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Worthington Building Cash Ahead of Separation

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,

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