Worthington Steel flags interest rates, outlines debt reduction plans

Call commentary  

On the call, an analyst asked the executives to elaborate on prepared remarks, during which Worthington highlighted broader market factors, like interest rates, as headwinds. He asked about general inflationary factors and if any projects had been paused or canceled.

Geoff Gilmore, Worthington’s CEO, president, and director, said the company had no knowledge of cancellations.  

“Definitely because of rising steel costs or other inflation, it’s just the pressure of higher interest rates has become that much more. We start to feel a bit more optimistic about construction in the second half, probably the later second half,” he said. 

Gilmore continued, “But that’s really going to come with lower interest rates and then just getting past all the uncertainty with the geopolitical issues and inflation, tariffs. Until we get more clarity there, I think projects will continue to sit on the sidelines outside of data centers.”  

In addition, the callers discussed the company’s $150 million in “EBITDA synergies” in its merger with Kloeckner & Co.  

“We’re going to stick with the $150 million EBITDA synergies. We also had said we think there’s another $150 million of working capital opportunities as well. I would split that 50-50 year one and year two. That’s what we’ve said publicly,” Gillmore said. 

He reiterated the debt reduction strategy he foresees in the next two years. 

“We are highly confident in our ability to achieve this as well as cutting the debt in half within the same time period,” he said.  

Background

Worthington and Kloeckner Metals signed a formal agreement in January, allowing Worthington to move forward with the acquisition of the Düsseldorf, Germany-based metal distributor.

At the end of March, Worthington said it had exceeded the share threshold for the deal to proceed.

On June 3, the company said it completed its acquisition of Kloeckner & Co. after fulfilling all closing conditions.