Worthington Steel Reports First Quarter Fiscal 2027 Results
Worthington Steel, Inc. (WS) filed an SEC Form 8-K — Results of Operations and Financial Condition. EXHIBIT 99.1 Worthington Steel Reports First Quarter Fiscal 2027 Results Includes financial results from Kloeckner & Co following majority acquisition COLUMBUS, Ohio, October 6, 2026 – Worthington Steel, Inc. (NYSE: WS), a market-leading, value-added metals processing company, to
How this was made
The 30-second read
Why it matters
The earnings miss may trigger short‑term sell‑off, but the dramatic sales increase suggests underlying demand strength.
Market read
Primary earnings disclosure for a mid‑cap industrial stock; potential catalyst for sector peers.
What to watch
Integration of Kloeckner may generate future earnings upside; one‑time acquisition costs are driving the current loss.
Worthington Steel Reports First Quarter Fiscal 2027 Results Includes financial results from Kloeckner & Co following majority acquisition
The Kloeckner acquisition lifted net sales 212% and operating income rose to $56.0 million, but acquisition-related costs, investment losses and higher interest expense drove a net loss attributable to controlling interest of $7.0 million, while negative free cash flow widened and net debt reached $1,948.2 million.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Volume (tons)other | 1,943,340 | – | – |
| Net salesGAAP | $2.73B | – | 212% |
| Legacy Worthington Steel net salesGAAP | $953.9M | – | 9% |
| Gross marginGAAP | $261.2M | – | increase of $146.0 million |
| Selling, general and administrative expenseGAAP | $208.8M | – | – |
| Restructuring and other income, netGAAP | ($3.6 million) | – | – |
| Operating incomeGAAP | $56M | – | increase of $7.7 million |
| Adjusted operating incomenon-GAAP | $75M | – | – |
| Miscellaneous income (expense), netGAAP | ($10.5 million) | – | – |
| Interest expense, netGAAP | $38.8M | – | – |
| Equity in net income of unconsolidated affiliateGAAP | $5.3M | – | – |
| Earnings before income taxesGAAP | $12M | – | – |
| Income tax expenseGAAP | $12.1M | – | – |
| Net earnings (loss) from continuing operationsGAAP | ($0.1 million) | – | – |
| Net loss from discontinued operationsGAAP | ($4.9 million) | – | – |
| Net earnings (loss)GAAP | ($5.0 million) | – | – |
| Net earnings attributable to noncontrolling interestsGAAP | $5M | – | – |
| Net earnings (loss) attributable to controlling interestGAAP | ($10.0 million) | – | – |
| Net earnings (loss) from continuing operations attributable to controlling interestGAAP | ($7.0 million) | – | – |
| Adjusted net earnings from continuing operations attributable to controlling interestnon-GAAP | $29.1M | – | – |
| Diluted EPS – Continuing OperationsGAAP | ($0.14) | – | – |
| Adjusted Diluted EPS – Continuing Operationsnon-GAAP | $0.57 | – | – |
| Diluted EPS – Discontinued operationsGAAP | ($0.06) | – | – |
| Diluted EPS – ConsolidatedGAAP | ($0.20) | – | – |
| Weighted average common shares outstanding – dilutedGAAP | 50M | – | – |
| EBITnon-GAAP | $43.9M | – | – |
| Adjusted EBITnon-GAAP | $78.5M | – | – |
| Depreciation and amortizationGAAP | $27.8M | – | – |
| Adjusted EBITDAnon-GAAP | $111M | – | – |
| Net earnings (loss) from continuing operations attributable to controlling interest marginGAAP | (0.3%) | – | – |
| Adjusted EBIT marginnon-GAAP | 2.9% | – | – |
| Adjusted EBITDA marginnon-GAAP | 4.1% | – | – |
| Net cash used in operating activitiesGAAP | ($6.0 million) | – | – |
| Investment in property, plant and equipmentGAAP | ($63.0 million) | – | – |
| Free cash flownon-GAAP | ($69.0 million) | – | – |
| Trailing 12 months free cash flownon-GAAP | $46.7M | – | – |
| Total debtother | $2.20B | – | – |
| Net debtnon-GAAP | $1.95B | – | – |
Capital returns
- Declared a quarterly dividend of $0.16 per common share, payable on December 28, 2026, to shareholders of record at the close of business on December 14, 2026.
- Cash dividends declared per share were $0.16 in the three months ended August 31, 2026, compared with $0.16 in the three months ended August 31, 2025.
- Dividends paid were $8.2 million in the three months ended August 31, 2026, compared with $8.1 million in the three months ended August 31, 2025.
What drove it
- Kloeckner contributed $1,772.7 million to net sales and $144.0 million to gross margin in the first quarter of fiscal 2027.
- Excluding Kloeckner, net sales increased $81.0 million, or 9%, driven primarily by higher direct volumes and, to a lesser extent, higher average direct selling prices.
- Direct tons sold increased 3% and direct selling prices increased 6%; toll volumes decreased 8% while toll selling prices increased 6%.
- The consolidated mix of direct tons versus toll tons processed was 77% to 23%, compared with 63% to 37% in the prior year quarter.
- Excluding Kloeckner, gross margin increased $2.0 million, primarily reflecting higher direct spreads, partly offset by higher manufacturing expenses and lower toll spreads.
- The Kloeckner Acquisition increased operating income by $24.2 million.
- Adjusted EBITDA includes the full adjusted EBITDA of consolidated operations, including noncontrolling interests, and prior-year amounts were recast to conform to this presentation.
Concerns
- Kloeckner gross margin was impacted by an approximately $43 million net inventory fair value step-up recognized in connection with the acquisition.
- Excluding Kloeckner, operating income decreased $16.5 million, driven primarily by a $17.6 million increase in SG&A and a $1.0 million unfavorable change in restructuring and other income, expense, net.
- The increase in Legacy Worthington Steel professional fees was primarily related to the Kloeckner Acquisition.
- Interest expense, net was $38.8 million, compared with $2.9 million in the prior year quarter.
- The Company recognized a $15.5 million remeasurement loss on its previously held Kloeckner equity interest.
- The Disposal Group is reported as discontinued operations, and the Company expects its sale to be completed within one year of the Kloeckner Acquisition.
- The DPLTA remains subject to required shareholder approvals and registration with the commercial register and cannot occur before January 1, 2027.
What to watch
- Effectiveness of the DPLTA, which cannot occur before January 1, 2027 and remains subject to shareholder approvals and commercial-register registration.
- Completion of the planned sale of the Kloeckner Disposal Group within one year of the Kloeckner Acquisition.
- The effect of the approximately $43 million net inventory fair value step-up on Kloeckner gross margin.
- Direct volumes, direct selling prices, toll volumes and the direct-versus-toll processing mix.
- Professional fees and other Kloeckner acquisition-related expenses.
- Cash generation, property, plant and equipment investment, and the Company's debt and net-debt position following acquisition financing.
Balance sheet and cash flow
- Cash and cash equivalents were $248.2 million as of August 31, 2026, compared with $84.6 million as of May 31, 2026.
- Total debt was $2,196.4 million as of August 31, 2026, compared with $256.8 million as of May 31, 2026.
- Net debt was $1,948.2 million as of August 31, 2026, compared with $172.2 million as of May 31, 2026.
- Net cash used in operating activities was $6.0 million, compared with net cash used in operating activities of $6.3 million in the prior year quarter.
- Investment in property, plant and equipment was $63.0 million, compared with $29.4 million in the prior year quarter.
- Negative free cash flow was $69.0 million, compared with negative free cash flow of $35.7 million in the prior year quarter.
- Acquisitions, net of cash acquired, were $545.2 million.
- Proceeds from long-term debt, net of issuance costs, were $1,568.7 million, and principal payments on long-term debt were $642.1 million.
Analysis
Worthington Steel's first quarter fiscal 2027 results were transformed by the Kloeckner acquisition. Net sales rose 212% to $2,726.6 million and volume reached 1,943,340 tons, with Kloeckner contributing $1,772.7 million of sales. Excluding Kloeckner, net sales increased $81.0 million, or 9%, driven primarily by higher direct volumes and, to a lesser extent, higher average direct selling prices. The consolidated processing mix moved to 77% direct tons and 23% toll tons from 63% and 37%, respectively, in the prior year quarter.
Profitability was mixed. Gross margin increased to $261.2 million from $115.2 million, but Kloeckner contributed $144.0 million and its gross margin included the effect of an approximately $43 million net inventory fair value step-up. Excluding Kloeckner, gross margin improved $2.0 million as higher direct spreads offset higher manufacturing expenses and lower toll spreads. Operating income rose to $56.0 million from $48.3 million, although operating income excluding Kloeckner declined $16.5 million, principally because SG&A increased $17.6 million, largely from Legacy Worthington Steel professional fees associated with the acquisition.
Below operating income, the new capital structure and acquisition accounting weighed heavily on reported earnings. Interest expense, net increased to $38.8 million from $2.9 million, and the Company recorded a $15.5 million Kloeckner securities investment loss, net. Net loss from continuing operations attributable to controlling interest was $7.0 million, compared with net earnings of $36.8 million, and diluted EPS from continuing operations was a loss of $0.14 compared with earnings of $0.73. After adjustments, adjusted net earnings from continuing operations attributable to controlling interest were $29.1 million and adjusted diluted EPS was $0.57, both below the prior-year figures of $38.8 million and $0.77. Adjusted EBITDA increased to $111.0 million from $78.8 million, while adjusted EBITDA margin declined to 4.1% from 9.0%.
Cash flow and leverage reflect the scale of the transaction. Net cash used in operating activities was $6.0 million, while property, plant and equipment investment was $63.0 million, producing negative free cash flow of $69.0 million compared with negative free cash flow of $35.7 million in the prior year quarter. The Company ended the quarter with $248.2 million in cash and cash equivalents, total debt of $2,196.4 million and net debt of $1,948.2 million. It also declared a quarterly dividend of $0.16 per common share.
The release did not provide forward financial guidance. Near-term execution centers on integrating Kloeckner while it continues to operate independently until the DPLTA becomes effective, managing acquisition-related costs and financing obligations, and completing the expected disposal of the held-for-sale group. The DPLTA cannot become effective before January 1, 2027 and remains subject to Kloeckner shareholder approvals and commercial-register registration.
Management, verbatim
This quarter marks an important milestone for Worthington Steel as we report our first results including Kloeckner.
Geoff Gilmore, president and CEO
The addition of Kloeckner significantly expands our capabilities and positions us as a more diversified metals processing and manufacturing company.
Geoff Gilmore, president and CEO
At the same time, our core Worthington Steel business delivered solid operating performance, driven by higher direct volumes and improved pricing.
Geoff Gilmore, president and CEO
Not in the filing
stated, not guessed- Forward financial guidance for revenue, gross margin, operating expenses, tax rate, earnings, cash flow, capital expenditures, leverage or other operating metrics was not provided.
- Previous-period outlook was not provided, so no comparison of actual results with prior guidance is available.
- Reportable segment revenue, segment profitability and segment guidance were not provided.
- Share repurchases were not reported.
- A GAAP or non-GAAP tax rate was not reported.
- Prior-quarter comparisons were not reported for most first-quarter income-statement metrics.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Worthington Steel reported its first quarter results after acquiring a majority stake in Kloeckner & Co, reflecting the impact of the integration.
Ticker impact
First-quarter fiscal 2027 results disclosed via 8‑K, showing net sales up 212% but a net loss of $7 M versus prior profit.
likely downward pressure as market prices in the unexpected loss
Loss per share of -$0.14 versus +$0.73 a year ago signals earnings miss; investors may sell on profit decline.
Market effects
Metals processing sector may see mixed reaction; sales growth highlights demand while loss raises cost concerns.
U.S. industrial stocks could be modestly affected by the earnings surprise.
Limited to investors tracking mid‑cap industrials and the Kloeckner acquisition integration.
Counterpoint
Despite the loss, the 212% sales jump and acquisition synergies could support a longer‑term upside.
Key entities
- CompanyWorthington Steel, Inc.
U.S. metals processing firm (NYSE: WS) reporting Q1 FY2027 results.
- CompanyKloeckner & Co SE
German metals distributor acquired by Worthington Steel.
