Worthington Sees Solid Growth from Cylinder Business in Fiscal Second-Quarter 2013, Despite Weak Steel Prices

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Researched by Industrial Info Resources (Sugar Land, Texas)--Diversified metals manufacturer Worthington Industries Incorporated (NYSE:WOR) (Columbus, Ohio) reported solid overall gains in the second quarter of the company's 2013 fiscal year as volumes improved, particularly in the Pressure Cylinders segment, despite declines in the market price of steel. In addition, Worthington significantly benefited from several recent acquisitions. Net earnings for the quarter were reported to be $31.83 million, compared with $11.99 million in the second quarter of fiscal year 2012.

Total sales stood at $622.62 million, a 10.07% increase from the same period last year. The December 2011 acquisition of Angus Industries Incorporated, now reported as the Engineered Cabs segment, has proven to be a boon to Worthington, as it sharply increased overall volumes. The Pressure Cylinders segment also benefited from acquisitions made in the past year. Although the Steel Processing segment was negatively affected by a decline in volumes ($4.9 million) and lower selling prices for steel ($29.2 million), the segment saw fewer inventory holding losses when compared with second-quarter 2012.

Last year's second quarter was hit by $9.7 million in charges from the voluntary recall of propylene cylinders, while this year's quarter only incurred $1 million in related costs. In September 2012, Worthington acquired Westerman Companies, a manufacturer of tanks and separators for the oil and gas, nuclear and marine markets, for about $70 million. Westerman contributed more than $3.5 million in operating income during the quarter, adjusted for purchase accounting.

As part of its growing North American Metals & Minerals Project Database, Industrial Info is keeping tabs on 22 operational plants owned by Worthington, including 10 in Ohio, two in Maryland and two in Mexico. One executive singled out Monterrey pickling steel mill, where volume hit 10,000 tons this month after starting last August.

"On the joint venture front, we have turned in another quarter of outstanding results, continuing to find strength in the commercial remodel market," said Mark Russell, the president and chief operating officer of Worthington, in a conference call. "An unprecedented percentage of [subsidiary] WAVE's volume comes from commercial renovation and remodel projects. Both WAVE and [subsidiary] ClarkDietrich are particularly well-positioned for the eventual recovery of the commercial construction market."

Although the Steel Processing segment reported a decrease in net sales, both of Worthington's major segments reported gains in operating income:

• The Steel Processing segment reported net sales of $339.31 million, a 9.14% decrease from second-quarter 2012, and operating income of $13.31 million, compared with $7.39 million in the same period last year.
• The Pressure Cylinders segment reported net sales of $207.49 million, a 17.42% increase from second-quarter 2012, and operating income of $17.08 million, compared with only $531,000 in the same period last year.
• The recently implemented Engineered Cabs segment reported net sales of $57.8 million and operating income of $565,000.
• Other segments reported total net sales of $18.01 million, a 16.4% increase from second-quarter 2012, and a total operating income loss of $2.14 million, compared to a loss of $5.07 million in the same period last year.

Worthington executives expect the Pressure Cylinders and Engineered Cabs segments to continue to improve in the coming quarters, as demand remains strong for cylinder products in the energy, alternative fuels and retail markets. The company is implementing measures to improve its base business and is continuing to make major acquisitions as it enters new markets.

"On the high-margin, high-growth front, we are particularly excited about our continued organic and strategic growth in the clean natural gas and alternative fuels market," Russell said in the conference call. "Shale and tight-sand natural gas is not only the cleanest hydrocarbon energy on the planet, but here in North America it is also the most economic."

He added: "Our acquisition of Westerman focused on the production and separator tanks at the well head end of this market. At the combustion end of the market, we can to see the continuation of our significant organic growth in automotive and transportation fuel cylinders, up 10% over last year."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, 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.