Worthington Steel (WS) 19 Dec 242025 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to Worthington Steel's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] And I would now like to turn the conference over to Melissa Dykstra, Vice President, Corporate Communications and Investor Relations. Melissa, you may begin.

operator. you, Thank welcome XXXX and Steel's quarter second Good call. to year earnings fiscal morning, Worthington On we Adams, call Chief Chief our today, Officer. Executive President Worthington Financial Officer; and Steel's and Tim Vice and have President Geoff Gilmore,

those included that everyone refer to statements market closed. Before made We certain risks results which and are it the as on for reference suggested. meaning the after subject today on in to detail presented materially. Unless Litigation measures, differ Securities uncertainties the are statements items the XXXX within to that differ that Private Please earnings we reported, could forward-looking standalone our Reform actual our to cause like GAAP financial basis. results for will discussion adjust release begin, of non-GAAP could results I'd more from cause remind a actual are Act. issued today's noted, factors and These yesterday which to certain

find definitions release. Today's You earnings and replay and being recorded worthingtonsteel.com. today non-GAAP is will our of a to on measure can available within call later reconciliations each non-GAAP be GAAP

to I'll Now over Gilmore. turn Geoff it

us. Good thank Melissa. and you for Thanks, everyone, joining morning,

our Cliff's and a as and publicly is in Sitem sharpen year As quarterly report to leadership full stamps acquire safely, Klingler's second $X.XX role stake position. of generated built President talented prior that $X.XX vehicles. Klingler move in strategy, and Processing, team EBITDA a customers has strengthens This compared suppliers. highlights named month, we Last adjusted in strength a strengthened growing and million traded commercial of a when last both new our at Europe and of Flat-Roll were electric Europe, sizable we is remains continue across pleased Cliff's market with the allows recognizes Group. implement and steel purchasing quarter. There accolades number partnerships our selling lamination teams work the period presence we leading he of to produced $XX lower his COO motors. Jeff average work of came selective for our despite and best year Sitem in loss Worthington growing implementing continues we In quarter, same XX% or toward to global our Sitem this from Cliff earn Jeff million markets. Steel XXXX, Earnings year. the Larivey, industrial versus reach business. celebrate announced we will Results prices headwinds operations. Further, am hybrids. to as high-growth for standalone laminations quarter Earlier month, the on our electric focus business XX% per value-added Like which some agreement in we the vital volumes this our end with by in quarter. share being growing to acquisitions vehicles And make Tempel, high our battery of $XX.X I Worthington earnings strides for strategy. a to a made automotive Europe company, both through place be this by it expected the electrical a solid business move Steel our were lower share Steel work. milestones first to generated impacted and per our several uncertainty separating

electrical leverage to plants. making electrical be solidify across tool able steel long-term electrical expanded expertise practices gives footprint world-class and partnership and respected success. is one and to most to we and allows steel customer More and And for press our importantly, required this global Europe. Worthington together Sitem best fulfill of laminations. steel significant which presence our us compatible expectations automation, in lamination producers access Bringing an in Sitem our the in will provides die largest cultures our

ways the after streamline customary to and early our transaction manage combined this our in approvals is expertise drives our employees And Sitem processes capacity regulatory unnecessary expect IT strategy employees. Rounding ongoing Tempel The second serving our and efficiencies, purchasing teams find often and more transformation for transformation close always customers. of quality with over and quarter, closing with Group interactions of process together conditions. excited to eliminate mindset look our is to customers to our improve we Worthington in carries free-up out We system reduce continuous service, an to the scrap, XXXX This Steel. transformation, and saw to I begin our efficiently improvement. contractors. The am mindset for costs. come

Over the and tool inventory lead Steel key analytics help and improve Worthington an reducing to both customer order thereby quarter, we a developed inventory. times, control

filling sustainability Foundation. for interest decrease On rounded organizations tested with receive through significant customers TWB technology such as momentum record and are we being report, safety highlighting to the new nearly product continue emissions front, than is teams the Steel we carbon period in October, of our like all in on using equipment the In the Worthington The better other potential our of thank a Companies capabilities corporate released installed schedule. quarter average, they our do ablation first each the pipeline XX to from business. we out support a support opportunities. and remain about our licensed and key our industry citizenship and new at I'd Worthington The areas strategy. We of Xx and achievements non-profit to

year me, veterans and is proud row in for to a moment our the the our Victory communities for we to improve and philosophy the each and named day hard right our work on and XXth our were doing based We a efforts. Military a shareholders Friendly our development special Workforce this is Employer approach for commitment thing organization. suppliers, military was ESG to and incredibly company. members employees, customers, Our by of a

Computerworld in its employer accolade just week Worthington as annual Another when our Top company of list IT. in an to Steel Work for last Places included was announced

became applications perform. Yesterday, added end to ERP security adds systems working with while we to I I'm new Our all welcome and Board at Board. Scott diverse member year. to in look as every our The deserves voice great a public new of a implementation team forward Steel energy Tempel, the business to our separated operations IT ensuring and IT-dependent Directors. and to in and to day-to-day recognition day we him. and a our background pleased him Worthington operations brings industry working off special company improve team standalone kicked this and user infrastructure, Kelly the a

earlier, headwinds the and during several in sizable markets, saw including automotive, As we quarter some construction I mentioned heavy truck.

headwinds few the persist these may automotive of next the especially in Some market. for quarters,

optimistic signs rates cautiously as adjust positive rates commercial and segment moves strategy Looking inflation. about positive levels this construction November and offset their ahead, U.S. by OEMs rebuild lower some market and also for momentum market. lower saw be to decreasing could we their make headwinds reached interest share. are inflation We in vehicle highest of XXXX. Lower provide sales overall when the interest since May The

data calendar construction in year moderate supply, XXXX. expect market as such growth we to and in centers areas the manufacturing continued We

in and about believe the our into requirements We feeling as enter the company. traded expect second heavy we half help we as positive regulatory first will growth second year standalone XXXX, the XXXX. Overall, are remain fuel slow the tailwinds half but to relatively year of publicly we calendar year in truck of a

accomplished in We relatively already period short so have time. much a of

have strategy. experienced sound leadership customer relationships, We strong an team a and

and and to employees amazing team on Worthington a of have place safety every energized work best the the as commitment I'm to with We grateful with we Steel work. strong team. day recognized consistently an are everyone to

things Now to turn discuss over financials. Adams I'll to Tim

morning, Geoff, you, Thank good and everyone.

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

annuitization current The For were quarter, included the second of per results, we per per frozen results in Tempel reporting quarter $X.X with $X.XX loss a the or the or recognition or $X.XX a of earnings that plan. the quarter. There share the pre-tax $X.XX with quarterly million share $X of associated year gain non-cash share our including of of pension prior impacted following. $XX.X portion compared items million unique million several a as are

Additionally, of we or year $X.XX land China. The in $X.XX included a share per excess of $X.X sale gain million separation pre-tax prior the recognized expense share. per pre-tax million related results or to $XX.X of

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

bankruptcy partially of favorable offset pre-tax swing per inventory earnings the pre-tax and bad $X.XX was holding Gross of addition, in a partially primarily customer. by share. In pre-tax we we of is $X.XX adjusted lower to This with inventory as quarter, of to including $XX.X $X offset reported million separate quarter, debt customer in our million higher prior reserves SG&A had at associated higher was $X.XX volume. SG&A by a holding $XX.X second share $X.X $XX.X holding or over as of impacted year being which losses losses $XX.X primarily year-over-year Serviacero. of EBIT losses, prior the an equity In in increase in million increased the spreads, estimated company second increase adjusted a lower the associated direct estimated expense higher up inventory with increase to compared million or margin, impact from lower or associated standalone costs the due margin $X.X the incremental million, by quarter, million. well prior direct year second the year and per share due a gross quarter, material an expense million with quarter EBIT per pre-tax of

most higher lower of to acquisition. pending decreased as prices professional were the than by rate Serviacero impacted exchange were the Equity with normal impact Additionally, unfavorably announced lower earnings incurred movements. well European from direct the spreads, fees, of which due associated as company steel which

the of primarily volume band movement the market in inventory of lower quarter, the as with most With in on Next, million, in between $XXX market tons $XX.X million I quarter, pricing, the and sales quarter. compared pricing estimated down content July, or Direct XX% holding the of prior the markets. third estimated a with fluctuated ton. and our the tight quarter and XX% which year some minimal quarter has second XXXX. Net with Direct down relatively year coil year $XXX compared will were in approximately shipped XXXX in X% direct the fiscal prior as the quarter expect losses million the in $XX due direct holding hot-rolled we X% $XXX X% was We mix shipments. down compared gains in our to market year for market down lower with provide Since sales pricing. little in volume the of the shipments quarter. over up was prior quarter quarter current made year prior from during XXX,XXX volumes per sales

X% to the year shipments to automotive market were down compared quarter. the Our prior

As the unit their as progressed. second we increase in of to deeper The due you automotive commercial their XX% Detroit more as a volume strategy. estimated approximately levels The for quarter, of the basis, mirroring the customers a with than of expected attempted the decrease at OEM Three Automakers XX% inventory represent decrease experienced and one production volume to reset than that On those year-over-year customer, our in cuts net cuts decrease they to primarily rightsize continued sales. production. customer's was know, production quarter

OEM monitoring the they build the to are their believe more normal next situation within a challenges quarters. as schedule the X We return closely and very could navigates we

volume have other the increased entire in automotive the for of throughout supply volume our shipments we done The chain automotive the OEMs. prepare working decrease as year-over-year vast As the our OEM increases with offset in automotive by in are we years, ramps up. closely back partners were requirements prior to majority with

have past the over we share have won few our quarters and the noted automotive We new in increased market. programs that

programs. We are beginning to see those new of of the some volume impact

the than XX%. remaining Detroit shipments Three more by to increased Our

them help Our mutually be to automotive We with find customers. our collaborating with goals. beneficial our to our their continuing solutions partnership look strategic strategy forward to meet that continues automotive customers

Turning to market. the construction

Our volumes The year-over-year basis. was decreased several a a combination decrease XX% on of factors.

successfully Three. the pivoted construction-heavy we the we as in at for year, prior the potential strike more mix prepared a Detroit automotive to First,

year, current more a construction. typical between and we in Second, automotive mix the anticipated

partially pickling magnitude secure tons we I to to our limited year-over-year, book. cuts experienced and However, replacement in of the Toll X% mentioned, deep primarily order in our volumes, and as and volume blanks. the increase an were automotive Both to coated cuts offset by down sudden due tailor other those timing lower markets. ability welded

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

to spent announced on During $XXX of expenditures of now We expect expenditures versus XXXX estimate capital million $XX.X steel the quarter, capital related be previously variety approximately projects, expansions. our fiscal we previous to the $XXX electrical million including a million. for

XXXX We are for fiscal for CapEx estimate the several increasing reasons.

portion XXXX. change First, fiscal we a the This larger be for fiscal of spent now expansion expect Canada timing. our a in than in XXXX rather simply to is CapEx

talked we other expect as up course in to Second, about past, we of any the the come year. during fiscal projects

facility new For business. we in a press steel example, China to new are our support adding to electrical

$XX.X quarterly we the November $XX per transformation. On elected quarter to generated flow. our and trailing $XX announced a of floor in In we addition, maximize XXXX. of debt system, as the cash and process using on basis, future previously for the share resulting We of cash XX-month million to upgrade ended million, with have $XXX our the opportunities payable at net million XX we $X.XX mentioned part XX, Tempel was warehouse dividend of data free million. ERP a shop Wednesday, debt system ABL of improvements March

to your Steel driving and be the safety team am forward value our to Finally, incredible to with priority point, public would Worthington of our this at we highest proud all continue I stakeholders. At making part I entire happy be to for to working look delivering team for year questions. take would for every a facility thank company. like first our performance as and in

Your question first Phil Markets. comes Instructions] Gibbs KeyBanc Capital with from [Operator

know you gains Geoff, holding drop the a losses the have been back managing to color, you off $XX more I range. I know of and you what give EBITDA it guys were not to down get And biggest, about some but expect guess, of guys sequentially, some certainly profitability ton in we're I particular? ex levels think we something the inventory per expecting. What a so made was when your we pretty abruptly sequentially some impacts that? did ton were within should tight to? I used to

question, I'm for to the Tim to you. for that going Phil. actually answer to pass Thanks

your be the drivers. Whether and outlined it's would But production is was X% down think drivers, volume could was our think or to variable. DX kept X over would quarter. expanding Phil, a of course fixed and and they time, unexpected. I And X%. to a And over that and fast the operating furious the that point. occur be We it's in, sequential if long of cuts period at basis Most expense would year-over-year, that big X% actually you have way it X the take of expected a the are with volume. I on we #X the customer, the came look sequential costs at came down what everything

well associated as with the X debt as transaction. increase which an bad other professional on. The the had are Sitem drivers We we SG&A, in touched fees

came the at performance And yet, then Serviacero. Now transaction but is not in. fees that closed finally,

you've happening So things down a couple of there. got

you've -- You've should some losses, plus the got got than FX gains FX gains. occur spread I compression say, rather volume, that

So the those really drivers. are

items? then when the reserve And customer of to professional the way then magnitude expense bad square highlighted those guys debt from bankruptcy any the also fees, you X and up and the the increased

start commercial just that. think if group debt work -- with I that, our let mean, job. credit group. I at a Sure. expense with They hand-in-hand you bad -- fantastic start me look with does our I'll

of record customers, reserve quarter, happened things bankruptcy got debt We've the in rarely seriously. bad million the a very $X receivable that risk. less. we think probably bit specific outstanding was unexpected our little that take over elected collection And we But that million, of then where a little track write-offs. and to an we we about a one X customer have maybe is So $X for second at that of

AR collectability on it's we about up, $X this would you don't those a additional we guess, quarter add you quarter. if customer-by-customer -- standpoint. any every review But issues should beyond have million. basis X think as we review So We a from

And then I'm the professional sorry. fees?

Professional about give million, fees, probably or take. $X

you that closer out should that Sitem is items transaction as down on to didn't some carve wind you or similar the to reason expected close? of take those gets Any guys or recur to other that the did as you

Yes, the whether not. expenses time. These land. we sale normal typically normal goes kind Those transaction we're kind of all -- I of mean, business, on are are through lift going things that's versus the gain course normal or right? at to things of or have acquisitions pension the transaction the course. And out We're looking of the

So those to we reoccur. don't expect

as fiscal the of of do know typically year certainly look customers? out calendar And deep next of customer guys one as first and particularly the much year auto in from part of you a are period volumes of of year, you lift stronger little of part What sentiment, expecting lastly, of you carve-out into your early into part come then this then the the latter bit in for out kind all. terms you key I

Yes. automotive, I we Phil, I feel we're cautiously I across that's optimistic. think -- said in mentioned the intro, specifically that where my board. about but had overall,

we fairly large reasons. I various greater think OEM one get beyond, excluding out our start spring stable, few the and to will next looking for think gets here But customer things the to optimism be I as months.

hearing well. I you've other Phil, that's think customers. sentiment as and been what really reading from And the that's executives from our

almost fact the to vehicle decade point, people rates, is is highs, think which years replace vehicles. this I interest specifically with averaging at lower automotive, that XX want those the

also look into specifically able more Even we've the to with because OEM market I quarters. If how gains positioned ourselves specifically large market. you overall over comes we that have offset sharing that OEMs. that's that my was the last that, automotive. few I than other been at down, And that were from share of to optimism addition with with In Worthington,

Now we And good that's had that's about situation. that's bit this business excluding long-term Tier a where our OEM, going XX% forward. the market, hose. We're of that feeling specifically and Xs, a a large of isn't

them. we another a work to think to short-term quarter long-term to continue and a frustration, going it's problem. with have we're I not got And

that through be very work in going to I we'll think So we're shape. good and

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

and customers on question reserve in? were increase of A operating What those the in industry the type expense. bad the debt

was scrap dealer. increase reserve a The

our sell That in the the scrap to then we truck reserve. scrap dealer. So the bankruptcy that was was industry. And heavy

seeing, guess, other verticals? any Okay. elsewhere Are you across -- those I risks or industries in those

not situations. those in industries specifically. were customer-specific No, These

-- don't people fundamentally scrap work or about we fundamentally, other pretty think all. those no, with wrong truck we So suppliers, feel we from good the either verticals the those There's heavy a at with things. of nothing perspective we

in And that good we Martin, add, do even market, forward. continuing truck business them with I heavy customer to specific would going feel the about

and through Okay. have on on or operations I and trading north in and there Appreciate that. partners And your the if the to our U.S. forward, walk it? then as the change and changes you front a are south continued know the to for north growth. significant administration you in negatives with you positives, tariffs with think puts looking follow-up neutrals and takes trade question the investment the there the south. businesses, about Could

could mean, what answer. first, directions. in on as we're just of devil the and aware Is products? it a the steel? give I Martin. is can take So it, Yes, details know, implications, general on fully Is you tariffs it you the different I until finished you got the

our We on we're not concerned. business. I think little impact very see

this, know locally. we source You

perspective, as I So expect wouldn't material far any interruptions. as a raw

bit South. costs a able through Canada, maybe the efficiently your be a we'd as to think to the difference manage in is Mexico point on and north I of well. Where on

are countries are risk at of less We importing. Those imports. right now

issue to an occur -- place be China. be see pivot to an But who any there. So on issue mitigate The able that and there. of type tariffs in for we is us looking put exception to don't not even interruption were supply to sorry Canada, if in also Martin, may

that good you since positively. been different overall, XXXX impacted some we've some policies I and And markets able in always Martin, been are think this, shape. negatively, So to with dealing and we've are quite well. have we're navigate very know administrations different And

So from well we're we a think business positioned. perspective,

a a my Mexico Canada, surprised on bit Now aggressive he guess, Trump to position been if that personal I see under we Martin. opinion, negotiate. I'd We've and wants administration be and

like I seeing Mexico already think that. And the to that the cooperation. and of get day, tighten think up administration they'd has I that Canada at on. they'll We're end things certain see

of point. hopefully, too we're Mexico and tariffs to feel So another any type critical that's and how the one it's we are business usual. have to able avoid at U.S. as to But Canada, this interruptions.

books the one. I Appreciate OEM. next understand moving with understood. If now. the that are you're improved any Okay, year But all today I are a bit in of automotive, worse your than seems you the with It across out and constructive inflections -- you type with shoots expected speaking context Maybe recovery. some I to out understand marketplace? general one could, their end understand specific or seeing a markets, I outlook. manufacturing order activity But of maybe look margin When into customer on through like folks were quarters, of color. what or early right the the last construction, one volumes you improvements green are lull elsewhere, a and couple they're

it XX.X year, think, with I at about markets, mean, million think we're I start to our I Yes. think units. I This to I going Martin, we'll when comes mean, automotive. end

somewhere XX.X, that plays all how we'll on like plays going it depending year, is see be out, automotive in how XX.X out. OEM to think And around that. the I Next to market

of the think we people serve, what going. it is the construction, about market construction end to like. positive markets future generally the that and about year we I feel generally positive I to sat sidelines be overall, the understand a in think in where here was the on going the people tough we're of Again, But was at construction. for lot

is heavy of the ag heavy being to still then impact There's big interest think will the changes I the rates the and on trade, some mean, prices being And probably market, low that know, as end happens truck cyclical whatever And coming. towards with and to there's year. high a and in market again, pick-up year, with challenges continue right? regulatory that ag have when to think usually going I relatively commodity happen, heavy it's some has well. throughout regulatory then truck -- related truck, changes you are very I the the as those regulatory relatively changes.

pick-up see end the may as year. we So some get truck in the heavy we to of

I to for at November million. XX.X Even with XXXX rates come there, buyers had fuel XX XX.X a calendar continuing sideline. And September able said. everything little other And think sooner. to were optimistic. importantly, then are you. good It automotive, off going with that interest is few us. again, a bit specifically that their now, OEM the but optimism and of that just to Martin, XXXX number, data for flat the to larger adjusted tailwinds hey, seasonally is, And Tim October That could making mentioned targets and we're in certainly is to right I if up seems inventory cautiously meet there agree recovery they progress. speed that was year And bit that add Tim to that the get million, down maybe rates points is million. more certainly

in highest it's been years. the three that's So

So we your a point, have OEM. large

of to bit pre-COVID levels. months little difficulty to short-term. on sign data back a looking and start that's if to automotive And points. But in start marching good those have overcome those the a think X beyond, out is We we going you

there to markets ahead with may demand people be and/or think broad-based potential incoming inflation. the so you some other of end get forward automotive administration, in of trying Do anticipated pull because tariffs

implemented? So now that before by might be

predict, ]. [ Mike So hard to

seen haven't yet. We that

to So that's in that Martin, our we're strange find believe. not I difficult And anything seeing order would been honestly, books.

the of how manage size going customers, OEMs, these our think to with I and we capital manage want the they're their smart discipline. business, working to

little over we're going that the see last go disciplined Xs. know on I a bit things years, wildcard those gotten time think is of only X don't a a would I But through they the long. I customers The the that pull to have front. living more Certainly, our Tier from bit and OEMs. cycles you all big try more ahead may So tell to

And question I will Gilmore, for closing and Geoff this Executive Chief back the Officer, And concludes answer session. turn our and now to President conference over comments.

today the short-term hopefully, you off, to lot is everybody explained and Obviously, of frustrations. you some First thank showing Steel. in interest Worthington what we can you how But The them them that about we -- for had heard joining a could opinion, we we In control start looking we going my we quarter. control, forward. optimism a great things controlled and controlled of well.

feel our couldn't continues future. our team to about exceed expectations my better I and think

joining everybody. quarter. forward to next to again So you thank happy for to talking and Look you holidays

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