Kennametal Posts Record Profit on Raw-Material Pricing Timing
Adjusted operating margin reached 41.5% as favorable pricing timing lifted quarterly profit.
Kennametal Inc. (KMT), the industrial tooling and materials maker, posted record adjusted earnings of $2.96 a share in its fiscal fourth quarter as the timing of raw-material pricing relative to costs boosted profit.
The result marked a sharp acceleration from earlier in the year. Sales growth climbed from 3% in the first quarter to 10% in the second and 22% in the third before reaching 43% in the fourth quarter.
Fourth-quarter sales rose to $736.6 million, including 42% organic growth, and increased 24% sequentially from $593 million. Adjusted earnings advanced from $0.77 a share in the third quarter, while adjusted operating margin widened from 13.8%.
Favorable raw-material-related pricing timing increased to approximately $252 million from $39 million in the third quarter and $17 million in the second, becoming the principal driver of the profit increase.
Infrastructure led the gain, with sales rising 73% to $338.8 million despite lower sales and production volumes. Approximately $198 million of favorable raw-material pricing timing helped lift the segment’s adjusted operating margin to 58.4% from 6.8% a year earlier. Metal Cutting sales increased 24% to $397.8 million, and its adjusted operating margin widened to 27.3% from 7.9%.
For the fiscal year, sales increased 20% to $2.357 billion and adjusted earnings reached $4.57 a share, exceeding the company’s previously raised forecasts for sales of $2.33 billion to $2.35 billion and adjusted earnings of $3.75 to $4.00 a share.
Kennametal expects fiscal 2027 sales of $3.33 billion to $3.45 billion and adjusted earnings of $4.15 to $5.15 a share. First-quarter guidance calls for sales of $745 million to $775 million and adjusted earnings of $2.50 to $2.80 a share.
Cash conversion weakened as tungsten-price inflation raised inventory values and Kennametal made advance payments to secure raw materials. Fiscal-year operating cash flow fell to negative $4 million from positive $208 million, while free operating cash flow declined to negative $79 million after remaining positive through the third quarter.