Worthington Turns to Eagle Ford Shale, LNG Market after Sales Growth in 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 mixed results for the first quarter of the company's 2015 fiscal year, as $2.1 million in pre-tax impairment charges, largely related to the company's stainless steel business, offset a solid improvement in sales that was attributed to a recovering U.S. automotive market and the booming domestic oil & gas industry. Net income was reported to be $44.17 million, a 19.04% decrease from the first quarter of fiscal 2014.

Worthington also reported an $11.0 million pre-tax gain and a $4.5 million favorable tax adjustment in first-quarter 2014, which negatively affected the income comparison for this quarter. The tax adjustment was related to the acquisition of an additional 10% interest in the TWB joint venture in July 2013.

As part of its North American Metals & Minerals Project Database, Industrial Info is tracking two key Worthington projects: the $3.6 million, ongoing maintenance program at a steel galvanizing plant in Monroe, Ohio, and the planned, $1.3 million expansion of a steel processing plant in Jackson, Michigan. The Monroe maintenance involves normal inspections and repairs to pickling, slitting, blanking and dry-lubing operations at the 70,000-ton-per-month plant on both monthly and random schedules. It is expected to be completed in June 2015.

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The $1.3 million Jackson project involves installing a second blanking press to improve laser-welding services and warehouse material for automotive customers. The grassroot project is expected to kick off in January 2015 and to be completed in July.

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Total net sales stood at $862.41 million, a 24.57% increase from the same period last year. Stronger sales in the U.S. automotive market and the consolidation of TWB, a joint venture that is the leading manufacturer of tailor welded products in North America, significantly improved income in the Steel Processing segment. Worthington's continued acquisitions in the oil & gas equipment market boosted results in the Pressure Cylinders segment, which also saw higher average selling prices.

The Engineered Cabs segment faced a challenging market; despite a jump in sales, it reported an operating loss due to higher manufacturing expenses stemming from a ramp-up in production. Worthington also reported strong losses in its Construction Services business.

During the first quarter, Worthington made two acquisitions that will boost its profile in the booming domestic oil & gas industry: the $35.2 million acquisition of Midstream Equipment Fabrication LLC, which manufactures patented horizontal heated and high-pressure separators for customers in the Eagle Ford Shale and the Permian Basin; and the $1.6 million acquisition of James Russell Engineering Works Incorporated, which manufactures aluminum and stainless steel cryogenic transport trailers for top producers and distributors of industrial gases and liquefied natural gas (LNG).

"The maturation of our energy platform is making progress," said Andy Rose, the executive vice president and chief financial officer of Worthington, in a conference call. "We have been working through issues related to weather, production changes and product modifications at our Garden City [in Kansas] location, and saw a solid increase in the profitability of this location during the quarter. Unfortunately, we're seeing a similar set of issues at one of our Ohio locations in the segment. We've invested in new production capacity at both facilities to meet demand from our customers, and continue to feel good about their prospects, as we work through these issues and fill our capacity."

Worthington executives expect to see continued improvement in the automotive industry, which is benefiting from improving consumer confidence, and the oil & gas industry, where the company is seeing strong demand for natural gas storage and production equipment as well as transmission technology for LNG.

"The success of our transformation in a metric-driven culture is being showcased in Steel Processing, where the team is delivering above-market growth while expanding margins," Rose said in the conference call. "If we can successfully embed the same level of discipline throughout Pressure Cylinders and Engineered Cabs, which is under way, both of those businesses have similar opportunities to improve."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 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.