Worthington Steel delivered a solid QQ3 2024 performance as a standalone public company, with revenue of $687.4 million and net income of $13.8 million (EPS $0.28). Excluding separation-related costs and inventory swings, adjusted EBIT rose meaningfully to $66.9 million, up from $10.7 million a year earlier, driven by a higher gross margin and favorable pre-tax inventory movements. The quarter featured substantial non-operating items—most notably, anticipated fourth-quarter inventory holding losses of $5–$10 million pre-tax as steel prices normalized from the spike seen earlier in the quarter. Management underscored a transformation program designed to lift margins, reduce working capital, and add capacity, with ongoing investments in capacity expansion (Canada and Mexico electrical steel expansions) and a first-mover licensing agreement for ablation technology to differentiate the product mix.
Key operational vectors include: (1) volume dynamics—quarterly shipments of 986,000 tons (+4% YoY; +9% total tons YoY) with direct sales up slightly but automotive direct down 4% due to end-of-life programs and launch delays; (2) pricing and spreads—steel prices ranged from $700/ton to $1,100/ton intra-quarter, ending near $750/ton, supporting material spreads and a robust gross margin; (3) cash generation—operating cash flow of $53.8 million and free cash flow of $25.2 million in QQ3, aided by favorable working capital movements despite higher receivables and inventory; (4) balance sheet and liquidity—cash at period-end approximately $63.3 million; $147 million ABL debt; total debt $222.3 million; trailing-12-month free cash flow of $175 million; and a $150 million dividend paid to the former parent related to the separation. The company also signaled a multi-year capex path totaling roughly $100 million annually for 2024–2026, with additional near-term increments from ERP projects and the ablation line.
Looking forward, the management narrative centers on: (i) expanding niche, high-value-add capabilities (Tempel, electrical steel laminations, tailor-welded blanks) to capture premium tolling and end-market demand (auto and electrification); (ii) potential revenue upside from ramping new plants in Canada, Mexico, and Germany and (iii) an expected cadence of inventory normalization that may swing working capital in the near term. Investors should monitor the progress of the ablation/LASER-coated line ramp (timing is ~24 months to full production) and the realization of revenue from the Canada/Mexico expansions, the Nagold integration in Germany, and the ERP upgrade at Tempel as success multipliers on margins and ROIC over the next 2–4 quarters.