Worthington: Inventory Holding Losses Pull Down Q1 Profits

All told, Worthington reported net earnings of $64.1 million in its fiscal Q1’23, down nearly 52% from $132.5 million in fiscal Q1’22 despite net sales rising 27% to $1.41 billion in the same period.

The increase in net sales year-on-year (YoY) was driven by contributions from the acquisition of Tempel Steel and higher average selling prices across all segments.

“Steel Processing was negatively impacted by inventory holding losses in the first quarter, but our Building Products and Consumer Products segments both continued to perform exceptionally well,” said Andy Rose, Worthington’s president and CEO in comments released with earnings data on Thursday, Sept. 29.

Worthington’s Steel Processing division recorded adjusted earnings before interest and taxes (EBIT) of $34.9 million in FY Q1’23, down $72.8 million from FY Q1’22. The main reason was an inventory holding loss of $48.6 million in FY Q1’23 compared to inventory holding gains of $47.1 million in FY Q4’22.

Consumer Products’ net sales totaled $188.7 million, up 28%, or $40.9 million, over the prior year quarter due to higher average selling prices and contributions from the acquisition of Level5 in Q1’23.

Building Products’ net sales totaled $150.3 million, up 31%, or $35.6 million, over the prior year quarter on higher average selling prices, the company said.

Sales in the company’s Sustainable Energy Solutions division totaled $30.8 million, up 21%, or $5.3 million, from the comparable prior year quarter due to higher volumes.

Rose put a positive spin on the outlook for Worthington’s 2023 fiscal year: “Most of our businesses are holding up well despite increased market volatility and a murky economic outlook. Our teams are ready to respond to market demands, up or down, as changes occur,” Rose said.

Worthington announced it is splitting the company into two separate business, creating a standalone Worthington Steel (see related story).

By David Schollaert, David@SteelMarketUpdate.com