Kennametal Reports 2% Decline in Sales and 25% Drop in Net Income for Q3 2024

Kennametal Inc. reported its financial results for the three months ended September 30, 2024, revealing a decline in sales and profitability compared to the same period in the previous year. Total sales for the quarter were $481.9 million, a decrease of 2% from $492.5 million in the prior year. This decline was attributed to a 2% organic sales decrease, compounded by a 1% unfavorable currency exchange effect, although partially offset by a favorable business days effect of 1%.

Gross profit for the quarter was $151.0 million, down from $162.9 million, resulting in a gross profit margin of 31.3%, compared to 33.1% in the prior year. Operating income also fell to $36.0 million from $45.1 million, reflecting lower sales and production volumes in the Metal Cutting segment, alongside increased wages and general inflation impacting the Infrastructure segment. The operating margin decreased to 7.5% from 9.2% in the previous year.

Net income attributable to Kennametal shareholders for the quarter was $22.1 million, down from $30.1 million, leading to basic and diluted earnings per share of $0.28, compared to $0.38 and $0.37, respectively, in the prior year. The effective income tax rate increased to 25.2% from 21.0%, primarily due to a $6.2 million benefit from unrecognized tax benefits and a $3.1 million charge for tax litigation in Italy.

In terms of segment performance, the Metal Cutting segment reported sales of $296.9 million, a 4% decrease from $308.2 million, while the Infrastructure segment saw a slight increase in sales to $185.0 million from $184.2 million. The decline in Metal Cutting was driven by lower sales in key markets, including Aerospace & Defense and General Engineering, while the Infrastructure segment's operating income decreased to $12.7 million from $13.6 million, attributed to manufacturing costs and temporary plant shutdowns.

Kennametal's cash flow from operating activities improved significantly to $45.7 million from $25.7 million in the prior year, supported by net income and non-cash items. The company also reported total current assets of $1.0 billion and total assets of $2.5 billion as of September 30, 2024. Shareholder returns during the quarter included $15 million in share repurchases and $16 million in dividends.

Restructuring charges for the quarter were minimal at $0.6 million, down from $3.7 million in the prior year, indicating a shift in the company's restructuring strategy. The company continues to focus on its two reportable segments: Metal Cutting and Infrastructure, with ongoing efforts to manage costs and improve operational efficiency.