Worthington Steel(US:WS)2025-03-20 12:30Financial Data and Key Metrics Changes - Adjusted EBITDA for the third quarter was $41.9 million, down from $82.8 million in the prior year quarter [5] - Earnings per share decreased to $0.27 from $0.98 in the same period last year, impacted by lower volumes and average selling prices [6][21] - Net sales were $687 million, a decrease of $118 million or 15% from the prior year quarter, primarily due to lower direct volumes and market pricing [24] Business Line Data and Key Metrics Changes - Shipments to the automotive market were down 3% year over year, with production cuts at a major OEM affecting results [7][25] - Construction market shipments decreased by 20% year over year, attributed to economic uncertainty and a prior year pivot towards construction due to an automotive strike [29] - Heavy truck market demand remains slow, but signs of improvement are noted, with expectations for GDP-type growth for the remainder of 2025 [9] Market Data and Key Metrics Changes - The North American automotive market is forecasted to produce approximately 15.3 million units in 2025, showing flat builds year over year [7] - The construction market is expected to gain momentum in the second half of 2025, benefiting from anticipated interest rate cuts [8] - The agriculture market is expected to remain soft due to interest rates, commodity prices, and tariffs affecting purchasing decisions [9] Company Strategy and Development Direction - The company remains focused on investments in the electrical steel market, anticipating a 6% annual growth in power demand over the next 15 years [10][11] - Strategic capital expenditures and acquisitions are ongoing, with expansions in electrical steel capabilities in Canada and Mexico [13] - The company is pursuing a transformation strategy aimed at improving operational efficiency and reducing costs [14][15] Management's Comments on Operating Environment and Future Outlook - Management expresses cautious optimism about the near term, with expectations for improved clarity in the second half of 2025 [18] - The company is closely monitoring macroeconomic conditions, including inflation and interest rates, which could impact demand [47] - Management believes they are well-positioned for growth, with a strong focus on safety, quality, and customer service [19] Other Important Information - The company reported cash flow from operations of $54 million and free cash flow of $25 million for the quarter [31] - A quarterly dividend of $0.16 per share was announced, payable on June 27, 2025 [32] - The company is exploring AI integration into its operating model and expanding its advanced analytics portfolio [18] Q&A Session Summary Question: Impact of tariff policy - Management anticipates minimal impact on business from tariff policies, with localized strategies in place to mitigate risks [37][40] Question: TWB performance and charges - Special charges related to TWB included a write-off of R&D and early retirement program costs, impacting quarterly results [42][44] Question: Normalization of underlying EBITDA - Management indicates uncertainty in demand makes it difficult to predict when underlying EBITDA will normalize, but they are cautiously optimistic for the end of the calendar year [46][48] Question: Construction market share efforts - Management acknowledges a tough comparison in construction volumes but is actively pursuing opportunities to regain market share [61] Question: New automotive customer awards - The company has gained share in the automotive market, with expectations for increased volume and margin impact from new programs over the coming months [63][65]