Worthington Steel(US:WS)2025-03-20 13:32Financial 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] - 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 [25][27] - Construction market shipments decreased by 20% year over year, attributed to economic uncertainty and a prior year pivot to a construction-heavy mix [29] - Heavy truck market demand remained slow, but signs of improvement were noted, with expectations for GDP-type growth for the rest 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 farmers' 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] - Strategic capital expenditures and acquisitions are part of the growth strategy, with ongoing expansions in electrical steel capabilities in Canada and Mexico [12][13] - The company is exploring AI integration into its operating model to enhance efficiency and analytics [18] Management's Comments on Operating Environment and Future Outlook - Management expressed 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 noted that while there is uncertainty, they believe they are well-positioned for growth [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 in the process of closing a transaction for a 52% ownership stake in a steel lamination manufacturer [11] Q&A Session Summary Question: Impact of tariff policy - Management anticipates very little impact on business from tariff policies, with localized strategies in place to mitigate risks [37][40] Question: TWB charges and performance - Special charges related to TWB included a write-off of R&D and early retirement program costs, impacting quarterly results [42][43] Question: Expectations for underlying EBITDA normalization - Management indicated that normalization of underlying EBITDA is uncertain and heavily driven by market demand and volume [46][47] Question: Performance of Servius Aero - Servius Aero faced demand compression similar to the U.S. market, with impacts from exchange rate movements and inventory holding losses [53][54] Question: Construction market share efforts - The company is actively pursuing more opportunities in the construction market to regain market share lost due to economic uncertainty [60] Question: New automotive customer awards - New automotive programs are expected to ramp up over the coming months, contributing positively to volume and margins [64][65]