Worthington Steel (WS) Q1 2025 earnings summary

Executive summary

• Q1 FY2025 net sales were $834.0 million, down 8% year-over-year, with net earnings attributable to controlling interest of $28.4 million, a 51% decrease from the prior year, driven by lower steel prices, reduced volumes, and inventory holding losses.

• Adjusted EBIT was $39.4 million, down from $80.5 million, reflecting lower gross margin, reduced equity income, and higher SG&A costs post-separation.

• Gross margin declined to $100.4 million (12.0% of net sales), mainly due to unfavorable direct spreads and inventory holding losses.

• Investments in electrical steel, strategic CapEx, and capacity expansions in Mexico and Canada remain on track, supporting margin-accretive growth.

• A quarterly dividend of $0.16 per share was declared, payable December 27, 2024.

Financial highlights

• Net sales: $834.0 million, down 8% year-over-year, driven by a 6% decrease in direct selling prices and a 4% decrease in direct tons.

• Net earnings attributable to controlling interest: $28.4 million, down from $58.5 million.

• Adjusted EBIT: $39.4 million, down from $80.5 million.

• Free cash flow for the quarter was $33.1 million, a turnaround from negative $38.0 million in the prior year quarter.

• Net debt stood at $86.2 million as of August 31, 2024.

Outlook and guidance

• Management expects continued inventory holding losses in Q2 FY2025, but at a lesser extent than Q1.

• Automotive market expected to remain flat at 15.6 million units for 2024, with normalization anticipated as delayed model launches resolve.

• Construction market demand is steady, with optimism for 2025 due to potential interest rate cuts.

• Anticipated upward pressure on steel prices from recent North American fair trade initiatives.

• The company believes it has adequate liquidity and access to capital to fund operations and strategic initiatives for at least the next 12 months.