Kennametal reports 22% sales decrease

Kennametal Inc has reported results for the 2016 fiscal third quarter ended 31 March, 2016. Sales were US$498 million, compared with US$639 million in the same quarter last year. Sales decreased by 22%, reflecting a 10% decline due to divestiture, an 8% organic decline and a 4% unfavorable currency exchange impact.

Operating income was US$27 million, compared with an operating loss of US$120 million in the same quarter last year. Adjusted operating income was US$39 million, compared with US$56 million a year ago. The decrease in adjusted operating results was driven primarily by organic sales decline, unfavorable mix, lower fixed cost absorption and an unfavorable currency exchange, the company said.

Industrial segment sales of US$316 million decreased 11% from US$355 million in the prior year quarter due to unfavorable currency exchange of 5%, organic decline of 5% and 1% due to divestiture. Excluding the impact of currency exchange and divestiture, sales decreased approximately 26% in energy, 6% in general engineering, 1% in aerospace and defense and 1% in transportation.

Challenging environment

‘Kennametal’s third quarter performance reflects progress from operating results in a challenging environment, and benefited from a favorable tax rate,’ said Ron De Feo, Kennametal president and CEO. ‘The 2016 third quarter adjusted operating margin of 7.8% is substantially higher than the year-to-date December fiscal 2016 adjusted operating margin of 3.6 percent, reflecting sequential volume growth and lower raw material costs. Infrastructure made progress, posting adjusted operating income of US$10 million compared with losses for the first half of the year, and Industrial results reflect better sequential margins as well with adjusted operating income of US$30 million. Adjusted EPS, while still lower year-over-year, strengthened sequentially as a result of the higher gross margins and lower operating expenses.’

De Feo continued, ‘We have a lot of improvement opportunities within Kennametal to simplify operations, lower costs and drive margin improvements over time. We need to be more customer responsive and grow market share with innovation, entrepreneurship and speed – all things we are working on and plan to discuss with the investment community in the future.’

This story is reprinted from material from Kennametal, with editorial changes made by Materials Today. The views expressed in this article do not necessarily represent those of Elsevier.