KMT - Earnings call transcript Q2 2020

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Operator

Good morning. I would like to welcome everyone to Kennametal's Second Quarter Fiscal 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. event recorded. this that note is being Please

I to Investor Kelly like to Relations. conference over turn the Boyer, Boyer, go would please now Ms. ahead. Vice President of

Kelly Boyer

Welcome, fiscal XXXX our Yesterday joining operator. Thank release you earnings issued website. results. and presentation and Kennametal's quarter review posted evening, for our you, second us everyone, our to press we thank on slides

replay call, be will and that throughout March for a be of to slide We referring today's will Xth. call recording the available through the deck

I'm Vice Boyer, President Kelly of Investor Relations.

Dragich, today Damon's line Joining the and Ron and Chris on prepared the Watson, Chief business up and Corporate me Infrastructure President, and President, Officer; Broetz, open Port, Pete Executive Financial Damon call Vice segment. remarks, Industrial President are Vice business Alexander After Rossi, and for will Chris Finance Widia questions. Controller; Audia, Segment; President we business President, Patrick Officer; President, Chief segment;

direct statement. time, your statements under this At Litigation our the constitute XXXX. Private discussion Reform as comments Today's forward-looking forward-looking defined Securities I that to attention of contains Act like would to disclosure

filings. Such results, materially statements statements. or company’s that the could to involve actual factors and by risk and These in of in a SEC cause risks detailed forward-looking assumptions, differ or expressed Kennametal’s from uncertainties forward-looking those achievements implied performance number such are uncertainties

X-K to GAAP be that on Form back be we can will deck the the and measures discussing non-GAAP today. financial financial addition, website. of on Reconciliations the believe In directly at on are measures we our found comparable most our slide call

Chris. I’ll now turn to that, And the call with over

Chris Rossi

thank joining call you, the Good for Thank you morning, And Kelly. everyone. today.

remain reviewing Though some on the by focused control. general currently we the all our comments making experiencing begin end that me can things the markets, quarter. we before downturn across we're Let

and completed be simplification/modernization leverage results will drive seeing are the still profitability to actions, improved from end to markets completed as begin well these those to-date. strengthen. actions when And our We as

by consecutive XX% in quarter end organic quarter on the Starting state second X weakened our quarter growth markets. in last the Slide the second is in organic sales highlights year. the of This of double-digit versus declined and decline X% presentation deck, the

expected the more second quarter the While U.S., markets few sequentially, and than declined end countries had a we we decline in Germany anticipated. had to India significantly specifically

the the aerospace the prior the in challenges margin Adjusted XXX in market this effect EBITDA conditions. versus but improved market points the EPS to basis XX.X%, XXX despite trickle-down decreased to Furthermore, points exacerbated sequentially Adjusted lower MAX $X.XX to related already end the quarter. XX supply $X.XX sales in and weak chain basis decreased year quarter.

result decreases in margin three main factors. were of and The EPS the

markets year-over-year. First, our the contributor was as all a decline end significant declined volume in

inefficiencies the and efforts. effect manufacturing simplification/modernization in by volume the negative under-absorption the to Second, were said, plant That fiscal year. of the closures is of decrease associated expected related recent closures plant this to half second the effect magnified our from disruptive

margins our discussed depress material continued the last in we raw as call, to our on earnings headwinds Third, quarter. temporarily

reverse that will effect sequentially first or margins P&L expected, in year expectation raw as of the the represented 'XX. the points the effect half This quarter, Although $X.XX in year is full basis be And of the EPS. roughly still decline neutral. since our inventory through fiscal second half, higher our cost the the the first work material of improved situation XXX magnitude year-over-year of the from will it in

factors progress negative by incremental of were making $X.XX simplification/modernization, an on are offset These which we year-over-year. partially the contributed EPS

year-to-date from to simplification/modernization the million bringing $XX $XX $XX since and incremental an total program achieved million. inception we quarter, the savings million This in of

the than this reminder, fiscal our savings rationalization modestly expect $XX million modernization. reflecting in manufacturing still the year, we savings footprint half year full second and to last from a achieved As higher year increased be

quarter. these facilities from the expected the in annualized million restructuring to rate two manufacturing of to in closed 'XX end second which closures deliver The $XX year the are We $XX actions, million are savings 'XX. fiscal savings run part year by fiscal of

these also actions by with $XX our year cost. on the 'XX. annualized a fiscal fiscal to contribute of $XX end savings We million an rate million remain And are now year lower to track we to savings of expect expected restructuring 'XX that additional achieve at run

to than it, increased lower to after per profitability decided by representatives Essen with and required reaching employee driven work compelling downsize hours costs. We've closing rather improve local week the a operation agreement operating

evaluating also ongoing of facility restructuring the activities. part are closures our other as acceleration We of

before, an me one, on in control, as market focused to important that As you we disciplined it's things unpredictable this can as the such environment say heard cost such management. stay

opportunities market a current the of Our costs, of represents to X% to dollar adjusted continue in will we XX.X% environment. operating for especially decrease expense terms. in reduce look And year-over-year

Looking experienced expectations ahead, the in total current have the of year fiscal as further through well the our market as necessitated lower we QX, remainder year reduction a outlook. end weakness our demand for in

Slide discuss some of have X to the that call to changes our lowered last expectations. earnings turn since Let's our

macroeconomic negative of over the many As what U.S. was manufacturing significantly end quarter. on second production first and first positive can have last the you for in see versus turned markets the this this unexpectedly was in quarter. quarter, our indicators changed end quarter, the at forecasted slide, key

production indicating India with Industrial signs to be recovery was Similarly, X%. September positive of forecasted

was QX. in German negative X% in expected end performance actual to than with further the versus continued consistent of and start forecast However, the the further weaken quarter negative a X% saw of in of production decrease transportation the with the Industrial we market at quarter. X% negative deterioration The that

quarter our affected to levels fiscal subsequent developments supply XX the At well. of actual call, they XXX and The time production year and affected were end. forecasting increase course chain. also an second full of were associated Boeing’s outlook the monthly by the year our with the MAX last as production XX And

Finally, to our at forecasted the of stabilize count, the approximately seen stay land in last end to time at XXX now call, balance these significantly of in lower, market only U.S. around is and which the for the year. fiscal levels around energy expected was was as drop and XXX rig the

these our is across costs, for to challenges as Slide structural our manufacturing end Despite improved on footprint as markets, to in continue long-term productivity. manufacturing we profitability, simplification/modernization our our well processes reduce Part as leveraging modernized seen of improve X. reduction

include evaluation. reduced Essen operation, operate that does Note the of significantly or first we've to-date under Since employees in the to the considerably similar from the operations currently start the a less closures downsized footprint other X of business. in year period. this footprint not to require the are in journey, facility comparing and the flow our the cash These by chart, this half reduction shown actions revenue reflected improvement in as

significant versus through see, can Overall, footprint through services, the in Investor manufacturing flow you as progress. we’re good and automation processes pricing, including a reduced To-date, there's product simplification/modernization, portfolio As making and improvement improving December cash and on rationalization. our in we CapEx X footprint we’ve our million focused simplification/modernization removing XX%, value-based costs XXXX by modernized are productivity our of to the required our expect approximately simplifying expect add to recover. and million this X spend year. capital except for end of $XXX This which will be the capacity approximately incremental spend the by $XXX once to program, X of fiscal projection modernization XX% needed for incremental we of Day complete markets will structural

capital the of note that productivity much important modernization from the It's are improvements to come. to still

are program, simplification/modernization productivity we’ve into ahead the consolidation of these new As products year the of and us track are we of benefits online of discussed, fiscal a that. significant. on processes as would complete happen closures plant processes our bring still the with and modernized that the 'XX smaller enable throughout towards 'XX. transfer are modernization footprint, the And entire and of plants we end of The

billion I in once to So that sales our summary, will target deliver billion of to $X.X adjusted achieve the EBITDA range. we to confident within XX% savings the are XX% $X.X our remain needed

and cutting Damon, has call into executive newly to leveraging announced responsibility positions he leading to turn management currently was and the VP metal of over our of will drive discuss and to lead with In role accelerate best Commercial the joining segments February by full Infrastructure like growth Cardenas customers us Company I commercial our for the target general various week. Comes marketing last business created our team. recently Ron and I'd Donaldson this from cutting operations. will moved practices who role, Before where across businesses. Franklin for XXth held portfolio. new metal is Officer the He to as our improve segment. effectiveness cutting segment, Asia-Pacific. Chief to business team Ron Welcome is Franklin business sales Port, most changes the Kennametal the with Infrastructure company's of metal and

And I'll it with turn to over Damon. that,

Damon Audia

you, basis. adjusted I a review Thank begin And reported of and Slide on X good results morning, with will our both Chris. on operating the everyone.

to resulted more markets. negative recent These XXX aerospace This magnified basis mentioned, changes XX% production. in expected end Chris by end deteriorated trends demand or $XXX MAX organic to following trends our As previously million. year-over-year declining than significantly were XX% sales market headwinds across the on in

another a as X% as contributed had that negative currency effect negative well Foreign divestiture of a X%.

largely XXX points effect down inventory effect a year-over-year. its expenses The X% the The of points Adjusted margin year, of an half year. through and materials the sales, lower basis roughly profit the The and full and P&L. effect the performance of for basis of basis neutral gross XXX roughly the from basis XX way in quarter. volumes reverse sequentially. result first inventories priced quarter of of points, Adjusted improvement second of down in raw higher were this XXX year-over-year be year-over-year operating was was the down XX.X% was higher represented of will points still working priced XX.X% negative

down $X.XX loss items the versus are Taken share of that XXX in the comparisons. adjusted reported X.X%, Reported highlight. margin tough I'd positive $X.XX There of prior basis was to EPS quarter share together, margin per per this year was points year-over-year loss operating against one-time in like period.

rate. for First, transitioned expect benefits accounted a discrete change $X.XX our tax change, we Despite adjusted long-term tax this not do tax reform. primarily to of provisions due on material Swiss

negligible. million China, weakness $XX market of asset after-tax was deteriorating addition effect change in Second, of sector. Widia, engineering this in of the India intangible reflective but not The on primarily charges global quarter we impairment current environment. simply the overall recorded to weak macro non-cash conditions, EPS This result a applications and as transportation action in pre-tax in is does manufacturing view general our Widia and

$X.XX to Infrastructure per share. non-core proceeds of as the business a in of million which alloys Third, specialty cash divestiture we completed in amounted part for simplification/modernization, $XX

$X.XX temporary reflected the half costs the such to On was $X.XX was an expected of previous reverse negative raw approximately per The X. $X.XX EPS within The in performance main year. year. highlighted Slide significantly of operations $X.XX. that largest to it quarter the from drivers effects to adjusted last basis this share EPS contributing lower adjusted the in is for effect share per will neutral of down operations effect higher quarter negative be the second and category This on volumes. Also amounted are $X.XX. the our versus was material The $X.XX factor full roughly of for the

Another plant closures. manufacturing our to temporary the was inefficiencies related factor

headwinds continued improving, as Although this these quarter. expected

proceed through as expect the year. We diminish we this to

up quarter, $X.XX Simplification/modernization which restructuring $X.XX from contributed is the in last $X.XX from actions. of quarter,

As to increase of benefits as we we year. progress expect half the through these fiscal second mentioned, Chris the

supply segments of through respectively. top production the auto as XX% transportation respectively. and aerospace plant shutdowns biggest down largest XX% our XX% decline of Americas X detail decelerating This followed surrounding weakness as end manufacturing Sales extended down the quarter. was QX chain. market by From in short regional fell XXX perspective, remains in demand the in an X XX%, on primarily and declined affected the prior by organically and the challenges EMEA broad-based general the X% this sales performance of the provide QX the ongoing the year. and in the engineering negative MAX on activity, expectations the X%, by in global of corresponding end driven growth Industrial Asia holiday in customers. well and at market From a standpoint, by developments of Pacific with Slides XX% was and effects

year-over-year approximately came costs XX.X% XX.X% represented effects The in Adjusted the operating of in in driven by margins material raw was prior decrease year. points at to of higher the XX decline. basis the primarily volume. compared decline The

on However, sequential margin flat basis a roughly points basis, the increased approximately XX operating sales. adjusted on

Regionally X faced macro this a organically challenges prior for largest X% be declined primarily is period. Sales with Industrial end year-over-year EMEA quarter Widia due Asia quarter. that operating XX%. noted the was well. decline as to slowdown Slide segment specifically against engineering and Widia. the market year India, slowdown X% also as positive in the loss X% down the were the Americas Asia-Pacific the the significant the during both general to in Turning similar the the It Adjusted decline a of was should down Pacific That X.X%. was sector. quarter affecting in margin for transportation in in

half. those will second points affected quarter, higher other raw down costs the this points approximately quarter, headwinds margin basis and material segments, to business XXX in operating reverse XXX Similar Widia's the from basis by last

a X. the Regionally, were the up down market, year XX% count. in primarily end while Asia X% were was X% by energy, EMEA, rig to Infrastructure Slide year-over-year, in on XX% significant sales declines the land in and which respectively. Pacific declined down reflecting sales these X% driven prior Turning XX% By against positive were only Organic U.S. results period. and Americas

period. loss earthworks down costs quarter significantly in two prior X% to a of of margin an year the X% more to material sensitive and in recorded Remember, X.X% engineering and in were respectively. is Infrastructure Infrastructure General ways. profit X.X% raw changes operating compared this

sold. cost materials percentage First, raw of a of are larger goods Infrastructure’s

a create difference, affecting timing further prices customer spot certain market and based on materials operating margins. temporary Second, of adjust prices

material to improvement basis in higher by expect from the Again, points this XXX margins profitability was affected and basis second down see quarter, year-over-year. Infrastructure’s This raw XXX will reverse cost last sequentially half. that approximately in points an we such

facility, the margins of benefits well part divestiture we as in simplification/modernization our as as closure to Infrastructure business. initiative, Pennsylvania expect of our the see Furthermore, recent of following Castle the additional Irwin, New

of balance to flow. was increase the sequentially inventory sheet the The both to Now, percentage capital $XXX and modest our basis, primary On Primary our to sales review XX million. result reductions the XX.X%. in capital Slide is decreased quarter. of turning year-over-year more and year-over-year sales working compared to working slight a cash decline

expenditures year $XX capital Net increased prior to compared $XX million in to period. million the

on track. Chris results As and mentioned, our simplification/modernization spending are

of second of seasonal operating a restructuring cost. negative cash outlook, of In updated represents quarter to the consistent context second expenditures with increased flow free full in roughly and $XX cash $XX net flow our we operating was on free million the cash expect cash Our breakeven $XX million resulting capital the year. in improve half, million This free flow our increased normal patterns. year-over-year decline for

quarter on XXXX. U.S. our at balance We at debt cash until well quarter the and February revolver overfunded we have no end and Our $XXX million, remains maturities with positioned strong, and significant remain debt and pension in plans. no $XXX borrowings million had our

$XX our at dividend sheet. to confident I'm our balance in of program. Overall, and the year-over-year we flat approximately were strength million committed Dividends remain

revolver Our drive our coupled generation the cash our allows forward performance cash to flow and our will unutilized position cash initiatives, economic with throughout simplification/modernization financial flows and improve with cycle. which us

balance sheet found can Slide in full on the The XX be appendix.

Slide 'XX outlook. fiscal to year XX Turning for our

in Our last Chris updated which since outlook the our several call, of many mentioned. change factors reflects

deterioration in the market assuming end First, we now are further second half.

encompasses all have affecting the expected, outlook the related the supply segments. XXX of effect the declined rapidly U.S. developments land only and and Also, has recent results more count been business the our the Secondly, the reduced on rig projections across chain. MAX than

off what had our we our in normal of outlook. steer are seasonality, headwinds these prior revenues is second expected the assumed which course Together, half to

negative the X%. organic negative to negative is now X%, from X% down of revised outlook Our in range negative XX% to

geographic in adjusted two lower like that earnings to adjusted to I'd the are points mix. XX% and related tax rate is be increase of expected result to taxable highlight. tax to in is Our this our of There XX%. effective increase The range rate effective to additional a

tax of adjusted First, lower in XXs and the improves. would is as current profitability a the normalized effective outlook expect reflective we rate more earnings taxable low

this Second, the on and in year a paid million] to in in the expect 'XX. change fiscal fiscal have paid material cash year to approximately pay 'XX, we a cash is taxes expected not in rate of year 'XX. effect amount [$XX taxes modestly amount lower In fiscal

these $X.XX Given adjusted are changes, $X.XX. we the updating to EPS outlook to

free cash on Moving to flow. operating

capital and our proceeding million of we plans mentioned, simplification/modernization $XXX prior are forecast As to maintaining million. Chris with XXX spending our

be but year our levels current historical of Our higher Remember, the than reflects environment, earnings that to weak expectations. million charges. cash updated for operating of also restructuring CapEx breakeven free outlook this reflective $XXX cash to inclusive flow $XXX lower is assumes roughly and it's significant million demand

conversion that flow will Our are through be simplification/modernization we cash the expectation XXX% is once initiatives.

the And Chris. with that, turn call to I'll back over

Chris Rossi

Damon. you, Thank

to Slide XX, few me to year Turning a let summarize take quarter fiscal outlook. and 'XX the the minutes

remain making in the strong on developments the half, and emphasis our costs. end billion. Nevertheless, in discussed have execution, we continuing by to improve our combined to sales simplification/modernization customer continue adjusted recent reached EBITDA billion outlook. we're in results the profitability material focus already, With $X.X of on with not the second we the what and slowdown our in in confident our improving on focus target aerospace to across in raw service, and quarterly on I range achieving improvement we progress $X.X markets can anticipated expect driven and control our prior As affected were

it operator, for And that, open let's questions. with up

Operator

Instructions]. [Operator

The comes Jefferies. go with Please Stephen from question Volkmann today first ahead.

Stephen Volkmann

think I how that I I positioned would when have to adding the in to Maybe be materials. sort margins go started about something your better. surprised been decrementals opening things how even Chris, large your guess the well get incremental have been And said raw back I comments of you can back

brackets to you be don't know would things actually So a maybe some you helpful? for what expect if there's around turn for up put I when it margins would that way incremental

Chris Rossi

Yes.

math, we talked costs, segments, basically just we and on decremental line back of me of we’ve in with the they the margins, and the -- not we're falling surprised the all say, what do material as Let and these about. sort are out effects the

that plant efficiencies Now, bit have of -- of as manufacturing elevated we about this But we’ve little the you things. they talked are and sort a with those as associated because type closures question, sort think things when away, of I when we with is stuff term margins think decremental longer away, in which expectations. sort your you line our those go peel of are

and the the I think and 'XX the process simplification those closures, to the we associated are that made got that of ongoing lifting you good which We've in other We've progress. starting And products on where was million right was know, lower heavy with thing said, hit to really I to now. And is, track modernization. which FY plant transferring once happen. we’re with modernization. of way done, to-date. 'XX, subset volume talked a look to from the about facilities. And And to at a as good feel closed is FY restructuring now We've we're savings are about of actions recovers. lot monetization as forward we're facilities Steve, cost $XX the is targets

in also 'XX then benefits come simplification/modernization second benefits in ramp for the 'XX. FY starting notion this of and more So of half a up to

just on we're like feel we and come waiting equals for volume all to that the track So back.

Stephen Volkmann

bit. And is possible the switching second maybe half? the it MAX? factor that then just How And question, was a much around your numbers do in to put any in maybe think guide down the MAX? exposure the how Damon much actually Is a you to little

Damon Audia

year. on customer. guess, will specifics the what not in given chain that given tell sort go I impact I on Steve, supply the to our it in of we Yes, the on going into you, the was overall though, half -- second expected an change outlook we overall to did we're be any of

Chris Rossi

across the of XXX our and and 'XX could just said, been We we MAX. resources the of on the the those in aerospace the to a there And all the number across second feel as chain, like big it's to has new given servicing quite well. start redirected to of tier industry been that. we've customers really been impact resources very we Damon transportation If I full grow market, a space be able it the quarter. strategy aero. and lot market supply was, year But board, also since aero. X, X, and with beyond pretty that including sub the FY to whether to good in about actually being that successful It an have and Tier engineering feel think in part OEMs, And share the gaining of are the the we've Tier direct add grow redirect suppliers our I was added,

just to add wanted that. So

Operator

ahead. question next The with Morgan. JP Duignan Ann go from comes Please

Ann Duignan

along regionally ask me losing Let it's businesses? segment anywhere disruption simplification, you those to just share all lines, and your in aerospace, gaining this you through of the you market that share been you go have just as or but talked having about by

Chris Rossi

We but consistent have But we market share lot where of in at, we transportation a design. talked that that I then want us area have years, be the There’s very in say the available we with and to a only we as Sandvik, that was you're wasn't segments. profitable terms at would would for we resources share are. business to that about, with in more for when very where to shift their And don't those our lost we last Ann, sort profitable actually look drop of as publicly data it’s at competitors so. revenue point look example, given believe we Where any like measure. is challenge over two at of by

we look share believe the back when at at peel we and don't all. losing So onion the we're data

and new targeting, that the we're where us we’re segments come business our customers so And also gaining on aero, and just not engineering fact with have adding-in volumes gives new Our existing with share. customers, losing general in competitors. are confidence we're track ones, that adding actually down we’re of the that based commensurate it’s we the keeping

Ann Duignan

how there Yes, this spot based Infrastructure, I the mean really, have you is before follow-up repricing prices. with generally My to may would on suggest just are that I may whereby have be take there. situation up new that out competitor, not is be competitors that maybe question only But going I’ll forward but Sandvik on offline. asked I even did understands automotive a in everybody but you you in lag may spot a given you inventory. end repricing

So, a I'm business up pricing, just you're your material raw giving curious how ended with in coincident up situation where changes?

Damon Audia

one honing business our I Ann, you're in think, in of at part Infrastructure.

I think lag. other oil of of and products It our on pricing in the we and gas our have we're based does the customers. do index the We and which that individual some traditional have business depends for an components selling, customers price for parts. we that value

And I piece again, are powders based think adjusted business the prices. the is specific powder referencing we point on marketplace. sell that into current do you where our is market

with deal cost And the where but of subset business. overall do inventory so only we versus a it's our our Infrastructure spot price,

Operator

Ritchie comes from Sachs. Goldman The ahead. go next question with Please Joe

Joe Ritchie

questions. So just a few clarifying

think in half? second revenue I you in MAX. first on zero assuming one the your guys fiscal Are the just

Chris Rossi

not going to online. in not I simplest to say is the that's the is the to is that come -- going going come half assumption it. to back back -- Our to second guess production is way

Joe Ritchie

still coming in potential having on MAX revenue base, revenue full And online. impact there the from a incremental not is the your coming second production some back half? or So

Chris Rossi

think that be all this in the sort starting people Yes, consumable uncertainties MAX to us. it's I and buying up, any when think ultimately potential translate starting I does pluses way, tools that and for the and more and upside to figure difficult to the that cut chips that environment, by the of current macro given which out there start might minuses from

that's be the about a for to difficult I area, given one cautious in looking predict. uncertainties. So But sort positives of thing would all

terms for all in. second we of the in variables So do we've outlook half best the factoring can tried of our to these

offset. cherry-pick -- And so be if there that guidance be if in find to some you potentials some would my you is, easily environment this positive could you

So we've our tried outlook. to take current view on a balanced

Joe Ritchie

as say And your called like Chris. versus it’s and of abating I fair that's clearly of roughly, raw $X.XX. second guess midpoint half think the guide the material first have about half, Okay, in takes the what kind I you out puts of transpired headwinds guys

You've like it to I kind still backdrop the pretty of expected benefits, guess have simplification/modernization which $X.XX $X.XX range. got to in incremental that type be that is call I given half versus muted bridging it how in the to get second is half, that am I call to necessary plus first better $X.XX the to I then guess second profitability the half?

Chris Rossi

Yes, kind let I'm through you it. the of about way thinking walk me

range, $X.XX improvement $X.XX If improvement you incremental look incremental it at our to second in EPS guidance the half. implies

$X.XX the subject. half, than year, you said you're raw be to going if that’s benefits, say last that So increased which I they modestly start we've $XX first correct million. the were would on the that with a materials $X.XX for greater got we so simplification/modernization was far

EPS that then And that's applies be say category -- we've we volume more volume. would you up either to to $X.XX I a number would our of So range higher flat control. initiatives of maybe by could $X.XX also the have subject. to cost the like in and And that then volumes it’s got driven call I $X.XX

something cost a pluses But or and actions will in where be those manufacturing associated abating that doing in could decreasing those there's bunch then example, to control benefits. sort And closures, offset and plant in that's minuses Europe subject. we of similar efficiencies were U.S. half. types have furloughs of are second some driving of salary that those the the with of help a things. and recognize that potentially net additional can, Also benefit, those For higher taxes taking $X.XX we

how basically there. that's get So we

Operator

Barclays. The go next Julian question ahead. Please with comes Mitchell from

Julian Mitchell

fair levels. a destocking sort guess first sort channel now, assuming if you’re Maybe inventories the I right to inventories fiscal a reasonable think any of your Do need or question And for also you amount. are second you half? own of happens in in you half your the second moved how inventory assess terms level? in plant what sequentially own your of production customers out around under and at partners in at a get down see any inventories those

Chris Rossi

vigilant. there's Let from generally We me positive And -- expect saw to with Even vigilant. additional frankly, in customers of remain the going QX. external in the my sense our indicators recently, destocking are up, our maybe but the talking customers to the year. though is are sort start they're I view. picking some continue of the remain customers where through And going U.S. balance of things -- to that's to going

pretty I the would behavior downturns. with say -- is that it's what in previous also we've seen consistent basically customer And

In our did quarter. forward. internal we’re comment Damon of on the inventory, see quarter to of from second the loading I'll point a the how sort that let from plants decline terms we first nice

Damon Audia

I improvement make Yes, Julian, first quarter quarter. think you in we did as to alluded the the to, second

we're service. back flexible as I to the market want of be based the We the think based in at very the right fluid the outlook. on as past, year, don't half on or going But here. customer production to said compromise to look we’ve we’ve tried size demands

half think balance I the back first in modest as you we year what a inventory of I saw reduction will is the see think at the half. here the more look year, in in what the you of versus

Julian Mitchell

the aspect. the was first at frame the magnitude half around then second to first But half. in there shrink they versus inefficiencies in any wonder my the second And all their way manufacturing half. that question if Realize just

help, us much they smaller how to for For cost there headwind, example, that were any sizing give you is inefficiency? material raw relative could the example,

Chris Rossi

not I much sort And that's that, be I understand just it'd assume haven't you. that than helpful a do little for detailed present I'd like really this But to Julian. think out. I to We information format. given Yes. of detail too in

Julian Mitchell

the think up you Fair guess because sales recover, to I'm of do you enough. return I inefficiencies, that catch sales think once you're you some to there's do recovering against your growth, that about, some impact trying with volumes once Or modernization? run inefficiencies? juggling risk those kind get

Chris Rossi

question. up I'm asked glad follow you the

the I down think of -- you're inefficiencies shutting about it's way very to is moving they think Now plants the you're by just sort I the sort did start they're time we be and I that second be operational, of lot done quarter of and are a understand lot and 'XX. temporary the of us behind FY disruption -- a in when equipment, and Look, we plant where think will the heading. the closures that

operation -- next FY will going restructuring, of low there be -- that However, significantly is And continue that's downsized through the product is is sort cost part year. 'XX to and Essen to moving countries. of is and there

going come are to they FY some 'XX. in significantly they'll down, be but still So,

change guess to of way much I that it pattern too increases, by the I think end although, there is going it FY and think half it's Even some the will bulk don't first to of think if about could comes of don't the to more them be gone disruptive, going still is the 'XX. be potentially I much. will that that be But volume largely I of as FY think I back, think volume be. 'XX through sort

Operator

go Research. comes question from ahead. Adam Cleveland with next Please The Uhlman

Adam Uhlman

back you of as to but need I'm again, beginning around the been the back about should it's relatively this is should minor range? of mentioned how revenues those thinking targeted the the this be as and asked Or Is this, as we to more demand come And magnitude little capacity comes just back. modest I the cost? wondering of your and call significant? desire be amount bit add and something guess thinking we At a costs about

Chris Rossi

adding to Yes, the comments CapEx. relative were the capacity around

So million. the back modernization Day, incremental our $XXX spending to you all way for was go and Investor CapEx simplification if

FY XX% the And of processes. by modernize adding just spent that to of is more capacity the end 'XX. have balance will We

So if, with you're one sixth for example, the to from we going is or volume with in operator. XX some press, some a presses At went press. plants such point, X presses to down example to fifth for add need that operators XX

costs higher volume as So, as up. I at expenses comes or look these wouldn't

presses, we with better the a As presses that on they'd may need be simply modernized a associated few were just CapEx productivity with to we commenting more add modernization.

Adam Uhlman

net review mentioned think get half, you you'll that and drivers income flow back working quick for right? to second next that capital then and the the again year of back long-term I conversion that comment, cash coming is XXX% to outlook the key And that

Chris Rossi

also you then forecasting the things, normal the color bonuses way half the end first a think half from front second half, EBIT advantage because I Yes, terms company coming year the is the first can the cash but some add right. of those -- second substantially. see the pay we're to in outlay was improvement And for from Damon to going for is big CapEx we That's down So and the the here, when positives that significant are to the loaded. breakeven in going is half half. second we

are an things three improvement. those drive to going So

also incremental and in us bit capital first restructuring have improvement working a charges we we half. of saw in of tailwind the will be the However, a for higher terms

get things would to those of like Damon, all So, you cash back add this to sort we that? equal, breakeven point. to anything

Damon Audia

Yes.

Adam, So that I -- as the only make for around I I Chris working it wouldn't which half cap would million, think repeat. alluded The is, the capital, positive we to comment call $XX and EBIT the think on was, first the only -- I expect full capital. think amount positives the to,

reduction. I think I inventory as said modest

the you'll positive other you'll what's -- there a alluded sort net back are little driving Chris bit half. sequentially, then positives million of the and So the it a of see for tailwind coupled with $XX see to

Operator

comes Markets. from with question next Joel Tiss Your Capital BMO

Joel Tiss

maybe other months not on like any you worst couple of feel the and color some couple through more is you there couple behind to next a or end little highlight a the a of like markets. improvement where just is where be to ones going for just you Can the Alright, you feel just run quarters?

Chris Rossi

the a taking I'd say but end we're and be markets, continued to this expecting we the and cutting Yes, at We're forecasting see going see is all to talk all certainly about let year-over-year sales kind half, of they sort -- softness -- regions expected are possibility are second thing the of first. declines are in look to sort me of down. pessimistic a metal

aero for where I spaces. on the earlier, -- MAX, China maybe based some in actually and signs China, example, XXX about recovery said had softness side talked -- got are those Coronavirus. some was of to sort the things I but of aero for about would stable aero grow we're we going Mexico have appeared on the be We there in the the regions, talked EMEA until with to

how would as your would how going guess if been area have -- out, play see to for that thought some we not start Joel, as good have but mine that's signs. had is the long would to So, encouraging been one that it I Coronavirus

its probably sort side, view not feel going we too from more QX looking of will our the earthworks, that trend. we're and much that than stable pretty normal the general energy, and a going Infrastructure decline sort see -- QX like seasonal get through we year. the the did of probably that's worse to of follow On then thought significant to of it's and sort rest taking that engineering than And we we're actually

Joel Tiss

talk a bit little a switching about and highlighted guys little offensive a step guys about of And can maybe take you have initiatives defensive lot aerospace, little some a have lot about you talk -- bit term are Okay, you bit great. what like internally more like to a little initiatives more transportation can drive a back the talking offensive of also? bit -- of you internally that's talk forward, you is you you like to some of longer to a then, can you like the just just

Chris Rossi

I'd happy to. Sure, be

showed last is in aerospace also of the that and in technology you some space. development. course, few technology largely of but continue, We on research And general obviously, to then focused invest engineering and calls, the actually we've

And ourselves we penetrate and general where we've set has and a very done we've ourselves right an down business segmented that market even the exactly large on have especially transportation, we been now hadn't really that Kennametal as and we focus I think -- portfolio feel they've enormous know very we U.S. exactly is segment, -- company which go detail we the been to and gone product focused that. a market, and in engineering, on to organized and the know in where they

I as really commercial is of Head changes about operations. the on best the that of across to our with that Port in Cutting the Ron going things over made talked Ron announcement the be Commercial One executive we practices is, taking for Metal driving segments

necessarily before, on we investment just in said I and expense, we're not as its but an just it whole improving operations we at investment focused productivity As its such, see that, capital commercial investment, process. sales the look an the efficacy really that as like of and

our is before, be that there's across And -- segments the platforms practices think tools about it customers. to leveraged whole is in those experience investing connected fact can this CRM, there as is our matter best of to we we've that and common that better and such but talked that we're customer digital

looking The high well segmented would we but there other understand they have Industrial performance we've that's and tooling, don't for sort needs that something which thing quite of customers that the they of of, sold also this segment, customer that that Kennametal of say, is suited the portfolio Widia are of well through a portfolio we're now value there end the that the largely market, top performance sort for work that's doing broader so part is suited are spectrum end, for they're I that's that broad general portfolio. is need engineering as do, that but

terms there of to out customers at our as to trying to portfolio sure the of But them as want Ron because allowing that in Kennametal commercial and getting that that portfolio make tooling we're to the tie Widia leverage from well process capability. looking we've now way we commercial got actually is benefit and frankly, full own want the together

tooling the happy reputation we of all as side, way play yourself And supplier encouragement know to of able in in needs give It's also to us and the focus. really customer general we're to value. it's We've So that disciplined to just deliver up be about that going drive the a to understand it the company. technology things with growth engineering. on on got never focused it's those the that a organized they're technology getting different a yourself and kind aerospace setting

feel bit the very a talk things little the we about opportunity that's you. Thank good the Joel fun. and those question, stuff So about I to appreciate and

Operator

comes The of Bank Gilardi Ross with next question from America.

Ross Gilardi

seem I to just have to dividend, wanted you're revolver liquidity you the whatnot, it with of some run just to you say about I but committed and you numbers. through know the the and ask plenty of to

is, you've So cash million million $XX balance to $XXX on dividend the got in mean $XX the need. annual think I understand, million I sheet, I

you some go event And on sustain a that cash sheet the I a you cushion years. two you sizable your want balance in coming into restructuring maturity additional in to that need up do and downturn we imagine deeper to actually got did or

other any either honestly flow of your dividend or you're the business So thing do, number given sustain for now. not that things and automation even require a why you're additional the right right additional investment generating restructuring to might or cash free --

Damon Audia

in on tell is cash have, come capital of I this going this spent. guess that the We've spending year. that the [$XX down is we I Ross, the is most generating we're which year, you next told Yes, $XXX you has of to would back million significantly. year half company what million] We're

balance grade balance don't agencies, you these And have downturns, are expressed do see any sheet, dividend with cut right will When at three prior the sheet. any downturn turn. by or rating which we recessions we I expect concern. when now, or at an to the to risk turn. the economic need none prior surplus look look due investment which started cash all We any on I of

we we our access that at given see any need where of again, this in don't that is to moment. is $XXX any the extent I anything And revolver like So undrawn have there to given prolonged, sit. do million

in is we've said cash operating into restructurings as committed 'XX. balance the that at be less you, we us, we've baked free that's flow the We're the for given already So call, we've that sheet on the will FY said dividend. When look the strong. to

to So with us there is now no -- that's not really internally discussion that. even consider right a

Ross Gilardi

right you I still, that you very competitors Just half guys to having off next you're think mean a of on But not year, your lot who I seem I expected to Damon, though, been CapEx. efficiently more understand margins issues are -- now. and be that. and that the have drop having running significantly you your know clear the

that should levels pretty you be number end-all? four your business to really of How with require extending back up going to competitors? global heavier their maintenance comfortable to spending your and margins continue ago, to three million are came the is you be, or competitive capex this R&D. years restore won't and be just robustly, I CapEx comparable where anything, they why more to to if investing mean when advantage, are Why be-all more seem competitors spending on $XXX

Damon Audia

that run the we differences, XX% need modernize We'll return. but have stand-alone factories. a investments we I've from they look competitive. you Well to as the believe The have. million are capital on from us look is our long-term standpoint, there think said size When there continue, what mix at to own beginning obviously $XXX with is factories is the said and versus got those of at to continue portfolio what others, get Ross, we we've investment further their their is they economies allocation it's we'll longer-term, how of to to us scale or factories the margins have

heading. or more capital. other at smarter some what areas as to you've like or those to sit about justifiable of good as are the again what what we have very today, we industrial returns that and we're as been incremental about seen some with examples factories of further basis we we're about looking a able we've able to on automation, stand-alone our Rogers, future achieve feel we where going doing achieve we're in of factories, But think to are think that have So

Ross Gilardi

it production is is do on you're your moving chance additional point? your a I than you are Is mean got rationalization, chart stuff the on have But to there closures I your footprint need anticipate factories? You more you mean, and to lower to and But now? restructuring now. into were spend you've cost you realize facilities. and where do cash additional close factory right I lower this done at where you

had I going I for hard mean confused a you restructuring on to are really to charges I of a of turn is point. given twice demand last around mean at just what confidence all have you cut that visibility cash turn, on the little you business outlook in bit this when so kind to months. the guess the don't pretty four I'm accounted this gives the lot

Chris Rossi

now is opening we already Ross, and inside published. 'XX additional review plant we are FY they're are comments, that under right our -- the perspective FY as we there said closures 'XX and our on in restructurings captured which that

FY the a Now 'XX, they I'm I'm where as far beyond going CEO modernized. don't this itself keep don't concerned at long as situation company -- -- they they they don't -- as and operations don't get here, as is look in their never to manufacturing

improving be fixing fundamentally Damon there mode the to is that it. And be were investments they They the just literally Kennametal. And rationalize that's -- before going -- and makes not just as ongoing of is opportunities in footprint business. looked sense. at made. said, looking it we're looked their at I always Kennametal But if just that I to need maintenance capital if to that. were things for

are that we just before I to upgraded of were of going now the be it actually going to of lot just be -- can have was, things right. of sort think on repairing running, a can actually they be that investments, feel These equipment, it -- keeping or the returns will maintained. a it. But capital, keep not make So I make lot not investment since to got whereas legitimate just to we're maintenance all with going sort we've we've this investments

inside opportunity there's to So maintenance continue that advance. capital to

of we can our the not terms But like projecting return. And -- in good Company estimates the I going feel be program, said tell said, what's the to as the to terms next we I'm we 'XX volumes is FY when that there. beyond you, simplification/modernization got of year, feel restructuring in going timeframe. But look, like positioned I'm I charges pretty not happen we've proper

Operator

from Walter Seaport comes question with Liptak next Global. The

Walter Liptak

you've plant about about second like go disruption, about how so EPS be add to when looks a just about of may first up plant magnitude a thinking it we those how back bit the want the you're those closure Q&A made disruptions. half underestimating thinking And you wonder closure half. the we -- if in that more just I talk to disruptions, buckets, understand. I about could you you comment the detail in commented versus little

it and fiscal like of closings then had Germany that quarter. and And -- you are won't those us give in some in sounds Europe be done or in Thanks. planned two, disruptions out the that most that third especially assurance your there

Chris Rossi

are around category have cost think attributed control doing $X.XX that due was bridge I EPS I this when to sort Yes, of to actions, inefficiencies plant the I closures. decreasing

it's $X.XX improvement, potential plant some to than So the directionally say are I less guidance inefficiencies half that -- would to And closures think of just sort inside certainly you are from window. give I our guidance. less that you than, just directional of, give

going to But go that Germany in of kind which have the good some the year Essen plant But the facility through to, and it. Essen and the FY at rest one this in also this especially was away, U.S. the -- I the but least is of continue we reality have restructuring see that's we year, FY of announced 'XX we disruptions is is, of downsized from through 'XX, the that chunk disruption going is I half next closure to how a the of first get being actions, think once

I'm have we've we'll be not just call And clarity potential about plant disruption for will discuss all along. actions additional I there while then haven't that current And recognize haven't this, we that reasons, there going -- will plant they're is we're that some like to our a that but working about and think things some we -- other around on inside closures that. closures also then some those talked restructuring and talked additional by be obvious

Operator

Chris Dankert with next comes from Longbow The question Research.

Chris Dankert

half assumed bit lot now, guide and is a a the of as of here. is there us what uncertainty how of in right kind kind scenarios Asia the down around but China India and far can of could bracketing Appreciate in little of year specifically fiscal give a be of the back of you revised range China as

Chris Rossi

that of India, have the could we've to we going in not worse. -- improve view things get I -- not Yes, terms and a are going to think taken slightly, potentially slightly

that's gets end case, that if us low that's then sort of end So the the -- our the toward guidance. of --

China, latest we not, factor outlook, potential we that frankly, had the we outlook. in didn't -- the of effects into Coronavirus, our our

and new that know a You certainly -- that's a of it's new that's fluid. kind situation

the But around we yet. put -- brackets Chris, have to ourselves So we're trying number working frankly, don't we haven't this on that. point, at for

contemplated guidance. is that some uncertainty is So current one it's -- our and not that one in

Damon Audia

in challenged this cities said, of what a of we're what's we're, long-term very and or temporary one Chris, we're fluid of with think, is some And there the ramifications time what right is period to and watching environment whether I in be the available as back is the it it's term. whether is Chris -- publicly now Yes, ways is China the the one and snap out closely. that's are of longer that things a where going down

Chris Dankert

SKU or there. it, count focused a additional for footprint, Got then head is just lot value -- but pricing you guys. rationalization changes the for on Thank any And we helpful that's very color left. there

that's just improvement. process beyond else anything Just

Chris Rossi

the want we've past, more a -- pricing. got $XX -- discussed little about part got. that want focused that lot streamline I the We're of side where of I Yes, the value as on simplification is to we've and simplification we've bit we've we've a what in What to-date much talk portfolio. to million

So we're driving benefits there. from

drive is reductions is, to are here -- those mentioned buckets. and the there thing CapEx costs, specific that's is from we're a all not there -- there the these you processes productivity which other and not are you as equipment structural higher This headcount recognize spending of is restructuring inside now The savings of but footprint modernized get volume. to of all sort yeah sort installed those lot

a get of terms that not through big more the a modernized headcount -- -- the So we're the as to change in going actually boost may headcount all more on you big much, processes, but or leverage. capacity volume drive

Operator

comes The ahead. from next KeyBanc. Steve question with Barger go Please

Steve Barger

to want team. back I going CRM to Kennametal digital question. back Joel's been multiple Chris, through management and about go has talking

just on means? there? you force on getting expand this what's do already the into have or sales can to So is best just And disciplined spend practices process you money what using a more this

Chris Rossi

so driving this disciplined first -- I terms there the CRM, investment additional CRM And is it. bit And Yes, in on here, this when working done have Kennametal not of behind -- we've CRM any more is, there. a it's practices. companies is we've about of kind in just terms best little like It's been been got it. most being of is before, is --

leveraging and know it's two natural it's -- always you made just we have leveraging best practices. we that we two -- I the that segments, to I they're type we're make of those as those I want of not learnings be across a example improvements to practice have mentioned -- We best think because have an so that segments, made sharing and going sure

sure value it I On market you to can really some done tools, you and for digital bring how get think don't that focused excellent think the platform, and paid past, don't the the Kennametal drive does I have it. on and make from do are that was we've in understanding, customers -- company engineering the that but

things one are going we that's you to to that investment. require -- that of that happens. when so on We'll going it to And is additional about guys talk have the to

this that Damon investment needs of things that but And these things as going through process of as obviously. don't I certainly the if be once capex lot want we we of It's happen the to want to like modernization. to, type And justified, we said, generating I returns that get where expenditure, next we there. modernization in. and a they'll returns those this one are are to the think of be see it's not some a are kind invest cash the be -- have to

If time I grow to step to back, of we devote Kennametal as now fixed out our grow can going fix we that has been that we've help some very trying business. got much the structural come of and things a the market and are and things this share actually lot of us to simplification/modernization,

-- not investments mode that they're to growing and to we're because from as drive shifting in. afraid proper we're going the that make Damon fixing So now returns. to said, to do I'm some happy But

Steve Barger

conversion back the sales not sales share? right market they just on have the So product and on now, winning the here threads, side are about get you're thinking or deals plus to around are what that pricing, competitive overcome common to that you for what do

Chris Rossi

you the think value ability want customers actually to and and what the target understand the bring Yes, I to them. I proposition it's focus -- think to

who the very certain have to For example, well in you tooling. specific have specific -- cutting very high very product we a metals applications to needs a for end if portfolio suited that's from want broad customers have based

-- all customers not equally. treated are be treated can And

that equally to not sure here we're treat of to don't organization, them part trying of to bringing we customer. is what make we're the and trying And proposition the in so, way do particular value sure get that make right

best that's greatest equal. and customers your all a them in terms instead to way approaching of practice in as So have value the understanding treating going of customer that's the

more something that the And example to So kind engineering that's improvement. to have bucket that, of of frankly, you're just general just need than focusing one do you on.

it also an you think about who customers opportunity commercial change. guys experience, sort faster performance why would the his you're at made which blocking charge down That's the next various You've why industries, these the improvement, is company the I'm my need or excellence put drive focused based folk Kennametal's past does. that market -- -- in we one in into actually tackling on going that segmented executive a actually the lot belief why an segmentation of reasons on things, of and knows what if a any way, to which we're best-in-class but my putting to you is the it the is basic that for executive improvements

Steve Barger

you Got the putting for state margin that quick to if stable you more I'll out it. a question of up me, when incremental And hoping you're environment, raw to in is from is material platform? just modernization revenue one if a one think growth mid-single numerical what again incremental largely try last would the just digit answer, future done, forward expect

Damon Audia

depend where And to similar it XX%. Well, I comes range deleveraging from. Industrial, with be I going -- to the where is guess, leveraging of our environment, average going course north lever Obviously of you think is if the it's with raw start of look Industrial say would that. the the to I we to on at current on excluding upside materials, at

Steve Barger

right. you I Which is that is as think had said mid-XXs,

I on last said the it call... you think

Damon Audia

didn't component. you We we do -- the give -- We've the we you a on material I gave math specific given you Industrial. could number, the the guess and can raw

sort what out of is. can directionally figure that You

Operator

Wells next ahead. from go question with Please comes Casey The Andy Fargo.

Andy Casey

U.S. what sure you within destock the these. addressed you negative respect Not to in with inventory the quarter? development see during did But distributor Germany, and the

Chris Rossi

saw Hey until view U.S. I destocking both Andy, wasn't the very is are Germany. the It view taking this and in And a -- firm. customers are limited the I as said of signals we demand places exactly. before, conservative just our to and

cautious going to hold. I I think they're they inventory be think about -- continue much to going to how it's

Andy Casey

quarter? to Okay. relative last the this accelerate Chris. And prior quarter did that Thanks, during

Chris Rossi

Even there. Yes, down They that started we XXX continued. was there that halted nervous that saw the accelerated. example of was as the are a think, -- customer yet, announcement. And destocking may actual before uncertainty production they though hadn't stocking about necessarily feeling -- heading people thing slow where I were the a for have my to lot even is the have on and anticipating what don't behavior little start in is I MAX, that QX. know may

Andy Casey

little more Inside sort mix, to relative Manufacturing over And kind do of then I changed like your the Kennametal's the the you six a something exposure to of target take it been Index, mean revenue a revenue ISM time. U.S. What relative is a trends in couple lag moving bit months? questions. of expect

Chris Rossi

It's reasonably a question. normal pieces been before. where just say has the there so January reaction I'll might I'd said and a of bits in in the go little data and But improving. be in numbers about environment We good to would to it you some much something a a just U.S., improvements trend. back uncertainty, becomes cherry the cautious saw I quick I until a of get more picking things

are happens they I just to environment, to when this may to it they're wait and start the customers the more get kind of inventory. to In think orders, going really see if buy that's going and start when -- they

is, exact based But up but I on really... don't could number I this wouldn't the surprise lag six signal months. the -- it what don't know and So system, me lag to could in the noise the if the uncertainty it all

Andy Casey

decrementals wondering it OK. -- on your expect mean seems extrapolating mean, what not, you're a I'm environment, it like sub-XX I the question of the is, just you're Okay, in any then guide, not gist the you're the, the performance operational I And with quarter inefficiencies still impact contribution margin the gross you you been was? I questions of some in can that know think high. asked help about what was us have But the of pretty it. was,

Chris Rossi

but the certainly are I we inefficiencies able add that efficiencies, once with raw out Is that Damon we Yes, manufacturing is to are our take not decrementals, materials in give our the decrementals can that actually seeing specifics, and eliminate part the can of be say and we're the all that, a to certainly line or...? with you there you we -- going those were manufacturing to anything expectations.

Damon Audia

No.

Andy Casey

what these accelerating Okay, the going operational customers, demand you're decelerating decelerating same is to and make in have environments. on then environments inefficiencies? environments in not, you're thanks. accelerating the what -- And the your that's environment demand that are inventory lastly, the I now carrying inefficiencies understand demand servicing where thing And and sure up popped if

Chris Rossi

of been specific program. just environment of function the a that environment that's closing So fact -- decelerating plants, that the decelerating part we are a wasn't that was our and has very to really

talked of associated modernize So you've about we've other to team side. why how now -- and you've about on the workers, you're project on holding with got on plant to trying closure inefficiencies side, talking why we're are consolidation to the really while closing each plant them you're and you're facilities hold hired production holding you're

demand a modernization. that's necessarily self-imposed not more really based that's phenomenon, So reduction on a

hang they these on modernization news would is, hugely production let good they had company back. It's behaved layoffs, when volume those the they because you they the -- historically, on if look all how trivial at flat-footed to were mass them. be and to train dependent caught to if came about Now not if workers did they folks

of cycle and be to also cash to less better as we've modernized, on many not because once in labor. -- not we're preserve We we're that, a dependent hanging positioned sort we're down So down should salary people. react

just that through to feel we And the cycle. is good going so, -- feel better the operate we company

decremental modernized [Project W] that At after the done, point, the that remember it's you company hadn't really inefficiencies be volume volumes if And had to off didn't came to we we again. downsize -- began we company. people had the a they Now, that saw we want or have project, when workers to were the we to laid -- to back came anything. of and temporary whole when didn't knew want potentially going we we Andy, back, used lot because, hire to

to you're a able So, dependent modernized efficient and back, company once should the we're up again, people volume comes and in on be -- more less we ramp way.

Operator

would conference remarks. concludes now This turn Rossi I question-and-answer session. Chris for like any to back our the closing to

Chris Rossi

the glad me that. operator I to tell for I'm Okay. waited

the appreciate please much. certainly today. very on follow-up the on, anything for being you Thanks to if contact for So thanks have interest. Thanks We -- everyone to your Kelly. call questions. And

Operator

the will approximately this toll-free of United dial States you To one United after available the XXX-XXX-XXXX. within of may replay A may its at replay, dial be event the hour Outside conclusion. access States, XXX-XXX-XXXX. you

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Kennametal (KMT) 4 Feb 202020 Q2 Earnings call transcript