Kennametal(KMT) - 2025 Q4 - Annual Results

Earnings Release Summary Overall Performance Kennametal's Q4 and full-year FY2025 financial performance declined, with adjusted EPS and sales decreasing Q4 & FY2025 Earnings Per Share (EPS) Summary | Period | Reported EPS | Adjusted EPS | Prior Year Reported EPS | Prior Year Adjusted EPS | | :--- | :--- | :--- | :--- | :--- | | Q4 2025 | $0.28 | $0.34 | $0.47 | $0.49 | | FY 2025 | $1.20 | $1.34 | $1.37 | $1.50 | Q4 & FY2025 Sales Performance | Period | Sales | Change vs Prior Year | Organic Sales Change | | :--- | :--- | :--- | :--- | | Q4 2025 | $516 million | -5% | -5% | | FY 2025 | $1,967 million | -4% | -4% | Management Commentary Management implemented productivity and restructuring actions in FY2025, anticipating FY2026 headwinds but confident in strategic growth - The company faced significant headwinds from persistent market softness, tariff impacts, and foreign exchange weakness during the past year[3] - Strategic actions are focused on productivity, cost restructuring, footprint consolidation, and portfolio optimization, including the sale of the Goshen facility[3] - Despite expecting continued market headwinds in FY2026, the company is focused on strategic growth initiatives and has seen recent wins in the Aerospace & Defense and Energy end markets[3] Fiscal 2025 Fourth Quarter Financial Performance Q4 FY2025 sales decreased 5% to $516 million, with operating income falling to $31 million due to lower volumes and costs Q4 FY2025 Operating Performance | Metric | Q4 FY2025 | Q4 FY2024 | | :--- | :--- | :--- | | Sales | $516 million | $543 million | | Operating Income | $31 million | $61 million | | Operating Margin | 6.1% | 11.3% | | Adjusted Operating Income | $38 million | $63 million | | Adjusted Operating Margin | 7.4% | 11.5% | - Operating income was negatively impacted by lower sales volumes, higher raw material and wage costs, a net increase in tariffs of approximately $4 million, and higher restructuring charges of about $4 million[8] - The company completed the sale of its Goshen, IN subsidiary, receiving $19 million in proceeds and recognizing a loss on divestiture of approximately $2 million[7] - Restructuring actions delivered annualized run-rate pre-tax savings of approximately $28 million, with total expected savings from these actions increased to $35 million[6] Fiscal 2025 Full Year Financial Performance Full-year FY2025 sales decreased 4% to $1,967 million, with operating income and cash flow declining due to lower volumes FY2025 Operating Performance | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | Sales | $1,967 million | $2,047 million | | Operating Income | $143 million | $170 million | | Operating Margin | 7.3% | 8.3% | | Adjusted Operating Income | $158 million | $183 million | | Adjusted Operating Margin | 8.0% | 8.9% | FY2025 Cash Flow Summary | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | $208 million | $277 million | | Free Operating Cash Flow (FOCF) | $121 million | $175 million | - The company has achieved approximately $65 million in annualized run-rate pre-tax savings as of June 30, 2025, and has increased its total cost savings target from $100 million to $125 million by the end of fiscal 2027[19] Business Segment Performance Both Metal Cutting and Infrastructure segments experienced Q4 FY2025 sales and operating margin declines Q4 FY2025 Metal Cutting Segment Results | Metric | Q4 FY2025 | Q4 FY2024 | | :--- | :--- | :--- | | Sales | $321 million | $335 million | | Sales Change | -4% | N/A | | Operating Income | $21 million | $44 million | | Operating Margin | 6.6% | 13.2% | Q4 FY2025 Infrastructure Segment Results | Metric | Q4 FY2025 | Q4 FY2024 | | :--- | :--- | :--- | | Sales | $196 million | $209 million | | Sales Change | -6% | N/A | | Operating Income | $11 million | $18 million | | Operating Margin | 5.5% | 8.5% | Fiscal 2026 Outlook Kennametal projects FY2026 sales between $1.95 billion and $2.05 billion, with adjusted EPS from $0.90 to $1.30 Q1 Fiscal 2026 Outlook | Metric | Guidance | | :--- | :--- | | Sales | $465 - $485 million | | Adjusted EPS | $0.20 - $0.30 | Full Year Fiscal 2026 Outlook | Metric | Guidance | | :--- | :--- | | Sales | $1.95 - $2.05 billion | | Adjusted EPS | $0.90 - $1.30 | | Free Operating Cash Flow | ~120% of adjusted net income | | Capital Spending | ~$90 million | Shareholder Returns The company returned $122 million to shareholders in FY2025 and declared a $0.20 quarterly dividend - Returned a total of $122 million to shareholders in FY25, consisting of $62 million in dividends and $60 million in share repurchases[5][18] - During Q4, the company repurchased 232 thousand shares for $5 million; inception-to-date, $60 million has been spent under the $200 million three-year repurchase program[11] - The Board of Directors declared a quarterly cash dividend of $0.20 per share, payable on August 26, 2025[24] Financial Statements Condensed Consolidated Statements of Income FY2025 sales decreased to $1.97 billion, resulting in lower gross profit and net income, with diluted EPS falling to $1.20 FY2025 vs FY2024 Income Statement Highlights (in thousands) | Metric | Twelve Months Ended June 30, 2025 | Twelve Months Ended June 30, 2024 | | :--- | :--- | :--- | | Sales | $1,966,845 | $2,046,899 | | Gross Profit | $598,070 | $627,093 | | Operating Income | $143,123 | $170,223 | | Net Income Attributable to Kennametal | $93,125 | $109,323 | | Diluted EPS | $1.20 | $1.37 | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $2.55 billion, with cash and inventories also rising Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $140,540 | $127,971 | | Total current assets | $1,039,270 | $1,002,592 | | Total assets | $2,545,412 | $2,503,758 | | Total current liabilities | $422,329 | $415,961 | | Long-term debt | $596,788 | $595,980 | | Total liabilities | $1,220,764 | $1,215,159 | | Total Kennametal shareholders' equity | $1,283,979 | $1,249,875 | Condensed Consolidated Statements of Cash Flow FY2025 net cash from operating activities decreased to $208.3 million, resulting in a net cash increase of $12.6 million Cash Flow Summary (in thousands) | Metric | Year ended June 30, 2025 | Year ended June 30, 2024 | | :--- | :--- | :--- | | Net cash flow provided by operating activities | $208,324 | $277,108 | | Net cash flow used for investing activities | $(61,825) | $(109,426) | | Net cash flow used for financing activities | $(133,919) | $(141,747) | | Net increase in cash and cash equivalents | $12,569 | $21,950 | Segment Data FY2025 Metal Cutting sales were $1.22 billion and Infrastructure $747.2 million, with all segments and regions declining FY2025 Sales & Operating Income by Segment (in thousands) | Segment | FY2025 Sales | FY2024 Sales | FY2025 Operating Income | FY2024 Operating Income | | :--- | :--- | :--- | :--- | :--- | | Metal Cutting | $1,219,686 | $1,280,781 | $86,375 | $132,573 | | Infrastructure | $747,159 | $766,118 | $58,465 | $39,857 | FY2025 Sales by Geographic Region (in thousands) | Region | FY2025 Sales | FY2024 Sales | | :--- | :--- | :--- | | Americas | $967,608 | $1,012,969 | | EMEA | $601,087 | $628,536 | | Asia Pacific | $398,150 | $405,394 | Non-GAAP Reconciliations Reconciliation of Non-GAAP Measures Non-GAAP measures, including adjusted EPS of $1.34 and FOCF of $121.2 million, offer insights into operational performance - Management presents non-GAAP measures like adjusted operating income, adjusted EPS, and FOCF to provide useful information about the company's operational results, excluding certain items[38] FY2025 GAAP to Non-GAAP EPS Reconciliation | Metric | Amount | | :--- | :--- | | Reported Diluted EPS | $1.20 | | Restructuring and related charges | $0.13 | | Loss on divestiture | $0.01 | | Adjusted Diluted EPS | $1.34 | Free Operating Cash Flow (FOCF) Reconciliation (in thousands) | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | Net cash flow from operating activities | $208,324 | $277,108 | | Purchases of property, plant and equipment | $(88,971) | $(107,561) | | Proceeds from disposals of property, plant and equipment | $1,841 | $5,425 | | Free operating cash flow | $121,194 | $174,972 |