Kennametal Q2 sales up 10%
Kennametal Inc. announced its second quarter sales totaled $530 million, an 10% increase on both a reported and organic basis from the prior year quarter.
"We are pleased with our second quarter results, which exceeded the high end of our sales and adjusted EPS Outlook, driven by volume in the quarter, largely from buy-ahead in response to the tungsten pricing environment and modest improvement in certain end markets," said President and CEO Sanjay Chowbey.
"Looking ahead, we remain focused on driving above market growth, improving our cost structure and shaping a smarter portfolio to deliver long-term value for shareholders."
Fiscal 2026 Second Quarter Financial Highlights
Operating income was $53 million, or 9.9% margin, compared to $32 million, or 6.6% margin, in the prior year quarter. The increase in operating income was driven by the favorable timing of pricing compared to raw material costs of approximately $17 million within the Infrastructure segment, pricing and tariff surcharges within the Metal Cutting segment, higher sales and production volumes in the Metal Cutting segment, and incremental year-over-year restructuring savings of approximately $8 million. These factors were partially offset by higher compensation costs, tariffs and general inflation, a prior year benefit from insurance proceeds of approximately $3 million that did not repeat in the current year and an increase in incremental restructuring and related charges of approximately $2 million. Adjusted operating income was $56 million, or 10.5% margin, in the current quarter, compared to $33 million, or 6.9% margin, in the prior year quarter.
Year-to-date net cash flow from operating activities was $73 million compared to $101 million in the prior year period. The change in net cash flow from operating activities was driven primarily by working capital changes including an increase in inventory, partially offset by higher net income in the current year period. Year-to-date free operating cash flow (FOCF) was $38 million compared to $57 million in the prior year period. The decrease in FOCF was driven primarily by working capital changes including an increase in inventory, partially offset by higher net income and lower net capital expenditures in the current year period.
Outlook
The company's expectations for the third quarter of fiscal 2026 and the full year are as follows:
Quarterly Outlook:
Sales expected to be $545 - $565 million
Adjusted EPS is expected to be $0.50 - $0.60
Annual Outlook:
Sales expected to be $2.190 - $2.250 billion
Adjusted EPS is expected to be $2.05 - $2.45
Free operating cash flow of approximately 60% of adjusted net income
Capital spending expected to be approximately $90 million
The company will provide more details regarding its outlook during its quarterly earnings conference call.
Segment Results
Metal Cutting sales of $331 million increased 11% from $298 million in the prior year quarter, reflecting organic sales growth of 9% and a favorable currency exchange effect of 2%. Operating income was $30 million, or 9.0% margin, compared to $17 million, or 5.6% margin, in the prior year quarter. The increase in operating income was driven by pricing and tariff surcharges, higher sales and production volumes and incremental year-over-year restructuring savings of approximately $6 million. These factors were partially offset by higher compensation costs and tariffs and general inflation. Adjusted operating income was $32 million, or 9.6% margin, in the current quarter, compared to $18 million, or 6.0% margin, in the prior year quarter.
Infrastructure sales of $198 million increased 8% from $184 million in the prior year quarter, reflecting organic sales growth of 11% and a favorable currency exchange effect of 1%, partially offset by a divestiture effect of 4%. Operating income was $23 million, or 11.8% margin, compared to $16 million, or 8.5% margin, in the prior year quarter. The increase in operating income was driven by the favorable timing of pricing compared to raw material costs of approximately $17 million, and incremental year-over-year restructuring savings of approximately $2 million. These factors were partially offset by higher compensation costs, a prior year benefit from insurance proceeds of approximately $3 million that did not repeat in the current year, and general inflation. Adjusted operating income was $24 million, or 12.3% margin, in the current quarter, compared to $16 million, or 8.6% margin, in the prior year quarter.
INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Applied Industrial Technologies. Plus, we're featuring articles by contributing writers Dr. Bharani Nagarathnam and Frank Hurtte, as well as interviews with numerous product and distribution industry experts.
