Worthington Steel, Inc.

Our primary ongoing requirements for cash are expected to be for working capital, funding of acquisitions, dividend payments, debt redemptions and capital expenditures. We believe that our sources of liquidity, including our cash balances, the funds generated by our operating activities and the funds accessible to us, primarily through the Credit Facility, are adequate to fund our operations for the next 12 months and for the foreseeable future and will allow us to meet our current and long-term obligations and strategic initiatives. However, there can be no assurances that our current sources of liquidity and capital resources will continue to be sufficient for our needs or that we will be able to obtain additional debt or equity financing on acceptable terms in the future. A more detailed description regarding our capital structure changes can be found elsewhere in this MD&A as well as in the “Financing Activities” section below.

Historically, we financed our working capital requirements through cash flows from operating activities and arrangements with the Former Parent. Upon completion of the Separation, we ceased such arrangements with the Former Parent and secured independent debt financing in the form of the Credit Facility. Our capital structure, long-term commitments, and liquidity sources have thus changed from our prior practices. Our ability to fund our operating needs is dependent upon our ability to continue to generate positive cash flow from operations, and on our ability to maintain our debt financing on acceptable terms.

As of May 31, 2025, our cash, cash equivalents, and restricted cash balance was $92.9 million, of which $54.9 million was restricted cash primarily the result of our funding of the Sitem Group acquisition ahead of the June 3, 2025, closing date. During fiscal 2025 we generated $230.3 million of cash from operating activities, and we used $129.1 million of cash in investing activities, which primarily related to $130.4 million invested in property, plant and equipment. Additionally, we made net debt draws of $1.2 million under the Credit Facility, and we paid dividends of $31.9 million. The following table summarizes our consolidated and combined cash flows for the periods presented:

We believe we have access to adequate resources to meet the needs of our existing businesses for normal operating costs, mandatory capital expenditures, debt redemptions, dividend payments, and working capital, to the extent not funded by cash provided by operating activities, for at least 12 months and for the foreseeable future thereafter. These resources include cash and cash equivalents and unused borrowing capacity available on the Credit Facility. As of May 31, 2025, the Credit Facility had up to $400.8 million of borrowing capacity, subject to the borrowing base. The additional credit extended to us primarily relates to strategic capital expenditure projects. A more detailed description regarding our capital structure changes can be found elsewhere in this MD&A as well as in the “Financing Activities” section below.

We believe we could access the financial markets to be in a position to sell long-term debt or equity securities. However, the continuation of uncertain economic conditions and a heightened interest rate environment could create volatility in the financial markets, which may impact our ability to access capital and the terms under which we can do so. We will continue to monitor the economic environment and its impact on our operations and liquidity needs.

We routinely monitor current operational requirements, financial market conditions, and credit relationships and we may choose to seek additional capital by issuing new debt and/or equity securities to strengthen our liquidity or capital structure. The additional financing arrangements entered into during fiscal 2025 were the result of favorable financing terms available through those instruments to fund certain of our strategic capital expenditure projects and were not the result of insufficient capital resources. While we believe we currently have adequate capital, should we seek additional capital, there can be no assurance that we would be able to obtain such additional capital on terms acceptable to us, if at all, and such additional equity or debt financing could dilute the interests of our existing shareholders and/or increase our interest costs.

Operating Activities

Our business is cyclical and cash flows from operating activities may fluctuate during the year and from year to year due to economic and industry conditions. We rely on cash and short-term borrowings to meet cyclical increases in working capital needs. These needs generally rise during periods of increased economic activity or increasing raw material prices, requiring higher levels of inventory and accounts receivable. During economic slowdowns, or periods of decreasing raw material costs, working capital needs generally decrease as a result of the reduction of inventories and accounts receivable.

Net cash provided by operating activities was $230.3 million during fiscal 2025 compared to $199.5 million in fiscal 2024, an increase of $30.8 million. This change was primarily due to a $44.9 million increase in cash provided from net operating working capital (accounts receivable, inventories, and accounts payable), driven by the reduction in average steel prices in fiscal 2025 over fiscal 2024. Additionally, there was a $23.4 million favorable reduction in the cash used for other operating items, net, and a $10.8 million increase in cash dividends received from our unconsolidated affiliate. These increases were partially offset by a $50.8 million decrease in overall net earnings.

Investing Activities

Net cash used in investing activities was $129.1 million during fiscal 2025 compared to $123.2 million in fiscal 2024. Net cash used in investing activities in fiscal 2025 included capital expenditures of $130.4 million. In the current year period, the driver of net cash used in investing activities was primarily related to capital expenditures, which were substantially related to the previously announced strategic expansions of our electrical steel operations in Mexico and Canada to service the automotive and transformer markets, respectively, as well as certain other assets. Additionally, we paid $21.0 million, net of cash acquired, for the acquisition of Voestalpine Nagold in fiscal 2024. See “Note 15 – Acquisitions” for further information.

Capital expenditures reflect cash used for investment in property, plant and equipment and are presented below (this information excludes cash flows related to acquisition and divestiture activity) for each of the prior three fiscal years:

Investment activities are largely discretionary and future investment activities could be reduced significantly, or eliminated, as economic conditions warrant. We assess acquisition opportunities as they arise, and any such opportunities may require additional financing. However, there can be no assurance that any such opportunities will arise, that any such acquisition opportunities will be consummated, or that any additional financing will be available on satisfactory terms. We estimate our annual maintenance capital needs to be between approximately $40.0 million and $45.0 million, which excludes planned capital expenditures related to planned projects that are not directly linked to increased manufacturing capacity such as the corporate headquarters and other technology upgrades.

Financing Activities

Net cash used in financing activities was $48.5 million in fiscal 2025 compared to $68.8 million in fiscal 2024. The decrease in net cash used in financing activities in fiscal 2025 was primarily due the fact we no longer participate in the Former Parent’s centralized cash management program under which we distributed $47.6 million to the Former Parent in the period prior to the Separation. In fiscal 2025, we paid to shareholders of our common shares $31.9 million of dividends in our first full year of being public company compared to $7.9 million in the prior year period as the first dividend declared after the Separation was paid in March 2024. In the prior year period, there were net short-term borrowings of $145.2 million from our Credit Facility, which were primarily to fund the $150.0 million distribution to the Former Parent.

Revolving credit facility – We entered into the Credit Facility on November 30, 2023, immediately prior to the Separation. The Credit Facility allows for borrowings of up to $550.0 million, to the extent secured by eligible accounts receivable and inventory balances at period end, which consist primarily of U.S. Dollar denominated account balances. Individual amounts drawn under the Credit Facility will have interest periods of up to six months and will accrue interest at rates equal to an applicable margin over the applicable Term SOFR Rate, plus a SOFR adjustment. We incurred approximately $2.7 million of issuance costs, of which $2.5 million will be amortized to interest expense over the five-year Credit Facility term and are reflected in other assets.

As of May 31, 2025, we were in compliance with the financial covenants of the Credit Facility. The Credit Facility does not include credit rating triggers. There were $149.2 million outstanding borrowings drawn against the Credit Facility on May 31, 2025, leaving a borrowing capacity of $400.8 million, subject to the eligible borrowing base, available for use. At May 31, 2025 and May 31, 2024, the available borrowing capacity was $260.9 million and $307.6 million, respectively. Under the Credit Facility, we may extend borrowings up to the maturity date subject to the eligible borrowing base.

Canadian Government Regional Economic Growth Loan – Tempel owns a subsidiary in Canada (“Tempel Canada”). Tempel Canada entered into a loan through the Canadian Government’s Regional Economic Growth Innovation program and received the first distribution of CAD $3.2 million (approximately USD $2.2 million at the time of distribution, which is 90% of the total available through the program) during the third quarter of fiscal 2025. The loan is interest free and is for an amount of up to CAD $3.5 million (approximately USD $2.5 million as of May 31, 2025). The loan is scheduled to be paid off in sixty equal installments beginning April 1, 2027, with the final payment due March 1, 2032. There were no debt issuance costs associated with the loan.

Business Development Bank of Canada Canadian Loan – On March 25, 2025, Tempel Canada entered into a letter of offer (“BDC Letter”) with Business Development Bank of Canada (“BDC”). Pursuant to the terms of the Letter, BDC has committed to lend Tempel Canada up to CAD $57.5 million (approximately USD $41.9 million as of May 31, 2025) (“BDC Loan”), subject to the satisfaction of customary closing conditions and deliverables. The purpose of the BDC Loan is to fund the construction of a new manufacturing facility to be located in Burlington, Ontario, Canada (“Burlington Property”).

The BDC Loan is structured as a construction draw loan. The draw period for the BDC Loan will lapse on March 21, 2026, unless extended by BDC. Monthly interest only payments will be due until July 1, 2026, at which point the BDC Loan will also be subject to monthly amortization payments until maturity. The BDC Loan will accrue interest (a) during the construction period, at a per annum rate equal to BDC’s Floating Base Rate minus 1.75%, and (b) at all times thereafter, at a per annum rate equal to BDC’s Floating Base Rate minus 1.75% or BDC’s Base Rate minus 1.75%, at Tempel Canada’s election. The Loan matures on June 1, 2051.

Worthington Steel guarantees the payment obligations of Tempel Canada in respect of the BDC Loan. As amended subsequent to the end of Fiscal 2025, the guarantee is for the full amount of the BDC Loan amount on the date of any demand. Provided that there has never been a breach of certain default conditions, the guarantee is reduced to 50% of the outstanding BDC Loan balance once the principal amount outstanding is less than reaches CAD $40.0 million (approximately USD $29.1 million as of May 31, 2025), subject to the satisfaction of certain conditions. The Company will also provide customary cost overrun and completion guarantees in respect of the construction of the Burlington Property. The obligations of Tempel Canada under the BDC Letter are secured by a mortgage on the Burlington Property, an assignment of rents relating to the Burlington Property, and a lien on certain equipment and other personal property located on or used in connection with the Burlington Property.

As of May 31, 2025, there were no amounts drawn and outstanding on the BDC loan.

Common shares –Prior to the Separation, our common shares were owned by the Former Parent. After the Separation was completed as described in “Note 10 – Equity”, there were 49.3 million shares issued and outstanding. On December 1, 2023, the common shares began trading on the NYSE under the ticker symbol “WS.”

During fiscal 2025, we declared cash dividends totaling $0.64 per common share at a quarterly rate of $0.16 per common share. During fiscal 2024 and following the Separation, we declared cash dividends totaling $0.32 per common share at a quarterly rate of $0.16 per common share. Prior to the Separation, the Former Parent was the sole owner of Worthington Steel.

On June 25, 2025, during the first quarter of fiscal 2026, the Board declared a quarterly cash dividend of $0.16 per common share payable on September 26, 2025, to the shareholders of record at the close of business on September 12, 2025.

There were no common shares purchased by Worthington Steel during the period presented as part of publicly announced plans or programs.

Dividend Policy

We currently have no material contractual or regulatory restrictions on the payment of dividends provided that no event of default exists under the Credit Facility and it meets the minimum availability threshold thereunder. Dividends are declared at the discretion of the Board. The Board reviews the dividend quarterly and establishes the dividend rate based upon our consolidated financial condition, results of operations, capital requirements, current and projected cash flows, business prospects, and other relevant factors. There is no guarantee that we will continue the payments of dividends in the future or that any dividends declared by the Board in the future will be similar in amount or timing to any dividends previously declared by the Board.

Recently Issued Accounting Standards

Refer to “Note 1– Description of Business, The Separation, Agreements with the Former Parent and Separation Costs, and Basis of Presentation” for further information.

Environmental

We do not believe that compliance with environmental laws has or will have a material effect on our capital expenditures, future results of operations or financial position or competitive position.