Worthington Steel, Inc. Q1 FY2026 earnings call

• Acquired 52% of Sitem in June, with excitement about collaborating with Sitem teammates.
• Achieved the safest quarter on record, but continues to focus on 0 injuries.
• In automotive, saw continued growth with new programs ramping up, Detroit 3 production up 5% year-over-year and shipments up nearly 13%.
• Electrical steel investments: Canada on track to start production in early 2026 for transformer cores; Mexico facility to begin production soon for electrical steel laminations for EV traction motors; integrating Sitem's automation and toolmaking capabilities.
• Using AI for predictive maintenance, intelligent reporting, demand forecasting, predictive inventory optimization, etc., with 4 critical AI-driven pilots launched.
• Back-office process automation initiatives, such as automating daily cash posting, streamlining IT access provisioning, and cutting manual work in credit function.

For the first quarter of Fiscal Year 2026, net sales were $872.9 million. Adjusted EBITDA came in at $75.2 million, and earnings per share were $0.72. Direct sales volume made up 63% of the mix, while toll volumes were down 22% year-over-year. The acquisition of Sitem contributed to the results. The market pricing for hot-rolled coil has been under downward pressure, and current pricing is approximately $800 per ton.

• Cautiously optimistic about the automotive market for the rest of 2025.
• Electrical steel market expected to grow by up to 7% per year over the next decade.
• CapEx forecast for Fiscal Year 2026 remains at $100 million, with review of Sitem's CapEx priorities upcoming.
• Announced a quarterly dividend of $0.16 per share payable on December 26, 2025.

• Market uncertainty with limited visibility in several sectors.
• Impact of foreign exchange rates on the redeemable noncontrolling interest related to Sitem.
• Potential impact of tariffs on electrical steel laminations and transformer cores, though currently seeing little material impact.
• Volatility in toll processing volumes due to market conditions and customer decisions.

Q: Can you give more color on the Sitem transaction, particularly the mezzanine financing structure?

A: The Sitem purchase price was $60 million in cash plus contribution of the Nagold facility. The mezzanine equity for Sitem's minority interest is due to put and call options in euros, presented at redeemable value in U.S. dollars, affected by exchange rate changes.

Q: What do you see moving forward for automotive and more opportunity to layer in business?

A: Cautiously optimistic, projecting 15 million unit build rate, commercial team continues to gain market share with opportunities in contract season.

Q: How much of the toll decline was related to the closure of Worthington Samuel versus mill and other customers?

A: Half of the toll decline is due to market conditions, vast majority related to Worthington Samuel Coil Processing shutdown, with some additional factors like customer program changes.