Kennametal Inc. · NYSE:KMT
Kennametal — Q4 2023 Earnings Presentation
44 slides from Kennametal's earnings presentation, Aug 1, 2023
Slide 1: FY23 Fourth Quarter Earnings Call Presentation
FY23 Fourth Quarter Earnings Call Presentation August 1, 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: FY23 Summary
FY23 Summary Organic growth and strong free operating cash flow ▪ Sales up YoY to $2,078 million Sales Growth Sales Growth by Region Sales Growth by End Market 9% (in constant currency) (in constant currency) Price and growth initiatives • Organic growth in both Segments 11% 14% driving sales gains
Slide 4: Q4 FY23 Summary
Q4 FY23 Summary Strong free operating cash flow as market conditions moderate ▪ Sales of $550M, up YoY Sales Growth Sales Growth by Region (in constant currency) Sales Growth by End Market (in constant currency) Price and strategic initiatives • Organic growth in both Segments 7% 12% driving sales g
Slide 5: Recent Customer Wins Q4 FY23
Recent Customer Wins Q4 FY23 Investments in Commercial Excellence and Innovation driving share gain Gen. Engineering Aerospace EV Engine Additive Mining Photo credit GE Additive Photo credit GE Additive • Provided solution utilizing • Secured orders to provide • Provided tooling for the • Secured an
Slide 6: Innovating to Drive Growth
Innovating to Drive Growth Drill Fix PRO™ is a robust, cost-effective and versatile tool for EV and Aerospace applications Cost-effective*: Up to 200% better tool life from more cutting edges per inserts and optimized material Energy efficient*: Up to 12% reduction in energy usage due to tool optimi
Slide 7: Consolidated Q4 FY23 Financial Overview
Consolidated Q4 FY23 Financial Overview Continued to execute our strategy in a challenging macro environment Adjusted Reported Quarter Ended ($ in millions) Change from PY June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Sales 4% $550 $530 $550 $530 Organic 7% 7% 7% 7% FX (2)% (4)% (2)% (4)%
Slide 8: Q4 FY23 Adjusted EPS Bridge
Q4 FY23 Adjusted EPS Bridge Improved Metal Cutting profitability offset by lower volume in Infrastructure • Tax reserve and valuation allowances • Pricing actions offset raw material, wage and general cost inflation on a dollar basis • Lower Infrastructure volume • Legal settlement ($0.02) ©2023 Ken
Slide 9: Metal Cutting Business Segment — Q4 FY23 Summary
Metal Cutting Business Segment — Q4 FY23 Summary Solid performance driven by strategic initiatives, innovation and operational excellence ▪ Growth in EMEA and the Americas Sales Growth Sales Growth by Region Adjusted 10% Organic sales • EMEA strength driven by Transportation and General Engineering
Slide 10: Infrastructure Business Segment — Q4 FY23 Summary
Infrastructure Business Segment — Q4 FY23 Summary Profitability sequentially improved; softer end market conditions than expected ▪ Growth in EMEA and Asia Pacific 3% Organic sales • EMEA – growth driven by General Engineering and Energy Sales Growth Sales Growth by Region Adjusted growth (in consta
Slide 11: Balance Sheet and Cashflow Statement Highlights
Balance Sheet and Cashflow Statement Highlights Best cashflow since 2015; strong balance sheet positioned for growth and shareholder returns Total Debt Net Debt Share Repurchases & Debt Profile $1,095 $1,100 ▪ $200M 3-year share repurchase program • Q4: $12M purchased; 443K shares $ Millions $800 $6
Slide 12: Full Year Adjusted EBITDA Margin Waterfall vs. Prior Year
Full Year Adjusted EBITDA Margin Waterfall vs. Prior Year Effects of price/inflation, lower pension income and FX: ~190 bps margin dilution Macroeconomic Factors Lower Infrastructure volume from safety stock reduction efforts as supply chains improved and supply chain disruptions in Q1 * *Foreign ex
Slide 13: Q1 FY24 Outlook
Q1 FY24 Outlook Growth accelerates as year progresses Q1 FY24 Outlook Q1 Revenue Assumptions YoY: Slightly below normal seasonality driven by: Sales $485M - $510M Volume growth ~(5)% - flat ▪ Energy and General Engineering continue at the Q4 level Price Realization ~3% Foreign exchange Neutral ▪ Con
Slide 14: FY24 Full Year Outlook
FY24 Full Year Outlook Overall end-markets experience modest growth; stronger second half expected FY24 Total Year Outlook FY Revenue Assumptions YoY: Sales $2,100M - $2,200M ▪ Q1 slightly below normal sequential trend with growth accelerating in the Volume growth (2)% - 3% second half Price realiza
Slide 15: Summary
Summary Delivered organic growth & strong cash flow this quarter; margin expansion in FY24 and beyond ▪ Pricing actions and strategic initiatives drive growth in FY23 ▪ FY24 growth prospects buoyed by several drivers: Commercial • Base business expansion through strategic initiatives, innovation and
Slide 16: Investor Day
Investor Day Company will host an Investor Day on September 8, 2023 at the New York Stock Exchange Attendees will have the opportunity to meet with and hear from members of EVENT DETAILS: Kennametal’s Executive Management Team, who will provide an update on the Date: September 8, 2023 Company’s grow
Slide 17: Appendix
Appendix EX cennametat
Slide 18: End Market Realignment FY22
End Market Realignment FY22 End markets focused on future strategic growth initiatives Metal Cutting Q4 FY22 Infrastructure Q4 FY22 Prior End Market Alignment New End Market Alignment Prior End Market Alignment New End Market Alignment Gen Eng Transp 27% Gen Eng Transp 27% Gen Eng Gen Eng 56% 55% 33
Slide 19: Consolidated FY23 Financial Overview
Consolidated FY23 Financial Overview Continued focus on execution in a moderating demand environment Adjusted Reported Quarter Ended ($ in millions) Change from PY June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Sales 3% $2,078 $2,012 $2,078 $2,012 Organic 9% 11% 9% 11% FX (5)% (2)% (5)% (2)
Slide 20: FY23 Adjusted EPS Bridge
FY23 Adjusted EPS Bridge Volume growth offset by inflation, foreign exchange and macro headwinds • Metal cutting volume increased at typical operating leverage • Infrastructure under absorption of $10M; Supply Chain disruptions $5M • Pricing actions substantially offset raw material, wage and genera
Slide 21: Segment Results Q4 FY23
Segment Results Q4 FY23 Growth moderates in all regions; aerospace and defense at double digit YoY growth Metal Cutting Infrastructure AsiaPac Energy 7% AsiaPac 19% Transp 22% Earthworks Gen Eng 27% Americas 37% 34% 43% Aero & EMEA Gen Eng Americas EMEA Def 19% 55% 59% 38% 11% Energy Aero & 23% Def
Slide 22: Segment Results FY23
Segment Results FY23 Growth in all end markets and regions; aerospace and defense and energy at double-digit YoY growth Metal Cutting Infrastructure Energy AsiaPac 7% AsiaPac Transp Earthworks 20% 22% Gen Eng 27% 34% 34% Americas Aero & EMEA EMEA 44% Gen Eng 18% Americas Def 26% 55% 60% Energy 11% A
Slide 23: Balance Sheet
Balance Sheet Strong balance sheet driven by strong cash flow 1042+969+362+189 ASSETS ($ in millions) June 2023 June 2022 Cash and cash equivalents $106 $86 Accounts receivable, net 307 295 Inventories 558 571 Other current assets 56 73 Total current assets 1,027 1,025 Property, plant and equipment,
Slide 24: Non-GAAP Reconciliations
Non-GAAP Reconciliations The information presented by the Company contains certain non-GAAP financial measures including organic sales decline, constant currency regional sales growth (decline), constant currency end market sales growth (decline), adjusted gross profit and margin; adjusted operating
Slide 25: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations (cont’d) Constant Currency End Market Sales Growth (Decline) Constant currency end market sales growth (decline) is a non-GAAP financial measure of sales growth (decline) (which is the most directly comparable GAAP measure) by end market excluding the impacts of acquisitions
Slide 26: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations (cont’d) Non-GAAP Reconciliations Operating Operating Effective Tax ($ in millions, except percents and per share data) Sales Gross Profit Expense Income Net Income(5) Diluted EPS Rate Q4 FY23 Reported Results $ 550.2 $ 175.7 $ 110.0 $ 55.9 $ 36.4 $ 0.45 19.9 % Reported Marg
Slide 27: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (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 FY23 Reported Results $ 2,078.2 $ 646.4 $ 437.3 $ 192.4 $ 118.5 $ 1.46 22.7 % Rep
Slide 28: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) Three months ended June 30, Year ended June 30, ($ in millions) 2023 2022 2023 2022 Net income attributable to Kennametal, reported $ 36.4 $ 41.7 $ 118.5 $ 144.6 Add back: Interest expense 7.1 6.7 28.5 25.9 Interest income (0.4) (0.
Slide 29: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) Metal Cutting Infrastructure Metal Cutting Operating Infrastructure Operating ($ in millions, except percents) Sales Income Sales Income FY23 Reported Results $ 1,269.8 $ 135.8 $ 808.4 $ 59.8 Reported Operating Margin 10.7 % 7.4 % R
Slide 30: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) Metal Cutting Infrastructure Metal Cutting Operating Infrastructure Operating ($ in millions, except percents) Sales Income Sales Income Q4 FY23 Reported Results $ 336.9 $ 37.2 $ 213.4 $ 19.2 Reported Operating Margin 11.0 % 9.0 % R
Slide 31: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) Three months ended June 30, 2023 Metal Cutting Infrastructure Kennametal Organic sales growth 10 % 3% 7% Foreign currency exchange effect (2) (2) (2) Business days effect (2) (1) (1) Sales growth 6 % — % 4 % Three months ended June
Slide 32: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) Metal Cutting Three months ended June 30, 2023 Americas EMEA Asia Pacific Constant currency regional sales growth 8 % 12 % 1 % Foreign currency exchange effect — (1) (6) Regional sales growth (decline) 8 % 11 % (5) % Infrastructure
Slide 33: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) Metal Cutting Three months ended June 30, 2022 Americas EMEA Asia Pacific Constant currency regional sales growth (decline) 12 % 6 % (1) % Foreign currency exchange effect 1 (12) (4) Regional sales growth (decline) 13 % (6) % (5) %
Slide 34: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) Metal Cutting Year ended June 30, 2023 Americas EMEA Asia Pacific Constant currency regional sales growth 12 % 10 % 2 % Foreign currency exchange effect — (10) (8) Regional sales growth (decline) 12 % — % (6) % Infrastructure Year e
Slide 35: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) Metal Cutting Year ended June 30, 2022 Americas EMEA Asia Pacific Constant currency regional sales growth (decline) 14 % 10 % (2) % Foreign currency exchange effect — (6) — Regional sales growth (decline) 14 % 4 % (2) % Infrastructu
Slide 36: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) Metal Cutting General Aerospace & Three months ended June 30, 2023 Energy Engineering Defense Transportation Constant currency end market sales growth 3 % 7 % 19 % 7 % Foreign currency exchange effect (2) (2) (2) (1) End market sale
Slide 37: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations (cont’d) Metal Cutting General Aerospace & Three months ended June 30, 2022 Energy Engineering Defense Transportation Constant currency end market sales growth 9 % 6 % 20 % 4 % Foreign currency exchange effect (5) (5) (6) (6) End market sales growth (decline) 4 % 1 % 14 % (2
Slide 38: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) Metal Cutting General Aerospace & Year ended June 30, 2023 Energy Engineering Defense Transportation Constant currency end market sales growth 4 % 8 % 22 % 8 % Foreign currency exchange effect (5) (5) (5) (7) End market sales (decli
Slide 39: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) Metal Cutting General Aerospace & Year ended June 30, 2022 Energy Engineering Defense Transportation Constant currency end market sales growth (decline) 6 % 13 % 21 % (1) % Foreign currency exchange effect (1) (3) (2) (2) End market
Slide 40: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) Net Debt Year ended (in millions) 6/30/2023 6/30/2022 6/30/2021 6/30/2020 Total debt (gross) $ 595.9 $ 615.6 $ 600.5 $ 1,094.5 Less: cash and cash equivalents 106.0 85.6 154.0 606.7 Net debt $ 489.9 $ 530.0 $ 446.5 $ 487.8 Three mon
Slide 41: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) (in thousands, except percents) 6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022 Average Current assets $ 1,026,789 $ 1,079,035 $ 1,048,303 $ 1,011,486 $ 1,024,708 Current liabilities 433,975 488,729 494,334 497,488 485,610 Workin
Slide 42: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) (in thousands, except percents) 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Average Current assets $ 1,024,708 $ 1,043,241 $ 984,201 $ 966,948 $ 1,004,807 Current liabilities 485,610 460,365 410,983 389,223 437,394 Working ca
Slide 43: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) (in thousands, except percents) 6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020 Average Current assets $ 1,004,807 $ 966,916 $ 948,686 $ 935,721 $ 1,440,812 Current liabilities 437,394 425,553 402,641 415,573 898,080 Working capi
Slide 44: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations Non-GAAP Reconciliations (cont’d) (cont’d) (in thousands, except percents) 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Average Current assets $ 1,440,812 $ 966,723 $ 1,035,912 $ 1,065,389 $ 1,190,827 Current liabilities 898,080 383,131 409,110 418,719 461,726 Working