Worthington Steel, Inc. Q1 FY2025 earnings call

• Safety: Six facilities recognized for reaching the highest level of SafeWorks program.
• Market Updates: Automotive market sales at 51%, with some model changeover delays and a customer commercial strategy adjustment; construction market at 11%, with strength in metal framing and building products.
• Transformation: Examples like reducing payroll process time by 80%, PC configuration/distribution time by 15%, and IT contractor hiring tasks by 30%. Tempel facility in India received a best supplier award.
• Expansion: Canada and Mexico expansion projects on time and budget, TWB equipment installation on schedule, and Europe electrical steel facility in Nagold Germany gaining interest.

The automotive market made up 51% of first quarter fiscal year 2025 sales, down from 54% in the same period of fiscal 2024. Volume shipped to automotive market on a direct sale basis decreased 10% in Q1 FY2025. The construction industry was the second largest market, making up 11% of sales in Q1 FY2025, same as the prior year quarter. Electrical steel investments are focused on supporting electrified vehicle and transformer markets, with expansion projects in Canada and Mexico on track.

• Estimated pre-tax inventory holding losses in Q2 FY2025 are expected to be slightly lower than the $16.6 million in Q1.
• Cautiously optimistic about automotive and toll volumes in the coming quarters as demand appears steady.
• Anticipates upward pressure on steel prices over the longer term due to North American fair trade initiatives.

• Market pricing fluctuations leading to inventory holding losses.
• Model changeover delays and commercial strategy shifts impacting automotive volume.
• Impact of steel fair trade initiatives not yet quantified but expected to affect prices.

Q: You noted some slower start-up of newer programs and changes in program needs for steel. What's the situation?

A: There were model changeover delays and a customer retooling their commercial strategy, but sales rebounded and it's behind us.

Q: What prompted the shift away from direct volumes to tolling?

A: Customers looking for toll galvanizing and a shift in business model with some customers owning material and hiring for toll processing.

Q: Any new on electrical steel contract wins and capacity allocation?

A: Won additional business for future capacity in Mexico, with three of five presses installed and spoken for, and positive customer communication; Canada has some additional customers signing up in advance.

Q: Why was laser welded blank business up bucking the trend?

A: Spreads were up, had to recover costs like freight, and were able to raise prices due to the differentiated nature of the product.

Q: Cliffs announcing transformer build in Weirton, impact on Worthington?

A: Not seen as a disruption, as the electrical steel lamination market is growing rapidly with an 18-24 month backlog, and partnership with customers is still beneficial.