Worthington Enterprises Reports Second Quarter Fiscal 2024 Results

Worthington Enterprises, Inc., formerly Worthington Industries, Inc., reported results for its fiscal 2024 second quarter ended November 30, 2023. These quarterly results include both Worthington Enterprises and Worthington Steel. Beginning in the third quarter of fiscal 2024, historical results will be restated to reflect the operations of the Company’s former Steel Processing segment as a discontinued operation in periods prior to the December 1, 2023, separation date.

Net sales in the second quarter of fiscal 2024 were $1.1 billion and net earnings attributable to controlling interest were $24.3 million, or $0.49 per diluted share. For the second quarter of fiscal 2023, the Company reported net sales of $1.2 billion and net earnings attributable to controlling interest of $16.2 million, or $0.33 per diluted share.

“This was our last quarter as Worthington Industries, and I am very proud of our people all across the company who stayed focused on serving our customers while we worked hard during the last year to prepare for and ultimately execute the separation of our steel processing business on December 1. Not only did we finish ahead of schedule but I am confident all of our advisors would say the work done was best in class. I could not be more excited for the future of both companies,” said Worthington Enterprises President and CEO Andy Rose. “For the businesses that are part of Worthington Enterprises, the current quarter was solid despite some headwinds. Building Products delivered healthy year-over-year results that were consistent with normal seasonality. While results in Consumer Products and Sustainable Energy Solutions declined year-over-year, both segments delivered sequential improvements in earnings relative to the first quarter and our teams are doing a good job positioning these businesses for a solid start to 2024.”

Consolidated Quarterly Results

Net sales for the second quarter of fiscal 2024 were $1.1 billion, a decrease of $88.6 million, or 7.5%, from the prior year quarter. The decrease was attributed mostly to Steel Processing, down $53.3 million, due to lower average selling prices which were partially offset by higher volumes. Combined net sales at the remaining segments were down $35.4 million driven by the impact of lower average selling prices and an unfavorable product mix in Building Products and lower volumes in Sustainable Energy Solutions.

Gross margin increased by $18.0 million from the prior year quarter to $123.7 million, largely driven by an estimated $18.3 million favorable change in Steel Processing from inventory holding losses of $53.1 million in the prior year quarter compared to losses of $34.8 million in the current year quarter.

The operating loss in the quarter was favorable by $1.1 million compared to the $7.0 million operating loss in the prior year quarter, as the combination of higher incremental costs associated with the separation of the Company’s Steel Processing business and higher net restructuring charges more than offset the improvements in gross margins. Excluding these items, adjusted operating income of $16.0 million was up $17.6 million compared to the prior year quarter.

Net interest expense was $2.2 million in the current year quarter, down $5.4 million compared to the prior year quarter due to higher interest income and, to a lesser extent, 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”).

Equity income increased $5.6 million over the prior year quarter to $42.4 million, due in part to a $2.8 million gain associated with the divestiture of the Brazilian operations of the cabs joint venture. Excluding the impact of the divestiture, equity income was up $2.8 million in the current year quarter, as slightly higher contributions from both WAVE and Serviacero were partially offset by lower contributions from ClarkDietrich.

Income tax expense was $7.2 million in the current year quarter compared to $4.1 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 23.4%, compared to 23.7% in the prior year quarter.

Balance Sheet

Total debt was $623.8 million at the end of the second quarter of fiscal 2024, down $69.0 million from May 31, 2023, driven by the redemption of the 2026 Notes, partially offset by $175.0 million of short-term borrowings by Worthington Steel at quarter-end ahead of the business separation. The Company ended the second quarter of fiscal 2024 with $430.9 million of cash, down $24.0 million from May 31, 2023, primarily due to the early redemption of the 2026 Notes earlier in the fiscal year, partially offset by cash proceeds of $175.0 million associated with Worthington Steel’s debt issuance at quarter end, a portion of which funded a $150.0 million cash dividend paid to the Company in connection with the December 1, 2023 separation.

Quarterly Segment Results

Consumer Products generated net sales of $147.7 million during the current year quarter, down $6.1 million, or 3.9%, from the prior year quarter. The decline in net sales was driven by lower average selling prices and an unfavorable shift in product mix. Adjusted EBIT was down $4.0 million in the current year quarter to $9.5 million, driven primarily by lower volumes and a $3.1 million non-cash inventory obsolescence charge related to a recall of the Balloon Time® Mini helium tank.

Building Products generated net sales of $123.0 million during the current year quarter, down 13%, or $18.7 million, from the prior year quarter as lower average selling prices and an unfavorable shift in product mix more than offset the impact of higher volumes. Adjusted EBIT decreased $0.9 million from the prior year quarter to $40.3 million, driven primarily by the impact the decline in net sales had on gross margin. Equity income was essentially flat in the quarter, as higher contributions from WAVE were almost equally offset by a modest decline at ClarkDietrich.

Sustainable Energy Solutions generated net sales of $27.5 million during the current year quarter, down 28%, or $10.6 million, compared to the prior year quarter, as lower volumes and an unfavorable mix more than offset the impact of higher average selling prices. Adjusted EBIT was a loss of $2.6 million, $3.8 million lower than the prior year quarter, primarily due to lower volumes and an unfavorable product mix.

Steel Processing’s net sales for the second quarter of fiscal 2024 totaled $788.7 million, down $53.3 million, compared to the prior year quarter. Adjusted EBIT was up $24.0 million over the prior year quarter to $6.8 million.

Recent Developments

• On December 1, 2023, the Company completed the separation of its Steel Processing business, into a standalone publicly traded company, Worthington Steel, Inc., which trades under the symbol “WS” on the New York Stock Exchange. In connection with the separation, Worthington Steel made a cash distribution of $150.0 million to the Company.
• On December 6, 2023, the Company used the cash distribution from Worthington Steel to pay off in full the unsecured senior notes that were set to mature in August 2024. The payoff amount consisted of $150.0 million in principal plus accrued interest of $0.5 million.
• On December 19, 2023, Worthington Enterprises’ Board of Directors declared a quarterly dividend of $0.16 per share payable on March 29, 2024, to shareholders of record on March 15, 2024.

Outlook

“I could not be more proud of our company and the teams we have in place,” Rose said. “Heading into calendar 2024, we are well positioned as a leading designer and manufacturer of Building Products, Consumer Products and Sustainable Energy Solutions with more focused strategies better able to serve our customers and accelerate our growth. I am very optimistic about our future given our market-leading brands, strong balance sheet and talented people.”

For full second quarter fiscal results click here.

About Worthington Enterprises 

Worthington Enterprises is a designer and manufacturer of market-leading brands that help enable people to live safer, healthier and more expressive lives. The Company operates with three segments: Building Products, Consumer Products and Sustainable Energy Solutions. Worthington’s emphasis on innovation and transformation extends to building products including water systems, heating and cooling solutions, architectural and acoustical grid ceilings and metal framing and accessories, and consumer products in tools, outdoor living and celebrations categories sold under brand names Coleman®, Bernzomatic®, Balloon Time®, Level5 Tools®, Mag Torch®, Well-X-Trol®, General®, Garden-Weasel®, Pactool International® and Hawkeye™. The Company serves the growing global hydrogen ecosystem through on-board fueling systems and gas containment solutions.

Headquartered in Columbus, Ohio, Worthington Enterprises employs approximately 5,000 people throughout North America and Europe.

Founded in 1955 as Worthington Industries, Worthington Enterprises follows a people-first Philosophy with earning money for its shareholders as its first corporate goal. Worthington Enterprises achieves this outcome by empowering its employees to innovate, thrive and grow with leading brands in attractive markets that improve everyday life. The Company engages deeply with local communities where it has operations through volunteer efforts and The Worthington Companies Foundation, participates actively in workforce development programs and reports annually on its corporate citizenship and sustainability efforts. For more information, visit worthingtonenterprises.com.

Contact:

Sonya L. Higginbotham – SVP, Chief of Corporate Affairs, Communications and Sustainability – sonya.higginbotham@wthg.com – (614) 438-7391

Source: Worthington Enterprises, Inc.