Worthington Steel reported fiscal first-quarter 2027 net sales of $2.73 billion, up 212% year over year, but the comparison includes its newly acquired majority interest in Klöckner & Co. Excluding Klöckner, sales rose 9%. Operating income increased to $56.0 million, while the company recorded a $7.0 million loss from continuing operations attributable to controlling interest.
What were Worthington Steel’s Q1 earnings?
Worthington Steel announced its fiscal Q1 2027 results on October 6, 2026. The quarter ended August 31, 2026. Except where otherwise noted, the reported results include Klöckner & Co (Kloeckner) from the June 3, 2026 acquisition close; Kloeckner results are consolidated from that date. The company’s release presents headline year-over-year comparisons on a continuing-operations basis.
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| Measure | Fiscal Q1 2027 | Fiscal Q1 2026 |
|---|---|---|
| Net sales | $2,726.6 million | $872.9 million |
| Operating income | $56.0 million | $48.3 million |
| Net earnings (loss) from continuing operations attributable to controlling interest | $(7.0) million | $36.8 million |
| Diluted EPS from continuing operations attributable to controlling interest | $(0.14) | $0.73 |
| Adjusted EBIT (non-GAAP) | $78.5 million | $55.5 million |
| Adjusted diluted EPS from continuing operations (non-GAAP) | $0.57 | $0.77 |
| Adjusted EBITDA (non-GAAP, including consolidated operations and noncontrolling interests) | $111.0 million | $78.8 million |
Figures are from Worthington Steel’s October 6, 2026 earnings release. Adjusted EBITDA’s prior-year figure uses the company’s recast presentation. Adjusted measures are non-GAAP and should not be confused with the GAAP continuing-operations loss.
Why did Worthington Steel report a loss despite higher sales?
The 212% sales increase is not an organic-growth comparison: Kloeckner contributed $1,772.7 million in sales during the quarter. Excluding Kloeckner, sales increased $81.0 million, or 9%, year over year. Worthington Steel attributed that increase primarily to higher direct volumes and, to a lesser extent, higher average direct selling prices.
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- Direct tons sold rose 3%, and direct selling prices rose 6%.
- Toll processing volumes fell 8%, while toll selling prices rose 6%.
Kloeckner also added $24.2 million to reported operating income. Without that contribution, Worthington Steel’s operating income fell $16.5 million from the prior-year quarter. Selling, general and administrative expense increased $17.6 million, including an $18.6 million rise in professional fees primarily related to the acquisition.
Higher operating income did not flow through to higher net earnings attributable to controlling interest. Net interest expense was $38.8 million, compared with $2.9 million a year earlier, and miscellaneous expense was $10.5 million, compared with $0.2 million of miscellaneous income in the prior-year quarter. These costs help explain the gap between operating income and the reported continuing-operations result.
What changed in gross margin?
Gross margin increased $146.0 million to $261.2 million. Kloeckner contributed $144.0 million of the increase, including the effect of an approximately $43 million net inventory fair-value step-up recognized in connection with the acquisition. Excluding Kloeckner, gross margin rose $2.0 million: higher direct spreads were partly offset by higher manufacturing expense and lower toll spreads.
What do cash, debt and the dividend show?
At August 31, 2026, the company reported $248.2 million in cash and cash equivalents and $2,196.4 million in total debt, for net debt of $1,948.2 million. It used $6.0 million of cash in operating activities and invested $63.0 million in property, plant and equipment during the quarter. Its company-defined free cash flow was negative $69.0 million.
The board declared a quarterly dividend of $0.16 per common share, payable December 28, 2026, to shareholders of record at the close of business December 14, 2026.
What is the status of the Kloeckner agreement?
After settlement of its public delisting tender offer, Worthington Steel said it held approximately 62.11% of Kloeckner. The companies entered into a Domination and Profit and Loss Transfer Agreement on September 8, after the quarter ended. At the time of the earnings release, it remained subject to required shareholder approvals and registration and could not become effective before January 1, 2027.
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What investors should take from the quarter
The sales headline reflects a major acquisition as well as growth in the legacy business, so the two comparisons answer different questions. Consolidated operating income improved, but the continuing-operations result attributable to controlling interest turned to a loss amid much higher interest expense and acquisition-related costs. Adjusted EBIT rose, while adjusted diluted EPS declined; cash and debt figures also show why earnings alone do not describe the quarter’s financial position.
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Worthington Steel scheduled its Q1 2027 earnings call for October 7, 2026, at 8:30 a.m. Eastern Time. The company’s CEO Geoff Gilmore said: “At the same time, our core Worthington Steel business delivered solid operating performance, driven by higher direct volumes and improved pricing.”
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