SMU Data and Models
Worthington Building Cash Ahead of Separation
December 21, 2022
Worthington Industries is building cash to strengthen its balance sheet as it prepares to move its Steel Processing segment into a separate business.
The Columbus, Ohio-based company said it had had $129.6 million of cash at the end of its fiscal second 2023 quarter ended Nov. 30, an increase of $95.1 million from May 31, 2022, according to earnings released Dec. 20.
Andy Rose, Worthington president and CEO, said the cash buildup was so both companies have financial flexibility to maximize their potential.
“We do not anticipate any material changes to our modest leverage and ample liquidity mindset for both companies,” Rose said in an earnings call Wednesday, Dec. 21.
In September, the company announced its plan to separate into two publicly traded companies. The Steel Processing segment will be called Worthington Steel, while the Consumer Products, Building Products and Sustainable Energy Solutions will be rolled into “New Worthington.”
Despite a challenging quarter that saw its Steel Processing segment swing to a loss compared with the same time last year, Rose was optimistic regarding the separation into Worthington Steel, expected to be complete by early calendar 2024.
“With higher margins and lower asset intensity, this business should benefit from premium sector multiples,” Rose said.
“Worthington Steel is and will continue to be a best-in-class steel processor with excellent growth opportunities in automotive light-weighting and electrical steel laminations, positioned to take advantage of fast-growing trends in electrification, sustainability and infrastructure spending,” he continued.
However, Geoff Gilmore, chief operating officer of Worthington Industries, and future CEO of Worthington Steel, explained the headwinds the company faced in its second fiscal 2023 quarter ended Nov. 30.
In Steel Processing, net sales of $842 million were down 10% from $938 million in Q2 of last year, “primarily due to lower average selling prices and lower volumes, which were partially offset by the inclusion of the Tempel Steel acquisition,” Gilmore said during the call.
Worthington completed its acquisition of Tempel Steel Co. in late 2021 for approximately $255 million. Tempel is a global manufacturer of precision motor and transformer laminations for the electrical steel market with five locations in Chicago, Canada, China, India, and Mexico.
“It’s been one year since we purchased Tempel Steel, and it continues to prove to be an excellent addition to our steel processing business,” Gilmore said.
He added that the Tempel buy is helping Worthington meet the growing demand for increased electrification in many of its markets.
During the quarter, though, Gilmore saw a mixed demand profile.
“From a demand perspective, we continue to see stability and signs of growth in automotive, but did experience some weakness in our construction end market demand, which has been impacted by the slowdown in both residential and non-residential construction,” Gilmore said.
The company reported an adjusted earnings before interest and tax (EBIT) loss of $17 million in its second quarter vs. a $72-million gain in the prior year quarter.
Additionally, Joe Hayek, Worthington’s CFO, said the company incurred pre-tax expenses of $9 million, or 14 cents a share, related to the planned separation of the steel processing business.
“We will quantify those costs each quarter going forward until the contemplated separation is complete,” Hayek said.
Looking forward, Gilmore said, “Though steel prices have stabilized because of lag in price indices, we anticipate we will see moderate inventory holding losses in Q3, which could approximate or be slightly lower than the loss we reported in Q3 of fiscal year 2022, which was $25 million.”
Ethan Bernard, Ethan@SteelMarketUpdate.com
Latest in SMU Data and Models

SMU Survey: Buyers’ Sentiment tumbles as caution increases
SMU’s Buyers’ Sentiment Indices resumed their downward trend this week, erasing the modest recovery seen two weeks ago.

Service centers: Mill orders down further in April
SMU’s Mill Order Index (MOI) declined for a second straight month in April after repeated gains at the start of the year, according to our latest service center inventories data.

SMU Survey: Mill lead times edge lower
Sheet and plate lead times declined across the board this week, according to buyers responding to the latest SMU market survey. While our lead time ranges were unchanged compared to mid-April levels, average production times for each steel product we measure have declined from they were two weeks ago.

SMU Survey: Most buyers say price negotiations back on the table
Domestic mills are largely negotiable on spot prices, according to the majority of steel buyers responding to our latest market survey.

SMU Scrap Survey: Current, Future Sentiment Indices log declines
However, in a month plagued by tariff and economic uncertainty, both current and near-term outlooks for our scrap survey respondents remained surprisingly optimistic.