Worthington Industries, Inc. (NYSE:WOR) Q4 2023 Earnings Call Transcript

John Tumazos : So in the fiscal year just ended, the steel processing volumes fell 272,000 tons. If we have a 5% rebound in fiscal 2024, in-line with the auto production, for example, it would only make up about half of that lost ground. What are the segments in steel processing that are declining? I would have thought that reshoring and lower steel imports wouldn’t be helping you.

Tim Adams : We had some divestitures in there in prior quarters. So we exited our facility in Decatur, Alabama, that was a direct facility only, direct sale facility only. We also exited a toll processing facility in Jackson, Michigan. So you’ve got some divestiture noise in there that you’ve got overcoming the figures in front of me. But that’s you’re seeing some of the impact of that in those numbers when you look at [indiscernible].

Joe Hayek : Yeah, John. In Q4, specifically excluding divestitures, our direct tons were down 1% and total tons were actually up 8%. And I think, Tim mentioned this that we are seeing some headwinds in the construction space. And automotive is kind of from recessionary levels growing a bit. And since that’s our largest debt market that makes that picks up some of the slack and some of the year-over-year weakness you see in construction.

John Tumazos : Concerning the demerger, do you think it would be unreasonable to estimate $300 million or larger buybacks the first year from the combined companies? And let me just elaborate. I’m estimating steel dynamics is under a six PE on current earnings and new core under eight. So I’m worried the Steel Processing business has a discounted PE and sympathy to that. And I’m a little worried that the RemainCo of diverse construction and cylinder and WAVE and Dietrich businesses doesn’t have an exact comparable and might get misunderstood like a little mini conglomerate. So it’s not clear to me that the combined valuation is a lot more. Maybe I’m just saying tongue in cheek, your legal and banking advisors encourage you to do it to charge you these big asset fees $24 million. But do you think it’s unreasonable to expect much larger buybacks in the coming year out of concern the two companies don’t trade as well as your current 10 PE-ish?

Tim Adams : Well, a couple things there, John. First, we didn’t do this spin because our bankers and lawyers encouraged us to. We did it because we believe it’s the right thing to do for our shareholders and for the long-term value creation of the company, and for our employees and other stakeholders. I will say, while we have not been buying back stock this year, because we are trying to fortify our balance sheet so that when we do separate, both companies have a tremendous amount of liquidity and low leverage to take advantage of opportunities. But it’s a little difficult to say right now, what those opportunities might be if you have followed us, which I know you have for a long time that we allocate capital based on where we think the best opportunities are.