Kennametal Sales Rise 3.3%, EPS Up Amid Restructuring Efforts

TL;DR

**KMT's restructuring is paying off with higher sales and EPS, but watch that inventory build.**

AI Summary

Kennametal Inc. (KMT) reported a solid financial performance for the three months ended September 30, 2025, with sales increasing by 3.3% to $497.97 million from $481.95 million in the prior year. Net income attributable to Kennametal shareholders rose by 5.3% to $23.30 million, up from $22.12 million in the same period last year. Basic earnings per share also improved to $0.31 from $0.28. The company continued its restructuring efforts, recording $3.2 million in charges for the quarter, primarily in Metal Cutting, as it completed the closure of a facility in Greenfield, MA, and consolidated facilities in Barcelona, Spain. Cash and cash equivalents decreased by $37.04 million to $103.50 million from $140.54 million at the beginning of the period, largely due to $31.08 million used in financing activities, including $10.03 million for capital stock purchases and $15.14 million in cash dividends paid to shareholders. Inventories increased by $28.03 million to $565.19 million, indicating potential inventory build-up. The company also increased its obligations under a supplier finance program to $25.0 million from $17.3 million.

Why It Matters

Kennametal's modest sales growth and improved net income signal resilience in a challenging industrial landscape, which is crucial for investors seeking stability. The ongoing restructuring, including facility closures in Greenfield, MA, and consolidation in Barcelona, Spain, aims to enhance long-term competitiveness, potentially impacting employees in those regions but benefiting overall operational efficiency. For customers, these changes could lead to more streamlined product delivery and potentially better pricing due to cost efficiencies. In a competitive market, these strategic moves are vital for KMT to maintain its position against rivals by optimizing its manufacturing footprint and cost structure.

Risk Assessment

Risk Level: medium — The company faces medium risk due to a significant decrease in cash and cash equivalents by $37.04 million, from $140.54 million to $103.50 million, and a substantial increase in inventories by $28.03 million to $565.19 million. While sales are up, the inventory build-up could signal slowing demand or inefficient inventory management, potentially tying up capital and increasing carrying costs. Additionally, ongoing restructuring charges of $3.2 million, though aimed at long-term benefits, represent continued operational adjustments.

Analyst Insight

Investors should monitor Kennametal's inventory levels closely in upcoming quarters to ensure the $28.03 million increase is not indicative of weakening demand. While the sales and EPS growth are positive, consider if the current share price fully reflects the ongoing restructuring benefits and potential inventory risks. A wait-and-see approach might be prudent before making significant new investments, focusing on how the company manages its working capital.

Financial Highlights

revenue

$497.97M

operating Margin

7.5%

total Assets

$2,477.71M

net Income

$23.30M

eps

$0.31

gross Margin

31.0%

cash Position

$103.50M

revenue Growth

+3.3%

Revenue Breakdown

Key Numbers

• $497.97M — Sales (Increased by 3.3% from $481.95M year-over-year)
• $23.30M — Net income attributable to Kennametal (Increased by 5.3% from $22.12M year-over-year)
• $0.31 — Basic earnings per share (Increased from $0.28 year-over-year)
• $3.2M — Restructuring and other charges, net (Recorded for the three months ended September 30, 2025)
• $103.50M — Cash and cash equivalents (Decreased from $140.54M at June 30, 2025)
• $565.19M — Inventories (Increased by $28.03M from $538.24M at June 30, 2025)
• $25.0M — Obligations under supplier finance program (Increased from $17.3M at June 30, 2025)
• $10.03M — Purchase of capital stock (Cash used in financing activities)
• $15.14M — Cash dividends paid to Shareholders (Cash used in financing activities)

Key Players & Entities

• KENNAMETAL INC. (company) — Registrant
• New York Stock Exchange (regulator) — Exchange where KMT is registered
• Greenfield, MA (location) — Location of a facility closure
• Barcelona, Spain (location) — Location of facility consolidation
• Metal Cutting (business_segment) — Segment incurring restructuring charges
• Infrastructure (business_segment) — Segment incurring restructuring charges
• Bloomberg (company) — Publisher of the analysis
• SEC (regulator) — Regulator for 10-Q filings

FAQ

Risk Factors

• Restructuring and Facility Consolidation [medium — operational]: The company incurred $3.2 million in restructuring charges during the quarter, primarily in Metal Cutting, related to facility closures in Greenfield, MA, and consolidation in Barcelona, Spain. These actions, while aimed at efficiency, introduce execution risks and potential disruptions to operations.
• Inventory Build-up [medium — financial]: Inventories increased by $28.03 million to $565.19 million. This significant increase could indicate slower sales than anticipated or a strategic build-up, potentially leading to increased carrying costs, obsolescence risk, or future markdowns if demand falters.
• Decreasing Cash Position [medium — financial]: Cash and cash equivalents decreased by $37.04 million to $103.50 million. This reduction was largely driven by $31.08 million used in financing activities, including $10.03 million for stock repurchases and $15.14 million in dividends, which could limit financial flexibility for future investments or unexpected needs.
• Increased Supplier Finance Obligations [low — financial]: Obligations under the supplier finance program rose to $25.0 million from $17.3 million. While this can help manage working capital, a significant increase may signal reliance on this financing method and potential pressure on cash flows if these obligations need to be settled.

Industry Context

Kennametal operates in the industrial manufacturing sector, specifically providing metalworking tools and solutions. The industry is characterized by cyclical demand tied to global manufacturing output, particularly in automotive, aerospace, and general engineering. Key trends include the adoption of advanced materials, automation, and digital solutions to improve efficiency and precision in manufacturing processes.

Regulatory Implications

As a publicly traded company, Kennametal is subject to SEC regulations and accounting standards (GAAP). The company must ensure accurate and timely financial reporting, including disclosures related to restructuring, financial instruments, and market risks. Compliance with environmental, social, and governance (ESG) regulations is also becoming increasingly important for investors.

What Investors Should Do

1. Monitor inventory levels closely: The significant increase in inventory warrants attention to ensure it does not lead to write-downs or signal weakening demand.
2. Analyze the impact of restructuring: Track the effectiveness and costs associated with ongoing facility consolidations to ensure they yield the expected operational efficiencies.
3. Evaluate cash flow generation: Assess the company's ability to generate sufficient cash from operations to fund its financing activities, such as dividends and stock repurchases, given the decrease in cash reserves.
4. Scrutinize supplier finance program usage: Understand the strategic rationale and potential risks associated with the growing obligations under the supplier finance program.

Glossary

Restructuring and other charges, net

Costs incurred by a company related to significant organizational changes, such as facility closures, workforce reductions, or business divestitures. 'Net' indicates that any gains or proceeds from related asset sales have been deducted. (These charges impact profitability and indicate ongoing efforts by Kennametal to optimize its operational footprint, as seen with the $3.2 million recorded in the current quarter.)

Supplier finance program

A program where a third-party financial institution pays a company's suppliers early, often at a discount, and the company then pays the financial institution later according to agreed terms. This helps suppliers with cash flow and can extend payment terms for the company. (Kennametal's increased reliance on this program, with obligations rising to $25.0 million, suggests a strategy to manage working capital, but also highlights a growing financial commitment.)

Noncontrolling interests

The portion of equity in a subsidiary that is not attributable to the parent company. It represents the ownership stake of outside shareholders in a consolidated entity. (The 'Net income attributable to noncontrolling interests' of $1.333 million indicates that a portion of Kennametal's consolidated net income belongs to other shareholders in its subsidiaries, reducing the amount available to Kennametal shareholders.)

Year-Over-Year Comparison

Compared to the prior year's comparable period, Kennametal has demonstrated modest top-line growth with sales up 3.3% to $497.97 million. Net income attributable to shareholders also saw a positive increase of 5.3% to $23.30 million, and basic EPS improved to $0.31. However, the current filing highlights a notable decrease in cash and cash equivalents and a significant increase in inventory levels, contrasting with potentially more stable or favorable liquidity and inventory metrics in the prior period.

Key Financial Figures

• $1.25 — ch registered Capital Stock, par value $1.25 per share KMT New York Stock Exchange

Filing Documents

• kmt-20250930.htm (10-Q) — 1155KB
• kmt930202510-qex311.htm (EX-31.1) — 10KB
• kmt930202510-qex312.htm (EX-31.2) — 10KB
• kmt930202510-qex321.htm (EX-32.1) — 6KB
• 0001628280-25-049444.txt ( ) — 8402KB
• kmt-20250930.xsd (EX-101.SCH) — 52KB
• kmt-20250930_cal.xml (EX-101.CAL) — 71KB
• kmt-20250930_def.xml (EX-101.DEF) — 440KB
• kmt-20250930_lab.xml (EX-101.LAB) — 765KB
• kmt-20250930_pre.xml (EX-101.PRE) — 580KB
• kmt-20250930_htm.xml (XML) — 1273KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION 1. Financial Statements Condensed Consolidated Statements of Income (Unaudited) Three months ended September 30, 2025 and 2024 4 Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three months ended September 30, 2025 and 2024 4 Condensed Consolidated Balance Sheets (Unaudited) September 30, 2025 and June 30, 2025 5 Condensed Consolidated Statements of Cash Flow (Unaudited) Three months ended September 30, 2025 and 2024 6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 21 3. Quantitative and Qualitative Disclosures About Market Risk 31 4. Controls and Procedures 31 5. Other Information 31

- OTHER INFORMATION

PART II - OTHER INFORMATION 1. Legal Proceedings 32 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 32 6. Exhibits 33

Signatures

Signatures 34 2 Table of Contents FORWARD-LOOKING INFORMATION This Quarterly Report on Form 10-Q contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements that do not relate strictly to historical or current facts. You can identify forward-looking statements by words such as "should," "anticipate," "estimate," "approximate," "expect," "may," "will," "project," "intend," "plan," "believe" and other words of similar meaning and expression in connection with any discussion of future operating or financial performance or events. We have also included forward-looking statements in this Quarterly Report on Form 10-Q concerning, among other things, our strategy, goals, plans and projections regarding our financial position, liquidity and capital resources, results of operations, market position and product development. These statements are based on current estimates that involve inherent risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, our actual results could vary materially from our current expectations. There are a number of factors that could cause our actual results to differ from those indicated in the forward-looking statements. They include: uncertainties related to changes in macroeconomic and/or global conditions, including as a result of increased inflation, tariffs, and Russia's invasion of Ukraine and the resulting sanctions on Russia; the conflict in the Middle East; other economic recession; our ability to achieve all anticipated benefits of restructuring, simplification and modernization initiatives; Commercial Excellence growth initiatives and Operational Excellence initiatives; our foreign operations and international markets, such as currency exchange rates, d

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS KENNAMETAL INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended September 30, (in thousands, except per share amounts) 2025 2024 Sales $ 497,974 $ 481,948 Cost of goods sold 343,424 330,939 Gross profit 154,550 151,009 Operating expense 113,028 111,653 Restructuring and other charges, net (Note 6) 1,589 611 Amortization of intangibles 2,374 2,718 Operating income 37,559 36,027 Interest expense 6,186 6,312 Other income, net ( 2,322 ) ( 1,657 ) Income before income taxes 33,695 31,372 Provision for income taxes 9,064 7,906 Net income 24,631 23,466 Less: Net income attributable to noncontrolling interests 1,333 1,343 Net income attributable to Kennametal $ 23,298 $ 22,123 PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL SHAREHOLDERS Basic earnings per share $ 0.31 $ 0.28 Diluted earnings per share $ 0.30 $ 0.28 Basic weighted average shares outstanding 76,128 78,067 Diluted weighted average shares outstanding 76,829 78,657 KENNAMETAL INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended September 30, (in thousands) 2025 2024 Net income $ 24,631 $ 23,466 Other comprehensive (loss) income, net of tax Unrealized loss on derivatives designated and qualified as cash flow hedges ( 8 ) ( 84 ) Reclassification of unrealized gain on derivatives designated and qualified as cash flow hedges ( 166 ) ( 222 ) Unrecognized net pension and other postretirement benefit plans gain (loss) 646 ( 2,575 ) Reclassification of net pension and other postretirement benefit plans loss 2,353 2,186 Foreign currency translation adjustments ( 3,254 ) 35,036 Total other comprehensive (loss) income, net of tax ( 429 ) 34,341 Total comprehensive income 24,202 57,807 Less: comprehensive income attributable to noncontrolling interests 709 2,066 Comprehensive income attributable to Kennametal Shareholders $ 23,493 $ 55,741 The accompanying notes are an integral part of the

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View this 10-Q filing on SEC EDGAR