Steel Summit: Worthington Steel still seeking M&A opportunities post-Kloeckner

Worthington Steel completed its acquisition of Kloeckner in early June after signing a formal agreement in January. While the service center group is based in Germany, Gilmore has said it was the company’s presence in North America that Worthington Steel found particularly attractive.

In a wide-ranging conversation at Steel Summit, he talked about Worthington’s openness to further buys, the room for additional consolidation in the service center space, and current market conditions.

Future acquisitions?

Gilmore said Worthington Steel’s growth plan was never about getting bigger just for the sake of getting bigger, but was part of a very deliberate strategy: “Ultimately, what we wanted was to be the preeminent metal supplier in North America.”

And Worthington Steel “is 100% focused on high value-add processing,” he said.

When asked if Worthington Steel was still hunting for buys after Kloeckner, Gilmore was unequivocal.

“You’ll continue to see us look at medium(-sized) to larger acquisitions that might be more flat-rolled focused,” he said. “But now with Kloeckner, we also have the ability to pursue medium(-sized) to smaller bolt-ons in aluminum, stainless, downstream fabrication. It sets us up to go a couple different directions.”

More consolidation

Gilmore believes there is still plenty of room for consolidation in the service center space.

He cited Reliance as an example of a company with a successful acquisition strategy over a long period. “They’ve been doing this for two decades, three decades, and it’s been successful. They’re a great company,” he remarked.

Gilmore pointed out Reliance has been “well led, service hasn’t dropped, and they’ve been able to do well, and then continue to invest in maybe some of these smaller competitors that they’ve acquired.”

For service centers in general, he said there are still many opportunities for consolidation, even with the recent Ryerson-Olympic merger and the Worthington-Kloeckner deal.

“It’s still highly fragmented, and so I think you’re going to continue to see that accelerate. I don’t think it’s something to worry about,” he said.

With current market conditions and the big spike in steel prices over the past year, even more consolidation could be possible.

“That is very disruptive for smaller or even medium-sized service centers,” Gilmore said. “Though they do an excellent job in the marketplace and they have their niche, trying to double down and leverage and build any scale is very difficult, and I think that’s where we’re able to acquire and bring our transformation.”

A look at the markets

Gilmore said before the Kloeckner deal, over 50% of Worthington Steel’s business was automotive, “and that’s continued to be a bright spot for us.”

He noted automotive has been much more resilient than many had expected. “We’re still not close to pre-COVID levels, but it’s 15.4, 15.5 million units of production, which is solid.”

An area he said was surprising was energy. “We have seen more solar jobs than we probably had anticipated, and so we’ve been able to win some of those jobs. That’s been very strong for us.”

And he said electrical steel and the need for transformers are booming.

Though he pointed out farmers have been having a tough time, agriculture as a market has been “pretty decent as well” for Worthington.

“Fortunately, I think that’s in the trough right now, and we’re going to see rebounds into 2027,” he said.

What’s been disappointing?

“Construction has not been very exciting, though I think you have pockets,” Gilmore said. “Obviously, data centers, healthcare have been great, but we have not seen a return to what I would call normal in our order book there.”

He cited heavy truck and trailer manufacturing as being “very slow here the last couple of years. Hopefully, we’ll see a bit more of a rebound in 2027.”