Worthington Industries closed fourth quarter FY 2015 with net sales of $846 million and net earnings of $28.9 million. Quarter earnings were negatively impacted by pre-tax impairment, restructuring and other charges, totaling $6.5 million. Earnings in Q4 2014 were $33.2 million.
Steel processing net sales dropped 4 percent y/y to $540 million due to lower toll volumes and lower average selling prices. Operating income slipped to $22.6 million due to lower toll volume and higher inventory holding losses.
Pressure Cylinder sales were also affected by lower volumes and average selling prices. Sales of $251.6 million were down 5 percent y/y. Operating income $10.3 million was $4.3 was higher as decreases in impairment and restructuring charges more than offset declines in oil and gas equipment and industrial products, said Worthington.
Engineered cabs sales were $6.2 million lower y/y at $46.5 million due to the sale of Advanced Component Technologies and lower volume in the agricultural market. The segment recorded a $3.7 million operating loss for the quarter.
A $1.9 million operating loss was recorded in the Other category which includes Construction and Energy Innovations businesses. Weaker results were attributed to lower sales volume and losses occurring while exiting from the Construction Services business.
For the fiscal year 2015 ending May 31, net sales were $3.4 billion, an 8 percent improvement over FY 2014. Net earnings were $76.8 million and were negatively impacted by impairment and restructuring charge totaling $107.1 million.
“We had a solid quarter and we generated solid earnings for fiscal 2015; however, we did not meet our goal of year-over-year growth,” said John McConnell, Chairman and CEO. “There were a number of factors that contributed to the softer year-over-year results, including falling steel prices, the downturn in oil and gas markets, and operations issues at certain facilities which are being addressed.”
McConnell noted in the earnings statement that the automotive and construction markets are improving but agriculture is “less robust.” “We are seeing a more stabilized steel pricing environment,” commented McConnell.
Last September Worthington closed its Florence Cabs facility and is moving the business, and a number of its employees, to Greenville, Tenn. The company is in the process of hiring 140 new employees to meet projected increase in demand.
During the earnings conference call Worthington said, “We continue to view acquisitions as part of our strategy to grow the company but maybe not right now as aggressively as we have been over the past five years. And it’s also a little frothy out there right now to be honest. I mean prices are pretty steep, low cost capital is widely available, so there are a lot of buyers, so I think we are going to be a little more cautious right now on that front.”
Cap ex expansion is centered on capacity expansion and productivity.
On steel inventories and pricing, the Worthington executives said, “There is always a quarter lag, prices have recently stopped going down, it has recently stabilized with perhaps a slight uptick but it will take us a quarter to work through the downward prices. We anticipate some FIFO headwinds for the next quarter but after that we should be right at rock bottom prices and after that our spreads should level out again.”
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