Kennametal Reports 10th Consecutive Quarter Of YoY EPS Growth

Kennametal Incorporated has posted sales of US$597 million for the fiscal 2019 third quarter ended March 31, 2019, down by two percent from US$608 million compared with the same period in the previous year. Earnings per share (EPS) was $0.82, up from $0.61 in the prior year quarter, and adjusted EPS of $0.77, compared with $0.70 in the prior year quarter—the company’s 10th consecutive quarter of EPS growth.

“We delivered organic sales growth in every business segment, on increasingly tougher comparables, and end markets remained generally positive except for automotive,” said Chris Rossi, president and CEO. “Earnings improved, and our adjusted EBITDA margin for the quarter increased notably year-over-year which is in-line with the fiscal 2021 targets outlined at our most recent Investor Day. We are seeing the increasing benefits from simplification/modernisation in our financial results. Moving forward, we expect the associated restructuring efforts to further reduce structural costs while maintaining customer commitments.”

Kennametal has also detailed the next phase of restructuring associated with simplification /modernisation. These actions are expected to reduce structural costs and are currently estimated to achieve US$35-US$40 million of annualised savings by the end of fiscal 2020. The company is expected to incur pre-tax charges of $55-$65 million through fiscal 2019 and 2020 for these restructuring activities.

Operating income was US$82 million, or 13.7 percent margin, compared to US$81 million, or 13.3 percent margin, in the prior year quarter. Adjusted operating income was US$85 million, or 14.3 percent margin, compared to US$83 million, or 13.6 percent margin, in the prior year quarter.

Net cash flow provided by operating activities was US$157 million compared to US$158 million in the prior year period. Free operating cash flow (FOCF) was US$15 million compared to US$54 million in the prior year period. The change in FOCF was driven primarily by higher working capital and greater net capital expenditures due in part to simplification/modernisation initiatives, partially offset by increased cash flow from operations before changes in certain other assets and liabilities.

Segment Results

Industrial sales was US$319 million, down by four percent from US$333 million year-over-year. Operating income was US$57 million, or 18 percent margin, compared to US$50 million, or 15.1 percent margin, in the prior year quarter. Adjusted operating income was $58 million, or 18.3 percent margin, compared to US$51 million, or 15.4 percent margin, in the prior year quarter.

Widia sales reached US$51 million, down by two percent from US$52 million year-over-year. Operating income was break-even, compared to US$1 million, or 2.4 percent margin, in the prior year quarter. Adjusted operating income was US$1 million, or 1.3 percent margin, compared to US$1 million, or 2.4 percent margin, in the prior year quarter.

Infrastructure sales was US$228 million, up by two percent from US$223 million year-over-year. Operating income was US$25 million, or 11 percent margin, compared to $30 million, or 13.5 percent margin, in the prior year quarter. Adjusted operating income was $27 million, or 11.7 percent margin, compared to $31 million, or 13.8 percent margin, in the prior year quarter.

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