Steel Mills

Worthington Industries Posts First-Quarter Loss

September 26, 2019

Worthington Industries reported net sales of $855.9 million, a 13 percent year-over-year decline, and a net loss of $4.8 million for its fiscal 2020 first quarter, driven by lower volume and lower average selling prices in steel processing. Worthington was also hit by a pre-tax impairment and restructuring charge of $43.5 million primarily related to its engineered cabs business and a writedown of its 10 percent investment in a steel joint venture in China.

“Despite softness in several of our end markets and a lot of noise in the numbers, the overall health of the company is good,” said John McConnell, chairman and CEO. “We delivered strong results in pressure cylinders, led by increasing demand in the oil and gas business and continued solid performance in consumer products. Steel processing continues to deal with steel price declines and market softness in automotive and agricultural demand, but our steel team is managing that business well with a focus on long-term growth.”

Steel processing net sales of $523 million plunged 21 percent with total shipments down 9.3 percent and direct shipments falling 15.4 percent compared to a year ago. CFO Joseph Hayek attributed lower shipments to destocking by customers who built up inventories last year anticipating higher steel prices.

“We believe year-over-year destocking is beginning to moderate,” said Hayek. “We did continue to see some softness in Q1 automotive volumes due to reduced North American auto builds year-over-year and we saw weakness in agricultural end markets.”

Net sales in the pressure cylinder business increased 1.0 percent year-over-year to $304 million. End markets in the U.S. were stable, but headwinds were noted in Europe due to economic conditions.

“In addition to declining steel prices, which impact our revenues and demand, many of our markets are seeing very little or no growth, and we believe economic conditions, trade wars, tariffs and uncertainty have impacted behaviors both in the U.S. and in Europe,” said Hayek.

Worthington President Andrew Rose said the company is focused on cleaning up underperforming and non-core assets. Worthington exited its alternative fuels business in Turkey and wrote off the value of its strip steel joint venture in China. The company is looking to revise its strategy for its engineered cabs business, including the possibility of selling it.

“A lot has changed in the past year at Worthington, with new leadership in many of our businesses and a renewed commitment to driving shareholder value,” said Rose. “There is not an industry in America that is not being disrupted in some manner right now and ours is no different, whether it’s electric vehicles, cloud-based data analytics or robotics, all of these forces are accelerating change around us.”