Worthington Steel Reports Robust Automotive Market Gains, Raises Fiscal 2026 Forecast
Worthington Steel Outperforms in Automotive Sector, Elevates Fiscal 2026 Outlook
Worthington Steel (WS) reported its fiscal Q1 2026 financial results on September 25, 2025, demonstrating a significant resurgence in its automotive segment. The company announced a substantial 17% year-over-year increase in shipments to the automotive market, a performance attributed to the successful ramp-up of new programs and strategic market share gains with the Detroit Three OEMs. This growth notably outpaced the Detroit Three's production increase of 5% during the same period, contributing to an overall nearly 13% rise in Worthington Steel's total shipments.
Detailed Q1 2026 Performance and Financial Overview
Financially, Worthington Steel posted net sales of $872.9 million for the quarter, marking a 5% increase compared to the prior year. Adjusted EBIT reached $54.9 million, an increase of $15.5 million from Q1 fiscal 2025. Direct sales volume constituted a larger portion of the sales mix, rising to 63% from 56% in the prior year quarter, with direct sales volume growing by 6%. Conversely, toll processing volumes experienced a 22% decline year-over-year.
Despite the strong top-line performance, the company reported a cash flow from operations outflow of $5 million and a free cash flow outflow of $34 million, primarily due to increases in working capital. Capital expenditures for the quarter amounted to $29 million, with a projected $100 million for the full fiscal year 2026. Worthington Steel concluded the quarter with $78 million in cash and a net debt position of $155 million.
Market Response and Catalytic Factors
The positive developments from Worthington Steel underscore a broader rebound within the automotive manufacturing sector. The company's management expressed cautious optimism, elevating its full-year automotive build rate forecast from a previous 13.5 million units to 15 million units. This upward revision reflects stronger-than-anticipated resilience in the automotive market. Furthermore, the company anticipates potential economic tailwinds from prospective interest rate cuts by the Federal Reserve, which could further stimulate demand and reduce borrowing costs for the industry.
Broader Context and Strategic Implications
Worthington Steel's robust performance and optimistic outlook are indicative of a bullish sentiment for both the company and the wider Basic Materials Sector and Automotive Sector. This strong showing signals potential for broader economic improvement. Strategically, the company is making significant investments in electrical steel, with production facilities in Canada slated for early calendar year 2026 and a Mexico facility expected to commence production in the coming months. The acquisition of a 52% stake in S.I.T.E.M. S.p.A. (Sitem) further strengthens Worthington Steel's global presence in the rapidly expanding electric vehicle (EV) market, particularly in European electrical steel laminations. The company also highlights its focus on AI-driven operations for cost savings and efficiency improvements, positioning 80% of its steel sales to support powertrain-agnostic automotive parts.
Management Commentary and Forward-Looking Statements
Geoff Gilmore, President and Chief Executive Officer of Worthington Steel, commented on the quarter's results, stating,
> "Worthington Steel is off to a strong start in fiscal 2026 driven by disciplined execution in a soft market, resulting in year-over-year volume growth. This quarter reflects the strength of our base business, our team's ability to adapt in a dynamic market and the benefits of our transformation mindset."
Management reiterated their satisfaction with the updated 15 million unit build rate forecast, noting its resilience compared to earlier, lower projections. They also expressed hope for continued market recovery into fiscal year 2026, buoyed by potential interest rate adjustments.
Outlook and Key Factors Ahead
Looking ahead, Worthington Steel forecasts inventory holding losses of approximately $5 million to $10 million in Q2 FY26, contrasting with the $5.6 million gains realized in Q1. The direct sales mix is expected to stabilize between 60% and 65%. Management remains confident in sustained automotive strength, the successful execution of new programs, and ongoing cost discipline, despite acknowledging persistent macro uncertainty and limited sector visibility. The company has declared a quarterly dividend of $0.16 per share and plans approximately $100 million in capital expenditures for fiscal year 2026, primarily directed towards electrical steel and electrification markets. While no immediate catalysts for a sharp increase in overall demand are anticipated, Worthington Steel is strategically positioned to capitalize on long-term trends.
