WOR - Earnings call transcript Q2 2021 | Worthington Industries, Inc.

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Operator

Good afternoon and welcome to the Worthington Industries Second Quarter Fiscal 2021 Earnings Conference Call. All participants will be able to listen-only 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 would now like to introduce Marcus Rogier, Treasurer and Investor Relations Officer. Mr. begin. may you Rogier,

Marcus Rogier

Chief Good fiscal and our XXXX have President afternoon Amy. Worthington's Joe Industries Financial Chief call to second we Officer. and Worthington's Rose, quarter earnings Andy Officer; afternoon, you, and welcome Hayek, everyone, Worthington this Executive Thank call. On

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

Joe Hayek

the quarter Marcus, during $X.XX per quarter. Thanks, of versus as everyone. of good unique two in This per two to loss reported consisted QX, in follows: or Corporation the There call loss out $XXX items share, $X.XX investment million, Recognized pretax quarter. prior were share the a year earnings a of Nikola on in and a loss we afternoon, $X.XX components. In our of

fell to quarter at beginning of related the shares $XXX Nikola, to $XX.XX million our First, the stock million we of quarter end. had $XX.XX unrealized X as of the at loss an from

future our for be subject mentioned mark-to-market long stock. we QX will as shares call, these on the own revaluations we as As to

the the sharing per $XX to of as cryogenic impairment prolonged assets, the to quarter. $X incurred impairment we profit we bonus the assets expenses divestiture related or announced oil we we market. that $X.XX last quarter, in million downturn in our due and charges the Nikola and American of our In gas which expenses share, mentioned primarily an quarter, during related and to also as that Second, North reported well to million restructuring

from prior to benefited to net last related year Cylinders the the a Pressure per Consolidated from lower exited generated year XX% lower year. year prior earnings gas and $XXX in the in gain $X.XX sale we international QX business. equity $X.XX processing, per compared $XX are operations. steel and decreased in by we the average due sales WAVE million selling Adjusting unique volumes in and Finally, these million the quarter completed recorded prices share for of Cabs to business a of pretax when its $X.XX items, quarter second with quarter share record of oil Engineered in last combined the

profit year increased gross the reported QX this of $XX XX.X% million increased quarter from by from to in for year. gross margin to QX Our XX.X% $XXX and million last

to in million. prior now fluid our quarter markets we XXXX, $XX our end and XX-month teams QX navigating strength million the well, is and while EBITDA from EBITDA million was adjusted of our of many $XX our In exceptionally Our continued trailing in in environment. value $XXX in and executed adjusted saw up to customers continue QX deliver challenging

market of were year's mix Coil in for from Worthington our the Direct up the steel of to quarter a quarter. The In of XXXX, prices. XX% were from last made Total of of were the U.S. been of job a $XXX have million Steel and to due tons XX% an and to X% consolidation prior average net needs year. X% businesses. supply doing down managing the mix to shipped calendar up compared increase our second primarily Processing the selling Samuel to lower QX tons customers. Processing, as due tons great our this in chains in year-over-year Turning sales total result meet tightened of significantly earlier year JV teams flat the our

primarily prices last driven arbitrage more We see and was in we're the million in steel or $X.XX and of losses to that have expect million able from steel downturn Based take the gains X.X% to year. estimated conversion A $X $XXX gas demand Processing $XX due holding costs, in net prices, solid increase inventory year-over-year this improvements muted from holding in current business were to per remain quarter. income to our than year the beginning sales doubled margin year. up year end demand gains to the gains continue we by see we to to construction of In to of the down of industry. operating in and related were X%. QX Cylinders current compared million, The sales negligible Pressure automotive $XX business, last and XX% agriculture inventory oil Steel Operating prior large the markets. million in on and that for rise in share quarter favorable from advantage quarter given was

Cylinders Volumes excluding in as last income due had million, restructuring down $X Industrial sale offset Consumer facilities, of WAVE's earlier compared down demand the equity was the year. JVs, and products very to operating operations. a production cylinders year-over-year flat. in $XX gain quarter our oil and Our improvements business. International charges increased the production. year-over-year as by to were tough gas during respect remains $XX and impairment business slightly recovery to in were down our a last industrial very $XX continue in mentioned of prior Products continues. our to comp result to to also a million year-over-year margins staffing solid. the demand continue business downturn income softness commercial team we which WAVE's was from in Europe. slow see at Consumer year, The our million volumes business, construction limited million high level for shortages few a current included at limitations due operating of facing results perform year consumer quarter to and and the related essentially to the primarily a the decline $XX was With million our the were in which at partially

on quarter. gain prior year equity slightly WAVE's up over prior Excluding the income was sale, the

from During our million JVs. the quarter, in did received dividends we unconsolidated $XX

statement flow free was sheet, was operations million. flow $XXX to $XX the the in cash Turning the flow and cash cash and balance quarter from million

from we XXX,XXX to cryogenics related During in million and average invested the in asset assets, $XX the of quarter, at our our we capital divestiture million projects, primarily of received stock price million $XX $XX sales, $XX. shares repurchase an dividends, proceeds of spent to in million $XX paid

QX turn at today, with which $XXX dividend is the declared Looking per in quarter. will million funded of million and sequentially was end million At prior to in at Board We March our point, over share $X.XX was $X a of for ended I liquidity our payable flat interest line balance debt Andy. quarter XXXX. this position, it Earlier year cash. sheet $XXX in the and quarter, expense the with

Andy Rose

Thank everyone. you, Joe. afternoon Good

recover. has a performance and demand unique was been a continues operating tight to prices second been as rising Steel challenges. few very have despite record fiscal quarter supply Our rapidly

hard go ensure quarantines with timely several hiring are grateful we processing labor in steel are safely while We manner mill continue COVID to strong and our who to meet as regions meet obstacles, are steel business coupled working limiting are so to shortages our demand to in that customer and and these Pressure above efficiently. receive beyond production. Despite can our employees working schedules. expectations facing challenges we delivery partners In that a customer Cylinders,

our the the and cash the from unrealized core solid business large Nikola delivered Excluding mark-to-market quarter. for loss free flow stake, EBITDA

of that will of include execution for it a dislocations capacity and opportunities businesses, in We these that us where this We has repurchases. arise allow during History market matters. return key continue advantage have where expansion allocation and approach high balanced is balance like opportunistic intend will sizable and financial us to sense. shown to flexibility XXXX likely makes to times speed take capital cash share our M&A,

transformation, is horizon, place the are come rollout under normal it and our the people innovation, the effective way, several One next marketplace holding by from the will in ourselves separating competitors. when vaccine an a to M&A. happen XXXX. to and philosophy. value Worthington challenging business own executing pandemic leverage A thank you we that months final optimistic drivers hopefully a for to is strategies we great an remain culture, on our day. likely Our are work entered, business leaders from is with Worthington of than Though standpoint, second note, big that its of our stronger half very is of operating Industries family out of well-positioned because Worthington further our making its every all this rooted solid

for in to people, transform importance philosophy philosophy years set great be way led for President like years. finally the of taught the shine. his business, us the in one the is they in Thank as and on you lifetime and an and XX people. as money any Our Ohio. the bridging lot marks we He them in And taught where be the are now day but biggest on for of retire of has treating hold the to the we of to Manufacturing. disciples accountable. primary to He present, questions. his a and Winland how not one us can impact business lessons of to goal of our And of our of it better up of be his by the XXXX people their taught past, us in Senior step golden hire with historic We'll retiring all future Xrd a how practicing with the someone's in the principles as right Vice our our how started mess years but shoes, take good treated. prepare us a more leaders. doing environment but welder for successful, He for XX consider importantly, career a be business with truly company. I you the process. several us next making shareholders, he success about others is a of endeavors, as after great Columbus, will Virgil rule January would our Virgil contributions. to but Cylinders be business provide accomplished He the

Operator

Instructions] of Seth BNP. Please today comes question your Exane first with Your proceed the with Rosenfeld [Operator from question. line

Seth Rosenfeld

for good today. of a questions our on Congrats afternoon. Good set taking and results, thanks

Andy Rose

Seth. Thanks

Seth Rosenfeld

kickoff in a your follow-up can please. remarks. I To with made If you comments prepared of couple

expect you bit I then in QX? confirm, us inventory quarter you. I can what opportunity gains you Within can scale confirm holding and as the in this basis might gains scale have a mentioned on you think, color a scale arbitrage misheard relative And please? the also on first you perhaps an you of of steel the processing, the was of all, Can the last little steel that give following processing, more and

Joe Hayek

Sure.

a handful questions quarter. We in of holding had Seth. So inventory there $XXX,XXX the of in gains

zero. essentially So

those was do in respect significantly in trended, significant the expect it and up steel in what prices put if the significant gains prices And to gains QX. regard. way historic business we and will lean is was We look and operating for to on QX, our that arbitrage but to expect that and be in able back have taking group advantage that you with steel a a higher steel that through to go so QX number have run margins in leverage of really pretty generate intel and in really the ability truly

Seth Rosenfeld

lower Okay. to some forward, bigger expect trade-off gains in think the bit benefit inventory continue a we you benefit arbitrage or should QX? going arbitrage holding Would about

Joe Hayek

it's to And gains QX. after tax quantify in that $X just fair. Well, was million about arbitrage

on and have yet. hard inventory front And quarter the in gains just predict to old days XX anything so so holding arbitrage is certainly QX. The

Seth Rosenfeld

market environment. more Okay. And a please then the Very question general on clear.

market You pass any weeks. going supply what recent just We've prices? ability higher to Are about steel the vertically is. on pushback has weaken earlier tight how in or demand rather prices go the concerned on all touched side, seeing lot market are the are And signs you obviously, from when crack forward, the seen led you extent a than about been to you of this and higher on of on customers your a any supply To led. facing tightness how beginning think the horizon? the supply you

Andy Rose

Yeah.

the spread. But a know sell prices. based don't to when customer we a dollar I like customers is typically index it's obviously, So, you plus Seth way think run higher on an our we business this

So do. is automatically prices reset bit market the little what the the contracts based a spot really specifically Obviously on different.

for $X,XXX pretty doesn't our think very there there to nervous. still to get it I get pricing pay substantially, I minus mean, -- rolled I But customers think pricing, anywhere for is works. the obviously the have the XX% spot at any ton to around pressure feels us up right when a given if start hot or close upward now. prices January they like up obviously and market for It plus need the to respect a just time. that's But is certainly run With spot way prices. have steel, people often. we market get there

haven't point, we in wonder occur. that to seen cracks when starting while think at I we're any the this price might So,

market right tight now. So

Seth Rosenfeld

Great. you very Thank clear. much. Very

Andy Rose

you. Thank

Operator

comes Your question Gibbs the Phil with proceed from question. KeyBanc. of your next with line Please

Phil Gibbs

Hi. Good afternoon.

Andy Rose

Hey, Phil.

Phil Gibbs

just inflation, has The hot back down supply it rolled steel comes the spot online. comes as doubled. questions obviously, that clear the I in on think curve anticipation, There's

to pretty, of lack be the think – steel product few to well labor. you own But next availability in spike or impact does mentioned weeks steel this seems the the margins I inflation and understood. how pretty the that consumer challenge because months, of that think in I businesses the line just so and you consuming the

potential the terms run? the spreads get cylinders? to And consumer impacts back to when So of, short the in then, in just curious businesses can the non-steel in trend you in firstly just

Andy Rose

five different Yeah. of there of historically, reacts been how on side terms we rise become would purchases hedging, with steel business. and say will I A in lot steel that a there, that steel cylinders, it for every business lot questions In lag bit of have rising sophisticated has last or between years through. prices What to a that, Phil. over the cylinder respect flows a the – to tell more little I when when you four is prices. our

anticipate we I historically of impact we're locking some less that margins is to been has than would market, go hedges. a So there. it the in lot When those with

get they cost when of different a steel increases tends and increases, price these is those because able and in on a of order price number WAVE WAVE as hits, So business for environments, in have do itself typically to well well. because get they're steel of inflation ahead they months. to the

would couple I some next So would be margin the likely expect – over quarters. for WAVE of there enhancement

little For based be – most in it on steel cylinders, we're degradation. spread of as been be has we dollar as it'll And price But may the much business anticipate the part. then there a bit for I historically. a don't –

will margin gains, down, we're go dollar Overall, contribution respect some so FIFO there with while change money making, the the it'll so prices have percentage degree. like will the risen. be to steel that And shouldn't significantly, that to appear although because

Joe Hayek

Phil. Hey,

with thought embedded was, mentioned. off in and question And that – just Andy's I finish so Andy – and workforce there related to your to both so

Everybody We to have all and country being been COVID and in been the nervous, that at challenged cases of unique and things. across challenged all not those is with quarantines, has and us. people

from other. each people happen out so job CDC it safe is. And other the the a our and terrific and are what But of for each keeping and things these our looking doing plants is again, protocol

able And and the it. if had could some business other to in produce have we sold so, we in consumer of more businesses, been certainly,

as that after healthy. of they're get and their we back people we've we the and up assuming more have labor, available ramped quarantine so obviously end And more hiring

kind expect next go, people better full that get so of we a as strength will to And little months back of but certainly bit over we be the at that few terms least. should in

Phil Gibbs

handling up for multipart Seth. trying keep Thanks to was Thanks. I my questions. with

should the recent history, Second – light is relative we to second a question for here. QX budget anticipate this least what at CapEx year? in

Joe Hayek

look terms being -- spent the in double quarter probably if QX for and first expect pretty being what half. the you what it pretty second of average second and think, at what light, sorry, we half, you spending heavy those in the was I could QX in

we've earlier, projects growth that are CapEx think, mentioned coming really got what Andy attractive up. As some, we are

that pretty you those. And expect, cost us excited so, we're about might will as some But, money.

Phil Gibbs

you. Thank

Andy Rose

Thank you. cash there, The now. $XXX a balance million news good Phil, we is that have exceeds right

CapEx So take capital we're as other projects, in as opportunities. to allocation advantage a good of those spot well

Phil Gibbs

Andy. Thanks,

Operator

question of with line next with from Please Independent. John your Your John Tumazos comes question. Tumazos proceed

John Tumazos

able orders, get have enough much. very turn to or customer down you you grade Thank to there's steel? steel you had of of enough not each been Have because any

Andy Rose

the our are us. and are need for customers is single mill the what having conversations mill get to our market ultimately, we partners they and, very, partners John, very same and everybody trying our tight day, with every doing thing

so, it's are of And and of let's get be customers trying just getting in those without can. and whoever is as a is very to into everybody challenging everybody we best time and take ecosystem customers, level this to this might we where through stay, aware care quickly as for specifics,

John Tumazos

or galvanized or us Ohio, you tighter, easier versus is processing any for anything or to or your whether Can rolled Buffalo whether or get in to hot Indiana as steel rolled give it's insight like somewhere cold that? else,

Andy Rose

anywhere. to same. everything know pockets I are we we're answer certainly think can is not where are we as and overall, get geography the like steel the doing it's partners but, our as There easy matters, we doing

can't that, any specificity than more you So, reliably give John. we probably

John Tumazos

good confess I something on I any Four to a or out busy placement a get million Is there rationale haven't done? in to them lend new I've tried a had few or the they're your $X times a in years managers private done say, desire company. whenever as part or one over phase, as your Nikola. a help five to trying

Andy Rose

passive Nikola -- XXXX free. Yes. we then seeded us. The best we say company investor John, we probably, helped ways since, They it way capital to a them and it have raising of been outside essentially the maybe third-party with set capital company separate of started went we the in is, start kind their and

have operationally investments. financially all at not or our And so, we original been beyond involved

we got two three So, or paid back $X in million fact, investment ago. years our

capital we really So even then. since at had haven't risk

he's of they’re over but a lot respect working he's a to think And I there. nice market. capable and Mr. to Russell, a have built their We feverishly for guy team very get product

John Tumazos

million still you X lock same XX. the own your Presumably through shares up the as November

Andy Rose

correct. That's

John Tumazos

With Do thing proceeds, offering. to the their recent to GM say be through into million they their having away, or raise you need you'd financing next along? them help money XX% fallen presumably, think of that $XX public a your to willing put

Andy Rose

on they burn their need Well, of million million have sheet don't rate now, John. balance or capital less cash is right than that. and They far $XXX $XXX their

capital the need all So for product line was now systems. do in which large us the think that investment not to that's a road, private This they at we're equity extent around and around -- time a strategic I was to don't investors. down raise the we were fuel

do public don't that's investments. the way companies. typically in invest So large we We

John Tumazos

Thank you.

Operator

John from Tumazos comes your with Your [Operator question. line Please proceed with question Tumazos of Independent. Instructions] next John the

John Tumazos

Samuel recently of and interest expanded the been profitability income or… the the from the net of acquired Is JV because increase deduction in minority

Andy Rose

Mostly yes.

our and as correct You're the majority owned Coil which include Samuel Spartan. venture, in JVs Processing WSP improvement reflection and a well the TWB, strength John. as of Worthington is It

John Tumazos

you. Thank

Operator

Rosenfeld question. with with line question from your of Exane Seth next Your the proceed Please BNP. comes

Seth Rosenfeld

Thank you.

any on WAVE spoke offices comment look last JVs things are you headwinds trends? ClarkDietrich that follow-up, the that all non-resi some sort. please. we Are able businesses? think quarter, and demand Just weakness exposed, most across one current the are of at about I two seeing When you you to those two for of construction at and meaningful

Joe Hayek

meaningful April of in kind weakness other in trough any Seth I from way than the So not other a say May. recovery slow would

think was I quarter-over-quarter and down their X% slightly. were volumes WAVE's down with profitability

they recover to but GDP So with see them continuing we construction, were year. this below and last where with time certainly still

Seth Rosenfeld

very much. you Thank Okay.

Operator

this I back in And questions at any the over further are time presenters call for closing there remarks. no to queue. turn the

Andy Rose

joining hope enjoy again family. and to thanks listening some I Well Year. that forward safe us look We a today. you right. everyone get happy quality has for season to the speaking a your after and All to holiday time chance New everyone with

Joe Hayek

Thanks everyone.

Operator

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

may disconnect. You now

Worthington Industries (WOR) 17 Dec 202021 Q2 Earnings call transcript