Worthington Steel’s first quarter of fiscal 2027 was transformed by its majority acquisition of Klöckner & Co, with consolidated net sales jumping to $2.73 billion from $872.9 million a year earlier, a gain of $1.85 billion, or 212%.
Volume nearly doubled to 1.94 million tons from 928,866 tons. Direct tons sold rose to 1.50 million from 585,073, while toll tons fell to 441,391 from 343,793.
Operating income increased to $56.0 million from $48.3 million. Gross margin rose to $261.2 million from $115.2 million, up $146.0 million.
But the bottom line moved sharply lower. Worthington reported a net loss attributable to controlling interest of $7.0 million, compared with net earnings of $36.8 million in the prior-year quarter. Diluted loss per share from continuing operations was $0.14, down from diluted earnings per share of $0.73.
Adjusted results were also lower on a per-share basis. Adjusted diluted EPS fell to $0.57 from $0.77, while adjusted EBIT increased to $78.5 million from $55.5 million and adjusted EBITDA climbed to $111.0 million from $78.8 million.
Excluding Klöckner, net sales would have risen 9%, or $81.0 million, driven mainly by higher direct volumes and, to a lesser extent, better direct pricing. Direct tons increased 3% and direct selling prices rose 6%. Toll processing sales slipped 2%, as toll volumes fell 8% even though toll prices increased 6%.
The mix shifted toward direct business. Consolidated direct tons accounted for 77% of processed tons in the quarter, up from 63% a year earlier. Excluding Klöckner, the direct mix was 66%, also up from 63%.
On gross margin, Klöckner contributed $144.0 million, though that figure included an estimated $43 million inventory fair value step-up tied to the acquisition. Excluding Klöckner, gross margin rose just $2.0 million year over year, helped by a $13.9 million increase in direct spreads, partly offset by $11.1 million higher manufacturing expenses and a $0.9 million decline in toll spreads.
Operating income from the legacy Worthington business fell $16.5 million year over year, as SG&A rose $17.6 million, including an $18.6 million increase in professional fees tied largely to the Klöckner deal. The prior-year quarter included a gain on an asset sale related to the Cleveland toll-processing facility closure.
Cash flow weakened. Net cash used in operating activities was $6.0 million, slightly better than the $6.3 million used a year earlier, but capital spending nearly doubled to $63.0 million from $29.4 million. That pushed free cash flow to negative $69.0 million, compared with negative $35.7 million in the prior-year quarter.
At quarter-end, Worthington held $248.2 million in cash and cash equivalents and $2.20 billion of total debt, leaving net debt at $1.95 billion.
The company also declared a quarterly dividend of $0.16 per share, unchanged in amount from the current payout level stated in the release. As a result of these announcements, the company's shares have moved -2.38% on the market, and are now trading at a price of $38.19. For more information, read the company's full 8-K submission here.
