Kennametal Inc. · NYSE:KMT
Kennametal — Q2 2024 Earnings Presentation
32 slides from Kennametal's earnings presentation, Feb 7, 2024
Slide 1: FY24 Second Quarter Earnings Call Presentation
FY24 Second Quarter Earnings Call Presentation February 7, 2024
Slide 2: Safe Harbor Statement
Q 2 F Y 2 4 E AR N I N G S 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
Slide 3: Sales reflect slowing market conditions
Q 2 F Y 2 4 E AR N I N G S Sales reflect slowing market conditions Earnings per share: Reported $0.29; Adjusted $0.30 (vs. $0.27 prior year) Sales Growth Sales Growth Sales Growth by Region by End Market Sales of $495M, (3)% organic decline year-over-year (in constant currency) (in constant currency
Slide 4: Changes in end-market conditions drive lower full year outlook
E N D M AR K E T O U T L O O K Changes in end-market conditions drive lower full year outlook Year over Year Sales General Engineering Transportation Energy Earthworks Aerospace & Defense Prior Current Prior Current Prior Current Prior Current Prior Current Flat Down Up Up Flat Down Up Down Up Up Sl
Slide 5: Proprietary geometry enabled through Modernization
I N N O VAT I N G T O D R I V E G R O W T H Proprietary geometry enabled through Modernization Increase productivity and reduce customer costs • 30% increased tool-life* • Reduce machine downtime • Improve cutting speeds • Increase cutting consistency • Versatile applications allowing customer to re
Slide 6: Operating in a challenging macro environment
C O N S O L I D AT E D Q 2 F I N AN C I AL O V E R V I E W Operating in a challenging macro environment Adjusted Reported Quarter Ended ($ in millions) Change from PY Dec 31, 2023 Dec 31, 2023 Dec 31, 2022* Sales 0% $495 $495 $497 Organic (3)% (3)% 11% FX 1% 1% (8)% Business Days 2% 2% (1)% Gross Pr
Slide 7: Lower volume effects offset by favorable tax benefits
Q 2 F Y 2 4 AD J U S T E D E P S B R I D G E Lower volume effects offset by favorable tax benefits Lower share count Tax benefit due to change in Swiss tax rates Lower volumes and price/raw timing partially offset by operational excellence initiatives & restructuring savings ©2024 Kennametal Inc. |
Slide 8: Project wins and price offsetting slowing markets
M E TAL C U T T I N G B U S I N E S S S E G M E N T Q 2 F Y 2 4 S U M M ARY Project wins and price offsetting slowing markets Growth in EMEA and the Americas Sales Growth Sales Growth by Region Adjusted Flat Organic sales • EMEA driven by Transportation and Aerospace & Defense (in constant currenc
Slide 9: Sales, end-market and near-term margin pressures continue
I N F R AS T R U C T U R E B U S I N E S S S E G M E N T Q 2 F Y 2 4 S U M M ARY Sales, end-market and near-term margin pressures continue Organic sales Regional Sales Sales Growth by Region Adjusted decline 8% • Asia Pacific – growth in General Engineering offset by Earthworks (in constant curren
Slide 10: Strong cash flow generation from improved inventory levels
B AL AN C E S H E E T AN D C AS H F L O W S TAT E M E N T H I G H L I G H T S Strong cash flow generation from improved inventory levels Total Debt Net Debt $800 Share Repurchases & Debt Profile $674 $629 $605 $597 $619 $200M 3-year share repurchase program $600 $ Millions $526 $528 $503 • Q2: $15
Slide 11: Q3 FY24 Outlook
N E X T Q U AR T E R O U T L O O K Q3 FY24 Outlook OUTLOOK CONSIDERS THE FY24 THIRD QUARTER OUTLOOK FOLLOWING ASSUMPTIONS Sales • Inflationary environment continues to moderate $510 - $530M ~(5)% - (2)% ~2% ~(1)% Year over Year sales growth reflects: Volume growth Price realization Foreign exchange
Slide 12: FY24 Outlook
F U L L Y E AR O U T L O O K FY24 Outlook OUTLOOK CONSIDERS THE FY24 TOTAL YEAR OUTLOOK FOLLOWING ASSUMPTIONS Sales • Inflationary environment continues to moderate $2.02 - $2.07B ~(4) – (2)% ~2% Neutral Revenue Assumptions Year over Year Volume growth Price realization Foreign exchange • Aerospace
Slide 13: A compelling investment opportunity
S U M M ARY A compelling investment opportunity Sustainable • Deep customer insight and application expertise in core markets Competitive • Materials Science and engineering expertise Advantages • Advanced product development and innovative product portfolio • Market-leading products serving diversi
Slide 14: Appendix
Appendix 14
Slide 15: End markets focused on future strategic growth initiatives
E N D M AR K E T R E AL I G N M E N T F Y 2 3 End markets focused on future strategic growth initiatives Metal Cutting Q2 FY23 Infrastructure Q2 FY23 Prior End Market Alignment New End Market Alignment Prior End Market Alignment New End Market Alignment 7% 7% 22% 10% 11% 29% 35% 35% 56% 55% $299M $2
Slide 16: Flat sales as end markets slow
Q 2 F Y 2 4 S E G M E N T R E S U LT S Flat sales as end markets slow Metal Cutting Infrastructure Energy 7% AsiaPac 19% AsiaPac 24% Energy 23% Aero & Def 12% Gen Eng 34% Americas 43% Gen Eng 54% Aero & Def 6% Transp 27% EMEA 19% Americas 57% Earthworks 37% EMEA 38% Period Ending December 31, 2023 (
Slide 17: Strong balance sheet fuels strong cash flow generation
B AL AN C E S H E E T Strong balance sheet fuels strong cash flow generation 1042+969+362+189 ASSETS ($ in millions) December 2023 June 2023 Cash and cash equivalents $91 $106 Accounts receivable, net 291 307 Inventories 571 558 Other current assets 58 56 Total current assets 1,010 1,027 Property, p
Slide 18: Non-GAAP Reconciliations
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations The information presented by the Company contains certain non-GAAP financial measures. Kennametal management believes that presentation of these non-GAAP financial measures provides useful information about the results of operations of the Company
Slide 19: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Constant Currency End Market Sales Growth (Decline) Constant currency end market sales growth (decline) is a non-GAAP financial measure of sales growth (decline) (which is the most directly comparable GAAP measure) by end market excluding
Slide 20: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Operating Operating Effective Tax ($ in millions, except percents and per share data) Sales Gross Profit Expense Income Net Income(5) Diluted EPS Rate Q2 FY24 Reported Results $ 495.3 $ 139.6 $ 107.3 $ 28.5 $ 23.1 $ 0.29 (9.0)% Reported Ma
Slide 21: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Three Months Ended December 31, ($ in millions, except percents) 2023 2022 Net income attributable to Kennametal, reported $ 23.1 $ 21.9 Add back: Interest expense 6.8 7.0 Interest income (0.4) (0.3) (Benefit from) provision for income tax
Slide 22: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting Metal Cutting Infrastructure Infrastructure ($ in millions, except percents) Sales Operating Income Sales Operating Income Q2 FY24 Reported Results $ 311.4 $ 25.5 $ 183.9 $ 3.2 Reported Operating Margin 8.2 % 1.8 % Restructur
Slide 23: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Three Months Ended December 31, 2023 Metal Cutting Infrastructure Kennametal Organic sales growth (decline) —% (8)% (3)% Foreign currency exchange effect 2 1 1 Business days effect 2 — 2 Sales growth (decline) 4 % (7) % — % Three Months En
Slide 24: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting Three Months Ended December 31, 2023 Americas EMEA Asia Pacific Constant currency regional sales growth 1 % 4 % — % Foreign currency exchange effect 1 5 (1) Regional sales growth (decline) 2 % 9 % (1) % Infrastructure Three M
Slide 25: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting Three Months Ended December 31, 2022 Americas EMEA Asia Pacific Constant currency regional sales growth 12 % 9 % 2 % Foreign currency exchange effect (1) (15) (10) Regional sales growth (decline) 11 % (6) % (8) % Infrastructu
Slide 26: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting General Aerospace & Three Months Ended December 31, 2023 Engineering Transportation Defense Energy Constant currency end market sales growth (decline) 1 % 4 % 6 % (3) % Foreign currency exchange effect 2 2 1 2 End market sale
Slide 27: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting General Aerospace & Three Months Ended December 31, 2022 Engineering Transportation Defense Energy Constant currency end market sales growth 6 % 13 % 19 % 1 % Foreign currency exchange effect (8) (10) (8) (7) End market sales
Slide 28: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Net Debt Three Months Ended (in millions) 12/31/2023 12/31/2022 12/31/2021 12/31/2020 Total debt (gross) $ 618.9 $ 673.6 $ 605.0 $ 628.7 Less: cash and cash equivalents 90.7 76.8 101.8 103.2 Net debt $ 528.2 $ 596.8 $ 503.2 $ 525.5 Six Mon
Slide 29: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 12/31/2023 9/30/2023 6/30/2023 3/31/2023 12/31/2022 Average Current assets $ 1,009,820 $ 1,010,555 $ 1,026,789 $ 1,079,035 $ 1,048,303 Current liabilities 414,108 419,846 433,975 488,729 494,334 Working capi
Slide 30: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 Average Current assets $ 1,048,303 $ 1,011,486 $ 1,024,708 $ 1,043,241 $ 984,201 Current liabilities 494,334 497,488 485,610 460,365 410,983 Working capita
Slide 31: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 12/31/2021 9/30/2021 6/30/2021 3/31/2021 12/31/2020 Average Current assets $ 984,201 $ 966,948 $ 1,004,807 $ 966,916 $ 948,686 Current liabilities 410,983 389,223 437,394 425,553 402,641 Working capital, GAA
Slide 32: Non-GAAP Reconciliations (cont'd)
Q 2 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019 Average Current assets $ 948,686 $ 935,721 $ 1,440,812 $ 966,723 $ 1,035,912 Current liabilities 402,641 415,573 898,080 383,131 409,110 Working capital, G