Kennametal reports eighth consecutive quarter of sales growth
February 5, 2019
Kennametal Inc., Pittsburgh, Pennsylvania, USA, has reported the results for its fiscal 2019 second quarter ended December 31, 2018. The company reported sales of $587 million, up 3% year-on-year with organic growth of 4%, making this its eighth consecutive quarter of sales growth.
Operating income was reported at $79 million, or 13.4% margin, compared to $64 million or 11.1% margin in the prior year quarter. Adjusted operating income was $81 million, or 13.8% margin, compared to $65 million or 11.4% margin in the prior year quarter.
The increase in adjusted operating income was said to be primarily due to organic sales growth and incremental simplification/modernisation benefits, partly offset by higher raw materials costs and a short-term increase in manufacturing expenses at certain locations due to the timing of simplification/modernisation efforts. Price realisation was said to continue to cove r raw material cost inflation.
Chris Rossi, Kennametal’s President and Chief Executive Officer, stated, “In the second quarter of fiscal 2019 we delivered strong earnings per share results, margin improvement year-over-year and the eighth consecutive quarter of sales growth. These results reflect our continued transformation of Kennametal and the ongoing monetisation of our growth and simplification/modernisation initiatives.”
Net cash flow provided by operating activities was $62 million compared to $41 million in the prior year period. Free operating cash flow (FOCF) was negative $24 million compared to negative $18 million in the prior year period. The change in FOCF was reportedly driven primarily by greater net capital expenditures due in part to modernisation initiatives, in addition to changes in working capital, partially offset by increased cash flow from operations before changes in certain other assets and liabilities.
Industrial segment
Kennametal’s Industrial segment saw sales of $317 million, an increase of 2% from $312 million year-over-year, reflecting organic sales growth of 3%. Operating income was $58 million, or 18.1% margin, compared to $41 million, or 13% margin, in the prior year quarter. Adjusted operating income was $59 million, or 18.6% margin, compared to $41 million, or 13% margin, in the prior year quarter.
Widia segment
The Widia segment saw sales of $49 million, an increase of 3% from $48 million year-over-year. Operating income was $2 million, or 3.5% margin, compared to less than $1 million or 1% margin in the prior year quarter. Adjusted operating income was $2 million, or 3.7% margin, compared to $1 million, or 1.4% margin, in the prior year quarter.
Infrastructure segment
The Infrastructure segment saw sales of $221 million, increased 5% from $211 million year-over-year. Operating income was $21 million, or 9.3% margin, compared to $24 million, or 11.3% margin, in the prior year quarter. Adjusted operating income was $21 million, or 9.6% margin, compared to $25 million, or 11.8% margin, in the prior year quarter.
Following the release of its Q2 2019 results, Kennametal reaffirmed its previously stated outlook for the fiscal year 2019, with predicted capital spending of $240–260 million and FOCF of $120–140 million.
