Worthington Steel, a leader in value-added metals processing, has announced its financial results for the first quarter of fiscal 2025, which concluded on August 31, 2024.
First Quarter Highlights (Comparisons to Q1 Fiscal 2024):
- Net Sales: $834.0 million, down 8% from $905.8 million.
- Operating Income: $43.4 million, compared to $69.7 million.
- Net Earnings: $28.4 million, a decrease from $58.5 million.
- Earnings Per Share: $0.56 per diluted share, compared to $1.19; adjusted net earnings per diluted share also at $0.56, down from $1.26.
- Adjusted EBIT: $39.4 million, compared to $80.5 million.
- Dividend Declaration: A quarterly dividend of $0.16 per share, payable on December 27, 2024, to shareholders of record on December 13, 2024.
Geoff Gilmore, president and CEO of Worthington Steel, stated, “The first quarter of fiscal year 2025 was solid for Worthington Steel despite some headwinds. Our teams are focused on serving our customers and managing the dynamics of our industry and the markets we serve. Demand remains stable, and we continue to deliver unique, custom, value-added solutions for our customers by transforming metals, providing lightweighting solutions, and supporting electrification.”
Financial Summary for Fiscal 2025 (in millions, except volume and per share amounts):
| Q1 2025 | Q1 2024 | |
|---|---|---|
| Volume (tons) | 994,093 | 1,023,545 |
| Net Sales | $834.0 | $905.8 |
| Operating Income | $43.4 | $69.7 |
| Net Earnings | $28.4 | $58.5 |
| Adjusted EBIT (Non-GAAP) | $39.4 | $80.5 |
| Equity in Net Income of Unconsolidated Affiliate | $1.3 | $9.0 |
| Earnings Per Diluted Share | $0.56 | $1.19 |
| Impairment of Long-Lived Assets per Share (after-tax) | – | $0.01 |
| Separation Costs per Share (after-tax) | – | $0.06 |
| Adjusted Net Earnings Per Diluted Share (Non-GAAP) | $0.56 | $1.26 |
The first quarter’s net sales totaled $834.0 million, reflecting an $71.8 million decrease, or 8%, from the previous year. This decline was primarily driven by a 6% drop in direct selling prices, alongside a 4% decrease in direct tons sold and a 2% decrease in toll tons sold. However, this was somewhat mitigated by a more favorable mix within toll tons sold, maintaining a direct-to-toll tons ratio of 56% to 44%.
Gross margin decreased by $28.1 million compared to the prior year quarter, totaling $100.4 million, largely due to lower direct spreads and volume. The direct spreads fell by $19.9 million, influenced by an unfavorable change from a $15.5 million inventory holding gain last year to an estimated $16.6 million inventory holding loss this quarter.
Operating income dropped by $26.3 million year-over-year to $43.4 million, affected by the gross margin decline and a $3.2 million rise in selling, general, and administrative (SG&A) expenses due to increased wage and benefit costs, along with the costs associated with operating as a stand-alone public company. The decline was partially offset by a $3.6 million decrease in expenses related to the Company’s separation from Worthington Enterprises, Inc. Additionally, there were no impairments of long-lived assets in this quarter, in contrast to $1.4 million recorded in the previous year.
The Company reported net earnings attributable to controlling interest of $28.4 million, or $0.56 per diluted share, compared to $58.5 million, or $1.19 per diluted share in the prior year. Adjusted net earnings attributable to controlling interest were also $28.4 million, or $0.56 per diluted share, down from $62.0 million, or $1.26 per diluted share last year, with prior year results excluding after-tax separation costs of $2.8 million and impairment of long-lived assets of $0.7 million.
Balance Sheet, Cash Flow, and Capital Allocation
As of August 31, 2024, the Company reported cash and cash equivalents of $36.0 million. During the first quarter of fiscal 2025, cash flow from operations was $54.6 million, a notable improvement from cash used in operations of $20.7 million in the prior year. Capital expenditures increased to $21.5 million from $17.3 million, largely due to ongoing strategic expansions of the Company’s electrical steel operations in Mexico and Canada. Free cash flow for the quarter was positive at $33.1 million, contrasting with a negative free cash flow of $38.0 million in the previous year.
At the end of the first quarter, the Company had $122.2 million in debt under its revolving credit facility and $36.0 million in cash and cash equivalents, resulting in a net debt position of $86.2 million.
The Board of Directors has declared a quarterly dividend of $0.16 per common share, scheduled for payment on December 27, 2024, to shareholders of record as of December 13, 2024.
