Shares of metal processor Worthington Industries (WOR) got a lift after it announced a joint venture with two Japanese steel makers to process steel near Shanghai, China. It will join Nisshin Steel Co., Ltd. and Marubeni-Itochu Steel Inc. to make cold rolled strip steel mainly for the automotive industry. The Ohio-based company’s shares gained as much as 4.7% following the announcement. The stock is up around 38% so far this year.
Worthington will have a 10% stake in the joint venture, which will be known as Zhejiang Nisshin Worthington Precision Specialty Steel Co., Ltd., with Nisshin and Marubeni-Itochu owning 55% and 35%, respectively. The deal also provides Worthington an option to increase its ownership in the joint venture. The companies will sign the formal agreement by the end of this month.
The deal will enable Worthington to leverage its expertise in cold rolled strip steel in China, the biggest automotive production market on the planet. The joint venture plans to construct a plant in Pinghu City, Zhejiang, with an annual capacity of roughly 130,000 tons. Construction of the facility is expected to commence immediately following government clearance. The plant is expected begin production in fourth-quarter 2015.
Worthington saw its profit surge roughly 61% year over year to $54.6 million or 76 cents per share in first-quarter fiscal 2014 (ended Aug 31, 2013), reported last month, on strength across its Steel Processing and Pressure Cylinders divisions and contributions of its joint ventures.
The results were also boosted by gain associated with favorable tax adjustments related to the company's purchase of an additional 10% interest in the Tailor Welded Blanks (:TWB) joint venture. Adjusted earnings of 58 cents a share met the Zacks Consensus Estimate.
Revenues rose around 4% year over year to $692.3 million and beat the Zacks Consensus Estimate of $689 million. Sales were boosted by higher volumes stemming from recent acquisitions, which more than offset lower pricing.
Worthington remains positive about fiscal 2014 and continues to expect growth both organically and from acquisitions. The company is seeing strength in the automotive space and improvements in commercial construction and agriculture markets. Worthington will remain committed to explore fresh opportunities and drive improvement and optimization across its businesses.
Worthington currently retains a Zacks Rank #2 (Buy).
Other companies in the metal processing and fabrication industry having favorable Zacks Rank are NSK Ltd. (NPSKY), NN Inc. (NNBR) and Northwest Pipe Co. (NWPX). All of them hold a Zacks Rank #1 (Strong Buy).
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