Worthington Reports Fourth Quarter Fiscal 2023 Results

Worthington Industries, Inc. (“Worthington”) reported net sales of $1.2 billion and net earnings of $129.9 million, or $2.61 per diluted share, for its fiscal 2023 fourth quarter ended May 31, 2023. In the fourth quarter of fiscal 2022, the Company reported net sales of $1.5 billion and net earnings of $80.3 million, or $1.61 per diluted share.

“We finished our fiscal year on a strong note delivering record earnings per share in the fourth quarter, led by an exceptional performance in our Steel Processing business,” said Andy Rose, President and CEO.  “Demand for most of our key end markets remained healthy with all business segments delivering solid cash flows and earnings despite some pockets of market softness.  I am very pleased with the way our teams have executed this year, and I want to thank all of our employees for their dedication and hard work as they continue to focus on improving and growing the Company while executing on our Worthington 2024 plan.”

Consolidated Quarterly Results

Net sales for the fourth quarter of fiscal 2023 were $1.2 billion, a decrease of $291.4 million, or 19%, from the comparable prior year quarter. The decrease was driven primarily by lower average selling prices in the Steel Processing business and to a lesser extent lower overall volumes.

Gross margin increased $76.6 million over the prior year quarter to $244.4 million, on higher direct spreads in Steel Processing which were partially offset by the impact of lower overall volumes. Direct spreads in Steel Processing benefitted from an estimated $74.9 million favorable swing from inventory holding losses in the prior year quarter to inventory holding gains in the current quarter.

Operating income was up $57.2 million over the prior year quarter to $122.6 million despite a $12.6 million headwind resulting from the combination of higher impairment and restructuring charges and incremental costs associated with the planned separation of the Company’s Steel Processing business (Worthington 2024). Excluding these items, operating income was up $69.7 million as the increase in gross margin was partially offset by higher SG&A expense, which was up $6.9 million due primarily to the net impact of acquisitions and divestitures as well as higher wages and benefits driven by continued inflationary pressures.

Net interest expense was $4.5 million in the current quarter, down $3.7 million from the prior year quarter due to higher interest income, and to a lesser extent, the impact of lower average debt levels associated with short-term borrowings.

Equity income from unconsolidated joint ventures increased $2.5 million over the prior year quarter as improvements at WAVE and ClarkDietrich were partially offset by lower equity income attributable to Serviacero and Artiflex, the latter which was divested in August 2022.

Income tax expense was $40.5 million in the current quarter compared to $25.0 million in the prior year quarter. The increase was driven by higher pre-tax earnings. Tax expense in the current quarter reflects an annual effective rate of 22.9% compared to 23.3% in the prior year.

Balance Sheet

Total debt was $692.8 million at quarter-end, down $51.8 million from May 31, 2022, on lower short-term borrowings. The Company ended fiscal 2023 with $454.9 million of cash, up $420.5 million over the prior fiscal year end on lower working capital levels, which were down $152.8 million primarily due to lower average steel prices, and higher dividends from unconsolidated joint ventures, which were up $140.8 million over fiscal 2022.

Quarterly Segment Results

Steel Processing’s net sales totaled $860.1 million, down $259.7 million, from the prior year quarter, driven by lower average direct selling prices and a slight decline in overall volume. Adjusted EBIT was up $79.7 million over the prior year quarter to $96.2 million due to a $76.5 million increase in operating income, which was partially offset by a decrease of $2.7 million in equity income attributable to Serviacero. Operating income in the current quarter was negatively impacted by a $1.8 million non-cash impairment charge, unfavorable by $4.1 million to the net restructuring gain included in the prior year quarter. Excluding these items, operating income was up $80.5 million, driven primarily by higher direct spreads, which benefitted from an estimated $74.9 million favorable swing from inventory holding losses of $42.3 million in the prior year quarter compared to inventory holding gains of $32.6 million in the current year quarter. The mix of direct versus toll tons processed was 57% to 43% in the current quarter, compared to 56% to 44% in the prior year quarter.

Consumer Products’ net sales totaled $181.2 million, down 3%, or $5.0 million, from the prior year quarter due to lower volume, partially offset by contributions from Level5® Tools, LLC following its acquisition on June 1, 2022. Adjusted EBIT was down $3.8 million in the current quarter to $25.7 million, on the unfavorable impact of lower volumes and higher SG&A expense.

Building Products’ net sales totaled $142.2 million, down 18%, or $30.8 million, from the prior year quarter, as the impact of lower volume more than offset a favorable shift in product mix. Adjusted EBIT decreased $4.4 million from the prior year quarter to $59.2 million as the combination of lower volume and higher manufacturing expenses drove a $10.2 million decrease in operating income, which was partially offset by a $6.0 million increase in equity income. Equity income for the current quarter totaled $49.6 million, with equity income attributable to WAVE and ClarkDietrich increasing $3.5 million and $2.5 million, respectively, compared to the prior year quarter.

Sustainable Energy Solutions’ net sales totaled $45.4 million, up 9.9%, or $4.1 million, from the prior year quarter, primarily due to higher average selling prices, partially offset by an unfavorable change in product mix. Adjusted EBIT was $2.6 million, favorable by $4.3 million compared to the loss in the prior year quarter, as higher average selling prices drove margin improvements despite continued inflationary pressure.

Worthington 2024

On September 29, 2022, the Company announced that its Board of Directors approved a plan to pursue a separation of the Company’s Steel Processing business which it expects to complete by early 2024. This plan is referred to as “Worthington 2024.” Worthington 2024 will result in two independent, publicly traded companies that are more specialized and fit-for-purpose, with enhanced prospects for growth and value creation. Worthington plans to effect the separation via a distribution of stock of the Steel Processing business, which is intended to be tax-free to shareholders for U.S. federal income tax purposes. A dedicated area of the Company’s website has been established with more information and will be regularly updated as new details become available at www.WorthingtonIndustries.com/W24.

Recent Developments

On June 28, 2023, Worthington’s Board of Directors declared a quarterly dividend of $0.32 per share payable on September 29, 2023, to shareholders of record on September 15, 2023, a 3% increase or $0.01 per share.

Outlook

“We are very well positioned heading into our new fiscal year.  We have solid growth strategies and a strong balance sheet, both of which create opportunities for us regardless of economic conditions,” Rose said.  “We continue to make good progress on our Worthington 2024 plan, which will create two, distinct market leading companies that will generate long-term value for our shareholders, and we remain on-track to complete the separation by early calendar 2024.”

For the full fourth quarter results, click here.

About Worthington Industries

Worthington Industries (NYSE:WOR) is a leading industrial manufacturing company pursuing its vision to be the transformative partner to its customers, a positive force for its communities and earn exceptional returns for its shareholders. For over six decades, the Company has been delivering innovative solutions to customers spanning industries such as automotive, energy, retail and construction. Worthington is North America’s premier value-added steel processor and producer of laser welded solutions and electrical steel laminations that provide lightweighting, safety critical and emission reducing components to the mobility market. Through on-board fueling systems and gas containment solutions, Worthington serves the growing global hydrogen ecosystem. The Company’s focus on innovation and manufacturing expertise extends to market-leading consumer products in tools, outdoor living and celebrations categories, sold under brand names, Coleman®, Bernzomatic®, Balloon Time®, Mag Torch®, Well-X-Trol®, General®, Garden-Weasel®, Pactool International®, Hawkeye™ and Level5®; as well as market leading building products, including water systems, heating & cooling solutions, architectural and acoustical grid ceilings and metal framing and accessories. Headquartered in Columbus, Ohio, Worthington operates 52 facilities in 15 states and nine countries, sells into over 90 countries and employs approximately 9,000 people. Founded in 1955, the Company follows a people-first philosophy with earning money for its shareholders as its first corporate goal. Relentlessly finding new ways to drive progress and transform, Worthington is committed to providing better solutions for customers and bettering the communities where it operates by reducing waste, supporting community-based non-profits and developing the next generations of makers.

Contact:

Sonya L. Higginbotham – Vice President, Corporate Communications & Brand Management – sonya.higginbotham@worthingtonindustries.com – (614) 438-7391

Source: Worthington Industries, Inc.