Worthington Industries (NYSE:WOR) reported robust Q1 earnings of $1.93 per share, up from $1.30 in the previous year. The company also announced plans to separate its Steel Processing business by December 2023, incurring pre-tax expenses of $6 million related to the move.
Key takeaways from the earnings call include:
Worthington Industries used $244 million to pay off bonds, resulting in a non-cash charge of $2 million.
* The company recognized $1 million in pre-tax impairment charges in Steel Processing.
* Consolidated net sales for the quarter were $1.2 billion, a 15% decrease from the previous year due to lower average selling prices and volumes.
* Gross profit increased to $197 million, and gross margin increased to 16.6%.
* Adjusted EBITDA for the quarter was $165 million.
* Cash flow from operations was $60 million, and free cash flow was $30 million.
* The company expects volumes and margins to gradually improve in its Consumer Products and Building Products segments.
* In Sustainable Energy Solutions, net sales were down 7% due to lower volumes.
* In Steel Processing, net sales were $881 million, down 15% primarily due to lower average selling prices.
* The company reported EBIT of $78 million for Steel Processing, driven by increased direct spreads and equity income from unconsolidated joint ventures.
Worthington Industries is on track to complete the separation of its Steel Processing business by the end of 2023.
The company's Q1 earnings were the second-best first quarter in their 68-year history. The planned separation of their Steel Processing business is ahead of schedule, with the two post-separation businesses named Worthington Steel and Worthington Enterprises. The company has also renewed credit facilities and paid down debt to ensure both businesses have strong balance sheets.
Worthington Industries expressed confidence in navigating potential impacts from the auto market strike and anticipates improvements in volumes and margins in the Consumer Products segment. The company also highlighted the growth prospects of the electrical steel business and the positive impact of investments therein.
The company plans to reduce inventory levels to minimize the impact of steel price volatility and utilize new mills to access new customers in different regions. In the Consumer segment, the company acknowledged a decline in the containerboard market due to reduced outdoor activities and spending but continues to focus on cost-cutting measures and continuous improvement.
Worthington Industries will host an Investor Day on October 11 to showcase the prospects for both Worthington Steel and Worthington Enterprises. The company also expects steel production to be lower than pre-pandemic levels for the next four years and is managing steel processing differently to access new mills.
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