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Sales and operating income are expected to continue to show solid year on year growth during the remainder of the year but third quarter results will be affected by seasonal factors.
Analysis of 2012 Second Quarter Results
Sales volume (metric tons) Q2 2012 Q1 2012 Q2 2011Tubes - Seamless 701,000 664,000 6% 633,000 11%Tubes - Welded 237,000 251,000 (6%) 198,000 20%Tubes - Total 938,000 915,000 3% 831,000 13%Projects - Welded 55,000 43,000 28% 68,000 (19%)Total 993,000 958,000 4% 899,000 10% Tubes Q2 2012 Q1 2012 Q2 2011(Net sales - $ million)North America 1,291.2 1,289.2 0% 946.0 36%South America 345.2 323.2 7% 327.9 5%Europe 287.8 263.1 9% 279.0 3%Middle East & Africa 361.4 284.8 27% 303.7 19%Far East & Oceania 132.0 128.5 3% 141.2 (7%)Total net sales ($ million) 2,417.6 2,288.7 6% 1,997.8 21%Cost of sales (% of sales) 59% 60% 63%Operating income ($ million) 548.1 508.6 8% 319.4 72%Operating income (% of sales) 23% 22% 16%
Net sales of tubular products and services increased 6% sequentially and 21% year on year. In North America, higher sequential sales in the United States, particularly in the Gulf of Mexico, and Mexico were offset by a seasonal reduction in sales in Canada. In South America, sales increased sequentially due primarily to higher shipments in Venezuela. In Europe, sales of OCTG products increased while sales to European distributors remain weak. In the Middle East & Africa, the sequential increase in sales was due to an improvement in the product mix and a strong level of shipments to Iraq. In the Far East&Oceania, higher sales of OCTG in China offset lower sales of other products in the region.
Operating income from tubular products and services increased 8% sequentially and 72% year on year. The sequential increase in operating income was mainly attributable to the increase in sales and a slight increase in the operating margin.
Projects Q2 2012 Q1 2012 Q2 2011Net sales ($ million) 187.8 140.1 34% 212.4 (12%)Cost of sales (% of sales) 64% 67% 65%Operating income ($ million) 47.4 26.1 82% 51.5 (8%)Operating income (% of sales) 25% 19% 24%
Projects net sales amounted to US$187.8 million in the second quarter of 2012, an increase of 34% sequentially and a decrease of 12% relative to the second quarter of 2011. Sequentially, the increase in sales was due primarily to an increase in shipments of line pipe to projects in Brazil following low deliveries in the previous quarter.
Operating income from Projects increased 82%, reflecting an increase in net sales and higher operating margins.
Others Q2 2012 Q1 2012 Q2 2011Net sales ($ million) 196.0 188.6 4% 192.9 2%Cost of sales (% of sales) 73% 71% 68%Operating income ($ million) 25.5 31.5 (19%) 38.9 (35%)Operating income (% of sales) 13% 17% 20%
