A much larger business after its combination with Kloeckner & Co. posted an adjusted profit miss and a GAAP loss. The shares slipped in thin after-hours trading.
Worthington Steel's first quarter as a far larger company produced bigger sales and thinner profitability.
For the fiscal first quarter ended , net sales rose to $2.727 billion from $872.9 million a year earlier, an increase of about 212% that reflects the company's combination with German steel distributor Kloeckner & Co. Operating income rose to $56.0 million from $48.3 million.
Adjusted earnings were 57 cents a share, short of the 68 cents analysts expected. On a GAAP basis, the company lost $10 million, or 20 cents a share.
The margin comparison captures the change in the business. Operating income equaled about 2.1% of sales in the quarter, compared with about 5.5% a year earlier. Revenue more than tripled while operating profit rose about 16%, so each new dollar of sales is carrying far less profit than the legacy business did.
The headline revenue comparison is less useful than usual. Analysts' revenue estimates were built on different assumptions about when and how the combined business would be reflected, so the figures are not directly comparable with the reported total.
Shares closed down 2.38% at $38.19 on Tuesday before the release and traded at $37.45 in light after-hours dealing, down about 2%.
What to watch
Investors will be looking for the company's outlook and segment detail to judge how quickly the combined operation can lift margins back toward the standalone business's historical level. The first full quarter of integration costs and synergy progress will set the tone.