Worthington Steel, Inc. earnings recap
Q1 FY2027, reported October 6, 2026 · Beat 3 of last 7 quarters
Worthington Steel, Inc. reported Q1 FY2027 revenue of $2.73B, a miss of 13.1% against consensus, and EPS of $0.57, a miss of 38.0%.
The Buildout is a website built by one person using AI agents, and could have factual errors.
Worthington Steel sits upstream of electrical equipment demand through its electrical steel lamination business serving transformer, generator and industrial motor markets, and management reiterated its long-term demand drivers tied to electrification and grid investment. This quarter's results were dominated by the Kloeckner consolidation, purchase accounting, and steel supply tightness rather than any new grid or data center-specific demand commentary, so the read-through to the AI infrastructure buildout is indirect. Extended mill lead times, maintenance outages, and hot-rolled coil around $1,200 per ton could keep input costs and availability for processed electrical steel elevated as electrification and grid-related investment proceeds.
| Estimate | Actual | vs est | ||
|---|---|---|---|---|
| Revenue | $3.14B | $2.73B | -13.1% | miss |
| EPS | $0.92 | $0.57 | -38.0% | miss |
Worthington Steel reported its first quarter including Kloeckner, whose results were consolidated following the June 3 close; net sales were $2.7 billion, up roughly $1.9 billion year-over-year, and Kloeckner shares were delisted from the Frankfurt Stock Exchange on August 12. The company reported a net loss from continuing operations attributable to Worthington Steel of $7 million, or $0.14 per diluted share, versus net earnings of $36.8 million, or $0.73, a year ago, with adjusted EPS of $0.57 versus $0.77; adjusted EBIT was $78.5 million, up $23 million, and adjusted EBITDA was $111 million. Purchase accounting on acquired Kloeckner inventory reduced gross margin and adjusted EBITDA by an estimated $43 million, and net interest expense rose to $38.8 million from $2.9 million. Total shipments were approximately 1.9 million tons at a 77% direct sale / 23% toll processing mix versus 63%/37% a year ago; legacy net sales rose 9% to $954 million on 921,000 tons of shipments, down 1%, with automotive direct volumes up 4%, agriculture up 40% on OEM and grain bin demand, other transportation up 39% on new business wins, energy down 31% on a customer sourcing shift and construction down 9% on competition and tight steel availability. Operating cash outflow was $6 million, capital spending was $63 million, and the company ended with approximately $248 million of cash and $1.9 billion of net debt.
Management framed the quarter around Kloeckner integration: the Domination and Profit and Loss Transfer Agreement was signed September 8 and remains subject to shareholder approval in October, and if approved and effective it would provide a framework for operating control and formal integration and synergy capture beginning in the first quarter of calendar year 2027. Previously communicated synergy and deleveraging targets are unchanged, with debt reduction expected to progress alongside synergy capture and working capital improvement, and Becker Stahl is being marketed for sale with the majority of net proceeds expected to go to debt reduction. Tim Adams guided to $10M-$15M of pre-tax inventory holding gains in the legacy business in the second quarter of fiscal 2027, said only a limited residual impact from the $43M purchase-accounting step-up is expected, and set combined capital expenditures at $160M-$180M for fiscal 2027 with capital priorities to be reviewed once the DPLTA is effective. On end markets, management assumes North American automotive production essentially flat versus calendar 2025 and solid through year end, construction still pressured by rates and consumer confidence, agriculture improving, and heavy truck and trailer stabilizing with share gains, while not assuming a significant near-term inflection in builds. Supply is expected to remain tight, with mill maintenance outages likely to keep lead times extended and hot-rolled coil ending the quarter around $1,200 per ton. Management also said it has applied AI to MRO inventory decisions and sees that capability scaling across a larger footprint as Kloeckner integration proceeds.
“Simply put, this is one of the most challenging steel supply environments most of us have ever seen.”
on Steel supply conditions
“You could add back the $43 million to the $111 million to get to, you know, $150 million that's more representative of EBITDA.”
on Normalized EBITDA
“So we feel pretty strongly on the sustainability piece as we move to this new contract season that would start January 1. And so from that point on is where you would start to see that reflected in our numbers.”
on Coated spread sustainability
Legacy Worthington direct tons were down less than 1% sequentially despite tight supply, better than normal seasonality — is that market share wins in auto and heavy truck, and can you share more detail on the volume beat?
Management attributed the performance to continued share gains being layered in across heavy truck, agriculture and automotive, and noted the company probably missed out on another 30,000 tons of shipments in the quarter due to supply chain constraints.
Can you give a clearer view of Kloeckner's normalized EBITDA for the quarter, excluding the $43 million purchase accounting inventory step-up, and any color on earnings across Kloeckner's North America and Europe footprint?
Tim Adams said the company is not disclosing segment type data at this point and that no vetted pro forma exists, and clarified that the $43 million is additive back to the $111 million of adjusted EBITDA to get to roughly $150 million, which is more representative of EBITDA.
Could you explain the German law under which the 38% minority holders retain their shares and how long they can retain them, and the difference in inventory turnover and gross margin between Kloeckner and the legacy Worthington business?
Geoff Gilmore said that once the DPLTA is approved by shareholders and declared effective by the German courts, minority shareholders are granted a put option at EUR 11 per share, and if they choose to remain they receive annual guaranteed cash compensation of 6%, or EUR 0.66 per share, and can hold their shares as long as they like. Tim Adams added that Worthington's gross margins are higher because of higher value-added processes such as galvanizing and pickling, which Kloeckner buys rather than makes — one of the identified synergies — and that the $150 million of working capital synergies includes a large inventory component, with the intent to drive similar inventory day improvements at Kloeckner.