Worthington Steel (WS) 27 Jun 242024 Q4 Earnings call transcript

Thank you for standing by. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Worthington Steel's Fourth Quarter 2024 Earnings Conference Call.

[Operator Instructions] I will now like to turn the conference over to Melissa Dykstra, Vice President of Communications and Investor Relations. Melissa, you may begin.

operator. you, Thank welcome XXXX and Steel's Quarter Fourth Good Call. to Year Earnings Fiscal morning, Worthington On we Executive call Vice Chief Chief our today, Officer; President Executive President Worthington Operating Officer. Officer; and and Steel's Chief Jeff Tim Klingler, and Vice Financial and have President Adams, Geoff Gilmore,

uncertainties to to started, Act. could XXXX statements Private suggested. that Litigation that Reform made risks meaning today to Before we those note the the get are statements of subject are These and I'd like results from actual certain forward-looking within cause Securities differ

yesterday We issued that our the materially. Please earnings more differ those to release refer for to factors detail results on after it closed. actual cause could market

adjust which items results for our GAAP as presented are in certain reference noted, Unless today's which discussion included and reported, a will stand-alone on basis. measures, non-GAAP financial

each GAAP find measure can non-GAAP You release. non-GAAP of earnings within reconciliations definitions our and to

being today be recorded, will and replay Today's worthingtonsteel.com. call on is a later available made

Now call I'd over like Gilmore. to to Geoff turn the

Melissa, who a to strong. solid fiscal today's XXXX in Worthington at QX joining everyone We results Steel. year is thanks morning here is and good It finished call. Thanks, and saw

to steel Our growth. people Worthington our continue a unique that performance is processor and Steel significant for poised demonstrate

to electrical industry. value-added and steel Our products customers ability unique processing, deliver our to solutions laminations steel welded flat-rolled our to is and tailor

differentiating, positioning serve. maintain to distinctive we processes to our positioning are is us continue truly goal gain offering the Our leadership by and areas in that

value positioned strategic ensure and believe our company, and help strategy for we strategy XXXX, through full our strong shareholder returns stand-alone as grow on first shareholders. year differentiation are executing our remain As fiscal driving and our we well deliver M&A. growth organic year to we enter We a and focused

deal have know just achieved X but to have great a much Worthington as we Steel, We months accomplish. in we

investments to improvement through accretive everything of execute is With faster selective continuous do, margin growing and electrical capital add to steel work market, CapEx will our transformation, working which in we focused margins, and our reduce capacity. increase growth in the Worthington disciplined the business strategy growing we GDP, and acquisitions of system system rapidly than embedded

focus, our created organizational processing America partners and one driving of status enhanced is metals most North accountability innovative value-added leadership and the beyond. alignment by and separation, and vision Our the trusted, most around most in as

Essential H. marking as month, order leader Day, a to continuing Founder's steel. our this market McConnell's strong John Earlier is celebrated culture. first we of

XXth and Mac year the embodied [ at is Mr. Worthington ] we look XXXX, in to philosophy our Boise alive As well here Steel.

treat continue be we investors our We to treated. as like and to would suppliers employees, customers,

workplace in culture Ohio evident We Examples to Columbus, row. is our more top me. philosophy even that an This of award this the winning our for our and in several named in award-winning of a on are our milestones so special we employees, makes quarter. were feedback year from city headquarter XXth achieved action a based in

the by named the Coil metals venture Industries of Year industry. Cleveland Metals in XXXX Women the of growth the Processing Worthington supporting Samuel was advancement Chapter Cleveland the Our for joint in women and of of Company Association for

by a business. the of XXth a That distinction. last honors we XXXX time we proactive, General supplier value as April, earned In This who Deere were John X Partner-level were of month, Motors. Supplier of named for years this recognized same customers consecutive Both Year way year. from are doing third Worthington the solution-focused the in we've is Steel's these longtime the

thank to us who to our support pay customers, every Steel's value, vision. I'd off. and helping to and help recognize live our philosophy dedication single employees Our create Worthington continues like our X,XXX customers achieve day our

and made we've progress the of about in the excited front opportunities am us. I

We our with customers our to suppliers. and on advance continue partnership to through commitment industry our deliver

help be a culture the best and steel us continue the great generating time to in We return team It processing. for right have to is our a shareholders.

needs demand and products the for grow the continue to offer we will ever more customer As unique, expand. services

I'll over to to our comment now turn things operations. Jeff on Klingler

Thanks, good everyone. morning, Geoff, and

mentioned, quarter, Geoff we As multiple good by had public from a accolades highlighted groups.

Our customers to on a direct ability our focus to serve correlation has our safety.

start year I'd employees our XXXX. saw fiscal by off we congratulating in like improvements on the to

in While our has XXXX, ultimate team saw what zero I'm and proud year recordable injuries is fiscal reduction we a in the accomplished. goal incidents, XX% of

philosophy. clear Our best-in-class First our safety reflection record and programs People that a record of are that drive

As a the we saw largest start we end in X our what for the operational look quarter, with let's overview at look at markets.

of automotive ] units [ Sales believe North as American than next fourth ] the more market XX as for of of fiscal pre-COVID up quarter fiscal same year. solid XXXX. made The we the sales, us, XXXX market vehicle fourth automotive calendar XX% to the year million [ could early and remains return levels quarter as production year to light

continues as anticipate Our more hybrid to and the EV OEM customers growth adoption grow. plug-in in market

in electrical capitalize opportunity. will Our Mexico facility this our steel capital on investments to allow us

market of remains market experienced industry the is modest construction In markets. increase The we market. fourth construction of and XXXX, our the the sales, we and quarter culvert serve. In where in construction year fiscal a building XXXX second strength metal when fiscal the construction made the submarkets quarter market fencing, diverse of participate, the large was over year sales. only reflecting up largest XX% The we fourth of XX% a

to electrical of capital presses arrived on X budget. new projects in Mexico operational X during our to steel to steel at and facility our electrical Turning highlights QX. the for quarter, track the continue be on large related

of near to future. first installation and the and we'll the the finalizing are third attention our We second turn presses in press, the

with We also our for respect progress to efforts new business programs. are electrical commercial to win good making vehicle

volumes OEM when secured will programs for enough are we installed, will to expected presses running orders customers where X production-level have produce [ move our phase, fall for fill the in the of next we Once the XXXX. production. the X of We at trial and ] the orders full presses are to prepare initial

electrical from Canada standpoint. also project steel Our progressing a commercial well expansion is

We transformer have in new to backlog new been book. to the look order their fill XX% close of the as capacity business enough awarded customers

Canada remains on expect Our to of be operational expansion track, and year end we the the by XXXX. facility calendar

more about will rails, include talked I This licensed door our quarter, cross applications, process for pillars, car automotive tailor-welded rings. business. beams Last our us ablation technology newly allow many to and blanks

the for pleased market interest In fact, we we believe already in it existing us by receiving share customer orders. blank new products are and XX%. opportunities I'm and welded opens to up about

steel in be relates reception to Nagold, to continue with large well our customers Germany. facility We projects, our pleased from the as as our newest electrical it as

enthusiastic X customers and of our list grow. are about Our projects, continues potential commercial all opportunities to

transformation use continuous and plants apply improve improvement. we our scrap overall and in inventory the transformation, systematically to we our Alongside this, as performance. to enhance productivity look We system of continue our safety, reduce and

Our transformation projects year working to facilities on improve are optimize each multiple and our efficiencies. processes

flow process, cycle found days transformation the X In to by a a recent work by our At goods example, improved finished facilities, supplier of customer. our work has the this way from in to and improved streamline reduced cycle largest times one process X teams times material days.

and a for safer our environment a This creates workflow employees. organized more

customers make with. capital, us even do to it allow We respond and to quickly reduce also more working us will easier expect to business

our and We partners principles areas the perform functions. improve make to corporate better believe apply an will teams us our find are efficiencies transformation tools these always those line. to an safety. same we been using and and innovate, eye with continue towards that our bottom It's and to quarter, will We exceptional in

you at Steel the I'll call over turn Tim my Adams. and close to with to sincere comments a Worthington everyone thank

good Thank and morning, you, Jeff, everyone.

consolidated the Before like remind fourth quarter, compared some basis. results stand-alone provide year color prepared which are a basis I I the with was on a on quarter, a that to carve-out current everyone prior-year on quarter would

strong million million as per or per fiscal quarter prior-year $XX.X fourth or $X.XX the quarter of with finished share. earnings quarter, earnings We with our a $XX.X of $X.XX reporting share compared year

and prior-year equipment. per share quarter unique idled million pretax or $X.X $X.X several $X.XX included of or The expense pretax charge per including to related $X.XX a separation of share items, million impairment

items, share per current the the in compared in with earnings quarter generated we share $X.XX per these of $X.XX prior-year Excluding quarter.

holding In share pretax of gains addition, in of $X.X had $XX compared inventory or the of swing prior-year million and holding losses per unfavorable to $X.XX quarter fourth share share. per pretax $X.XX per million or estimated quarter, $X.XX in the inventory we pretax $XX.X estimated or million

was EBIT of primarily fourth $XX lower $XX.X which adjusted prior-year adjusted offset quarter. margin, gross spreads the $XX.X due from within processing. This in to including the million spreads, quarter, to the of reported was losses. material decrease EBIT the by down spreads In estimated million million, higher by impacted inventory due toll direct toll of was lower partially holding mix improved Lower pretax which direct impact the were an we

Additionally, $X.X was expense variance up due current-year higher not $X quarter, expense. in stand-alone swing compensation incentive expense compared bad and to year, in a debt quarter. is million expected debt we with the costs $X.X incremental to cost million bad prior benefits company, $XX.X SG&A In million primarily from being a associated debt the and associated matter of of with is reoccur. isolated income believe recognized the with bad We million the that an prior-year

preacquisition the final Tempel court net zero. ruling for unfavorable on which indemnified also the is we earnings to results of Fourth impact by matter, of quarter former related a included were tax Tempel. The owners recognition

$X.X miscellaneous indemnity However, we an recognized additional [ of ] $X.X million related the expense. receivable tax to income of and million

provide to and quarter. market past pricing will volatile over market the over steel Next, some the we on Similar our the year, experienced I was commentary shipments. what

price ton to hot decreased April, per per hot ton. with the range The pricing the recently rolled $XXX then been fell March, rolled prices in market rolled mid-January $XXX at ton has in in for ton, peaked further back fell steel per $XXX to May. $X,XXX per in market Hot unsettled. increased of prices Since in

losses $X.X We of $XX first losses fiscal in basis. estimate estimated be With in million holding pricing, to approximately in those be quarter losses could million estimated the of the a higher holding fourth XXXX will we inventory million pretax decreases the expect on quarter. the market inventory $XX than

during fourth prior-year processing, pricing fourth was with XX% the fourth up due favorable included from mix quarter million value-added within volume down in the quarter, X% prior-year million, to processing. over mix $XXX Net the toll the in up sales our was X% quarter. sales quarter which quarter. made of XX% We X Direct quarter, which high compared direct the a prior-year with in slightly tons just the shipped compared more higher and primarily

in were most increase with than volume volumes down softness that by other an X% construction-related in was sales markets. Direct prior-year more over quarter, the offset

capacity open in take some Specifically utilized business. on some construction to spot to as it relates construction, we shorter-term

sales experienced life, their prior-year volume the was the X% was to market to down end primarily due compared to launch while programs replacement automotive platforms of Direct the decrease The quarter. delays. reaching several

Our automotive ] XX% the business to book healthy, fourth of quarter. be making our in sales up continues [ of

that customers result of helping our that Our our with commercial Year meet teams Supplier to General the succeed. recent from closely Geoff provide Gilmore challenges. dedication technical mentioned, to of and customers Motors The worked solutions customers a their award help is

Toll due down [ the year-over-year, X% ] tons with were tickling toll decreased mills. to primarily

However, higher value-added tailor-welded next the and heavily optimistic was galvanizing towards We're the blanket. volume mix including cautiously toll weighted quarters. of few about more products,

drop-off would expect strongest we tends from months standpoint, volume the be during the in Our quarter the automotive to our to market. quarter a fourth seasonal summer so normal related volume

fourth benefited both quarter higher our galvanized order and mix of from books. in a our total addition, In direct

free outflow Cash an cash and flow sheet. Turning balance to from million, the of was flow cash was and operations $X.X flows million. $XX.X

million trailing quarter, a the Canada. $XX During projects, related variety XX-month we free and steel on we a announced spent electrical the in including expansions generated basis, previously expenditures to million fourth of Mexico $XX.X of capital flow. cash On

in share $XX.X operating payables. announced Yesterday, increased million quarter, dividend $X.XX quarterly the regard a to to working sheet, of we primarily during balance due on September In per payable a reduction fourth capital our XX, XXXX.

of the to on due which third $XX.X the cash, quarter $XX.X with quarter million from ended is We million strategic capital down various spending projects.

on May resulting $XXX debt XX debt ABL Our in was million, million. $XXX.X net of

had for focused both on driving to Steel and Steel and quarter, of of stakeholders our Worthington our be commitment continued basis. to Worthington dedication performed for fourth very and well. long-term for safety. In I'm near-term at summary, all teams teams Everyone proud our on a continues excellent value their an their

At would your this point, happy take we questions. be to

[Operator Instructions] Seaport comes from Englert Your first Martin with Research question Partners.

I this you have steel seemed watermark EBITDA holding minimal, like it's within understand were quarter, and which ton, and the some the back high but profitability to underlying it given in overall apples-to-apples, circle not the for just discussion, I alluded versus fairly the to excluding EBITDA Wanted discuss of been a mean per the history. separation. losses the might exact

called the it more we at was good drivers, relative toll a is had And an mix favorable a a underlying this quarter of little favorable type a in maybe but of of maybe higher galve mix, on you of of mix some a, higher I'm tolling so out sustainability is and getting this margins processing, the and anomaly good as and is bit to Or history? galve, that EBITDA. what of

Tim. Yes, Martin, is this

think own I you your answered question.

tailor-welded galvanizing as -- more a blanks this And well. I galvanizing think very And was -- a then toll, as some, direct, we within within on. tons overall, good had mix well had it additional as lot galve quarter. it was we

picked some in there. spot up also business We

that, market, didn't the higher as that up spot was mention picked in the well. margins You we there but business and construction

were the... those the So big drivers for

you overall Okay. year inventories as about appreciate That's planned supply July specific helpful. little looking How seasonality, and that a that. but that is the maintenance Can far last this alluded bit when in chain versus downtime. you're talked in seeing auto comment versus discuss any again, more automotive -- And what history? and you seeing? you to maybe schedules you're as and I

Tim is again. This

to and talk general start about it then little me in automotive. to a to he's what Klingler seasonality talk seeing over bit Let Jeff just us, hand in I'll about for

at So our looked quarter-by-quarter. we we back seasonality went and

be what So if for quarter. the and divide would see our by I it look average then you QX, tons take at quarters, is direct call you you QX When is what direct And at be typically and X% that volume you look X%. X down standpoint, QX to us or a from QX, X% X%. up or those tend to when tends

an average So QX it's us. perspective, quarter for

I'm So you do strongest, Jeff, our the is trying strongest. want on is say comment overall, to tends be QX to QX what and automotive? second

I just versus clarify, Is X% for apologize year. any interrupting, seasonality? X% quarterly and you're to but to average the discussing for up X% to given X% negative that

Yes, versus the [ ]. simple average

average simple Got [ Sure. it. the Versus ].

And about the XXXX. in then -- very remainder with the automotive regard to is sector here market, this Jeff Klingler. for With remain -- to optimistic automotive Martin, of the regards we

don't now going to the see will it's has or something think unusual us right We out normal believing summer the I be anything slowdown. of ordinary.

modest expect we a XXXX X% do in over we of But increase as to which see a the on year-end optimistic. We're keeping slowdown rates, But and interest remain cause very eye could a to such there. generally, inflation builds. -- close X% things very

on year, looking downtime, you're year? deviations The any extension this last for at just summer year seeing planned or not what's the versus last planned an on down scheduled versus being

No.

most for weeks X roughly anticipating are automobiles. We

I some comment if the quarter, understand overall did share performed sales? business, margins to initiatives? there's That's overall goalposts lamination business? I any the Okay. of prepared on however, steel in touch of an things on embedded I that And could, a the far know on lot else in it's anything how kind as update helpful. but as you the the If add on of remarks, provide you just electrical on aspect. could growth in

I And want can to jump Jeff, take that? do you in?

our date. press business. budget. been very We're are That and in investments or million ] quite factory installed about on we Sure. the project next in bit spent working Yes. that the general, most focused Overall, to complete. on We've a the about, have, pleased that is X. electric [ we're with talking about steel first We've excited Mexico time building The vehicles. the nearly on $XX expansion is for electric and we've

orders happy level end -- calendar of Those early start very new production activity with at XXXX. orders we're of the we will received. will the commercial Commercially, the and very not production have that be

but on time, little a project. very the have with still pleased we So that we're progress

is facility budget. the begin there. the new to that We've [ commercial of level in And ] pleased scale and Canada, Same with very time also date. project in will activity. and on end also that million interest an then XXXX. initial of also at about on towards production story And spent $XX We're

for received XX% we've orders of fact, ] that already In [ capacity. roughly future

this Martin, is Geoff. And

the you business. that we've had that business, several times Just margins highest be mentioned But mentioned our rest ] embedded the margin margin to add, business the in in for be will will business. exactly the embedded are certainly, electrical [ this steel lamination right, which it's the of

exciting certainly that's to So us.

will growth more next be to making than much the over in XX think, markets GDP, investments X the And because those we're importantly, these years. greater we

So optimistic term. longer we highly remain

Any there goalposts for contributed have on or quarter even what the overall the year? sales last the might

that's Martin. report going not to to we're in embedded the it. It's how business, going to disclose that, No, we're and continue

Would potentially you transformers? to downstream, further going have any interest somebody partnering produce in with

now, right no. Martin,

core I think around our of be us years, get in. a the over ourselves. before we're Think strategy staying It's start front -- too close that growth we in getting very and our and right we best-in-class next us ahead this of far now. to have have our specific and let confident about arms the enjoy we XX opportunity the

to stay core. our close going to we're So

on I Excellent. job quarter. Nice appreciate Okay. the that.

Markets. comes Your next Gibbs KeyBanc from question Phil with Capital

of provided some the color the on Question business new wins. you for

] that secured the capacity I you the think presses you to respectively, for. said gone and already business of related out X Mexico X and [ and out XX% Canada, of

about open value or and think capacity? capacity trying that more goal leaving on leaving for try just commitments. your firm how you the some secure spot? open wanting some that So are purposely it to Would of in business you be ahead I'm to to view the Or months

question. Klingler sure. here. Yes, Good Phil, Jeff

the installed of different right, you're X two first presses. we've scenarios. Mexico, In X So

We for business, And startup. XX have type building. that intentions yes, buy cycle anticipate from sales time we partially to because that would program presses the of of in

pursuing the are commitments in advance. ahead of installed business actively and We equipment being

we are XX awarded. out programs So launch actively are months new to win and XX that will time pursuing to from the continue

to for from the basis. presold, now on, transformer right XX% that that a Canada, take -- long-term a In we will having the very business, And with of have, will, we're position so point that capacity we we this case-by-case with commitment. happy of more speak,

of we that a of of things and that, We in equipment. percentage comfort demand like the certainly do need but having flexibility for commitments to leave capacity open for like and certain installing surge advance

going So It's we're are some balance places we're that very we There longer-term commitments. go happy to going now. that. handful that we're to to But a with the pace be secure right situational. on would of like

And Phil, believe, make that's to Mexico, highly Geoff automotive. will sense This Gilmore. is is this you, I

will contractual that be So business.

we're up ideal to able on that's if situation. as those So fill are presses an order,

So pleased where at. with we're we're

and programs, those of of aware life generally you're it's know, you As program.

contracts. longer-term they're So

And is and the fill of just gate. to go head, Canada out and of up of excited a business obviously, the the that you a hit his to different bit XX% nail out on Jeff team, situation. were

great highly business, to opportunity you're he'll you've sell have your got baseload do. team covering optimistic So we're a Jeff continue to And which great fixed capacity, and a that cost. now

you had hear yes, And a question then I can also me? --

Yes.

question quarters in our expectations working that over of capital Okay. bit couple on this had the about next a I also did evolution come how quarter. just and we above should think net the a

the look could And the some next substrate couple with quarters coming of costs particularly to what in with about like -- think down? so trying of that

correct. give specific you, is intuition Yes. absolutely have your numbers I don't but to

over of come working price capital will the steel down, we release As time.

an working see in quarter-over-quarter. should you So improvement capital

terms terms of margin either think the ago And think in me, that you EBITDA in Investor Day business relief. structural few of of efficiency outlined [ also lastly that I goal. a in some or for -- in cost the things that innings XX% into mentioned our then at a your early quarters weeks embedding you're ] conference doing you're was you're ago I And few

are just but it process the question, long-winded with flow basically initiatives [ thinking should a of we're in those of a and some on those about way if so you're through? see terms that we're initiatives? where that What talk And some communicating? right you of of here about can ] we what track asking, the And way

kick add at targeting. and Geoff talk Phil, off Jeff again. about let we're it this I'll I'll is they'd we're or in you and what to Tim where Klingler if like.

a waste time we eliminating talking identifying program. spend our is all systematic of continuous So just lot our of transformation which our about a organization. improvement process, It's across way really and

mentioned indirect focusing functions, corporate What's on taking we are we expertise, new [ purchasing. that structure are some and is resources, you IT, in the new duty of ] and finance the

want I same So process. value all identifying processes mapping to then We're attack. and we're out that the we And the taking say are stream. areas we

we our we from to serve -- ways going to easier functions. the But it techniques improvement, reduce cost solve. and streamline, want of generally to more take developed the we're to efficient, businesses much we've the problem the to over years think corporate yes, things improvement able various make And be make

So Tim is off I at right processes we program, and where and stage know -- those of month, just now the it the out. mapping partner in we're last all kicked we're don't --

Phil, this then, Geoff Gilmore. And is

XX-month I into methodical approach. process. We'll of each about timing do add, about it's this, those to really you of a departments. mean one a deep-dive as diagnostic Just think a

through trying what's working, then diagnostic truly go do you're to eliminate? so do in And add? what process, to maybe you that identify not What you're to once you what's implement. need putting And working, plans need to you

a good is this for is biggest business. scenario the the functions, really, And our at corporate look customer way worst-case to

customers. become a we better supplier business to supplier And then of so business. the becomes the better And our a

and excited and those about both, initiatives, And the is opportunities. the know see excited Jeff that we'll improvement bottom to confident savings the find we're and we about we're line. is efficiencies there's Klingler case cost I Best very and

Research. Your next from question comes Tumazos Independent John John with Very Tumazos

Should cash you business in the to a generate the of the is quarter for fell? capital, that place. steel Worthington August prices [indiscernible] working tough from expect given steel Thank we earnings,

absolutely. Yes,

what a little earlier, -- up yet, typically, As working it see. prices that's this some capital. fall we quantified expect to release we haven't -- that bit but I came but

And gentlemen, conference Gilmore Geoff closing question-and-answer remarks. conclude will now for over turn that ladies back and does I session. our the to

the in everybody, questions. And and quarter showing interest for you, And getting in thank Thank the will I Again, Steel. a our pleased. with great then X,XXX all want very for look great you we're back you. to the of we this end Have Worthington at listening appreciate all I employees, again. of forward to another update. Thank day.

concludes call. your participation, you and for This you disconnect. may conference Thank today's now