Low Steel, LNG Prices Weaken Worthington's Results for Fiscal First-Quarter 2015

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Researched by Industrial Info Resources (Sugar Land, Texas)--Diversified metals manufacturer Worthington Industries Incorporated (NYSE:WOR) (Columbus, Ohio) reported a companywide drop in revenues and profits for the first quarter of the company's 2016 fiscal year, as the ongoing weakness in steel and energy prices dragged down results across all business segments. As part of its North American Metals & Minerals Project Database, Industrial Info is tracking progress at 23 operational plants owned by Worthington, including 11 in Ohio and two in Nuevo Leon, Mexico.

Among the most closely watched of Worthington's projects is the $14.5 million addition of several equipment lines in Greeneville, Tennessee. The company plans to install a new production line to manufacture cabs for Deere & Company (NYSE:DE) (Monroe, Illinois); three new lines to manufacture cabs for Caterpillar Incorporated (NYSE:CAT) (Peoria, Illinois); and supporting equipment and systems. The Greeneville Regional Planning Commission approved the expansion earlier this month.

Capital expenditures for the quarter were reported to total $38 million. The company did not give an exact amount for its capital-expenditure outlook, but Andy Rose, executive vice president and chief financial officer, estimated "just north of $100 million" for the full year in a quarterly earnings conference call. He added: "The good news is most of it is sort of capacity expansion in markets where our business is strong. And it's also good news because they tend to be higher margin markets for us."

Worthington reported net earnings of $31.4 million for the quarter, a 28.96% decrease from fiscal first-quarter 2015, and net sales of $758.1 million, a 12.09% decrease from the same period last year. The company's largest segment, Steel Processing, was the hardest hit by lower average selling prices, a problem compounded by lower toll volumes and inventory holding losses. The Engineered Cabs segment saw weaker volumes in the construction and agriculture markets; however, lower sales for this segment were expected, as Worthington sold off a related subsidiary, Advanced Components Technologies Incorporated, in January. The Pressure Cylinders segment reported lower sales volumes for oil and gas equipment.

"While each of our businesses are operating in varying market conditions, each are doing a very good job of maximizing their respective opportunities," said John McConnell, the chairman and chief executive officer of Worthington, in a conference call. "In the case of engineered cabs and the oil and gas business that meant the very difficult and emotional task of aggressively cutting costs to right size these businesses to mask reduction in volumes that exhibit no sign of recovering quickly."

Also weighing on Worthington's quarterly results were $6.1 million in restructuring charges, including $4.9 million tied to the pending closure of an Engineered Cabs facility in Florence, South Carolina, and $1.2 million related to severance accruals in the Pressure Cylinders segment.

"Market conditions in the strategically important liquid natural gas (LNG) market are soft currently due to tight spreads between diesel and natural gas," said Mark Russell, the president and chief executive officer of Worthington, in the conference call. "So we've increased our focus on industrial cryogenic applications and in geographies where the switch from traditional fuel to LNG remains compelling."

Executives also said that the company is relaunching is "lean transformation" process to curb spending.

"The company continues to generate solid earnings and free cash flow despite a few difficult end markets," Rose said. "The worst of the steel price declines appear to be behind us. Our consumer products operations are improving rapidly, and we are approaching the end of a difficult chapter in engineered cabs with the closure of Florence."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and ten international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.