WOR - Earnings call transcript Q2 2020 | Worthington Industries, Inc.

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Operator

Good afternoon and welcome to the Worthington Industries Second Quarter Fiscal 2020 Earnings Conference Call. All participants will be able to listen until the question-and-answer session of the call. 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 turn the introduction of the conference over to Marcus Rogier, Treasurer and Investor Relations Officer. Mr. begin. may you Rogier,

Marcus Rogier

Good welcome Stephanie. quarter our earnings call. afternoon you, to and second Thank

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

today On comments. some has Andy President, Hayek. Vice Rose opening Joe CFO, President are our call and Joe and

Joseph Hayek

following: prior $X.XX a earnings Thank versus including $X.XX you, we the EPS of quarter operations $XX resulted and in QX, September, which Marcus, the generated in $X.XX. gain its a quarter. equity In quarter and afternoon by completed sale share, pretax the a in in the unique everyone. that million international items year There of good in increased the by few WAVE were earnings

interest losses cabs company. assets XX% received the to simultaneously acquired share the of that prior in Engineered exchange, million holding manufacturer. in or We a per $X.XX that substantially newly In we $X.XX our in all a $X.X inventory QX were company Cabs to year Estimated of per another new share, a formed gain compared of sold business quarter.

for and losses the on related line, expenses the pre-tax of to typical deal companies we early fees In merged $X.XX. million $X.X income or quarter, equity operational newly recorded

the income company impact profitable, fiscal be QX. accounting of one-time some see additional new will expenses in believe will our we we equity likely impacts the and purchase While will that

processing. from XX% the and due inventory gross flat increased million shipments relative in was year $XXX QX last average lower from of direct lower sales XX.X%. million the the in decreased and holding gross to steel and quarter $XXX revenue prior net at margin of profit quarter Consolidated Despite in decline year XX.X% our prices to losses, to the selling

steel lower direct of were million In volumes, of year processing, sales $XXX driven at down to were stoppage average steel from net prices part selling the in to direct primarily that prices. Motors XX% by work and lower due General QX due last declining

quarter. were XX% mix of facility year-over-year, X% last pickling shipments Direct increase tons increased second up of acquisition with tons decreased tons in were sequentially. Cleveland. XX,XXX XX% compared mix, of in by from our to Direct X% Total year's but loans quarter. attributable Steel XX% the Total Heidtman the shipped to September slightly by increased of

million income for $X million down approximately the QX negative by inventory Operating steel processing from of of which million was driven year, $XX losses. swing was holding $X last

with basis a was a is business profitability. focus that team the income Processing's Steel well $XX increasing operating managing and on very sequential up share on market million and

the that certain discussed is have and stabilizing though are end destocking year-over-year believe We remains to demand coming pattern in an prior markets quarters volumes soft. we in

losses steel do in holding declines to in inventory due continue expect the will Finally, prices we quarter, during currently second QX.

coupled softness the primarily offset were margins, with business. improving increased business, was $XX Cylinders down driven million products success income quarter. gas X% sales from in year in oil consumer up net continuing million $XXX results industrial Cylinders prior In were improved last products by X% by from partially $XX to Operating our and demand year. and Pressure million, the the business,

markets products remains consumer-facing Domestic with and industrial national consistent are some are soft. conditions for as trends Cylinders growth end-market showing

Our continued geographies. demand experience to with operations to Europe weak conditions persistently in those in due challenges economic

mentioned gain $X JVs WAVE million and prior income income, year of quarter. from earlier, the impact joint the up our to the the excluding equity Turning from equity was million during our quarter I $XX ventures

in quarter. due earnings Increase over year, $X a in construction JV deal dividends one-time primarily offset unconsolidated million to $XX during million. our venture was strong our ClarkDietrich, increased $X.X We which joint cost new from JVs million demand our partially prior reduced which and in loss received the by the equity cabs by

fiscal the million our Turning the from balance and flow six was operations months the to quarter first in sheet. Cash is million for the cash $XXX year. and of flow $XXX

million we the Cleveland Heidtman to pickling Steel’s acquire During spent $XX quarter, operation.

capital We invested share Board million in we which per of quarter, XXXX. declared $XX dividend the for a dividends. and $XX the $X.XX payable projects distributed on in is million Today, March

close in both completed I’ll end that a was $X significantly refinancing of lower average million metrics. million; debt to quarter, debt interest quarter lower at million debt at was some flat the QX from sequentially rates with year prior and Funded expense interest due was $XXX at $X borrowings. down

$XXX We months our million times. of last cash million roughly is $XXX million debt was ended and to and quarter revolving over with credit XX under the the facilities. trailing ratio X.X available $XX leverage our consolidated EBITDA net Adjusted EBITDA

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

Andy Rose

business of the We to in prices continuing WAVE’s over afternoon facility pickling closing you, manage fico from a of the Thank all two the of purchase the Cabs, everyone. decline the Good the busy sale while had of steel with losses international and in extended sale years quarter Heidtman’s past Cleveland, Engineered Joe.

businesses all as prices holding losses it's incur just are inventory remind like frustrating for of lower as run, to prices fall. I'd folks we that on long occasion Worthington's in the steel good

are realizing good the positioned where and began businesses supply the commercial feel that XXXX. chain on Cylinders the we from for transformation years are operations Overall, how streams. and about of reboot we a benefits is few work calendar. ago Pressure solid

encouraging. facing we Oil more some plants and meaningful early a successes go but weakness and at but is are gas during the to volumes headwinds, improved has Business. with now FIFO bit Cylinder. are European AEBITDA, recovered in contracting our season accretive nicely the Steel has and galvanizing to

and a have and had you Engineered their ClarkDietrich done I both margins of and for WAVE jobs holding quarter JVs years. steel past to Cabs admirable thank employees fallen. say solid work all hard Our to dedication would our prices several like as the have over

believe manufacturing will outsourced but be only to not new market leader newly ownership. under We the combined well-positioned in be is the profitable, cab clear its

operating progress on can. capital significant sale, manner up we we businesses We're highest made focused assets. solid as and underperforming to this in such that on returns with With have very a flow the non-core and them generate cash free owning cleaning

is returns our across any these new strategy drive built all as as being to well Our of higher existing businesses, acquisitions.

to drive acquisitions As calendar that we the earnings and we we are XXXX, forward year-over-year organization, across look deliver on can of transformation, so growth. continuing innovation our to goal

enable stronger around separate that advanced and to will us building capabilities from also analytics ourselves competitors. technologies, automation, are We further

Thanks to XXXX. employees work us beginning in Those and positioned our are impact of all results the well for financial have and to efforts their to calendar XXXX. hard off contributions start

any take questions. now will We

Operator

ahead. Martin [Operator Instructions] Englert. comes Please first Our go question from

Martin Englert

good Hi, everyone. afternoon

Joseph Hayek

you? are Martin, Hi, how

Martin Englert

Good and yourselves?

Joseph Hayek

Thank Great. you.

Martin Englert

Good.

the on there you So, Heidtman quarter. touched for the contribution

that is said XX,XXX you that think contributed, that had correct? was I tons

Joseph Hayek

and Yes, months. for that was two

Martin Englert

Okay.

on tons that of So north an that, rate annualized something if purposes, XXX,XXX modeling we think for like is about XXX?

Joseph Hayek

about month, was to if you for close - That's It that should I two a not XX,XXX it, mean that. unreasonable. think - be be was it months. right, should

Martin Englert

Thanks for for potential inventory there? or likely losses that magnitude as there. well. inventory you goalpost detail out in Okay. And the a called XQ holding Any

Joseph Hayek

would hold, if last through obviously, a prices FIFO this and be in quarter. prices and we they we would that QX QX losses expect than they guarantees smaller QX in bit in holds, QX. talked We about but in again if Yeah, than were would in smaller QX. no be those they losses were were

Martin Englert

and one the correct? you Thank that. Okay, If $X.XX that transaction in was on that per could, $X.X pre-tax - on about think million I is through XQ. cabs costs for basis what more you share, a I talked

Joseph Hayek

startup the also combination them. $X.X million expenses is the I transaction would and The call of the losses

Martin Englert

Okay.

Joseph Hayek

half half. About and

Martin Englert

little comment Steel quick contract then, review Okay. a catch provide you pricing. a Processing Could more And But about that. that bit again, didn't I made you quite very context.

Joseph Hayek

terms far season Steel in comment, in Processing. so that the I good just was contract think Andy's so of

Martin Englert

up something that, Meaning year-on-year?

Joseph Hayek

I share wins. been of some What Yes. the season still But with contracting underway. had at is gains that nice believe we new least we've of say think is which would wallet a our I has few gate, the customers some of out long-standing and

Martin Englert

quarter. Okay. nice for detail there results the the Thanks for additional and

Joseph Hayek

sir. you Thank

Operator

please next question Tumazos comes from go ahead. John Your

John Tumazos

year Could you – on the Framing say business? John and explain the losing if call. ago, to you he Christmas was all improvement. Could Metal turnaround A congratulations million. the not $X.X on it a is in the Merry I’d

prices? big a That's of quarters. three you over million the steel And $XX is explain your rhythm income equity Now change. could

over in the XXX, week-by-week. question. You the the in were the were was quarter XXXs as NYMEX soon the But be mentioning as contract the expired, and XXX, to third losses XXX, prices November November would spot earlier

the $XX some cylinders, us you prices might we have I locations, on products, the month. an simplistic different outside, So different $XX, all have wrong might this across of and rose that impression different be immediately And that that contracts under think view. are overly customers galvanized,

Andy Rose

a is try losses is the prices in That FIFO uptick with we explain that quarter, the lag. way and why accurate have to next easiest steel John, will in which is one-quarter there

quarterly the index. and of it - driver the for us is So big

if So, is of trending to you numbers January February, still index the going we're those because one-quarter December, and be quarterly add down, quarterly the for sense. part losses when then, lag And down. will makes that experience

John Tumazos

Thank you.

Andy Rose

or you there. the things been going relatively to they what to there tell I team on. the they, over And been months which As it One, new there some call have it couple is of go XX ClarkDietrich, past, relates is, market, margins. would enhancing ways changing a a are has so leadership

decline. this tell cycle, in doing would you I job managing then, that better of they as price a prices been And have much price steel downward

as fell. the whereas metals precipitously So, in prices price steel would often of studs drop times past the

been as which to make them more decline has enabled They've slowly the happens. money dropping

are to and a So, their commended be rationally result. that think competitors they more are behaving as for also I

John Tumazos

River Gallant River I then electric and question, look ask there new out is years And doublings Steel one doesn't. three Big Delta. whole a three, we maybe and If or mill does four can Big mill, and furnace builds more Dynamics as

all make produces the XX%, JSW Is with Worthington? more grow simple output maybe more XX%? imports get XX%, XX% hopefully sheet should they as Worthington displaced. Does But opportunities market sheet maybe grows don't. and and new it then, as domestic this And output, if for grows that

Andy Rose

don't is steel. we add there think necessarily I Well, more just means customers buying capacity that, because

would as market there relates tell you, be and then to about going those it So the the will is I capacity I would maybe opportunities. what be on if more new based products growing, market it adds for Worthington, as think things. a What to the is couple

pressure for spread is capacity lower which to prices steel the keeping we in is company is, that, I in made that more a on steel are that processor us. goes continue comment earlier are our to One prices and we which apply a good should business.

use input. all prices are as and a So are we our steel businesses, essentially we less of in working an manufacturer other using capital lower, as

good raw are for prices lower So costs. material our

and would headwinds I would long the thing. be it's compete should say, some overall say good the mills for I add But overall there. good are us there few the There areas run. So, be we a in capacity with may

John Tumazos

steel, Texas capacity opportunity ton? if getting processing to for foreign a domestically-produced the opposed example, Gulf order two If in the it's one Coast you better displace as ton of new or mills a imported a do the an have

Andy Rose

oftentimes that I I less who What much. foreign do very in to in that at buy that to and tell less not try the it sure the some is will about, am use speculative there prices opportunities our low which and think competitors you for U.S., impairs buys if share, there steel I margins of market is like matters we'll marketplace.

that So, I net-net would positive. a be think

John Tumazos

they mill at sometimes department if their customer thinking your get in pickling whatnot. the was or behind are I

Andy Rose

business our I Yes. the interesting that's about Yes, right. thing mean,

our It customers, our our to you – is We the them all mills have competitors have – partners. take independently. joint venture are and almost

John Tumazos

Thank very much. you

Andy Rose

you. Thank

Operator

ahead go [Operator question. Instructions] moment next for One please Gibbs, please question. your our And with Phil

Phil Gibbs

zero. One

Merry I think star got messed something. I'm star, up. or kind of usually one Christmas. I

Andy Rose

you. Same to

Phil Gibbs

for? pressure because the Cylinders sales the were but unusual came Was you tighter. line looking sometimes anything wasn't expectations, at look the or it I the margins there around assets I looked on little some at I times there side, a SG&A know with was like in have that and the inefficiencies side When SG&A business, just move

Joseph Hayek

Cylinders, in margin-wise I so, think things Yes were good. generally

business, mentioned are bit certainly. The products There in pockets is room a that margins to business business the industrial and couple of on a pockets earlier year-over-year is strength improve. some European You some consumer drag have - better. are gas and and our oil slow a are

- It largely of kind and less a respect more with to domestically that's and it’s a SG&A, corporate-wide answer Cylinders answer.

really SG&A I'd Our three it It's - buckets was up. in Phil. put

tight first a attract that, are want is that a We're can. brightest We in labor the retain The to labor and bit costs best higher. market. we possibly and

and resources value from invest There are ourselves But there our Andy is I the as hopefully one-timers others. transformation in to investing in couple in, analytics, corporate. that, separate further recorded mentioned, that that and the we and we And Engineered are a advanced NPD improve third transaction. were to proposition, to of expensed would relates continued piece Cabs have technologies, say

And as component to extent an an is well. there there so, investment

Phil Gibbs

And to I've then, that? it on quarterly was below was income million, the $X.X something presumably for above very which doing non-controlling what I was net you. basis some a the line Thank time, means seen well the interest think line Okay. highest quite

Joseph Hayek

our of consolidated business one coated specifically tooling that does couple a ventures, the in It’s joint

Phil Gibbs

I it losses. still think think you one had holding I I - are answered Then, why you more. Yeah, Okay. Andy, experiencing was

lag the answer. gave You

gents. So, Thanks all over good here.

Joseph Hayek

Thank you, Phil.

Operator

are There further [Operator at no Instructions] this questions time.

Andy Rose

March. thank have and for Christmas, a you us great Year Well, you New right. All will today. happy holiday, speak all to a in Merry we Everyone joining

Joseph Hayek

Thanks.

Operator

participation your using T for AT& today. Ladies conference and for for conclude our you teleconference. and gentlemen, Thank that does

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Worthington Industries (WOR) 17 Dec 192020 Q2 Earnings call transcript