Kennametal Inc. · NYSE:KMT
Kennametal — Q2 2023 Earnings Presentation
33 slides from Kennametal's earnings presentation, Feb 7, 2023
Slide 1: FY23 Second Quarter Earnings Call Presentation
FY23 Second Quarter Earnings Call Presentation February 7, 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: Q2 FY23 Summary
Q2 FY23 Summary Strong growth and free operating cash flow despite macroeconomic headwinds Sales up YoY to $497 million Sales Growth Sales Growth by Region Sales Growth by End-Market Price and growth initiatives • Strong organic growth in both segments 11% (in constant currency) 19% (in constant c
Slide 4: Growth Roadmap
Growth Roadmap Sustainable growth from strong competitive position and well-defined Commercial Excellence initiatives Grow share in Mega-trends Growth in Accelerate current base business + align with KMT expertise + underserved markets + with M&A • KMT holds leadership • Steady demand for • Targetin
Slide 5: Recent Customer Wins
Recent Customer Wins Investments in Commercial Excellence and Innovation driving share gain Fit-for-Purpose Aerospace Chemicals Packaging Hybrid/EV Battery Photo credit GE Additive Photo credit GE Additive • Provided tooling for • Achieved new product • Renewed sole-source • Increased our • Secured
Slide 6: Innovating to Drive Growth
Innovating to Drive Growth Game-changing solutions enabled by design and additive manufacturing expertise Customer Goal: Multi-stage, light-weight, one-operator tool capable of precision machining in one operation “The Kennametal tool delivered outstanding quality and performance from the first use,
Slide 7: Consolidated Q2 FY23 Financial Overview
Consolidated Q2 FY23 Financial Overview Continued focus on execution in an inflationary and strong FX environment Change from PY Reported* Adjusted Reported Quarter Ended ($ in millions) December 31, 2022 December 31, 2021 December 31, 2021 Sales 2% $497 $487 $487 Organic 11% 11% 11% FX (8)% - - Bus
Slide 8: Q2 FY23 Adjusted EPS Bridge
Q2 FY23 Adjusted EPS Bridge Volume growth offset by inflation, foreign exchange and macro headwinds * $0.03 due to Swiss tax reform ruling • Metal Cutting volume increased at typical operating leverage • Infrastructure under-absorption due to intentionally extending planned shutdowns to lower powder
Slide 9: Metal Cutting Business Segment — Q2 FY23 Summary
Metal Cutting Business Segment — Q2 FY23 Summary Steady performance despite challenging macro dynamics Sales Growth Sales Growth by Region Operating 11% Organic sales Growth in all regions (in constant currency) Margin growth • Americas strength driven by broad, resilient demand 12% Sales of $299
Slide 10: Infrastructure Business Segment — 2Q FY23 Summary
Infrastructure Business Segment — 2Q FY23 Summary Price and productivity reducing effects of inflation and safety stock reduction actions Growth across all regions 12% Organic sales • EMEA - growth driven mainly by Gen Eng and Earthworks Sales Growth by Region Operating growth • Americas - growth
Slide 11: Balance Sheet and Cashflow Statement Highlights
Balance Sheet and Cashflow Statement Highlights Strong cashflow and balance sheet support investment and returning cash to shareholders Share Repurchases & Debt Profile Total Debt Net Debt $800 $200M 3-year share repurchase program $674 $595 $629 $605 $597 • Q2: $11M purchased; 468K shares $ Milli
Slide 12: Q3 FY23 Outlook
Q3 FY23 Outlook Sequential improvement despite continuing high inflation, FX and other macro headwinds Revenue Assumptions YoY: Continued growth in Aerospace, Energy, Earthworks and General Engineering Transportation gradually improves through the year as supply chain Q3 FY23 Outlook disruptions
Slide 13: FY23 Total Year Outlook
FY23 Total Year Outlook Ending the year stronger through focused execution of initiatives FY23 Total Year Outlook Revenue Assumptions YoY: Sales $2,050M - $2,100M Volume growth 0% - 2% 2H sales expected to be approximately in line with normal Price realization ~7% seasonality; excluding the effect
Slide 14: Summary
Summary Strong growth and cash flow in the quarter with more growth and margin improvement ahead Pricing actions, strategic initiatives and market resiliency supporting growth despite macroeconomic uncertainties in FY23 Strong growth prospects including: Commercial • Base business expansion thro
Slide 15: Appendix
Appendix EX cennamerat
Slide 16: Segment Results
Segment Results Growth in all end-markets and regions; aerospace, transportation & earthworks at double-digit YoY growth Metal Cutting Infrastructure AsiaPac Energy 7% AsiaPac 20% Transp 22% Earthworks Gen Eng 27% Americas 36% 35% 44% EMEA Aero Americas Gen Eng 18% EMEA 10% 60% Energy 56% 36% 29% Pe
Slide 17: Balance Sheet
Balance Sheet Strong balance sheet supports initiatives ASSETS ($ in millions) December 2022 June 2022 Cash and cash equivalents $77 $86 Accounts receivable, net 291 295 Inventories 606 571 Other current assets 75 73 Total current assets 1,048 1,025 Property, plant and equipment, net 982 1,002 Goodw
Slide 18: Non-GAAP Reconciliations
Non-GAAP Reconciliations The information presented by the Company contains certain non-GAAP financial measures including organic sales decline, constant currency regional sales growth (decline), constant currency end market sales growth (decline), adjusted gross profit and margin; adjusted operating
Slide 19: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Constant Currency End Market Sales Growth (Decline) Constant currency end market sales growth (decline) is a non-GAAP financial measure of sales growth (decline) (which is the most directly comparable GAAP measure) by end market excluding the impacts of acquisitions
Slide 20: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Operating Operating Effective Tax ($ in millions, except percents and per share data) Sales Gross Profit Expense Income Net Income(5) Diluted EPS Rate Q2 FY22 Reported Results $ 486.7 $ 153.0 $ 106.7 $ 47.5 $ 31.4 $ 0.37 25.9 % Reported Margins 31.4 % 21.9 % 9.8 % N
Slide 21: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Three Months Ended December 31, ($ in millions) 2022 2021 Net income attributable to Kennametal, reported $ 21.9 $ 31.4 Add back: Interest expense 7.0 6.5 Interest income (0.3) (0.2) Provision for income taxes 5.0 11.5 Depreciation 31.5 29.1 Amortization 3.1 3.3 EBI
Slide 22: 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 Q2 FY22 Reported Results $ 298.6 $ 27.9 $ 188.1 $ 20.0 Reported Operating Margin 9.3 % 10.6 % Net benefit from reversal of restru
Slide 23: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Non-GAAP Reconciliations (cont’d) Three Months Ended December 31, 2022 Metal Cutting Infrastructure Kennametal Organic sales growth 11 % 12 % 11 % Foreign currency exchange effect (10) (6) (8) Business days effect (1) (1) (1) Sales growth — % 5 % 2 % Three Months En
Slide 24: Non-GAAP Reconciliations (cont’d)
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) % Infrastructure Three Months Ended Decem
Slide 25: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Metal Cutting Three Months Ended December 31, 2021 Americas EMEA Asia Pacific Constant currency regional sales growth (decline) 11 % 8 % (4) % Foreign currency exchange effect — (3) 1 Regional sales growth (decline) 11 % 5 % (3) % Infrastructure Three Months Ended D
Slide 26: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Metal Cutting General Three Months Ended December 31, 2022 Engineering Transportation Aerospace Energy Constant currency end market sales growth 6 % 13 % 19 % 1 % Foreign currency exchange effect (8) (10) (7) (7) End market sales (decline) growth (2) % 3 % 12 % (6)
Slide 27: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Metal Cutting General Three Months Ended December 31, 2021 Engineering Transportation Aerospace Energy Constant currency end market sales growth (decline) 13 % (10) % 24 % 7 % Foreign currency exchange effect (1) (1) — — End market sales growth (decline) 12 % (11) %
Slide 28: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Net Debt Three Months Ended (in millions) 12/31/2022 12/31/2021 12/31/2020 12/31/2019 Total debt (gross) $ 673.6 $ 605.0 $ 628.7 $ 595.3 Less: cash and cash equivalents 76.8 101.8 103.2 105.2 Net debt $ 596.8 $ 503.2 $ 525.5 $ 490.1 Three Months Ended December 31, (
Slide 29: Non-GAAP Reconciliations (cont’d)
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 capital, GAAP $ 553,969 $ 513,998
Slide 30: Non-GAAP Reconciliations (cont’d)
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, GAAP $ 573,218 $ 577,725 $ 567
Slide 31: Non-GAAP Reconciliations (cont’d)
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, GAAP $ 546,045 $ 520,148 $ 5
Slide 32: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Average Current assets $ 1,035,912 $ 1,065,389 $ 1,190,827 $ 1,162,842 $ 1,119,034 Current liabilities 409,110 418,719 461,726 430,018 412,053 Working capital, GAAP $ 626,802 $ 646,6
Slide 33: Kennametal
KE <cennamerat