| ||2Q 2022|| || ||2Q 2021|| || ||6M 2022|| || ||6M 2021|| |
|Net sales||$||1,232.9|| || ||$||731.1|| || ||$||2,343.7|| || ||$||1,434.0|| |
|Operating income|| ||90.5|| || || ||37.4|| || || ||226.3|| || ||7.2|| |
|Equity income|| ||60.2|| || || ||25.6|| || || ||113.1|| || ||49.3|| |
|Net earnings (loss)|| ||110.3|| || || ||(74.0)|| || || ||242.8|| || ||542.6|| |
|Earnings (loss) per diluted share||$||2.15|| || ||$||(1.40)|| || ||$||4.71|| || ||$||9.97|| |
“We had a record second quarter led by strong results from our Steel Processing and Building Products segments,” said President and CEO Andy Rose. “Steel Processing continued to benefit from inventory holding gains and Building Products saw significant contributions from both ClarkDietrich and WAVE and solid growth in our wholly owned businesses. While Consumer Products continued to feel the impact of higher input costs, our teams made good progress toward recovering margin as the quarter progressed and we believe we are well positioned heading into the new calendar year.”Consolidated Quarterly Results
Net sales for the second quarter of fiscal 2022 were $1.2 billion compared to $731.1 million, an increase of $501.8 million, or 69%, over the comparable quarter in the prior year. The increase was primarily driven by higher average direct selling prices in Steel Processing.
Gross margin increased $49.1 million over the prior year quarter to $184.6 million, primarily due to improved direct spreads in Steel Processing and, to a lesser extent, higher overall volume.
Operating income for the current quarter was $90.5 million, an increase of $53.1 million over the prior year quarter. Excluding impairment and restructuring items in both quarters and the impact of the Company’s investment in Nikola in the prior year quarter, adjusted operating income was $88.5 million for the current quarter, an increase of $35.1 million over the prior year quarter, as the impact of higher gross margin was partially offset by higher SG&A expense, up $14.0 million, on higher profit sharing and bonus expense.
Interest expense of $7.3 million for the current quarter was down slightly, compared to $7.5 million in the prior year quarter.
Equity income from unconsolidated joint ventures increased $34.6 million over the prior year quarter to $60.2 million, driven by higher contributions from ClarkDietrich, WAVE and Serviacero, where results benefited significantly from higher average selling prices. The Company received cash dividends of $28.9 million from unconsolidated joint ventures during the quarter.
Income tax expense was $31.2 million in the current quarter compared to an income tax benefit of $19.4 million in the prior year quarter. The change was driven by higher pre-tax earnings in the current quarter and the impact of the unrealized mark-to-market loss related to the Company’s investment in Nikola in the prior year quarter. Tax expense in the current quarter reflected an estimated annual effective rate of 22.8% compared to 21.5% for the prior year quarter. Balance Sheet
At quarter-end, total debt of $702.2 million was down slightly compared to debt at May 31, 2021, and the Company had $225.2 million of cash, a decrease of $415.1 million from year-end primarily due to an increase in working capital associated with higher steel prices and the acquisition of the Shiloh Industries U.S. BlankLight® business on June 8, 2021. Quarterly Segment Results
Steel Processing’s net sales totaled $937.8 million, up $469.1 million over the comparable prior year quarter. The increase in net sales was driven by higher average selling prices and, to a lesser extent, contributions from the acquisition of the Shiloh business. Adjusted EBIT was up $37.4 million over the prior year quarter to $71.9 millionon improved operating results and a higher contribution of equity income from Serviacero, which was up $7.0 million benefiting from higher steel prices. Operating income was up $28.2 million over the prior year quarter on higher direct spreads, partially offset by higher conversion and distribution costs. Direct spreads in the current quarter benefited from significant inventory holding gains, estimated to be $42.1 million in the current quarter, compared to immaterial inventory holding gains in the prior year quarter, partially offset by a higher gap between the cost of steel and scrap prices. The mix of direct versus toll tons processed was 47% to 53% in the current quarter, compared to 48% to 52% in the prior year quarter.
Consumer Products’ net sales totaled $140.8 million, up 20%, or $23.3 million, from the comparable prior year quarter, primarily due to the inclusion of General Tools & Instruments which was acquired in the third quarter of fiscal 2021, and to a lesser extent, higher average selling prices. Adjusted EBIT was up slightly over the prior year quarter to $17.6 million as higher material and conversion costs largely offset the impact of higher net sales.
Building Products’ net sales totaled $121.1 million, up 29%, or $27.1 million, from the comparable prior year quarter due to higher volume and higher average selling prices. Adjusted EBIT of $54.7 million was $28.7 million more than the prior year quarter, due primarily to higher equity earnings at ClarkDietrich and WAVE, up $27.2 million on strong volume and the favorable impact of higher steel prices. Operating income was up $1.4 million on the combined impact of higher volume and higher average selling prices, partially offset by an increase in labor and material costs. Volume in the prior year quarter was at depressed levels due to the impact of the COVID-19 pandemic.
Sustainable Energy Solutions’ net sales totaled $33.1 million, down 3%, or $0.9 million, from the comparable prior year quarter on lower volume. Adjusted EBIT was $0.8 million compared to $1.5 million in the prior year quarter, on the combined impact of lower volume and an unfavorable product mix. Both volume and mix in the current quarter were negatively impacted by the ongoing semi-conductor chip shortage. Volume in the current quarter was also negatively impacted by the May 31, 2021, divestiture of the Liquified Petroleum Gas business in Poland. This business continues to evolve as it transitions to serve the global hydrogen ecosystem and adjacent sustainable energies. Recent Developments
- On Dec. 1, 2021, the Company’s Steel Processing segment completed the acquisition of Tempel Steel Company (“Tempel”) for approximately $255 million plus the assumption of certain long-term liabilities. Tempel is already a global leader in the electrical steel market, which supplies steel laminations to the manufacturers of transformers, electric motors and electric vehicle motors, employing approximately 1,500 people across five manufacturing facilities located in Chicago, Canada, China, India, and Mexico.
- During the second quarter of fiscal 2022, the Company repurchased a total of 235,000 of its common shares for $12.7 million, at an average purchase price of $54.03.
“We are optimistic that we will continue to see healthy demand across our key end markets, and we are very excited to have recently closed on our largest acquisition to date with the purchase of Tempel Steel,” Rose said. “The addition of Tempel makes us a global leader in the electrical steel market complementing our existing sustainable mobility offerings in lightweighting and hydrogen and positioning us to more widely serve rapidly growing global markets for electric vehicles and electricity infrastructure.” Conference Call
Worthington will review fiscal 2022 second quarter results during its quarterly conference call on Dec. 16, 2021, at 2:00 p.m., Eastern Time. Details regarding the conference call can be found on the Company website at www.WorthingtonIndustries.com
. About Worthington Industries
Worthington Industries (NYSE:WOR) is a leading industrial manufacturing company pursuing its vision to be the transformative partner to its customers, a positive force for its communities and earn exceptional returns for its shareholders. For over six decades, the Company has been delivering innovative solutions to customers spanning industries such as automotive, energy, retail and construction. Worthington is North America’s premier value-added steel processor and producer of laser welded solutions and electrical steel laminations that provide lightweighting, safety critical and emission reducing components to the mobility market. Through on-board fueling systems and gas containment solutions, Worthington serves the growing global hydrogen ecosystem. The Company’s focus on innovation and manufacturing expertise extends to market-leading consumer products in tools, outdoor living and celebrations categories, sold under brand names, Coleman®, Bernzomatic®, Balloon Time®, Mag Torch®, Well-X-Trol®, General®, Garden-Weasel®, Pactool International® and Hawkeye™; as well as market leading building products, including water systems, heating & cooling solutions, architectural and acoustical grid ceilings and metal framing and accessories.
Headquartered in Columbus, Ohio, Worthington operates 58 facilities in 16 states and nine countries, sells into over 90 countries and employs approximately 9,500 people. Founded in 1955, the Company follows a people-first philosophy with earning money for its shareholders as its first corporate goal. Relentlessly finding new ways to drive progress and transform, Worthington is committed to providing better solutions for customers and bettering the communities where it operates by reducing waste, supporting community-based non-profits and developing the next generations of makers.