Worthington Steel Reports Decline in Net Sales but Improves Operating Income in Q2 Fiscal 2025

Worthington Steel, Inc. reported a decline in financial performance for the second quarter of fiscal 2025, with net sales totaling $739.0 million, down 8.5% from $808.0 million in the same period last year. The decrease was attributed to lower volumes and direct selling prices, with direct tons sold decreasing by 5%. Despite the drop in sales, the company achieved a gross margin of $80.0 million, an increase from $60.2 million in the prior year, primarily due to favorable direct spreads and a reduction in estimated inventory holding losses.

In comparison to the previous fiscal period, Worthington Steel's operating income improved significantly, reaching $18.9 million, a turnaround from an operating loss of $8.8 million in the second quarter of fiscal 2024. The company reported net earnings attributable to controlling interest of $12.8 million, compared to a loss of $6.0 million in the prior year. Earnings per diluted share were $0.25, a notable recovery from a loss of $0.12 per share in the same quarter last year.

Strategically, Worthington Steel completed the spin-off from Worthington Enterprises, Inc. on December 1, 2023, establishing itself as a stand-alone publicly traded company. The separation involved a cash distribution of $150 million to the former parent and the assumption of certain assets and liabilities. The company also made a significant acquisition of Voestalpine Automotive Components Nagold GmbH & Co. KG for $21.0 million, enhancing its capabilities in automotive and electrical steel lamination stampings.

Operationally, Worthington Steel's total assets decreased to $1.739 billion as of November 30, 2024, from $1.866 billion at the end of the previous fiscal year. The company reported a reduction in accounts receivable and inventories, which fell to $372.9 million and $343.0 million, respectively. The workforce remained stable, with 49.5 million common shares outstanding at the end of the reporting period. The automotive sector continued to be the largest end market, accounting for 52% of net sales, with the company maintaining a strong position in the North American carbon flat-rolled steel market.

Looking ahead, Worthington Steel anticipates continued challenges in the steel processing industry, including fluctuating raw material prices and competitive pressures. The company is focused on leveraging its operational efficiencies and expanding its market share, particularly in the automotive sector. The management expressed confidence in the company's ability to generate positive cash flow and meet its financial obligations, supported by a robust credit facility that allows for borrowings of up to $550 million.