Annual Report 2005 - Tenaris

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Annual Report 2005 - Tenaris

Annual Report 2005


Annual Report 2005


Company

profile

More than 60 years in activity

In 1943, the banker Gastão Vidigal, in partnership

with the Polish industrialist Isydor Kleinberger,

acquired the Fábrica Nacional de Tambores

in auction. The company, which produced steel

drums, gas cylinders and refrigerators, had been

confiscated from its German owners in consequence

of the Second World War. This was the

beginning of Confab's history in the São Paulo

district of Pompéia.


Gastão Vidigal placed his son, Carlos Bueno

Vidigal in charge of Confab, and it was he who

ensured the consolidation of the company, imbuing

it with a sense seriousness, responsibility,

transparency and respect for people, combined

with a constant drive to improve the quality

of products and services and invest in technology

and human capital.

With the creation of Petrobras in 1953 and the

development of the petroleum refining industry

in the country, Confab had the opportunity to

expand its business, manufacturing equipment

for the new industry.

Growing with Brazil

In 1961, Confab began to manufacture welded

steel pipes. It was at this time that the company

closed its first large scale contract: supplying

tubular stakes for the construction of Usiminas.

In the 1970's, Confab was split into two units:

pipes and equipment, with the construction

of two plants in Pindamonhangaba, 160 km

from São Paulo. The company started supplying

the petroleum & gas, petrochemical, mining,

steel, cellulose & paper and sanitation industries,

as well as nuclear power plants.

5. Annual Report 2005


It was during this period, with the business now

under the command of Roberto Caiuby Vidigal,

that Confab realized that it was time to expand

into new markets. The company thus initiated

what was to become a major participation in the

implantation of the country's petrochemical

industry, projected to make Brazil self-sufficient

in petroleum, as well as in the amplification of

the country's steel industry.

Exports and the stock exchange: new challenges

Confab began to gain global recognition in the

beginning of the 1980's, when in partnership

with Cosipa, it won a tender from All American

Pipeline to build a 2,000 kilometer oil pipeline,

stretching from Texas to California in the United

States. During this decade, the company's commercial

network was extended from Singapore

and Teheran to Houston, Texas.

It was also during the 1980's that senior management

decided that taking the company public

would be essential for its future. 60% of its shares

were offered to ensure growth, diversification and

external funding. The funds raised – and the

confidence of shareholders – provided the fuel for

the company to continue its activities. In addition

to bringing on board a large number of shareholders,

Confab transformed its employees into

true partners by initiating a profit sharing scheme

for all employees meeting their targets.

6. TenarisConfab

Tenaris: global leader

In 1993, as part of the company's growth and

globalization strategies, 30% of Confab's shares

were swapped with Siat, a welded steel pipe manufacturer

belonging to the Techint Organization,

which values and principles had a great deal

in common with Confab's. The company shares

remained listed on the São Paulo Stock Exchange

(Bovespa), with 60% of its capital in the hands

of Brazilian shareholders.

To add value and increase the range of products

on offer to customers, in 1998 Confab formed

a joint venture with the Argentine company Soco-

Ril. The partnership was sealed with the construction

of a center of excellence in pipe coatings

– today known as Socotherm Brasil, also located

in Pindamonhangaba.

In 1999, the Techint Organization acquired a controlling

share in Confab, and Roberto Vidigal was

invited to stay on as president of the company.

In 2001, the Tenaris brand, which originally denoted

a strategic alliance involving eight welded and seamless

steel pipe producers strategically located around

the globe, came into existence. The following year,

the company signed some of the biggest contracts

in its history: the supply of pipes for the Camisea

project in Peru; OCP in Ecuador; Gasyrg in Bolivia

and Carina & Aries in Argentina.

Tenaris is the leading global manufacturer

of seamless steel pipes for the world’s oil and gas

industry and a leading global supplier of seamless

steel pipes for process and power plants and for

industrial and automotive applications. We are

also the leading regional supplier of welded steel

pipes for oil and gas pipelines in South America.

Our customers include most of the world’s major

oil and gas companies as well as a large number

of engineering and industrial companies.


Domiciled in Luxembourg, we have manufacturing

facilities in Argentina, Brazil, Canada, Italy, Japan,

Mexico, Romania and Venezuela and specialized

R&D and proprietary global service and distribution

networks. Our annual manufacturing capacity

is 3.3 million tons of seamless and 930 thousand

tons of welded pipes. With this infrastructure and

our 17,500 employees, we focus on providing enduser

customers a service that integrates manufacturing,

procurement, distribution and on-time delivery

of high quality products throughout the world.

TenarisConfab and Confab Equipamentos

In Brazil, with the incorporation by Tenaris, the

Confab units were renamed TenarisConfab and

Confab Equipamentos.

TenarisConfab is the leading producer and supplier

of welded pipes to the Brazilian energy industry,

and a leading exporter of these products to Mercosur

and Latin America.

Confab Equipamentos produces equipment utilized

in the chemical, petrochemical, steel, energy, steam

generation, oil and gas, pulp and paper, infrastructure,

engineering, construction and service industries.

With the mission of complementing its products

with an ever growing number of services, in 2002

TenarisConfab installed a base in Macaé in the

state of Rio de Janeiro to manage customers' stocks

and ensure the just-in-time supply of pipes for oil

wells. The following year, the company gained

a definitive foothold in the oil and gas exploration

and production industry with the inauguration

of a Heat Treatment plant in Pindamonhangaba.

In 2004, the company started producing sucker rods

and accessories for onshore applications.

In 2005, through Socotherm Brasil, the company

invested in the construction of a special coatings

plant in the state of Espírito Santo for offshore projects.

In addition to providing the company with

an exclusive technology in Brazil, the venture reinforces

Tenaris's global partnership with Socotherm.

25 years on the São Paulo Stock Exchange

In 2003, TenarisConfab adhered to Level 1

Corporate Governance, confirming the commitment

to its investors that the company had striven to

maintain since its shares were first traded on

the stock market. Through the application of criteria

that go beyond those required by law, the select

group of companies that Confab is part of today

shows single-minded dedication to providing

greater security for those who invest in the company.

The share split in 2004 was projected to provide

greater liquidity for Confab's shares, and once

more the market responded positively, valuing

the company's sotcks.

In 2005 the company celebrated 25 years of activity

on the São Paulo Stock Exchange and also received

a sustained performance seal from APIMEC SP

– the Capital Markets Investments Analysts and

Professionals Association – for five consecutive years

of presentation in the institution.

During this time, sustained by its transparent and

responsible performance, Tenaris has won the trust

of the market and its shareholders.

7. Annual Report 2005


8. TenarisConfab


Striving for excellence is more than just a Quality Program at TenarisConfab, it is an operational guideline

supported by a program certified by national and international standards.

9. Annual Report 2005


Highlights

10. TenarisConfab


PIPE DIVISION (IN TONS)

Export sales

Domestic sales

Total sales volume

SAW - submerged arc welding production

ERW - electrical resistence welding production

Total production

EQUIPMENT DIVISION (IN MAN HOURS)

Level of activity

HEADCOUNT (NUMBER OF EMPLOYEES)

CONSOLIDATED FINANCIAL INFORMATION (*)

Net operating revenues

Net earnings

Net earnings per share in R$

Common nominative shares

Preference shares

Total shares

Current assets

Long term receivables

Permanent assets

Total assets

Current liabilities

Long term liabilities

Minority interests

Shareholders' equity

Total liabilities and shareholders' equity

Dividends / Interest on owner's equity

(*) Amounts expressed in thousands of reais, except earning per share and shares

(**) Interest on own capital already deducted from Shareholders' Equity

(***) To be ratified in Shareholders' Assembly in April 2006

107,369

320,548

427,917

279,871

103,288

383,159

604,371

2,086

1,783,105

277,013

0.8517

127,794,168

197,453,829

325,247,997

769,311

39,172

318,050

1,126,533

2005 2004

358,043

10,746

20,117

637,627 (**)

1,126,533

67,118 (***)

154,221

92,385

246,606

260,701

46,210

306,911

574,135

2,050

887,626

17,519

0.0539

127,794,168

197,453,829

325,247,997

884,037

31,077

298,480

1,213,594

666,604

106,841

13,748

426,401

1,213,594

21,596

11. Annual Report 2005


Message

to the

shareholders

12. TenarisConfab


Dear Shareholders,

A landmark in 2005 was the 25th anniversary of the company's decision to

go public. Once again, it is worth repeating that this decision was decisive

in allowing Confab to continue to grow solidly and transparently, leading

to a year of achievements worthy of commemoration.

Important regional projects, mainly in the energy transportation sector

and the excellent performance of the equipment division once again proved

Confab's efficiency in meeting its customer needs.

The result of this hard work was net revenues of R$ 1,783.1 million, 101%

higher than in 2004, a net profit of R$ 277.0 million, and a rise in earnings per

share to R$ 0.8517, due to increased sales and a better product and price mix.

A total of R$ 47.2 million was invested in 2005, mainly in the expansion and

modernization of plants to improve quality, automation and competitiveness.

We also invested in the construction of a new plant for special coatings in

partnership with Socotherm Brasil. The plant, located in the state of Espírito

Santo, will supply products for deepwater projects.

During the year, the demand for natural gas and petroleum in Brazil continued

to grow, stimulated by the increased participation of natural gas in the

Brazilian energy grid, which in turn ensured the ongoing expansion of pipeline

networks with important projects such as: Coari-Manaus, Cabiúnas-Vitória

and Catu-Carmópolis-Pilar.

There was an upturn in the mining sector and Confab contributed with the

supply of pipes to Companhia Vale do Rio Doce (CVRD) for the world's first

bauxite mineral pipeline.

With the support of the BNDES, TenarisConfab and TenarisSiat delivered

more than 700 kilometers of piping for the amplification and modernization

of the Argentinean gas pipeline network, a highlight in the export segment.

The main projects in Confab Equipamentos were: a pulp evaporation plant

for Veracel; a ship loading system for CVRD; a precipitation system for

Alunorte and the supply of maritime metallic structures for Petrobrás' PRA-1

autonomous repumping platform.

13. Annual Report 2005


The segment supplying fuel tanks for service stations performed well during

the year, especially worthy of note being the company's sales to Companhia

Ipiranga and to BR Distribuidora.

The outlook for 2006 in TenarisConfab is affected by the evolution of the

GASENE projects in Brazil and the second expansion phase of the north and

south gas pipelines in Argentina. It is expected that the lack of definition in

these projects will result in decreased demand for welded pipes in the regional

market, which should be partially offset by higher sales outside the region.

Even so, if the demand and prices of natural gas maintain their current levels,

large projects in the area may well come to fruition.

In the industrial equipments unit, the outlook for 2006 is favorable, based

on the expansion plans announced by Petrobras, as well as the enlargement

and modernization of its main refineries. In the petrochemical and pulp

sectors there are also a number of investment plans. Companhia Vale do Rio

Doce should also be investing in equipment and plants in the mining sector.

We take this opportunity to thank our team for their great professionalism

and dedication, resulting once again in increased efficiency and productivity

for the company.

We also thank our customers, suppliers and shareholders for their continous

support and confidence in the company.

Roberto Caiuby Vidigal

President of the Board

14. TenarisConfab


Increasing productivity using the best technology available. Research and technological development

driving new products, methods, processes and solutions are part of our daily routine.

15. Annual Report 2005


Letter

of principles

16. TenarisConfab


TenarisConfab has the ongoing objective of growth

and self-perpetuation. This objective is pursued based

on solid principles that guide the conduct of our

workforce and the way the company does business.

Customers

Excellence in meeting our customers' needs is our

major and permanent concern. In order to fulfill

market expectations, we act with the utmost seriousness,

responsibility, reliability and transparency.

We expect no less from our employees, who are

our representatives in our dealings with customers.

Any commitments assumed by employees, even

verbal ones, will be honored by the company.

Our employees

Our greatest asset is our human resources. For this

reason we strive constantly to improve our team,

to engage people and to maximize efficiency and

effectiveness.

Each individual is encouraged to be entrepreneurial

and innovative. Personal growth within our

organization occurs in alignment with the growth

of the company itself, in function of personal

and team performance.

We offer better remuneration, encouraging increased

efficiency rather than higher hierarchical position.

We are committed to implanting a lean, responsive

organization, with a minimal number of hierarchical

levels, placing greater value on team work than

on individual distinction.

Technology

We continuously strive to improve productivity

using the best technology available, from our systems

to the most advanced means of production

and processes. Research and technological development

into new products, methods, processes

and solutions is a constant priority.

Suppliers

Tenaris is committed to considering its suppliers

as partners; showing respect and commitment

to common objectives based on the needs of the

final customer.

The practice of these principles is reflected in

our success, growth and perpetuation.

Profits permit new investments, attract new shareholders,

generate new jobs and create new wealth

which is shared in a transparent manner. They

also generate taxes, which contribute to the welfare

of the country through the provision of further

resources in the areas of education, health, sanitation

and security.

The company has an overriding commitment

to the health and safety of its employees and

of the community, as well as to the preservation

of the environment.

17. Annual Report 2005


Business review

18. TenarisConfab


NET REVENUES

MILLLIONS

OF R$

1800

1600

1400

1200

1000

800

600

400

200

0

Operating Performance

2005 saw the confirmation of the increased importance

of gas in the Brazilian energy grid, with the

amplification of gas pipeline networks. In Argentina,

the greater demand for gas due to economic growth

also led to expansion of its gas pipeline network.

We successfully concluded the supply of pipes for

large projects, mostly in South America, and several

of which were on our order books at the end of

2004. The main highlights were the Coari-Manaus,

Cabiúnas-Vitória, Catu-Carmópolis-Pilar gas

pipelines and the amplification of the North and

South gas pipelines in Argentina.

TOTAL PIPES EQUIPMENT

710.4

547.8

162.6

1,462.0

1,221.1

240.9

994.7

800.5

194.2

887.6

676.0

211.6

1,783.1

1,659.5

2001 2002 2003 2004 2005

123.6

In 2005, the area also supplied pipes for the

Paragominas bauxite slurry pipeline, dedicated

to the transportation of bauxite from the mine

in Paragominas (Pará) to the Alunorte aluminum

processing plant located in Barcarena (Pará).

The industrial equipment operations showed an

increase in nominal production levels, as well as a

significant increase in profitability in consequence

of the selective operational strategy adopted.

Revenues

Confab Industrial S.A. had net operating revenues

of R$ 1,783.1 million in 2005, a 101% increase over

2004. This impressive growth in revenues was due

to increased sales volume and an improved product

and price mix.

The following chart shows the evolution of net revenues

over the last five years.

Result

Net profit for 2005 was R$ 277.0 million, compared

with R$ 17.5 million in 2004. The chart at the

next page shows the evolution of the consolidated

result for the period from 2001 to 2005.

The profit per share was R$ 0.8517 in 2005, against

R$ 0. 0539 for 2004.

The operating profit before the financial result and

results in associated companies increased from

19. Annual Report 2005


20. TenarisConfab

On a daily basis, the Quality Control Department carries out tests to ensure products meet

the parameters demanded by specifications, certifying the quality of TenarisConfab products.


RESULT

MILLLIONS

OF R$

72.5

R$ 64.7 million in 2004 to R$ 436.3 million in

2005, the result of higher sales and greater production

efficiency.

Financial Result

The net financial result for 2005 shows an expense

of R$ 9.3 million, against an expense of R$ 24.2

million for the same period of the previous year.

This result corresponds to 0.5% of net revenues

against 2.7% in 2004.

The breakdown of these results is as follows:

I) interest net of liability and asset operations characterized

an expenditure of R$ 0.8 million in 2005

and R$ 12.1 million in 2004; II) a gain from exchange

variation of R$ 3.3 million in 2005 and

an expenditure of R$ 4.8 million in 2004; III) expenditures

with CPMF and other taxes on financial

revenues of R$ 11.8 million in 2005 and R$ 7.3

million in 2004.

170.7

277.0

20.5 17.5

2001 2002 2003 2004 2005

CONSOLIDATED

EBITDA RESULT

MILLLIONS

OF R$

500

450

400

350

300

250

200

150

100

50

0

122.4

257.1

72.0

99.2

450.5

2001 2002 2003 2004 2005

The EBITDA result (Profit before interest, taxes,

depreciation and amortization) was R$ 450.5

million (R$ 99.2 million in 2004), which breaks

down as follows:

Operating Profit R$ 427.8

Results in associated companies R$ (0.8)

Financial Revenues R$ (36.6)

Financial Expenses R$ 45.9

Depreciation and Amortization R$ 29.6

Management and Employee Profit Share R$ (15.2)

Non-Operating Expenses R$ (0.2)

EBITDA R$ 450.5

The following chart shows the evolution over the

last five years.

The total financial debt on December 31st 2005

was R$ 56 million, 24% of which short and 76%

long term.

At the end of the period the net cash position

(cash less loans and short term bank financing)

was R$ 246 million.

Shareholdings

Confab Industrial S.A. holds shares in the companies:

Siat S.A. (30%), an Argentinean manufacturer

of welded steel pipes; Socotherm Brasil S.A. (50%),

a company specialized in pipe coatings; Tenaris

Confab Hastes de Bombeio S.A. (49%), a company

specialized in manufacturing and commercializing

of sucker rods.

Confab's holding in Siat represented earnings of

R$ 4.8 million in 2005 (against a loss of R$ 3.7 million

in 2004) due to a positive operating result of R$ 15.2

million, driven by increased sales and offset partially

by a negative exchange rate in function of the appreciation

of the Real against the Argentine Peso.

21. Annual Report 2005


22. TenarisConfab

The graph shows the equity equivalence evolution

for Siat over the last five years.

The holding in Socotherm Brasil, a company special

ized in pipe coatings, produced earnings of R$ 11.1

million for Confab in 2005 (compared with R$ 1.1

million in 2004) as a result of the increased demand

for coated pipes. There follows the evolution in

results for the period 2001 to 2005, net of minority

shareholdings (50%).

Tenaris Confab Hastes de Bombeio was founded in

2004 to produce sucker rods and other materials for

the oil and petrochemical sector. Up until September,

SIAT EQUITY EQUIVALENCE

MILLLIONS

OF R$

36

30

24

18

12

6

0

(6)

(12)

OPERATING

RESULTS

12.8

(11.6)

1.1

EXCHANGE

PARITY

35.7

(9.4)

26.3

TOTAL SIAT

2001 2002 2003 2004

0.9

15.2

(3.8)

(5.9)

(4.6) (3.7)

(9.7) (10.4)

2005

4.8

the company honored previously signed commercial

contracts denominated in US dollars. In October

a new two-year contract was signed with Petrobras,

producing positive results for the end of the year,

but not enough to revert the losses accumulated

in the company's balance sheet for the year of 2005.

This led to a loss of R$ 1.6 million for Confab

in 2005 (compared with R$ 0.4 million in 2004).

Human Resources

Social Action - Working Responsibly

Confab seeks to practice corporate social responsibility

by means of diverse actions that contemplate the

needs of the different publics with which it interacts.

To this end, the company is involved in identifying

the needs of its employees and the communities

in which it operates, as well as emphasizing respect

for the environment. At the end of 2005, the company

had 2,086 employees.

In 2005, Confab invested a total of R$ 2.7 million

in technical, management, information technology,

language and postgraduate courses for its employees,

a 153% increase compared with the previous year

(see Social Action Report on page 40).

Investments

The company invested R$ 47.2 million last year,

mainly in the amplification and modernization

of plants. The main focus was on technological

modernization to improve quality, automation

and competitiveness. The investments undertaken

over the last five years are shown in the chart on

the next page.

A number of investments were aimed at increasing

productivity and the quality of our products for

the offshore market. Especially worthy of mention

are the installation of a fluoroscopic station at the

UOE plant, a transportation mechanism at the exit


SOCOTHERM EQUITY

EQUIVALENCE

MILLLIONS

OF R$

12

6

0

3.8

11.3

of the “O” press, the installation wire caging on

the internal welding machines, the modernization

of the side stamping press and the automation

of work stations.

Socotherm Brasil invested R$ 18.4 million in the

construction of a new coating plant in the state

of Espírito Santo, equipped with state-of-the-art

technology designed to meet the needs of our customers

in deepwater and ultra deepwater petroleum

and gas exploration and production projects.

Auditors

The company's policy with respect to contracting

services unrelated to external audits from our

independent auditors is based on principles that

preserve the independence of the independent

auditor. These principles are in accordance with

internationally accepted conventions and stipulate

that: (a) the auditor should not audit his/her own

2.6

1.1

11.1

2001 2002 2003 2004 2005

INVESTMENTS

MILLLIONS

OF R$

80

60

40

20

HEAT

TREATMENT

0

26.8

73.0

43.0

30.0

INVESTMENTS

IN PRODUCTION

PROCESSES AND OTHERS

75.0

56.4

18.6

51.8

47.2

2001 2002 2003 2004 2005

work, (b) the auditor should not exercise management

functions at the client and (c) the auditor

should not promote the interests of his/her client.

During 2005, we hired independent auditors for

consulting services worth less than 5% of the annual

amount spent on independent auditing services.

The consulting services were provided in March,

2005. They totaled 50 hours of work and concerned

the area of indirect federal taxes.

23. Annual Report 2005


The challenges TenarisConfab faced

in supplying the Coari-Manaus gas

pipeline did not stop at the tough

negotiations and international tender

to win this important R$ 242

million contract with Petrobras.

The company was also responsible

for part of the complex logistics

involved in the operation.

The 400 km of welded pipes were

transported from Pindamonhangaba

to Porto Velho by road, and

from there to Manaus by waterway

– ferries were loaded with 20", 70

grade steel API 5L pipes – for transportation

to jungle clearings. Some

4,500 tons of the pipes were delivered

to and stored in Manaus.

An Expedition

in the Jungle .

24. TenarisConfab

The major challenge of this stage

of the project was meeting the rigorous

deadlines, imposed by natural

phenomena. In June, the level

of the rivers in the region decreases,

making it impossible for the ferries

to operate.

The gas pipeline will transport some

4.5 million m3 of gas per day

and will go through the municipal

districts of Coari, Codajás, Anori,

Anama, Iranduba and Caapiranga.

The project represented a great

opportunity for TenarisConfab to

show off its capacity to provide

customers with complete solutions.

Coari-Manaus Project

Porto Velho, Rondônia

Petrobras

TenarisConfab supplied 400 km of pipes to transport gas

to the Amazon's capital. The work will enable the region to substitute

diesel oil with natural gas for its energy supply.

Location

. Customer

. Project Description


25. Annual Report 2005


Leading

indicators

26. TenarisConfab


amounts expressed in thousands of reais, except earnings per share

STATEMENT OF RESULTS - CONSOLIDATED

Net operating revenues

Operating costs and expenses

Operating income before financial and other income

Financial income

Equity equivalence in subsidiaries and associated companies

Shares, statutory contributions and non-operating results

Income tax and social contribution

Net profit for the year

Net profit per share in R$

Total shares

EBITDA (profit before interest, taxes, depreciation and amortization)

FINANCIAL POSITION

Working Capital

Total Assets

Long Term Debt

Shareholders' Equity

2005 2004

2003

1,783,105

887,626

994,756

(1,346,818) (822,908) (948,879)

436,287

64,718

45,877

(9,283)

(24,165)

(10,940)

777

(6,146)

(15,409)

(23,193)

(4,734)

(5,242)

(127,575)

(12,154)

6,221

277,013

17,519

20,507

0.8517

325,247,997

450,515

411,268

1,126,533

64,251

637,627

0.0539

325,247,997

99,225

217,433

1,213,594

78,059

426,401

0.1892

108,415,999

72,018

175,166

1,118,811

50,417

430,478

1,461,974

(1,217,391)

244,583

(32,364)

36,680

(21,146)

(57,015)

170,738

1.5748

108,415,999

257,115

2002 2001

250,486

1,148,856

105,016

461,978

710,374

(600,957)

109,417

(10,855)

3,832

(10,327)

(19,584)

72,483

0.6686

108,415,999

123,543

199,496

753,210

59,637

340,815

27. Annual Report 2005


Pipes

28. TenarisConfab


PIPES - SALES VOLUME

THOUSANDS

OF TONS

500

450

400

350

300

250

200

150

100

50

0

DOMESTIC

MARKET

322.9

245.8

77.1

497.4

417.5

Market and background

Sales of welded tubular products in 2005 totaled

427,900 tons, a 73% increase over the 246,600 tons

invoiced in 2004.

The demand for natural gas and petroleum continued

to increase in Brazil and Argentina, sustained

mainly by economic growth and the increased

participation of natural gas in the Brazilian energy

grid. Important infrastructure projects for the transportation

of natural gas and slurry that had previously

been postponed came to fruition in 2005.

EXPORT

MARKET

311.6

71.5 320.5

240.1

246.6

154.4

79.9 92.2

427.9

107.4

2001 2002 2003 2004 2005

PIPES - NET REVENUES

MILLLIONS

OF R$

1800

1600

1400

1200

1000

800

600

400

200

0

547.8

1,221.1

800.5

1,659.5

676.0

2001 2002 2003 2004 2005

.

.

.

.

With this, the domestic market accounted for 75%

of sales in 2005, the largest share in recent years,

as shown in the chart below.

TenarisConfab had net revenues of R$ 1,659.5

million in 2005, 145% higher than the previous

year (R$ 676.0 million).

The behavior of the different market segments

during 2005, were as follows:

In the Brazilian gas transportation market, the sustained

demand for the product (both effective and

projected) ensured continuity in the amplification

of the pipeline network, the main projects worthy

of note being the Coari-Manaus pipeline in the

Amazon region; Manati Onshore and Offshore,

Catu-Carmópolis-Pilar, and Cabiunas-Vitoria (part

of GASENE), in the southeast and northeast of

the country.

In the mining sector, the highlight was the supply

of pipes to the Companhia Vale do Rio Doce

(CVRD) for construction of the Paragominas /

Barcarena bauxite slurry pipeline to supply the

Alunorte aluminum processing plant, the first such

pipeline built in the world.

Pipe sales to the dealer market grew 6.9% compared

with 2004, a reflex of the increased industrial activity

in Brazil.

In contrast to the otherwise positive climate, the

performance of the sanitation market maintained

29. Annual Report 2005


30. TenarisConfab


Confab Equipamentos: investments in modernizing the welding process and buying ultra modern instruments

for non-destructive tests, such as TOFD, Phased Array and Digital Radiography.

.

the low levels of recent years due to lack of funding

for infrastructure works and a lack of regulatory

definition in the sector.

In the overseas market, oil and gas prices remained

high, driving prospecting and drilling activities

and leveraging demand for pipes in all markets.

Especially worthy of note among the company's

export activities were the sales to Argentina, where

the existing gas pipeline network infrastructure

was amplified through the construction of loops.

Outlook

At the end of the year there was a downturn in

the demand for pipes for regional products, mainly

due to the delay in the definition of the second

stretch of the GASENE (Cacimbas-Catu) pipeline,

as well as in Gasfor II and the new loops for the

Argentinean gas pipelines.

The outlook for 2006 continue to be good, as

definitions are expected for the GASENE project

in Brazil and the Loops projects in Argentina.

Export sales are expected to account for a larger

proportion of overall welded pipe sales.

The deficit in gas transportation capacity persists

in Brazil, mainly in the northeast of the country,

where there is significant demand from thermoelectric

power stations. In the south of the country,

where gas is in demand for industrial purposes,

amplification of the gas pipeline network is expected

but depends on definitions involving Bolivia.

With respect to petroleum transportation, Petrobras

has initiated the purchase process for the PDET

offshore project in the Campos basin.

In the mining sector, we have received an order

from Samarco for the construction of a new 345 km

31. Annual Report 2005


32. TenarisConfab

In 2005 more than R$ 47 million was invested in amplifying and modernizing the plants

to improve quality, automation and the competitiveness of the company.


PIPES - BOOKED ORDERS

MILLLIONS

OF R$

1000

800

600

400

200

0

713.4

long pipeline consisting of 16” diameter pipes

for transporting iron ore from the state of Minas

Gerais to the Espiríto Santo coast.

In Argentina, if the gas transportation deficit

continues throughout the winter and if the current

industrial growth and GDP projections for the

coming years hold true, there will be an increase

in the demand for gas, making it very likely

that projects such as the Loops and the gas pipeline

under study to bring gas from Bolivia will

be implemented.

In the overseas markets, the demand and the prices

of natural gas and petroleum are at high levels,

producing a favorable scenario for the execution

of large exploration and production projects

and, consequently, elevating potential sales in countries

in North America and Africa.

788.9

299.6

965.9

490.8

2001 2002 2003 2004 2005

PIPES - PRODUCTION

THOUSANDS

OF TONS

500

400

300

200

100

0

347.7

434.0

288.6

306.9

383.2

2001 2002 2003 2004 2005

In the following chart, we show the evolution of

TenarisConfab order book over the last five years.

Production

Production in 2005 reached the level of 383.2

thousand tons, a 25% increase over 2004. The chart

below shows the evolution of pipe production

from 2001 to 2005.

A number of production records were broken during

the year, notably in SAW pipe manufacture

and coating. Additionally, a series of challenges

with high demands in terms of quality requirements

were successfully met, such as pipe production

for the deep and shallow Campos Basin petroleum

outflow and treatment projects (PDET in their

Portuguese acronym).

33. Annual Report 2005


PRA-1 is a Petrobras project aimed

at making Brazil self-sufficient in

petroleum. Confab Equipamentos

participated in this challenge with

the production of jacketed components

for the PRA-1 petroleum

exploration platform, projected to

increase deep water production,

a part of the Campos Basin Petroleum

Flow and Treatment plan (PDET).

Confab Equipamentos was subcontracted

by Techint Engineering,

responsible for detail engineering,

building and assembly, and for manufacturing

knots, piping, casing and

supports, among other accessories.

7 thousand

tons for PRA-1 .

34. TenarisConfab

The Autonomous Pumping Platform,

known as PRA-1, will enable the

transportation of the oil and natural

gas produced by platforms located

at a depth of more than 1000

meters. It is a fixed platform that

will be installed 115 km from

the Rio de Janeiro coast at a depth

of 105 meters. It will have a daily

capacity to pump and transfer

818,000 barrels of petroleum and 1.9

million cubic meters of natural gas.

Project PRA-01

Bacia de Campos

Petrobras

Confab Equipamentos supplied 7 thousand tons for the PRA-1

Location

. Customer

. Project description

Autonomous Pumping Platform.


35. Annual Report 2005


Equipments

36. TenarisConfab


EQUIPMENT

NET REVENUES

MILLLIONS

OF R$

300

200

100

0

162.6

240.9

Market and background

The industrial equipment operations, which include

manufacture and assembly, showed an increase

in the nominal level of production, reaching 604

thousand man/hours in 2005, compared with 574

thousand man/hours in 2004. The following chart

shows the evolution of man/hours worked

between 2001 and 2005.

The net revenues of the unit for 2005 were

R$ 123.6 million, a 42% decrease from the previous

year (R$ 211.6 million). This effect was due mainly

to the supply contract for the PRA-1 platform,

where all the raw materials were supplied by the

customer. The chart below shows the evolution

of revenues over the last five years:

194.2

211.6

123.6

2001 2002 2003 2004 2005

EQUIPMENT

ACTIVITY LEVEL

THOUSANDS

OF m/h

1000

800

600

400

200

0

956

957

504

574

604

2001 2002 2003 2004 2005

.

.

.

.

.

.

The major factors influencing our order book during

2005 were:

The Veracel Project (black Liquor Evaporation system),

contracted in 2003.

The ship loader for the Companhia Vale do Rio

Doce (CVRD) – contracted at the beginning of 2004.

The aluminum precipitation system for Alunorte

– contracted at the beginning of 2004.

Supply contract for maritime metallic structures

(knots, stakes, piping and accessories ) for the

Petrobras PRA-1 autonomous repumping platform

in the Campos Basin.

The continued postponement of capital investment

plans, mainly in the petroleum and petrochemical

areas had a negative effect on our sales forecasts.

The performance of the service station fuel tank

segment was satisfactory in 2005, the main customers

in the period being Companhia Ipiranga de Petróleo

and BR Distribuidora.

Outlook

Sales and growth prospects look favorable for 2006,

on account of the expansion plans announced by

Petrobras in gas supply and the exploration and production

of petroleum, as well as the expansion and

modernization of its main refineries.

37. Annual Report 2005


38. TenarisConfab


In-depth knowledge of metallurgy and tubular properties, combined with experience in working

close to customers, ensures products that anticipate and meet market needs.

In the petrochemical sector, a number of investment

plans should be implemented in the short term

in São Paulo, Bahia and Rio Grande do Sul.

Companhia do Vale do Rio Doce (CVRD) should

be investing in plant and equipment for the extraction

and processing of minerals (iron, copper and

nickel), as well as infrastructure for exportation.

Alumar (Maranhão) and Alunorte (Pará) should

increase the production capacity of their alumina

plants in 2006 and 2007.

In the pulp and paper sector, various investment

studies are in course. There is great likelihood the a

number of these will result in concrete orders over

the coming years (2006-2008), most notably from the

Aracruz, International Paper and Veracel projects.

The following chart shows the evolution of the

unit's order book over the last five years.

EQUIPMENT

BOOKED ORDERS

MILLLIONS

OF R$

250

200

150

100

50

0

216.1

139.1

187.4

79.5

61.9

2001 2002 2003 2004 2005

39. Annual Report 2005


Social action

review

40. TenarisConfab


Confab seeks to practice corporate social responsibility

by means of diverse actions that contemplate

the needs of the different publics with which it

interacts. To this end, the company is involved in

identifying the needs of its employees and the communities

in which it operates, as well as emphasizing

respect for the environment.

By assuming this commitment to social responsibility,

whilst at the same time striving to be competitive

in an ethical and transparent manner, TenarisConfab

is contributing to sustainable social, economic

and environmental development, resulting in greater

quality of life for all.

Human capital - the company's most important value

TenarisConfab's present and future development

depends on the professional and personal development

of its people, the company's most important

asset. The quality of the company's products and

services is the product of the combination of talents

and technologies within a global organizational

structure.

TenarisConfab's human resources philosophy is

based on promoting synergies, team work, flexibility

and interchange to meet the current challenges

that face any state-of-the-art company and the

growing demands of an increasingly competitive

marketplace.

In 2005, the company invested R$ 2,708,000 in

technical, management, information technology,

language and postgraduate courses, a 153%

increase over the previous year. A total of 113,000

hours of training were given to employees, resulting

in an average of 54 hours per person.

The quality of these activities was assured

by the high caliber of the institutions with which

TenarisConfab established partnerships, such as:

the Universidade de São Paulo (USP), Universidade

Federal do Rio de Janeiro (UFRJ), Universidade

Estadual Paulista (UNESP), Faculdade de Engenharia

Industrial (FEI), Instituto de Tecnologia Aeronáutica

(ITA), The Welding Institute (TWI), Fundação

Dom Cabral (FDC), Fundação Getúlio Vargas

Foundation (FGV) and Stanford University,

among others.

In 2005, Confab initiated its second Industrial

Technology program in partnership with the Serviço

Nacional da Indústria (SENAI). The 1,300 hour long

course, which was adapted specifically to meet the

needs of the company, is being taken by 21 employees

in the industrial production area.

In partnership with the Colégio Objetivo, the company

continued its primary and secondary education

supplementary program, which benefits 128 employees.

In addition to providing a first rate course,

TenarisConfab pays for the participants' expenses

with travel, meals, uniforms and teaching materials.

41. Annual Report 2005


42. TenarisConfab

The quality of the company's products and services depends on the professional and personal

development of its people, the company's most important asset.


The courses in the areas of Non-Destructive Testing,

Laboratories and Quality Management

accounted for 25% of all the training hours given

to employees. Highly qualified professionals were

hired to give courses on complex themes such as

phased array ultrasound and Electron Microscope

Scanning, among others.

2005 also saw the formation of an initial group for

the Metallurgy course organized by the company

in conjunction with the Welding Institute. With

a course load of 140 hours, the program benefited

23 TenarisConfab employees from the technology

areas, as well as guests students from nearby

universities.

Another training highlight was the postgraduate

Project Management course. 27 executives from

the Proposal and Project Management, IT and

Engineering areas spent 180 hours learning how

to use the tools developed by the Project Management

Institute (PMI).

As part of a Tenaris global alignment project,

13 TenarisConfab executives took part in a course

at Stanford University in the USA. With other

Tenaris executives from around the world, they

participated in a 40 hour module designed specifically

to analyze Tenaris strategy.

In 2005, in line with Tenaris' strategic principles,

the TenarisConfab training area was denominated

TenarisUniversity-Brazil. This major change was

designed to ensure greater alignment of training

with the organization's international strategy.

The Metallurgy and the Stanford University courses

are a result of this new approach, as are the e-learning

programs– which accounted for 9% of the number

of training hours (2,340 hours) provided for

administrative staff in the second half of the year.

In addition to managing training, TenarisUniversity

is responsible for all areas related to knowledge

management, intranet and university relations.

Global Trainee Program

The company has a differentiated trainee program,

which is implemented throughout the global organization.

This is a strategic initiative designed to

develop young talents. Reformulated in 2005, the

main characteristics of the program are: the Global

Trainees (GTs) work in at least two different

areas; they are formally assessed in accordance

with pre-established targets, which in turn are

linked to those of the department(s) in which they

are located; individual accompaniment throughout

the program; specific e-learning courses in accordance

with the GT's area; and a global induction

program during which Tenaris GT's from around

the world spend one month together to familiarize

themselves with the company's values and culture

and other basic information about the organization.

A total of 113 young professionals have graduated

from the program in Brazil over the last five years,

receiving a thorough grounding in state-of-the-art

business practice.

The partnership with the Fundação Dom Cabral

for the training course which is an integral part of

the program utilizes the concept of distance education,

that is, the use of IT resources, in conjunction

with classroom activities, with both types

of learning activity conducted by highly qualified

lecturers. The subjects covered include: strategic

management, business management, people management,

written and spoken communication,

managerial skills and project management.

43. Annual Report 2005


The program modules are designed to broaden

participants' technical and managerial skills and

further opportunities for their professional development.

Split up into groups, at the end of the

course participants engage in real-life projects, the

contents of which are determined by the directors

and managers of the areas involved. These managers

are also responsible for providing orientation

for the trainees. The fourth class, with 32 participants,

was begun in May, 2005.

Relations with universities

In order to tighten its links with the universities from

which it recruits people, Confab has established

an intern program, known as the PRV (Summer

Remunerated Practice Program) 10 interns were

hired during the 2005 vacations.

In addition to this program, the company also has

an annual intern program offering opportunities

for undergraduates in the areas of both human

and exact sciences.

In 2005, the company continued to promote its

Roberto Rocca Education Program, designed to promote

the development of human resources in the

science and technology area. Among other actions,

the program provides study grants for undergraduate

students. The latest group consisted of 25 students,

selected from among the best Engineering students

at the Universidade do Estado de State of São Paulo

(UNESP), Escola Politécnica of the Universidade

de São Paulo (Poli/USP), Faculdade de Engenharia

44. TenarisConfab

Industrial (FEI), Faculdade de Engenharia Qúimica

de Lorena (FAENQUIL) and the Instituto Tecnológica

de Aeronáutica (ITA).

The program includes a monthly allowance, quarterly

meetings in the company and monitoring of

the recipients academic performance. The students

selected to receive a grant are given priority for selection

as interns or trainees.

Profit share and rewards

Confab has an employee profit share program

designed to reward employees who achieve their targets

and improve company performance indicators.

In 2005, the company distributed R$ 7,335,000

to its employees under this scheme.

Health, safety and environment

Production, quality and cost control in tune with

environmental preservation – both inside its units

and in the areas surrounding its plants – plus an

overriding concern for the safety and health of its

employees. To ensure this working philosophy,

in 2005 the company strengthened the work tools

used in the action plan prepared for its Accident

Reduction Campaign.

The company also implanted the Tenaris Safety

Environment program, which ensures that records

are kept of all accidents and incidents, as well as

follow up with preventive and corrective actions.

To celebrate International Environment Day

on June 5th, 200 native tree seedlings were planted

in the company's units, in a ceremony attended

by employees and their families.


At TenarisConfab, Research & Development are focused on pipe application engineering

and developing products for severe conditions.

45. Annual Report 2005


In 2005, Confab invested R$5.3 million in the

safety, health and environment area.

Quality of Life

The company engages in a number of activities

designed to improve employees' quality of life

by promoting physical, organic and emotional

balance. The actions promote sports and leisure

activities and a healthy working environment.

At the end of 2005, Confab had a total of 2,086

employees.

The company invested R$ 6.6 million in medical

and dental assistance, offering diverse health plans

with differentiated coverage for employees and

their dependents.

R$ 4.0 million was invested in meals. The company

plants have self-service restaurants, which

served a total of 599,000 lunches and dinners and

295,000 breakfasts to employees.

Confab provides transportation subsidies for travel

between work and home for 1,100 employees.

R$ 2.6 million was invested in this benefit in 2005.

The company also invested more than R$ 478,000

in subsidized medicines, school materials, toys,

Christmas hampers and clothing for employees'

new born babies.

46. TenarisConfab

Credit Cooperative

Employees belonging to the Credit Cooperative are

eligible for quick and cheap credit. On December

31st 2005, the 1,726 members of the credit cooperative

had accumulated funds of R$ 4.3 million.

A total of R$ 8.1 million was loaned to employees

during the year. The cooperative had a surplus of

R$ 821,500 in the year, which will be carried forward

for future activities.

Confab Employees' Association Club

The Confab ADC club was completely refurbished

to meet the needs of Confab employees and their

families. Around US$ 100,000 was invested in the

first stage, which included the remodeling of the

installations and landscaping. Another US$ 22,000

was spent on restoring the tennis court.

Installed on an old farm, the club offers a large

green area where employees and their families have

the use of adult and children's swimming pools,

cloakrooms, a playground, barbecue facilities,

a gym, a multi-use sports court, a full-size football

pitch and a seven-a-side football court, a clubhouse

and a function room.

Support for the community

The company has sought to contribute to community

well-being through a number of initiatives

in the town of Pindamonhangaba, where its manufacturing

plants are located. The company is careful

in choosing the organizations with which it establishes

partnerships. In 2005, two of these charities

– the Casa Transitória Fabiano de Cristo (Fabiano

de Cristo Halfway House), responsible for the “Anália

Franco” project, and the Associação de Pais e Amigos

dos Excepcionais de Pindamomohangaba-APAE)

(Pinhamonhangaba Association for the Disabled)

– received the coveted Efficiency Award, (Prêmio

Bem Eficiente), for which they competed with 355

non-profit-making institutions from all over Brazil.


In 2005, Confab invested around R$ 590,000 in

diverse projects that benefited hundreds of people.

Intensive Therapy unit for the Hospital Santa Casa

de Misericórdia

The company donated R$ 148,000, which was used

to buy X-ray and electrocardiogram machines,

essential for the start up of this unit, the first in

the district to initiate operations. The unit will attend

both adults and children.

Staying off the Streets Project

Around 1,700 children and teenagers in the Pindamonhangaba

area benefit from this project, which

stimulates participants' formal education with back

up classes from specialized professionals. The project

also provides participants with classes in street

dancing, aerobics, capoeira, football and seven-aside

football. The project seeks to promote social

inclusion by ensuring that participants' free time

is dedicated to cultural and educational activities.

The “Anália Franco” Space

More than 400 children and teenagers from needy

families in Pindamonhangaba attend the “Anália

Franco” Space, a halfway house whose mission

is to promote ethical behavior and citizenship.

The children participate in a number of activities

designed to develop their self-esteem and basic skills.

Confab provided support for the construction

of this home four years ago and since then has

provided a monthly allowance to fund the activities

it undertakes.

The Brasil Florido (Flowers for Brazil) Project

The company has adopted the seven main squares

in Pindamonhangaba, assuming the cost of maintenance

for them. This initiative benefits the population

with green areas that contribute to a healthier

environment.

Help for the Elderly

In 2005, Confab maintained its support for the two

old people's homes in Pindamonhangaba: the Irmã

Terezinha and São Vicente de Paula homes provide

shelter for around 140 elderly people. Over the last

five years the two homes have received approximately

R$ 250,000 from the company. This support from

the company ensures greater quality of life, leisure

and special care for inmates.

Volunteers in Action” campaign

To increase the impact of its social responsibility

initiatives, Confab encouraged its employees to participate

in voluntary social activities in institutions

in the Pindamonhangaba area.

Support for APAE

Recognized nationwide for its important role in educating

children and young people with special needs,

APAE – Associação de Pais e Amigos dos Excepcionais

(Support Association for the Disabled) receives

support from Confab for the construction of a

multiuse sports stadium – the only one in the region

specifically adapted for this public.

47. Annual Report 2005


Board of Directors

48. TenarisConfab

President

Vice Presidents

Council Members

Executive Officers

Executive President

Roberto Caiuby Vidigal

Equipment Business Director

Emyr Elias Berbare

Human Resources Director

Hércules de Jesus Peres Filho

Strategic Planning Director

Juan Carlos Satostegui

Roberto Caiuby Vidigal

Paolo Rocca

Ricardo Juan Pedro Soler

Carlos Eduardo Bacher

João Pedro Gouvêa Vieira Filho

Rinaldo Campos Soares

Tomas Tomislav Antonin Zinner

Executive Vice President

Ricardo Juan Pedro Soler

Administration & Finance and Investor

Relations Director

Marcelo Héctor Barreiro

Local Sales Director

Nicolau Marcelo Bernardo

Pipe Business Director

Túlio Cesar do Couto Chipoletti


Financial

Statements

December 31st 2005 and 2004

Amounts in thousands of reais, except when otherwise indicated


Balance sheet

50. TenarisConfab

ASSETS

CURRENT

Cash on hand and in banks

Financial investments (Note 3)

Accounts receivable (Note 4)

Inventories (Note 5)

Receivables from related parties (Note 10)

Taxes recoverable (Note 6)

Deferred income tax and social contributions (Note 16)

Prepaid expenses

LONG TERM RECEIVABLES

Subsidiaries and associated companies (Note 10)

Deferred income tax and social contributions (Note 16)

Taxes recoverable (Note 6)

Judicial deposits

Assets for sale

Tax incentive investments

Acounts receivable

PERMANENT ASSETS

Investments

Subsidiaries and associated companies (Note 7)

Others investments

Property, plant and equipment (Note 8)

Deferred

Total assets

The management's explanatory notes are an integral part of the financial statements

2005

3,157

251,525

129,870

229,643

43,402

60,088

11,319

987

729,991

16

18,382

5,950

4,443

7,109


823

36,723

98,990


228,808


327,798

1,094,512

Parent company

2004

55,745

37,166

187,051

356,045

18,091

123,151

23,712

692

801,653

16

10,760

6,398

1,556

7,324

214

3,893

30,161

82,181

325

224,858


307,364

1,139,178

2005

6,186

253,590

139,492

261,305

24,252

69,761

11,420

3,305

769,311


18,468

8,080

4,692

7,109


823

39,172

51,682

84

266,284


318,050

1,126,533

Consolidated

2004

61,578

105,040

187,865

360,549

15,207

129,112

23,783

903

884,037


10,760

7,081

1,805

7,324

214

3,893

31,077

48,682

487

248,849

462

298,480

1,213,594


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT

Suppliers (Note 9)

Loans and financing (Note 11)

Advances from customers (Note 12)

Taxes and contributions payable

PAES installments – special regime (Note 13)

Salaries and social security charges

Employee profit share provision

Loans – related parties (Note 10)

Dividends and interest on own capital

Other accounts payable

LONG TERM LIABILITIES

Deferred income tax and social contributions (Note 16)

Loans and finance (Note 11)

PAES installments – special regime (Note 13)

Contingencies provision (Note 14)

MINORITY INTEREST

STOCKHOLDERS' EQUITY (Note 15)

Capital

Capital reserve

Revaluation reserve

Profit reserves

Total liabilities and stockholders' equity

The management's explanatory notes are an integral part of the financial statements

2005

84,116

13,425

101,336

85,959

2,796

10,886

8,576

12,492

26,988

6,085

352,659

2,423

42,390

18,280

41,133

104,226


229,419

309

6,035

401,864

637,627

1,094,512

Parent company

2004

129,191

217,412

155,911

38,769

2,576

10,095


23,501

19,248

15,810

612,513

3,655

54,813

19,438

22,358

100,264


229,419

309

6,273

190,400

426,401

1,139,178

2005

71,009

13,425

122,435

90,457

3,335

12,379

9,031


27,553

8,419

358,043

2,423

42,390

21,861

44,072

110,746

20,117

229,419

309

6,035

401,864

637,627

1,126,533

Consolidated

2004

99,102

244,886

214,551

40,928

3,071

11,312


14,464

20,132

18,158

666,604

3,655

54,813

23,246

25,127

106,841

13,748

229,419

309

6,273

190,400

426,401

1,213,594

51. Financial Statements 2005


Income statement

GROSS REVENUE

Sales taxes

NET OPERATING REVENUES

Cost of goods and services sold

Gross profit

OPERATING EXPENSES

Selling

Administrative

Management fees

Amortization of deferred charges

Others operational expenses, net (Note 17)

INCOME BEFORE EQUITY IN RESULTS OF SUBSIDIARIES

AND FINANCIAL INCOME

Equity in results of subsidiaries and related companies (Note 7)

OPERATING INCOME BEFORE FINANCIAL INCOME (EXPENSES)

Financial expenses

Financial income

OPERATING INCOME

Net non – operating expenses

INCOME BEFORE INCOME TAX, SOCIAL CONTRIBUTION, PROFIT SHARE

AND MINORITY SHAREHOLDER'S INTERESTS

Income tax and social contribution (Note 16)

Profit share management and employees

Minority interest

Net income for year

Net income per share based on capital at end of year – R$

The management's explanatory notes are an integral part of the financial statements

52. TenarisConfab

2005

2,067,603

(313,900)

1,753,703

(1,168,652)

585,051

(104,485)

(49,376)

(7,025)


(23,957)

(184,843)

400,208

18,322

418,530

(45,981)

37,077

(8,904)

409,626

(242)

409,384

(118,375)

(13,996)


277,013

0.8517

Parent company

2004

918,106

(111,230)

806,876

(586,160)

220,716

(103,459)

(41,276)

(6,562)

(7,794)

(5,837)

(164,928)

55,788

(12,144)

43,644

(59,396)

39,247

(20,149)

23,495

(63)

23,432

(5,913)



17,519

0.0539

2005

2,121,874

(338,769)

1,783,105

(1,155,227)

627,878

(106,625)

(51,170)

(8,057)

(462)

(25,277)

(191,591)

436,287

777

437,064

(45,876)

36,593

(9,283)

427,781

(256)

427,525

(127,575)

(15,237)

(7,700)

277,013

Consolidated

2004

1,013,652

(126,026)

887,626

(649,529)

238,097

(107,156)

(43,386)

(7,728)

(7,995)

(7,114)

(173,379)

64,718

(6,146)

58,572

(61,388)

37,223

(24,165)

34,407

(69)

34,338

(12,154)


(4,665)

17,519


Statement of changes

in stockholders' equity

At December 31 2003

REALIZATION OF REVALUATION RESERVE

Through depreciation of own assets

Income tax on realization of revaluation

reserve of own assets

NET INCOME FOR YEAR

CONSTITUTION OF RESERVES

INTEREST ON OWN CAPITAL

(R$ 0.0664 PER SHARE)

At December 31 2004

CAPITAL INCREASE WITH INCOME

RESERVES

REALIZATION OF REVALUATION RESERVE

Through depreciation of own assets

Income tax on realization of revaluation

reserve of own assets

Reversion of income tax on revaluation

of plots of land

NET INCOME FOR YEAR

CONSTITUTION OF RESERVES

PROPOSED COMPLEMENTARY DIVIDENDS

(R$ 0.0762 PER SHARE)

INTEREST ON OWN CAPITAL

(R$ 0.1261 PER SHARE)

At December 31 2005

Capital

229,419






229,419









229,419

The management's explanatory notes are an integral part of the financial

Investments

w/incentives

309






309









309

Capital Reserve Income reserves

Revaluation

reserve

6,979

(1,069)

363




6,273


(1,046)

356

452





6,035

Legal

reserve

29,408




876


30,284






13,851



44,135

For capital

increase








87,000








87,000

Retention

of profits

164,363




17,349

(21,596)

160,116

(87,000)





263,400

(24,781)

(41,006)

270,729

Accumulated

profits


1,069

(363)

17,519

(18,225)




1,046

(356)

(452)

277,013

(277,251)



Total

430,478

53. Financial Statements 2005



17,519


(21,596)

426,401





277,013


(24,781)

(41,006)

637,627


Statement of changes

in financial position

54. TenarisConfab

ORIGINS OF FUNDS

OPERATIONS

Net earnings for year

Expenses (revenues) not affecting working capital

Depreciation and amortization

Residual value of permanent asset disposal

Equity in results of subsidiary and associated companies

Exchange differences and monetary correction on long term liabilities

Change in minority interests

Amortization of deferred assets

Amortization of goodwill on investments

Provision for losses on investments

Contingencies provision

Exchange variation in investment in associated company abroad

THIRD PARTIES

Loans raised

Dividends in subsidiary and associated companies

Reduction in long term receivables

Total funds provided

The management's explanatory notes are an integral part of the financial statements

2005

277,013

25,140

673

(18,322)

3,095



182

325

23,389


311,495


1,331


312,826

Parent company

2004

17,519

23,798

12,517

12,144

(465)


7,794

198


6,078


79,583

47,604

1,039

23,199

151,425

2005

277,013

29,076

687

(777)

3,401

7,700

462

182

393

23,837

(2,395)

339,579




339,579

Consolidated

2004

17,519

26,504

12,523

6,146

(212)

4,665

7,995

198


6,879

(1,988)

80,229

47,604


14,309

142,142


RESOURCES USED FOR

Property, plant and equipment

Investment

Interest on capital and proposed dividends

Short term transfer – loans

Future results

Decrease in long term liabilities

Total funds used

Increase in net working capital

CHANGES IN WORKING CAPITAL

CURRENT ASSETS

At beginning of year

At end of year

CURRENT LIABILITIES

At beginning of year

At end of year

Increase in working capital

The management's explanatory notes are an integral part of the financial statements

2005

29,763


65,787

13,820

6,702

8,562

124,634

188,192

801,653

729,991

(71,662)

612,513

352,659

(259,854)

188,192

Parent company

2004

42,572

1,505

21,596

17,526


5,806

89,005

62,420

646,949

801,653

154,704

520,229

612,513

92,284

62,420

2005

47,198


67,118

13,820

8,236

9,372

145,744

193,835

884,037

769,311

(114,726)

666,604

358,043

(308,561)

193,835

Consolidated

2004

51,778

1,505

22,634

17,526


6,432

99,875

42,267

776,850

884,037

107,187

601,684

666,604

64,920

42,267

55. Financial Statements 2005


Explanatory notes

56. TenarisConfab

1. Operations

Confab Industrial S.A. (hereinafter “Company”) is a publicly

traded corporation based in São Caetano do Sul, with

manufacturing plants in Pindamonhangaba, in the state

of São Paulo. Its main parent company is Siderca S.A.,

a subsidiary of Tenaris.

The main activities of the company and its subsidiaries

and associated companies involve the manufacture of welded

steel pipes for the petroleum, petrochemical, gas, mining

and sanitation industries, and industrial equipment for the

petroleum, petrochemical, pulp, metallurgical, steel industries,

among others.

The Company's performance in 2005 reflects the supply of

pipes and equipment for important infrastructure projects

in the petroleum, petrochemical, gas and sanitation industries,

a number of which were already included in the company's

order books on December 31st, 2004.

.

.

.

2. Main accounting practices

a. Financial statements

The financial statements of the parent company and consolidated

financial statements have been prepared and are

presented in conformity with accounting practices adopted

in Brazil, and are in compliance with Corporation Law and

the norms of the Securities Commission-CVM.

In the preparation of financial statements, it is necessary to

make estimates when accounting for certain assets, liabilities

and other transactions. Therefore, the parent company

and consolidated financial statements include various estimates

about the working lives of property, plant and equipment,

provisions necessary for contingent liabilities, income

tax and the like. Accordingly, the actual results may differ

from the estimates.

b. Determination of income

Income is determined by the accrual basis of accounting,

taking into account the following:

Revenues from steel pipe sales are recognized only when it

is probable that the relative economic benefits will be

received by the Company and when the respective risks and

rewards are transferred to the customer.

The gross profit on contracts is recognized proportionally

to the work performed on each contract up to the date of

the balance sheet. Provisions for losses are made in those

cases where costs incurred to date plus the estimate of

costs still to be incurred exceed the total restated sale price.

Provision for income tax is constituted with the inclusion

of tax incentives. Deferred taxes were recognized at the

rates in force for income tax and social contribution on tax

losses and temporary differences, to the extent that realization

is probable (Note 16).


.

.

.

c. Current assets and long term assets

Assets are stated at realizable values, including monetary

or exchange variations and related accrued income, when

applicable.

Allowance for doubtful receivables has been set at a level

considered to be sufficient to cover possible losses on the

amounts receivable from customers and others, accounts

receivable are recorded net of this allowance.

Inventories are stated at the average cost of purchase or

production, less than replacement costs or realizable

values. Imports in transit are stated at the accumulated

cost of each importation.

d. Permanent Assets

Permanent assets are stated at cost price restated monetarily

up to December 31, 1995, under the following

conditions:

Investments in subsidiaries and associated companies are

recorded using the equity equivalence method.

Revaluation of property, plant and equipment, conducted

in 1991, is based on appraisals by independent experts.

Depreciation of property, plant and equipment on a

straight line basis, using the annual rates given in explanatory

note 8, which take into account the useful working

lives of the assets.

e. Current and long term liabilities

Are shown by known or calculable amounts, in addition

to monetary or exchange variations and corresponding

charges, when applicable.

.

f. Consolidation Criteria

The consolidated financial statements were prepared in

accordance with the technical consolidation criteria in

Ruling no. 247/96 issued by the CVM.

For the preparation of the consolidated financial statements,

the following accounts are eliminated: investments,

unrealized profits or losses between parent company and

subsidiaries or associated companies, the results of equity

equivalence, the revenues and expenses from transactions

among the companies, the balances among companies

for current and long term assets and liabilities. The

minority stockholders' interests are clearly shown in the

results and net worth.

The consolidated financial statements include the following

subsidiary companies:

Confab Montagens Ltda.

Revestimentos Ltda.

Socotherm Brasil S.A.

Confab Trading LLC and its subsidiary Confab Trading N.V.

g. Supplementary information

In order to maximize the information being made available

to the market, the Company is presenting as supplementary

information the cash flow statement prepared in

accordance with norm NPC 20 issued by IBRACON

(Institute of Independent Auditors of Brazil), taking into

account the main operations influencing the Company's

available cash and financial investments.

57. Financial Statements 2005


Explanatory notes

58. TenarisConfab

3. Financial investments

LOCAL CURRENCY

Time deposits

FOREIGN CURRENCY

Time deposits

Trust

4. Accounts receivable

CUSTOMERS

Domestic (*)

Overseas (*)

EXPORT CONTRACT ADVANCES

OTHER RECEIVABLES – NET (*)

(*)

The amounts for domestic and overseas customers and other receivables are stated net of

provisions for doubtful receivables, fines and other deductions in the amount of R$ 9,274

(R$ 8,357 on December 31, 2004) in the parent company and R$ 12,446 (R$ 11,931 on

December 31, 2004) in the consolidated statements.

2005

42,254

209,271


209,271

251,525

2005

107,338

8,327


14,205

129,870

Parent company Consolidated

2004


37,166


37,166

37,166

2004

138,803

54,666

(26,385)

19,967

187,051

2005

42,254

211,336


211,336

253,590

2005

107,813

15,554


16,125

139,492

2004


50,757

54,283

105,040

105,040

Parent company Consolidated

2004

124,598

39,478


23,789

187,865


5. Inventories

Finished products

Products in progress

Raw material

Sundry material

Advances to suppliers

Imports in progress

Provisions for obsolescence / market

The reduction in the level of products in stock is related to

the Company's strategy to adjust stock levels for the needs

projected for the first months of 2006.

2005

120,628

729

67,544

20,548

14,359

9,950

(4,115)

229,643

Parent company Consolidated

2004

228,004

263

103,643

11,489

13,163

1,799

(2,316)

356,045

2005

128,020

2,616

85,844

22,155

16,278

10,507

(4,115)

261,305

2004

229,876

263

109,069

12,643

9,120

2,274

(2,696)

360,549

59. Financial Statements 2005


Explanatory notes

.

60. TenarisConfab

6. Taxes recoverable

Represented mainly by tax credits and advances, as follows:

CURRENT

Value added tax on goods and services – ICMS

Excise tax – IPI

Income tax – IRPJ

Social contribution on net earnings – CSLL

PIS and COFINS recoverable – non-cumulative

Others

LONG TERM

Social purposes recoverable (Finsocial)

ICMS recoverable on fixed assets

The Company continues to implement its action plan projected

to use tax credits in the short term. Among the main

actions during the years, the following are worthy of note:

Federal taxes (PIS, COFINS and IPI) – used to offset tax

payments on sales and, mainly, income tax and social contributions.

.

2005

40,876

4,073

3,181

1,363

8,440

2,155

60,088

2,368

3,582

5,950

Parent company Consolidated

2004

60,043

26,330

5,847

3,364

21,227

6,340

123,151

2,368

4,030

6,398

2005

43,984

6,272

3,352

1,432

8,440

6,281

69,761

2,368

5,712

8,080

2004

61,901

26,690

6,375

3,676

21,240

9,230

129,112

2,368

4,713

7,081

State tax (ICMS) – used to offset the amounts payable for

the ICMS tax on sales and on diverse imports. Also used to

pay suppliers.


7. Investments in subsidiaries and associated companies

MOVEMENT

Balances on December 31, 2003

New investments

Amortization of goodwill

Dividends received and receivable

Results in related companies

Balances on December 31, 2004

Amortization of goodwill

Dividends received and receivable

Results in related companies

Balances on December 31, 2005 (Parent company)

Eliminations

Balances on December 31, 2005 (Consolidated )

(I) Examined by our independent auditors

(II) Reviewed by our independent auditors

(III)Examined by other independent auditors

Confab

Montagens

Ltda.

8,238


(198)


(4,849)

3,191

(182)


5,921

8,930

(8,930)


Confab

Revestimentos

Ltda.

(5)





(5)




(5)

5


Socotherm

Brasil

S.A.

(II) (II) (III)

10,121



(1,039)

1,065

10,147


(1,331)

11,075

19,891

(19,891)


TenarisConfab

Hastes de

Bombeio S.A.


(I)

1,505



(406)

1,099



(1,616)

(517)


(517)

Confab

Trading LLC

24,558




(4,210)

20,348



(1,856)

18,492

(18,492)


(II)

Siat S.A.

51,145




(3,744)

47,401



4,798

52,199


52,199

(I)

Total

94,057

1,505

(198)

(1,039)

(12,144)

82,181

(182)

(1,331)

18,322

98,990

(47,308)

51,682

61. Financial Statements 2005


Explanatory notes

62. TenarisConfab

On December 31, 2004

Confab Montagens Ltda.

Confab Revestimentos Ltda.

Socotherm Brasil S.A.

Tenaris Confab Hastes de Bombeio S.A.

Confab Trading LLC

Siat S.A.

On December 31, 2005

Confab Montagens Ltda. (I)

Confab Revestimentos Ltda. (II)

Socotherm Brasil S.A. (III)

TenarisConfab Hastes de Bombeio S.A. (IV)

Confab Trading LLC (V)

Siat S.A. (VI)

(I) Confab Montagens Ltda – activities consist mainly of conducting studies and carrying out

the assembly, installation and maintenance of devices, machinery and/or industrial subunits

manufactured by third parties.

(II) Confab Revestimentos Ltda – company not in operation.

(III)TenarisConfab Hastes de Bombeio S.A. – the company's main activity is the manufacture

and commercialization of sucker rods and other materials, equipment, components and

metallic accessories used in the petroleum and petrochemical segments.

Ordinary

Shares



932

1,505


12,000



932

1,505


12,000

(IV) Confab Trading LLC – based in Delaware – USA, the company was incorporated on Novem

ber 9, 2001, with capital paid up by all the shares of Confab Trading N.V. It was created

with the objective of participating as a shareholder in foreign companies.

Thousands of shares or

quotas held by Company

Quotas

10,419

7,103





10,419

7,103





Company share in

made up

capital – %

100

100

50

49

100

30

100

100

50

49

100

30

Adjusted

shareholders'

equity

3,009

(5)

27,495

2,240

20,348

158,003

8,930

(5)

42,895

(1,056)

18,492

173,997

Adjusted

Net earnings/

(loss)

(4,849)


9,330

(832)

(2,213)

3,029

5,921


15,400

(3,296)

548

37,474

(V) Socotherm Brasil S.A. – activities consist mainly of the manufacture, commercialization and

provision of services in the segment of internal and external coating for steel pipes and

metallic parts in general and the acquisition and transfer of technology in the segment of

anticorrosive and thermal coating for metallic parts.

In Ordinary and Extraordinary General Assembly on April 29, 2005, and by filing with

JUCESP on June 28, 2005, the name of the subsidiary Soco-Ril do Brasil S.A. was changed

to Socotherm Brasil S.A.

(VI)Siat S.A. – located in Argentina, its activities consist mainly of the manufacture of welded

steel pipes for the petroleum, petrochemical, gas and sanitation industries.


8. Property, plant and equipment

Land

Buildings

Machinery and equipment

Installations

Data processing equipment

Furniture and fixtures

Vehicles

Construction in progress

Others

Land

Buildings

Machinery and equipment

Installations

Data processing equipment

Furniture and fixtures

Vehicles

Construction in progress

Others

Annual

depreciation

rate – %


4

10

10

20

10

20



Annual

depreciation

rate – %


4

10

10

20

10

20



Restated cost

and revaluation

increments

9,010

78,294

205,994

17,884

30,182

3,427

14,251

28,060

20

387,122

Restated cost

and revaluation

increments

9,010

83,507

223,735

20,247

30,652

3,543

16,348

49,484

29

436,555

Accumulated

depreciation


(28.806)

(93,457)

(4,879)

(18,093)

(2,044)

(11,015)


(20)

(158,314)

Accumulated

depreciation


(30,883)

(100,118)

(6,322)

(18,450)

(2,096)

(12,373)


(29)

(170,271)

2005

Net

value

9,010

49,488

112,537

13,005

12,089

1,383

3,236

28,060


228,808

2005

Net

value

9,010

52,624

123,617

13,925

12,202

1,447

3,975

49,484


266,284

Parent company

2004

Net

value

9,010

49,169

108,489

10,713

15,391

1,385

3,975

26,625

101

224,858

Consolidated

2004

Net

value

9,010

52,746

116,773

12,447

15,553

1,460

4,874

35,872

114

248,849

63. Financial Statements 2005


64. TenarisConfab

In 1991, the stockholders approved the revaluation of property,

plant and equipment based on appraisals by specialized

companies. The position of the revalued assets on December

31, 2005 is as follows:

Land

Buildings

Machinery and equipment

Vehicles

The construction in progress refers basically to expenditure

on the expansion and modernization of the Pindamonhangaba

plant.

9. Suppliers

SUPPLIERS

Local

Overseas

Annual

depreciation

rate – %


4

4


2005

46,772

37,344

84,116

Restated

cost

1,331

15,009

11,817

428

28,585

2004

79,084

50,107

Accumulated

depreciation


(9,966)

(9,733)

(428)

(20,127)

2005

Net

value

1,331

5,043

2,084


8,458

Parent company Consolidated

129,191

2005

61,583

9,426

71,009

2004

68,033

31,069

99,102

2004

Net

value

1,331

5,731

2,437

6

9,505


10. Transactions with associated companies

ACCOUNTS

CURRENT ASSETS

ACCOUNTS RECEIVABLE

Confab Montagens Ltda.

Confab Trading N.V.

Dalmine S.p.A

Exiros BR Ltda

Siat S.A.

Siderca S.A.I.C.

Socominter Sociedade Comercial Internacional Ltda

Socominter S.A. (Venezuela)

Socotherm Brasil S.A.

Tecgas Argentina S.A.

Techint Compagnia Tecnica Internazionale S.p.A.

Techint S.A.

TenarisConfab Hastes de Bombeio S.A.

Tenaris Global Services (Canadá) Inc.

Tenaris Global Services (USA) Corporation

Tenaris Global Services S.A.

Tubular DST Nigéria Ltd

ADVANCES TO SUPPLIERS

Exiros BR Ltda

Socotherm Brasil S.A.

RECEIVABLES

Confab Trading N.V.

Dalmine S.p.A

Exiros BR Ltda

Socotherm Brasil S.A.

TenarisConfab Hastes de Bombeio S.A.

RECEIVABLES FROM ASSOCIATED COMPANIES

Confab Trading N.V.

Socotherm Brasil S.A.

TenarisConfab Hastes de Bombeio S.A.

LONG TERM RECEIVABLES

LOANS

Confab Revestimentos Ltda.

Total

NOTES

(I)

(II)

(III)

(IV)

(V)

(VI)

(VII)

2005

1

832





1


2,382

40

50

1

6,616



1,937


11,860


11,126

11,126

78

130

8

2,004

5

2,225

13,127

6,023

24,252

43,402

16

16

68,629

Parent company Consolidated

2004


44,360

2

89





10,243


57

147

9,499





64,397

100

4,043

4,143








2,884

15,207

18,091

16

16

86,647

2005






500

1

8,434


40

50

1

6,616



2,759

6

18,407





130

8


5

143



24,252

24,252



42,802

2004



2

101

2,757

599





57

148

9,499

1,245

2,152

3,329

47

19,936

100


100









15,207

15,207



35,243

65. Financial Statements 2005


66. TenarisConfab

ACCOUNTS

CURRENT LIABILITIES

SUPPLIERS

Confab Trading N.V.

Dalmine S.p.A.

Metalmecanica S.A.

Siat S.A.

Siderar S.A.I.C.

Siderca S.A.I.C.

Socotherm Brasil S.A.

Tubos de Acero de México S.A.

Tamtrade S.A. de C.V.

Techint Compagnia Tecnica Internazionale S.p.A.

Techint Eng. Technical and Commercial Services LLC

Techint Engineering Company Inc.Panamá

Techint Engineering LLC USA

Techint Engineering Holding S.A.

Techint Internat.Construction Corporation

Tenaris Conection B.V.

TenarisConfab Hastes de Bombeio S.A.

Tenaris Global Services (USA) Corporation

Tenaris Global Services LLC

Tenaris Global Services Far East Pte Ltd

ADVANCES FROM CUSTOMERS

Techint S.A.

Socominter Sociedade Comercial Internacional Ltda

RECEIVABLES

Confab Trading N.V.

Dalmine S.p.A.

Exiros BR Ltda

Metalcentro S.A.

Metalmecanica S.A.

Siat S.A.

Siderca S.A.I.C.

Socotherm Brasil S.A.

Tamtrade S.A. de C.V.

TenarisConfab Hastes de Bombeio S.A.

Tenaris Global Services LLC

Tenaris Global Services S.A.

LOANS

Confab Montagens Ltda.

Techint Engineering Company B.V.

Total

NOTES

(VIII)

(IX)

(X)

(XI)

(XII)

2005

(23,640)

(735)

(105)

(10)

(1)

(2,116)

(4,931)

(12)






(6)





(94)


(31,650)


(5,359)

(5,359)

(1,250)

(1,034)

(11)

(1)


(238)

(92)

(4)



(1,321)

(240)

(4,191)

(12,492)


(12,492)

(53,692)

Parent company Consolidated

2004

(26,808)

(811)

(10,505)

(11)

(1)

(1,782)

(14,876)

(5)

(261)

(89)

(11)

(64)

(7)


(796)

(538)

(1,300)

(2)

(560)


(58,427)

(1,407)


(1,407)

(1,417)

(24)

(18)

(9)

(502)


(1,415)

690

(229)

(6)

(1,014)


(3,944)

(9,037)

(14,464)

(23,501)

(87,279)

2005


(735)

(105)

(56)

(1)

(2,116)


(12)






(6)





(101)

(5)

(3,137)


(5,359)

(5,359)


(1,046)

(11)

(1)


(238)

(92)




(1,321)

(240)

(2,949)




(11,445)

2004


(917)

(10,505)

(64)

(1)

(1,782)


(5)

(261)

(89)

(11)

(64)

(7)


(796)

(538)

(1,300)

(2)

(567)

(6)

(16,915)

(1,407)


(1,407)


(24)

(18)

(9)

(502)


(1,415)


(229)

(6)

(1,014)


(3,217)


(14,464)

(14,464)

(36,003)


ACCOUNTS

REVENUES FROM:

FINANCIAL INVESTMENTS

Tenaris Financial Service S.A.

SALES OF PRODUCTS AND SERVICES

Confab Montagens Ltda.

Confab Trading N.V.

Dalmine S.p.A

Exiros BR Ltda

Siat S.A.

Siderca S.A.I.C.

Socominter S.A.

Socotherm Brasil S.A.

Tubos de Acero de México S.A.

Tecgas Argentina S.A.

Techint Compagnia Tecnica Internazionale S.p.A.

Techint International Construction Corporation

Techint S.A.

TenarisConfab Hastes de Bombeio S.A.

Tenaris Global Services (Canadá) Inc.

Tenaris Global Services (UK)

Tenaris Global Services (USA) Corporation

Tenaris Global Services S.A.

Tubular DST Nigéria Ltd

RECEIVABLES FROM ASSOCIATED COMPANIES

Confab Trading N.V.

Socotherm Brasil S.A.

TenarisConfab Hastes de Bombeio S.A.

Tenaris Global Services B.V.

LONG TERM RECEIVABLES

LOANS

Confab Montagens Ltda

Confab Trading N.V.

Socotherm Brasil S.A.

Total

2005



2

70,302


249

3,576


31,624

2,313


187



1,340

1,396






110,989

77

553

3,024


3,654





114,643

Parent company Consolidated

2004

336

336


351,613

3

46


1,319



7

160



214







353,362

2,877



399

3,276

585

1,100

102

1,787

358,761

2005






252

8,859

475

31,624



187


31

1,341

1,396

2,793


16,010

8,280

4,961

76,209



3,024


3,024





79,233

2004

336

336



3

46

4,559

2,206



10,696

160

67


214


18,341

2,459

80,439

38,470

1,274

158,934




399

399





159,669

67. Financial Statements 2005


Explanatory notes

68. TenarisConfab

ACCOUNTS

COSTS AND/ OR EXPENSES FROM:

SUPPLIERS

Dalmine S.p.A.

Exiros BR Ltda

Metalcentro S.A.

Metalmecanica S.A.

Siat S.A.

Siderar S.A.I.C.

Siderca S.A.I.C.

Socotherm Brasil S.A.

Socominter Sociedade Comercial Internacional Ltda

Tubos de Acero de México S.A.

Tamtrade S.A. de C.V.

Techint Compagnia Tecnica Internazionale S.p.A.

Techint Compañia Internacional SACI - Bs As

Techint Eng. Technical and Commercial Services LLC

Techint Engineering Company Inc.Panamá

Techint Engineering LLC USA

Techint International Construction Corporation

Tenaris Conection B.V.

TenarisConfab Hastes de Bombeio S.A.

Tenaris Global Services LLC

Tenaris Global Services UK Ltd

Tenaris Global Services S.A.

Texas Pipe Threaders Co.

LOANS

Confab Montagens Ltda.

Techint Engineering Company B.V.

Tenaris Global Services B.V.

Total

2005

(1,003)

(4,866)

(49)

(1,821)

(1,384)

(13)

(2,943)

(93,831)

(2)

(33)

(112)

(55)


(116)

(4)


(30)

451

(4,932)

(2,572)


(250)


(113,565)

(1,411)

(175)


(1,586)

(115,151)

Parent company Consolidated

2004

(558)

(3,186)

(152)

(1,579)

(1,514)


(12,213)

(33,849)


(5)

(511)

(79)

(3)

(191)


712

(858)

(592)

(4,670)

(13,372)

(35)


(79)

(72,734)

(62)

(788)

(373)

(1,223)

(73,957)

2005

(1,003)

(4,866)

(49)

(1,821)

(1,384)

(13)

(2,943)


(2)

(33)

(112)

(55)


(116)

(4)


(30)

451

(4,932)

(2,572)


(250)


(19,734)


(175)


(175)

(19,909)

2004

(558)

(3,186)

(152)

(1,579)

(1,514)


(12,213)



(5)

(511)

(79)

(3)

(191)


712

(858)

(592)

(4,670)

(13,375)

(35)


(79)

(38,888)


(788)

(373)

(1,161)

(40,049)


The purchase and sale of merchandise, products and services

are carried out under normal market conditions;

balances of assets and payables between related companies

are subject to the usual market finance charges.

The main amounts of receivables and liabilities with

related parties were:

(I) Socotherm Brasil S.A. – balance receivable from commercial

operations, without guarantee, due on following

dates: R$ 155 in January 2006 and R$ 2,227 in June 2006.

(II) Tenaris Confab Hastes de Bombeio S.A. – balance

receivable from commercial operations, without guarantee,

due in June 2006.

(III) Tenaris Global Services S.A. – balance receivable from

commercial operations, without guarantee, due in February

2006.

(IV) Socotherm Brasil S.A. – advance made on pipe coating

services for Petrobras job (PDET Raso) to be used in

January 2006 and February 2006.

(V) Confab Trading N.V. – loan granted at average interest

rate of 3.25% p.a. plus libor, without guarantee, due in

May 2006.

(VI) Socotherm Brasil S.A. – balance receivable of R$ 6,023,

of which R$ 5,458 is related to a loan granted at interest

rate of 12% p.a., without guarantee, due in March 2006 and

R$ 565 is related to interest on own capital receivable.

(VII) Tenaris Confab Hastes de Bombeio S.A. – loan granted

at Selic rate interest, without guarantee, due in June

2006 and December 2006.

(VIII) Confab Trading N.V. – balance payable on commercial

operations, without guarantee, due in March 2006.

(IX) Siderca S.A.I.C. – balance payable of R$ 2,116, of

which R$ 242 is related to commercial operations, without

guarantee, due in February 2006 and R$ 1,874 is related to

interest on own capital payable.

(X) Socotherm Brasil S.A. – balance payable related to

provision of pipe coating services, without guarantee, due

as follows: R$ 1,068 in January 2006, R$ 3,125 in February

2006, R$ 510 in March 2006, R$ 142 in June 2006 and

R$ 86 in December 2006.

(XI) Socominter Sociedade Comercial Internacional Ltda. –

advance received on account of execution of work for

Petrobras (Paranaguá-Paraná), to be used in January 2006

and February 2006.

(XII) Confab Montagens Ltda. – balance payable related

to current account for intercompany operations, with no

determined due date, subject to interest of 1% per month.

69. Financial Statements 2005


Explanatory notes

70. TenarisConfab

11. Loans and financing

Type

a. BALANCES ON 31ST OF DECEMBER

LOCAL CURRENCY

BNDES investments

BNDES investments

FOREIGN CURRENCY

Exchange contract advances

Pre-export finance

Working capital finance

Total

CURRENT

LONG TERM LIABILITIES

TJLP – Long Term Interest Rate

UMBND – BNDES monetary unit (basket of currencies)

b.FALLING DUE IN LONG TERM

2006

2007

2008

2009

2010

2011

c.GUARANTEES

Index

or currency

TJLP

UMBND

US$

US$

US$

Financing for investment was guaranteed by mortgaging company assets.

The other financing in local and foreign currency was guaranteed by promissory notes.

Annual interest

rates per year

4% and 4.25%

4% and 4.25%

4.05%

4.49%

6.41%

2005

41,968

12,585

54,553

1,262



1,262

55,815

(13,425)

42,390

2005


14,559

9,307

9,227

6,137

3,160

42,390

Consolidated

2004

47,310

16,664

63,974

186,088

8,848

13,315

208,251

272,225

(217,412)

54,813

Parent company

and Consolidated

2004

11,619

14,683

9,439

9,345

6,227

3,500

54,813


12. Customer advances

The balance of R$ 101,336 (R$ 155,911 on December 31,

2004) in the parent company and R$ 122,435 (R$ 214,551

on December 31, 2004) in the consolidated statements is for

customer advances for the production of goods or provision

of services. This liability is represented by the contractual

obligation to produce such goods or provide services

and if these should not materialize, the return of the

money received.

13. PAES – Special installment plan – Law 10.684/03

On July 31 2003 the parent company Confab Industrial

S.A. and its subsidiary Confab Montagens Ltda, joined the

PAES regime, benefiting from payment in up to 120

Labor suits

Labor suits – Rio de Janeiro Refrescos S.A.

Tributary suits

Tributary suits – Rio de Janeiro Refrescos S.A.

Civil suits

Civil suits – Rio de Janeiro Refrescos S.A.

The provisions are as follows:

Balance on December 31, 2004

Provisions constituted, net of reversions

Compensation with amounts receivable – Rio de Janeiro Refrescos

Payments

Balance on December 31, 2005

installments. This involved giving up actions using tax

losses and negative social contribution, not taking into

consideration the limitation of 30% of profit in the period.

These amounts were provisioned as contingencies and have

been transferred to current and long term liabilities.

14. Contingencies

It is the company's practice to make provisions for the labor,

tax and civil claims which its legal advisors consider to be

probable losses; management judges that historically such

provisions have proved sufficient to cover eventual losses.

On the dates of the financial statements, the Company had

the following liabilities related to contingencies:

2005

23,459

3,335

9,339

2,460

1,540

1,000

41,133

22,358

23,389

(2,907)

(1,707)

41,133

Parent company Consolidated

2004

16,211

3,375

1,118

651

3

1,000

22,358

2005

24,670

3,335

11,067

2,460

1,540

1,000

44,072

25,127

23,837

(2,907)

(1,985)

44,072

2004

17,467

3,375

2,601

651

33

1,000

25,127

Parent company Consolidated

71. Financial Statements 2005


Explanatory notes

72. TenarisConfab

The company is responsible for contingent liabilities

from the time when it administered its ex-subsidiary Rio

Janeiro Refrescos S.A., sold in 1994. Additionally, in

accordance with the corresponding sale contract, the

company has a mortgage on its plant equipment assets

with a net book value of R$ 16.557.

The company also has law suits deemed by its legal advisors

to be possible losses, in the amounts of R$ 89,782

(R$ 59,554 on December 31, 2004), in the mother

company and R$ 90,803 (R$ 59,921 on December 31, 2004)

in the consolidated statements. From these suits, the

amount of R$ 14,737 (R$ 14,265 on December 31, 2004) is

related to the company Rio de Janeiro Refrescos S.A. Based

on the information from legal advisors and management

analysis, no provision was made for these contingencies.

The company also has ongoing law suits where a favorable

outcome is probable, involving the consolidated

amount of R$ 72,988 (R$ 57,136 on December 31, 2004)

net of legal fees, which will be recognized when realized.

The Company contested judicially the constitutionality

of the broadening of the calculation base determined

by the Law nº 9.718/98 with reference to the Programa de

Integração Social-PIS and the Contribution for the Financiamento

da Seguridade Social-COFINS. On November

9, 2005, in a plenary session, the Supreme Federal Court

(Supremo Tribunal Federal) ruled, in individual suits,

that the law is unconstitutional.

Since this decision only benefited the parties involved

in that case, and since the suits being brought by the

Company have not yet been judged, and based on the

guidelines released by the Securities and Exchange

Commission (Comissão de Valores Mobiliários-CVM)

in its Ruling nº 489/05 and by the Institute of Independent

Auditors (Instituto dos Auditores Independentes

do Brasil-IBRACON) through its bulletin nº 02/2006, the

reversal of the registration of the liability provisioned

and consequent recognition of revenue will only occur

after a favorable and irreversible court ruling.

15. Shareholders equity

a. Capital

At the Extraordinary General Meeting on May 31st,

2004, the Council deliberated on the split of the company's

shares such that each share in existence on the date

of the EGM would be attributed with two new shares

of the same type, with no alteration in capital value.

With the share split deliberated on May 31, 2004, the

Company by-laws authorized the increase in capital to

a total limit of 422,822,400 shares (before the split, the

limit allowed for was 140,940,800), respecting the proportionality

amongst the existing classes of shares, the

Council being the competent body for such deliberation.

It is also within the Council's competence to determine

the conditions applicable based on the authorized capital

as well as the applicability or not of the preference rights

of the current shareholders under the terms of Article

172 of Law nº. 10.303/2001.


The subscribed and paid up capital on December 31, 2005

is as follows:

SHAREHOLDERS

Controlling (Foreign Capital)

Management

Administrative Council

Board of Directors

Audit Council

Other shareholders

Total

Breakdown on December 31, 2004:

SHAREHOLDERS

Controlling (Foreign Capital)

Management

Administrative Council

Board of Directors

Audit Council

Other shareholders

Total

b. Retained profits reserve

Quantity of

ordinary

shares

126,800,634

15

600,003


393,516

127,794,168

Quantity of

ordinary

shares

126.800,634

15

600,003


393,516

127,794,168

Since own generation of funds is the company's main

source of financing and given the prospect of important

investments in pipelines in Brazil and South America,

the Company's main markets, at the Ordinary General

Meeting, to be held on April 18, 2006, it will be proposed

that there be a capital increase of R$ 87,000 in this reserve

and that the balance of profits remaining from the accumulated

results be retained in line with the capital budget

proposed by management.

%

99.22


0.47


0.31

100.00

%

99.22


0.47


0.31

100.00

Quantity of

preferential

shares



5,655,000

530,000

191,268,829

197,453,829

Quantity of

preferential

shares



5,655,000

489,000

191,309,829

197,453,829

%



2.86

0.27

96.87

100.00

%



2.86

0.25

96.89

100.00

Total

quantity

126,800,634

15

6,255,003

530,000

191,662,345

325,247,997

Total

quantity

126.800,634

15

6,255,003

489,000

191,703,345

325,247,997

%

38.99


1.92

0.16

58.93

100.00

%

38.99


1.92

0.15

58.94

100.00

73. Financial Statements 2005


Explanatory notes

74. TenarisConfab

c. Dividends and interest on capital

Preferential shares, which do not have voting rights, have

priority on the return of capital, as well as the preferential

right to receipt of fixed non-cumulative dividends of 8%

per year on that portion of the capital attributable to them,

which take priority in payment above all other classes of

shares. After payment of the 8% on the preferred shares,

the ordinary shares are guaranteed the same participation

in profits, being at least equivalent to 25% of adjusted net

profit, whichever is the greater of the two.

In accordance with tax legislation, the company opted to

pay interest to shareholders on capital in line with the

mandatory dividend for 2005 of R$ 41,006. These interest

Net profit for year

Legal reserve

Basis of calculation of dividends

Proposed complementary dividends

Interest on own capital

Total dividends paid out

Percentage of net earnings of year

payments were approved in meetings of the Board held

on July 26 and November 3 2005 and were paid out on

September 13 and December 2 2005.

Although for tax purposes the interest on capital has been

recognized in the results, for purposes of the financial

reports it has been restated as shareholders equity.

Additionally, the Company will be proposing to the

Ordinary General Assembly complementary dividends

of R$ 24,781.

The calculation of dividends and interest on capital is

shown below:

2005

277,013

(13,851)

263,162

24,781

41,006

65,787

25%

2004

17,519

(876)

16,643


21,596

21,596

130%


16. Income tax and social contribution

a. Nature of deferred taxes

The parent company and subsidiaries recorded tax credits

as a result of temporary timing differences relating to income

tax losses and negative social contribution base. These

credits have been recorded in current and long term assets

DEFERRED TAX ASSET

Taxes challenged in court

Non-deductible provisions

Tax loss and negative base

Total Parent company

Subsidiaries

Consolidated Total

DEFERRED TAX LIABILITY

Revaluation reserves

Public company profit

Total Parent company and consolidated

Net change in result

Current


9,961

1,358

11,319

101

11,420




based on the expected date of their realization, taking into

account projections of future profits approved by the

Administrative Council, as well as finalization dates and

the restriction of offsets to 30% of annual taxable income

under the law in force.

Long term

asset/

liability

7,370

11,012


18,382

86

18,468

2,423


2,423

2005

Change

in result


9,475

(14,246)

(4,771)

116

(4,655)

809

423

1,232

(3,423)

Current


8,108

15,604

23,712

71

23,783




Long term

asset/

liability

7,370

3,390


10,760


10,760

3,232

423

3,655

2004

Change

in result

145

1,058

(2,007)

(804)

(3,174)

(3,978)

364

51

415

(3,563)

75. Financial Statements 2005


Explanatory notes

76. TenarisConfab

Estimate of realization of credits recorded:

DEFERRED TAX ASSET

Taxes challenged in court

Provision for losses on receivables

Contingencies provision

Tax loss and negative base

Other temporary credits

Parent company total

Subsidiaries

Consolidated total

DEFERRED TAX LIABILITY

Revaluation reserves (*)

Total parent company and consolidated

(*) Deferred income tax and social contribution calculated based on the revaluation of property,

plant and equipment are expected to be realized based on the depreciation of assets, the rates

of which are informed in Note 8.

1 year


1,943


1,358

8,018

11,319

101

11,420



2 years

267


1,073



1,340

86

1,426

345

345

3 years

7,103


2,285



9,388


9,388

345

345

From 4

years



7,654



7,654


7,654

1,733

1,733

Total

7,370

1,943

11,012

1,358

8,018

29,701

187

29,888

2,423

2,423


. Reconciliation of income tax and social contribution with the

amount of taxes that would be payable were they to be assessed

by applying tax rates to the results shown in the corporate accounts

PROFIT BEFORE INCOME TAX AND SOCIAL CONTRIBUTION

AND AFTER MANAGEMENT AND EMPLOYEE PROFIT SHARE

NOMINAL AGREED RATE – %

EXPENSES WITH NOMINAL INCOME TAX AND SOCIAL CONTRIBUTION

PERMANENT DIFFERENCES

Equity in results of subsidiaries and associates

Interest on own capital

Deferred income tax in non-recognized subsidiary

Other permanent additions and exclusions, net

TEMPORARY DIFFERENCES

Use of tax loss and negative base

Tax credit on temporary additions and exclusions

Current tax

Use of tax loss and negative base

Deferment of temporary additions and exclusions

Reversion of deferred income tax and social contribution of Confab Montagens Ltda.

Deferred tax

Charge for income tax and social contribution for period

17. Other operating expenses, net

Contingency provision

Others, net

Other operating expenses, net

2005

395,388

34

(134,432)

6,230

13,943


(4,116)

14,246

(10,707)

(114,836)

(14,246)

10,707


(3,539)

(118,375)

2005

(23,389)

(568)

(23,957)

Parent company Consolidated

2004

23,432

34

(7,967)

(4,129)

6,990


(807)

2,007

(1,618)

(5,524)

(2,007)

1,618


(389)

(5,913)

2004

(6,078)

241

(5,837)

2005

412,288

34

(140,178)

264

14,849


(3,637)

15,373

(10,823)

(124,152)

(14,246)

10,823


(3,423)

(127,575)

2005

(23,837)

(1,440)

(25,277)

2004

34,338

34

(11,675)

(2,090)

7,343

(2,129)

(1,132)

2,007

(915)

(8,591)

(2,007)

915

(2,471)

(3,563)

(12,154)

Parent company Consolidated

2004

(6,879)

(235)

(7,114)

77. Financial Statements 2005


Explanatory notes

78. TenarisConfab

18. Financial Instruments

The parent company and its subsidiaries engage in transactions

with financial instruments to reduce exposure to

the effects of changes in interest and exchange rates and

other market risks. Transactions observe guidelines established

and monitored by the board of the company.

a. Valuing of financial instruments

The Company's main asset and liability financial instruments

on December 31, 2005 are herein described, together

with the criteria for valuing / evaluating them:

(I) Cash and banks, financial investments, accounts receivable,

other current assets and accounts payable

The amounts accounted for are approximate to those realized.

(II) Investments

These consist mainly of investments in private subsidiaries,

recorded by the equity equivalence method, which are of

strategic interest to the company. The market value of the

shares held is not taken into consideration.

(III) Loans and financing

Subject to normal market interest rates, as described in

Note 11.

b. Risk Management

The main risks the Company and its subsidiaries are

exposed to are of a strategic/operational and

economic/financial nature.

Operational-strategic risks, such as demand behavior, competition

and technology are taken into consideration in the

company's management model.

Economic financial risk reflects mainly the behavior of macroeconomic

variables, such as interest and exchange rates.

Policies and guidelines determined by the company management

forbid speculative negotiation and establish the

diversification of instruments and counterparts. They also

aim to constantly monitor and evaluate the global portfolio

position in order to measure financial results and the

impact on cash flow.

To protect its assets, the company and its subsidiaries

adopt conservative fund raising and financial investment

policies and seek to minimize the cost of capital.

(I) Interest Rate Risk

Interest rate risk comes from that portion of debt contracted

at floating rates. The portion of debt in foreign currency

at floating rates is subject mainly to the oscillations of the

LIBOR-(London Interbank Offered Rate) rate.

The portion of the debt in reais subject to floating rates consists

basically of that subject to Brazilian long term interest

rate (TJLP), determined by the Brazilian Central Bank.

(II) Exchange Rate Risk

The Company monitors the effect of exchange rate oscillations

on its assets and liabilities in foreign currency and on

the commercial flow of contracts on the books and under

negotiation. Additionally, it strives to diversify its financial

investments between domestic and foreign currency (reais

and U.S dollar), in accordance with its working capital and

estimated usage of same. Financial derivative operations

are on occasion used to ameliorate specific risks related to

these positions.


The equity position related to the US dollar on December

31, 2005 was as follows:

CURRENT ASSETS

Financial investments (Note 3)

Accounts receivable (Note 4)

Total current assets

CURRENT LIABILITIES

Loans and financing (Note 11)

Suppliers (Note 9)

Total current liabilities

At the end of the financial year, the Company had active

derivative or forward contracts with a principal value equivalent

to R$ 1,229 (US$ 525,000) to cover specific oscillations

in its commercial flow.

(III) Credit risk

These risks are managed and minimized through a specific

policy of granting credit selectively to customers, with

coverage for eventual default established according to the

provisions in explanatory note 4.

(IV) Project volatility risk

The company's economic and financial performance is

dependent on the supply of steel pipes for infrastructure

projects in the petroleum, petrochemical, gas and sanitation

industries.

c. Market Value

The Company and its subsidiaries evaluate their book assets

and liabilities in relation to market values using available

information and appropriate methodologies, a procedure

requiring considerable judgment and reasonable estimates

to produce the most suitable realizable value. The use

of different market assumptions and / or methodologies

for estimates may have a material effect on the estimated

realizable values.

209,271

8,327

217,598

(1,262)

(37,344)

(38,606)

Parent company Consolidated

211,336

15,554

226,890

(1,262)

(9,426)

(10,688)

The market values of financial investments and loans and

financing were calculated based on the current value of the

respective contracts, using indices and interest rates applicable

to instruments of a similar nature, terms and risks.

The book value of the financial instruments is equivalent

to their market value.

19. Insurance Cover

It is the policy of the Company and its subsidiaries to contract

insurance cover against the risk of fire for plant and

equipment and inventories subject to risk for amounts

considered sufficient to cover possible losses, considering

the nature of the operation and based on advice from insurance

consultants.

79. Financial Statements 2005


Statement of cash flow

80. TenarisConfab

OPERATIONAL ACTIVITIES

NET PROFIT FOR YEAR

EXPENSES (REVENUES) NOT AFFECTING CASH AND EQUIVALENTS

Depreciation and amortization

Monetary / exchange variation

Amortization of deferrals

Residual value of written off permanent assets

Results in subsidiaries and associates

Deferred income tax and social contribution

Provision for investment losses

Amortization of goodwill in investments

Variation in minority shareholdings

Exchange variation of investments in overseas subsidiary

Contingency provision

REDUCTION (INCREASE) IN ASSETS

Accounts receivable

Credits from associates

Inventories

Expenses brought forward

Taxes recoverable

Others

INCREASE (DECREASE) IN LIABILITIES

Suppliers

Customer advances

Taxes and contributions payable

Salaries and charges

PAES – special regime

Disbursement for contingencies provision

Disbursement for income tax and social contribution

Others

Cash generation from (use of cash in) operational activities

2005

277,013

25,140

(575)


673

(18,322)

3,539

325

182



23,389

311,364

57,181

(24,645)

126,402

(236)

63,063

1,001

222,766

(45,075)

(54,575)

55,968

791

(938)

(1,707)

(8,778)

(4,056)

(58,370)

475,760

Parent company Consolidated

2004

17,519

23,798

(7,226)

7,794

12,517

12,144

389


198



6,078

73,211

(34,067)

71,410

(177,695)

1,630

(80,483)

4,845

(214,360)

38,181

78,482

6,131

659

782

(3,512)


5,624

126,347

(14,802)

2005

277,013

29,076

2,386

462

687

(777)

3,423

393

182

7,700

(2,395)

23,837

341,987

48,373

(9,045)

99,244

(2,343)

59,351

(446)

195,134

(28,093)

(92,116)

64,155

1,067

(1,121)

(1,985)

(14,626)

(3,615)

(76,334)

460,787

2004

17,519

26,504

(1,690)

7,995

12,523

6,146

3,563


198

4,665

(1,988)

6,879

82,314

33,254

(241)

(163,528)

2,183

(81,712)

4,751

(205,293)

11,312

82,060

6,540

690

664

(3,798)

(2,922)

(852)

93,694

(29,285)


INVESTMENT ACTIVITIES

Dividends received from subsidiary and associate

Acquisition of property, plant and equipment

Acquisition of investments

Use of cash in investment activities

FINANCING ACTIVITIES

Payment of dividends and interest on own capital

Loans and financing

Funds raised

Payments

Use of cash in financing activities

Effect of exchange variations on cash and equivalents

Net increase (decrease) cash and equivalents

Starting balance of cash and equivalents

Closing balance of cash and equivalents

Net increase (decrease) in cash and equivalents

Sérgio Ricardo Putini

TC CRC 1SP221919/O–2

CPF 063.498.578–79

2005

665

(29,763)


(29,098)

(58,047)

662,816

(878,097)

(273,328)

(11,563)

161,771

92,911

254,682

161,771

Parent company Consolidated

2004


(42,572)

(1,505)

(44,077)


471,261

(493,370)

(22,109)

(2,102)

(83,090)

176,001

92,911

(83,090)

2005


(47,198)


(47,198)

(59,697)

706,163

(949,305)

(302,839)

(17,592)

93,158

166,618

259,776

93,158

2004


(51,778)

(1,505)

(53,283)

(1,077)

476,766

(493,370)

(17,681)

(8,188)

(108,437)

275,055

166,618

(108,437)

81. Financial Statements 2005


Report of the Independent Auditors

To the Board of Directors and Shareholders

Confab Industrial S.A.

1. We have audited the balance sheets of Confab Industrial S.A. and the consolidated balance sheets

of Confab Industrial S.A. and its subsidiaries as of December 31, 2005 and 2004 and the related

statements of income, of changes in shareholders' equity and of changes in the financial position

of Confab Industrial S.A. and the corresponding statements of income and of changes in financial

position for the years then ended. These financial statements are the responsibility of the company's

management. Our responsibility is to express an opinion on these financial statements.

2. We conducted our audits in accordance with approved Brazilian auditing standards, which require

that we perform the audit to obtain reasonable assurance about whether the financial statements

are fairly presented in all material aspects. Accordingly, our work included, among other procedures:

(a) planning our audits taking into consideration the significance of balances and the accounting

and internal control systems of the companies, (b) examining, based on tests, evidence and records

supporting the amounts and disclosures in the financial statements, and (c) assessing the most

significant accounting principles and estimates used by the company's management, as well as

the overall presentation of the financial statements.

3. In our opinion the financial statements examined by us present fairly, in all material aspects,

the equity and financial position of Confab Industrial S.A. and Confab Industrial S.A. and its subsidiaries

on December 31, 2005 and 2004, and the results of the operations, the changes in shareholders'

equity and the changes in financial position of Confab Industrial S.A. for the years then

ended, as well as the changes in consolidated financial position for the years then ended, in compliance

with accounting practices adopted in Brazil.

4. We conducted our audits with the objective of presenting an opinion about the financial statements

referred to in the first paragraph, taken as a whole. The statement of cash flow, presented

in the attachment to provide supplementary information about the company, is not required as an

integral part of the financial statements. This statement of cash flow was submitted to the auditing

procedures described in the second paragraph and in our opinion fairly presents, in all material

aspects, the cash flow situation in relation to the overall presentation of the financial statements.

São Paulo, January 27, 2006

Independent Auditors

CRC 2SP000160/O–5

Paulo Cesar Estevão Netto

Accountant CRC 1RJ026365/O–8 "T" SP


www.tenarisconfab.com.br

www.confabequipamentos.com.br

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