Tubos Reunidos S A : 2022 - Year 2022 Results

PERFORMANCE AND RESULTS FOR 2022

PERFORMANCE AND RESULTS FOR 2022

01

Tubos Reunidos earns 43.5 million euros in 2022

€ 43.5m

of net profit compared to a loss of 64.7 million in 2021.

IT IS THE BEST RESULT SINCE 2008, WHICH CONFIRMS ITS RECOVERY AND COMPLIANCE WITH THE STRATEGIC PLAN.

TURNOVER OF

514 million euros

doubling the 2021 figures

EBITDA

64 million euros

increasing by 115 million from 2021.

HAS CURRENTLY A BACKLOG OF

303 million euros

UP 71% FROM THE BEGINNING OF THE YEAR

This marks a record level, especially with a highly concentrated mix of carbon and low alloy steels in the OCTG and mechanical segments.

TR has generated a net cash flow of 18 million euros ending the year with 95 million euros in cash and reducing its net financial debt.

Growth has been remarkable in volume but especially in sales prices, which have shown an upward trend as we have been able to progressively pass on the strong increases in energy and raw material costs to the market, and subsequently to maintain them despite the high volatility.

Within these projects, in 2022, there are two that have been undertaken that have a marked transformational nature due to the synergies that can be achieved in the production processes: firstly, the joining of the cold-drawing units of the Pamplona and Amurrio plants

on the last one, now already complete, and, secondly, the concentration of the casting processes of the Trapaga and Amurrio steel mills on the last one thanks to an investment of over €11m that will allow both billet and ingots to be manufactured in the same facility, the raw materials needed for the manufacture of pipes of different diameters and compositions.

The performance of 2022 allows us to face 2023 with confidence, as we have a backlog volume of 303 million euro and a market that is giving favourable indicators from the demand point of view, along with the challenge of managing uncertainty and possible cost volatility. Our strategy affords us greater efficiency in our internal management, through weighting the backlog and product mix best suited to our facilities and production process.

PERFORMANCE AND RESULTS FOR 2022

02

Key Performance Indicators*

Millions of euro unless otherwise stated	2022	2021	Difference	Difference (%)
Results
Business turnover	514	243	271	112%
EBITDA	64	(51)	115	-
EBITDA margin/turnover	12.6%	(21.2%)	33.8	-
Net results	43	(65)	108	-
Cash Flow and debt
Cash flow from operations	41	(38)	79	-
Net cash flow	18	57	(39)	-
Net financial debt	293	300	(7)	(2%)
Net financial debt/EBITDA		4.5x	(5.9x)	-	-
Cash and cash equivalents	95	77	18	(23%)
Other
Order book	303	177	126	71%
CapEx	14.7	-6.7	8.0	119%

* The definition of the indicators can be found in the "Alternative Performance Measures" section of the Management Report for the consolidated financial statements for FY 2022

Business development
Tubos Reunidos closed 2022 with consolidated revenue of	mers and the distribution chain throughout the previous
€ 524m and a turnover of € 514m, doubling the 2021 figu-	year; the strong inflow of carbon steel orders from oil and
res and achieving the best results in recent years. This subs-	gas in the United States throughout the year; and on-
tantial improvement is based on a significant rebound in	going sustained inflows of orders for pipes for large-sca-
demand and the impact that the overall increase in pro-	le mechanical and industrial uses. The main European
duction costs has had on sales prices in the sector.	markets, having taken the full impact of the reduction
	in gas supplies from Russia and focused on the need to
Our activity has been heavily focused on carbon steel pi-	boost investment to reduce their dependence on that
ping, for three main reasons: an initial backlog in January	country, have also shown very good performance, with
2022 with a significant weighting of commodity pro-	strong demand and favourable price trends.
ducts due to the replenishment of inventories by custo-

PERFORMANCE AND RESULTS FOR 2022

03

Sales, in Thousands of euros		H2 2022	H2 2021	H2 2022 vs.	H1 2022	H2 2022 vs.	FY 2022	FY 2021	2022 vs.
	H2 2021	H1 2022	2021
Sales by geography	249,392	114,810	117%	228,789	9%	478,181	222,139	115%
Domestic	13,286	11,313	17%	17,270	(23%)	30,556	27,254	12%
Rest of Europe	73,062	47,073	55%	78,179	(7%)	151,241	86,234	75%
North America	147,085	33,364	341%	104,949	40%	252,034	56,503	346%
East Asia	12,068	17,327	(30%)	19,124	(37%)	31,192	41,197	(24%)
MENA	3,274	2,972	10%	3,074	7%	6,348	5,787	10%
Others	617	2,761	(78%)	6,193	(90%)	6,810	5,164	32%
Sales by sector	249,392	114,810	117%	228,789	9%	478,181	222,139	115%
Refinning&petrochemical and	40,101	41,755	(4%)	58,418	(31%)	98,519	91,174	8%
Power generation (Downstream)
Oil&Gas - OCTG (Upstream)	106,413	14,863	616%	63,292	68%	169,705	31,494	439%
Oil&Gas - Linepipes (Midstream)	41,537	21,218	96%	40,446	3%	81,983	39,027	110%
Construction, mechanical,	61,341	36,974	66%	66,633	(8%)	127,974	60,444	112%
industrial

By geographic area, sales to North America have increased to €252m, representing 53% of the Group's total revenues, compared to 25% in 2021. High oil and gas prices have accelerated investments in major shales, sharply increasing demand for OCTG piping in the US throughout 2022 from

3.5 million tonnes in 2021 to 4.6 million tonnes in 2022. In this context, the Group was able to react with sufficient agi- lity to reactivate its production capacity that had been shut down during the pandemic.

Moreover, the agreement reached by the US and Euro- pean Commission administrations to establish tariff-free quotas for steel and aluminium exports has boosted sales in the United States, also supported by high prices due to the lack of capacity in the local market to service domestic demand.

These factors have allowed us to supply material again to RDT, our product finishing plant in the United States, recovering positions in our main market by winning large piping contracts with its BTX connection throughout the year. Additional orders have also been won for TRPT, the pipe plant joint venture with premium connections. In pa- rallel, pipeline procurement in the United States has also been at very high levels, and all at historically record sales prices.

The high volume of exports outside the European Union has also benefited from the appreciation of the dollar against the euro.

The main European markets, having taken the full impact of the reduction in gas supplies from Russia and focused on the need to boost investment to reduce their dependence on that country, have also shown very good perfor- mance, with strong demand and favourable price trends.

On the other hand, we are still to see a revival in other areas. Demand for orders from China, still affected by restrictive policies to deal with successive outbreaks of COVID-19, has been weaker than expected, while projects that have started up in the Middle East have done so at unattractive prices for foreign manufacturers, who are unable to benefit from the region's low energy costs.

Sales growth has occurred in all business sectors: upstream (OCTG) accounts for 33% of total turnover, with a 439% increase on 2021, based on the recovery of the North American market to pre-pandemic levels, but with much higher prices. Secondly, pipes for mechanical-industrial applications are noteworthy, with an increase of € 68m in turnover, 112% with respect to 2021. There are also increases in downstream sales, 8% on 2021, and midstream 110% compared to a 2021 with very little activity.

In relation to projects related to electric power generation, refining and petrochemicals (downstream) that provide a mix of alloyed and stainless steels, although there has been some reactivation of projects paralysed by the pandemic, the impetus we expected in the major markets in Asia and the Middle East has not yet been recovered.

PERFORMANCE AND RESULTS FOR 2022

04

ORDER BOOK

The strong increase in demand for drilling and driving in North America and the contraction of a significant portion of traditional supply have meant that, throughout the year, the order intake has continued to gain momentum month -on-month. Growth has been remarkable in volume but especially in sales prices, which have shown an upward trend as we have been able to progressively pass on the

strong increases in energy and raw material costs to the market, and subsequently to maintain them despite the high volatility, to end 2022 with a backlog of €303m, up 71% from the beginning of the year. This marks a record level, especially with a highly concentrated mix of carbon and low alloy steels in the OCTG and mechanical segments.

CONSOLIDATED STATEMENT OF INCOME

Millions of euro	2022	2021	% Var.
Net turnover	513.7	243.0	111%
Other operating income	10.1	7.8	29%
Operating income	523.8	250.8	109%
Change in inventory of finished products and those in production	23.6	27.4	(14%)
Supplies	(206.9)	(132.4)	56%
Staff expenses	(101.9)	(102.9)	(1%)
Other operating expenses	(174.4)	(94.7)	84%
Other net profit/(loss)	0.4	0.3	33%
EBITDA	64.5	(51.4)	-
Turnover margin	12.6%	(21.2%)
Depreciation of property, plant and equipment	(15.8)	(13.1)	21%
Impairment and results for fixed assets disposal	5.3	77.4	(93%)
Operating income	54.0	12.9	319%
Turnover margin	10.5%	5.3%
Financial results	(16.0)	(77.6)	(79%)
Tax on profits	5.5	0.1	-
Result attributed to external partners	0.0	0.0	-
Result attributed to the parent company	43.5	(64.7)	-
Turnover margin	8.5%	(26.6%)

The positive trends in sales, together with the start of the efficiency measures envisaged in the Strategic Plan and the appreciation of the dollar against the euro, have led to a significant improvement in consolidated results. The Group has therefore achieved a positive EBITDA of

• 64.5m, a remarkable turnaround from the negative
• -51.4min 2021 and even compared to the positive €

18.6m in 2018, the first year of the introduction of the tariff in the United States. For its part, the Group's consolidated operating profit amounted to € 54.0m compared to

• 12.9m in the previous year (the 2021 amount that inclu- des an non-recurring positive effect due to the reversal of impairment of fixed assets of € 77.4m).