Worthington Industries, Inc. Company Analysis

Introduction

Worthington Industries (Worthington) is a diversified metal processing company. Worthington engages in steel processing and manufacturing of metal products such as metal framing, pressure cylinders, automotive past model service stampings, metal ceiling grid systems, and laser welded blanks. The company primarily operates in the US (Bios, 2002). It is headquartered in Columbus, Ohio and employs about 6,900 people. The company recorded revenues of $3,067.2 million in the financial year ended May 2008 (FY2008), an increase of 3.2% over the financial year ended May 2007 (FY2007). The operating profit of the company was $106 million in the FY2008, a decrease of 17.9% compared with FY2007. The net profit was $107.1 million in the FY2008, a decrease of 6.0% compared with FY2007.

Industry Analysis

Iron and steel mills have ranked among the largest economic enterprises in the Chicago region since before the Civil War. During the second half of the nineteenth century, the area became one of the world's leading centers of steel production (Bios, 2002). For much of the twentieth century, tens of thousands of area residents worked to turn iron ore into steel and shape steel into a variety of products. Only after the U.S. steel industry suffered a sudden decline in the 1970s did Chicago-area mills begin to shut down and lay off thousands of workers.

The emergence of a large iron and steel industry in the Chicago region during the nineteenth century was a function of entrepreneurial effort and geographical advantage. Mills could obtain raw materials from the vast iron ore deposits in the Lake Superior region relatively cheaply and easily. Because most of the iron ore used by the American steel industry during its rise was mined in Minnesota and Michigan, mills located along the Great Lakes were well positioned to enjoy lower costs than their competitors elsewhere, especially after 1924, when U.S. government regulators ended the “Pittsburgh Plus” pricing system that had protected Pennsylvania mills from competition (Davenport, 2000).

In the final years of the nineteenth century, the steel industry in Chicago and around the country was simultaneously expanding and consolidating. By this time, Chicago-area mills sold large quantities of iron and steel products to the railroads and companies that built skyscrapers and bridges, as well as to those that made goods such as pipe, containers, and wire. Dozens of area companies, from giants such as Pullman and Crane to much smaller firms, generated considerable local demand for steel (Davenport, 2000). As local and national demand rose, mergers were thinning the numbers of steel producers. One of the first great mergers occurred in 1889, when most of the large Chicago-area mills—including North Chicago, South Works, Union, and Joliet—combined to form a huge new entity, the Illinois Steel Company. The world's largest steel company, Illinois Steel not only owned multiple mills employing a total of about 10,000 men but also controlled iron mines, coal mines, and transportation systems. By the end of the nineteenth century, workers at the various Chicago-area mills owned by this company were turning out ...