Worthington Steel (NYSE:WS) reported first-quarter fiscal 2027 results that included Kloeckner for the first time following the June 3 acquisition, as management highlighted progress toward integrating the German metals distributor and processor amid a tight steel supply environment.
The company reported net sales of $2.7 billion, adjusted EBITDA of $111 million and adjusted earnings of $0.57 per diluted share. On a reported basis, Worthington Steel recorded a net loss from continuing operations attributable to shareholders of $7 million, or $0.14 per diluted share, compared with earnings of $36.8 million, or $0.73 per diluted share, a year earlier.
Kloeckner Purchase Accounting Weighed on Margins
Adams said purchase accounting required Worthington Steel to record Kloeckner inventory at fair value. As that inventory was sold, the resulting step-up reduced first-quarter gross margin and adjusted EBITDA by an estimated $43 million. The company expects only a limited residual effect in the second quarter.
During the question-and-answer session, Adams said adding the purchase-accounting impact back to the reported $111 million of adjusted EBITDA would result in roughly $150 million that was more representative of EBITDA for the period.
Kloeckner’s shares were delisted from the Frankfurt Stock Exchange on Aug. 12, and a Domination and Profit and Loss Transfer Agreement was signed Sept. 8. The agreement remains subject to shareholder approval in October. If approved and declared effective by German courts, the agreement would give Worthington Steel a framework for operating control, formal integration and synergy capture beginning in the first quarter of calendar 2027.
CEO Geoff Gilmore said teams from both businesses are already working together to understand each other’s operations, processes and cultures. “We want to move with discipline, not just speed,” Gilmore said.
Under the agreement, minority shareholders would be able to sell their Kloeckner shares to Worthington Steel for EUR 11 per share. Shareholders that retain their shares would receive annual guaranteed cash compensation of 6%, or EUR 0.66 per share, Gilmore said. Adams added that minority shareholders could retain their shares indefinitely if they choose.
Legacy Business Sees Automotive, Agriculture and Truck Gains
For the legacy Worthington Steel business, quarterly net sales rose 9% year over year to $954 million, reflecting higher direct-sale volumes and selling prices. Total legacy shipments were about 921,000 tons, down 1% from the prior-year period. Direct-sale volume increased 3%, while toll-processing volume declined 8%.
Automotive remained a favorable market, with direct shipments to the sector rising 4% year over year. Agriculture shipments increased 40%, supported by OEM equipment and grain-bin demand. Other transportation shipments, which now include heavy truck, rose 39%, largely due to market-share gains and new business.
Those gains were partly offset by a 31% decline in energy shipments, which the company attributed to a customer shifting sourcing to another supplier. Construction shipments fell 9%, reflecting increased competition and tight steel availability that limited Worthington Steel’s ability to quote short-term contract business.
Gilmore said North American automotive production has remained resilient in calendar 2026 and is expected to be essentially flat with 2025 through year-end. He said the company expects to grow through customer wins, technical solutions and longer-term localization and nearshoring trends rather than a major near-term increase in vehicle builds.
Construction demand declined during the quarter, though data-center construction continued to support activity. Gilmore said broader construction markets remained sensitive to interest rates and consumer confidence. Heavy truck and trailer markets showed signs of stabilizing after a slow start to calendar 2026, with Worthington Steel benefiting from new business and share gains.
Tight Supply Supports Outlook for Steel Spreads
Gilmore described the current steel environment as among the most challenging supply conditions the company has faced, citing tight supply, long lead times, changing production schedules and difficulty securing material for customers. Imports have declined, while expected mill maintenance outages are likely to keep lead times extended, Adams said.
Hot-rolled coil prices ended the quarter at about $1,200 per ton. Worthington Steel estimated pretax inventory holding gains in its legacy business of $12.1 million during the first quarter, compared with $5.6 million a year earlier. It expects $10 million to $15 million of pretax inventory holding gains in the second quarter.
Gilmore said the company expects coated-steel spread conditions to remain sustainable as imports remain limited and markets stay tight. However, he noted that more than 90% of Worthington Steel’s business is contractual, limiting the immediate benefit from spot-market pricing. He said improved pricing would be more likely to appear as new contracts begin Jan. 1.
Cash Flow, Capital Spending and Debt Reduction
Worthington Steel reported operating cash outflow of $6 million and capital expenditures of $63 million, resulting in negative free cash flow of $69 million for the quarter. The company expects combined fiscal 2027 capital expenditures of $160 million to $180 million, with spending expected to moderate later in the year.
As of Aug. 31, Worthington Steel had approximately $248 million of cash and $1.9 billion of net debt following the Kloeckner acquisition. The company did not report a trailing 12-month leverage ratio because the calculation would include acquisition financing and Kloeckner debt but only three months of Kloeckner EBITDA.
Management said previously communicated synergy and deleveraging targets remain unchanged. Kloeckner is also marketing Becker Stahl-Service for sale, and Adams said Kloeckner expects to use the majority of net proceeds for debt reduction. Worthington Steel’s board declared a quarterly dividend of $0.16 per share, payable Dec. 28, 2026.
About Worthington Steel (NYSE:WS)
Worthington Steel, Inc is a steel processing company that produces value-added flat-rolled steel products for manufacturers in the automotive, construction, energy, industrial and consumer markets. Its offerings include electrical steel, laser-welded and tailor-welded blanks, and other processed steel products designed to meet specific customer requirements.
The company provides services such as slitting, blanking, cold reduction, welding and other steel processing capabilities. Its products are used in applications including automotive components, electrical motors and transformers, building products, pressure vessels and industrial equipment.
Worthington Steel was separated from Worthington Industries as an independent public company in December 2023.
