Kennametal Inc. · NYSE:KMT
Kennametal — Q1 FY2021 Earnings Presentation
29 slides from Kennametal's earnings presentation, Nov 3, 2020
Slide 1: FY21 First Quarter Earnings Call Presentation
FY21 First Quarter Earnings Call Presentation November 3, 2020
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: Q1 FY21 Overview & Highlights
Results reflect strong execution in the face of continued end-market weakness Q1 FY21 Overview & Highlights Organic sales down due to declining end-markets: (21)% organic sales decline vs. (11)% decline prior year • Segment organic growth rates: Metal Cutting (23)% and Infrastructure (18)% • Regio
Slide 4: Focused on growing beyond market rates and positioning for the recovery
Focused on growing beyond market rates and positioning for the recovery Fit-for-Purpose Applications • Progress tracking with expectations • Positive reaction from new and existing customers with early wins including a major machine tool builder • Channel partners are enthusiastic about operating in
Slide 5: Trailing 12 Month Adj. Operating Margin
Simplification/Modernization & cost-controls improve profitability through the downturn Trailing-twelve-month adjusted operating margin higher than FY09 downturn Revenue* Adjusted Operating Margin* $2,900 16% Trailing 12 Month Revenue ($ millions) Trailing 12 Month Adj. Operating Margin FY09 $2,700
Slide 6: Consolidated Q1 FY21 Financial Overview
Strong execution results in EBITDA margin increase even on low volumes Consolidated Q1 FY21 Financial Overview Adjusted Reported Change Quarter Ended ($ in millions) from PY Sept. 30, 2020 Sept. 30, 2019 Sept. 30, 2020 Sept. 30, 2019 Sales (23)% $400 $518 $400 $518 Organic (21)% (11)% (21)% (11)% FX
Slide 7: Q1 FY20 Adjusted EPS Bridge
Higher simplification/modernization benefits partially offset low volumes Q1 FY20 Adjusted EPS Bridge Main driver lower volumes and associated under absorption, partially offset by temporary cost-control actions and raw materials ($0.30) Other Taxes Currency Simplification/Modernization Q1 FY21 Oper
Slide 8: Metal Cutting Business Segment
Slow end-markets partially offset by strong cost-control and modernization benefits Sales by Geography Sales by End Market Metal Cutting Business Segment AsiaPac 24% Americas Aerospace 9% Energy 8% General 39% Engineering Q1 FY21 Summary 54% Transportation EMEA 29% 37% Q1 FY21 sales $248 million; (2
Slide 9: Infrastructure Business Segment
Raw materials and simplification/modernization benefits offset slow end-markets Sales by Geography Sales by End Market General AsiaPac Energy 25% Infrastructure Business Segment 24% Engineering 34% Q1 FY21 Summary EMEA 21% Americas Earthworks 55% 41% Q1 FY21 sales $152 million; (18)% organic sales d
Slide 10: Strong balance sheet & cash position allow continued focus on initiatives
Strong balance sheet & cash position allow continued focus on initiatives Debt Structure & Covenants 800 Total Debt Net Debt Debt Structure 697 • Two $300M notes; mature February 2022 & June 2028 700 640 • $700M revolver matures June 2023; $500M draw largely repaid $ Millions 586 592 600 596 • Amend
Slide 11: FY21 primary EPS and FOCF drivers
FY21 primary EPS and FOCF drivers Year-over-Year Change 1H21 2H21 FY21 Highlights Simplification/Modernization + + • Full year benefits ~$80 million + • 1H temporary cost-control actions EPS Drivers Temporary Cost-Control Actions ─ • Prior year actions and variable compensation 2H headwind Raw Mater
Slide 12: Navigating through challenging environment with a focus on the future
Navigating through challenging environment with a focus on the future Advancing strategic commercial initiatives to drive growth and market share gain Effectively managing costs and aligning production with current demand to protect margins Strong execution on simplification/modernization init
Slide 13: Appendix
Appendix Fiscal 2019 Second Quarter Earnings Call Presentation February 5, 2019
Slide 14: Adjusted Segment Results
Adjusted Segment Results Quarter ended ($ in millions) September 30, 2020 September 30, 2019 Metal Cutting Infrastructure Total Metal Cutting Infrastructure Total Sales $248 $152 $400 $324 $194 $518 Organic (23)% (18)% (21)% (11)% (11)% (11)% FX (1)% - (1)% (2)% (1)% (2)% Business Days - 1% - 1% 1%
Slide 15: Balance Sheet
Balance Sheet ASSETS ($ in millions) September 2020 June 2020 Cash and cash equivalents $98 $607 Accounts receivable, net 250 238 Inventories 509 522 Other current assets 79 74 Total current assets $936 $1,441 Property, plant and equipment, net 1,054 1,038 Goodwill and other intangible assets, net 4
Slide 16: Non-GAAP Reconciliations
Non-GAAP Reconciliations The information presented by the Company contains certain non-GAAP financial measures including organic sales decline, constant currency regional sales growth (decline), constant currency end market sales decline, adjusted gross profit and margin; adjusted operating expense
Slide 17: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) EBITDA EBITDA is a non-GAAP financial measure and is defined as net income (loss) attributable to Kennametal (which is the most directly comparable GAAP measure), with interest expense, interest income, provision for income taxes, depreciation and amortization added
Slide 18: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Operating ($ in millions, except per share data and Gross Operating (Loss) Effective Net (Loss) Diluted percents) Sales Profit Expense Income Tax Rate Income(5) (L)EPS Q1 FY21 Reported Results $ 400.3 $ 105.1 $ 93.3 $ (17.2) 12.1% $ (21.7) $ (0.26) Reported Margins
Slide 19: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Three months ended September 30, ($ in millions) 2020 2019 Net (loss) income attributable to Kennametal, reported $ (21.7) $ 6.5 Add back: Interest expense 10.6 7.9 Interest income (0.3) (0.4) Provision for income taxes, reported (2.9) 3.8 Depreciation 27.6 27.3 Amo
Slide 20: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Metal Cutting Infrastructure Metal Cutting Operating Infrastructure Operating ($ in millions, except percents) Sales (Loss) Income Sales Income Q1 FY21 Reported Results $ 247.9 $ (23.6) $ 152.4 $ 7.3 Reported Operating Margin (9.5%) 4.8% Restructuring and related ch
Slide 21: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Three months ended September 30, 2020: Metal Cutting Infrastructure Kennametal Organic Sales Decline (23%) (18%) (21%) Foreign Currency Exchange Impact (1%) 0% (1%) Business Days Impact 0% 1% 0% Divestiture Impact 0% (4%) (1%) Sales Decline (24%) (21%) (23%) Three m
Slide 22: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Metal Cutting Three months ended September 30, 2020: Americas EMEA Asia Pacific Constant currency regional sales decline (29%) (24%) (9%) Foreign currency exchange impact (1%) 1% (2%) Regional sales decline (30%) (23%) (11%) Metal Cutting Three months ended Septembe
Slide 23: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Metal Cutting Three months ended September 30, 2019(7): Americas EMEA Asia Pacific Constant currency regional sales decline (7%) (11%) (17%) Foreign currency exchange impact 0% (3%) (1%) Regional sales decline (7%) (14%) (18%) (7) Amounts for the three months ended
Slide 24: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Metal Cutting General Three months ended September 30, 2020: Engineering Transportation Aerospace Energy Constant currency end market sales decline (20%) (21%) (45%) (17%) Foreign currency exchange impact 0% (1%) 0% 0% End market sales decline (20%) (22%) (45%) (17%
Slide 25: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Metal Cutting General Three months ended September 30, 2019(7): Engineering Transportation Aerospace Energy Constant currency end market sales decline (9%) (17%) (1%) (8%) Foreign currency exchange impact (2%) (2%) (2%) (1%) End market sales decline (11%) (19%) (3%)
Slide 26: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Three months ended September ($ in millions) 2020 2019 Net cash flow from operating activities $ 9.6 $ 27.5 Purchases of property, plant and equipment (39.3) (72.5) Proceeds from disposals of property, plant and equipment 0.3 0.4 Free operating cash flow $ (29.4) $
Slide 27: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 Average Current assets $ 1,065,389 $ 1,190,827 $ 1,162,842 $ 1,119,034 $ 1,121,482 Current liabilities 418,719 461,726 430,018 412,053 439,171 Working capital, GAAP $ 646,670 $ 729,10
Slide 28: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017 Average Current assets $ 1,121,482 $ 1,546,166 $ 1,240,587 $ 1,128,382 $ 1,075,915 Current liabilities 439,171 886,531 477,790 407,621 396,967 Working capital, GAAP $ 682,311 $ 659,63
Slide 29: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016 Average Current assets $ 1,075,915 $ 1,113,901 $ 1,043,046 $ 971,745 $ 991,837 Current liabilities 396,967 461,478 426,799 390,151 402,574 Working capital, GAAP $ 678,948 $ 652,423 $