Worthington Reports Improved Quarterly Sales, Earnings
Worthington Industries Inc., Columbus, Ohio, reported net sales of $569.4 million and net earnings of $26.3 million during its fiscal 2011 third quarter ended Feb. 28. Both marked sharp improvements over the same time period the previous year.
Net sales for the third quarter were up 26 percent from the comparable quarter last year. An overall increase in volumes had a $79.1 million positive impact on net sales as both Steel Processing and Pressure Cylinders segments showed improvements.
Operating income for the quarter was $28.0 million, up $63.3 million vs. last year's operating loss. Increased volumes and better spreads between average selling prices and the cost of steel were the drivers for the increase in operating income, said company officials.
“We are very pleased with the excellent results this quarter and continue to see positive signs of recovery in many of our markets,” said John McConnell, chairman and CEO during the company’s quarterly conference call with investors and analysts. “Our businesses have continued to perform well as we have remained focused on enhancing our earnings potential, improving our operating efficiencies and investing in businesses that will help us achieve our goals.”
Worthington’s gross margin for the current quarter was $88.3 million, or 16 percent of net sales, compared to $57.7 million, or 13 percent of net sales, for the prior-year quarter. The $30.6 million increase in gross margin is primarily due to increased volumes in both Steel Processing and Pressure Cylinders.
Steel Processing's net sales of $301.8 million were up 30 percent over the prior-year quarter. The largest increase came from higher-value-added processing for the automotive market, aided by the contribution from the Gibraltar strip steel acquisition.
The change in the product mix combined with a higher average cost of steel in the quarter resulted in an increase in the average selling price and a $21.6 million increase in net sales. The mix of direct vs. toll tons processed was 54 percent to 46 percent, vs. 51 percent to 49 percent a year ago.
“We remain optimistic about the current business environment. While the potential remains for some uneven results, we are confident that the overall trend will continue to show positive year-over-year gains in our current businesses,” McConnell said. “We will also continue to build our international presence and explore opportunities to augment our current platform with acquisitions that meet our criteria of increasing our margins and decreasing the volatility of our earnings.”
Among four growth objectives undertaken in the quarter, the company agreed to form a joint venture with Marubeni-Itochu Steel America Inc. to combine Dietrich Metal Framing and ClarkWestern Building Systems. The agreement closed March 1. Worthington received a 25 percent interest in the new joint venture, ClarkDietrich Building Systems LLC, as well as the assets of three MISA Metals Inc. steel processing locations.
“This is another step in our overall strategy to improve margins, decrease volatility and strengthen our financial performance,” said George Stowe, president and chief operating officer. “With the formation of the joint venture, it will allow us to better serve the customers and rationalize an industry plagued by overcapacity.”