Kennametal reports sales growth in fiscal 2022 Q1 results
November 1, 2021
Kennametal Inc., Pittsburgh, Pennsylvania, USA, has reported results for its fiscal 2022 first quarter, ended September 30, 2021. Sales of $484 million increased 21% from $400 million in the prior year quarter, reflecting organic growth of 19% and a favourable currency exchange effect of 2%.
Christopher Rossi, president and CEO, stated, “The continued execution of our commercial and operational excellence initiatives in an improving market environment resulted in strong performance this quarter, with sales and free operating cash flow outpacing normal quarterly sequential patterns. The results show substantial year-over-year margin improvement, driven by strong operating leverage and timely, strategic pricing actions.”
“Looking ahead, despite existing market and supply chain uncertainties, we remain confident in our ability to drive strong operating leverage for the full year,” Rossi concluded.
Operating income was $55 million – 11.3% of sales – compared to an operating loss of $17 million – 4.3% of sales in the prior year quarter. The increase in operating income was due primarily to organic sales growth, $1 million of restructuring and related charges compared to $29 million in the prior year quarter, favourable pricing, favourable product mix and approximately $5 million of incremental simplification/modernisation benefits, partially offset by approximately $15 million due to the restoration of salaries and other cost-control measures that were taken in the prior year. Adjusted operating income was $56 million (11.6% margin) compared to $11 million (2.9% margin) in the prior year quarter.
The reported effective tax rate (ETR) for the quarter was 27% and the adjusted ETR was 26.9%, both provisions on income, compared to reported ETR of 12.1% (benefit on a loss) and adjusted ETR of 33.4% (provision on income) in the prior year quarter. The year-over-year change in both the reported ETR and the adjusted ETR is reported to be due primarily to higher pretax income in the current year.
Earnings per diluted share (EPS) were reported at $0.43, compared with loss per share (LPS) of $0.26 in the prior year quarter, and adjusted EPS of $0.44, compared with $0.03 in the prior year quarter.
Reported EPS in the current quarter includes restructuring and related charges of $0.01 per share. Reported LPS in the prior year quarter includes restructuring and related charges of $0.30 per share, partially offset by differences in annual projected tax rates of $0.01 per share.
Year-to-date net cash flow provided by operating activities was $16 million compared to $10 million in the prior year quarter; this change was driven primarily by higher net income, partially offset by working capital adjustments. Year-to-date free operating cash flow (FOCF) was -$2 million compared to -$29 million in the prior year quarter. The change in FOCF was said to be driven chiefly by lower net capital expenditures related to simplification/modernisation initiatives and higher cash flow provided by operating activities.
During the quarter, Kennametal repurchased $13 million of Kennametal common stock under the previously announced share repurchase programme.
Metal Cutting Segment
Metal Cutting sales of $298 million increased 20% from $248 million in the prior year quarter, driven by organic growth of 19% and a favourable currency exchange effect of 2%, partially offset by an unfavourable business day effect of 1%. Operating income was $29 million, or 9.8% of sales, compared to an operating loss of $24 million, or -9.5% of sales, in the prior year quarter. The increase in operating income was due primarily to organic sales growth, $1 million of restructuring and related charges compared to $26 million in the prior year quarter, favourable product mix, approximately $4 million of incremental simplification/ modernisation benefits and favourable pricing, partially offset by approximately $11 million due to the restoration of salaries and other cost-control measures that were taken in the prior year and certain manufacturing inefficiencies. Adjusted operating income was $30 million, or 10.2% margin, compared to $2 million, or 1.0% margin, in the prior year quarter.
