Worthington Industries, Inc.’s (WOR) first-quarter fiscal 2013 (ended August 31) earnings of 49 cents per share beat the Zacks Consensus Estimate by a couple of cents and exceeded the year-ago quarter’s earnings of 35 cents. Profit shot up 32% year over year to roughly $34 million, boosted by the synergies of recent acquisitions and increased volume.
Revenues and margins
Revenues climbed 11% year over year to $666 million, beating the Zacks Consensus Estimate of $659 million. The growth was led by higher volume and acquisitions, partly masked by lower average selling prices in the Steel Processing division. Strong volume was witnessed in the Pressure Cylinders business.
The takeover of Angus Industries (acquired in late 2011) and acquisitions in the Pressure Cylinders segment drove volume growth in the first quarter. Worthington, which has made a host of acquisitions over the last few years, recently snapped up leading atmospheric tanks and pressure vessels maker Westerman Companies for $70 million. The acquisition fits well with the company’s growth strategy as it broadens its footprint in the global energy and alternative fuels markets
Gross margin improved to 14.1% in the quarter from 11.9% year ago, benefiting from acquisitions and favorable mix. Operating income jumped nearly 58% year over year to $33.4 million, aided by lower net losses from impairments, restructuring charges and joint venture transactions.
Segment Results
Revenue from the company’s larger Steel Processing segment dipped 7% year over year to $380 million on lower steel pricing. Volumes declined marginally to 695 tons in the quarter.
The company’s Pressure Cylinders division had yet another healthy quarter with revenues soaring 15% to $194.2 million thanks to strong volume growth and contributions of acquisitions. Volumes surged 47% to 21,469 units.
The Engineered Cabs unit, which consists of the operations of Angus Industries, delivered sales of $64.5 million in the quarter.
Financial Position
Worthington exited the quarter with cash and cash equivalents of $30.5 million, down 17% year over year. Total debt remained flat year over while declined 14% sequentially to $459.6 million. During the quarter, the company used the net proceeds from the issue of $150 million of 12-year unsecured Senior Notes to repay a portion of its debt.
Outlook
While Worthington is seeing weakness across automotive, agriculture and mining markets, it hopes to continue its earnings momentum on the back of acquisitions. The Westerman acquisition places it well to capture the opportunities to boost its oil and energy business around the Utica and Marcellus shale formations, where Westerman has a broad customer base.
Worthington, which competes with AK Steel Holding Corporation (AKS) among others, retains a short-term Zacks #3 Rank (Hold).
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