Kennametal Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Steven Fisher - UBS - Analyst : Thanks. Good morning. Wondering if you can just help us frame the margin assumptions you have for the second quarter sequentially compared to the first quarter, excluding the benefit from the insurance proceeds? I think typically, seasonally, they should be lower. But I'm just curious, kind of what you're embedding in there in your assumptions and maybe you could just kind of bridge the key items for us?

Question: Steven Fisher - UBS - Analyst : Okay. That's very helpful. And then, the guidance does imply a nice recovery in organic growth in the second half. Just talk about where you have the most confidence in that recovery or it's perhaps the bias at this point as in any other information that we should be kind of gearing towards the lower end of the range? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 2:30PM, KMT.N - Q1 2025 Kennametal Inc Earnings Call

Question: Steven Fisher - UBS - Analyst : Terrific. That's very helpful. I appreciate it.

Question: Julian Mitchell - Barclays - Analyst : Hi, good morning. Maybe just the first question, if you could elaborate a little bit on China, and I suppose broader Asia Pacific. You had decent

Question: Julian Mitchell - Barclays - Analyst : That's helpful. Thanks very much. And then just wanted to circle back, when we think about that, I suppose we'll look half on half, but you have a fairly typical second-half increase in operating margins, total company in the back half versus the first half normally. Pretty similar, I suppose this year seems to be dialed in. So any color you could provide as we think about kind of the weighting of that margin ramp, maybe third versus fourth quarter? Anything to bear in mind in that sense? And understanding that I think second-quarter margins are kind of flattish sequentially. So we know that base and then you have kind of a couple of points of back half step up, I think. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 2:30PM, KMT.N - Q1 2025 Kennametal Inc Earnings Call

Question: Julian Mitchell - Barclays - Analyst : Great. Thank you.

Question: Steve Barger - KeyBanc Capital Markets - Analyst : Sorry about that. Yeah, Pat, starting with slide 8, that bridge. You showed the negative impact of lower production volumes. Working capital as a percentage of sales looks pretty flat over the last few years and you've had negative volume growth over the past year. Can you just talk about where you are now for inventory relative to demand? Do you need to continue to take production days out or how are you positioning relative to the potential back-half improvement that Sanjay talked about?

Question: Steve Barger - KeyBanc Capital Markets - Analyst : Understood. Thanks. And then on that same slide, is there an opportunity around the temporary shutdowns for maintenance and process improvement? Meaning that you can use those shutdowns and just a generally softer environment right now to move some product lines and accelerate plant closures to lock in structural cost savings for when we do see the markets improve?

Question: Steve Barger - KeyBanc Capital Markets - Analyst : Appreciate the detail. Thanks.

Question: Angel Castillo - Morgan Stanley - Analyst : Hi. Thanks for taking my question. I just wanted to talk about, maybe put a finer point on kind of the near-term trends. What are you seeing kind of September, October versus what you saw in the first full fiscal 1Q general kind of trends across that markets, please?

Question: Angel Castillo - Morgan Stanley - Analyst : And maybe switching over to price/cost. Just can you talk about what you're seeing in terms of both tungsten and just general kind of cost inflation? And then your degree of confidence around getting the 2% realization and just broader price/cost thoughts would be helpful.

Question: Angel Castillo - Morgan Stanley - Analyst : Very helpful. Thank you.

Question: Tami Zakaria - J.P. Morgan - Analyst : Hi, good morning. Thank you so much. So my first question is historically, how does fed rate cuts impact you? Do you see a pickup in demand maybe at a one or two quarters lag? What are you hearing from customers now that finally rates have started to come down? Is there a sense of optimism amongst customers? So any thoughts on how you're thinking about this rate cut environment transitioning hopefully to a lower rate scenario? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 2:30PM, KMT.N - Q1 2025 Kennametal Inc Earnings Call

Question: Tami Zakaria - J.P. Morgan - Analyst : Got it. That's helpful. And my other question is, just to clarify, can you tell us what -- how the model and the business days impact for the next -- for the remainder of the year for the next three quarters?

Question: Tami Zakaria - J.P. Morgan - Analyst : Got it. Thank you.

Question: Christopher Dankert - Loop Capital Markets - Analyst : Hey, morning. Thanks for taking the questions. First off, a quick housekeeping item and apologies if I missed it. But did you delineate what the [realized] restructuring savings were in the quarter?

Question: Christopher Dankert - Loop Capital Markets - Analyst : Okay, perfect, perfect. Thanks for that. And I guess just to drill down a little bit more on the margin at metal cutting. I guess, it's a pretty hefty decremental -- it seems like it's [2x] typical. I think typically, you call it 40% decremental on volumes despite some of the cost actions. Maybe can you just help us understand? Is it mixed? What else is going on under the hood there in terms of margins for metal cutting here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 2:30PM, KMT.N - Q1 2025 Kennametal Inc Earnings Call

Question: Christopher Dankert - Loop Capital Markets - Analyst : Thanks for the detail.

Question: Joseph Ritchie - Goldman Sachs - Analyst : Hey, guys, good morning. Really helpful slide on the metal cutting share gains. I guess, in Europe specifically, I guess the question I have is, as you kind of think about hopefully a potential recovery in that end market, do you expect to keep these types of share gains if the market were to recover? And then just -- what are you looking at as maybe leading indicators and maybe just focusing on the German market that can maybe give you some confidence once that market starts to turn?

Question: Joseph Ritchie - Goldman Sachs - Analyst : Okay, helpful. And then Sanjay, you're going to be my first election question. So post yesterday, how are you thinking about these potential implications for your business? Also with the prospect of potential tariffs on the comp. How does that potentially change your either competitive dynamics here or abroad? Just any thoughts that you have? Broad thoughts on the outcome from yesterday?

Question: Joseph Ritchie - Goldman Sachs - Analyst : Okay, guys, thank you.