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Inventory Losses Cut into Worthington Earnings

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Worthington Industries Inc., Columbus, Ohio, reported net sales of $874.4 million and net earnings of $26.8 million for its fiscal 2019 third quarter. Sales were up 3.9 percent, but earnings fell 66.1 percent compared with the third quarter of the previous fiscal year.

The decline in earnings was credited to inventory holding losses of $10.8 million in the company’s Steel Processing segment, among other factors.

“We continued to feel the impact of higher input costs and volatility in steel prices, but we also made good progress toward recovering margin as the quarter progressed,” said John McConnell, chairman and CEO.  “We believe that we are through the worst of the recent cost pressures and I’m proud of the way our teams have executed.”

Steel Processing’s net sales totaled $555.9 million, up 7 percent compared with the prior fiscal year, driven by higher average direct selling prices but partially offset by lower direct volume. Operating income of $10.2 million was $20.9 million less than the prior year quarter on lower direct spreads, which were impacted by significant inventory holding losses in the quarter and continue to be negatively impacted by an expanding gap between the cost of steel and scrap prices, combined with lower direct volume.  

The mix of direct versus toll tons processed was 57 percent to 43 percent in both the current and prior year quarters.

“Despite recent headwinds, the company is performing well, and we remain focused on driving improvements throughout our businesses,” McConnell said.  “Overall, our markets remain steady. We expect to see continued margin expansion in Pressure Cylinders, but also anticipate continued inventory holding losses in Steel Processing in the upcoming quarter.”

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