January 6, 2010 / 2:00 PM / 10 years ago

UPDATE 2-Worthington swings to Q2 profit, shares rise 18 pct

* Q2 EPS $0.29 vs loss of $2.09 a year ago

* Q2 sales drop 40 pct to $448 mln

* Metal framing segment returns to profitability

* Shares touch year-high (Recasts; adds analyst’s comments, background, share data)

By Antonita Madonna Devotta

BANGALORE, Jan 6 (Reuters) - Metals processor Worthington Industries Inc (WOR.N) posted a second-quarter profit helped by cost cuts and lower material costs, sending shares up more than 18 percent to a year-high.

For the quarter ended Nov. 30, the company posted a net income of $23.2 million, or 29 cents a share, compared with net loss of $164.7 million, or $2.09 a share a year ago, when it took certain charges.

Analysts, on average, were looking for earnings of 9 cents a share, before items, on revenue of $468.5 million, according to Thomson Reuters I/B/E/S.

Shares of the Columbus, Ohio-based company rose $2.56 to a year high of $16.44 in early trade, making it the top gainer on the New York Stock Exchange. They later pared some of the gains to trade at $15.90 Wednesday morning.

“The beat was substantial and primarily driven by lower-than-expected average material costs in each of the three divisions, which offset lower-than-expected prices,” Goldman Sachs analyst Sal Tharani wrote in a note to clients.

Earlier in the day, Goldman Sachs raised Worthington Industries Inc (WOR.N) and Schnitzer Steel Industries Inc (SCHN.O) to “neutral” from “sell,” citing improving fundamentals in the steel industry.

Operating income from Worthington’s largest segment, steel processing, rose to $14.7 million in the quarter from about $1 million.

“Automotive bills are going to continue to help Worthington in its metals processing segment,” analyst Bob Richard of Southridge Research Group said.

The company’s metal framing segment, which caters to the depressed non-residential construction market, was last profitable in the first quarter of fiscal 2009.

Goldman’s Tharani also said the positive operating result in metal framing was “surprising,” given the state of commercial construction market.

Weakness in the U.S. non-residential construction sector will persist in 2010 before giving way to a mild rebound in 2011, according to a semi-annual survey of construction forecasters. [ID:nN05244200]

Net sales in the quarter fell 40 percent to $448 million on lower average selling prices and volumes.

However, the company which has seen its topline erode by over 55 percent in the past year, has shown a sequential improvement of 7 percent in the latest quarter.

“We continue to operate in a historically low demand environment... we do not believe we will know how quickly our markets will rebound until the end of the third quarter, at the earliest,” Chief Executive Officer John McConnell said in a statement. (Reporting by Antonita Madonna Devotta in Bangalore; Editing by Kavita Chandran, Dinesh Nair)

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