Worthington Steel, Inc. (NYSE: WS) reported a fourth-quarter fiscal 2026 operating loss of $57.6 million, swinging from operating income of $66.4 million in the prior-year quarter, after recording $94.5 million in impairment charges against its Electrical Steel reporting unit.
Net sales for the quarter ended May 31, 2026, reached $929.2 million, an increase of 12% from $832.9 million in the same period a year earlier. The revenue gain was offset by non-cash asset writedowns and acquisition-related expenses associated with the Klöckner & Co SE acquisition, which closed on June 3, 2026, after the quarter ended.
#Electrical Steel Impairment Reflects Weakened Industrial Demand
The $94.5 million charge comprised $53.8 million in goodwill impairment and $40.7 million in long-lived asset impairment, both within the Electrical Steel reporting unit. The company attributed the writedowns to weakened demand in certain end markets, particularly industrial motors in Europe and the United States, citing increased foreign competition and delayed automotive program launches.
The impairment was the primary driver behind the quarter's net loss attributable to controlling interest of $48.7 million, compared to net earnings of $55.7 million in the fourth quarter of fiscal 2025. Net loss per diluted share came in at $0.98, against earnings per diluted share of $1.10 a year earlier.
Excluding impairment charges, acquisition-related expenses, and other one-time items, adjusted net earnings per diluted share were $0.74, compared to $1.05 in the prior-year quarter. Adjusted EBIT came in at $54.0 million versus $70.1 million a year ago.
#Net Sales Rise on Direct Business Growth
The 12% increase in net sales was driven by higher direct volumes, including a $47.6 million contribution from the Sitem Group, acquired earlier in fiscal 2026, as well as higher average direct selling prices. Direct tons sold rose 3%, with legacy business increasing 1% and the remainder attributable to Sitem Group.
Toll processing sales declined $1.9 million, or 6%, compared to the prior-year quarter, partly reflecting the May 2025 closure of the Cleveland-area Worthington Samuel Coil Processing facility and softening demand from mill customers. Toll volumes fell 15% year over year.
Gross margin declined to $118.1 million from $127.0 million in the prior-year quarter, reflecting lower direct and toll spreads, partially offset by a $2.3 million contribution from Sitem Group.
#Kloeckner Acquisition Closes After Period End
On June 3, 2026, following the close of the fiscal quarter, Worthington Steel completed settlement of its voluntary public cash offer for Klöckner & Co SE shares at €11.00 per share, securing approximately 62% of Kloeckner's outstanding shares. The company described the deal as the largest acquisition in its history.
"The completion of the Kloeckner transaction shortly after year-end marks the largest acquisition in our history and a defining step in building a stronger, more diversified metals processing platform," said Geoff Gilmore, president and chief executive officer, in the earnings release.
Worthington Steel ended the quarter with cash and cash equivalents of $84.6 million, total debt of $256.8 million, and net debt of $172.2 million. Selling, general and administrative expenses rose $22.3 million year over year, including $15.5 million in professional fees related to the Kloeckner transaction.
For the full fiscal year ended May 31, 2026, net sales reached $3.44 billion compared to $3.09 billion in fiscal 2025. Adjusted EBIT for the full year was $160.8 million, up from $149.1 million. Adjusted earnings per diluted share were $2.23 for the year, compared to $2.16 in fiscal 2025.
The company's board declared a quarterly dividend of $0.16 per share, payable September 29, 2026, to shareholders of record on September 15, 2026.
Worthington Steel operates 37 facilities across seven US states and 10 countries, processing carbon flat-roll steel, electrical steel laminations, and tailor-welded blanks primarily for automotive and industrial customers.
Management noted integration readiness and operational discipline as priorities heading into fiscal 2027. Risks to that outlook include execution complexity around the Kloeckner integration, continued weakness in electrical steel end markets, foreign competition, macroeconomic conditions, and commodity price volatility.