The Chinese translation is being made; the original is shown for now.
Worthington Steel reported divergent demand trends across its key end markets during its fiscal first-quarter earnings call, with gains in agriculture, automotive and heavy truck helping offset weakness in construction and energy-related demand.
The value-add steel processor and service center posted strong results for the fiscal 2027 first quarter ended August 31, 2026, and company executives highlighted the backdrop of challenging steel supply during the period.
“This is one of the most challenging steel supply environments most of us have ever seen,” Worthington Steel president and chief executive officer Geoff Gilmore said on Wednesday October 7 during an earnings call. “Supply remains tight, lead times are long, production schedules are shifting, and securing the right material for customers has been difficult.”
Gilmore said demand was “uneven across end markets” and that “customers continue to be careful with inventories and commitments.”
The prolonged tightness in spot steel availability has been a consistent theme among steel market participants in the US, which has led to continued strength in hot-rolled coil prices.
Agriculture, automotive and transportation drive demand
Agriculture was the strongest-performing sector, with shipments to agricultural customers increasing 40% year over year, driven primarily by original equipment manufacturer (OEM) demand and grain-bin markets.
“We have strong customer relationships in this space, and we are staying focused on where we can add value,” Gilmore said.
Automotive remained a bright spot, with North American vehicle production proving more resilient than expected despite broader economic uncertainty.
Worthington’s chief financial officer Tim Adams said direct automotive shipments in Worthington’s legacy business increased 4% year over year during the quarter.
The heavy truck and transportation segment also improved significantly. Adams noted shipments to “other transportation,” which includes heavy truck and trailer markets, increased 39% year over year, due to market-share gains and new business wins.
Construction and energy remain under pressure
In contrast, the construction sector remained under pressure. Gilmore said data-center projects continued to support steel consumption, but broader construction activity was constrained by higher borrowing costs and weak confidence among project developers and customers.
Adams said legacy construction shipments fell 9% year over year, citing increased competition and limited steel availability that reduced the company’s ability to quote short-term contract business.
The US Federal Reserve raised the benchmark federal funds rate by 25 basis points to a range of 3.75% to 4.00% on September 16, 2026, the first rate hike since July 2023, part of an effort to slow down accelerating inflation in the United States.
The energy sector recorded the steepest decline among the company’s major markets. Legacy energy shipments fell 31% year over year due primarily to a shift in sourcing by a customer to another supplier, according to Adams.
Overall, legacy Worthington Steel shipments totaled approximately 921,000 tons, down 1% from the prior-year quarter. Direct-sale shipments increased 3%, while toll-processing volumes declined 8%. Net sales in the legacy business rose 9% to $954 million, supported by higher selling prices and stronger direct volumes.
Kloeckner acquisition reshapes Worthington’s business
This was also the quarter where Worthington Steel’s takeover of German metals company Kloeckner & Co was reflected in its earnings report.
“This quarter marks an important milestone for Worthington Steel as we report our first results including Kloeckner,” Gilmore said. “The addition of Kloeckner significantly expands our capabilities and positions us as a more diversified metals processing and manufacturing company.”
Worthington Steel reported higher first-quarter fiscal 2027 sales following the acquisition of a majority stake in Kloeckner & Co, a transaction the company says expands its scale, product portfolio and geographic reach while positioning it as one of North America’s largest steel service center operators.
Net sales in the quarter ended August 31 surged 212% year over year to $2.73 billion from $872.9 million, while shipment volumes increased to 1.94 million tons from 928,866 tons. Kloeckner contributed approximately $1.77 billion in revenue during the quarter, the first to include the acquired company’s results.
Operating income rose 16% to $56.0 million from $48.3 million, while adjusted EBIT increased 41% to $78.5 million from $55.5 million, according to an earnings statement released on Tuesday October 6.
Worthington reported a net loss from continuing operations attributable to controlling interest of $7.0 million, or $0.14 per diluted share, compared with net earnings of $36.8 million, or $0.73 per diluted share, in the year-earlier quarter.
Excluding the impact of Kloeckner, net sales increased 9% year over year, supported by a 3% increase in direct shipment volumes and a 6% rise in average direct selling prices.
At the time the transaction was announced, Worthington said the combination would create the second-largest steel service center company in North America with more than $9.5 billion in combined revenue and approximately 12,000 employees.
Management has estimated approximately $150 million in annual cost, operational and commercial-process synergies, with 95-99% expected to come from North American operations and full realization targeted by the end of fiscal 2028.
The acquisition also broadens Worthington’s exposure across carbon flat-rolled steel, plate, electrical steel, aluminium, stainless steel and long products, while increasing its participation in automotive, construction and industrial markets.
Understand current steel price trends and access hundreds of historical steel prices in one place. Find out more about Fastmarkets’ steel prices here.