Worthington Industries, Inc. (WOR) on Q3 2021 Results - Earnings Call Transcript
Operator: Good afternoon, and welcome to the Worthington Industries Third 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 the Worthington Industries. If anyone objects, you may disconnect at this time. And I'd now like to introduce Marcus Rogier, Treasurer and Investor Relations Officer. Mr. Rogier, you may begin. Marcus Rogier: Thank you, Tamia. Good afternoon, everyone, and welcome to Worthington Industries third quarter fiscal 2021 earnings call. On our call this afternoon, we have Andy Rose, Worthington's President and Chief Executive Officer; and Joe Hayek, Worthington's Chief Financial Officer. Joe Hayek: Thank you, Marcus. Good afternoon, everyone. In Q3, we reported earnings of $1.27 per share versus $0.27 in the prior year quarter. There were a few unique items in the current and prior year quarters to call out that include the following. We incurred pretax restructuring and impairment charges of $28 million, or $0.16 per share, in Q3, primarily related to the exit of our unprofitable oil and gas business, which we divested at the end of January. This compares to charges of $0.48 per share in the prior year quarter. We recognized a net pretax benefit of $4 million, or $0.07 per share, on our investment in Nikola Corporation during the quarter. This benefit was primarily due to us selling our remaining shares of Nikola for $147 million. In total, we realized cumulative pretax cash proceeds of $634 million from our investment in Nikola and contributed $20 million in shares to the Worthington Industries Foundation, establishing a charitable endowment supporting worthwhile community causes. The prior year quarter included an $0.11 per share benefit related to a gain on the consolidation of our Worthington Samuel Coil Processing JV, combined with the lowering of a reserve associated with the tank replacement program within Pressure Cylinders. Excluding these items, we generated a record $1.36 per share in earnings in Q3, compared to $0.64 in Q3 a year ago. Consolidated net sales in the quarter of $759 million were relatively flat compared to $764 million in the prior year quarter. Our reported gross profit for the quarter increased by $49 million from Q3 last year to $164 million, and our gross margin increased to 21.6% from 15.1%, as we had inventory holding gains this quarter and losses in the prior year quarter. Our adjusted EBITDA was $126 million, up from $79 million in the prior year quarter and our trailing 12-month adjusted EBITDA is now $364 million. Our adjusted EBITDA through the nine months ended February is $297 million. We had a very strong quarter with solid demand across most of our end markets, and our teams continue to execute very well and are focused on delivering value to our customers. Andy Rose : Thank you, Joe. Good afternoon, everyone. Our fiscal third quarter was a record financial performance. We faced some lingering operational challenges including steel supply shortages, staffing issues related to COVID quarantines and some extreme weather, all of which impacted production schedules. But our teams did a terrific job and we delivered outstanding results. The good news is that demand is excellent across most of our end markets and there does not appear to be any signs of let-up. We continue to be grateful to our mill partners who are working hard to ensure that we receive steel in a timely manner. The rapid rise in steel prices over the past two quarters created large inventory holding gains in our steel processing business. We have been raising prices in our downstream manufacturing business to offset increased raw material cost. I want to give yet another shout out to the dedicated employees Worthington Industries, who have come together in inspiring ways to keep our operations running safely and effectively in these trying times. Without question our people deserve recognition for these exceptional financial results. So with our core businesses performing well and the cleanup of our underperforming operations largely complete, our focus has shifted to accelerating our strategic growth initiatives. We continue to have sizable cash balance and a growing pipeline of attractive M&A opportunities that will accelerate our growth. Our lean transformation playbook and new product development and innovation will augment our M&A to drive shareholder value. Our opportunistic and balanced approach to capital allocation has served us well over the years. That approach led us to raise our quarterly dividend by 12% today, a reflection of our strong financial position and performance further rewarding our shareholders. With the vaccine rollout underway, we are hopeful that a normal business environment is only months away. We need to stay vigilant until such time as we can all come together again, but we are well positioned to come out of this pandemic stronger and more nimble than before. We have learned a lot this past year, including how to adapt quickly to changing rules and safety protocols, to manage and work remotely and perhaps most importantly, to be flexible in our daily activities to do what it takes to help get the job done. Operator: And your first question comes from the line of Phil Gibbs with KeyBanc Capital Markets. Phil Gibbs: Hey. Good afternoon. Andy Rose: Hey, Phil, good afternoon. Phil Gibbs: I had a question on Cylinders. You've made a handful of strategic maneuvers here, both buying things and selling things. You typically have positive seasonality in your fourth quarter -- your May quarter. But I just wanted to make sure we weren't missing anything from a baseline perspective, because there's some puts and takes. So, are you anticipating that there's going to be kind of normal seasonality versus this third quarter base or are there other things that we’re not considering that have come out? So just trying to understand the composition of the business now and what to expect? Andy Rose: Sure. Phil, we would expect a pretty normal seasonality in Q4. The businesses that we have divested of were actually on the margin probably less seasonal than the ones that are part of the core at this point, so we wouldn't expect that to change materially. Phil Gibbs: So this level, 255-ish of sales is a good base to work off of? Andy Rose: It seems reasonable than anything else, sure. Phil Gibbs: Sounds good. And you had mentioned in the release and I think in some of the remarks that there were some challenges in terms of steel procurement, obviously, supply lagging demand, had been a persistent theme here for a few months. Is that inhibiting your ability to see volume growth this coming quarter versus the February quarter or do you think the normal seasonality will prevail, and there’s also I guess some questions about the auto issues, which you're obviously very well aware of and involved in. So, help us think about what we should be expecting for just steel from a volume perspective given all the puts and takes right now. Andy Rose: Yes. I would say, Phil, you should certainly expect the normal seasonality uptick for steel processing. As you kind of mentioned, there are a few different variables here which are a little bit tricky to predict. One is the semiconductor shortage, which is kind of intermittently affecting the production schedules of some of our customers; you've got the steel supply issue, which -- it's hard to predict exactly when we will face those challenges. It was probably worse back in December, January timeframe. It's gotten better a little bit more as of late, although, it's a seasonal uptick. Our guys are kind of anticipating that we might see a little bit more of that in the kind of April, May timeframe. So, it's hard to say, but I still don't think, even if we do experience some delays related to those things, we're still going to have the reasonably good seasonal uptick that we normally experienced. Andy Rose: Yes. Phil, we also did have an outage in one of our facilities that was planned. It went a few days longer than planned. That was in Q3. And obviously, we hope at this point, nothing like that would recur in Q4. Phil Gibbs: Thank you, guys. And then lastly, on the strategic side, you're obviously flushed with cash right now and as Andy said, looking to pounce on growth opportunities. So, if you do go the M&A route, what are some of the things that you're interested in? Are you planning on branching out any of your silos? Are you staying within the core? And then secondly, what type of annualized CapEx, should we think about given, I'm sure you also got some organic opportunities as well? Thanks. Andy Rose: Yes, I would say on the M&A front, Phil, most of what we do will be in and around our core. There's certainly opportunities in steel processing. I think we've historically focused on kind of the higher margin, higher value-add segments there, which I think we would likely continue that. Within the Pressure Cylinders segment, you saw us recently do a sizable acquisition in the consumer product space. We think there's a tremendous amount of opportunity there. There's lots of businesses out there and we're doing our best to stay disciplined as well. Those businesses tend to trade at higher multiples then we have historically acquired businesses, but at the same time, they're -- in many cases worth it. So, I would expect if we were to do something in the next 12 months to 18 months. You could think about consumer products as an area where we might do something. And then in our core legacy cylinder business, the industrial product space, there's still -- it's still a highly fragmented market globally, so there are opportunities out there for that as well. So, it's an interesting time to be looking at M&A, because it's a little bit of the haves and have-nots have been created because of the COVID situation. So, when we look at companies, we're trying to filter through a lot of the changes that have happened in the last year, some of which are sustainable, some of which aren't. Joe Hayek: And Phil, just to round out your -- the answer to your question relative to CapEx, we would expect Q4 will be in the neighborhood of Q3. And then beyond that, I think our fiscal year of 2021, we're going to have some growth-oriented projects where we're done with those investments, and we'll make some more, so I wouldn't expect them to be radically different at this point in the year to come. Phil Gibbs : Good color. Thanks guys. Good luck. Joe Hayek: Thanks Phil. Operator: Your next question comes from the line of Tristan Gresser with Exane BNP Paribas. Tristan Gresser: Yes. Hi. Thank you for taking my question. If I may, on gains, you mentioned you expect those gains to continue into the next quarter. Can you give us a sense of the magnitude of this gain given the prices has continued to rise to some extent? Let's say, prices hold that does double, what kind of size we would be looking at? Joe Hayek: Good question, Tristan. We would expect that they would be in the neighborhood of where they were in Q3 with potentially a little bit of upside. Tristan Gresser: All right. That's helpful. And maybe, there's been -- you've completed a lot of operation in recent months, the disposing and acquiring. So, obviously, the business is changing a lot. Is it possible, you could provide a bit more color on the guidance for the next quarter? And I understand, it's difficult with what you mentioned in your commentary with the production challenges, but moving forward, especially for cylinder, what should we expect? Andy Rose: Yes. I mean, you know this. We don't give earnings guidance. The one thing I will point you to in Joe's comments is that, he sort of outlined $4 million of one-time expenses, two-thirds of that probably was related to two businesses we divested, which were losing money. So those losses obviously go away, but that's probably as much color as we can give without kind of crossing the line on guidance at this point. Joe Hayek: Yes, Tristan, we may have -- just to clarify, we may have an additional sort of one-time acquisition accounting charge for GTI to the tune of a couple of million dollars in the quarter, but that would be it. Tristan Gresser: All right. That's helpful. And maybe last question, on the chip shortage, what kind of impact have you seen so far? And what do you expect moving forward? Is it -- do you have the sense that the situation right now is worsening? Andy Rose: Yes. I mean, I'm not sure we're the best positioned to answer that question. To be honest, it's more of our customers. I mean, we obviously talk to our customers regularly. And I think earlier this week, you saw, I think it was a Ford facilities that delayed some production-related to chip supply, so that could impact us. But again, it's kind of hit and miss. I mean, a lot of these production lines are hand to mouth right now, so they're getting chips, but they're just not sure how much and how fast they can produce. So, it's a little hard for us to answer that question with any level of accuracy. Joe Hayek: Yes. And Tristan, as you know, in certain situations, they're actually building cars and leaving the -- sending doctors and the chips out with the plan on adding those later, but it's definitely something that we're keeping an eye on. We would say, it's had a pretty limited or muted impact on us thus far, but that can always change. Andy Rose: Yes. And we're fortunate in some respects, because over the last several years, we've migrated our business and so in our Steel Processing business, the business that we have going into automotive, about 75%, that’s an estimate, but around 75% of that business is non-sedan. Its truck, crossover SUV, van and things like that. And so, just given the profitability profiles of those vehicles for the OEMs, those are typically the last that they're going to shut down. Tristan Gresser: All right. Thank you, very much. Andy Rose: Thank you. Operator: And your next question comes from the line of John Tumazos with John Tumazos Very Independent Research. John Tumazos: Thank you. Could you walk us through the 124,000 ton Steel Processing volume decline versus last year? How much of it was, because you couldn't get as much steel? How much of it was, because the auto customers couldn't get chips? How much of it was because last year was a good period with one more leap day? Joe Hayek: Yeah. All good questions and I think the answer would be yes, and yes, and yes. John to be a bit more specific direct tons, which we candidly profit more from and I think are more our core business those were flat and so the decline was exclusively related to our toll tons. And you had a number of things you had mill outages and furnace outages. And with the toll business, oftentimes we're partnering and doing some of that for the mills. And so if they're not producing steel, obviously we're not going to toll code or toll process those tons. We also in certain situations when we could shift it from tolling to direct, really just trying to take as good care of our customers as we could and then in one of those facilities as I mentioned earlier, we did have an outage in December for a couple of weeks. And so that coupled with as you suggested give us a pretty good comp from Q3 of last year is really what drove that decline. It was 100% in the tolling business. John Tumazos: I know that it's hard to have another Nikola, but are there any more $2 million investments laying around the company? Andy Rose: Yes. I mean we have a few things that we see periodically John but – and we've talked – I mean, one of the things that's interesting about our business now is we're starting to incorporate more technology. We've made some investments in hydrogen in different areas. So I don't think there's another Nikola laying around right now but at least as obvious to anybody sitting around the table but we will continue to be entrepreneurial and to seed ideas or businesses that we think make a lot of sense. And as you know in the world of investing, sometimes you never know what you're going to get and you get surprised in places where you least expect it. So – but at least right now, I don't see any investments on our balance sheet that are worth $650 million right now. John Tumazos: When you make investments like this, do you expense them? Do you capitalize them? If you capitalize them, where are they on the balance sheets other assets? Where would we see --? Joe Hayek: They're typically not all that large, John. They're typically expensed. John Tumazos: Thank you. Operator: At this point, we will turn the call back over to the company for closing remarks. Andy Rose: Just want to thank everybody for joining us. And appreciate, yet again, all of the efforts of our colleagues at Worthington Industries. Thanks for joining us today. And we will look forward to talking to you again in June. Have a great afternoon. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
Worthington Enterprises Beats Q3 Expectations, Shares Soar 23%
Worthington Enterprises (NYSE:WOR) shares jumped more than 22% intra-day today after the company delivered a solid fiscal third-quarter performance, exceeding both earnings and revenue forecasts.
For the quarter, the company posted adjusted earnings per share of $0.91, well above analyst expectations of $0.70. Revenue reached $304.5 million, beating the $289.09 million consensus, despite a 4% year-over-year decline primarily due to the deconsolidation of the Sustainable Energy Solutions segment.
Excluding that impact, sales were buoyed by volume growth and contributions from the recently acquired Ragasco business, which joined the portfolio in the first quarter of fiscal 2025.
Profitability improved significantly, with earnings before income taxes up 30% to $52.6 million, and adjusted EBITDA from continuing operations rising 10% to $73.8 million. The company cited market share gains, a favorable product mix, and strong margin performance in core businesses as key drivers of the quarter’s success.
Meanwhile, Worthington’s joint ventures held steady, even as ClarkDietrich’s results normalized following a particularly strong prior-year period.
The company also demonstrated strong cash generation, with operating cash flow of $57.1 million and free cash flow of $44.4 million, marking year-over-year increases of 14% and 11%, respectively.
Worthington Enterprises Beats Q3 Expectations, Shares Soar 23%
Worthington Enterprises (NYSE:WOR) shares jumped more than 22% intra-day today after the company delivered a solid fiscal third-quarter performance, exceeding both earnings and revenue forecasts.
For the quarter, the company posted adjusted earnings per share of $0.91, well above analyst expectations of $0.70. Revenue reached $304.5 million, beating the $289.09 million consensus, despite a 4% year-over-year decline primarily due to the deconsolidation of the Sustainable Energy Solutions segment.
Excluding that impact, sales were buoyed by volume growth and contributions from the recently acquired Ragasco business, which joined the portfolio in the first quarter of fiscal 2025.
Profitability improved significantly, with earnings before income taxes up 30% to $52.6 million, and adjusted EBITDA from continuing operations rising 10% to $73.8 million. The company cited market share gains, a favorable product mix, and strong margin performance in core businesses as key drivers of the quarter’s success.
Meanwhile, Worthington’s joint ventures held steady, even as ClarkDietrich’s results normalized following a particularly strong prior-year period.
The company also demonstrated strong cash generation, with operating cash flow of $57.1 million and free cash flow of $44.4 million, marking year-over-year increases of 14% and 11%, respectively.
Worthington Enterprises, Inc. (NYSE:WOR) Reports Fiscal 2025 Q2 Earnings
- Worthington Enterprises, Inc. (NYSE:WOR) exceeded EPS estimates with a reported $0.60 compared to the expected $0.55.
- The company's net sales decreased by 8% to $274 million, slightly above revenue estimates despite the deconsolidation of its Sustainable Energy Solutions segment.
- Significant improvements in operating income and net earnings from continuing operations, with operating income at $3.5 million and net earnings at $28.3 million.
Worthington Enterprises, Inc. (NYSE:WOR) is a diversified industrial manufacturing company. It operates in various segments, including steel processing and pressure cylinders. The company competes with other industrial manufacturers like Steel Dynamics and Nucor. On December 18, 2024, Worthington reported its fiscal 2025 second-quarter earnings, showcasing a strong performance despite some challenges.
WOR reported earnings per share (EPS) of $0.60, surpassing the estimated $0.55. This 5% increase in adjusted EPS from continuing operations highlights the company's ability to manage its core business effectively. Despite an 8% decrease in net sales to $274 million, due to the deconsolidation of its Sustainable Energy Solutions segment, the company exceeded revenue estimates of $273.8 million.
The company's financial health is further supported by its strategic actions. Worthington repurchased 200,000 shares for $8.1 million, leaving 5,715,000 shares available for future repurchases. This move can enhance shareholder value by reducing the number of shares outstanding. Additionally, the company declared a quarterly dividend of $0.17 per share, payable on March 28, 2025.
Worthington's operating income improved significantly, reaching $3.5 million from a loss of $14.4 million in the prior year. Earnings before income taxes increased to $37.1 million from $24.5 million, and net earnings from continuing operations rose to $28.3 million from $17.9 million. These improvements reflect the company's effective cost management and operational efficiency.
The company's financial ratios provide insight into its valuation and financial stability. With a price-to-earnings (P/E) ratio of approximately 48.80 and a price-to-sales ratio of about 1.82, investors are willing to pay a premium for each dollar of earnings and sales. The debt-to-equity ratio of 0.35 indicates a moderate level of debt, while a current ratio of 3.56 suggests strong liquidity to cover short-term liabilities.
Worthington Enterprises, Inc. (NYSE:WOR) Reports Fiscal 2025 Q2 Earnings
- Worthington Enterprises, Inc. (NYSE:WOR) exceeded EPS estimates with a reported $0.60 compared to the expected $0.55.
- The company's net sales decreased by 8% to $274 million, slightly above revenue estimates despite the deconsolidation of its Sustainable Energy Solutions segment.
- Significant improvements in operating income and net earnings from continuing operations, with operating income at $3.5 million and net earnings at $28.3 million.
Worthington Enterprises, Inc. (NYSE:WOR) is a diversified industrial manufacturing company. It operates in various segments, including steel processing and pressure cylinders. The company competes with other industrial manufacturers like Steel Dynamics and Nucor. On December 18, 2024, Worthington reported its fiscal 2025 second-quarter earnings, showcasing a strong performance despite some challenges.
WOR reported earnings per share (EPS) of $0.60, surpassing the estimated $0.55. This 5% increase in adjusted EPS from continuing operations highlights the company's ability to manage its core business effectively. Despite an 8% decrease in net sales to $274 million, due to the deconsolidation of its Sustainable Energy Solutions segment, the company exceeded revenue estimates of $273.8 million.
The company's financial health is further supported by its strategic actions. Worthington repurchased 200,000 shares for $8.1 million, leaving 5,715,000 shares available for future repurchases. This move can enhance shareholder value by reducing the number of shares outstanding. Additionally, the company declared a quarterly dividend of $0.17 per share, payable on March 28, 2025.
Worthington's operating income improved significantly, reaching $3.5 million from a loss of $14.4 million in the prior year. Earnings before income taxes increased to $37.1 million from $24.5 million, and net earnings from continuing operations rose to $28.3 million from $17.9 million. These improvements reflect the company's effective cost management and operational efficiency.
The company's financial ratios provide insight into its valuation and financial stability. With a price-to-earnings (P/E) ratio of approximately 48.80 and a price-to-sales ratio of about 1.82, investors are willing to pay a premium for each dollar of earnings and sales. The debt-to-equity ratio of 0.35 indicates a moderate level of debt, while a current ratio of 3.56 suggests strong liquidity to cover short-term liabilities.
