Worthington Steel swings to $48.7M Q4 loss on $94.5M Electrical Steel impairments

The board declared a quarterly dividend of $0.16 per share. Shareholders who own stock as of the close of business on September 15, 2026 will receive payment on September 29, 2026. This is a routine capital allocation decision returning cash to shareholders.

Worthington Steel completed its acquisition of Klöckner & Co SE on June 3, 2026, securing approximately 62% of outstanding shares. The company announced its intention to launch a public delisting tender offer for remaining shares and expects to complete a Domination and Profit and Loss Transfer Agreement (DPLTA) by the end of 2026 to solidify full legal control. The acquisition creates the second-largest service center in North America with an expanded geographic footprint across Americas and Europe.

Management has identified approximately $150 million of annual EBITDA synergies and $150 million of working capital reduction opportunities by fiscal year 2028. The EBITDA synergies include procurement optimization (~$55 million), operational efficiency (~$30 million), commercial process synergies (~$40 million including revenue opportunities), and overhead reduction (~$25 million). Management estimates 50% of run-rate synergies will be realizable in year one, with approximately $50 million in one-time costs expected to achieve these synergies.

Following the Klöckner acquisition, Worthington Steel is targeting net leverage below 2.5x within 24 months of closing. The company expects to maintain ample liquidity of $1,059 million across facilities denominated in multiple currencies. Management plans to continue paying dividends of $0.64 per share annually and targeting annual capital expenditures between $100-150 million per year (averaging 1.3% of net sales).

Worthington Steel is executing two strategic electrical steel capacity expansion projects totaling $170 million in capital expenditures. In Mexico, the company is expanding xEV motor lamination production capacity with $85 million in total expected capex (approximately 70% spent through May 31, 2026), with initial presses installed and production parts now shipping. In Canada, the company has substantially completed an $85 million investment to increase transformer core-making capacity, with some production underway and 60% of the additional capacity already awarded to customers. Management expects these investments to be accretive to steady-state EBITDA margins.

For the trailing twelve months ended May 31, 2026, Worthington Steel delivered 3.6 million tons (2.3 million direct, 1.3 million toll), generating net sales of $3.4 billion and adjusted EBITDA of $245.6 million (7.1% margin). The company generated free cash flow of $80.0 million after capital expenditures of $121.2 million (3.5% of sales). As of May 31, 2026, the company had net debt of $172 million, trailing twelve-month net leverage of 0.70x, and total liquidity of $320 million.

Worthington Steel reported Q4 FY2026 net sales of $929.2M, up 12% year-over-year, driven by higher direct volumes including $47.6M from Sitem Group acquisition and higher direct selling prices. However, the company swung to an operating loss of $57.6M from $66.4M operating income in the prior year quarter, primarily due to $94.5M in non-cash impairments in the Electrical Steel reporting unit and acquisition-related expenses. Net loss attributable to controlling interest was $48.7M, or $0.98 per diluted share, compared to net earnings of $55.7M, or $1.10 per diluted share, in the prior year quarter. Adjusted net earnings per diluted share was $0.74 versus $1.05 in the prior year quarter.

Worthington Steel completed its acquisition of approximately 62% of Klöckner & Co SE on June 3, 2026 (after fiscal year-end), at €11.00 per share. The company describes this as "the largest acquisition in our history and a defining step in building a stronger, more diversified metals processing platform." During Q4 FY2026, the company incurred $15.5M in acquisition-related professional fees and $12.3M in bridge loan commitment costs. Management's priorities include integration readiness and value capture from this transformative transaction.

Gross margin declined $8.9M to $118.1M in Q4 FY2026, driven by lower direct spreads (down $6.6M) and lower toll spreads (down $2.4M). The direct spread decline reflects a $6.1M unfavorable change in inventory holding gains (from $20.8M gain in prior year to $14.7M gain in current quarter) and $2.6M from value-added market spread compression. Management noted that "tighter year-over-year value-added spreads, which are beginning to normalize," indicating margin pressure in the business.

Worthington Steel's board declared a quarterly cash dividend of $0.16 per common share on June 24, 2026. The dividend will be paid on September 29, 2026 to shareholders of record as of September 15, 2026. This represents a routine return of capital to shareholders.

Gwen Joseph was appointed Corporate Controller and Principal Accounting Officer effective June 23, 2026. She is an internal promotion, having served as Director of External Reporting since December 2023 and previously as Director of Internal Audit at the parent company. This represents continuity in financial leadership with an experienced internal candidate.