KMT - Earnings call transcript Q2 2025

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Operator

Good morning. I would like to welcome everyone to Kennametal's Second Quarter and Fiscal 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Michael Pici, Vice President of Investor Relations.

Michael Pici

Thank you, operator. Welcome, everyone, and thank you for joining us to review Kennametal's second quarter fiscal 2025 results. our website. and issued slides our we our on morning, press posted release presentation This

be to Investor will Michael We referring Pici, call. throughout Vice I'm today's President of Relations. that slide deck

contains forward-looking I'd today attention constitute open Joining me SEC Executive statement. factors number and in actual expressed questions. At differ the disclosure Pat's Officer. that line uncertainties and Watson, Pat prepared Sanjay cause uncertainties to forward-looking Financial time, comments President President to such, Chief statements, Sanjay in those and risk company's involve for of that or are Officer; and are detailed and implied like a Vice After discussion results, on your Chief Chowbey, the filings. and remarks, our achievements to from as call performance by direct or the assumptions, Kennametal's and Today's we such risks materially this These could statements. will

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

Sanjay Chowbey

commentary. a results, Thank of 'XX outlook. I'll thank with by some you, recent the as fiscal the Mike. today you Good quarter morning, well us. Pat the review market start the our end followed and Then cover announcements, call for quarterly joining as some regarding and will remarks financial

questions. summary comments and Finally, open then call some I'll for the make

highlighted footprint. to plant our in we our announced we mid-January. Investor with Day start competitiveness, reduce structural navigate The long-term to our actions market closures to January In current and announcements our let's around conditions. Now, support commitment announcement address actions XX and commitments X costs taking we're of issued the

and expected near Massachusetts, X to the the The to closure of are Within a complete consolidation to XX, facility we April Greenfield, June expected XXXX. of facilities announced plant XX, by XXXX. facilities operations Barcelona, Barcelona, by a in expected facility. single Spain complete cease Cutting XXXX, closure modern Spain be Massachusetts in is consolidation and The in substantially segment, substantially the are Metal into of be the December Greenfield,

effort mainly Additionally, in in the reduction announced million EMEA, of professional global actions savings an $XX approximately market end workforce. are pretax combined These mitigate deliver to to current conditions, by a expected run the XXXX. in rate of fiscal annualized we

of to is the approximately us track actions. in deliver by approximately 'XX execution approximately expenditures. actions and commitment These facilities is The plants to with million charges; million cost is $XXX September close that $XX other for closures keep to on these severance-related for X committed We million cash $XX our in our cost expect $XX connection XXXX. facilities Investor X charges; savings cash-related fiscal at charges and $X approximately Day we achieve noncash to and facility million of breakdown pretax as for follows: million

within of Eaton best. portfolio. its and July hydraulics His Corporation of I change he the Creation Value to that in President as that, million contributions the Faisal General since to since recent as who Effective Faisal for named January segment Franklin was role Hamadi Kennametal roles Systems. organizational $XXX with past the increasing role the of an was July, Infrastructure him the responsibility Cardenas, Vice been served President serving his to me. at and announcement at to second The XXXX. X Franklin succeeded with reporting years. actuation for thank in Prior various company the segment. Faisal most has Infrastructure Eaton XX, want wish served the was Manager

manufacturing and team, sales experience finance, is in in He management. thinker General they improve positions collaborator strong business the with a bringing to to operations Infrastructure and general strategic our well-rounded role. to held his great infrastructure and and grow prior he Faisal addition Manager continue operations work business. is team and already a commercial, the true as hard and at is Additionally,

remains focus Additionally, area for continuous us. improvement an important

operations Creation integrated across Faisal's responsibilities improvement a Value So company. alignment Systems existing roles Kennametal. between efforts provide be strong This the will at with will continuous business, and

quarter second Now, from market profitability of on especially Cutting. let an me and is From market our sales dynamics. macroeconomic saying in and markets. a was quarter, begin to Slide further EMEA, turning worsened challenging viewpoint, our and X, sales be end results, perspective, impacted both conditions in our to In Metal by that this several a by continue industry our impacting disappointing

production soft. led U.S. in our factors quarter. sales come our end in remains to the industrial Together, Additionally, at expectations the the these of for low

things have can we we said external while our As focus before, do like we control. cannot these, control factors on efforts we

talked and in just not our For our longer-term I also profitability. but the positioning improved about with for announcements the company align that competitiveness example, to objectives, mid-January demonstrate they only commitment

at quarter our EMEA decreased and X% segment organic Asia marked this currency organically, X% Pacific Americas Infrastructure a Cutting Metal results, quarterly X%, of X%. X% level, decreased for while growth. consecutive declined decreased fifth basis, was On negative down constant Organically, sales Now, year-over-year. sales the sales were the X%. At flat

point, reference cycles quarters. tend a to last X historically, X As to

working strategic to initiatives challenges, near-term growth, committed above-market improvement business executing to our and continuous priorities we and managing optimize margin our drive While product improvement, remain and targeting on capital to portfolio.

updating look on all progress across work We each. these have make and more to to we areas you as forward do

response our and changes primarily EMEA, segment. have investments a in to general general volumes and conditions Metal our Americas, transportation EV of By lesser to and aerospace in declined X%, declined grew EMEA, earthworks and market customers markets. impacted X% to production were subsidies. we XX%, X%, defense engineering end X%. end seen the the market, energy declined Transportation realignment In Cutting now largely within extent, in lower and among grew by Moving engineering

are strong remain offerings in we regardless readiness. very In lower combustion market addition, with market, and factors hybrid end mining type engine, platforms. application product end positioned market impacting there Infrastructure's the preference EV other while But of for by the contributing the well investment consumer remember, EV and full transportation X broadly: engine earthworks activity. capital was Asia, infrastructure in we lower and In saw mining internal support Americas impacted this

compared million to the cash repurchase profitability in compared Free for $XX year-to-date $XXX was to operating million to Cash margin adjusted quarter. was year. Turning activities in flow the to in up period. to year-to-date from $XX EPS XX.X% from operating $X.XX the quarter, decreased prior-year prior-year XX.X% Adjusted prior our the $XX the EBITDA $XX was and our million prior line back million compared performance. program year. $X.XX in million, [ general revenue quarter end we during regarding shares looking market quarter. a end in results These lower current bought comments continued finally, ] with share results, EPS worth the expectations quarter. When And the we of were the last the provided with our few midpoint at at

well. First, aerospace to defense and continues perform

mainly timing of forward aerospace as the slight the within in have defense, driven EMEA. strike. after resolution the moves has in improvement seen recent performance Order production We

the rig Second, counts growth offset of in energy impact lower initiatives Americas. in the

in to activity Americas and mining Asia continue be soft. Third,

Engineering. pressure low market and PMI Finally, on the U.S. the and put General transportation worsening continuation IPI in levels the both conditions of EMEA in and

to X, I for take Turning commentary the to moment to our Slide full on a end additional want provide year. market

by associated have our which general updated the These contributors weakened. As our compared market we to bottom of combined in a foreign year top year section of our higher the forecast prior slide some were a end market. drivers, and has full market outlook what drivers the outlook. reminder, to market, lowered impacts, end the conditions, key current By outlook outlook. full strengthening the with the our both the dollar and exchange shows for shows assumptions factors and reflects of U.S. specific of had main market the The changed

the end have those call and defense markets transportation, and general aerospace attention to me Let as engineering, assumptions changed. your

forecast general and that China. external for The and data key PMI factors the expectations drive our First, U.S. EMEA IPI engineering. are in

down earlier, in forecast the Prior of As the seen slight in improvement conditions since slightly I year. happened. in start up noted worsen IPI XXXX. year now a U.S. of The external fiscal calendar forecast of in was has the previously have to half EMEA be That has to for IPI EMEA first not year, continue shifted slightly. we first this that forecast our calendar to half was expected also and

data latest a market. IPI the indicates China In remains U.S. flat fact, unchanged.

to together, anticipate to now the at this down previously year-over-year be midpoint, Taken communicated. end compared we as flat market slightly

and been was The the for indicators transportation: track we Second, vehicle IHS in the versus OEMs EMEA be prior recent pressure X% Once documented slowdown the key down X%. year, region It to to with are is external slight prior estimate primarily a production EMEA increase vehicle forecast has the in for well in production. IHS are most the the facing. light production pressure again, is Americas.

anticipate production to slightly market to customer now challenges, Given year-over-year the that up we anticipated. down end these previously compared and be forecasts as

efforts. OEM and as have improving. defense now slightly chain to we to assumptions to expected lumpy been continues patterns production see benefits to order continue Third, be growth The of with production aerospace steadily to anticipated The is the these the forecasted from increase our initiatives. our moderate benefit issues tend are previously. slightly Defense aerospace compared but levels customers supply to period-to-period, and do increase

previous consistent while and continues sentiment in forecasted exports. energy to to expectations rig remain relatively seasonality and our land-based with continues construction, U.S. and mining earthworks to in Finally, remains normal expectations. for lower decline, U.S. experience cautious, are counts decline China

will quarter over let call to the the second turn Now, financial review the performance outlook. and who Pat, me

Patrick Watson

will were X%, I an offset X%. Slide of second by of organic Sanjay, decline X% and morning, partially results. quarter you, down X of good review Thank operating the workdays Sales favorable on a everyone. year-over-year begin with with

most a of last quarter the of Year-over-year, were the and percentage and energy. bit I to will Sanjay operating we stronger reviewing we end we expense EBITDA our end Adjusted quarter. the provide in volume. EMEA with regions of margins XX.X%. and respectively experienced defense lower XXX and discussed, sales and provided moment. Adjusted Americas, exception sales in which than XX.X% was at Energy impacted and in to quarter. XX.X% X.X%, pressure, experienced basis As this and general a as a to in versus operating markets. Relative color the project anticipated continued more points had those prior-year end performance segment X% due expectations, increased earthworks transportation notably the year-over-year were most aerospace pressure the and when engineering, expectations markets we

million. the million run from $XX quarter, rate action announced the restructuring delivered savings successfully in During program. annualized previously we approximately This savings of pretax realized $X has approximately

EPS higher lower quarter. on advanced increased [ volume, this prior-year effect flat The price/raw The $X.XX prior partially sales was increase prior-year main The drivers adjusted manufacturing and in exchange the inflation. ] on This unfavorable the items of in and of positive rate recognized foreign XX.X%, discrete primarily our Inflation share was operations Act. Adjusted absence quarter $X.XX. effective performance highlighted under Slide to by manufacturing driven period. an per partially of and quarter geographical restructuring Lastly, X. $X.XX general production mix, in an year unfavorable by bridge reflects benefits advanced production year-over-year and the $X.XX was tax and the credit by year-over-year the this the versus in offset offset in incremental the Reduction earnings credit, wages quarter are the of

benefit also of related FY 'XX. damaged in proceeds a received $X.XX facility of of that fourth the the to net Rogers tornado quarter insurance We our

quarter on was results. and EPS $X.XX performance impacting also performance. You count, $X.XX, lower decline, quarter the Other $X.XX declines offset reflects the our of negative the rate share this as respectively. markets. impacts driver our and By prior-year region, and a partially constant detail which this prior were of Americas engineering contributed growth Metal declined our we this X%. the Pacific performance a X of execution flat, X% quarter. currency was on and the in end in Currency on offset our EPS and pension driven with aerospace our call, can sales EMEA X% by X largest year-over-year defense, Asia are were by workdays the $X.XX. Slides and Cutting change, X% declined to compared a year-over-year Americas noted segments effects the Reported and be see The general by favorable XX%. transportation initiatives on tax basis, the headwind, down of anticipated negative organic to was

in decline production strength transportation aerospace slight markets, partially weakness decline decline defense. in by driven end year-over-year and in general and offset reflects and the Pacific's reflects was defense primarily lower and Asia engineering the China. market a in end aerospace EMEA's by

restructuring quarter defense project to as were and $X partially this order savings to Looking pricing, wages production supply build X% Energy in offset and partially timing with project at raw and operating by by lastly, continue points decreased costs orders. Metal aerospace in And year-over-year volumes due customer offset along General and an engineering EMEA. sales of approximately of year-over-year, to results, Cutting initiatives X% year-over-year and X% material end EMEA sales drive lower due primarily and higher grew Americas. incremental improved declined EMEA, market, year-over-year our chain margin to general and from slowdown rates lower in easing These strategic declined challenges Americas, X% production million. in Transportation primarily lower adjusted due by Pacific year-over-year declined EMEA. overall XXX Asia inflation. X% timing activity, the the in basis and factors

Turning X%. business to X% X%. X%, X%, an days of a Slide offset decline currency on reported by flat sales of mine by order exchange were Regionally, X Growth primarily timing. energy with constant was mining. partially Pacific sales Infrastructure favorable in currency volume Asia basis, for EMEA by in were underground primarily foreign general and was activity defense The of and Americas defense decline order EMEA favorable flat and Infrastructure, offset The lower by organic the activity offset Americas the declined and driven and from earthworks, increased in in decline lower Pacific in by earthworks, mining in Asia timing project engineering. and primarily by timing reflects higher closures year-over-year

a tornado EMEA. Adjusted from in $X general primarily price/raw X.X%, offset late recoveries points Rogers, [ increased absence to struck in $X higher facility Act and by by by prior grew partially few of margin EMEA of at Americas. by These Looking Reduction Americas, to our the both net partially factors: defense end approximately XXX land of the ceramics partially XX% year; by basis, of the 'XX; count. execute activity on aerospace year-over-year driven growth the continuing approximately project Pacific, lower Americas, by lower and X%, by in activity credit restructuring and declined from offset Arkansas advanced lower insurance engineering ] unfavorable in the offset incremental And market basis a higher and operating in the Asia. closure were sales a year-over-year benefit by capital offset and mine to General rig production due that to manufacturing a million mining $X on currency lower production lower investment customer our Asia industrial in and Energy constant wages partially activity increased Inflation U.S. X% in declined initiatives we in levels million; earthworks million. volumes inflation. mining EMEA, timing, mainly factors lastly, the savings the sales fiscal X% from under in related

to our review balance sheet. turning and operating cash X Now, Slide free to flow

income net working compared operating second partially compared in cash by by cash change driven from activities offset prior-year $XXX million flow activities Our to lower the $XX net prior-year period. operating in the capital from primarily quarter million net was period. flow year-to-date changes, was The to

decreased focus to authorization. in to continues Our the under basis, over a since working focused every primary working QX a dividend year. operating $XX In capital was we optimizing percentage $XX shares company $XX year-over-year, XX.X%. Net On company programs. compared on basis, And $XXX our the cash capital million million capital ago, share quarter. working million capital on improved dollar million year. our this million and to total, million million, to shareholders. sales expenditures The a in $XX working paid XX $XX through $XXX year-to-date shareholders we Primary prior to decreased repurchased inventory of from We public and prior increased down years decreased to primary free million in on to our flow XXX,XXX we the remains from have returned driving as becoming prior-year quarter levels or to repurchase dividend quarter $XX and capital. a

Our shareholders drive confidence commitment to strategy to our our execute reflects growth to returning margin cash in to improvement. ability and

we're revolver appendix. be We continue quarter-end, a maturity and maintain availability $XXX on refunding million, and no our well to healthy full profile debt Slide within balance combined sheet cash balance approximately can sheet XX and near-term in financial At with the covenants. found The had we requirements. of

regarding XX quarter our Slide outlook. to third Turning

to $XXX and volume negative sales X% QX a and of price million with exchange. approximately between from realization expect from to be We X% impact negative ranging negative foreign $XXX X%, million, X%,

outlook. sales share Let on some trends and impacting assumptions the me the details QX

at Our a growth due conditions. and volumes below from mainly to trends. On OEM albeit slightly slightly. at market the range EMEA, continues, production to recover. takes time competitive slightly year-over-year expected North reflects and market basis, due to and The engineering normal with Energy sequential growth remains current high slower our midpoint QX a our are to continued in anticipated earthworks pace our decline, conditions. as in range of decline general the line end aerospace be that lower is Transportation historical defense American to is down norms

of pretax to million exchange million have basis. $X Foreign to XX.X%. a $X approximately a $X approximately pension expense respectively, Interest effective be approximately of and is noncash million, expected assumed tax rate negative and an expense impact on is and

we of Lastly, $X.XX $X.XX share. the range EPS per adjusted to in expect

expect between ranging now from to of 'XX price We full from exchange. and $X regarding billion, FY X%, approximately X% [ be on we Now, net approximate X%, negative billion headwind and anticipate realization to an outlook. volume negative X% year-over-year $X.XX Slide foreign ], X with the year sales

the As Sanjay production worsening industrial U.S. the in dollar, in U.S., coupled conditions prepared outlook. continued the stagnation his the market are EMEA and key behind of noted factors remarks, updated strengthening the in the with

slightly perspective, Using updated headwinds a material, raw and to seen cost January. a second a decline, $X.XX defense $X.XX million to dollar aerospace on be dollar decline, a $X.XX to a we and slightly. From approximately expected $XX growth, at exchange in from initiative and exchange from and offset expect transportation impact basis included slight anticipated the we've engineering headwinds on previously approximately midpoint earthworks of our a been and in and in slight to $XX expense for expect million is outlook. the we that to increases the and are second the to savings of our proxy fiscal of strengthen quarters decline the euro $X noncash first rollover Foreign of and pretax has strength, are basis. dollar sales and of year. to have to $X million range as Year-over-year, have wage cost respectively, to million, pension Approximately the U.S. announced general energy restructuring euro the half foreign to general

Our run restructuring savings. outlook generate to also includes plant which of are the rate annualized new effects million of $XX anticipated the and combined closures the actions, approximately

these $X related anticipate perspective, actions. million 'XX, fiscal in a in fourth the included a to quarter. we've majority recognized the be to From savings timing we of For significant approximately savings

will the and includes of changes for assuming credit be advanced Depreciation as associated similar in existing no manufacturing that million. anticipate approximately expected the with future, to Act. be legislation. outlook are the is Reduction part the to current there $XXX amortization eligible credits we We the Inflation Our $X.XX

million XX.X%. effective of We approximately of approximately and rate expense expect an interest $XX tax

$X.XX We to adjusted be EPS $X.XX. the in to of expect range

year and is is the outlook cash fiscal now expenditures approximately approximately for capital capital working outlook $XXX primary for million, full the XX% by year-end. side, On the

flow Taken greater continue cash to XXX% together, net we expect to income. of than operating free be adjusted

back trade The market developments does changing consider relates we landscape. And trade as any to I'll over it not a to that, to Sanjay. international favorable with Lastly, it turn provided today result outlook I of on developing the unfavorable do occur additional as or want the that comment costs, situation. the may outlook,

Sanjay Chowbey

Thank you, Pat.

a let XX, Slide me summarize. to to Turning take minutes few

at actively most discussed the those above-market far this clearly have and have remain the challenges. been I our committed even still this margin of we As improvement. and see call, to though quarter, top recent results. we managing disappointed year with conditions growth progress I'm we challenging so And That faced said, didn't market

with to better growth, the we it competitive position are or performing and in are relates market. pace As confident our overall keeping

customer in advance to continue We initiatives wins focused all areas. growth our targeting

relates profitability. a lever it improvement as strategic to Now, improving to key margins, our is continuous

role that everything we our hosted of and results Kaizen culture prioritizes tangible special an in on recently evolution For improvement of yielded Those process large our plants, example, played important we and events improvements. to several events the do. efficiency continuous focused one in in

the targets taken We'll as certainly run will recently open leverage to to the rate structural about actions million By and and fiscal monitor shareholder continue please take These more at together savings. We'll anticipate have that, appropriate Investor the within but Day, cost we out operator, actions all to ], those we [ of continue also end on XXXX. market we end our achieving us have specifically improvement to long-term improve do. our know laid on complete to advantages needed. this progress, structure value. With deliver line help cost We which be we competitive demonstrate the mitigation work questions. pillars $XXX to fiscal taken XXXX plan X actions XX% conditions year, also for actions of by achieve September the our

Operator

[Operator Instructions] Barclays. Our Julian will question with Mitchell first from come

Julian Mitchell

some sort peers the improving the as short-cycle Several better just and been things sentiment question soft of first engineering. of talked that have environment, around a like yours industrial well. seems general in of particularly surveys have about as a for sort It in current customer of couple data I have Maybe demand if suppose, distributors months. mentioned

piece. but for sales it's of you sort you're in what environment, much engineering seeing realize tough outlook region. your didn't that wonder I pretty by a general change Just

last of So just the and has there couple piece? that in update how trended in some months demand maybe

Sanjay Chowbey

have me overall, improvement, to seeing are right So especially as let first now, on comment we gone half second what we of January. just the definitely some

Our rates also. rates course, our [ improved, and have billing order incoming of ]

is are we sequential there definitely improvement So seeing.

improvement based of our challenges. in year there see things the However, we at in and improvement have India Europe. thinking that in early that time, Actually, we much one August assumptions be the pointed Europe, the China. little when on continued grow. will was continued in U.S. you that to had kind outlook, the also in assumed talked in of we were things more gotten that challenging that a bit out. But more

like think I in seeing terms are outlook in weeks. the half, we we but So reduced our that's definitely recent second why overall improving things of

Julian Mitchell

That's sort maybe for broadly in XX-year thinking, total X.X% then might X%, bit the maybe of structure with year about needed through-cycle is and there get with term. that of margins lot pushing the of measure another short it be you're margins announced a higher? Realized operating this past soft, great. demand and looks to actions years. Kennametal a more just January course, than average, multiple overall, down and of or plants plan a sort the Sanjay, company broader or you XX-plus restructuring that's But cost question, much of that's have view is my like the That's And the XX but when extra so. around running the margins sort at follow-up of sort XX, lower

Sanjay Chowbey

Yes, Julian.

right that the already also we now. done have summarize things me let First, in again and process

the As structure cost that we Investor laid $XXX in we mentioned out Day. actions type of million

be we of not short is with said, going line. we may all recent the restructuring that where in worth along With that we I managing actions that, million and announcement, of things example, that. shortfall we'll you the also And will you do, in these non-headcount-related for see of not what work and have are have volume, numbers bottom show the to our the week tools to we do to in at know what like and and continue But to actions disposal. when right we that. get have course, call involved, been other restructuring up all $XX But

continue and to continue actions. conditions will like working monitor market margin we that. with that this capital. necessary But to improvement always pillar, take in we on parallel, continue continuous improve and work the our So we'll I've talked point, about to overall At

Operator

with will next Angel Castillo from Our Stanley. Morgan question come

Angel Castillo Malpica

regionally, you're about I talk some in that you're you was of could first particular hoping of well [ January. back ] engineering, trends trends kind as as order markets seen seeing? just the second was pickup other but could key broadly? January, for that order that end prior Sanjay, seeing in of was half question, to around that the in specific general in same any to in versus region just And it the the engineering? go more improvement to we commentary it specific if orders Was general you've Was

Sanjay Chowbey

monitor all, in the have, both is also, of have improvement across of that Yes. board. end we There also area couple seen where the consisted we to Angel, But serve, again, weeks we markets that is and EMEA. One general we serve. more closely yes, it definitely industries engineering first the January. of last other overall continued

Angel Castillo Malpica

you see That's implied of And that little then, bridge some in on a helpful. based to fourth fourth if just kind savings normally think terms guide, I EPS guide. maybe is in XQ would the you get substantial quarter. be the the your I'm correctly, the just bit pickup this And would more of the start of than I reading quarter think

a savings market just to through kind of rebound starting of could versus help you just of kind us flow of So demand? is understand maybe how it any assumed start in much end these

Patrick Watson

beyond lot say, savings Angel, really of QX. is from that be we going Yes, would drives improvement, experience restructuring in that say, I the to additional what I normally program that would a would the

which to drives you QX that overall strongest higher, business, tends the the some the normally As quarter, heavy well be infrastructure volume additional sales know, quarter profitability in through as in to business. and for season, be our as tend infrastructure is construction particular, just volumes

Operator

question next Barger from Steve KeyBanc come Capital Markets. Our with will

Steve Barger

the segment do of Sanjay, should give for changes. expect specifics how past to management broader result just for a they replaced Can both you've each going X that what you some plans for in sense their months. differently heads change trying in Just to get us forward?

Sanjay Chowbey

Steve. Thank Yes. you,

slides, the they have sales, be good what I improvement laid delivering experience management, areas the last focus both of much think out which and talks been that. growth. bring a have They because the I with aligned continuous practitioner in both pretty strong will in very about product commercial, slide, in also like marketing

SKU we continue then, in And capital overall have talked like in and at in and optimization what to we all all on to and in really, of the do need of value. terms product through with things, that. improvements portfolio that, look So we'll margin portfolio, really creates expect terms that see pruning we shareholder portfolio, we to targeted along have of different our before, along working additional M&A

those the So element, further focus be in I and talent, our areas. strength foundational think -- building then will

Steve Barger

start product have or wins? those are loss-producing And we've that new excellence been commercial about down? why to them are you now. or talking for product lines shut that that years to point, so, So, Do dragging breakeven if not on divest consistently

Sanjay Chowbey

with disclose communicate we by And are there some at taking and a now, Steve, more directional have mentioned right and But pruning we are do you works point in goal here, we go you that, overall have of more before portfolio our and just revenue we we'll definitely forward here overall things date. not as solid building to line we we when to that margin and improve also mix can and a But that. looking we assure get give as that and I action actions. we current our little that answer diversifying portfolio yes, both our are the is have a bit mix. to all product

Steve Barger

a too process now. rooftops. Got lot being just quite we've just there about last faster years footprint could for rate? many it. a I the years one consolidating at thought over And any the big, talked accelerating few Sales have and Is if a to flat one, that potentially get been plants too

Sanjay Chowbey

very working are Steve. that, on We diligently

making we service think because we customer I of maintain to business have that. and lose not sure balance that between

we'll So it. continue work on I think overall, to

volume, As us the lower one for area been has yes, with you said, definitely of also. that focus

Operator

question next come America. with of Bank Mike will from Our Feniger

Michael Feniger

We're the understand very short-cycle side, kind on starting already seeing suppliers fluid it's I to Just think about situation. a tariff of some piece. the China

pricing Just and China could piece, the but you of help footprint where we think your any of any when situation? and the color how would Canada, us side also side we we kind much U.S.? kind this gets cost monitor versus of on how your there change how fits Mexico, view imported of as to color dynamic kind think about the on the Just that

Patrick Watson

I think over worth a of going Yes, are things Mike, there. that couple

of Canada X everyone runs exposure think of I absolute China $XX million, about is in our is right, aware those. half the and XX% terms is terms in total of size all of that, of portfolio. of so about Mexico the around

numbers on those put important any are those that things of of trading you couple a tends as and bilateral. is that think that to context, be relationships, in I

from U.S. import export So we the product well. tend some as products. some to We

what's to do to of couple exclusions, of looking or the the of they situation. want are offset global lastly, terms do be able the for things potentially to what's We that a well kind over responsibly service into be taking more monitoring and regimes that to globally. as are that be to cost for think ability are put and to the any our we're to footprint then, in leverage we we in to One about global last as do would competitive that happened of their days, the that targeted, remain where are pricing we're be have that footprint, and some here we responses of of global that, at cost consideration. all potential product? and customers Those environment and for obviously, us. place good Obviously, factors would be they the that broad-based needs going going the good So to tariff as

those to operational considerations And try as landscape we'll this all so, evolves. balance out

Michael Feniger

did just little Helpful. the inventories. own for And seem on progress there side inventories, it like a your inventory was

you commentary, reset where still kind Do for think half and your end feeling follow-on think with end you you the are of we're guys year? first end going fiscal of as the right understand, of of market half, for XXXX of of you you can customers, the and of on the inventories, go the or question on And the that, back given and go your like we the your kind to some take a how in Just the into half of back you up them QX then, year feel now kind kind us about inventories as distributors or heading out? just year? help are to

Patrick Watson

Yes.

in just in the outlook. terms the put So this context inventory, Mike, terms in also, of of I'll

constrain where say, here we our a the We're be. as the be. production where to would our year say the we sales to drive year. some want working Again, here quarter, move working to primary yes, to bit to So the given developed would total a by little them that elevated capital through inventory are objective, fiscal I'd is of probably levels bit them where as approximately going action and take balance to in of of like end bring I'd inventory we capital, the levels we to XX% back think

we'll prioritizing associated I'll of that. over, generating kind obviously, cash in efficiency absorption. Now, benefit that, doing from fixed noncash the some cost the say, how about think That's we're inventory with

I QX and a that think as of some perspective in then an the of inventory QX see year, course Over well. little additional here from happen reduction the bit happen in you'll

to channel, is. think that's point misaligned I on don't from there what inventories As out hearing the at time, we in are think this demand based where in inventory the customers, we're about

customer changing pretty I market in level at of think spite inventory some controlled the the of well even is conditions.

Operator

Our next question Fisher come with will from UBS. Steven

Steven Fisher

to there. just please? source wanted think bit you a competitive earthworks. dynamics Is a little Just seeing new additional sounded that, a I little competition? it before? about like some on on color of more in that? there made comment new you Can Is provide this follow pressures you more about It dynamics been just that talk Can up hadn't was a you

Sanjay Chowbey

It's mean One is here. the in of new, China. there not I something new. equation parts X necessarily Yes. are

down. I think overall, capital investment been has

because market puts has So including the almost excess falls that of when more supply, type of things we happens, that some also our little that the capacity. a category. And drums more expensive, bit in pressure products, are CapEx those

to pressure So of definitely we seen production some is of well. quite lost we have and some back value our in U.S., we there overall the but holding price reduction also we many our and and are where have have That's business, own in At pressure, times, customers some proposition. construction. come competing In seeing are compete. we us some because but the there, actually also cases,

we dynamics there. some see So do

Steven Fisher

sort what year growth about Day framework how from your penetration, That's -- products I in call. Okay. of for on for But organic Investor you earlier organic you just us the thinking in this your now and updated embedded can guidance your thinking And this that's back new year the of in terms update that helpful. the you're this market of apologize within contributions context if targets? of covered broader contribution to growth, just

Sanjay Chowbey

Yes.

been X% about Investor organic point, and discussed market growth, strategic feel confident I X% say, is Day, approximately we X% market, think what during price. still on price but a this we roughly, very growth approximately on X% just let's At headwind. the has bigger X% and

we definitely affected unit is as see by that. the volume So,

when thinking in I overall, that, the indicate and or that look that will also slightly still performing at So are are peer think that maintaining way. data that. And all better we you we

Operator

like our session. remarks. would question-and-answer back over conference closing Chowbey Sanjay to concludes the This for turn I to

Sanjay Chowbey

call the and you, you, thank Yes. operator, Thank everyone, for today. joining

support. out a great any your have Mike you if questions. don't you. to hesitate and appreciate to Please Have Thank interest we always, As day. reach

Operator

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

prompted symbol. enter be or will hash to XXXXXXX pound the conference You the then ID

You concluded. has name company. attending today's asked you Thank to The conference now will record be your and presentation. for

may disconnect now You lines. your

Kennametal (KMT) 5 Feb 252025 Q2 Earnings call transcript