Worthington Steel Inc, trading as WS on the NYSE, reported QQ2 2024 results on a carve-out basis, reflecting the company’s emergence as a stand-alone steel processor with a focus on high-value, engineered steel products (notably electrical steel laminations for EV/motor applications). Revenue of $739.0 million yielded a gross profit of $80.0 million (gross margin ~10.8%), and an operating income of $18.9 million (operating margin ~2.56%). Net income stood at $12.8 million, with diluted EPS of $0.25-$0.26. Management highlighted a favorable swing in inventory holding losses ( pretax -$34.8 million vs -$53.1 million year-ago, a $18.3 million improvement) and meaningful margin progression versus the prior year, driven by higher gross profit despite SG&A pressures. The quarter was characterized by material strategic actions: (1) Nagold, Germany electrical steel lamination facility acquisition for ~$21 million, (2) Mexico and Canada electrical steel expansions, and (3) ramping up multi-market volumes to offset automotive disruptions, including the Detroit UAW strike. Cash flow remained robust, with operating cash flow of ~$139.9 million and free cash flow of ~$121.0 million for the quarter. On a trailing-12-month basis, free cash flow reached ~$261 million, underscoring strong liquidity and capital deployment capability. The company also completed a $550 million five-year revolver, supporting near-term liquidity and a planned $150 million cash dividend to Worthington Enterprises in conjunction with the separation. Management reiterated a long-term growth thesis anchored in organic expansion, strategic acquisitions, and the Worthington Transformation playbook (continuous improvement, efficiency, and higher-value product mix). While the QQ2 2024 quarterly results reflect a still-cyclical steel pricing environment, management stressed the anticipated reversal of inventory losses into gains in Q3 and beyond, with steel price recovery since October contributing to better profit capture going into 2H 2024 and 2025. The standalone platform presents multiple growth channels, including: EV/motor laminations, transformer laminations, and larger end-market opportunities in construction and energy transition projects. Investors should monitor steel-price dynamics, integration milestones for Nagold, Europe, and North American expansions, and the progression of automotive volumes in 2024–2025 as the primary drivers of earnings trajectory and cash generation.
Key Performance Indicators
Revenue
739.00M
QoQ: -11.39% | YoY:-8.54%
Gross Profit
80.00M
10.83% margin
QoQ: -20.32% | YoY:32.89%
Operating Income
18.90M
QoQ: -56.45% | YoY:314.77%
Net Income
12.80M
QoQ: -54.93% | YoY:313.33%
EPS
0.26
QoQ: -54.39% | YoY:316.67%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $739.0 million (YoY: -8.5%; QoQ data not provided in the release for QQ2 2024).
Revenue and profitability snapshot (QQ2 2024 vs prior year):
- Revenue: $739.0 million (YoY: -8.5%; QoQ data not provided in the release for QQ2 2024).
- Gross Profit: $80.0 million (Gross margin: 10.8%), YoY +32.9%; QoQ -20.3%.
- Operating Income: $18.9 million (Operating margin: 2.56%), YoY +314.8%; QoQ -56.5%.
- Net Income: $12.8 million (Net margin: 1.73%), YoY +313.3%; QoQ -54.9%.
- EPS (basic/diluted): $0.26 / $0.25 per share; YoY +316.7%; QoQ -54.4%.
- EBITDA: $38.1 million (EBITDARatio: 5.16%).
- Inventory and working capital: Estimated pretax inventory holding losses improved to -$34.8 million (vs -$53.1 million prior year; a swing of +$18.3 million).
- Cash flow: Net cash provided by operating activities $68.0 million; free cash flow $89.5 million for the quarter; trailing-12-month free cash flow $261 million.
- Capital expenditures: $21.5 million in the quarter; major investments focused on electrical steel expansions in Mexico and Canada; Nagold acquisition cash outlay ~ $21 million.
- Balance sheet highlights: Total assets $1.8973 billion; total liabilities $725.9 million; total stockholders’ equity $1.0403 billion; cash at end of period $52.0 million; debt total $269.8 million; net debt $55.4 million; cash and equivalents $214.4 million.
- Liquidity: Revolving credit facility finalized at $550 million (5-year term); variable funding to support working capital during price cycles and the planned distribution.
- Leverage and liquidity metrics: current ratio ~1.83; quick ratio ~1.10; debt-to-capitalization 15.6%; debt-to-equity ~0.19.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
739.00M
-8.54%
-11.39%
Gross Profit
80.00M
32.89%
-20.32%
Operating Income
18.90M
314.77%
-56.45%
Net Income
12.80M
313.33%
-54.93%
EPS
0.26
316.67%
-54.39%
Key Financial Ratios
currentRatio
1.83
grossProfitMargin
10.8%
operatingProfitMargin
2.56%
netProfitMargin
1.73%
returnOnAssets
0.74%
returnOnEquity
1.27%
debtEquityRatio
0.19
operatingCashFlowPerShare
$1.37
freeCashFlowPerShare
$1.81
dividendPayoutRatio
61.7%
priceToBookRatio
2.2
priceEarningsRatio
43.35
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways from the QQ2 2024 earnings call:
- Strategy and growth trajectory: Geoff Gilmore highlighted a Defined growth strategy centered on organic growth, strategic M&A, and continuous improvement through the Worthington Transformation framework, with expansions in Mexico and Canada and the Nagold, Germany acquisition as catalysts for accelerated growth in electrical steel markets. Quote: “We have a defined strategy with a strong focus on organic growth, strategic M&A and driving continuous improvement using our proven transformation process, and we already have taken action on that strategy.”
- Operational execution and safety: Jeff Klingler emphasized safety, quality, and capacity expansion, noting the Nagold acquisition and the Mexico expansion as critical to the global footprint for motor laminations and transformer laminations. Quote: “Our teams continuously work on ways to systematically reduce injuries… safety is a more productive environment.”
- Financial performance and one-off items: Tim Adams described carve-out results, including pretax separation expenses of $14.9 million, a swing in inventory holding losses, and an adjusted EBIT improvement to $6.6 million, driven by higher gross profit offset by SG&A increases. Quote: “In the current quarter, we had estimated pretax inventory holding losses of $34.8 million… a favorable swing of $18.3 million.”
- Automotive cycle and end-market expectations: Management projected a return to higher automotive production in 2024-2025 (5–7% growth) and anticipated construction market improvement, with softening in heavy truck and agricultural segments after record years. Quote from Jeff Klingler: “We are anticipating automotive up anywhere from 5% to 7%, which would put automotive build rates at $16.3 million.”
- Balance sheet and funding: Tim Adams noted the use of an ABL facility to fund working capital and impending dividends related to the separation, with cash management and a revolving credit facility in place for liquidity management. Quote: “We borrowed on that credit facility on November 30 in anticipation of issuing a $150 million cash dividend to Worthington enterprises.”
we also acquired an electrical steel lamination facility in Nagold, Germany for approximately $21 million.
— Timothy Adams
We have a defined strategy with a strong focus on organic growth, strategic M&A and driving continuous improvement using our proven transformation process, and we already have taken action on that strategy.
— Geoffrey Gilmore
Forward Guidance
Outlook and key factors to monitor:
- Automotive market trajectory: Management expects 5–7% calendar 2024 automotive production growth, implying continued demand for engineered steel solutions (electrical steel lamination cores for EV/motor applications). Monitor actual OEM production data and supplier capacity constraints, which could influence Worthington Steel’s volumes and pricing power in North America.
- Global EV/Transformer laminations expansion: The Nagold facility acquisition and Mexico/Canada expansions create a multi-regional footprint. Track start-up progress and ramp rates in Nagold (electrical steel laminations) and the Mexico Focus Factory expansion, which the company expects to begin near year-end 2024. The performance of these assets will materially influence long-run profitability and operating leverage.
- Price and margin dynamics: The company highlighted a steel price rebound since October and expects inventory losses to flip to gains in Q3 and beyond. Continued steel price volatility could influence gross margins and working capital needs. Robust cost control and production efficiencies will be critical to sustain the margin profile.
- Working capital and financing: With a $550 million revolving facility and planned distributions related to separation, the company’s liquidity structure is favorable to execute expansion plans. Watch capex cadence, integration costs, and potential working capital swings as steel prices move and demand cycles shift.
- End-market diversification: Beyond automotive, construction, energy and infrastructure spend, and transformer markets could offer upside. The company’s diverse mix in direct vs. toll volumes suggests strategic flexibility if one channel underperforms.
- Regulatory and macro risk: Tariffs, trade policy, and exchange rates could affect raw material costs and cross-border operations, especially with Nagold in Europe and North American manufacturing.
Overall assessment: The QQ2 2024 results imply a positive trajectory supported by a higher-margin product mix, steady cash generation, and a rapid expansion of global electrical steel capabilities. A key pillar of achievability will be integration success, ramp-up of international laminations facilities, and sustaining price/mix benefits amid steel-price volatility.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
WS Focus
10.83%
2.56%
1.27%
43.35%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Valuation and strategic thesis support a positive longer-term outlook for Worthington Steel given its rapid expansion into high-margin electrical steel laminations and EV-related components, along with robust free cash flow generation. The company’s separation creates a focused platform for shareholders to benefit from recurring cash generation, while expansions in Nagold (Germany), Mexico, and Canada create a scalable global footprint for laminated steel products. The near-term watch items include the ramp of new facilities, integration of Nagold, and the resilience of automotive demand as OEMs normalize post-strikes. Given current EBITDA margins around the mid-single digits and strong FCF generation, a disciplined capital allocation approach (maintenance capex, dividends, and selective M&A) could yield attractive shareholder value if the growth deltas from the expansions materialize as expected. Investors should monitor: 1) ramp timelines for Nagold and Mexico/Canada expansions, 2) steel price cycles and inventory performance, and 3) automotive demand and end-market diversification progress.
Key Investment Factors
Growth Potential
Growth driven by: (1) expansion of electrical steel laminations capability in Europe (Nagold) and North America (Mexico, Canada) and (2) ramping up new capacities to serve EV and energy transition markets. This positions Worthington Steel to monetize higher-value end markets beyond traditional carbon steel processing.
Profitability Risk
Key risks include: (a) ongoing steel price volatility affecting gross margins and working capital, (b) integration risks from the Nagold facility and cross-border operations, (c) sensitivity to automotive cycle and construction market demand, and (d) execution risk of expansion timelines (start-ups by late 2024/2025).
Financial Position
Solid liquidity profile with cash and equivalents of ~$214.4M and a $550M revolver; trailing-12-month free cash flow ~$261M supports dividends, deleveraging, and targeted acquisitions; modest debt load (total debt ~$269.8M; net debt ~$55.4M) with a healthy current ratio (~1.83) and debt-to-capitalization ~15.6%.
SWOT Analysis
Strengths
Standalone platform with a clear growth strategy centered on organic expansion, M&A, and transformation initiatives.
Diversified end-market exposure (auto, construction, heavy truck, agriculture, energy) with a growing EV/lamination focus.
Strong free cash flow generation and liquidity (Trailing-12-month FCF ~$261M; cash at end of period ~$52–$214M depending on snapshot; revolver facility in place).
Strategic international footprint expansions (Nagold, Mexico, Canada) to accelerate global laminate production capacity.
Weaknesses
Carve-out reporting introduces potential discrepancies vs segment-level results; higher sensitivity to automotive and cyclical end-markets.
Near-term margin pressure from SG&A investments and integration costs related to expansions.
Reliance on the steel price cycle; near-term price weakness can compress margins.
Opportunities
EV/motor laminations growth and transformer laminations across Europe and North America.
Upside from inventory turns and working capital optimization amid steel-price cycles.
Potential additional bolt-on acquisitions or partnerships to extend laminations footprint.
Threats
Volatility in steel prices and input costs impacting profitability and inventory values.
UAW-related production variability and potential supply-chain disruptions in autos.
Macro headwinds in construction and heavy equipment markets; geopolitical and regulatory risks in cross-border operations.
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