Worthington Steel, Inc.

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.

32

Table of Contents

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

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

33

Table of Contents

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:

The automotive industry is one of the largest consumers of flat-rolled steel in North America, and the largest end market for us and our unconsolidated joint venture, Serviacero Worthington. North American vehicle production, including the Detroit Three automakers, is a leading indicator of automotive demand. North American vehicle production was up 1% in fiscal 2026 compared to fiscal 2025, and the Detroit Three automakers’ vehicle production was up 2% in fiscal 2026 compared to fiscal 2025.

Our remaining net sales are to other markets such as agricultural, appliance, construction, container, energy, generator, heavy truck, HVAC, industrial electric motor, service center, and transformer. Given the many different products that make up our net sales and the wide variety of end markets we serve, it is difficult to isolate the key market indicators that drive this portion of our business. However, we believe that the trend in U.S. gross domestic product growth (“U.S. GDP”) is a reasonable macroeconomic indicator for analyzing the demand of our end markets other than the automotive industry. U.S. GDP data reflect continued expansion through fiscal 2026, but with a less uniform trajectory in the second half of the fiscal year. While overall economic activity has remained resilient, continued uncertainty, including geopolitical developments, contributed to elevated inflation and uneven demand conditions across industrial sectors. Consistent with these trends, in our non-automotive end markets, customers remained deliberate and inventory-disciplined, and demand continued to reflect sensitivity to interest rates, trade policy developments and broader macroeconomic uncertainty.

Total volume (tons) decreased 6% compared to the prior year. Direct tons sold increased 6%, with the increase driven primarily by the legacy business, or approximately 5%, and the balance of the increase, or approximately 1%, due to the addition of Sitem Group. Direct shipments to the automotive market increased 14% compared to the prior year. Toll volumes decreased 21% compared to the prior year. The decrease in toll volumes was due to a combination of closing the Cleveland-area WSCP facility in May 2025, as well as softer demand from mill customers.

34

Table of Contents

The Detroit Three automakers represented 35% and 33% of our consolidated net sales during fiscal 2026 and fiscal 2025, respectively. Shipments to the Detroit Three automakers increased 17% in fiscal 2026 as compared to fiscal 2025, which significantly outpaced the reported 2% growth in the Detroit Three automakers production for the same period. The increase in automotive volume reflects share gains from new programs plus the impact of a key automotive original equipment manufacturer customer returning to a more normal build schedule after curtailing production in fiscal 2025. Energy and container volumes were up 15% and 14%, respectively, during fiscal 2026 compared to fiscal 2025. The increase in energy volume was driven by project-based solar programs. These gains were partially offset by softness in other markets, with construction, heavy truck, agriculture, and service center volumes down 8%, 10%, 10%, and 33%, respectively. The decrease in construction and service center volumes was largely driven by increased competition, while heavy truck and agriculture volumes were impacted by ongoing market weakness.

The following table summarizes the concentration percentage of consolidated net sales for the periods presented:

While our automotive business is largely driven by the production schedules of the Detroit Three automakers, our customer base is much broader and includes other domestic manufacturers and many of their suppliers.

During fiscal 2026, U.S. inflation rates have largely stabilized compared to the peaks seen in recent years, however, the U.S. inflation rate remains somewhat elevated above the U.S. Federal Reserve targeted rate of 2%. During fiscal 2026, the U.S. Federal Reserve lowered the benchmark interest rate on three occasions, with the most recent being in December 2025, before holding rates steady through the remainder of the fiscal year. These reductions lowered borrowing costs compared to the beginning of fiscal 2026, and we benefited from lower rates on borrowings under our Credit Facility. However, interest rates remained elevated, and U.S. Federal Reserve commentary during and shortly after our fourth quarter emphasized that future policy decisions remain dependent on economic data, inflation trends, labor market conditions and broader geopolitical developments. Further easing in inflation and interest rates could support improved economic activity and demand across our end markets, although the pace and timing of any improvement remain uncertain.

We use the following information from the past three fiscal years to monitor our costs and demand in our major end markets:

Sales for most of our products are generally strongest in our fiscal fourth quarter when our facilities operate at seasonal peaks. Historically, sales have been weaker in our fiscal third quarter, primarily due to reduced seasonal activity in the construction industry, as well as customer plant shutdowns due to holidays, particularly in the automotive industry. We do not believe backlog is a significant indicator of our business.

35

Table of Contents

Industry Developments

In 2025, the U.S. government continued to modify its tariff policy, including those related to imports of steel and aluminum among other items such as automobiles and automotive parts as well as universal tariffs. In June 2025, the U.S. government announced tariff increases to steel and aluminum from 25% to 50% under section 232 of the Trade Expansion Act (“Section 232”). While exemptions for certain allied countries remain, many prior country-specific exemptions have expired or are undergoing renegotiation. Other governments, including the Chinese government, have responded with reciprocal tariffs on U.S. imports. Additional measures from the U.S. government as well as other foreign governments have occurred since that time, however, many of the measures on steel and aluminum have remained in place. The scope and duration of these tariffs continue to evolve, which creates sustained uncertainty in global trade policy. While the February 2026 U.S. Supreme Court ruling on the International Emergency Economic Powers Act is separate from and does not repeal Section 232 tariffs on steel and aluminum, the decision increases overall tariff-related marketplace volatility. As a result, our customers’ supply chain decisions may abruptly shift, potentially impacting our financial performance. While tariffs have been a reality for some time, the potential for tariff changes has caused some continued trepidation in markets, including the metals markets. Recent evidence suggests that imports of steel have decreased. U.S. Department of Commerce data reflects a decrease of approximately 38% in fiscal 2026 compared to fiscal 2025 in the average import tonnage of U.S. import of flat (carbon and alloy) steel mill products. Lower imports of steel coupled with constrained domestic supply have put upward pressure on domestic steel and steel products prices and reduced the availability of steel in the U.S. market. This has resulted in lower than normal inventory levels and slightly higher operating costs to expedite shipments from our suppliers or to our customers. While we believe this is a temporary market dynamic, with both supply and demand expected to normalize, the ultimate impact tariffs will have on our financial position, results of operations, and cash flows remains to be determined.

In July 2025, the U.S. government enacted the One Big Beautiful Bill Act (“OBBBA”) into law, which ushers in a broad set of changes to the U.S. law and regulatory environments. The OBBBA did not materially impact our income tax expense for fiscal 2026. While the bonus depreciation and domestic research and development provisions reduced fiscal 2026 cash tax payments and benefited operating cash flows, the impact was immaterial.

Impact of Raw Material Prices

Our principal raw material is flat-rolled steel, including electrical steel, which we purchase in coils from primary steel producers. The steel industry has been cyclical, and at times availability and pricing can be volatile due to a number of factors beyond our control. This volatility can significantly affect our steel costs. In an environment of increasing prices for steel and other raw materials, competitive conditions may impact how much of the price increases we can pass on to our customers. To the extent we are able to pass future price increases in raw materials to our customers, this could positively affect our financial results, leading to inventory holding gains. To the extent we are unable to pass future price increases in raw materials to our customers, our financial results could be adversely affected. Also, if steel prices decrease, in general, competitive conditions may impact how quickly we must reduce our prices to our customers, and we could be forced to use higher-priced raw materials already in our inventory to complete orders for which the selling prices have decreased, which results in inventory holding losses. Declining steel prices could also require us to write down the value of our inventories to reflect current market pricing. Industry consolidation in recent years has reduced the number of steel suppliers, and further consolidation, and lower steel imports, could make it more difficult or costly to obtain alternate supply in the event of a disruption.

The market price of our products is closely correlated to the price of HRC, which is largely driven by the demand for steel and the cost of raw materials. Over fiscal 2025, HRC prices declined in the first quarter and then increased throughout the rest of fiscal 2025, with a significant increase in the fourth quarter of 2025. In fiscal 2026, prices fell in the first and second quarters, before increasing in the third and fourth quarters. The average price of HRC for fiscal 2026 remains higher than fiscal 2025. For the fiscal year, due to the increasing price over the period, direct spreads (calculated as sales less material costs) were favorably impacted by a $25.6 million change from $10.4 million of inventory holding losses in fiscal 2025 to an estimated $15.2 million of inventory holding gains in fiscal 2026. With the recent upward HRC price movements, we expect inventory holding gains to be between $10.0 million and $15.0 million in the first quarter of fiscal 2027.

To manage our exposure to market risk, we attempt to negotiate the best prices for commodities and to competitively price products and services to reflect fluctuations in market prices. Derivative financial instruments have been used to manage a portion of our exposure to fluctuations in the cost of our raw materials; steel is the most significant. These contracts covered periods commensurate with known or expected exposures throughout the periods presented. The derivative financial instruments were executed with highly rated financial institutions.

36

Table of Contents

The following table presents the average quarterly market price per ton of HRC steel during each of the past three fiscal years.

No matter how efficient, our operations, which use steel as a raw material, create some amount of scrap. The expected price of scrap compared to the price of the steel raw material is factored into pricing. Generally, as the price of steel increases, the price of scrap increases by a similar amount and vice versa. When increases in scrap prices do not keep pace with the increases in the price of the steel raw material, it can have a negative impact on our margins.

Results of Operations

Fiscal 2026 Compared to Fiscal 2025

The tables throughout this section present, on a comparative basis, our results of operations for the past two fiscal years.