Worthington Industries Q4 Net Earnings Double Y/Y

Steel processing posted net sales of $466.0 million, down 14 percent year-over-year primarily due to lower average selling prices. Operating income was $40.4 million, up $18 million from the prior year quarter. Executive vice-president and CFO Andrew Rose noted that an improvement in operating income was driven by recent increases in flat steel prices and modest market to-market gains on steel hedges. The mix of direct versus toll tons processed was 52 percent to 48 percent in the current quarter, compared to 62 percent to 38 percent in the prior year quarter.

Pressure Cylinder net sales of $218.6 million were down 13 percent from Q4 2015. The decline was driven by a 61 percent volume decrease in the oil and gas equipment business.

Engineered cab sales were down 37 percent year-over-year to $29.1 million. An operating loss of $1.2 million in the segment was an improvement of $2.6 million from the previous quarter as well as the year ago quarter.

“Despite the recent increase in oil prices, the equipment market continues to be extremely challenged and customer capital budgets for well drilling and completion remain limited. In response, we continue to adjust our cost structure, implementing another reduction in force during the quarter, our third since the downturn started,” said President and COO Mark Russell.

During the conference call Chairman and CEO John McConnell was asked to comment on the spread between domestic and foreign steel prices. Although Worthington Steel imports very little steel, McConnell said that with the current wide spread there is a lot of incentive. “I think we are anticipating seeing more products made of steel show up in the United States, as a result of the trade cases which takes a little time to manifest itself; but that’s another way to get steel into this country regardless of trade cases.”

Worthington does not plan to build inventory to take advantage of low prices. “We’re not inventory speculators,” said Rose. “We’re not going to do that just because we think prices are low, we don’t think that’s the right way to run our business. So at the end of the day we want to have the flexibility to flex up if the business does improve, and I think we’ve got that.”