Net sales for the quarter were down 13% from the comparable quarter in 2018, primarily driven by lower direct volume and lower average direct selling prices in Steel Processing due to a decline in the market price of steel.
Gross margin decreased $25.7m from the prior year quarter to $117.3m, primarily due to compressed direct spreads in Steel Processing, which were negatively impacted by inventory holding losses in the current quarter versus prior year holding gains, combined with lower direct volumes.
Operating loss for Q1 was $14.6m, a decrease of $65.5m from the prior year quarter. The lower gross margin combined with pre-tax restructuring and impairment charges of $41.1m, of which $40.6m related to Engineered Cabs, drove the loss for the quarter.
Equity income from unconsolidated joint ventures decreased $5.2m from the prior year quarter to $24.8m, primarily due to a $4.2m impairment charge to write down the company’s 10% investment in Zhejiang Nisshin Worthington Precision Speciality Steel to its estimated fair value.
“Despite softness in several of our end markets and a lot of noise in the numbers, the overall health of the company is good,” said John McConnell, Worthington Chairman and CEO.
Quarterly Segment Results
Steel Processing’s net sales totalled $523.4m, down 21%, or $137.1m, from the comparable prior year quarter driven by lower direct volume and lower average direct selling prices.
Pressure Cylinders’ net sales totalled $304.4m, up 1%, or $4m, over the comparable prior year quarter. The quarter benefited due to the impact of an early termination of a customer take-or-pay contract within the industrial products business, which accelerated future planned sales into the current quarter, partially offset by the impact of divestitures.
Engineering Cabs’ net sales totalled $28.1m, up $0.8m, or 3%, over the prior year quarter on higher volume. The operating loss of $45.1m and was $40.8m higher than the prior year quarter driven by impairment charges of $40.6m.
Outlook
“We made significant process in the quarter, continuing to address underperforming and non-core businesses, positioning us well for the remainder of the fiscal year,” said McConnell.
“While steel price declines remain a headwind for Steel Processing, overall, our businesses are executing well and taking advantage of market opportunities.”