Worthington Industries has today reported net sales of $702.9m and net earnings of $616.7m, or $11.22 per diluted share, for its fiscal 2021 Q1 ended 31st August 2020.
Gross margin decreased $3.9m from the prior year quarter to $113.4m, as higher gross margin in Steel Processing was more than offset by the $12.8m benefit recognised in the prior year quarter related to the cancellation of a customer take-or-pay contract in Pressure Cylinders.
Operating loss for the quarter was $30.1m, $15.5m higher than the prior year quarter. In addition to the impact of lower gross margin, the higher operating loss in the quarter was driven by profit sharing, bonus and other expenses in the aggregate amount of $49.5m related to the company’s investment in Nikola, partially offset by lower impairment and restructuring chargers and lower SG&A expense.
Andy Rose, President and CEO of Worthington, said, “We are pleased with our first quarter results and with how our teams have continue to operate safely and effectively, despite the challenging environment. We saw improvement in many of our end markets during the quarter, most notably automotive in Steel Processing, along with customer products in Pressure Cylinders.”
Quarterly Segment Results
Steel Processing’s net sales totalled $431m, down 18%, or $92.4m, from the comparable prior year quarter, driven by lower average selling prices and lower direct volume. Operating income of $13.6m was $7.4m higher than the prior year quarter as the impact of lower direct volume was more than offset by improved spreads and lower conversion costs. The mix of direct versus toll tonnes processed was 49% to 51% in the current quarter, compared to 54% to 46% in the prior year quarter.
Pressure Cylinders’ net sales totalled $270.9m, down 11%, or $33.5m, from the comparable prior year quarter. $17.2m of the decrease was due to the early termination of a customer take-or-pay contract within the industrial products business in the prior quarter year. Operating income of $8.6m was $21m less than the prior year quarter, when the take-or-pay cancellation contributed $12.8m of gross margin. The remaining decline was due primarily to current quarter impairment and restructuring charges, which totalled $10.2m.
“Demand remains solid across many of our markets with the exception of oil and gas and a few industrial markets. However, the current economy makes it difficult to predict with confidence how the balance of our fiscal year will play out,” Rose said.
“We are well capitalised and have significant cash on our balance sheet making us well positioned to take advantage of opportunities as they arise and drive long term value from our shareholders.”