Kennametal Inc Q2 2025 Earnings Call Transcript

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

Question: Julian Mitchell - Barclays - Analyst : Maybe just the first question around the sort of current demand environment I suppose, particularly in general engineering. Because it seems as if the sort of soft data and things like surveys have been better for a couple of months, several short cycle, industrial peers of yours have talked about improving customer sentiment and, and some distributors have mentioned that as well. Just wondered sort of what you're seeing in general engineering by region, realize it's a pretty tough environment, but you didn't change your sales outlook much for that piece. So maybe just some update there and how demand has trended in the last couple of months in that piece.

Question: Julian Mitchell - Barclays - Analyst : And then just my follow up question. When you're thinking, Sanjay, more broadly about the cost structure at Kenny Metal, and you have the extra measure announced January 14, but, sort of overall looks like operating margins this year for the total company. You know, maybe running around sort of, 8%, 8.5% or so. Yeah, that's lower than the 10 or 20 year average. And that's with a lot of restructuring actions in the past 10 plus years, realized demand is soft and of course, that's pushing margins down a bit short term. But is there a sort of a view that maybe another much broader plan might be needed with sort of multiple plants to get the through cycle margins higher?

Question: Angel Castillo - Morgan Stanley - Analyst : Sanjay, I was hoping we could just go back to that first commentary around the improvement that you've seen in orders in the second half of January was that, was that specific to general engineering? Was it more broadly, if it was just specific to general engineering, could you talk about the order trends you're seeing in some of the other key end markets in January as well as same kind of question before regionally? Was that order pickup in any particular region versus broader trends you're seeing?

Question: Angel Castillo - Morgan Stanley - Analyst : And then maybe just in terms of the implied kind of fourth quarter guide, I think the EPS pickup is a little bit more substantial than you would normally see based on your 3Q guide. And I think if I'm reading this correctly, the bridge would just be some of the savings that you start to get, in the fourth quarter. So could you just help us understand maybe how much of it is just these savings starting to flow through versus any kind of, assumed kind of a rebound in end market demand?

Question: Steve Barger - KeyBanc Capital Markets Inc - Analyst : Sanjay, you've replaced both segment heads in the past six months. Can you just give us some specifics for each of their plans for what they expect to do differently going forward? Just trying to get a sense for how that management change should should result in broader changes. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 2:30PM, KMT.N - Q2 2025 Kennametal Inc Earnings Call

Question: Steve Barger - KeyBanc Capital Markets Inc - Analyst : So to that point, we've been talking about commercial excellence for years now. Do you have product lines that are consistently break even or loss producing that are dragging on new product wins? And if so why not start to divest those or, or shut them down.

Question: Steve Barger - KeyBanc Capital Markets Inc - Analyst : Now, if I could just get one last one, we've talked a lot over the years about the footprint, potentially being too big, too many rooftops. Sales have been flat for quite a few years. Now. Is there any thought to accelerating that process and consolidating plants at a faster rate?

Question: Michael Feniger - BofA Global Research - Analyst : Just on the tariff side. I understand it's a very fluid situation. We're seeing some short cycle suppliers kind of starting to think about the China piece, just any color you can kind of help us on when we think of the China piece. But also, Mexico, Canada, how we kind of think about where your footprint fits and how much gets imported to the US, any color there and how that would change your view on the pricing side versus the cost side as we kind of monitor this dynamic situation. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 2:30PM, KMT.N - Q2 2025 Kennametal Inc Earnings Call

Question: Michael Feniger - BofA Global Research - Analyst : And just inventories. It did seem like there was a little progress on the inventory side for your own inventories. Just can you help us understand as you go to the end of the year? And we kind of go and think about Q3 in the back half. Where do you think your inventories are, are going to end up for the year? Do you still take them out? And then just a follow on question with that, given some of the reset on the end market commentary, how you feel like your customers on inventories or distributors are kind of feeling right now. As we're kind of heading into, the first half of 2025 or for you guys to come back half of your fiscal year?

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

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