Engineered cabs segment
Previously, we discussed the Steel and Pressure Cylinder segments at Worthington Industries (WOR). In this part of the series, we’ll learn about its Engineered Cabs segment. Worthington is a leading manufacturer of custom engineered cabs. It supplies cabs to industries including construction, agriculture, and mining.
Currently, WOR forms 2% of the SPDR S&P Metals and Mining ETF (XME). Steel Dynamics (STLD) and Carpenter Technology (CRS) respectively form 3.7% and 3.3% of XME. Compass Minerals International (CMP) is one of XME’s largest holdings, forming 4.7% of its portfolio.
Worthington’s Engineered Cabs segment serves over 100 customers. The company acquired the business in 2011. There’s been a marked slowdown, however, in the activity levels of its end consumers since then, particularly in the construction and mining sectors. Worthington has made some management changes, but the segment has been losing money for the last few quarters, as the chart above shows.
Worthington used to have four manufacturing locations in this segment. However, it recently closed down one of its plants in Florence, South Carolina. It incurred an ~$80 million impairment charge as a result of this move.
Higher operating costs at the Florence plant is one of the reasons why the Engineered Cabs segment was losing money. Worthington expects to move some of its Florence business to other manufacturing locations.
According to Worthington, its Engineered Cabs segment is nearly breaking even excluding the losses from Florence. With the plant now closed, this segment might become profitable once again. Demand, however, continues to be modest.
Worthington has made several acquisitions to grow its business. We’ll discuss these in detail in our next part.