Worthington Industries (WOR) 28 Sep 232024 Q1 Earnings call transcript

Good morning, and welcome to the Worthington Industries First Quarter Fiscal 2024 Earnings Conference Call. [Operator Instructions] This conference is being recorded at the request of Worthington Industries. If anyone objects, you may disconnect at this time.

I'd now like to introduce Marcus Rogier, Treasurer and Investor Relations Officer. Mr. begin. may you Rogier,

Executive Good Fiscal and our XXXX Andy and we Julianne. Chief Hayek, Industries Officer. Financial call to First have Chief President Worthington's Quarter Earnings Rose, and morning, you, Joe welcome Worthington's everyone, Worthington today, Officer, Thank Call. On

planned addition, have CFO and business the who we who become the Tim In Worthington is President Steel Vice complete Processing the we our separation. and Strategy Steel also of after of Corporate Adams, currently business Development for will

after Before the from we call uncertainties earnings actual market and like being it and factors are our refer I'd those to on yesterday suggested. website. Litigation Today's to remind more cause a that made on will today could made issued statements everyone statements differ materially. risks get started, Please the is that Securities release for that could differ are available meaning closed. Private detail These to later certain forward-looking those be XXXX our recorded, cause worthingtonindustries.com Act. replay within actual to Reform subject to the results of results We

I point, for discussion the the call will over a results. to quarterly Joe financial turn of this At

are our to related new Processing as a We now the following. business of expenses results, of were we Marcus, of as million There with a good the December complete company, a a few per the $X.XX you, incurred pretax Steel targeting items reporting which including We QX of XXXX. ago. fiscal early everyone. unique a public to $X.XX impacted $X started Thank and morning, planned year separation earnings quarter, $X.XX quarterly or our share into strong share year that versus

use or XXXX $X.XX of or per our pretax extinguishment The charges early restructuring a per million related our a as the called debt par. bonds. equipment strong $XXX Steel share in We Processing idle was at per off debt compared $X pretax charge to gain prior in took longer impairment resulted cash $X.XX million in share $X.XX noncash $X year. Recognized to of as no to using of pay million the balance advantage we in share that

quarter expenses In the ArtiFlex, by earn-out items, related to impacted an year a X. prior the of pension share was loss $X.XX to negatively settlement addition, several per on and charge a at including divestiture Level due

share per QX Excluding to items, per in these compared of in unique generated current share we year. last $X.XX earnings quarter $X.XX the of

we compared be QX, $X.XX gains share $XX holding $X.XX XXXX. a to QX per $X losses million or had holding In inventory estimated or addition, in million share in to inventory of

the combined Consolidated volumes segments. net average our of sales lower year due decreased in lower XX% with prior quarter prices $X.X of billion in Steel the Processing from most across selling to

gross for prior the year, quarter Our Processing. Steel gross $XXX to the in profit primarily from our improved to million increased increased and XX.X% spreads due in $XXX XX% from million margin

EBITDA is was million year, million capital million our sheet, adjusted primarily our With which we in in flows business. the on $XXX from our up now despite QX in EBITDA in $XXX $XXX achieved a quarter, of in $XX trailing was cash levels, last QX Steel working Adjusted $XX flow million. and to operations million, respect XX-month cash from balance increase

QX. in Free cash flow was $XX million

quarter, paid $XX the $XX in projects capital dividends. million and on invested million During we

equity income. $XX unconsolidated rate on received also million during cash our quarter, JVs from We XXX% that in a the conversion dividends

mentioned XX the that payoff sheet of bonds and funded our debt due I at earlier. $XXX of end at balance $XXX liquidity million sequentially position, quarter million down our Looking was to

average balances and debt $X due levels. interest on extent, lower to primarily down income our million, a Net we million earned was interest $X cash expense lesser of by to

the $XXX operate to We million under and we're was continue September on ample X.Xx. million in revolving in net positioned availability low with believe with extend of recently We to ratio cash our which credit for $XXX ending leverage trailing XXXX. with that and the facility, well remains leverage, extremely to to future debt EBITDA maturity liquidity, our QX amended

of ago. million, from spend the Products, each share million declared $X.XX We'll in In XX% a which $XXX business EBIT which Consumer last margin the higher Adjusted to $XX average were year result The minutes $X and Yesterday, XXXX. Board partially year. in was a and for on the favorable million net decrease and quarter, mix in of lower dividend EBIT QX of volumes, a million the X% QX, of down product Consumer per was few payable for was prices. XX% businesses. December selling $XXX was now is offset sales a adjusted by compared

number XX% of Consumers down due factors. was of earnings achieved quarter during QX the the as from last year volume suffered record a in to volumes

several seen in and caused weather destocking at air depressed summer's past seen additional have many moderate for customers. some smoky We've months demand quality Americans. this our hot also consumer activities We poor conditions by the outdoor

term. for team continues While execute the over for products Consumer and business, and quarter consumers value-added new to the well presented on delivering that our significant remains long headwinds laser-focused

driven quarter WAVE, XX% $XX to in QX normal QX, they was and million do to increase during XX% the $XX a for was The by more million adjusted While driven margin was will million $XX in we uncertainty generated compared from gradually The that from million of outlook prices. there million to combined Building related a of generated improve increased significant down is ago. and year-over-year volumes with anticipate XX% year last year. in quarter. by consumer record spending, decrease and volumes adjusted expect and EBIT net selling million average Products for $XXX $XXX patterns. the lower by sales seasonally return of equity earnings $X contributed Products Building margins EBIT adjusted higher to and EBIT lower the which

businesses, strong margin earnings ClarkDietrich, by from businesses margins offset wholly in higher gross equity million and the The an increase generated to but develop those partially of while focusing improvement quarter. The volumes the $X long-term as do earnings equity and innovative quarter. continue lower contributed lower income environment drove to WAVE in owned Despite which new Products operating Building million during $XX markets. our job continues on current they outstanding in with in to growth team in their the executing customers partner solutions was in

challenged. costs In sales loss of companies in positioned of impacted. of is only of economy will loss to million X% $X $X ecosystem QX Sustainable EBIT Solutions, reported this an results adjusted scale one were Solutions' million volumes to compressed a adjacent like with said, gas. lower our were from and primarily to to as sustainable remains in $X to net believe the current absorb million hydrogen and quickly quarter, in This handful unlikely the market That natural Sustainable Energy energies compares well too due and and until last million in then, the effectively expertise business $XX a of be the the QX of year, in year. globally develop or the as prior down the fixed simply Energy business. volumes SES Europe low We serve is

low recently to up to SES the navigate costs costs their action zero for set on driven The experienced, and the transition and demand by to That focus business as and team coming success. legacy and current the is with we're the environment long-term transportation. took we team aligning talented both confident ability our reduce and growth in market emission

Processing this over results. point, will Steel to it discuss At I who will turn Tim,

In of Joe. Steel year, last In steel of $XXX hot-rolled to year, approximately for from were in $X down due average selling lower per million of billion the market last QX averaged $XXX you, net Thank ton. XX% sales Processing, prices. QX price primarily

$XXX While primarily hot-rolled while market in Direct QX made sales selling tons mix of sales up with service XX% quarter. ton, compared down decrease in tons XX% tons year, shipped both total XXXX. for with shipped up XX% up and average centers. of a compared were to Direct in approximately mix increased our were in X%, mills tons volume the of X%, prior of to price our due Total resulting X% our per prices. QX the this were was

perspective, increases increases in to significant year-over-year due shipments, experienced a in we primarily automotive From automotive demand production.

decreases However, the growth both residential was year-over-year nonresidential in and in construction. our by offset automotive volume

increased In year income from of unconsolidated well year compared direct the as QX, the to reported from as spreads $XX to is of joint $X.X $XX prior our Steel EBIT Processing million, venture, was quarter. million million as Serviacero, as well in the incremental which equity an $XX due quarter. primarily This reported up prior million

of losses $XX estimated inventory had For compared inventory the year. holding quarter, million to million of holding estimated gains last we $X

August, ton X last XXXX, softened same noted over $XXX $XXX months of increased time As May that prices first approximately steel per through per period. the decreasing calendar ton quarter, but over in

the the of to we QX expect to holding gains in of gains losses in losses size anticipate QX holding XXXX. We in inventory and flip holding be will could inventory similar had QX those

quarter, of very had high business Steel The levels. teams and an excellent all first our at performed

in We several recognize QX, launching we that the automotive some confident meet negotiations may automotive for employees Detroit. teams in potentially the taking near-term great customers. challenge during will challenges impact in a but our did there place programs our new contract could are results Specifically, our job market any arising be

market time to challenges, when through our Similar needs potential to be schedules. we manage be very recent near-term customers' to disruptions Detroit in at prepared OEMs the the normal exciting build situation steel. other to will some Despite years, a meet it's and return

and and any Our experienced with will for teams dedication short-term teams ideas. work, their to and hard for I'm our their safety. they of are proud continued collaboration innovative challenge meet focused to continue commitment and

I turn over to At will this it Andy. point,

and Thank morning, good you, Tim, everyone.

nonrecurring best XXXX adjusted for results adjusting history our First in first fiscal after share per the restructuring quarter and second Our quarter items. were XX-year earnings

make lot our ensure level. perform a separation business high the putting people as to to our of continuing while hours in at all Processing of Steel have our a that success, businesses We extra

responsible continue Thank released America's companies Business on week, customers, they Investor the and named annual back most suppliers supporting of shareholders are the you Daily's Newsweek XXXX. to our sustainability report XXXX in and organization to Earlier XXX outstanding across we in ESG our fourth this who every being prove companies employees Best dedicated and day. to our

evolve to We continue approach of ESG profitably performance improving benefit to our our stakeholders. all and expand our to

in financially XXXX to key we strong milestones are growth end we separate distinct to in As track into XXXX. schedule plan close. on that ahead still lot on the of getting the report are work complete companies, of front separation before few pleased but we to of we a There is of and a X Worthington close our and are us,

working are for to and Our changes position both hard companies employees embrace continue to the coming success.

also both culture, our Enterprises. Worthington will for We to the Worthington branding of and X names unique and philosophy the businesses, in and businesses, which businesses. to the continue both and in keep Steel announced both prospects decided celebrate Worthington changed reflect growth but the names We names

Steel and Consumer Products of that market markets pay for Energy very significant facilities to available ensure develop businesses both electric and and Products, core electrical renew sheets plenty its capital, To has and down credit transformers. their to as and positions Worthington made we lives strong to its balance several steel out will begin grow higher-growth build moves new vehicles Building Worthington continue Sustainable opportunities Solutions. debt. with market-leading such in Enterprises

the remained also are businesses business and allocation position Worthington our Once both drive of complete, the balanced Both capital with and value. shareholder Rule be separation historical to utilize Our and strong system Golden will run acquisitions strategy to at with likely businesses. is our transformation, $XXX million. philosophy and principles continue growth innovation in cash we also

an excited both We for York that City, enterprises a.m. and X:XX Worthington XX hosting will Investor be Worthington Steel at at in October are on announce New p.m. we X:XX Day to

for growth forward looking are exciting to embark on strategies. independent the showcasing own of these they prospects both We their companies as

coming to continue shared Steel employees, for we continued suppliers, as and stakeholders, other in we thank the and look To Worthington all Worthington years as months success Enterprises. shareholders customers, forward partnership, you our and of and your

We will now take any questions.

Our [Operator from Katja question comes Markets. first Instructions] BMO from Jancic Capital

there minimize current the seeing Can Specifically, about there steps or impact can what are is the any and anything market potentially strike you're to impact? take you talk you more environment? a the little bit from auto

Tim. for Thanks It's the question. Katja,

front the So yes, obviously, is us. situation for center and

us. strike, to impact opportunities little there been it's We but of seen we've scope the far, strike short also So there's period the risk been business has actually and given is limited, of with our a recognize for the associated time. that

strike if So expands, slowdown. will the facilities that address our volume have playbooks

align the point these playbooks shareholders. the as way to the want is, So Rule right strike about things you expect, our philosophy employees out for things would our I Worthington us the But of for and going doing customers, our Golden and are with as opportunities one the the are well. to

do position a history great a job of rebound. markets business win when to ourselves So new our shows we recent in putting

customers helping which that tough when Our chain through suppliers but commercial and them Customers do parts helping on. occur teams an turns navigate stops, chain supply job our moving the the best a that supply when did suddenly remember absolutely excellent these importantly, chain situations. suddenly more then job all supply back navigate

you giving expect that, Consumer and just then these And Okay. that on will margins you the that volumes gradually improve from happen. What's segment, you to levels. confidence mentioned Products

demand right? just the or seen things this summer, were much as spend trip. on the didn't moderation we've that camping that backyard of whether was in that Katja, little believe, Some that is people outside, time episodic, their a happening We

And that to think so lot the of more gas consumer demand we softening really camping sort was is our segment. have in of a going

we get typically, respond. said, just to some this have that seasonally return that but season. we into headwinds continuing for volumes will that will people do with being the Consumer so We you probably winter seen because And think expect patterns normal And absolutely have movie before. QX the business,

cost Our products $X,XXX. don't

outdoor some category. And You throughout certainly to don't and credit the equity line we've a of throughout home seen what report we retail need have. softness

immune kind to normal of some and returning So 'XX, patterns. but 'XX those late we much we're is things, better and some our proposition awfully of value heading believe we into good the about more to feel volumes not early

inventory little a as hangover. as this having inventory as storm was destocking perfect may be fires, a and extra big-box summer, bit a retailers hot consumers This of well of the little bad COVID weather

coming So normal levels that's more in confident months. we return why to the that feel things will

Our from next Englert Partners. Research Martin question Seaport comes from

I there a and underlying I relative on But XX% key about quarter, right drove at a mean, think into know were it this sequential it to on far was that XX%. volumes the on surprised. at profitability. mid-teen sequential was to that out seemed as fixed the EBITDA really driver change touch as a a also there volumes there. there, -- I then And I driver wanted on as drove there you looking basis. you products a quarter margins looking and the costs. margins below like volumes I at drop consumer I called way it and Q, bit Is the like of think, little what -- on I just expecting least last sequential key volumes was the the to year-on-year read

you're think I Martin. Yes, exactly right,

It's excluding calls back head, losses, historical in holding like inventory Processing profitability, better EBITDA a in maybe mentioned being my that Got structural than this thoughts think, that including several it Any But and typically forward bit kept be of Okay. ton. yet to or the is underlying Steel a it. quarters, this is in Underlying necessarily per on I the been recent not going and quarter. of determined. this, -- I've in shift $XX past. $XX, gains something

losses. and target is taking holding -- ton about the it Martin, because you're the thinking difficult the right the dollar per But gains including a factors, mix. by inventory out specific a number to us of I way of think for fairly

out inventory right onetime, the about to and it I items onetime the thinking it. think about you're think holding way of So way pulling gains is

with that highlighting get discuss we in Maybe else changing. mix might get toll. sustain? you been positive the know we could that's that versus anything that rush presented the But worth I isn't maybe else on that's mix a Anything here there. can some the release on shift idea like going

going a to I that think and of of business business. in terms grow, there, think investing that's we right, electrical that's business, steel in it continue we're to the

impact will going profitability a forward. our So that positive have on

happen So over that I think will time.

are outsourced I bit the other tolling an around customers. tolling, bounces mills we for think little because often a with and

So to that little difficult more a one predict. is

an example, in this our increase and to mostly we had in due tolling pickling increase facility. tolling an quarter at in Northeast For was Ohio that

one tolling long little down. the the that in But our is, more bit term, difficult see again, So you we a pin is in invest business, steel increase. to as electrical should margins

you to how Also, compare just kind the [indiscernible] how profitability. today? of And kind and WAVE of that of date bit XQ does expected. seen was year-on-year? that What fiscal are that referencing period? year-ago And what to window, you've a the I'm kind compares seeing

in as WAVE repair QX where for volumes Martin, and mentioned, from up about Well, X/X remodel. they're slightly you of they Yes. were last Keep year. that I in QX, think in mind were

so certainly some or WAVE. XX% but XX% pretty stability. starting low And not environment a for flattish. Those see you're at are or per good And to they're reasonable that's digit end single year, markets growing

able how your innovative highest Honestly, think WAVE lot and to of an how and if put you're to cost pain reason has your floors do historically to how cost job really their products install make jobs ceilings, of them that the customers they highest up is efficient. grow has how done not materials, people terrific trying absolutely about labor and need do your points and of their is a think understanding more to your acoustical they're speed of XX about with the to are their

good really And a of they're so goodness really to and of to seeing have that way I that reflection show the margins. in able some up some think you're -- continue just perform

Phil KeyBanc. Our next question from comes Gibbs from

WAVE as do some but XX we seasons. volatility exactly portfolio not I'm joint last and across fall to clear a is lot of winter are So because months. the we had relates enter have big as results in in doing the seasonality spreads you've venture the the piece, it portfolio totality, what obviously, the a And probably over

So Is factor? next to seasonality a that as joint as relates the how do at bigger Trying it bucket. or the about we they we about venture everything think factors? spreads bucket quarters. look think couple to both Are of bigger factor just a

about WAVE, way the Products, Products, They're certainly we've So the I to a Building ClarkDietrich, about of little within They're substantial within X/X-ish expect or think just Tim Don't we is. portfolio talked other. speak can WAVE anything in But than that's with X JV the I JV bit talked portfolio specifically, steel. think construction. a different Building new that. mix this.

so headwinds related somebody versus And market that more to and who's they're some repair focused. their maintenance, remodel to seeing exposure

year And so be ClarkDietrich we've business year-over-year talked great team. they quarters do for about that they down phenomenal a next than this. off had a coming But is great expect 'XX. fiscal our will more of likely We in a and the several

And the Tim, side? steel on then,

the Mexico think JV in I Yes, unconsolidated Serviacero Worthington.

going are to but we is the that to far-reaching they see same well, extent strike not automotive them going U.S., similar maybe potentially as think do to can effects. have impact the headwinds impact, I because and in it right,

toll other lot of a there's I -- ventures, those of are there Those in as think processing. well. X our joint automotive

Worthington well. or Tailor And is we there as is So specialty refer coil Spartan and XXX% Processing. it Welded processing WSP then automotive. have Blanks operation TWB, how automotive a usually. in of Those lot to Worthington Samuel

the we'll goes, So North I American go ventures joint steel. on the how think dictate for it how really depends strike

of I in some You'll of normalization the have of strike still in irrespective would businesses, right? spreads those happening, imagine, though that the the metal kind

toll processing, tolling has directed Spartan in book of processing, lot is pretty is TWB and WSP by. a is order a toll that decent-sized

then high they will But Serviacero, metal So there large And they're exposed there. the changes. impact a book. and have order is at no toll direct, they processing also fairly and really to do margin be metal margin so

next from Tumazos Independent Our Instructions] [Operator John Research. from Tumazos question Very John comes

In new frieght dynamics, ship XXXX tons X, than steel there's to Congratulations U.S. each million of new core year, on the steel X capacity results. core, on again. coming great

tons going November, December 'XX less XXXX, to has X this or from X which absorb apparent looks be X While 'XX, lows, years. demand year tons steel like to pre-pandemic, rebounded about million for million the it demand average a the than year's doesn't is help

or differently you out How $X,XXX soon. you you prior to hold deliberately suppliers going new ton these disappear? of $X,XXX we of access don't going Do anytime anticipate your Steel to are that managing your inventories may lower see are mills? suppliers to concern And a ton Processing are that some -- a

of lot in a packed there's So questions there.

would tons, all to as keep drive of inventory even are say trying becomes I just recognize possible that our steel that volatile, when we the we money. price And stand-alone. and right, right? terms tons We as because at down in deliberately So of those low want more to important always we're is it's sleeping times,

participate I that is think sheet capacity What terms and we online. of coming the -- those market, plate we would in will envision the in don't use market, new I we but say in mills.

We welcome and worried to not going already potential are will to great, access to away. those I'm don't try suppliers about not We think capacity. it's we customers mills worried new have. we we the gain any use or

located to. down haven't attempt So traditionally in access had we after if go business are mills that's there Southern Texas, that to we those will

might reflect and activity, down and asked another slowdown, fall down. heroes? the if only last quarters autos you ask were consumer. Concerning was containerboard the XX% other or X%, shrank that same you'd sector a market, X it's half but market, can the question differently. About is but being steel. of under It's or drugstores containerboard it unusual or Is the supermarkets XX% words, poor question be a goes more systemically very say greater pressure. I little historically is earlier, but in fair consumer than to XX%. outdoor down In the manufacturing or steel that historically, than unlike containerboard market bit the consumer to a for In stable to

down XX% year a from in think, that's mind, I ago. record XX%. John, So down volumes Keep

other yes, is Andy storm. that seen, and tough it that seen in and down of from absolutely was a folks down. the were particular, to outdoor the compare. category, have from you've goods spending summer in this But referred exactly sporting It in participate right. perfect bit So we activities

things a for also so we was year, did comp of created QX for we tough One us the ourselves. well last really that in of

doing anything costs you to mortgage Are being of cut in for consumer XX-year X% the in And view are mortgages. rates everywhere. strapped almost today consumer segment the

Every and and Yes. single as every regardless we well them our are better, continuous playbook want as get using our conditions, to, single market transformation John, going day, not of things improvement try are mindset to when but we just day.

over have further like no closing call any in Andy for to Rose would We the questions to remarks. turn queue. I back

Thanks, everyone, today. for joining us

are on at Day City. you excited and our to XX about to everybody. October forward New York super our future look Investor Thanks, We speaking in

today's for Thank concludes your call. This you conference participation.

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