Worthington Industries Reports First Quarter Fiscal 2024 Results

Worthington Industries, Inc. (or the “Company”) today reported net sales of $1.2 billion and net earnings attributable to controlling interest of $96.1 million, or $1.93 per diluted share, for its fiscal 2024 first quarter ended August 31, 2023. In the first quarter of fiscal 2023, the Company reported net sales of $1.4 billion and net earnings attributable to controlling interest of $64.1 million, or $1.30 per diluted share. Results in both the current year quarter and the prior year quarter were impacted by certain items.

“We had a strong first quarter driven by solid results from our Steel Processing and Building Products segments,” said Andy Rose, President and CEO. “Steel Processing saw healthy demand across most of their key end markets while Building Products benefitted from strong contributions from both WAVE and ClarkDietrich combined with growth in our wholly owned businesses. Our Consumer Products business faced headwinds due to weather, customer destocking and lower consumer spending, but we believe demand and margins should improve in the coming quarters.” 

Consolidated Quarterly Results

Net sales for the first quarter of fiscal 2024 were $1.2 billion, a decrease of $215.4 million, or 15%, compared to the prior year quarter. The decrease was driven primarily by lower average selling prices in Steel Processing and, to a lesser extent, the impact of lower overall volumes.

Gross margin increased $28.1 million over the prior year quarter to $197.5 million, on higher direct spreads in Steel Processing, which were partially offset by lower volumes in Consumer Products. Direct spreads in Steel Processing benefited from an estimated $17.0 million favorable swing from inventory holding losses of $1.5 million in the prior year quarter to inventory holding gains of $15.5 million in the current year quarter.

Operating income was up $11.0 million over the prior year quarter to $77.7 million despite an $8.2 million headwind resulting from the combination of higher impairment and restructuring charges and incremental costs associated with the planned separation of the Company’s Steel Processing business (“Worthington 2024”). Excluding these items, adjusted operating income was up $18.7 million compared to the prior year quarter to $85.1 million on higher overall gross margin, partially offset by an $8.9 million increase in SG&A expense, due to higher benefit expenses and, to a lesser extent, higher wages.

Net interest expense was $3.1 million in the current year quarter, down $5.5 million compared to the prior year quarter due to higher interest income and, to a lesser extent, the impact of lower average debt levels driven by the July 28, 2023, redemption of the Company’s senior unsecured notes that were set to mature in April 2026 (“2026 Notes”) at a price of $243.8 million.

Equity income increased $22.7 million over the prior year quarter, which included a $15.8 million loss on the August 2022 divestiture of the Company’s equity investment in ArtiFlex. Excluding the impact of the divestiture, equity income was up $6.9 million over the prior year quarter, as higher contributions from both Serviacero and WAVE were partially offset by a decline at ClarkDietrich.

Income tax expense was $28.8 million in the current year quarter compared to $19.5 million in the prior year quarter. The increase was driven by higher pre-tax earnings. Tax expense in the current year quarter reflects an annual effective rate of 23.3% compared to 23.9% in the prior year quarter.

Balance Sheet

Total debt was $448.4 million as of August 31, 2023, down $244.4 million from May 31, 2023, driven by the redemption of the 2026 Notes. The Company ended the first quarter of fiscal 2024 with $201.0 million of cash, down $253.9 million from May 31, 2023, primarily due to the early redemption of the 2026 Notes.

Quarterly Segment Results

Steel Processing’s net sales for the first quarter of fiscal 2024 totaled $881.3 million, down $157.5 million, compared to the prior year quarter, driven almost entirely by lower average selling prices. Adjusted EBIT was up $43.1 million over the prior year quarter to $78.0 million due to favorable direct spreads, including $17.0 million associated with the quarter-over-quarter swing in estimated inventory holding gains and losses, and, to a lesser extent, a $7.2 million increase in equity earnings at Serviacero. The mix of direct tons versus toll tons processed was 56% to 44% in the current year quarter, compared to 58% to 42% in the prior year quarter. Excluding the impact of the prior year divestiture of the WSP toll processing facility, toll volumes were up 19% while direct tons were down 1%.

Consumer Products’ net sales for the first quarter of fiscal 2024 totaled $149.4 million, down 21%, or $39.3 million compared to the prior year quarter, as the impact of lower volumes more than offset modest improvements in mix and selling prices. Adjusted EBIT was down $11.9 million in the current year quarter to $9.0 million, driven primarily by lower volumes.

Building Products’ net sales for the first quarter of fiscal 2024 totaled $133.9 million, down 11%, or $16.5 million, compared to the prior year quarter driven by lower volume and lower average selling prices. Adjusted EBIT increased $1.3 million over the prior year quarter to $54.0 million, primarily due to higher contributions of equity income. Equity income for the current year quarter totaled $45.0 million, with equity income attributable to WAVE increasing $4.5 million to $28.3 million during the current year quarter, which was partially offset by a $3.3 million decrease in equity income attributable to ClarkDietrich to $16.7 million during the current year quarter.

Sustainable Energy Solutions’ net sales for the first quarter of fiscal 2024 totaled $28.6 million, down 7%, or $2.1 million, compared to the prior year quarter, as lower volumes and unfavorable mix more than offset the impact of higher average selling prices. Adjusted EBIT was a loss of $4.7 million, $3.3 million lower than the prior year quarter, as lower volumes combined with higher manufacturing and SG&A expense negatively impacted the current year quarter.

Worthington 2024

On September 29, 2022, the Company announced that its Board of Directors approved a plan to pursue a separation of the Company’s Steel Processing business which it expects to complete as early as December 2023, ahead of the originally projected timing of early 2024. This plan is referred to as “Worthington 2024.” Worthington 2024 will result in two standalone, publicly traded companies that are more specialized and fit-for-purpose, with enhanced prospects for growth and value creation. Worthington Enterprises will include the Company’s Building Products, Consumer Products and Sustainable Energy Solutions businesses. Worthington Steel will be the Company’s Steel Processing business. Worthington plans to effect the separation via a pro-rata distribution of common shares of the company operating the Steel Processing business, which is intended to be tax-free to shareholders for U.S. federal income tax purposes. A dedicated area of the Company’s website has been established with more information and will be regularly updated as new details become available at www.WorthingtonIndustries.com/W24.

Recent Developments

• On July 28, 2023, the Company redeemed its 2026 Notes in full resulting in a loss on early extinguishment of debt of approximately $1.5 million. The redemption price approximated the par value of debt of $243.6 million plus accrued interest of $0.2 million.
   
• On September 27, 2023, Worthington’s Board of Directors declared a quarterly dividend of $0.32 per share payable on December 15, 2023, to shareholders of record on November 15, 2023.

Outlook

“Our businesses continue to perform well despite some economic uncertainty and signs that consumers are stretched.  Our experienced teams continue to navigate the current environment exceptionally well, and we are well positioned with an outstanding balance sheet,” Rose said. “In addition, we continue to make good progress on our Worthington 2024 plan, which will create two, distinct market-leading companies, Worthington Enterprises and Worthington Steel, and we are on-track to complete the separation as early as December 2023.”

Conference Call

Worthington will review fiscal 2024 first quarter results during its quarterly conference call on September 28, 2023, at 9:00 a.m., Eastern Time. Details regarding the conference call can be found on the Company website at www.WorthingtonIndustries.com.

For the full first quarter results, click here.

About Worthington Industries

Worthington Industries (NYSE:WOR) is a leading industrial manufacturing company pursuing its vision to be the transformative partner to its customers, a positive force for its communities and earn exceptional returns for its shareholders. For over six decades, the Company has been delivering innovative solutions to customers spanning industries such as automotive, energy, retail and construction. Worthington is North America’s premier value-added steel processor and producer of laser welded solutions and electrical steel laminations that provide lightweighting, safety critical and emission reducing components to the mobility market. Through on-board fueling systems and gas containment solutions, Worthington serves the growing global hydrogen ecosystem. The Company’s focus on innovation and manufacturing expertise extends to market-leading consumer products in tools, outdoor living and celebrations categories, sold under brand names, Coleman®, Bernzomatic®, Balloon Time®, Mag Torch®, Well-X-Trol®, General®, Garden-Weasel®, Pactool International®, Hawkeye™ and Level5® ; as well as market leading building products, including water systems, heating & cooling solutions, architectural and acoustical grid ceilings and metal framing and accessories. Headquartered in Columbus, Ohio, Worthington operates 52 facilities in 15 states and nine countries, sells into over 90 countries and employs approximately 9,000 people. Founded in 1955, the Company follows a people-first philosophy with earning money for its shareholders as its first corporate goal. Relentlessly finding new ways to drive progress and transform, Worthington is committed to providing better solutions for customers and bettering the communities where it operates by reducing waste, supporting community-based non-profits and developing the next generations of makers.

Contact:

Sonya L. Higginbotham – Vice President, Corporate Communications & Brand Management – sonya.higginbotham@worthingtonindustries.com – (614) 438-7391

Source: Worthington Industries, Inc.