Kennametal Inc. · NYSE:KMT
Kennametal — Financial Executives International (October 2005)
20 slides from Kennametal's conference presentation, Oct 19, 2005
Slide 1: Earning the Right to Grow
Financial Executives International Earning the Right to Grow Markos I. Tambakeras October 19, 2005
Slide 2: Who We Are
3 Who We Are... Founded 1938 $2.3 Billion Annual Global Sales 14,000 Employees in 60 countries 1,000 Engineers/2,300 Patents Market leader in every target market Geographic Volume Balance The Americas Europe ROW 0.5 0.3 0.2 Auto Truck Off Road General Engineering Aerospace Energy Mining & Constructi
Slide 3: What We Do
What We Do... Founded on complex metallurgical consumables Used across all aspects of manufacturing, mining, construction, energy exploration, and specialty 'wear' applications Products consumed in the manufacturing process Deliver 3-4 times value relative to cost Best economics throughout the custo
Slide 4: Kennametal Years Ago
Kennametal 6 Years Ago: BUT... Excellent global brands Strong market share Quality reputation Great fundamentals 9
Slide 5: Vision, Ambitions and Values
Vision "To be the premier consumable materials company in tooling solutions, engineered components and advanced materials." Ambitions Consistent Top Tier Performer Grow Faster than Market 40% Sales from New Products Best in Customer Satisfaction Employees as Major Shareowners Employer of Choice for
Slide 6: Priorities - Responding to the Challenges
Priorities-Responding to the Challenges Fix the balance sheet-obsessive focus on cash flow Earn and preserve investment grade rating Reward results AND effort Stress accountability-DWYSYWD Re-establish confidence and competitiveness Earn the Right to Grow 13
Slide 7: Achieving the Strategic Intent
Achieving the Strategic Intent Cost Reductions Reduce Debt / Working Capital Major Operational Improvements Organizational Development New Product Development Sales Force Revitalization Accelerated Growth 2005 Portfolio Enhancement 2000 15
Slide 8: KVBS - Our Business Model for Systematic Execution
KVBS - Our Business Model for Systematic Execution Strategic Planning Consistent development of a long-term business strategy in alignment with our key values and ambitions. ACE - Product Development Stage-gated product development process for bringing new products to market. Customer Acquisition A
Slide 9: FY05 Performance Highlights
FY05 Performance Highlights Record sales of $2.3 billion Record EPS Growth of 55% On top of over 50% growth in 2004 Top quartile performance in cash flow from operations at 9% of sales Debt to Capital at 31% Investment grade rating across the board PWC at 22% - lowest ever 19
Slide 10: Key Performance Indicators FY2003 - 2005
Key Performance Indicators FY2003 - 2005 ($-Millions) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 20.4 27.4 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 2003 2004 2005 Return on Invested Capital 0.032 0.066 0.091 2003 2004 2005 Debt / Capital 0.415 0.328 0.306 2003 2004 2005 Sales 1759 1971 230
Slide 11: Key Performance Indicators FY2003 - 2005
Key Performance Indicators FY2003 - 2005 ($-Millions) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 20.4 27.4 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 2003 2004 2005 Free Operating Cash Flow 182 178 202 2003 2004 2005 % Primary Working Capital 0.282 0.254 0.224 2003 2004 2005 Space 7473 7149
Slide 12: The Road to Premier
The Road to Premier Sales EBIT ROIC Market Share Customer Satisfaction Rating New Products Balance... Sales-1/3, 1/3, 1/3 Portfolio End Markets 10+% 12 - - 15% 12 - - 15% 25% Top 2 >40% Ambitions Focus 25
Slide 13: Challenges
Challenges 22% competitive disadvantage Tax Burdens Regulation & Compliance Costs Frivolous Litigation US Manufacturers PA Manufacturers CNIT Among Highest in US (top 2 at 9.99%) Apportionment for CNIT 20-20-60 NOL Limits CSFT Double Taxation Threat of Mandatory Unitary Combined Reporting 29
Slide 14: Responding to the Manufacturing Challenges
Responding to the Manufacturing Challenges Develop a Partnership of Private Sector and Government Entities - URGENT Emphasize the Importance of Manufacturing to our Economy Accounts for nearly 1/5 of the US gross national product Standing alone, would be fifth-largest economy in the world Enlist Edu
Slide 15: Industry Challenges
Industry Challenges Cyclical nature of the economy Manufacturing footprint mostly in high-cost countries Ascendancy of China and India High and volatile raw materials costs Threats to intellectual property Protectionism 33
Slide 16: Responding to the Industry Challenges
Responding to the Industry Challenges Relentless focus on lowest global cost Obsessive commitment to technology and innovation Unwavering commitment to top talent Global and end - market balance Broad portfolio 35
Slide 17: Lessons Learned on the Journey
Lessons Learned on the Journey Develop a sense of urgency Stay focused Maintain high expectations Be consistent Don't tolerate "Good Enough" Respect the culture, but don't be held hostage by it Be the recruiter and personal trainer for your people 37
Slide 18: Role of the Finance Community
Role of the Finance Community Minimum Expectations: Be role model, practitioner and preacher of integrity Provide timely, accurate information Function as a business partner-anticipate Be relentless in pursuit of lowest cost structure Constructively question and challenge No Surprises 39
Slide 19: We Are Only at the Start of Our Journey
WE ARE ONLY AT THE START OF OUR JOURNEY TO BECOME A PREMIER COMPANY. 41
Slide 20: Q&A
Q&A Markos I. Tambakeras October 19, 2005 43
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