Steel Mills

Worthington Sees Oil & Gas Starting to Improve

March 30, 2017

Worthington Industries reported net sales of $703.4 million for third quarter FY 2017 and net earnings of $35.9 million. The company claimed inventory holding losses of $3 million and restructuring charges of $1.4 million.

“We had a very good third quarter performance with Steel Processing contributing near record earnings and overall, we produced year-over-year growth, which remains our focus,” Chairman and CEO John McConnell said. “Sales growth, higher steel pricing and higher tolling volume helped drive Steel Processing results. In Pressure Cylinders, demand improved for our helium and camping cylinders, while oil & gas markets remained soft, however, volumes have stabilized and certain markets are showing some increased demand.” McConnell added, “The Company’s joint ventures also contributed steady earnings.”

Steel Processing net sales were up 14 percent to $59.1 million year-over-year due to higher average selling prices and higher tolling volume.

CFO Andy Rose commented, “The business continues to benefit from strong toll volumes and expanded margins in the coated business, but higher manufacturing expenses due to production startup issues in our laser welding business and higher health care expense are offsetting these gains.”

During the company earnings call the Worthington executives commented on steel pricing and inventories.

“[Steel inventories] are at an all-time low in terms of days, whether you are looking back or forward, the day’s inventory that we have on hand is lower than it’s ever been,” said McConnell

On pricing for April in May, president and COO Mark Russell commented, “We see cash prices right now about $660 and we see the forward price around $600 as you get to the rest of the year, that’s about what we’re looking at, slight backwardation.”

Engineered Cabs net sales were down 8 percent to $23.5 million due as a result of declining market demand.

Pressure Cylinders net sales of $198.4 million were down 1 percent from Q3 2016 but operating income improved due to higher profitability from the consumer products business. Oil and gas equipment revenue in the segment was down 11 percent from last year but is beginning to improve.

Worthington’s Pressure Cylinder segment has bottomed, said McConnell. “…We’re seeing some uptick in activity more in the gas play than in the oil play, I mean, this is not a rocket ship. So I don’t want people to get overly enthusiastic that suddenly the oil and gas business is going to be back to where it was four years ago.” McConnell said that big exploration companies and other drillers are starting to spend money “but they are doing it in a somewhat cautious manner and certain plays where I think the economics make sense.”