Worthington Steel(WS) - 2026 Q2 - Quarterly Report

Financial Performance - Net sales for the three months ended November 30, 2025, were $871.9 million, an increase of 17.9% compared to $739.0 million for the same period in 2024[20] - Gross margin for the six months ended November 30, 2025, was $208.4 million, up from $180.4 million in the prior year, reflecting a 15.5% increase[20] - Operating income for the three months ended November 30, 2025, was $21.7 million, compared to $18.9 million for the same period in 2024, representing a growth of 14.8%[20] - Net earnings attributable to controlling interest for the three months ended November 30, 2025, were $18.8 million, a 46.9% increase from $12.8 million in the same period last year[20] - Net earnings for the six months ended November 30, 2025, increased to $60.1 million, up from $48.3 million in the same period of 2024, representing a growth of 24%[27] - Earnings per share attributable to controlling interest for the six months ended November 30, 2025, was $1.12, up from $0.83 in the same period last year, an increase of 34.9%[20] Assets and Liabilities - Total assets increased to $2,150.0 million as of November 30, 2025, compared to $1,961.8 million as of May 31, 2025, marking an increase of 9.6%[15] - Total current liabilities decreased to $584.9 million as of November 30, 2025, down from $631.5 million as of May 31, 2025, a reduction of 7.4%[17] - Total shareholders' equity increased to $1,248.7 million as of November 30, 2025, compared to $1,197.9 million as of May 31, 2025, an increase of 4.2%[17] - The balance of shareholders' equity at November 30, 2025, was $1,248.7 million, up from $1,145.1 million a year earlier, reflecting an increase of 9%[28] - The Company reported a total debt of $182.1 million as of November 30, 2025, compared to $151.5 million as of May 31, 2025, reflecting an increase of 20.5%[66] Cash Flow and Investments - Cash and cash equivalents increased to $89.8 million as of November 30, 2025, compared to $38.0 million as of May 31, 2025, reflecting a growth of 136.8%[15] - Net cash provided by operating activities decreased to $93.0 million from $122.6 million, a decline of 24%[27] - The Company reported a net cash used in investing activities of $54.3 million, slightly down from $55.2 million in the prior year[27] - Financing activities resulted in a net cash outflow of $41.9 million, compared to $55.6 million in the previous period, indicating a reduction of 25%[27] Dividends - The company declared cash dividends of $0.16 per share for both the three months ended November 30, 2025, and 2024, maintaining consistent dividend payments[20] - The Company declared cash dividends of $0.16 per common share, totaling $8.3 million for the period[28] Acquisitions and Spin-offs - The company completed a spin-off from Worthington Industries, becoming a stand-alone publicly traded entity on December 1, 2023[32] - The Company completed the acquisition of 52% of S.I.T.E.M. S.p.A. on June 3, 2025, with results included in consolidated financial statements on a one-month reporting lag[34] - The acquisition of 52% of Sitem Group was completed on June 3, 2025, with a total purchase price of approximately $48.9 million in cash consideration and a cash capital contribution of $11.3 million[107] Market and Industry Insights - Worthington Steel is positioned as a leading value-added steel processor in North America, serving diverse end markets including automotive and construction[31] - The automotive industry accounted for 56% of net sales for the three months ended November 30, 2025, up from 52% in the same period of 2024[42] - Direct sales for the six months ended November 30, 2025, were $1,683.6 million, an increase from $1,490.8 million in the same period of 2024[55] Operational Performance - The Company recognized total net sales of $1,744.8 million for the six months ended November 30, 2025, compared to $1,573.0 million for the same period in 2024[55] - The Company reported a pre-tax impairment charge of $0.6 million during the second quarter of fiscal 2026 due to a reduction in net asset value of certain machinery[46] - The Company recognized interest income of less than $0.1 million related to the cross-currency swap during the three months ended November 30, 2025[127] Economic and Regulatory Environment - The U.S. inflation rate remained above the Federal Reserve's targeted rate of 2%, impacting economic conditions[172] - The U.S. government increased tariffs on steel and aluminum from 25% to 50% in June 2025, creating uncertainty in global trade and potentially impacting financial performance[175] - The company expects cash tax savings in fiscal year 2026 due to provisions in the One Big Beautiful Bill Act, although the overall impact on financials remains uncertain[176] Risk Management - The company utilizes derivative financial instruments to manage commodity price risk, foreign currency exchange risk, and interest rate risk[117] - The company has established strict counterparty credit guidelines to mitigate counterparty credit risk associated with its derivative financial instruments[122] Restructuring and Future Outlook - The company plans to combine its toll processing manufacturing facility in Cleveland, Ohio, with its existing facility in Twinsburg, Ohio, as part of restructuring activities[211] - The company believes it has adequate resources to meet operational needs for at least the next 12 months, including cash and cash equivalents[212] - Uncertain economic conditions and a heightened interest rate environment may impact the company's ability to access capital markets[213]