Kennemetal Q2 sales decline 5% YoY
Kennametal Inc. reported second quarter sales of $516 million decreased 5% from $543 million in the prior year quarter, reflecting an organic sales decline of 5%.
"Kennametal responded to significant headwinds this past year, including persistent market softness, tariff impacts, and foreign exchange weakness," said President and CEO Sanjay Chowbey. "We took decisive actions to progress our efforts on productivity, cost restructuring, and footprint consolidation, and we plan to ramp up our work on right sizing capacity and cost improvement. We also executed our portfolio optimization strategy with the sale of our Goshen facility.
"While we expect market headwinds to continue throughout fiscal 2026, our team is relentlessly focused on executing our strategic growth initiatives," he continued. "Recent wins in the Aerospace & Defense and Energy end markets showcase the ability of our team to take share in all market conditions. With strategic and thoughtful actions on right sizing capacity, cost structure and portfolio optimization, and growth initiatives, I am confident that we will build a more resilient business and unlock value for our shareholders."
During the quarter, the company achieved incremental year-over-year restructuring savings of approximately $6 million. In January 2025, it announced actions to support the long-term competitiveness of the company and to mitigate softer market conditions. These actions were enlarged during the quarter and delivered annualized run rate pre-tax savings of approximately $28 million. Kennemtal now expects total annualized run rate savings of approximately $35 million in connection with these actions, exceeding the original target of $15 million. The company expects to incur pre-tax charges of approximately $25 million in connection with the execution of these actions, of which $5 million was recognized during the quarter. The company substantially completed the closure of a facility in Greenfield, Massachussets, and the consolidation of facilities in Barcelona, Spain during the quarter as a part of these actions.
During the quarter, the company completed the sale of its Goshen, Indiana subsidiary. The company received $19 million in proceeds, subject to working capital adjustments, and recognized a loss on divestiture of approximately $2 million.
Operating income was $31 million, or 6.1 percent margin, compared with $61 million, or 11.3 percent margin, in the prior year quarter. The decrease in operating income was primarily due to lower sales and production volumes, higher raw material costs, higher wages and general inflation, the net effect of increased tariffs of approximately $4 million, higher restructuring and related charges of approximately $4 million compared to the prior year quarter and a loss from divestiture of approximately $2 million related to the sale of a subsidiary in Goshen, Indiana. These factors were partially offset by pricing, a net benefit of $7 million within the Infrastructure segment related to the tornado that struck the Rogers, Arkansas facility late in fiscal 2024 and incremental year-over-year restructuring savings of approximately $6 million. Adjusted operating income was $38 million, or 7.4% margin, compared with $63 million, or 11.5% margin, in the prior year quarter.
Included in other income, net during the quarter is approximately $5 million from an above-market, preferential exchange rate offered in Bolivia in exchange for U.S. dollars.
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