Worthington Steel Posts First Results With Kloeckner
First-quarter net sales were $2,726.6 million after the June majority acquisition, while a $7.0 million continuing-operations loss replaced a year-earlier profit of $36.8 million.
Worthington Steel, Inc. (WS), a value-added metals processor, reported its first quarter including Klöckner & Co SE after closing a majority acquisition on June 3, 2026, and posted a net loss from continuing operations attributable to the controlling interest of $7.0 million, compared with net earnings of $36.8 million a year earlier.
Net sales were $2,726.6 million, up 212% from $872.9 million, with Kloeckner contributing $1,772.7 million from the acquisition date. Diluted loss per share from continuing operations was $0.14, versus $0.73 of earnings. Adjusted diluted earnings from continuing operations were $0.57 a share, compared with $0.77. Adjusted EBIT was $78.5 million and adjusted EBITDA was $111.0 million, the latter recast to include the full consolidated amount, including noncontrolling interests.
Excluding Kloeckner, net sales rose $81.0 million, or 9%, versus the year-ago quarter. The increase was driven primarily by higher direct volumes and, to a lesser extent, higher average direct selling prices. Direct net sales increased $81.7 million; direct tons sold rose 3% and direct selling prices rose 6%. Toll processing net sales decreased $0.7 million, or 2%, as toll volumes fell 8% and toll selling prices rose 6%.
Consolidated volume was 1,943,340 tons. Direct volume was 1,501,949 tons and toll volume was 441,391 tons. The consolidated mix of direct versus toll tons was 77% to 23%. Excluding Kloeckner, the mix was 66% to 34%.
Legacy Worthington Steel, excluding intercompany eliminations with Kloeckner, posted net sales of $953.9 million, EBIT of $15.7 million, and adjusted EBITDA of $75.1 million. President and Chief Executive Officer Geoff Gilmore said the core business delivered solid operating performance, driven by higher direct volumes and improved pricing.
Gross margin was $261.2 million, with Kloeckner contributing $144.0 million, including an approximately $43 million net inventory fair-value step-up. Excluding Kloeckner, gross margin increased $2.0 million. Direct spreads increased $13.9 million, including a $7.6 million volume effect and a $6.5 million favorable swing from an estimated $5.6 million inventory holding gain to an estimated $12.1 million. Pricing was a $0.2 million unfavorable direct-spread impact. Toll spreads decreased $0.9 million. Manufacturing expenses increased $11.1 million, primarily related to wages and benefits.
Operating income was $56.0 million, with Kloeckner adding $24.2 million. Excluding Kloeckner, operating income decreased $16.5 million, driven primarily by a $17.6 million increase in selling, general and administrative expense, including $18.6 million of professional fees related to the Kloeckner Acquisition, and a $1.0 million unfavorable change in restructuring and other income, net, partly offset by the $2.0 million gross-margin increase. Interest expense, net, was $38.8 million after acquisition financing.
Cash and cash equivalents were $248.2 million. Total debt was $2,196.4 million, for net debt of $1,948.2 million. Capital spending was $63.0 million. Negative free cash flow was $69.0 million. Net cash used in operating activities was $6.0 million. The board declared a quarterly dividend of $0.16 a share, payable December 28, 2026.
On July 15, 2026, the company commenced a public delisting tender offer for remaining Kloeckner shares at €11.00 a share. After the August 12 acceptance close, ownership rose to about 62.11%. On September 8, 2026, it entered a Domination and Profit and Loss Transfer Agreement with Kloeckner. Effectiveness remains subject to shareholder approvals and commercial-register registration and cannot occur before January 1, 2027. Kloeckner business units meeting held-for-sale criteria are reported as discontinued operations; the company expects the sale within one year of the acquisition.