Kennametal Inc. · NYSE:KMT
Kennametal — Q3 2023 Earnings Presentation
31 slides from Kennametal's earnings presentation, May 2, 2023
Slide 1: FY23 Third Quarter Earnings Call Presentation
FY23 Third Quarter Earnings Call Presentation May 2, 2023
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain statements in this release may be forward-looking in nature, or “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements that do not rel
Slide 3: Q3 FY23 Summary
Q3 FY23 Summary Consistent growth and strong free operating cash flow in a challenging environment Sales up YoY to $536 million Sales Growth Sales Growth by Region Sales Growth by End Market Price and growth initiatives • Organic growth in both segments 8% (in constant currency) (in constant curre
Slide 4: Recent Customer Wins Q3 FY23
Recent Customer Wins Q3 FY23 Strategic growth initiatives and innovative products continue to increase share-of-wallet Power Generation Aerospace EV Braking System Energy Additive • Provided custom • Provided tooling for a • Secured preferred supplier • Increased share-of-wallet • Leveraged our addi
Slide 5: Innovating to Drive Growth
Innovating to Drive Growth Delivering next generation performance enabled by Modernization KENGoldTM coated turning inserts provide a substantial improvement in performance*: • Longer life – up to 220% improvement in thermal resistance and up to 180% improvement in abrasion resistance • Faster – 20%
Slide 6: Consolidated Q3 FY23 Financial Overview
Consolidated Q3 FY23 Financial Overview Remained focused on strategy execution in an inflationary and unfavorable FX environment Change from PY Reported* Adjusted Reported Quarter Ended ($ in millions) March 31, 2023 March 31, 2022 March 31, 2022 Sales 5% $536 $512 $512 Organic 8% 8% 8% FX (4)% (4)%
Slide 7: Q3 FY23 Adjusted EPS Bridge
Q3 FY23 Adjusted EPS Bridge Volume growth offset by inflation, foreign exchange and macro headwinds * Geographic mix drives lower tax rate • Metal Cutting volume increased at typical operating leverage • Under-adsorption in Infrastructure • Pricing actions substantially offset raw material, wage and
Slide 8: Metal Cutting Business Segment — Q3 FY23 Summary
Metal Cutting Business Segment — Q3 FY23 Summary Improving performance driven by strategic initiatives, innovation and operational excellence Strong growth in the Americas and EMEA Sales Growth Sales Growth by Region Operating 10% Organic sales • Americas strength driven by broad, resilient demand
Slide 9: Infrastructure Business Segment — Q3 FY23 Summary
Infrastructure Business Segment — Q3 FY23 Summary Positioning for improved profitability in Q4 FY23 5% Organic sales Growth in EMEA and Asia Pacific, Americas flat • EMEA – growth driven mainly by General Engineering Sales Growth Sales Growth by Region Operating growth (in constant currency) Margi
Slide 10: Balance Sheet and Cashflow Statement Highlights
Balance Sheet and Cashflow Statement Highlights Strong cashflow and balance sheet support investment and returning cash to shareholders Total Debt Net Debt Share Repurchases & Debt Profile $800 $200M 3-year share repurchase program $659 $610 $622 $598 $566 • Q3: $7M purchased; 262K shares $ Millio
Slide 11: FY23 Total Year Outlook
FY23 Total Year Outlook Raising sales and EPS outlook due to ongoing end market resilience FY23 Total Year Outlook Revenue Assumptions YoY: Sales $2,070M - $2,100M 4Q sales expected to be approximately in line with normal Volume growth 1% - 2% seasonality; excluding the effects of currency exchang
Slide 12: Summary
Summary Solid quarter for growth & cash flow; further margin expansion & share gain expected in the future Pricing actions, strategic initiatives and market resiliency supporting growth despite macroeconomic uncertainties in FY23 Commercial Strong growth prospects including: Excellence • Base bu
Slide 13: Appendix
Appendix EX cennamerat
Slide 14: Segment Results
Segment Results Growth in all end markets and regions; aerospace, transportation & earthworks at double-digit YoY growth Metal Cutting Infrastructure AsiaPac Energy AsiaPac 18% 7% Transp 21% Earthworks Gen Eng 26% Americas 35% 33% EMEA 44% Aero EMEA Gen Eng 19% Americas 11% Energy 38% 56% 60% 32% Pe
Slide 15: Balance Sheet
Balance Sheet Strong balance sheet supports initiatives ASSETS ($ in millions) March 2023 June 2022 Cash and cash equivalents $93 $86 Accounts receivable, net 314 295 Inventories 595 571 Other current assets 77 73 Total current assets 1,079 1,025 Property, plant and equipment, net 975 1,002 Goodwill
Slide 16: Non-GAAP Reconciliations
Non-GAAP Reconciliations The information presented by the Company contains certain non-GAAP financial measures including organic sales decline, constant currency regional sales growth (decline), constant currency end market sales growth (decline), adjusted gross profit and margin; adjusted operating
Slide 17: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Constant Currency End Market Sales Growth (Decline) Constant currency end market sales growth (decline) is a non-GAAP financial measure of sales growth (decline) (which is the most directly comparable GAAP measure) by end market excluding the impacts of acquisitions
Slide 18: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Operating Operating Effective Tax ($ in millions, except percents and per share data) Sales Gross Profit Expense Income Net Income(5) Diluted EPS Rate Q3 FY22 Reported Results $ 512.3 $ 164.6 $ 107.1 $ 53.4 $ 35.3 $ 0.42 28.3 % Reported Margins 32.1 % 20.9 % 10.4 %
Slide 19: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Three Months Ended March 31, ($ in millions) 2023 2022 Net income attributable to Kennametal, reported $ 31.9 $ 35.3 Add back: Interest expense 7.7 6.4 Interest income (0.3) (0.3) Provision for income taxes 10.7 14.6 Depreciation 30.8 29.8 Amortization 3.2 3.2 EBITD
Slide 20: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Metal Cutting Metal Cutting Infrastructure Infrastructure ($ in millions, except percents) Sales Operating Income Sales Operating Income Q3 FY22 Reported Results $ 313.8 $ 30.2 $ 198.4 $ 23.7 Reported Operating Margin 9.6 % 11.9 % Restructuring and related charges —
Slide 21: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Non-GAAP Reconciliations (cont’d) Three Months Ended March 31, 2023 Metal Cutting Infrastructure Kennametal Organic sales growth 10 % 5% 8% Foreign currency exchange effect (5) (3) (4) Business days effect 1 — 1 Sales growth 6 % 2 % 5 % Three Months Ended March 31,
Slide 22: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Metal Cutting Three Months Ended March 31, 2023 Americas EMEA Asia Pacific Constant currency regional sales growth (decline) 16 % 11 % (3) % Foreign currency exchange effect — (6) (7) Regional sales growth (decline) 16 % 5 % (10) % Infrastructure Three Months Ended
Slide 23: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Metal Cutting Three Months Ended March 31, 2022 Americas EMEA Asia Pacific Constant currency regional sales growth (decline) 11 % 9 % (7) % Foreign currency exchange effect — (10) (1) Regional sales growth (decline) 11 % (1) % (8) % Infrastructure Three Months Ended
Slide 24: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Metal Cutting General Three Months Ended March 31, 2023 Engineering Transportation Aerospace Energy Constant currency end market sales growth 11 % 5 % 25 % 7 % Foreign currency exchange effect (4) (5) (4) (4) End market sales growth 7 % — % 21 % 3 % Infrastructure G
Slide 25: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Metal Cutting General Three Months Ended March 31, 2022 Engineering Transportation Aerospace Energy Constant currency end market sales growth (decline) 10 % (7) % 29 % 9 % Foreign currency exchange effect (4) (4) (5) (3) End market sales growth (decline) 6 % (11) %
Slide 26: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Net Debt Three Months Ended (in millions) 3/31/2023 3/31/2022 3/31/2021 3/31/2020 Total debt (gross) $ 659.0 $ 621.9 $ 610.4 $ 598.1 Less: cash and cash equivalents 93.5 100.0 114.3 85.2 Net debt $ 565.5 $ 521.9 $ 496.1 $ 512.9 Three Months Ended March 31, (in milli
Slide 27: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022 Average Current assets $ 1,079,035 $ 1,048,303 $ 1,011,486 $ 1,024,708 $ 1,043,241 Current liabilities 488,729 494,334 497,488 485,610 460,365 Working capital, GAAP $ 590,306 $ 553,96
Slide 28: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Average Current assets $ 1,043,241 $ 984,210 $ 966,948 $ 1,004,807 $ 966,916 Current liabilities 460,365 410,983 389,223 437,394 425,553 Working capital, GAAP $ 582,876 $ 573,218 $ 57
Slide 29: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Average Current assets $ 966,916 $ 948,686 $ 935,721 $ 1,440,812 $ 966,723 Current liabilities 425,553 402,641 415,573 898,080 383,131 Working capital, GAAP $ 541,363 $ 546,045 $ 520,
Slide 30: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Average Current assets $ 966,723 $ 1,035,912 $ 1,065,389 $ 1,190,827 $ 1,162,842 Current liabilities 383,131 409,110 418,719 461,726 430,018 Working capital, GAAP $ 583,592 $ 626,802
Slide 31: Kennametal
KE <cennamerat