Kennametal sales up 22% in fiscal third quarter
Kennametal Inc. reported fiscal third quarter sales of $593 million increased 22% and 19% on a reported and organic basis, respectively.
"Our third quarter results exceeded the high end of our sales and adjusted EPS Outlook, primarily due to the unprecedented rise in tungsten pricing and stronger volume," said Sanjay Chowbey, president and CEO.
"Our team is advancing volume momentum from improving end markets, pursuing share gains through growth initiatives, and executing on opportunities in a dynamic tungsten market," he added. "Additionally, we are actively managing our tungsten supply chain and executing our strategy to drive long-term shareholder value."
Other Highlights
Operating income was $79 million, or 13.4% margin, compared to $44 million, or 9.1% 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 $39 million within the Infrastructure segment, pricing and tariff surcharges within the Metal Cutting segment, higher sales and production volumes, incremental year-over-year restructuring savings of approximately $7 million, favorable foreign currency exchange of approximately $4 million and a decrease in restructuring and related charges of approximately $3 million. These factors were partially offset by higher compensation costs, tariffs and general inflation, the net effect of approximately $8 million from a normalized advanced manufacturing production credit under the Inflation Reduction Act in the current quarter within the Infrastructure segment, and higher raw material costs in the Metal Cutting segment. Adjusted operating income was $82 million, or 13.8% margin, in the current quarter, compared to $50 million, or 10.3% margin, in the prior year quarter.
Year-to-date net cash flow from operating activities was $70 million compared to $130 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 largely due to the unprecedented rise in tungsten prices, partially offset by higher net income in the current year period. Year-to-date free operating cash flow (FOCF) was $18 million compared to $63 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.
Segment Results
Metal Cutting sales of $358 million increased 18% from $304 million in the prior year quarter, reflecting organic sales growth of 12% and a favorable currency exchange effect of 6 percent. Operating income was $38 million, or 10.7% margin, compared to $25 million, or 8.2% margin, in the prior year quarter. The increase in operating income was driven by pricing and tariff surcharges, higher sales and production volumes, incremental year-over-year restructuring savings of approximately $5 million, favorable foreign currency exchange of approximately $3 million and a decrease in restructuring and related charges of approximately $2 million. These factors were partially offset by higher compensation costs, tariffs and general inflation and higher raw material costs. Adjusted operating income was $40 million, or 11.2% margin, in the current quarter, compared to $29 million, or 9.6% margin, in the prior year quarter.
Infrastructure sales of $235 million increased 29% from $182 million in the prior year quarter, reflecting organic sales growth of 30% and a favorable currency exchange effect of 4%, partially offset by a divestiture effect of 5%. Operating income was $42 million, or 18.1% margin, compared to $19 million, or 10.7% 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 $39 million and incremental year-over-year restructuring savings of approximately $2 million. These factors were partially offset by the net effect of approximately $8 million from a normalized advanced manufacturing production credit under the Inflation Reduction Act in the current quarter, higher compensation costs and general inflation. Adjusted operating income was $43 million, or 18.3% margin, in the current quarter, compared to $21 million, or 11.5% margin, in the prior year quarter.
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