Q1 2025 Worthington Steel Inc Earnings Call
Thank you for standing by and welcome to the Worthington Steel first quarter fiscal 2025 earnings conference call.
Things have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one.
Melissa Dykstra: Thank you I'd now like to turn the call over to Melissa Dykstra, Vice President of Communications and Investor Relations you may begin.
Melissa Dykstra: Thank you operator, good morning, and welcome to Worthington fields first quarter fiscal year 2025 earnings call on our call today, we have Jeff Gilmar Worthington steel President and Chief Executive Officer, Jeff Klingler, Executive Vice President and Chief Operating Officer, and Tim Adams, Vice President and Chief Financial Officer before we get.
Speaker Change: I'd like to remind everyone that certain statements made today are forward looking within the meaning of the 1995 Private Securities Litigation Reform Act. These statements are subject to risks and uncertainties that could cause actual results to differ from those suggested we issued our earnings release yesterday after the market well please refer to it for more detail on those factors.
Speaker Change: Could cause actual results to differ materially unless noted as reported in todays discussion will reference non-GAAP financial measure, which adjust for certain items included in our GAAP results and which are presented on a standalone basis.
Speaker Change: You can find definitions of each non-GAAP measure and GAAP to non-GAAP reconciliations within our earnings release.
Speaker Change: Today's call is being recorded and a replay will be made available later today on Worthington steel dot com.
Speaker Change: Now I'd like to turn the call over to Jeff Martin.
Jeff Martin: Thanks, Melissa good morning, everyone and thank you for joining us the first quarter of fiscal year 2025 was solid rewarded can steal despite some headwinds our teams are focused on serving our customers and managing the dynamics of our industry and the markets we serve.
Speaker Change: Demand is stable and we continue to find solutions for our customers and flat rolled steel processing electrical steel laminations and tailor welded blanks.
Speaker Change: Our solutions are unique in Kutztown, making us a valued partner in fact more than 90% of the steel we transform will go through multiple processes.
Speaker Change: We and our customers to improve their end products and saw challenging material needs. Today, we will share updates on how we continue to execute on our strategy for growth by first making focused investments in the rapidly growing electrical steel market, which supports the transition to a more electrified light vehicle fleet.
Speaker Change: <unk> hybrid and battery electric vehicles.
Speaker Change: And transform of course to support the modernization and growth of the nation's electrical infrastructure.
Speaker Change: Strategic growth via Capex, and selective acquisitions, leading to margin accretive growth and finally utilizing transformation our system of continuous improvement to increase margins reduce working capital and to add capacity.
Speaker Change: When it comes to our electrical steel investments, we remain bullish on the electrified vehicle and transformer markets.
Speaker Change: Automakers continue to invest in both EV and hybrid technology, and while EV adoption is slower than some anticipated. We are seeing pockets of acceptance and continued growth. We believe the shift to hybrid technology. In some models is a positive for Worthington steel because we can supply the specialty steel used in our <unk>.
Speaker Change: Hybrids automatic transmission as well as the electrical steel laminations used in hybrid traction motors.
Speaker Change: Electric vehicles data centers and AI continue to drive the need for electrical infrastructure and there continues to be an 18 to 24 month backlog for Transformers.
We remain well positioned to capitalize on the decarbonization of transportation the energy transition to more renewable sources.
Speaker Change: And the much needed investment in the U S infrastructure.
Speaker Change: Over the quarter the transformation will continue improvements in efficiency and productivity.
Speaker Change: <unk> will share some examples of innovation and transformation in just a few minutes.
Speaker Change: Our employees and powered by our philosophy and strong culture drive this improvement not only in our business, but also in our communities over the summer teams across Worthington steel came together to get back in many ways.
Speaker Change: From raising money for cancer research to maintaining a community garden to voluntary net of food bank, our employees exhibitor philosophy, each day to support the areas, where we live and work.
Speaker Change: Our commercial team continues to set the bar high for responding to customer needs.
Speaker Change: Last month, we had the opportunity to recognize their accomplishments contributions to our growth and embodiment of our philosophy at our national sales meeting I am honored to lead this team and I am excited about the progress we've made and the opportunities in front of us.
Speaker Change: Our breadth of value added processing capabilities end to end supply chain management.
Speaker Change: This risk management solutions, and our experienced and dedicated employees continue to differentiate Worthington steel in closing I'd like to thank each one of our employees for remaining focused on innovating for our customers and executing our strategy, our strategy and our differentiation positioned us well to grow and deliver.
Speaker Change: Strong returns for our shareholders.
Speaker Change: Yes, Jeff Klingenberg, who will comment on our operations.
Speaker Change: Thanks, Jeff and good morning, everyone I'd like to start our operational overview by highlighting our safety efforts over the quarter six of our facilities were recognized for reaching the highest level of our safe works environmental health and safety program our facilities in Monroe in Middletown, Ohio Monroe Mill.
Speaker Change: Again, Cambridge, Ontario, and Puebla, and Mexico led the company in the execution of our safety works program.
Speaker Change: In fiscal 2024.
Speaker Change: These teams met 100% of the criteria for safety management system and program audits, creating multiple safety and environmental continuous improvement initiatives and implementing targeted risk reduction plans.
Speaker Change: Ensuring our employees return home safely. After every shift is our number one priority.
Speaker Change: This emphasis continues to make Worthington steel a great place to work and enables higher productivity better customer responsiveness and stronger returns.
Speaker Change: As we look at our operational overview for the quarter, let's start with what we saw in our two largest end markets.
Speaker Change: Sales to the automotive market made up 51% of first quarter fiscal year 2025.
Speaker Change: A decrease from the same period, a year ago, when automotive made up 54% of our Q1 fiscal year 2024 sales.
Speaker Change: Our volume shipped to the automotive market on a direct sales basis decreased 10% in the first quarter of fiscal 2025.
Speaker Change: And to the prior year.
Speaker Change: We expected some of the variance as several customers to change their business model and direct sale to toll processing.
Speaker Change: Additionally, we believe some Detroit three suppliers were pulling ahead orders last year to prepare for a potential strike.
Speaker Change: We were unexpectedly challenged during the quarter as one of our key customers adjusted their commercial and pricing strategy. We believe that customer has put those issues behind them is largely back on track.
Speaker Change: Overall, the automotive market remains solid for us oil production timing was off this quarter, we continue to gain market share and provide value added solutions to help our customers.
Speaker Change: We believe North American light vehicle production will likely end up at $15 6 million units for calendar 2024, which is flat compared to calendar year 2023 production remains on track to reach pre COVID-19 production levels in the next year or two.
Our OEM customers continue to anticipate growth in the plug in hybrid and EV market as adoption continues to grow capital investments at our Mexico electrical steel facility will allow us to capitalize on this opportunity.
Speaker Change: Construction industry remains our second largest market, making up 11% of our sales in the first quarter of fiscal 2025, the same as the prior year quarter.
Speaker Change: As we have discussed in the past construction is a large and diverse market and the sub markets. We serve we experienced strength in metal framing and building products combined with strikes in the Culver category.
Our expansion projects in Canada, and Mexico continued to be on time and on budget with expanded transformer core in electrical steel lamination capacity coming online at the end of calendar year 2025, and those respective facilities.
Speaker Change: We continue to receive interest from customers about our additional capabilities at TWD using our licensed ablation technology and are filling our pipeline.
Speaker Change: The equipment is currently being installed and we remain on schedule.
Speaker Change: Our initial move into Europe with the addition of the electrical steel facility in <unk>, Germany continues to gain customer interest and commitments.
Acquired a strong team of highly skilled people at an angle to understand their customers very well.
Speaker Change: The ERP project at Temple is progressing as expected the entire project will take place over approximately three years and we will provide the benchmark data needed to enhance our tempo business through the transformation.
Speaker Change: On a related note I'd like to share a few examples of successful transformation projects you may recall last quarter I shared a story from one of our facilities about reducing work in progress I also mentioned that we are launching transformation in our corporate functions.
Speaker Change: I am pleased to report that even though we are just starting this work we are already seeing results from quick wins realized during the process mapping phase for instance, we've reduced the time involved in a payroll process by 80% we've identified ways to decrease the time it takes to configure.
Speaker Change: And distribute Pcs to employees by 15%.
And we have decreased the number of tasks needed to hire and it contractor by 30%.
Speaker Change: It's important to note that these changes are happening in the very early stages over time, the small but important wins start the transformation mindset among departments and will add up to what we believe will be significant transformations.
Speaker Change: This will lead to streamline work less time to complete tasks and cost savings, while making the work our employees perform everyday more valuable and more desirable.
Speaker Change: As I wrap up my comments I want to congratulate the team at our temple facility in India. A recently received our best supplier Award from Qatar Auto components for their exceptional contribution to <unk> electric vehicle Motor program.
Speaker Change: The award recognizes our commitment to innovation quality and excellence and electric vehicle motor manufacturer.
Speaker Change: Congratulations to that team and thank you to all our Worthington steel employees for your great work and contributions now I will turn the call over to Tim Adams to talk through the financial results.
Tim Adams: Thank you, Jeff and good morning, before I provide some color on the quarter I would like to remind everyone that the current year first quarter consolidated results on a standalone basis are compared with the prior year quarter, which was prepared on a carve out basis, we started our fiscal year with a solid quarter reporting first quarter earnings of <unk> 28.
Tim Adams: $4 million or <unk> 56 per share as compared with prior year quarter earnings of $58 5 million or $1 19 per share.
Tim Adams: The current quarter results included recognition of a second and final tax court ruling related to a temple pre acquisition matter for which we were indemnified by the former owners of temple.
Tim Adams: The net impact to earnings is zero, however, we recognized $4 $4 million of miscellaneous expense related to the indemnity payable.
Tim Adams: And $4 4 million of tax income associated with the refund the temporal tax indemnification adjustment for Q1 relates to a 2009 manner. While the matter we discussed in our Q4 2024 results was related to a 2008 simple matter.
Tim Adams: Prior year quarter included several unique items, including pre tax separation expense of $3 6 million or <unk> <unk> per share and a $1 4 million pretax impairment charge or <unk> <unk> per share related to assets at our consolidated joint venture Worthington Samuel coil processing.
Tim Adams: Excluding these items, we generated earnings of 56 per share in the current quarter compared to $1 26 per share in the prior year quarter.
Tim Adams: In addition in the first quarter, we had estimated pre tax inventory holding losses of $16 6 million or <unk> 25 per share compared to estimated pre tax inventory holding gain of $15 5 million or <unk> 24 per share in the prior year quarter.
Tim Adams: An unfavorable pretax swing of $32 million or <unk> 49 per share in the first quarter, we reported adjusted EBIT of $39 4 million, which was down $41 1 million from the prior year quarter adjusted EBIT of $85 million. This decrease is primarily due to lower gross margin and <unk>.
Tim Adams: Lower Serbia zero equity earnings.
Tim Adams: Gross margin was impacted by lower direct material spreads, including the impact of estimated pre tax inventory holding losses and lower direct volume lower direct volume was partially offset by higher toll spreads due to an improved mix within coal processing.
Tim Adams: Equity earnings from Serbia zero decreased due to lower direct spreads, which were unfavorably impacted by lower steel prices as well as the impact of exchange rate movements.
Tim Adams: SG&A was in line with our expectations, but $3 2 million higher than the prior year Q1, primarily due to incremental costs associated with being a standalone company.
Speaker Change: Next I'll provide some content on the market and our shipment.
Speaker Change: Steel market pricing trended lower throughout the quarter bottoming at $660 per ton in August down approximately $150 per ton for met with.
Speaker Change: With the decrease in market pricing, we expect estimated inventory holding losses in the second quarter of fiscal 2025 will be slightly lower than the $16 6 million of estimated inventory holding losses in the first quarter, we estimated inventory holding losses in Q2 could be approximately $10 million to $15 million.
Speaker Change: On a pretax basis.
Speaker Change: Flat steel prices prevailed throughout most of July and August and increased approximately $50 per ton since mid August recently, there have been several steel related fair trade initiative announced in the North American market, while we have not quantified the impact we would expect these cases to result in upward pressure on steel.
Speaker Change: Rice's over the longer term.
Speaker Change: Net sales in the quarter were $834 million down $72 million or 8% from the prior year quarter, primarily due to lower direct market pricing and lower direct volumes, partially offset by a more favorable mix within our toll business, which included a greater proportion of higher value added processing.
Speaker Change: We shipped approximately 1 million tons during the quarter, which was down 3% compared to the prior year quarter direct sale volume made up 56% of our mix in both the current year and the prior year quarter.
Speaker Change: Direct sale volume was down 4% over the prior year quarter with an increase in construction related volume that was more than offset by reduced shipments to the automotive market.
Speaker Change: Shipments to the construction market increased 8% on a year over year basis, while our direct sale volume to the automotive market was down 10% compared to the prior year quarter. The decrease in automotive volume was primarily due to several programs reaching their end of life, while the replacement platforms continue to experience launch delays as well as lower.
Speaker Change: <unk> for several specific programs, our automotive book of business continues to be healthy, making up 51% of our sales. We believe the lower year over year volume is related to specific platform and not indicative of the health of our overall automotive book of business, which we are expanding.
Speaker Change: We are cautiously optimistic about automotive volume in the coming quarters and look forward to continuing our partnership with our automotive customers.
Speaker Change: Total tons were down 2% year over year, primarily due to lower toll pickling with the mill. However, the mix of toll volume was more heavily weighted towards higher value added products, including tailor welded blanking and galvanizing.
Speaker Change: Similar to the automotive market, we are cautiously optimistic about overall volumes for the next few quarters as demand appears to be steady.
Speaker Change: Turning to cash flows and the balance sheet cash flow from operations was $54 6 million and free cash flow was $33 1 million.
Speaker Change: During the quarter, we spent $21 5 million on capital expenditures related to a variety of projects, including the previously announced electrical steel expansion in Mexico, and Canada on a trailing 12 month basis, we generated $167 2 million of free cash flow.
Speaker Change: And Wednesday, we announced a quarterly dividend of <unk> 16 per share payable on December 27, 2024 and.
In regard to our balance sheet operating working capital decreased $16 1 million during the first quarter. We ended the quarter with $36 million of cash, which is down $4 million from year end.
Speaker Change: Our ABL debt at August 31 was $122 million, resulting in net debt of 86 million.
Speaker Change: In summary, Worthington steel had a good first quarter and our team is performing at a very high level everyone. At Worthington steel continues to be focused on driving value for our stakeholders on both a near term and long term basis.
Speaker Change: At this point, we will be happy to take your questions.
Speaker Change: Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star one again.
Speaker Change: Your first question today comes from the line of Martin Engler from Seaport Research. Your line is open.
Martin Engler: Hello, Good morning, everyone.
Martin Engler: Gordon.
Gordon: A question.
Speaker Change: Just touch on here within autos, you noted some slower startup newer programs that rolled off from.
Previous models and programs and then you noted some changes and program needs for steel is that correct.
Speaker Change: I'm not sure we noted any changes from four program needs in steel.
Speaker Change: But you are correct, we had some some model changeover delays that impacted us.
Speaker Change: We did have a.
Speaker Change: Customer.
Who had to sort of retool their commercial strategy.
Speaker Change: Which they did and sales rebounded there and we think that's behind US and I think Martin that's third Jeff touched on the first two definitely a delay in the model changeover.
Martin Engler: Definitely retooling their strategy, where slowdown maybe incentivize and offer discounts as our competitors were doing.
Martin Engler: And then lastly, and this was anticipated if you look year over year.
Martin Engler: We had the auto strike looming. So there was quite a bit of pull ahead as.
As well so that was a difference.
Speaker Change: We think so.
Speaker Change: Lower ramp ups of the newer models.
Speaker Change: It's kind of it essentially some pent up demand within autos, where as those get rolling forward you would expect more of a.
Speaker Change: Normalized demand pool, I guess, it sounds like it inhibited some activity within autos recent history here.
Speaker Change: Yes, Martin our assumption would be that it probably will end up being more normalized.
Martin Engler: And there is a little bit slow on your commercial strategy and Youre missing out sales.
Martin Engler: Sacrificing market share at that point in time, so I think that'll work its.
Martin Engler: It's way out market share will shift where we're at.
Speaker Change: Where it needs to and you'd see a more normalized.
Speaker Change: Though structure auto build structure I should say.
Speaker Change: Why do you think there was a shift away from direct volumes and the pivot towards tolling.
Speaker Change: I guess, what prompted the athletic what was behind that.
Speaker Change: Yes.
Speaker Change: Good question.
Speaker Change: So predominantly there is there are two areas, where you saw a bit of a shift number one.
Speaker Change: We simply we're getting more customers looking for us to do toll galvanizing.
Speaker Change: So that was one piece of it.
Speaker Change: Another piece and maybe a bigger piece was just a shift in business model with some customers out of tailor welded blanks.
It was their preference to negotiate and own material and then obviously hire us to do that to do the toll processing. So that was a decision they made and certainly one we supported but that was the change.
Speaker Change: Okay got it.
Speaker Change: I know looking back a quarter ago, there was a pretty favorable mix when you look at excluding holding gains or losses on underlying EBIT.
Speaker Change: EBITDA for steel this quarter seemed to pivot back to something I guess may be characterizes pop.
Speaker Change: Possibly more normalized is that fair assumption or reinsure. The looking at the current fiscal <unk> underlying EBITDA at those holding gains and losses more normalized in the ballpark.
Speaker Change: Yes, Martin this is Tim I think what we saw in Q4 was we had a higher proportion of galvanized in the in our direct sales right. So what we're trying to signal in Q4 was hey that mix was a little higher weighted towards galvanized than it was the rest of the products. So I would say if youre looking at a historical average.
Martin Engler: Q1 meets that historical average that's pretty fair way to look at it.
Martin Engler: What are you seeing as far as just.
Speaker Change: Covering out in looking solely at gel coated products, what are you seeing as far as demand and availability out there.
Speaker Change: Are you seeing any notable shifts versus what you saw.
Speaker Change: Quarter two quarters ago.
Speaker Change: Sure. Good morning. This is.
Jeff Martin: Jeff Martin.
Speaker Change: Overall, I think we would describe the market as solid automotive is.
Jeff Martin: Despite the.
Jeff Martin: Small setback last quarter ultimately the year is going to be relatively flat at about $15 6 million units.
Jeff Martin: So.
Jeff Martin: Pretty flat there.
Jeff Martin: When it comes to other important markets for us the construction market, which is very large and very diverse.
Jeff Martin: For us we're cautiously optimistic about.
Jeff Martin: About going into going into calendar 'twenty five.
Jeff Martin: We expect that the cut in interest rates.
Jeff Martin: Likely to have a positive impact.
Jeff Martin: There the AG market expected to be muted for the rest of the calendar year.
Jeff Martin: Came off a really strong 23.
Jeff Martin: And but they continue to face challenges here with lower commodity prices this year higher interest rates and higher input costs. We did see some bright spots however throughout the year with the customers.
Jeff Martin: Ordering an increased number of grain bin was during the summer.
Jeff Martin: And then heavy truck is sort of in the same boat.
Jeff Martin: Experienced a pullback in demand that we saw late starting in late 'twenty three.
Jeff Martin: We expect that to last through the remainder of the year.
Jeff Martin: However.
Jeff Martin: We're expecting some improvement going into the next calendar year there.
Martin Engler: Hey, Martin I think.
Martin Engler: Good overview from Jeff on all of the markets I think you specifically asked about coded and galvanized and I wouldnt mere Jeff's comments there that that's another book, we're optimistic and feel like demand is going to be.
Speaker Change: Stable, obviously, we have an election, so we're going to stress stable I think most would mirror those comments right now.
Speaker Change: But as we get beyond that and with lower interest rates the markets we serve.
Speaker Change: With that galvanized product feeling.
Speaker Change: Feeling optimistic overall.
Are you able to say roughly like what kind of utilization youre running Gal blind what I'm curious about is of course trade case.
Speaker Change: And there is more volume coming back to the domestic market would you be able to cope more there.
Speaker Change: Maybe serve.
Speaker Change: A bit more volume into the modern market or spot market.
Speaker Change: Traditional customer base, if there is a need for it in the United States.
Speaker Change: Well you know.
Speaker Change: The way to answer that.
Certainly we would have.
Some open capacity and that's the importance of our transformation that continuous improvement.
Speaker Change: The team that we that we have to constantly be focusing on focusing on that and trying to free up capacity.
Speaker Change: And certainly the trade cases were already seeing an impact just from the announcements of golf slowing down coming in so.
Speaker Change: So certainly that could create some opportunities for us I think probably where we'd be most excited is certainly at a delta, but we also have Spartan and certainly would have capacity there that is open that.
Speaker Change: Would be able to go after additional market and market share.
Speaker Change: Yes.
Okay. Appreciate it helpful. Thank you very much.
Speaker Change: You got it.
Speaker Change: Our next question comes from the line of Phil Gibbs from Keybanc capital markets. Your line is open.
Phil Gibbs: Hey, good morning.
Phil Gibbs: Good morning, Bill good morning.
Phil Gibbs: I know last quarter, you gave us an update on electrical steel.
Speaker Change: Mid to longer term contract wins and allocated.
Speaker Change: <unk> at both.
Speaker Change: The Canadian facility in Mexican facility evening anything new.
Speaker Change: To report there in terms of dialogue with your customers.
Speaker Change: Yes.
Speaker Change: No nothing specific we knew we have won some additional business.
Speaker Change: For the future capacity, that's coming online in Mexico.
So we've got some additional business online to fill those process three of the five are installed and pretty much spoken for.
Speaker Change: The other two will be arriving.
Speaker Change: Within the next one to three months.
Speaker Change: And then installation will begin.
Speaker Change: I guess I would summarize it by saying.
Just a lot of very positive.
Speaker Change: <unk> communication and activity.
Speaker Change: <unk>.
Speaker Change: The.
Speaker Change: The capacity coming along in Mexico same thing in Canada.
We've got a couple.
Speaker Change: A couple of additional customers, who want to sign up in advance.
Speaker Change: Some of the additional capacity.
Phil Gibbs: But nothing specific there in Canada like in Mexico, and Phil You know this keep in mind at this point, it's what we can produce.
We can ship, hence the $84 million.
Speaker Change: Investment to add capacity to be able to continue to service customers need an increase in demand and then adding the capabilities because of our customers.
Speaker Change: Wants us to provide different products and we're providing today, which is all good news.
Thank you.
The equity income I think it was a little over $1 million in the quarter last year. It was $9 million is that a volume impact is that where you are or is that where youre seeing some of the model changeovers on the automotive comparisons or is that FIFO hits or is that all of the above but that was <unk>.
Speaker Change: Certainly softer than what we anticipated and I think obviously softer than what you would expect moving forward over the long run.
Speaker Change: Hey, Phil This is Tim So service here I want to start out with series there remains fundamentally strong and a key part of our strategy one of the things. We didn't update you guys. On was we are making progress on the new splitter project down there. So we've got new volume coming the newsletter should be installed by the first of December but what youre seeing.
Speaker Change: <unk> is a combination of two things and <unk> results and the impact of both is there kind of weighted the same.
Speaker Change: First service area showed significant decreases in inventory holding gains on a year over year basis. So they had significant gains last year and they were much much smaller this year and then second word.
Speaker Change: Also seeing is the impact of the volatility of the Mexican peso. So as you know the peso has been highly volatile over the last 12 months and last year's survey <unk> results show the impact of an appreciating peso while in the current quarter, we're showing the impact of a depreciating peso. So it's a combination of both those things.
Which one of those things as a stronger impact versus.
Speaker Change: Versus the other.
Speaker Change: No they're equally weighted.
Speaker Change: Equally weighted this quarter.
Speaker Change: Okay.
Speaker Change: And then lastly for me.
Speaker Change: On the side of temple neither it sounds like you are in the early innings of Av.
Speaker Change: Integration of it systems and other other new business practices.
Speaker Change: What type of what type of returns are you anticipating from.
Speaker Change: From some of these things I think you mentioned the kind of meaningful longer term cost savings and.
Speaker Change: Things of that nature so.
Speaker Change: Trying to understand where where your where your mindset regarding the project.
Speaker Change: I'm going to ask for some Grace for me and give us time because.
Speaker Change: We have taken.
Speaker Change: Now stay 100% focused on getting the ERP implemented Phil I mean, it's just until we get good timely data to set any type of baseline, it's going to be difficult for us to.
Speaker Change: To quantify what.
Speaker Change: What type of savings, we're going to start getting longer term and it's hard to compare I think as you could imagine versus what we've achieved in our flat rolled carbon business Theres just some some differences there I can just tell you that we're we're highly optimistic and think we have several opportunities identified and I am sure.
Jeff: Theres going to be a lot more to come what I can commit to is just like Jeff <unk> been doing over the last three calls as we're having various continuous improvement events and we're achieving success and were able to quantify those.
Speaker Change: We'll start sharing those with those calling in.
Speaker Change: Thank you so much.
Speaker Change: You got it thank you.
Speaker Change: Your next question comes from the line of John Tumazos from John Tumazos, very independent research. Your line is open.
Speaker Change: Okay.
John Tumazos: Thank you very much for your service to the company and the good results.
Thank you John Thank you for your support.
Speaker Change: Sure the laser welded blank business.
Speaker Change: $200000 more equity income or excuse me minority interest.
Speaker Change: Little over 200000, more net income for Worthington.
Speaker Change: And Thats very automotive related also.
Speaker Change: Could you explain why the laser welded blank business was up bucking the trend of the consolidated and the rest of the company.
Yes, John this is Tim so.
Tim Adams: I think the easy answer there is our spreads were up at service Aero are sorry, and PWB and service area on my brain, but spreads were up at <unk>, we had to do some recovery of costs freight costs and some other costs and.
Tim Adams: We absolutely had to raise prices to recover those.
Speaker Change: I would add Robert.
Correct.
Robert: So that product is so differentiated.
You can raise prices.
Robert: Even when.
Robert: Hot rolled sheet exchange prices were dipping below 700 a ton.
That's correct. It is a differentiate as a very high value added product.
Speaker Change: It's typically not hot roll based it is galvin cold roll.
Speaker Change: So we are able to when we have those situations where.
Speaker Change: And everybody has gone through these from an inflation standpoint, we had to recover cost.
Speaker Change: There and did the best we could and we were able to push price a little bit.
Speaker Change: Cliffs announce that they were going to build transformers.
Speaker Change: And we are.
Speaker Change: That's correct mix mix or electrical steel in Butler.
And I guess southwest of weird.
Speaker Change: To make the Transformers.
Speaker Change: With that bypass any opportunity for Worthington.
Speaker Change: Because they are going to be.
Speaker Change: Integrated from start.
Speaker Change: Scrap sales product.
Speaker Change: Or are there going to be intermediate phases, where you could process steel from.
Speaker Change: From the mill and before the weird and transformer plant.
Speaker Change: Yes, I mean, they certainly are making electrical steel today as we know they are announcing they announced that they will be making transformers, I don't know where electrical steel laminations and transformer course fit into that <unk>.
Speaker Change: Scenario at this point so to the latter part of your question or suggestion, yes theoretically.
Speaker Change: They could be a customer.
Speaker Change: But more importantly.
John Tumazos: John we don't.
John Tumazos: See that as a disruption.
John Tumazos: As we've said there is an 18 to 24 months backlog that market's going to grow much faster than GDP for the next 10 years. So.
Cleveland Cliffs: Cleveland cliffs entering that space, certainly will not disrupt.
Cleveland Cliffs: Our business and more importantly.
Speaker Change: We're going to continue to support our customers our customers are.
Speaker Change: Experts at making Transformers, and where the experts are making electrical steel laminations and it's a win win for us to continue to partner with them partnering with them is going to create more shareholder value and it's going to be better than industry.
Speaker Change: Versus us ever trying to leap into that market.
Speaker Change: And that concludes our question and answer session I will now turn the call back over to Jeff Gilmore for some final closing remarks.
Jeff Gilmore: Thank you for showing interest in Worthington steel and joining the call. This morning.
Jeff Gilmore: Great questions and we look forward to performing the balance of the quarter and getting back with you soon have a great day. Thank you.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.