Worthington Industries recently completed its separation into two distinct companies: Worthington Steel and Worthington Enterprises. SMU sat down this week with Geoff Gilmore, president and CEO of Worthington Steel, to find out how the separation process went, and what’s on the horizon for the Columbus, Ohio-based company.
Looking at six or seven weeks out from Dec. 1, when the company first started trading publicly on the New York Stock Exchange, Gilmore was upbeat.
“So far, the transition has been quite seamless,” he told SMU. “We were very prepared for this, we had the right resources on this, and very good project planning.”
Recall that Worthington Steel specializes in carbon flat-rolled steel processing, electrical steel lamination, and tailor welding. Worthington Enterprises, in contrast, designs and manufactures building products, consumer products, and renewable energy products.
Gilmore said he was especially appreciative of the hard work of the Worthington Steel team to make that transition happen smoothly. “We’re excited about where we ended up,” he said, adding that there has been significant shareholder value created so far. “I really couldn’t be prouder.”
With the separation process behind Worthington Steel, Gilmore said the company would shift its focus to growth: “This is not the status quo.”
“Right now, we’re bullish on auto,” Gilmore said. He thinks the industry is poised for growth with the impact of Covid-era supply chain snarls and the United Auto Workers (UAW) union strike receding. Another growth area is the decarbonization of transportation, Gilmore said, citing increased interest in electric vehicles (EVs) and hybrids.
He noted that the company’s Tempel Steel subsidiary, which produces electrical steel laminations, is particularly well positioned to take advantage of this development. Also, Worthington Steel’s TWB Co., which makes tailor-welded blanks and provides light-weighting solutions, has opportunities in this area.
“Many thought this would be a straight-line growth curve, but we didn’t,” Gilmore said. He noted that widespread EV adoption has required a huge amount of innovation and capital as well as steep learning curves.
“It’s going to be bumpy. … But this appears to be the direction that the market is going,” he said. “As newer vehicles come out and more platforms come out, I think we’ll continue to see that technology adopted.”
Additionally, the move to more renewable energy sources over the next five years will provide opportunities for the company’s galvanized products, Gilmore said.
This renewable shift “with new energy sources, it’s that much more critical to have backup power,” he said. He added that the need for the company’s electrical steel laminations to go into transformer cores “is another exciting growth opportunity.”
“Our transformer customers have a two-year backlog right now,” Gilmore said.
A final area he mentioned was infrastructure. “You’re going to see more and more money spent on that over the next five years, and that’s very exciting for us,” he said. He also predicted that the next 12-18 months would see more infrastructure spending flow into the economy.
Outside of the US, Gilmore said Worthington Steel is mostly keeping a North American focus, with investments in both Mexico and Canada. However, he did highlight Worthington’s recent acquisition of a Voestalpine automotive facility in Germany to serve European customers. And M&A opportunities will continue to play a role in the company’s growth, he said.
“Our industry is very undervalued,” Gilmore said about the North American steel industry more broadly. He pointed to Cleveland-Cliffs’ initial offer of $7.3 billion for U.S. Steel this summer, and Nippon Steel’s offer of $14.1 billion in December to highlight how much untapped value there might be in the steel industry.
“I think the North American steel market is a really great place to play right now,” Gilmore said.
There has been some grumbling as to whether Nippon’s buy would be successful, with grievances filed by the United Steelworkers (USW) union, and an upcoming review by the Committee on Foreign Investment in the United States (CFIUS). Commenting on this, Gilmore said, “Purely speculation on my part, but I find it hard to believe this deal doesn’t go through.”
As far as the question of further consolidation in the steel industry, Gilmore said he wasn’t sure if there would be another deal soon on the magnitude of the U.S. Steel sale. However, he said there needs to be more consolidation across the service center sector. “And we certainly hope to be one of those consolidators over the next 5-10 years.”
Regarding Worthington Steel’s current relationship with Worthington Enterprises, Gilmore said: “We expect it will be a great relationship going forward. Obviously, we were one team for 70 years.”
However, he emphasized “the reality is that we are two separate companies, completely at arm’s length.” He didn’t foresee significant synergies going forward “other than that they will be a top-10 customer consistently.”
Ethan BernardRead more from Ethan Bernard
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