Worthington Steel, Inc. (WS)

Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless otherwise indicated, all Note references contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) refer to the Notes to Consolidated Financial Statements included in “Part I – Item 1. – Financial Statements” of this Form 10-Q.

Introduction

The following discussion and analysis of market and industry trends, business developments, and the results of our operations and financial position, should be read in conjunction with our consolidated financial statements and the notes thereto included in “Part I – Item 1. – Financial Statements” of this Form 10-Q. The 2026 Form 10-K includes additional information about our business, operations, and consolidated financial position and should be read in conjunction with this Form 10-Q. This MD&A is designed to provide a reader with material information relevant to an assessment of our financial condition and results of operations, and to allow investors to view the Company from the perspective of management.

Basis of Presentation

Worthington Steel became an independent, publicly traded company on December 1, 2023, following its separation from Worthington Enterprises, formerly known as Worthington Industries, Inc.

Our consolidated financial statements include the accounts of Worthington Steel and its consolidated subsidiaries. On June 3, 2026, we completed the acquisition of a controlling equity interest in Kloeckner. Kloeckner’s results are included in our consolidated financial statements beginning on the acquisition date, with the portion of Kloeckner not owned by us reflected as NCI. Our investment in our unconsolidated affiliate is accounted for using the equity method. Material intercompany accounts and transactions are eliminated. For additional information, see “Note 1 – Description of Business and Basis of Presentation” and “Note 2 – Acquisitions.”

In connection with the Kloeckner Acquisition, the Company acquired certain Kloeckner business units that met the held-for-sale criteria as of the acquisition date, including the Kloeckner Disposal Group. Management has committed to a plan to sell the Kloeckner Disposal Group, and we expect the sale to be completed within one year of the acquisition date. The results of this Kloeckner Disposal Group are reported as discontinued operations in the accompanying interim consolidated financial statements for all periods presented. Unless otherwise indicated, the discussion and analysis of our results of operations included in this MD&A relates to continuing operations and excludes the results of discontinued operations. Prior-period amounts have been recast, as applicable, to conform to this presentation. For additional information, see “Note 18 – Discontinued Operations and Assets and Liabilities Held for Sale.”

Business Overview and Strategy

Business Overview

We are one of North America’s leading value-added metals processing and manufacturing companies. We partner with customers to deliver specialized, highly technical solutions across carbon flat-rolled steel, aluminum, stainless steel, long products, heavy plate and electrical steel to solve complex challenges across a broad range of industries.

On June 3, 2026, we completed the acquisition of a controlling equity interest in Kloeckner, a metals service center and processing company with operations primarily in the United States, Mexico, and Europe. The Kloeckner Acquisition significantly increased our

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scale and broadened our product and service offerings, customer and end-market exposure and geographic footprint. Through Kloeckner, our capabilities now include a broader range of carbon steel products, as well as aluminum, stainless steel, and long products, together with value-added processing, fabrication and distribution services.

Our legacy Worthington Steel operations primarily provide value-added processing of carbon flat-rolled steel, electrical steel laminations and tailor welded solutions. We serve customers through a combination of direct sales, in which we purchase and take ownership of the material, and toll processing and other fee-based arrangements involving customer-owned material. The addition of Kloeckner materially expanded our metals service center and distribution activities and diversified our business beyond our historical product, end-market, and geographic concentrations.

We sell steel on a direct basis, whereby we are exposed to the risks and rewards of ownership of the material while in its possession. Additionally, we toll process material under a fee for service arrangement whereby we process customer-owned material. Our manufacturing facilities further benefit from the flexibility to scale between direct and tolling services based on demand dynamics throughout the year.

Our strategy is focused on providing differentiated, value-added solutions to our customers, driving operational excellence through the Worthington Business System, investing in attractive growth opportunities and maintaining disciplined capital allocation. Following the Kloeckner Acquisition, our near-term priorities include supporting Kloeckner’s continued execution of its strategic initiatives, advancing integration planning and other collaborative activities permitted under applicable law, evaluating potential cost, operational and commercial opportunities that may be available if and when legally permissible, maintaining strong customer service and operational execution, and reducing acquisition-related debt.

Worthington Steel became an independent, publicly traded company on December 1, 2023, following its separation from Worthington Enterprises.

Our operations are managed principally on a products and services basis with a single operating and single reportable segment. We own controlling interests in the following operating joint ventures: Spartan, TWB, WSCP, and Sitem Group. We also own a controlling interest in WSP, which became a nonoperating joint venture in October 2022, when we completed the divestiture of its remaining net assets. The net assets and operating results of these joint ventures are consolidated with the equity owned by the minority joint venture member shown as NCI or, in the case of Sitem Group, Redeemable NCI in our consolidated balance sheets, and the noncontrolling interests in net earnings and OCI are shown as net earnings or comprehensive income attributable to noncontrolling interests in our consolidated statements of earnings and consolidated statements of comprehensive income, respectively. Our remaining joint venture, Serviacero Worthington, is unconsolidated and accounted for using the equity method.

AI in Transformation

We continue to integrate commercially available AI technologies into our long-term transformation strategy. Through these efforts, we are evaluating and using AI tools to support internal analysis, automate certain routine tasks and assist employee decision-making. We continue to develop and refine AI solutions in areas such as predictive maintenance and intelligent reporting, which are intended to improve system connectivity and operational decision-making. Expanding the use of AI across operations and the back office may enable our teams to focus on the most value-driving aspects of their roles.

Recent Business Developments

On October 6, 2026, the Board declared a quarterly cash dividend of $0.16 per common share payable on December 28, 2026 to shareholders of record at the close of business on December 14, 2026.

Kloeckner Acquisition

On June 3, 2026, we completed our acquisition of a controlling interest in Kloeckner through a voluntary public takeover offer. Following the acquisition, we held a total of 60,710,791 Kloeckner shares, representing approximately 60.86% of Kloeckner’s outstanding share capital. The total aggregate consideration for the tendered shares was €576.3 million (approximately $668.3 million). On June 15, 2026, we consummated the acquisition of an additional one million Kloeckner shares at €11 per share (approximately $12.7 million), increasing our total ownership to 61,710,791 Kloeckner shares representing approximately 61.87% of Kloeckner’s outstanding share capital. Kloeckner’s results are included in our consolidated financial statements beginning on the acquisition date, with the portion of Kloeckner not owned by us reflected as noncontrolling interests. For additional information, see “Note 2 – Acquisitions.”

In connection with the Kloeckner Acquisition, on June 1, 2026, we incurred $1.4 billion of secured indebtedness consisting of $700.0 million aggregate principal amount of 7.750% Senior Secured Notes due 2033 (the “2033 Senior Notes”), which mature on June 1, 2033, and incurred $700.0 million of borrowings under a seven-year senior secured term loan B credit facility (the “Term Loan Facility”), which matures on June 1, 2033. Borrowings under the Term Loan Facility bear interest, at our option, at a rate per annum equal to Term

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SOFR plus 4.00%, Daily Simple SOFR plus 4.00%, or the base rate plus 3.00%. The proceeds from the 2033 Senior Notes and Term Loan Facility, together with cash on hand, were used to fund the Kloeckner Acquisition, repay certain existing indebtedness of Worthington Steel and Kloeckner, pay related transaction fees and expenses, and for general working capital purposes.

On June 25, 2026, we entered into the 2031 Revolving Credit Facility, a new asset-based revolving credit facility in the aggregate principal amount of up to $550.0 million subject to borrowing base availability and other conditions, which refinanced and replaced our previous revolving credit facility. The 2031 Revolving Credit Facility matures on June 25, 2031, and borrowings bear interest at variable rates based on SOFR or a base rate, plus an applicable margin. The 2031 Revolving Credit Facility provides additional liquidity to support our working capital and general corporate requirements following the Kloeckner Acquisition. For additional information, see “Liquidity and Capital Resources” and “Note 8 – Debt.”

Kloeckner Delisting

On July 15, 2026, we commenced the Delisting Tender Offer. The acceptance period ended on August 12, 2026, and Kloeckner’s shares were delisted from the regulated market of the Frankfurt Stock Exchange effective August 12, 2026. Upon settlement of the Delisting Tender Offer, we acquired 242,446 additional Kloeckner shares for aggregate consideration of approximately €2.7 million ($3.2 million as of August 31, 2026), increasing our ownership interest to approximately 62.11%.

Domination and Profit and Loss Transfer Agreement

On September 8, 2026, subsequent to the end of the first quarter of fiscal 2027, Worthington Steel GmbH entered into a DPLTA with Kloeckner. The DPLTA is not currently effective. An extraordinary general meeting of Kloeckner shareholders to vote on approval of the DPLTA is expected to take place on October 23, 2026. Its effectiveness remains subject to the required shareholder approvals and registration with the commercial register at Kloeckner’s registered seat and cannot occur before January 1, 2027.

If and when the DPLTA becomes effective, and subject to applicable law, Worthington Steel GmbH will be entitled to issue binding instructions to Kloeckner’s management board, Kloeckner generally will be required to transfer its annual profits to Wo

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Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our consolidated and combined financial statements and the related Notes in this Form 10-K. This MD&A is designed to provide a reader with material information relevant to an assessment of our financial condition and results of operations and to allow investors to view the Company from the perspective of management.

The MD&A included in this report discusses our fiscal 2026 and fiscal 2025 financial condition and results of operations. For a comparison and discussion of our results of operations and financial condition for fiscal 2025 and fiscal 2024, see “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Fiscal 2025 Compared to Fiscal 2024” of our Annual Report on Form 10-K for the fiscal year ended May 31, 2025, filed with the SEC on July 29, 2025.

Basis of Presentation

Worthington Steel was formed as an Ohio corporation on February 28, 2023, for the purpose of receiving, pursuant to a reorganization, all of the outstanding equity interests of the steel processing business of Worthington Enterprises. On December 1, 2023, the Separation was completed and Worthington Steel became an independent, publicly traded company. Our financial statements for the periods until the Separation on December 1, 2023, are combined financial statements prepared on a carve-out basis. Our financial statements for the periods beginning on and after December 1, 2023, are consolidated financial statements based on our reported results as a stand-alone company. Accordingly, the third quarter of fiscal 2024 and onward included consolidated and combined financial statements, whereas all prior periods included combined financial statements. For additional information, see “Note 1 – Description of Business, The Separation, and Basis of Presentation”.

Business Overview

We are one of North America’s premier value-added metals processors with the ability to provide a diversified range of products and services that span a variety of end markets. We maintain market-leading positions in the North American carbon flat-rolled steel and tailor welded blank industries and are one of the largest global producers of electrical steel laminations. For over 70 years, we have been delivering high-quality steel processing capabilities across a variety of end markets including automotive, heavy truck, agriculture, construction, and energy. With the ability to produce customized steel solutions, we aim to be the preferred value-added steel processor in the markets we serve by delivering highly technical, customer-specific solutions, while also providing advanced materials support. Our scale allows us to achieve an advantaged cost structure and service platform supported by a strategic operating footprint. We serve our customers by processing flat-rolled steel coils, which we source primarily from various North American steel mills, into the precise type, thickness, length, width, shape, and surface quality required by customer specifications. We sell steel on a direct basis, whereby we are exposed to the risks and rewards of ownership of the material while in our possession. Additionally, we toll process steel under a fee for service arrangement whereby we process customer-owned material. Our manufacturing facilities further benefit from the flexibility to scale between direct and tolling services based on demand dynamics throughout the year.

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Our operations are managed principally on a products and services basis under a single group organizational structure. We own controlling interests in the following operating joint ventures: Spartan, TWB, WSCP, and Sitem Group. We also own a controlling interest in WSP, which became a nonoperating joint venture in October 2022, when we completed the divestiture of its remaining net assets. The net assets and operating results of these joint ventures are consolidated with the equity owned by the minority joint venture member shown as “Noncontrolling interests”, or, in the case of Sitem Group, “Redeemable noncontrolling interest” in our consolidated balance sheets, and the noncontrolling interest in net earnings and Other Comprehensive Income (“OCI”) shown as net earnings or comprehensive income attributable to noncontrolling interests in our consolidated and combined statements of earnings and consolidated and combined statements of comprehensive income, respectively. Our remaining joint venture, Serviacero Worthington, is unconsolidated and accounted for using the equity method.

AI in Transformation

During fiscal 2026, we continued integrating commercially available AI technologies into our long-term transformation strategy. Through these efforts, we use AI to generate insights, evaluate strategies, and automate routine tasks, improving productivity and strengthening internal decision-making. We are developing and refining AI solutions in areas such as predictive maintenance and intelligent reporting, which drive greater value through smarter, more connected systems. Expanding the use of AI across operations and the back-office functions enables our teams to devote more time to the highest-value aspects of their roles.

Recent Business Developments

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On June 1, 2026, we incurred indebtedness in the form of (1) the 2033 Notes, due June 1, 2033, and (2) the seven-year Term Loans under the Term Loan Facility.

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On June 3, 2026, we closed the Kloeckner Acquisition, at which date we owned approximately 60.86% of Kloeckner’s total outstanding share capital.

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On June 15, 2026, we settled our binding agreement to acquire one million additional Kloeckner shares at €11.00 per share (approximately $12.7 million), bringing our total ownership to approximately 61.87% of Kloeckner’s total outstanding share capital.

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On June 24, 2026, the Board declared a quarterly dividend of $0.16 per common share payable on September 29, 2026, to shareholders of record at the close of business on September 15, 2026. Refer to “Note 21 – Subsequent Events” for additional information.

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On June 25, 2026, we entered into the 2031 Revolving Credit Facility, an asset-based revolving credit agreement that matures on June 25, 2031, which refinanced and replaced the Credit Facility.

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On July 15, 2026, we launched a public delisting tender offer for all outstanding Kloeckner shares not already held by us at a price of €11.00 per share. The delisting tender offer is not subject to any closing conditions and does not include a minimum acceptance threshold; however, there can be no assurance as to how many Kloeckner shares, if any, will be tendered.

Kloeckner Acquisition

On January 15, 2026, we entered into a BCA with Kloeckner. Following execution of the BCA, we launched a voluntary public cash takeover offer to all Kloeckner shareholders to tender each Kloeckner share to us. Subject to the terms and conditions of the Offer Document, upon the Offer Closing, we committed to pay cash consideration equal to €11.00 per tendered share (subject to any increases either made voluntarily or in accordance with applicable German law) for the Offer.

As of April 14, 2026, 52,389,508 Kloeckner shares had been tendered for acceptance under the Offer and not withdrawn (the “Tendered Shares”). On June 3, 2026, (the “Settlement Date”), we accepted the transfer of Tendered Shares for consideration of €11.00 per Tendered Share. Together with the Kloeckner shares already held by us prior to the Settlement Date, as of the Settlement Date, we held a total of 60,710,791 Kloeckner shares, representing approximately 60.86% of Kloeckner’s total outstanding share capital. The total aggregate consideration for the Tendered Shares was €576.3 million (approximately $668.3 million). On June 15, 2026, we consummated the acquisition of an additional one million Kloeckner shares at €11 per share (approximately $12.7 million), bringing our total ownership to 61,710,791 Kloeckner shares representing approximately 61.87% of Kloeckner’s total outstanding share capital. We used the net proceeds from the 2033 Notes and Term Loans, together with cash on hand, to fund the Kloeckner Acquisition and pay related fees and expenses. For more information, see the “Kloeckner Acquisition and Other Capital Subsequent Events” section within the “Liquidity and Capital Resources” Section below.

On March 27, 2026, we informed Kloeckner about our firm intention to enter into a DPLTA, and Kloeckner published an ad hoc announcement to this effect on the same day. From the Settlement Date until the execution of the DPLTA (the “Transition Period”), we, on the one hand, and Kloeckner, on the other hand, will continue to operate as independent companies. The DPLTA would provide us with the right to issue binding instructions to the management board of Kloeckner with respect to the management of Kloeckner’s

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business and would obligate Kloeckner to transfer its annual profits to us. In return, we would be required, under the terms of the DPLTA, to (i) compensate Kloeckner for any annual losses, (ii) compensate the remaining minority shareholders of Kloeckner through a guaranteed annual recurring payment and (iii) offer to acquire the remaining Kloeckner shares held by such minority shareholders in exchange for adequate exit cash compensation, in each case as determined in accordance with applicable German law.

The execution and effectiveness of the DPLTA is subject to a number of conditions and procedural requirements under German law, including: (1) approval by the management board and supervisory board of Kloeckner, (2) approval at the general shareholders’ meeting of Kloeckner by a vote of at least 75% of the share capital represented at such meeting, (3) a valuation of Kloeckner confirmed by a court-appointed independent auditor to determine the adequate amount of the recurring compensation and the exit compensation to be offered to minority shareholders, and (4) registration of the DPLTA with the commercial register of the competent local German court. At this time, we have not satisfied any of these conditions. There can be no assurance that the DPLTA will be executed or become effective, or as to the timing thereof.

Trends and Factors Impacting our Performance

The steel processing industry is fragmented and highly competitive. Given the broad base of products and services offered, specific competitors vary based on the target industry, product type, service type, size of program and geography. Competition is primarily on the basis of price, product quality and the ability to meet delivery requirements. Our processed steel products are priced competitively, primarily based on market factors, including, among other things, market pricing, the cost and availability of raw materials, transportation and shipping costs, and overall economic conditions in the U.S. and abroad.

General Economic and Market Conditions

We sell our products and services to a diverse customer base and a broad range of end markets. The breakdown of net sales by end market for fiscal 2026 and fiscal 2025 is illustrated below:

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