Worthington Industries reported net sales of $764.0 million and net earnings of $15.3 million for its fiscal 2020 third quarter, ending Feb. 29, 2020. Sales were down 13 percent from the prior year due to lower average selling prices in Steel Processing and lower volumes in Pressure Cylinders.
Steel Processing net sales were down 12 percent for the quarter to $491.1 million. The mix of direct versus toll tons processed was 44-56 percent during Q3.
Pressure Cylinder net sales dropped 7 percent to $271 million due to lower volumes in both the industrial products and consumer products businesses. Impairment and restructuring charges contributed to an operating loss of $19.9 million for the segment.
Total shipped tons increased 36 percent from Q3 2019 due to higher volumes in tolling processing.
“There are still many unknowns regarding the spread of COVID-19 and how the measures to control it will impact the economy and our company,” said CEO John McConnell. “Many of our facilities are considered ‘essential businesses’ under the various state and federal guidelines and will continue to operate based on customer demand. I am especially grateful to our production workforce who are leading our effort to serve our customers and our country by continuing to make products.”
Some of the essential businesses Worthington contributes to are healthcare, home and portable heating, construction and critical transportation infrastructure.
“As for now, we have not experienced a big drop in demand, but we are anticipating more in the coming days and weeks,” said President Andy Rose. “Most of you know of the temporary closing of many of the automakers in several major construction projects. We are hopeful that many of these measures have their intended effect of minimizing the spread of the virus but are temporary in nature.
He added, “Of course, our Steel Processing business is heavily tied to automotive, which will certainly be impacted by a weaker economy. Interestingly, low financing rates and gas prices should help offset some of this decline.”
Worthington also expects to benefit from rules of origin stipulations in the USMCA once it is passed.
Rose said he would not speculate on how long the automotive shutdowns may last, although original shutdown estimates were through Monday, March 31. The impact of the shutdown on auto production will depend on when production restarts and, “probably more importantly, how soon and quickly people will in numbers return to dealerships and buy parts, and that’s a big unknown,” said Rose.
About 60 percent of Worthington’s steel processing business, including joint ventures, is automotive, said CFO Joseph Hayek. “March has for the first three and a half weeks been okay,” said Hayek, “but the declines and the demand drop-offs are here.”
So far, there hasn’t been any scaling down of business for Worthington and Rose is hoping for a V-shaped recovery that will allow business to bounce back, possibly in May.
“But we absolutely want to be prepared for a bunch of different scenarios, one of which would be this thing bounces back pretty hard and we’re ready for that. We want to be able to serve our customers,” said Rose. “We also have mitigation plans for different scenarios where it’s not as good. But we’re going to take a measured and slow approach to anything in terms of scaling down our business.”
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