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.

As of August 31, 2025, our cash, cash equivalents, and restricted cash balance was $78.3 million, compared to cash, cash equivalents, and restricted cash balance of $92.9 million at May 31, 2025.

During the three months ended August 31, 2025, we used $6.3 million of cash in operating activities and $29.6 million of cash in investing activities, which primarily related to $29.4 million invested in property, plant and equipment. Acquisitions, net of cash acquired, during the first quarter of fiscal 2026 was $1.6 million due to the acquisition of the Sitem Group. Additionally, we had net debt proceeds of $30.7 million, and we paid dividends of $8.1 million.

The following table summarizes our consolidated 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. These resources include cash and cash equivalents and unused capacity available under the Credit Facility. As of August 31, 2025, the Credit Facility had availability of $279.6 million, after accounting for the eligible 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. We entered into additional financing arrangements during fiscal 2025 to take advantage of favorable financing terms available through those instruments to fund certain of our strategic capital expenditure projects. Debt financing increased in the first quarter of fiscal 2026 due to the incremental debt assumed in the Sitem Group acquisition and a draw on the BDC Loan. 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 used in operating activities was $6.3 million during the three months ended August 31, 2025, compared to $54.6 million net cash provided by operating activities during the three months ended August 31, 2024. This change was primarily driven by a $95.2 million increase in cash consumed due to an increase in net operating working capital (accounts receivable, inventories, and accounts payable), which was driven by the increase in average steel prices over the prior year period. These increases were partially offset by the reduction of $12.9 million related to lower compensation and benefit payments, primarily incentive compensation, in the first quarter of fiscal 2026 as compared with the first quarter of fiscal 2025.

Investing Activities

Net cash used in investing activities was $29.6 million during the three months ended August 31, 2025, compared to $21.5 million during the three months ended August 31, 2024. In the current year period, the main driver of net cash used in investing activities was related to capital expenditures, primarily due to the previously announced strategic expansion of our electrical steel operations in Canada to service the transformer market. Acquisitions, net of cash acquired, during the current year period, was $1.6 million due to the acquisition of the Sitem Group. See Note 12 – “Acquisitions” for further information.

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 needed 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 capital expenditures related to manufacturing capacity expansions, corporate headquarters and other technology upgrades.

Financing Activities

Net cash provided by financing activities was $21.0 million during the three months ended August 31, 2025, compared to net cash used in financing activities of $37.3 million during the three months ended August 31, 2024. The increase in net cash provided by financing activities in the current year period was primarily due to net debt proceeds of $30.7 million, as compared to debt repayments of $25.8 million in the prior year period. The increase in net debt proceeds was primarily related to a $21.6 million draw on the BDC Loan and incremental borrowings on the Credit Facility. Dividends of $8.1 million to shareholders of our common shares were paid during current period.

Revolving credit facility – We entered into the Credit Facility on November 30, 2023. 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.

As of August 31, 2025, we were in compliance with the financial covenants of the Credit Facility. The Credit Facility does not include credit rating triggers. At August 31, 2025 and May 31, 2025, there were $160.0 million and $149.2 million, respectively, of outstanding borrowings drawn against the Credit Facility. After accounting for the eligible borrowing base, at August 31, 2025 and May 31, 2025, availability under the Credit Facility was $279.6 million and $260.9 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 – On December 17, 2024, Tempel Canada entered into the FED DEV Loan 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 FED DEV Loan is interest free and is for an amount of up to CAD $3.5 million (approximately USD $2.5 million as of August 31, 2025). The FED DEV Loan is scheduled to be paid off in 60 equal installments beginning April 1, 2027, with the final payment due March 1, 2032. There were no debt issuance costs associated with the FED DEV Loan.

As of August 31, 2025 and May 31, 2025, $2.3 million was outstanding under the FED DEV Loan.

Business Development Bank of Canada Canadian Loan – On March 25, 2025, Tempel Canada entered into the BDC Letter. Pursuant to the terms of the BDC Letter, BDC has committed to provide Tempel Canada the BDC Loan, subject to the satisfaction of customary closing conditions and deliverables. The purpose of the BDC Loan is to fund the construction of the 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 during the first quarter of fiscal 2026, 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 CAD $40.0 million (approximately USD $29.1 million as of August 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 August 31, 2025, $21.6 million was outstanding on the BDC loan, while there were no amounts drawn and outstanding as of May 31, 2025.

Canadian Advanced Manufacturing and Innovation Competitiveness Loan– On May 12, 2025, Tempel Canada entered into the AMIC Loan, which provided a loan of up to CAD $5.0 million (approximately USD $3.6 million as of August 31, 2025) to support building and equipment expansion at Tempel Canada’s Burlington, Ontario location. The first distribution to Tempel Canada was received in the first quarter of fiscal 2026 in the amount of CAD $1.0 million (approximately USD $0.7 million in quarter received), or 20% of the total available through the program. The remaining 80% is expected to be received in steps as project spending progresses. The AMIC Loan is interest free until June 1, 2028, at which point it will bear interest at a fixed rate of 5.97% per annum with interest due annually. The AMIC Loan is scheduled to be paid off in four equal annual installments beginning June 30, 2029 with the final payment due June 30, 2032. The AMIC Loan is structured with an incentive component that states up to CAD $0.5 million (approximately USD $0.4 million as of August 31, 2025) of the principal may be forgiven if certain performance targets are met. There were no debt issuance costs associated with the AMIC Loan.

As of August 31, 2025, $0.7 million was outstanding under the AMIC Loan.

Sitem Group Term Loans– We assumed the liabilities of the Sitem Group as part of the acquisition and recorded the liabilities within the consolidated balance sheet as part of the opening balance sheet. The Sitem Group’s obligations included various term loans (“Sitem Group Term Loans”), which spanned maturities and had varying interest rates and interest rate mechanism. The obligations, along with the relevant loan terms, are included in the summary table within “Note 7 – Debt.”

As of August 31, 2025, the aggregate amount outstanding of the Sitem Group Term Loans was $48.8 million, which includes the Sitem Group standstill agreement described below.

Standstill Agreement – Sitem Group– Sitem, through its subsidiary Stanzwerk AG, entered into the standstill agreement with UBS Switzerland AG, as agent and a syndicate of lenders in April 2025. The agreement relates to bilateral credit facilities originally provided to Stanzwerk AG in the aggregate principal amount of CHF 17.1 million (approximately USD $21.0 million). Under the terms of the standstill, the lenders agreed to maintain availability under the credit lines through June 30, 2026, and to forbear from exercising termination, enforcement, or acceleration rights with respect to scheduled repayments or collateral during the standstill period, subject to customary extraordinary termination rights upon events of default.

The standstill agreement provides for continued use of the facilities solely for loan advances and requires pro rata utilization of the credit lines across participating lenders. Borrowings bear interest at the applicable reference rate (which is based on the Swiss Average Rate Overnight and has a floor of zero) plus a 500 basis point margin, with an additional 0.25% quarterly commission on overdraft balances.

The standstill agreement contains financial covenants requiring Stanzwerk AG to maintain (i) a minimum equity ratio of 15%, tested quarterly beginning June 30, 2025, and (ii) minimum liquidity of CHF 4.0 million (approximately USD $4.9 million), tested monthly beginning April 30, 2025. Stanzwerk AG was in compliance with these covenants as of August 31, 2025.

Common shares – On September 24, 2025, the Board declared a quarterly cash dividend of $0.16 per common share payable on December 26, 2025, to shareholders of record at the close of business on December 12, 2025.

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

Redeemable noncontrolling interest – While redemption events are contingent, the existence of these features could require us to use available cash, debt capacity, or other resources to satisfy our obligations in the future. We continuously monitor our liquidity profile to ensure adequate capacity to fund potential redemptions, although no such obligations were triggered during the three months ended August 31, 2025.

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 payment 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.