- Earnings call transcript Q2 2023

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Operator

Good morning and welcome to the Worthington Industries Second Quarter Fiscal 2023 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’d now like to introduce Marcus Rogier, Treasurer and Investor Relations Officer. Mr. begin. may you Rogier,

Marcus Rogier

Executive Good Officer. fiscal and our XXXX Andy Gilmore, and we Chris. Financial Worthington’s Industries and Officer; call to second have Geoff Chief President Worthington's quarter earnings Chief Rose, Joe morning, you, Hayek, welcome Chief Operating everyone Worthington’s Worthington today, Officer; Thank call. On

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

Joe Hayek

by results, impacted related the the prior planned calendar pre-tax XXXX. $X.XX complete and and separation as Thank some Gilmore a There the share incurred of reported of steel which of to a Steel our the in and $X.XX In including consolidated we products, Geoff, to unique the energy go color versus a provide were additional million I we Officer will or and our on morning businesses. then through share quarter. We expenses $X businesses QX, quarterly know, business, sustainable Geoff products go results be Steel’s complete the over earnings processing CEO some business planned many our following. early consumer is items solutions that good and you, will Marcus the the expect the you building of of results. year current $X.XX we separation will Chief of Operating share when everyone.

quantify quarter will contemplated costs each separation forward complete. going those the until We is

incremental finally, related acquisition We due of share expenses by in And associated and of with acquisition. remaining we recognized also quarter. $X.XX our per a the compared steel benefited venture’s with year the a to gains earn-out LevelX that $X.XX recent to of WSP associated tools the $X.XX to joint prior share restructuring facility. our gains divestiture share processing of last restructuring This

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

billion sales Consolidated by X% average prices prior quarter share. Processing, from in offset had In or to holding compared holding addition, QX, gains inventory in share quarter, swing $X.XX share estimated $XX net inclusion in partially the unfavorable is an of $XX prior the million, lower primarily Tempel year in we which the a year, a of inventory decreased combined selling or losses be $X.XX $X.X million Steel. million of $X.XX to lower $XX of the volumes a with due the Steel to

prior processing. Our inventory from the the gross for gains in gross million $XXX was losses holding margin to from decreased to versus to swing primarily the year profit in quarter due XX% million steel $XXX X% and

respect EBITDA and cash flow in Our our cash sheet, free and million. adjusted and year EBITDA million trailing was million. With of in flow in our $XXX QX quarter $XXX operations to was last is $XXX QX flows the now was cash down adjusted $XXX from $XX million from XX-month million balance

have XX over in We $XXX last generated in million the cash flows free months.

unconsolidated received JVs. in in $XX dividends, sales, from paid million QX, and dividends $XX in invested proceeds million we from on During received projects, million $XX the our capital asset $XX million Like quarter, in unconsolidated in equity our allowing prior that quarter from earnings not them received payout their fiscal during distributed normalized, capital their earnings exceeded as were levels the to the the dividends have year. working JVs we

of Looking and position, was balance $XXX $X decreased interest million end at debt sheet a funded million basis. expense $X our at million sequentially quarter down and sequential also liquidity on

We are operating ratio X.XXx. with our leverage is trailing to low EBITDA debt roughly leverage and net

which We of credit also cash a liquidity of with Yesterday, in $X.XX XXXX. share million QX and facilities. is have per declared our in under and $XXX $XXX March the dividend Board ample ended for million in availability the quarter, payable revolving

X% of for offset minutes will The primary driven spend by were last the just lower million million consumers’ in of business two and selling prior was $XXX EBIT consumer each compared Adjusted We profitability. Consumer for decline to higher sales million, the X% quarter quarter. drivers EBIT in $XX by XX.X% under year. were $XX million the volumes. up was partially from in now few There the the and was average In prices, $XXX QX on a year net in which businesses. Products, increase margin

First, materially, retail but watching clear consumers their is sales that are spending. it discretionary not slowed,

inventory customers which quarter. addition lower volumes to our customer fixed reduced and led impactfully, more The levels decline result cost orders, the In absorption. in was during their retail a and significant lower

inventory to of acquisition the the including was of fair addition, by negatively write-up value. $X related of In quarter impacted to million market our expenses LevelX,

strong of continues as quarterly team for our the results have a an do through we business managing environment. not to challenging liked, excellent would the as While were consumer job

to from we up earnings will joint in going million see started inventory were equity levels $XXX have in year-over-year ordered lower economy. improvements higher levels. due and by last XX% in lines million Adjusted were demand very was partially Additionally, was decrease low product The early Building for $XX.X by stabilize, of and $X.X selling year in levels. many $XXX quarter. when which year saw volumes. And their net many the volumes overall normal customers saw to expected to saw or of above businesses, increase EBIT margin their slightly quarter. Products mix. owned on-hand we orders due $X.X of increase compared continued XX% favorable Building seasonally driven users million QX which strong was Similar $XX or million ClarkDietrich prior higher-than-optimal down in to by higher EBIT income million respectively our and wholly The uncertain our and margin offset and This Products demand softness WAVE driven the forward. selling has Products XX% we to end rationalizing and customers to average million product adjusted quarter $XX compared same was chains partially decrease grow, of are Building moderated believe results those in now while Consumer, in from what which operating to more were XXXX in XXXX, with a prices, In and in generated sales offset our supply primarily average prior and which QX, to tight and customers the year. inventories in inventory their at the lead was EBIT XX% our by demand customer million prices ventures,

slightly this business continued team costs. the in XX% from challenging the unique in generated be operating year of a up continues impacted higher And favorable prior that partially is outlook that average it the production see do a of very continues QX higher trends. by volumes will to to Geoff. million Solutions, as net by our point, fuels in seasonally $XX the more the was The and prices. up $XX inventory demand selling our offset market sales as executing, we economy, Sustainable we year SES level. an and the adjusted environment broader average to due EBIT hydrogen and team normal business. quarter, Energy In which and Europe, impact by compared were increased to I prices of to higher quarter will million turn Despite in stabilize, job demand was return million high ecosystems optimistic a end we customer over believe $X current prior about very levels alt to selling the excellent remain execute At at will While

Geoff Gilmore

of Tempel year, were last volumes, Thanks, Joe. lower prices QX partially were lower prices the acquisition. selling average And the per $XXX in from and $X,XXX under over we’re million peaked which sales at inclusion Steel XXXX of to offset $XXX of Steel ton. trading $XXX Steel half in Processing, by In due of net ton. XX% primarily million the recently, latter down per

quarter demand in experience Steel, a fiscal to primarily excellent quarter. electrification and compared It’s mentioned reported which or we to flat year’s we was relatively the large we of X both business. earlier, compared to million be be last prices $XX and business an did year lag gain prior were perspective, many of in strategic losses automotive, loss of see $XX of our the estimated million to total is could approximate some impacted spreads, driven the slowdown quarter, with compared year on negatively to and an construction holding swing $XX an lower were in prior The team addition lower the the year markets. last XX% driven in continue million anticipate than impacted we QX in our steel mix since demand inventory was million. inventory JV, be signs non-residential but Joe by to and quarter. second for were QX, the job been to compared in in managing a of quarter an $XX shipped have weakness exit loss in QX has market In executing which continues doing the unfavorable adjusted price mills year Our From were moderate tolling growing to and which tons by increased WSP. to XX% see indices, leadership slightly we Direct the lower million. stability processing the of and our volume million of XX% purchased in of the $XX which consolidated losses the down compared because prior XXXX, decrease it construction. holding end EBIT Steel The prove demand, the year to residential in stabilized year, year-over-year reported to Though meet by direct Tempel in outstanding by Tempel been initiatives steel QX, growth $XX that our tons will

and of our keeping they to as turn for I Andy. safe our teams At point, excellent all our people on delivering customers. remained while this am, over Lastly, focused proud it so, job of running an efficient operations, all I will doing

Andy Rose

good Geoff, morning, you, and everyone. Thank

trends are chain be price larger customers somewhat we several remained short-term continued the building impact Federal spending enter the quarter another there of from the represents earnings at destocking some market with headed driven rates steady and quarter in across a the and inventory but to Reduction the and Inflation continued our These and that waning. was of clearly markets Our Science our we despite of most supply Investment hikes. fiscal investment products appear recall as is government that challenges. economy debate trough momentum. to is second XXXX some around approved stockpiled And of product Act challenging, trillion result where solid Infrastructure a Chips will markets, underway. $X.X Act and the declines significant products by and demand Jobs offset steel and Reserve’s this Act, rate will optimistic calendar End consumer Higher

will the deliver want ebb and to and the money go gratitude of hard various to certainly quantify. who for our our chains. this for I to flow of employees supply above my beyond benefit Some despite customers to input is express and although almost businesses, costs extent continue our

outstanding the of of us evidence As Company received Business three work, our Daily as awards their Worthington quarter. Investors’ top hard ESG voted during XXXX.

their list Place IT XXXX Computerworld Responsible of us for for as Companies to Most Work named us to Best XXXX. the America’s named in Newsweek and

thank you. and steel rule All announced our dedication of company. hard work these our accomplishments culture Congratulations, that day. to of processing and own Last work separate public business golden to bring quarter, every our employees we its and the exciting plan and an reflect quality into the strength

financially two We strategically are their this with Worthington well-positioned calling initiative standing up companies potential. to the and XXXX full goal strong unleash of

opportunities planned In are ample building anticipation do been planned financial balance a fast-growing the on and to flexibility rule that asset capital to liquidity positioned XXXX, cash, are automotive complete, drive growth Worthington of in be poised separation strategies value. in not market-leading to companies. we advantage electrification, steel and with and of and best-in-class both benefit in happen. to business will Our transformation, their hard. that excellent the separation strengthening steel Worthington similar in so this and with track make any laminations, principles sustainability, modest early capitalize have and outdoor likely to we With maximize sustainability key mindset continue And from sector And Once our to lower trends intensity, anticipate sheet Both the and and construction building philosophy material processor have be team with shareholder run products sustainable utilize products, we have infrastructure and living. acquisitions is consumer business will of premium allocation system spending. take multiples. changes We is both business working innovation our complete. growth a Steel to electrical trends leverage potential. we in should light-weighting to will continue is higher once and margins energy on golden businesses and companies technology, for our by

So challenging, with teams, shareholders headed. while excitement our was results. solid. the you will and our the combined strength Demand hope bright. our when in primarily market where decline are poised of we to future our quarter are other in take we well I employees, is and return prices, stakeholders, is capitalized suppliers, To steel a all better rapid for we any excellent customers, now questions. to And share due for and

Operator

Our with Capital first Thank Gibbs you. KeyBanc is Instructions] Markets. Phil from [Operator question

open. is line Your

Phil Gibbs

morning. good Hi,

Andy Rose

Phil. morning, Good

Joe Hayek

Good morning.

Phil Gibbs

seasonality. just firstly on Question is

You out businesses extent, was recent construction. some consumer in there sizable in destocking your and in then quarter, your to that pointed some notably

quarter, I that about it. typically or volume I’m November think the standpoint a than a third quarter in thinking from line is correctly, if the little pretty lower with

right seasonal second out should similar to So you’re patterns now? those versus expect we should where saying play quarter, that at relative the you’re

Joe Hayek

that’s fair. think I

so And some a upside. the destocking think is we little see I and seasonality most think of of that not bit done do returns. XXX%, but we sequentially,

Phil Gibbs

the In terms positive in second, okay. of the the bit seasonality versus quarter little being a third

Joe Hayek

Sorry.

certainly April, So flat. because wholly-owned more But a little earlier. products there the seasonality the seasonally normal businesses It’ll is more on is relatively building time might more growth March, destocking May. take consumers saw like

Phil Gibbs

less the versus maybe And And the this next little I makes have going sense. out bit a half quarter, called in past to that the is swings correctly million then you That hear quarter? of then on guys inventory there? $XX more headwind, Did a neutral. impact than be Geoff

Geoff Gilmore

quarter, this Yes, Phil, this quarter. is think Geoff and you heard and me correctly, $XX to And last $XX million this approximately current would be saw what million. headwind similar that QX, very probably you I year,

Phil Gibbs

now? over see covering down? right does around take or Is should million or largely you. $X what three So pretax, are million, quarters, And or separation we think this those is the – up I of cost the level last the half, the million. just $XX one, this quarter, four Does next go that And up? that that then, $X thank costs take spend

Joe Hayek

those I reasonable down are be will that costs in that’s will terms the $XX we is And happen there range. will associated $XX fee, I And and mean the with you. to line to And material of now Phil, numbers be bit between flow But a it in then might things be that advisory shouldn’t transaction-oriented etcetera. costs million costs think, little those think a of other out-of-pocket, gave addition there some all a ebb those fees. software, But million good and those neighborhood, in separation. the potential estimate. the end I ultimately.

Andy Rose

the go we is the road, Phil, be companies determine there various financing the Joe may some that down of structures didn’t costs how and mention forward. once too, might capital One cost,

Phil Gibbs

It sense. Thank makes you.

Joe Hayek

Thank you.

Operator

question is The next Jancic from Markets. Capital Katja with BMO

Your line open. is

Katja Jancic

Hi, Thank you for morning. good taking questions. my

Andy Rose

Good morning.

Katja Jancic

quarters, talk a how – processing the you or over the developing about quarter the can please? First, you and two margins next what bit non-steel little business see

Joe Hayek

have you Consumer Products volumes it’s as to as low the So, outrun you fixed margin-wise, again, your destocking harder costs. are, in when they business, have and

it And QX, had likely in steel input – last should in sequentially Consumer so in for Products, some year. In particular. it we different QX we be than although I better had worse was no think of costs

So, recovery volume then story Products, those as back. as But space by V-shaped QX as sort things improvement of Andy seeing were won’t more talked expect about don’t of some means. the bit we any year. the a it’s But probably be high when of Products to do a last get sequential in to in And they there, expect really in well. little terms Building going same we continuing Building It’s trough be helpful revenues. just

Katja Jancic

maybe said you to be up that? the CapEx, provide Okay. it’s on or update stand, an can year-over-year. XX% going XX% Does previously then, quickly still you I And on think that to

Joe Hayek

Yes.

are We through year. the halfway

million are for We still trending $XXX around the year.

Katja Jancic

on Okay. lastly, steps what expect we should kind separation, from next? just or we next will the the see what And then you, are of

Joe Hayek

Yes.

of actually progress and us to for think focused areas, quarter, to in to state for a the have of next in we So, two teams lot the companies. future current start analysis both both step made about state analysis is companies. starting Probably then major the populate current really

some year. the And after Xst the will on announcements so Got likely that’s of there that it. be

we welcome. more or so that at And are just we slightly You are said to thing, early on come. pace, of have ahead to add to one tracking be XXXX,

Katja Jancic

Okay. Thank you.

Operator

Independent is Research. with John Very from [Operator John Tumazos next Instructions] question Tumazos The

is Your open. line

John Tumazos

for assets you describe Thank the you much. very Could in million sale? $XX held

Joe Hayek

a John. us there, give second Yes,

up firing the are We supercomputer.

John Tumazos

of restriction on I there are buybacks no is another explanation? buying there you quarters. there working back Is that separation, or legal on two for see because stock is the something While a when straight

Andy Rose

legal the a up of point restriction until was announcement. There

trading kind under we today, of are windows. normal of As

achieve they built this up get can will cannot to that tell wanted had buying well stock. we no and we because in but won’t capitalized our be don’t our we to we I million are that not of build both of of best at we means consciously point at have sure can $XXX stock out reason there that’s anticipation buy I stock, very also to think necessarily gate. to that say the rating been end, that I back you So, bias up making is credit of purchase the a that cash. I upwards that made companies this will least balance cash decision quarter point. think

We a that continue by steel to higher-priced with steel, but pretty cash. prices And we to build decline earn in steel driven of replace continue lot is good as the lower-priced we money. also

those things So, of that helping two that build us combination is the cash.

Joe Hayek

And to question, John, a sale, back held circle you for just us $X first it’s The to for there. scared million. assets your minute

might have one it’s be you there. $X think just sale. line on we a for building I off printer your that million It’s

John Tumazos

sale running Was at reason Steel the Worthington not strip for the melt, U.S. of Michigan they’re in shut the specialty but the Great rouge that products the old plant, the mill. and hot Lakes

the same. the sources steel So, aren’t of

Geoff Gilmore

remain we strategically for was portfolio. mean reason and a longer. like John. we rigorous any the at it fit we didn’t not it, business to strategic have do That’s are program. always our I portfolio just our fit that that capital something and businesses like the we long-term, management Is a want feel they in And looking

that interest sell in seemed to So, to of continuing best it. the run it versus shareholders

John Tumazos

Thank you.

assume million steel stayed account as the process at little The enough buying or inventory customers accounted is for or materials work raw price year movements the inventory else you accounts, large. a the or unfinished million down, in products, the year expected. stayed finished and a movements very quickly either accumulated, prices sheet, the with finished at inventory now are materials and finished have little middle the was Should inventory ago? this because steel very less you would with at deal have accounts. flavor the that for economy didn’t a give just product raw in And that the large great $XXX $XXX the lack one fell of inventory Looking us cheap we with a on-balance slowing the

Geoff Gilmore

Yes.

big driver side, and some in think were on embedded were to get John, down are and ago, are the I ready and real Building more question answers raw there the I and really buckets. there Products going any processing And mean we than seasonality. is And the then, of driven have side side. we So, But be to month side Consumer by could prices on of the things. the January your year we what you different buying on you coming tends of had your had then a steel do – up you some orders Steel goods a sort We in in more question. the the – is the couldn’t keep inventory. finished satisfy. pretty

And could setting make them. so we as we literally out soon the things were as door

And so especially were ago. levels, inventories just year have seasonally returned to a they more where to relative normal

John Tumazos

month. And for of you. to advisors what million Thank lot $X hell know. it’s But charging don’t you. are you you tell what a money a Thank already I of know those a you

Andy Rose

we definitely have happy It the process. very and But the that helping really an we are our we have far. we happy with are And done teams teams is own thus work us. with that expensive

John Tumazos

glad Thank you. I just have like am don’t I that. advice any

Andy Rose

Sure.

Operator

at It any I appears further presenters we turn will to this questions for Instructions] remarks. no closing that time. it back the [Operator have

Andy Rose

a We terrific Well, Christmas, season holiday Year. Alright. thanks and everybody a a Merry us everyone New today. joining Happy wish for

will We XXXX. in talk you to

Joe Hayek

Thank you.

Geoff Gilmore

Thanks.

Operator

this Ladies and conference for participating. today’s you Thank concludes gentlemen, call.

now disconnect. may You

Worthington Industries (WOR) 21 Dec 222023 Q2 Earnings call transcript