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Worthington Industries (WOR)Stock (Manufacturing Industry, Steel & Iron Industry)
 Worthington Industries (NYSE: WOR) processes sheets of steel for the construction and automotive industries. Worthington sells the largest number of metal frames and trusses for wall and floor support in the U.S.[1] The company also makes gas cylinders and recycles used metal to make pallets and storage structures.[2] Worthington Industries is involved in 10 different joint ventures and expects to gain specialization and save $38.5 million from lower labor costs from the agreements.[3] High steel prices, which have nearly tripled from 2007 to 2008, have pushed the construction industry, which makes up 40% of the company's revenue, towards cement and wood.[4] The company also is dependent on the continued growth of the US housing market and the construction of new homes. The shift away from aluminum and the general decline in the housing market both have hurt Worthington.[5] High jet fuel costs and oil prices have also encouraged airlines and car manufacturers to use aluminum and titanium - which are lighter than steel.[6]
[edit] Business OverviewWorthington does not sell any of its products directly to consumers. Instead, its products are purchased by other companies which use the steel goods as part of their final products. WOR sells most of its products to the Construction and Automotive Industries. The construction industry is the company's largest consumer. 10% of the company's total sales go to construction of residential homes, while 30% go to the construction of commercial buildings and infrastructure.[7] The automotive industry purchases mostly flat rolled steel to be used for body panels. Chrysler, Ford, and General Motors (GM), "the big three", consist of most of Worthington's sales to the automotive industry.[7]   Worthington Industries processes sheet metal through 4 different segments.
In 2007, Worthington purchased 3 million tons of steel. Because all of its segments use steel as their main input, the company is able to purchase the raw material in bulk. Steel is a commodity and so its price is generally determined by the market value. Worthington purchases its steel from over 15 different suppliers to prevent shortages and price hikes.[17]
Worthington's sales are largely based in the US. In 2008, foreign sales constituted only 9% of the company's total revenue. Although Worthington has joint ventures and production facilities in places like China, France, Mexico, Slovakia, Spain and the United Kingdom, it uses these sites only to take advantage of lower labor prices or specific technology.[19] Worthington also purchases a large amount of its raw material abroad; nearly all of its zinc purchases are from foreign nations.[20] Approximately 14% of the company's labor force is part of a collective labor union. This is relatively low for a steel company, and in August 2008, the workers at Worthington Steel filed a petition to decertify from the United Steel Workers. The lack of a strong labor movement amongst the Worthington laborers has helped allow the company to maintain high profit margins.[21] [edit] Trends and Forces[edit] Aluminum, wood, composites, and other substitutes threaten to replace steelHigh oil prices and environmental regulation has pressured automakers to lower the weight of their vehicles. Since the mid 70s, the use of aluminum in cars has risen by 300% and the use of plastic has risen by 60%.[22] Because it weighs less, Titanium has replaced steel for large sections of airplanes.[6] Rising steel prices, which have nearly tripled from 2007 to 2008,[5] has also pushed developers away from steel towards wood and cement.[23] [edit] Worthington is involved in many joint-ventures which could cause disruptions and lower profitsAs of 2008, Worthington was involved in 10 different joint-ventures. In 2007 and 2008, the company entered 5 different ventures. Worthington is involved in a many different ventures to provide diversification and specialization in different parts of the steel industry.[24] In August 2007 for example, Worthington signed a 50% venture with Serviacero Planos, a Mexican Steel Processing company with annual sales of $125 million. [25] Through its joint ventures, Worthington expects to save $38.5 million by taking advantage of specialization and lower labor. Disruptions or failures in any of these joint-ventures will negatively effect Worthington's expected margin.[3] [edit] Worthington's sales are dependent on the construction and domestic automotive industriesIn 2007, 40% of the company's sales were to the construction market.[4] Spending on US construction projects fell by 3% from 2007 to 2008, while construction on private homes fell by 19.7% during the same time period.[26] 26% of Worthington's sales are to the the automotive and truck market which have also experienced slowing sales.[4] In July 2008, US auto sales fell by 13.2% and truck sales fell 25.2%.[27] The great majority of Worthington's sales to the automotive industry are used in domestic cars and trucks. The continued decline of this industry, and the construction industry, will negatively impact Worthington's sales. [edit] CompetitionWorthington faces competition from many companies which process steel. Unlike Worthington, many of the companies are involved in other metals besides steel such as aluminum and iron ore. However, the majority of its competitors make steel products for the construction and automotive industries.
 Worthington Industries2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] References
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