Worthington Steel’s first quarter with Kloeckner & Co. on the books tripled its sales, more than doubled its tonnage and produced a net loss. The Columbus, Ohio, processor reported $2.73 billion in net sales for the three months ended Aug. 31, up from $873 million a year earlier, and a $10 million loss where it had earned $36.8 million.
The numbers come from the earnings release the company filed on Oct. 6. Worthington closed on a majority stake in Kloeckner, the German owner of one of the largest metals service center networks in North America, on June 3. It held 62.11% by August, when Kloeckner came off the Frankfurt exchange.
For anyone who buys plate, beams or coil through a service center, that’s a change in who is on the other side of the counter.
What Worthington Steel reported with Kloeckner included
Kloeckner contributed $1.77 billion of the quarter’s sales. Total shipments reached 1.94 million tons against 929,000 a year ago, and 77% of that was steel Worthington owned and sold, not material it processed for a fee.
The loss is mostly deal cost. The company lists $21.4 million of acquisition expenses in operating results, a $15.5 million remeasurement loss on Kloeckner shares it already held, and about $43 million of inventory written up to fair value and then sold through. Adjusted for those, it reports earnings of 57 cents a share, down from 77 cents.
The margin is what’s worth a second look. Adjusted EBITDA was $111 million, or 4.1% of sales. A year ago it was 9.0%. Distribution is a thinner business than processing, and Worthington now owns a lot of it.
It also borrowed to get there. Total debt stood at $2.2 billion on Aug. 31. Three months earlier it was $257 million.
Steel service center pricing: up 6% before Kloeckner
Set the acquisition aside and the legacy business tells contractors more. Sales rose 9%, or $81 million. Worthington says direct selling prices were up 6% and direct volumes up 3%. Toll processing prices rose 6% as well, while toll volumes fell 8%.
The company also booked a $12.1 million inventory holding gain, against an estimated $5.6 million a year earlier. That’s what a processor reports when the steel on its floor is worth more than it paid. It squares with the rest of the market: Nucor and SSAB are raising plate $60 a ton, and Steel Market Update reported on Oct. 6 that sheet and plate were still climbing on scarce spot tons and long lead times.
What the release doesn’t offer is any breakdown by end market. There’s no construction volume, no galvanized tonnage and no comment on demand. Readers have to infer it.
What steel distribution consolidation means for fabricators
Worthington’s product list now runs from carbon flat-rolled and electrical steel to long products and heavy plate, with galvanizing, pickling and fabrication in house. It says the combined company will have about 12,000 employees and roughly 150 facilities once a control agreement with Kloeckner takes effect. That agreement needs Kloeckner shareholder approval and can’t start before Jan. 1, 2027.
Until then, three things in the release bear on supply. Some Kloeckner units are classified as held for sale, with deals expected within a year of the acquisition, and the company doesn’t name them. Restructuring has begun, including facility exits and asset sales in Louisiana and Switzerland. And a buyer carrying $2.2 billion of debt on a 4.1% margin has every reason to hold price.
None of that is alarming on its own. But steel fabricators already working with lead times that have doubled are about to find out which branches stay open, and whether the yard that stocked their sizes last year belongs to the same company next year.
Management’s call was set for Oct. 7. The list of businesses for sale is the thing to ask for.