Posted July 11, 2019

Kennametal to close manufacturing facilities

Kennametal announced several restructuring actions that would facilitate a simplified and leaner structure, while further positioning the company for long-term profitable growth.

As part of its ongoing simplification/modernization initiative, Kennametal will close its manufacturing facilities in Essen and Lichtenau as well as its distribution center in Neunkirchen, all in Germany. Additionally, the company announced its decision to close its manufacturing facility in Irwin, Pennsylvania.

"The proposed measures are difficult but necessary to achieve structural improvements, further improve operational efficiency and continue to drive value for shareholders," said Christopher Rossi, president and chief executive officer. "We recognize the effect on our employees and will work closely with their representatives to support them throughout this transition."

The proposed restructurings are expected to be executed over the next two years. Facility closures in fiscal 2020 are part of the current restructuring action, which in total are expected to deliver estimated annualized savings of $35 - $40 million and $55 - $65 million in pre-tax charges.

Fiscal 2021 closures would result in further structural cost reductions with estimated annualized savings of $25 – $30 million. Most of these savings will be achieved in fiscal 2021 with full run rate savings being realized in fiscal 2022. The company is expected to incur pre-tax charges of $60 – $75 million through fiscal 2020 and 2021 for this restructuring. These charges are primarily cash with the majority being spent in fiscal 2021.

Under the proposed measures, Kennametal would consolidate its Essen and Lichtenau operations, including both Kennametal and WIDIA branded products, into other lower-cost Kennametal Industrial facilities. The Irwin operations would be consolidated primarily into the newly modernized Infrastructure plant in Rogers, Arkansas.

Kennametal also proposed plans to outsource the distribution operations in its Neunkirchen and Essen facilities to a third-party logistics specialist.

The closure plans are contingent on the negotiations with the relevant employee representatives.