Worthington Steel (WS) Q2 2025 earnings summary

Executive summary

• Net sales for Q2 FY2025 were $739.0 million, down 9% year-over-year, primarily due to lower volumes and direct selling prices.

• Operating income improved to $18.9 million from a loss of $8.8 million in the prior year quarter, and net earnings attributable to controlling interest were $12.8 million, reversing a net loss of $6.0 million.

• Adjusted EBITDA was $30.6 million, up from $23 million year-over-year, and adjusted net earnings per diluted share were $0.19, up from $0.11.

• Completed spin-off from Worthington Enterprises in December 2023 and celebrated first full year as a standalone public company.

• Announced acquisition of a controlling stake in Sitem Group, expanding European electric motor lamination capabilities.

Financial highlights

• Gross margin increased to $80.0 million (10.8% of sales), up from $60.2 million (7.5%), driven by higher direct spreads and lower inventory holding losses.

• Adjusted EBIT for Q2 was $14.3 million, up from $6.6 million year-over-year.

• Free cash flow for the quarter was $33.2 million; trailing 12-month free cash flow was $79.4 million.

• Cash and cash equivalents stood at $52.0 million, with net debt at $63.0 million as of November 30, 2024.

• Quarterly dividend of $0.16 per share declared, payable March 28, 2025.

Outlook and guidance

• Management is cautiously optimistic for automotive segment recovery as OEMs adjust strategies and rebuild market share.

• Construction market expected to see moderate growth in 2025, especially in data centers and manufacturing.

• Heavy truck market anticipated to remain slow in early 2025, with regulatory-driven growth expected in the second half and into 2026.

• CapEx for fiscal 2025 increased to $125 million, mainly due to timing shifts and new projects.

• Management expects minimal inventory holding impact in Q3 FY2025 and believes current liquidity and capital resources are adequate for the next 12 months.