Worthington Steel — First Quarter Fiscal 2027 Earnings Summary

Financial Performance

• Net sales increased 212% to $2,726.6 million from $872.9 million in the prior year quarter.
• Operating income increased to $56.0 million from $48.3 million in the prior year quarter.
• Net loss attributable to controlling interest was $7.0 million, compared to net earnings of $36.8 million in the prior year quarter.
• Diluted loss per share from continuing operations was $0.14, compared to $0.73 in the prior year quarter.
• Adjusted Diluted EPS from continuing operations was $0.57, compared to $0.77 in the prior year quarter.
• Adjusted EBIT increased to $78.5 million from $55.5 million in the prior year quarter.
• Adjusted EBITDA increased to $111.0 million from $78.8 million in the prior year quarter.
• Gross margin increased to $261.2 million from $115.2 million in the prior year quarter.
• Net cash used in operating activities was $6.0 million, compared to $6.3 million in the prior year quarter.
• Free cash flow was negative $69.0 million, compared to negative $35.7 million in the prior year quarter.
• Total debt was $2,196.4 million as of August 31, 2026, resulting in a net debt position of $1,948.2 million.
• Cash and cash equivalents were $248.2 million as of August 31, 2026.
• Investment in property, plant, and equipment was $63.0 million, compared to $29.4 million in the prior year quarter.

Guidance and Future Outlook

• The company expects to complete the sale of the Disposal Group (business units meeting held-for-sale criteria) within one year of the Kloeckner Acquisition.
• The DPLTA effectiveness remains subject to shareholder approvals and registration, with no earlier effective date than January 1, 2027.
• Management priorities include serving customers, improving operations, and creating long-term shareholder value.
• The company anticipates realizing cost, operating, commercial, revenue, and working capital synergies from the Kloeckner Acquisition.

Business Segments and Product Lines

• Kloeckner contributed $1,772.7 million to net sales in the first quarter of fiscal 2027.
• Excluding Kloeckner, net sales increased 9% to $953.9 million, driven by a 3% increase in direct volumes and a 6% increase in direct selling prices.
• Direct tons sold increased 3% and direct selling prices increased 6% compared to the prior year quarter.
• Toll processing net sales decreased 2% to $441.4 million, with toll volumes down 8% and toll selling prices up 6%.
• The consolidated mix of direct tons versus toll tons processed was 77% to 23% in the first quarter of fiscal 2027, compared to 63% to 37% in the prior year quarter.
• Kloeckner's gross margin was impacted by an approximately $43 million net inventory fair value step-up recognized in connection with the acquisition.
• Kloeckner recognized a $3.6 million gain in restructuring and other income, net, due to various restructuring programs including early retirement, severance, and facility exit costs.

Market and Competitive Landscape

• The company positions itself as a more diversified metals processing and manufacturing company following the addition of Kloeckner.
• The company operates approximately 150 facilities, primarily in North America, with additional operations in Europe and Asia.
• The company employs approximately 12,000 people.

Risks and Challenges

• The DPLTA effectiveness is subject to required shareholder approvals and registration with the commercial register.
• Risks include the possibility that anticipated synergies, cost savings, and margin expansion from the Kloeckner Acquisition may not be realized when expected or at all.
• Risks include the time and effort required to integrate the businesses and the risk that integration may not be successful or timely.
• Risks include limited financial flexibility and increased interest expense resulting from the Kloeckner Acquisition.
• Risks include adverse impacts from economic conditions, commodity price volatility, supply chain constraints, and regulatory changes.
• Risks include the potential for litigation or appraisal proceedings related to the Kloeckner Acquisition or DPLTA.

Management Commentary and Tone

• CEO Geoff Gilmore stated the quarter marks an important milestone with the first results including Kloeckner, which significantly expands capabilities and diversifies the company.
• Management noted the core Worthington Steel business delivered solid operating performance driven by higher direct volumes and improved pricing.
• The tone emphasizes clear priorities: serving customers, improving operations, and creating long-term value for shareholders.

Other Key Points

• On June 3, 2026, the Company completed the acquisition of a majority interest in Kloeckner, securing approximately 62% of outstanding shares.
• On July 15, 2026, the Company commenced a public delisting tender offer for all outstanding Kloeckner shares not already held, at €11.00 per share.
• Upon settlement of the delisting tender offer on August 12, 2026, the Company acquired additional shares, increasing ownership to approximately 62.11%.
• On September 8, 2026, the Company entered into a Domination and Profit and Loss Transfer Agreement (DPLTA) with Kloeckner.
• The Company declared a quarterly dividend of $0.16 per share, payable on December 28, 2026, to shareholders of record on December 14, 2026.
• Kloeckner's results are included in consolidated financial statements beginning on the acquisition date, with the non-owned portion reflected as noncontrolling interests.
• Adjusted EBITDA metrics have been updated to include the full adjusted EBITDA of consolidated operations, including noncontrolling interests, and prior year periods have been recast.
• The Disposal Group results are reported as discontinued operations for all periods in fiscal 2027 and onward.
• The company recognized a $15.5 million loss on the remeasurement of previously held Kloeckner equity securities upon acquisition closing.
• Acquisition-related expenses for Kloeckner totaled $22.6 million, primarily consisting of professional fees.
• The company recognized a $1.2 million gain from a pension curtailment associated with headcount reductions.
• The company recognized a $15.5 million loss on the Kloeckner securities investment, net.
• The company recognized a $0.9 million gain from the Kloeckner purchase derivative.
• The company recognized a $0.2 million unfavorable impact from debt issuance cost write-offs.
• The company recognized a $0.11 million deferred tax asset adjustment.