The words "uncertainty" and "change," but also "cautiously optimistic" are on the minds of Worthington Steel executives amid President Donald Trump's tariffs on foreign steel and aluminum.
Worthington Steel President/CEO Geoff Gilmore and other executives spoke on the issue on an earnings call on Thursday morning and took questions from investors.
The Columbus-area company that produces carbon flat-rolled steel is one of the top 10 U.S.-based steel manufacturers.
Since a peak in November, Worthington Steel's (WS) stock price has declined on the New York Stock Exchange from a peak of over $46 per share to just over $28 on Thursday afternoon. However, Gilmore sees reason for optimism despite what he called uncertainty and change in the market.
Like Gilmore said, the economy is in an uncertain moment as the Trump administration adds a 25% tariff on steel and aluminum imports from all foreign countries. The tariffs were off-again, on-again for weeks as Trump negotiated delays with countries like Canada and also threatened an even stiffer 50% steel tariff at one time.
The move has the potential to give a helping hand to domestic steel and aluminum makers, while also raising costs for businesses and consumers that buy steel and aluminum — ranging from automakers to soda pop and beer drinkers.
The company operates mostly in the United States with operations in other countries including Canada and Mexico.
As all of this happens, the U.S. is being dealt retaliatory tariffs by many countries.
Worthington Steel just announced in early March it would close its Cleveland plant that it shared with a Canadian metals distributor. The company, however, said the decision to consolidate the facility with its Twinsburg location wasn't caused by the import taxes on foreign goods.
Gilmore responded to a question saying he thinks the tariffs will have very little impact on the company's earnings.
"The biggest downfall right now, it is that uncertainty and it's probably — I'm laughing a bit — the intellectual strain of trying to keep up and keep the conversations going with the customers so we can get a better understanding of what the rules are going to be going forward," Gilmore said.
Gilmore said the company has dealt with tariffs in the past and they think they have mitigation strategies in place. He said the most important thing to do in this economic moment is to stay completely aligned with customers and suppliers.
"All bets are off right now, right? What happens to inflation? What happens to interest rates? What happens to the economy as a whole? Do we tend more towards recession versus small growth, right?" Gilmore said. "I think we're cautiously optimistic that by the end of the year, we should be at more normalized run rates from a volume perspective, but there's a lot of moving parts."
Gilmore started the call by discussing the company's earnings for the third quarter as compared with previous quarters. He said in the third quarter, Worthington Steel generated about $41.9 million in revenue, compared with the $82.8 million in revenue generated in the same quarter of the previous year, while earnings per share came in at 27 cents versus 98 cents per share in the same period last year.
Gilmore said results were impacted by both lower production volumes and lower average selling prices. He said the company expected many of the headwinds from the second quarter to continue into the third quarter, as customers manage uncertain macroeconomic conditions.
"However, we saw signs of improvement during the last month of the quarter. And we believe most of the volume improvement at the end of the quarter was due to fundamental demand improvements rather than a buy ahead effort to beat potential steel price increases," Gilmore said.
When it comes to those steel prices, Gilmore said there's been a jump in prices from around $250 per ton in the last six months to around $950 per ton.
"Whether or not that's sustainable is certainly debatable," Gilmore said.
