WS — Worthington Steel, Inc.

Summary of Worthington Steel, Inc. Q3 2026 Earnings Call

1. Key Financial Results and Metrics:

• Net Sales: $769.8 million
• Adjusted EBITDA: $41.6 million
• Adjusted Earnings Per Share (EPS): $0.27
• Net Income: $10.4 million ($0.20 per share), down from $13.8 million ($0.27 per share) year-over-year.
• Total Shipments: Approximately 818,000 tons, a decrease of 7% year-over-year.
• Free Cash Flow: $33.0 million, benefiting from reduced working capital.
• Capital Expenditures: $30.0 million, with expectations for total CapEx in fiscal 2026 between $110 million and $115 million.

2. Strategic Updates and Business Highlights:

• Kloeckner Acquisition: The acquisition process is progressing well, with a voluntary public tender offer launched in Germany. The company is confident of meeting the 57.5% minimum threshold for shares and expects to close the transaction in the second half of the calendar year.
• Market Performance: Direct shipments to the automotive sector increased by 10%, significantly outpacing the overall market growth. The company is also seeing positive developments in agriculture and data center construction.
• Electrical Steel Investments: Progress in expanding production capacity in Canada and Mexico is on track, with over 60% of new capacity sold. The company is adapting to shifts in the automotive market towards hybrids.

3. Forward Guidance and Outlook:

• Market Conditions: The company is cautiously optimistic about the second half of calendar year 2026, anticipating a recovery in key markets and improved conditions in automotive and agriculture.
• Steel Pricing: Expectation of continued volatility in steel prices, with projected inventory holding gains of $15 million to $20 million for fiscal 2026.
• Operational Improvements: Continued focus on automation and AI to improve efficiency and reduce manual processes across the organization.

4. Challenges and Points of Concern:

• Declining Metrics: Adjusted EBIT decreased to $20.0 million, down from $25.3 million year-over-year, primarily due to lower toll processing volumes and increased SG&A expenses.
• Market Headwinds: Softer demand in Europe, particularly in electrical steel and automotive markets, with increased competition from China. The company is taking actions to address these challenges.
• Operational Challenges: Weather disruptions impacted supply chain performance, leading to missed shipment opportunities.

5. Notable Q&A Insights:

• Market Share Gains: The increase in automotive shipments is attributed to successful market share gains, despite overall automotive production being flat.
• Kloeckner Investment Strategy: The company used $101 million of its ABL to purchase approximately 8% of Kloeckner shares, indicating a strategic move to secure shares ahead of the tender offer.
• Debt Levels Post-Acquisition: Management expressed confidence in maintaining current debt levels, indicating no immediate plans to shift towards a more equity-heavy capital structure despite economic uncertainties in Europe.

Overall, Worthington Steel, Inc. demonstrated resilience in a challenging macroeconomic environment, with strategic initiatives aimed at growth and operational efficiency, while also addressing market headwinds and competitive pressures.