Worthington Steel (WS) investor relations material

Executive summary

• Net sales for Q1 FY2026 were $872.9 million, up 5% year-over-year, driven by higher direct volumes and the Sitem/Sedum Group acquisition, despite a soft market.

• Adjusted EBITDA reached $75.2 million, adjusted EBIT was $54.9 million, and adjusted EPS was $0.77, all up year-over-year.

• Net earnings attributable to shareholders rose to $36.8 million ($0.72 per share), compared to $28.4 million ($0.56 per share) in the prior year.

• Completed acquisition of 52% of Sitem/Sedum Group, expanding global EV and electrical steel market reach and integrating automation capabilities.

• Transformation efforts include AI-driven pilots and process automation to improve efficiency and cost savings.

Financial highlights

• Gross margin increased by $14.8 million to $115.2 million (13.2% of sales), mainly due to higher direct spreads and volumes.

• Direct tons sold increased 6%, with Sitem/Sedum Group contributing about 1% of the increase; toll volumes decreased 22% due to softening demand and facility closure.

• SG&A expense increased by $10.9 million, including a $4.6 million one-time Sitem/Sedum acquisition bonus.

• Free cash flow was a $34 million outflow for the quarter, impacted by working capital increases.

• Ended quarter with $78 million cash and $233 million debt, net debt at $155 million.

Outlook and guidance

• Management expects continued benefit from the Sitem/Sedum Group acquisition and ongoing transformation initiatives, including AI deployment for operational efficiency.

• Cautiously optimistic outlook for automotive market, expecting continued market share gains and new program ramp-ups.

• Anticipates normal seasonality with Q2 and Q3 volumes typically 3-4% below Q1.

• Expects $5-10 million inventory holding losses in Q2 due to lower steel prices and lagging contract mechanisms.

• CapEx forecast for FY26 remains at $100 million, with possible revision after Sitem/Sedum review.