Sales were US$676 million, compared with US$690 million in the same quarter last year. Sales decreased by 2%, reflecting decreases of 4% due to unfavorable currency exchange and a 2% organic decline, offset partially by a 3% increase from acquisition and a 1% increase due to more business days.
Operating loss was US$334 million, compared with operating income of US$50 million in the same quarter last year. Adjusted operating income of US$61 million was flat compared to the prior period.
‘I'm encouraged by the talent, technologies and innovation inside our company. They reflect the inherent potential we possess to generate value over the long-term,’ said Kennametal president and CEO Don Nolan. ‘While the current weakness in our end markets adversely affected our results, and the nature and magnitude of the impairment charge is disappointing, they also illustrate many opportunities for improving our operations and business portfolio.
Serious challenges
‘As attractive as our future may be, Kennametal also faces some serious challenges given that we have underperformed and missed investor expectations. It's clear we have some immediate work to do to deliver better performance by driving organic sales growth, getting our portfolio right and aligning our cost structure accordingly. We are taking additional actions to further reduce our manufacturing footprint and administrative overhead with a newly announced restructuring initiative, Phase 2. These key priorities—portfolio, cost structure and core growth with an accountable, customer-focused culture—are central to developing a path forward that will maximize profitability and generate improved shareholder returns.’
According to Kennametal, Phase 2 of could achieve an additional US$40-$50 million of annualized savings and incur US$90-$100 million of pre-tax charges. The company plamns to implement it over the next 12 to 24 months with the aim of improving operational efficiencies through the 'rationalization of certain manufacturing facilities as well as other employment and cost reduction programs’.