliance of the annual accounts of the Company as at 31 December 2021 with
relevant statutory requirements set out in the ESEF Regulation that are applicable to annual accounts.
For the Company it relates to the requirement that annual accounts are prepared in a valid XHTML
format.
In our opinion, the annual accounts of the Company as at 31 December 2021, identified as Tenaris AR-
2021-12-31-en, have been prepared, in all material respects, in compliance with the requirements laid
down in the ESEF Regulation.
PricewaterhouseCoopers, Société coopérative
Represented by
@esig
@esi
Gilles Vanderweyen
Luxembourg, 30 March 2022
Tenaris S.A.
Balance Sheet as at December 31, 2021
(expressed in United States Dollars)
The accompanying notes are an integral part of these annual accounts
169
DEC
DEC
2021
2020
Note(s)
USD
USD
ASSETS
C.
Fixed assets
III.
Financial assets
1.
Shares in affiliated undertakings
3
14,990,658,193
15,348,618,449
14,990,658,193
15,348,618,449
D.
Current assets
II.
Debtors
4.
Other debtors
a) becoming due and payable within one year
-
855
IV.
Cash at bank and in hand
339,638
254,060
E.
Prepayments
42,056
48,190
381,694
303,105
Total assets
14,991,039,887
15,348,921,554
CAPITAL, RESERVES AND LIABILITIES
A.
Capital and reserves
4
I.
Subscribed capital
1,180,536,830
1,180,536,830
II.
Share premium account
609,732,757
609,732,757
IV.
Reserves
1.
Legal reserve
5
118,053,683
118,053,683
V.
Profit brought forward
13,241,701,857
15,908,055,291
VI.
Loss for the financial year
(39,866,098)
(2,418,440,700)
VII.
Interim dividends
7
(153,469,788)
(82,637,578)
14,956,689,241
15,315,300,283
C.
Creditors
6.
Amounts owed to affiliated undertakings
a) becoming due and payable within one year
8
13,016,693
19,990,081
b) becoming due and payable after more than one year
8
11,403,787
7,347,177
8.
Other creditors
a) Tax authorities
5,457
116,079
c) Other creditors
i) becoming due and payable within one year
8,688,563
6,167,934
ii) becoming due and payable after more than one year
1,236,146
-
34,350,646
33,621,271
Total capital, reserves and liabilities
14,991,039,887
15,348,921,554
Tenaris S.A.
Profit and loss account for the year ended December 31, 2021
(expressed in United States Dollars)
The accompanying notes are an integral part of these annual accounts
170
2021
2020
Note(s)
USD
USD
4.
Other operating income
1,134,180
1,332,639
5.
Other external expenses
9
(8,384,641)
(7,436,190)
6.
Staff costs
(1,448,013)
-
8.
Other operating expenses
10
(30,764,930)
(22,011,736)
11.
Other interest receivable and similar income
b) other interest and similar income
263,681
2,229
13.
Value adjustments in respect of financial assets and of
investments held as current assets
3
-
(2,389,291,348)
14.
Interest payable and similar expenses
a) concerning affiliated undertakings
11
(659,504)
(615,926)
b) other interest and similar expenses
(1,414)
(414,455)
16.
Loss after taxation
(39,860,641)
(2,418,434,787)
17.
Other taxes not shown under items 1 to 16
12
(5,457)
(5,913)
18.
Loss for the financial year
(39,866,098)
(2,418,440,700)
Tenaris S.A.
Notes to the audited annual accounts
171
Note 1 – General information
Tenaris S.A. (the “Company” or “Tenaris”) was established on December 17, 2001 under the name of Tenaris
Holding S.A. as a public limited liability company under Luxembourg’s 1929 holding company regime
(
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 (s
ociété 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.
Note 2 – Summary of significant accounting policies
2.1 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 3). During the period there were no material changes in the significant
accounting estimates.
The Company is carefully assessing the potential impact of climate change and the energy transition on its business
in terms of the risks to its markets and its physical assets and is adapting its business strategy accordingly. These
events did not impact materially management judgements and estimates used in the preparation of these annual
accounts.
2.2 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.
2.3 Financial assets
Shares in affiliated undertakings are valued at purchase or contribution price including the expenses incidental
thereto.
The Company conducts impairment tests on its financial assets in accordance with Luxembourg regulations.
In case of other than a temporary decline in respect of the financial assets value, its carrying value will be reduced
to recognize this decline. If there is a change in the reasons for which the value adjustments were made, these
adjustments could be reversed, if appropriate.
Tenaris S.A.
Notes to the audited annual accounts
172
Note 2 – Summary of significant accounting policies (Cont.)
2.4 Debtors
Debtors are valued at their nominal value. They are subject to value adjustments whenever their recovery is
compromised. These value adjustments are not continued if the reasons for which the value adjustments were made
have ceased to apply.
2.5 Cash at bank and in hand
Cash at bank and in hand mainly comprise cash at bank and liquidity funds. Assets recorded in cash at bank and in
hand are carried at historical cost which approximates fair market value.
2.6 Creditors
Creditors are stated at nominal value.
Note 3 – Financial assets
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., Algoma Tubes Inc., 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:
USD
Gross book value - opening balance
20,677,201,141
Decreases for the financial year (*)
(357,960,256)
Gross book value - closing balance
20,319,240,885
Accumulated value adjustments - opening balance
(5,328,582,692)
Accumulated value adjustments - closing balance
(5,328,582,692)
Net book value - opening balance
15,348,618,449
Net book value - closing balance
14,990,658,193
(*) 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, 2021, in connection with cancellations of loans to Tenaris, the value of the participation of Tenaris in
Tenaris Investments decreased by USD 358 million.
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 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.
As of December 31, 2021 Tenaris Investments reported a net equity of USD 15 billion and an income for the financial
year of USD 59.2 million.
Tenaris S.A.
Notes to the audited annual accounts
173
Note 4 – 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, 2021 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.
Note 5 – Legal reserve
In accordance with Luxembourg law, the Company is required to set aside a minimum of 5% of its annual net profit
for each financial year to a legal reserve. This requirement ceases to be necessary once the balance on the legal
reserve has reached 10% of the issued share capital. The C
ompany’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.
Note 6 – Distributable amounts
Dividends may be paid by Tenaris upon the ordinary shareholders’ meeting approval to the extent distributable
retained earnings exist.
At December 31, 2021, the Company’s profit brought forward after deduction of the loss and the interim dividend
for the financial year under Luxembourg law totalled approximately USD 13.0 billion.
The share premium amounting to USD 0.6 billion can also be reimbursed.
Note 7 – Dividend payment
On May 3, 2021, the Company’s Shareholders approved an annual dividend in the amount of USD 0.21 per share
(USD 0.42 per ADS) for an aggregate amount of approximately USD 248 million. The amount approved included
the interim dividend previously paid on November 25, 2020 in the amount of USD 0.07 per share (USD 0.14 per
ADS). The balance, amounting to USD 0.14 per share (USD 0.28 per ADS), was paid on May 26, 2021.
On November 3, 2021, the Company’s Board of Directors approved the payment of an interim dividend of USD
0.13 per share (USD 0.26 per ADS), or approximately USD 153 million, payable on November 24, 2021, with an
ex-dividend date of November 22, 2021.
Tenaris S.A.
Notes to the audited annual accounts
174
Note 8 – Creditors: Amounts owed to affiliated undertakings
Within a
year
After more
than one year
and within five
years
After more
than five
years
Total at
December
31, 2021
Total at
December
31, 2020
USD
USD
USD
USD
USD
Creditors becoming due and payable
Tenaris Solutions Uruguay S.A.
3,392,387
2,034,540
5,616,319
11,043,246
5,935,409
Siderca Sociedad Anónima Industrial y Comercial
4,460,576
562,695
1,000,940
6,024,211
6,680,517
Management Solutions Services, Inc.
1,813,427
862,912
1,326,381
4,002,720
2,392,673
Tenaris Investments S.à r.l.
2,002,898
-
-
2,002,898
5,703,650
Dalmine S.p.A.
996,357
-
-
996,357
4,709,841
Tubos de Acero de México, S.A.
343,374
-
-
343,374
220,658
Tenaris Connections B.V.
-
-
-
-
1,688,484
Others
7,674
-
-
7,674
6,026
Total
13,016,693
3,460,147
7,943,640
24,420,480
27,337,258
Note 9 – Other external expenses
2021
2020
USD
USD
Professional services and fees (*)
7,454,142
6,649,918
Other services and fees
727,957
589,471
Others
202,542
196,801
8,384,641
7,436,190
(*) The total fees for the financial year received by the auditor amounted 1.5 million including 84 thousand related
to statutory auditor's other assurance services.
Total fees accrued for professional services rendered by PwC Network firms to Tenaris S.A. and its subsidiaries
are disclosed in note 31 to the Company’s consolidated financial statements.
Note 10 – Other operating expenses
2021
2020
USD
USD
Senior Management compensation and others
28,030,996
18,969,996
Board of directors' accrued fees
1,496,822
1,327,762
Others
1,237,112
1,713,978
30,764,930
22,011,736
Note 11 – Interest payable concerning affiliated undertakings
Interests payable concerning affiliated undertaking are referred to intercompany loans from Tenaris Investments.
Note 12 – Taxes
The Company is liable to all taxes applicable to a Luxembourg "Société Anonyme". For the financial year ended
December 31, 2021 the Company did not realize any profits subject to tax in Luxembourg.
Tenaris S.A.
Notes to the audited annual accounts
175
Note 13 – Parent Company
Tenaris’s controlling shareholders as of December 31, 2021 were as follows:
x
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.
x
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.
x
Rocca & Partners Stichting Administratiekantoor Aandelen San Faustin, a private foundation located in the
Netherlands (Stichting) (“RP STAK”) held vo
ting shares in San Faustin sufficient in number to control San
Faustin.
x
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.
Note 14 – 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 Tenar
is
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 is now proceeding 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.
Note 15 – U.S. patent infringement litigation
Tenaris Coiled Tubes, LLC (“TCT”), a U.S. subsidiary of the Company, was sued in 2017 by its competitor Global
Tubing, alleging defamatory conduct by TCT and seeking a declaration that certain Global Tubing products do not
infringe patents held by TCT. TCT subsequently counterclaimed that certain Global Tubing products infringe
patents held by TCT, Global Tubing has since sought to invalidate such patents. On December 13, 2019, Global
Tubing filed an amended complaint (including the Company as defendant), alleging that TCT and the Company
misled the patent office in order to monopolize the coiled tubing market for quench and tempered products. On
March 26, 2021, a magistrate to the principal judge in the case found that Global Tubing had established a prima
facie case that TCT had misled the patent office by failing to disclose a previous attempt to quench and temper
coiled tubing. On April 9, 2021, TCT filed its objections to the magistrate’s ruling with the principal judge in the
case. On August 25, 2021, the principal judge in the case affirmed the magistrate’s order and found possible
evidence of intent to commit fraud on the patent office. Such determination is not final. TCT is considering several
avenues to challenge this decision. TCT believes that it has meritorious defenses to this claim. Trial was expected
to take place in May 2022 but is likely to be postponed. 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.
Tenaris S.A.
Notes to the audited annual accounts
176
Note 16 – 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 public prosecutors’ office of Milan, Italy, completed a preliminary investigation into the alleged
payments and included 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, in the
investigation. The Company is not a party to the proceedings. On March 22, 2022, upon completion of the
evidentiary phase of the trial, the acting prosecutor requested the first-instance court in Milan in charge of the case
to impose sanctions on our Chairman and Chief Executive Officer, on the other two board members, and on San
Faustin. The Company’s outside counsel in Italy has advised the Company that neither the case file nor the
prosecutor’s request contain or identify any evidence of involvement in, or knowledge of, the alleged wrongdoing
by any of the three directors. The Company has also been advised that the defendants are scheduled to present their
arguments before the court on April 19, 2022, that the court may issue its decision on April 26, 2022, and that the
grounds for any such decision may not be immediately available. Any decision by the first-instance court may be
appealed by either party before a higher court.
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. The proceedings are underway. 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.
Note 17 – Off balance sheet commitments
The Company issued guarantees covering the funding obligations of Techgen S.A. de C.V. (“Techgen”), an
associated company of Tenaris, under a loan agreement between Techgen and various lenders. As of December 31,
2021 and 2020, the amount guaranteed was approximately USD 10.3 million and USD 4.9 million, respectively.
Tenaris S.A.
Notes to the audited annual accounts
177
Note 18 – The COVID-19 pandemic, the oil & gas industry situation and their impact on Tenaris’s
operations and financial condition
The rapid expansion of the COVID-19 pandemic around the world 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 in the first half of 2020 causing a collapse in
prices, an acute oversupply, a rapid build-up of excess inventories, and the consequent drop of investments in
drilling activity. The Company took prompt action to mitigate the impact of the crisis and to adapt its subsidiaries
operations on a country-by-country basis to comply with applicable rules and requirements and contain the effects
of the global crisis. In response to the COVID-19 outbreak, several countries, including countries where the
Company’s subsidiaries operate (such as Argentina, China, Colombia, Italy, Mexico, Saudi Arabia and the United
States) took mitigation and containment measures, including bans on business activities and closure of industrial
facilities. The Company implemented a worldwide restructuring program and cost-containment plan aimed at
preserving the financial resources and overall liquidity position and maintaining the continuity of its subsidiaries’
operations; adjusted production levels at its subsidiaries
’ facilities including through the temporary closure of
certain facilities or production lines and layoffs in several jurisdictions, and reduced capital expenditures and
working capital. In addition, the Company’s subsidiaries introduced remote work and ot
her flexible work
arrangements and implemented special operations protocols in order to safeguard the health, safety and wellbeing
of 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 mutate and spread, or new pandemics or public health crises emerge and
new preventive measures are imposed in the future, the Company’s operations could be further affected and
adversely impact our results.
Despite economic volatility as a result of the continuing presence and repercussions of COVID-19, as well as the
uncertainty about the future duration and extent of the pandemic, market demand for oil is approaching pre-
pandemic levels and that for natural gas already exceeds them. Oil and natural gas prices also exceed pre-COVID-
19 levels, while oil and gas drilling activity is steadily increasing in North America and the rest of the world. In
this context, even with raw material, energy and logistic cost increases, Tenaris’s margins show a significant
recovery compared to 2020.
Note 19 – Subsequent events
Annual Dividend Proposal
Upon approval of the Company´s annual accounts in March 2022, the Board of Directors intends to propose, for
the approval of the Annual General Shareholders' meeting to be held on May 3, 2022, the payment of an annual
dividend of USD 0.41 per share (USD 0.82 per ADS), or approximately USD 484 million, which includes the
interim dividend of USD 0.13 per share (USD 0.26 per ADS) or approximately USD 153 million, paid on
November 24, 2021. If the annual dividend is approved by the shareholders, a dividend of USD 0.28 per share
(USD 0.56 per ADS), or approximately USD 331 million will be paid on May 25, 2022, with an ex-dividend date
of May 23, 2022. These annual accounts do not reflect this dividend payable.
The Russia-Ukraine armed conflict and its impact on Tenaris’s operations and financial condition
On February 24, 2022, Russia launched a military attack on Ukraine. In response, the United States, the European
Union and the United Kingdom have imposed a wave of sanctions against certain Russian institutions, companies
and citizens. The Russian Government has retaliated by banning airlines from its airspace and has ordered economic
counter measures, including restrictions on residents transferring foreign currency abroad.
Russia is a major supplier of oil and gas in Europe and worldwide, and Russia and Ukraine are both major global
suppliers of internationally traded steelmaking raw materials and semi-finished steel products. For example, prior
to the conflict, Russia was producing between 10-12% of the world’s oil, supplying as much as 40% of the EU’s
natural gas, while Russia and Ukraine combined were accounting for around 50% of internationally traded pig iron,
around 30% of internationally traded semi-finished steel products, and a large proportion of internationally traded
ferroalloys used in steelmaking.
Tenaris S.A.
Notes to the audited annual accounts
178
Note 19 – Subsequent events (cont.)
As a result of the armed conflict and related sanctions, oil and gas prices have spiked upwards and foreign trade
transactions involving Russian and Ukrainian counterparties have been severely affected.
Although it is hard to predict how energy and commodity prices will behave as the conflict unfolds, higher prices
and even shortages of energy and raw materials used in our steelmaking operations are likely if there is a severe
disruption in energy supplies to Europe or in foreign trade transactions in steel making raw materials involving
Russian and Ukrainian counterparties.
Our purchases of raw materials from Russia and Ukraine, used in our production process, mainly ferroalloys for
our global operations and pig iron for our European operations, amounted to approximately USD 34 million in
2021. We are seeking supplies from alternative sources in response to the interruption in supplies from Ukraine
and the impact of sanctions on supplies from Russia and may be forced to pay higher prices to secure the raw
materials we require for our steelmaking operations.
Our sales to Russian customers represented approximately 0.2% of our global sales in 2021. We have suspended
sales to our Russian customers and purchases from Russian suppliers that would breach applicable sanctions.
Alicia Móndolo
Chief Financial Officer
Tenaris S.A. Annual Report 2021
179
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 2021 amounted to a gain
of $708 million.
For the year ended December 31,
Millions of U.S. dollars
2021
2020
2019
Operating income (loss)
708
(663)
832
Depreciation and amortization
595
679
540
Impairment charge
57
622
-
EBITDA
1,359
638
1,372
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.
At December 31,
Millions of U.S. dollars
2021
2020
2019
Cash and bank deposits
318
585
1,554
Other current investments
398
872
210
Non-current investments
313
239
18
Derivatives hedging borrowings and investments
2
8
19
Current borrowings
(220)
(303)
(781)
Non-current borrowings
(111)
(316)
(41)
Net cash position
700
1,085
980
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 2021 amounted to $119 million.
For the year ended December 31,
Millions of U.S. dollars
2021
2020
2019
Net cash provided by operating activities
119
1,520
1,528
Capital expenditures
(240)
(193)
(350)
Free cash flow
(120)
1,327
1,178
Tenaris S.A. Annual Report 2021
180
INVESTOR INFORMATION
Investor Relations Director
Giovanni Sardagna
Luxembourg Office
4
th
Floor
(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
General Inquiries
investors@tenaris.com
Stock Information
New York Stock Exchange (TS)
Mercato Telematico Azionario (TEN)
Bolsa Mexicana de Valores, S.A.B. de C.V. (TS)
ADS Depositary Bank
Deutsche Bank
CUSIP No. 88031M019
Internet
www.tenaris.com