Kennametal (KMT) 2 Feb 212021 Q2 Earnings call transcript

Good morning. I would like to welcome everyone to Kennametal's Second Quarter Fiscal 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. event recorded. this that note is being Please I to Investor Kelly like to Relations. conference over turn the Boyer, would now Vice President of Please go ahead.

us slides we issued Welcome you earnings press quarter operator. and posted our Web XXXX to our site. and joining presentation fiscal evening, you, second our review Yesterday Thank results. release Kennametal's on everyone for thank

deck Investor We will President I'm of Relations. Kelly call. be referring throughout to Boyer, today's that slide Vice

forward-looking involve Officer; and Rossi, and Joining risk statements. attention Executive results, I me actual those your will materially to direct in that Kennametal's President today as Chief for and and expressed time, and Chris the Damon's SEC line implied risks assumptions, filings. like in comments At differ questions. a such Today's we uncertainties of or Chris that Audia, contains on and could These the such, Damon uncertainties or our from factors detailed Financial call are remarks, achievements open After forward-looking and President to the to discussion constitute statement. would are this cause Vice number Chief performance Officer. prepared company's disclosure statements by

site. the In most and that on discussing financial addition, of call with deck slide over be Form I'll back financial And the to comparable non-GAAP that, the we call found GAAP our today. on can we measures will to directly on Reconciliations now are Web our Chris. be measures believe turn at X-K the

call finally, our a and the presentation. this for questions. some in general reflecting improvement will free operating as results ongoing initiatives. Sales recorded for We the review growth a market before quarterly the both see. I'll Beginning from general increase markets, strong the driven today. opening year-over-year, despite headwinds. that thank financial and And outpacing engineering QX for Damon cash benefits QX and margin results then some us XX%, with Slide on X% in although summary go as X the well sequential sequentially our simplification/modernization. comments make quarter initiatives, recovery. detail. and X% by more over from start to morning continue QX typically These year-over-year improvement Transportation expectations flow market of then and I'll this strategic today's still quarter, solid brief and from Good highest call and everyone discuss sales, end increasing we show you Kelly. the quarter Thanks, comments increased were to improving levels of by declining strategic joining to

As basis, XX% year-over-year XX% a XX% end be sales. totaled know, our top organic of a than challenged. year. the decline in sales On markets prior as reminder, Energy two and those declined you aerospace, on more continue to of a

material our costs, sales, disciplined raw prior benefits by expense XX% improve the effective versus despite execution and associated initiatives drop in however, year-over-year year-over-year due Operating control The improved control cost basis increasing terms of the to XX% were margin actions. However, under of actions, profitability, XX.X% increased and quarter. lower Adjusted decreased through EBITDA percentage lower cost in we was a driven absorption. to year simplification/modernization, in margin strategic in dollar from EBITDA able points sales by X%. to improvement and as XXX to volume

XX%. at prior flat for Our essentially remains Adjusted the the of factors I $X.XX was just expense $X.XX EPS mentioned. in quarter, operating reflecting target year versus

limited. be to continues environment this in visibility ahead, Looking

affected. possible vaccine early to regions being Nevertheless, due stages reasons of rollout. for as However, some Therefore, the 'XX. recent end how recent as with are we year additional some year difficult will last and be fiscal momentum of end remains will for not it couple markets providing full some restocking our cases, similar outlook optimism, be spikes as well such forecast market modest a to to contemplated COVID-XX customers of the shutdowns there indications in quarters, and in the

on FX. Based early some digit indications in on part QX the there provide shutdowns see the we will in of what sequential we single assuming January quarter, with QX, growth quarter. to are additional sales third significant color monthly expect from sequentially coming and to the sales, mid no in sales sales COVID-XX I high from related growth However, that our expect

X%. excluding and the mid to We we of our digits, to control, the growth, on the FX, pattern in be regardless initiatives of sequential improve expect which growth such and economic single effect of modestly operational and of pace our typical can the underlying the cycle. throughout share we But gain excellence things is the recovery, commercial levels X% organic executing focus trajectory will to to profitability the continue above as

track this excellence benefits in operational approximately the and expected. to On on $XX this million side, quarter, delivered year increase XX simplification/modernization are million XXX% deliver year-over-year initiatives as

for This the downsizing the this lower As expect rationalization laid and original our cumulative originally fiscal from volume inception savings for we are end and will Tennessee the Germany forward. much for to positive second spending year-over-year. second be Total Johnson and XX half outlook, they CapEx with performance expected fiscal which activities million the closure Damon a year, XXX by was year, a well to breakeven. performance year. and detail than to customer year, million as $XXX a on plant working will go going remained this This Total we in reminder, between total Essen, on. City, complete be now focused Free plant flow which with simplification/modernization us levels XX% without the the program and the normalized accomplishment current be of recovery. and this year-to-date approximately essentially achieved the expected excellent by result original of is flow in cash bringing reduction $XXX complete half despite expect the compromising Capital more is team target range the was out such and footprint quarter, figure of associated the million to on up cash end is sets into more planned. levels CapEx operating operating Based major service. as will by the million XXXX, the we is year-to-date capital December within of free

strategy. important as As announced you year recall, commercial changes fiscal we at the of 'XX, end of part excellence our two

I'm the purpose these larger the second, the Please First, while results. applications products purpose cutting presented earnings as progress with seeing We and the and offering metal that program on. roll repositioning X. to focused this tooling better the in not of quarter's is had our for updated cutting wallet. customers. our space of our market application to last address to segments to on out portfolio Slide capturing This direct metal fit resources, service approach business globally. a expectations dollar within two on initiatives reflect encouraged opportunity call up the and slide expertise tracking for turn are on the have we this better our combination share and increase multi-billion And we graphs a wins brand WIDIA and commercial Overall, technical options we by very served XX% for previously fit opens in

was to show right. one the the the the sales decline in the we reminder, operating adjusted experiencing Great time close experienced XXXX. the sales margin XX-month left last the company during on currently on a and trailing are As Recession Graphs corresponding the

is of already higher been we you revenue. control is to can see, quarter, with levels more benefits and the approximately on this in This And significantly we've profitability but the able stronger to combined have level much profitability additional note. due XX-month timely maintain that points captured, actions. cost to same simplification/modernization Two this downturn. As throughout of lower the

effect not the full day simplification/modernization. include yet First, rate numbers present of the do run

now see $XX million lasted the to has We of are an of summary, five these just are year. I'm starting fiscal results. by signs This yet about quarters. quarters. end And seven not savings this previous exited we The downturn. additional anticipating In encouraged we downturn early already And by secondly, the have downturn in very recovery. lasted approximately

markets positioned second several quarter as And the higher turn over last years. the are maintained review more executed downturn, have to the outperform initiatives the call We numbers I'll we've this that, well detail. will profitability and with throughout due recover who over to in Damon to

Chris, you, on good and will basis. with on and results operating Slide X Thank morning, begin QX everyone. review adjusted an a reported I both of

the sales outpaced XX% our of expectations year-over-year and seasonal a performance our sales declined sequential basis, pattern. the total organically. and On typical XX% mentioned, Chris As

basis X.X% simplification/modernization was actions control contributed absorption. offset approximately lower the was simplification/modernization XXX were quarter. the and year-over-year. raw business continued lower was of of million of year-over-year. from improved improved divestiture incremental effect Adjusted basis under business partially effect was back many associated XX.X% XX X% profit year-over-year year-over-year adjusted as X% or which of margin XX by EBITDA sequentially. the volumes and primarily margin geographical previous million, XX.X% up due and adjusted of basis due points to year in of to million income cost approximately currency quarter margin days a expected, of by each our had operating operating effect quarter, tax higher and Adjusted Adjusted XXX to and EBITDA actions negative temporary the temporary to The which due of basis XXX a the our contribute and X% XX% conditions margin basis in gross savings. pre-tax Adjusted effective control margin Sequentially, in the up mix. and XXX Foreign market expenses down points rate in up amounted points, benefits basis improving should performance XX was quarter. close the year-over-year despite to XXX The positive XX points points, cost rolling points materials

of year. $X.XX million XX of to share negative current the year our quarter $X.XX quarter largest $X.XX positive as and We from per XX% for compares levels $X.XX in the EPS positively significant raw to was year was The main amounted $X.XX. negative be of rate versus EPS a $X.XX cost offset actions. an basis, The per Our the the under earnings benefits increase term, share approximately since expect to year The versus the $X.XX low prior by be tax simplification/modernization, of 'XX. effect expectation bridge prior year and $X.XX brings of for This the to this for The Longer XX%. Slide temporary adjusted contributing per earnings continue $X.XX On loss quarter. factor beyond a rate X. absorption, materials benefits adjusted operations fiscal effective this to was to the from are in in both on volumes adjusted drivers GAAP in tax we range, effective associated the share prior XXX $X.XX control prior million cumulative in period. simplification/modernization the last the fiscal profitability reported lower operations effective on performance offset the negative adjusted and the partially our of highlighted is quarter. an $X.XX basically of or inception. increase This effect the by to negative quarter year

in decline negative Year-over-year taken with this As total Sequentially, continues the in be All which detail engineering, period. on renewable led XX% largest end more quarter. to improvement end experienced activity in and XX%, saw to COVID-XX offsetting simplification/modernization the bringing regions approximately driven low down portion mainly we but the in was EMEA XX% Adjusted performance year-over-year digits. improvement in our all the we of and X% year-over-year basis travel. actions to operating relative of points decreases cutting be reflects metal QX, million Energy primarily and X% temporary in volume regions. energy down flat by was with XXX respectively. and Asia XXX Pacific. sales XX% strength quarter other the X Metal the was challenging in market declined actions at Slides driven perspective, already the market gas the driven first declines at Asia raw savings performance to well more decrease will XX% in cumulative The offset above production declined across by China, regions incremental Chris India, engineering expected From end transportation which year the in Asia and by end oil air single in to the the XXX posted general XX market, our continued at X%. increase and expectation contributed X and of energy, XX% or which by prior XXXX. in decline an Pacific our mentioned, we of and was organically million Sequentially, simplification/modernization XX% continues best the affect benefits, that year-over-year, positive total a in mix, than quarter. in top Americas year by Aerospace experienced for be continues benefits was decline economic of with the a down mainly materials that basis levels general in transportation control markets. an margin Pacific the points. most by partially associated and followed however, segments year-over-year by the X.X% sales fiscal the sales and cutting year cost as declined performance announced,

declined Slide and the contributed Pacific. XX%, to sales partially the and by declined period. XX% Organic with XX% in the U.S. due land from engineering the construction end associated operating in count. year a which in we at and driven was experienced expected, down offset the rig of by were infrastructure mainly Regionally, sales customers their in FX weakness primarily driven up X% results U.S. of decline General which cost the by X% was by followed X.X% year-over-year, count. growth infrastructure. as points decline XX% Earthworks a X%, from EMEA the mining simplification/modernization a By on down increasing as to was year-over-year, X,XXX Sequentially, increased XX% volumes raw divestiture Asia days X%. the Other basis largest X in roughly again, market, XX%, driven in materials, control under end sales orders XX% of affecting decline then and an prior improved rig favorable market by for benefit Americas margin our of Turning factors of basis mainly at increase year-over-year, decline offset the the absorption. top were only Adjusted actions, X% energy, XX% temporary underground benefits XXX This in by energy was was points QX. partially year-over-year. lower improvement business

have QX quarters. that expectation will raw that stable tungsten is been around Our for relatively and materials given be for year-over-year neutral six prices QX

balance operating Slide to turning cash sheet flow. free Now X to our and review

maintaining environment, We has on conservative well liquidity, a continue believe that profile financial to ensure continue appropriate to our is to as the to the ample company particularly execute strategy. this ability in as

focus US$XXX current is revolver June in as the of within XXX our quarter revolver inventory. in remained notes, million Our as sales continued on XXX and two XXXX sales the percentage were end, outstanding had profile basis, we as well depressed. XX.X% and million primary given of debt our we year-over-year February made cash XXXX, combined financial availability of XXXX. to and maturing of to $XXX with million decreased Primary matures a million, increased capital of of well June $XX covenants. At working that million revolver working up capital approximately On on

due target primary expenditures capital capital simplification/modernization to and improved quarter million XX Year-to-date, flow is to to XX%. for flow were a expected free and operating in million cash stronger decrease spent Our to year Free the to substantially cash range remains is year-over-year million. CapEx million free breakeven XX profitability. flow as to Sequentially, improved lower be approximately XX ratio operating as capital million. cash our the XX of XXX also the with to can million. XX for on we've the the continue year. quarters, complete. and favorable expect XX paid have of our appendix. Consistent in more we the found from Capital XX sales working prior operating The full dividend million balance Year-to-date, compared Slide sheet last year XXX expenditures of spending prior be million, on

Slide call Before half. turn operating to flow the want 'XX FY X. discuss EPS drivers the free turn Chris, second to for to back I I Please and the over cash

expect factors this the slide with where reminder, will to highlights differences on half second basis simplification/modernization. slide cash details how show EPS been has updated The meaningful operating and appropriate. year-over-year affect a a factors to flow. these and free affect As we key sequential Starting how

first significant year-over-year we headwinds achieve control cost last mentioned, the in unlike in already to not fourth year. XX control year half. the the expect savings around cost to of of be repeat are reflective half actions we As the incremental XX this XX will of benefits in second implies million million approximately to 'XX, Temporary These expected headwind a of which actions, million, XX FY to million that aggressive with year-over-year quarter. million XX are million implemented XX in

the and accurately prices, the out the reflect the relative or control performance. XX headwind of will Due the we of will do in improved sequential phase operational leverage cost second the Based either half, not quarter, half. year-over-year place material face the year-over-your to material million a tungsten, effect actions current Given second have control particularly level last on QX be second not distorted in raw cost in sequentially expect to to actions a underlying material in temporary significant year of QX. approximately

in depreciation as $XX year the online. approximately and amortization the still million expect first to Although were half, equipment full for year-over-year modestly higher only new higher them be we comes

higher we was our expectations to of tax geographical income pre-tax effective our have for is rate year. fiscal which drivers, from estimate adjusted mix. approximately the lowered EPS last XX%, This rate year the tax reflective the previous also 'XX for effective Lastly, of XX% and improvement

mentioned, range to in year of In This both CapEx lower cash XXX second to and year-over-year spending capital million. Chris in is drivers, XXX terms be for free as the sequentially the half. flow million the already operating and I of implies expected

We in to to $XX expect FY now the and our approximate versus million the half. 'XX. restructuring represents versus to second cash original And XX the year-over-year in we cash expect higher year spent higher decrease by be both be expectation. restructuring a slightly million million XX sequentially full This modest

our free conditions, use capital we With and full a on market in in expect to the be capital, cash the improving half positive of second half. the conditions, we continued reductions focus our with now now working strong second market will the and expect modest be year. inventory Given improved year-to-date combined operating cash working

as it expect to be as Finally, relates with the single up to QX, digit sequentially we of FX. mentioned, Chris sales coming to sales mid growth part from high sequential

FX, X% We expect in And of to to single over that, of underlying effect the the with call turn organic our mid back the growth and sequential above I'll the pattern to growth, Chris. excluding be typical digits X%.

Thanks, Damon.

results Turning challenges this to summarize. by encouraged to despite me in let few Slide quarter, a our markets. our minutes the XX, end take I'm ongoing

to progressing initiatives and growth our on nearing with simplification/modernization Our track market commercial completion. excellence are well and operational are gain excellence drive initiatives share

with to optimize further customer service please that, of As years capital targeted to of allows of which we when profitability continue our adjusted three initiatives, the EBITDA shown cycle. line presentation, operator, $X.X are ago, reaffirming we for come throughout billion. of to strength The to as target XX% expectation began improving our to in balance benefits more that the XX% allocation, graphs sheet these while will open $X.X volumes sales the us the And and billion our earlier meet return, economic in and further cash margin the evident questions. the reached flow benefits range with

[Operator We the session. question-and-answer will begin now Instructions].

comes ahead. Volkmann today go Please Steve Jefferies. question first The from of

Great. you, appreciate guys. question. the I Thank

Thanks. you bit something don't I sort the I you little So, also about January you're more would off about about on love think And seeing to started words hoping well, mouth. Chris, just be that? January head I'm your us kind said what you its of you how into little talked modest that seeing. had in give sequentially up, quarter remarks a restocking and through restocking could some prepared to put hear color fairly whatever were bit a might poking want in your of maybe but

morning. Good Steve. Sure,

sort stocking we Asia I seeing said And the But and that. there as it terms primarily In China my in in improvement restocking And going haven't really of clearly the in was seen comment, Americas, saw of orders. level some Pacific relates was in on. -- to that evidence see month-over-month of we EMEA, some stocking we're we modest where just anything.

here activity. takeaway to see is So customers restocking starting I think still my Steve, we're remain modest But, key cautious. frankly, that

inventory. what share to sales to managing think changes said you it's value, us know, also inventory I in And China. by having high regardless to take parts operation way meeting be in our to weekly really a we've then of this So we're this this other meaningful in the recovery sort any to I But customer of planning than able react mover inventory high as moved don't levels, of and sort in quickly allow signals. to demand the in

FX, I relates digit the consistent think uptick mid in daily excluding January And you, activity, for of an of the As average that with to it it's the we quarter. versus average of saw sales that sort the in to that growth December. in say told it's single we of kind sort we've seen safe sort

Great.

think? Okay. the turned kind like a up that on counts that. little How I appreciate into flows rig your energy And business long specifically, then do they've look bit. of you sort the until through of just

growth the in a equal relates an count. amount. but on such to that is energy, low a it growth, some there, we're to As news we And modest base huge the will see the that frankly, are but seeing some not in we're good Americas rig thinking uptick going that we're

start of will. three maybe if That that benefit in quarter. you the fourth kind to maybe us, quarter, much in months takes might third it six maybe the but Steve, so to to through So flow not for to

pass fair appreciate enough. I Okay, on. it I’ll it.

Julian from ahead. go The of Barclays. Please next is question Mitchell

margins question infrastructure modest first the with trying despite to those understand to were the the down understand business just trying just revenue what Maybe in sequentially, increase. happened morning. Good Hi.

we're So sort sequentially? about what could the off placeholder us headwinds the just that then And wondered you if for have main understand when revenues, thinking half we in of second what that? higher should operating kind of leverage help the were there business

the was declined focus was you infrastructure Julian, operating sequential on Then, sales leverage as variable like. you as a can decline. talked you maybe that the on that as about a to But the that QX effect partially of point big offset and there Damon, volumes anything also some and bit slight temporary decline. had even profitable as comp issue. mix I QX; elements. sequentially. further all oil well raw better that materials. in came – performance, and had drove of some think from we off, frankly, business And these by And gas and that I'll add as manufacturing that a of Damon comment The out, increase But cost actions that a was

because metal was we cost So saw decline, little of did actions in a unlike largely a mix. temporary and bit we cutting, it those by dominated

a quarter -- $X added call for infrastructure over about environmental see a we cost million quarter. probably little in did for add the would have I that reserve our XX-Q it increase in as in you'll a of the bit slight

as comments, think very I changes in little a second have be at increases the as alluded leverage second looking is leverage, in would that my flowing challenging going to your cost margin you I think well. the To influenced half back Julian, half in. question the of temporary about to So year-over-year the about the as bit

of Metal slightly that absorption. again, I of we've past, said caution do in would costs the you all is sort to leverage basis try and just usually implemented actions in here around a really above skew some cost average As when half is year-over-year it with plus fixed infrastructure, last it year our this year. of the you, second historically, below control cutting as But XX%. these that changes, is

piece, to perhaps think the get year-on-year bit of maybe as leverage revenues at that's in see looking a start of closer sort operating return Thank maybe looking When closer such, to we cutting, can simpler to the not second we're as Got you. you XX% terms XX% that And in it. metal that, point. year-on-year that during to you growth half? but leverage do

in I coming -- back think we $XX in of second the headwinds, to have remember, million half year-over-year. in theory cost million leverage $XX

improvements half. you in from the as these that going referring here improving that to something QX to it's control won't repeat hopefully growth with by QX, the think sales even cost QX distorted about So level we're still the to in see of sequential be actions and we'll second

what that So I'm that's not optimistic sort the changes reflective downtrend given when leverage prior really of last anything do year going for to even recoveries, you see math on year-over-year, we of did you're our the and year-over-year.

good did on last when answer, what because they're think look them at paper, you we going to control costs. So, it's a year look I hard to to specific don't you give given

And at might way I look add, easier it to an is maybe sequentially.

number. than similar of quarter bit a the cost single they're And levered digit saw was of the margins the got in is going on And additional growth, think to $XX of FX. had more pretty third we've there's I we've depreciation this take your mid got way excluding think bit said a And XX% we some in second you quarter. off I actions. simplification/modernization kind million QX, because in to the about benefits, at Sort headwind what little be sort we sequential got at to

the of an sort gets that QX. you be That neighborhood it. may at in saw we all easier so what of And look in way to

Thank helpful. very That's you.

of go JPMorgan. Please Ann comes from question ahead. The next Duignan

negative, that which general mix On are sales. a that you of Yes. portion also cutting a was automotive significant metal engineering me and such or I said think your transportation given surprises

are that? automotive or could about low margin also So, either or talk particularly it businesses? margin engineering is just higher general you Is energy

Ann, when mix, business. talking cutting. talking business higher profitability gas I was I infrastructure metal about was about the than oil is and The

a I us mix was year-over-year. headwind for negative our think, Ann,

we've there as that as the was our It of because focused about portfolio years as were ago, the away several If simplification which the is aerospace, years. profitable profitability. down market, year-over-year. we It you the of you our we why that one lower which sort said, XX% which, growth our it down most was on is last part Transportation, markets think over from, most, was one know, best performing. end end that of the of of the moved was markets

also profit XX%. So definitely which year-over-year the higher Energy, changes, it's you was aerospace. lower when margin a about is downward think business the cutting, metal for

is in -- the metal it. mix effect was cutting, end that's but there more that market it a mix driving was So here

was flat cutting. that's no specifically restocking sure think Okay, understood the China's wanted it and was market sales in There's that. because cutting in mix. you metal end really I just out region, make remarks, maybe year-over-year. to called lower said specifically I And And but then in volume some seen we've I opening the flat China year-over-year. where been metal you again not there helpful,

we address market there China anything know need were flat? about why Is that? share? could So your to you in you losing sales Are

turbines, there. is see Asia we was also And transportation, transportation Pacific, an an which energy, In around Yes. of China did increase. uptake business wind in terms in

markets not beyond talking flat, I a it the to about So bit significantly to just expecting But well. sort recovered that already think little of it's is better, what we improve driven that pretty was done. when maybe but we're

in is did little a as automotive. But Asia, we to, see think, mix we bit growth different. of have comparing in every I company alluded Chris the again, what And good

think was Our is aerospace, a percentage. and the part transportation high in of business China a I down very there good energy, down significantly, which

China, mix which us, issue led So year-over-year. negative again probably was again, in be flat us that about a to for

Okay, flat. China specifically was yes, say because did you

I So that. sure understood make wanted I just to

up. Okay, get that's my it. I’ll question, queue. my the follow back appreciate I in

The next question is of coming ahead. from Ross of Please America. Bank Gilardi go

Good morning, guys.

Good morning, Ross.

you're bit cycle. I we next capacity right just over a could was how amount the about just if just about your wondering thinking talk the and little

was to to the achieved, billion back You X.X achieved EBITDA targets talked about your back margin in peak billion getting being you when margin get targets 'XX. in revenue, being X.X EBITDA to XXXX, which

your end the side. of back some markets as to infrastructure debatable levels, get clearly it's think those particularly I on

you’re would billion to really if my come much billion, the going normalized X.X conclusion think the how that capacity? do how you the peak below over that next on address a is to is And revenue to cycle? for basis X.X be you So capacitized question you

the plants Ross, a as way know, is, we're capacity about of our about the in thinking part lot seven you as So, footprint consolidation we've program. resulted that original done of

out, actually capacity coupled that the So of with workers think huge we volume, the we've furloughs at think the of modernized size be labor Recession, the that end have being to been factories the temporary do the able in using to of this and what low our because able We've amount or taken that today have to a will. of do U.S., Great all-time sits we than you the is seen. cycle for capacity out turns as one previous actually that it sized cycle if in we better lows we've in down the

good about to be good able because feel that. capacity flex ability pretty and to automated, our also then sort our And ramp is feel about of a lot of low with this up. So we we end

higher So we're I the ourselves downside able on at capacity and think up be see footprint. that ourselves we've current the way That's the I to ramp to volume protected levels. positioning

from raw Thank right beyond a of industrial a a And half. talk in a little just it. you material metals event but thinking got costs lot into fiscal additional there? now, have year? the spike, follow the about lot and have to margin on bit in we've Chris. just half that a And risk the a this maybe cobalt seen Okay, stock up material tungsten 'XX and of raw you recovery the are didn't outside. you really then spikes pretty little do going beyond second ability just But It is second harder of you, of visibility to dramatic the potential and are what could to bit the

[ph]. the driver material much especially between Those been sort infrastructure of side, Just for price the the metal XXX. of XXX prices big APT to have kind last on That's background, quarters. little the us, not six on so the over cutting is a stable this the

XXX. it in averaged think around I QX,

which got demand and happens, to then in is we've usually uptick the to So metal right, see, cutting see manage on of And that as that’s so the that. in coming we both slight side going a what a expect to to long raw we're positive. the when indicative And a able history infrastructure back, calculation. company that's be price

curve, we right maintain by of quarter, can that balance but we're the there. changes ahead the history It demonstrated Sometimes overall behind. sometimes the we've

we gas to our do There's these in there's prices so our expected those higher covered able prices that APT confident We and our to indication I'm -- in we've and in case inventory up. oil much manage of APT an whether a as advance. I see customers. as any price to It's we're of in off changes there, very go that don't been an the material kind I the push contracts. up the going to demand raw off move like In indices buying able the sort to been infrastructure, what's of customers. prices cycle, said, ability of And so lot industry. we've of So

Thank you.

question next Walter Please of Liptak The Seaport. ahead. go is from

I ask are temporary make guys. how to understand fully the costs we these back. that sure about morning, and want coming costs temporary Good

are returning to there about fourth quarter. So the I if and third that going XXXX split talk wonder bit. can the coming half maybe a Are costs more then? little costs first then back of you And in be quarter the

Walt. Yes,

QX. incremental headwinds XX about So and be about sit year-over-year, to there million said cost we million of XX to will XX would in that of XX

year-over-year about the XX in of of – That's call the year. QX. your So this back it for that headwind let’s half

we FY at of those per FY headwinds 'XX, QX around FY first look the QX first we cost place half and 'XX, half to that million we half actions of in are or will $XX due As first of quarter. so again see here 'XX the had in and

maybe roll we the as less here was started bit QX than that it actions in think cost those quarter. and second the a temporary in little just I around So XX off of of some

'XX. let's being do be 'XX, there's versus year-over-year this QX else fiscal of of So XX in should or And and of so then in million first assuming the cost of balance all neutral half first we equal, the the we half headwinds QX in nothing incremental call of year. that it 'XX

great. opening made switch And and the coming talk you're as And a begin to down. topics want that to think Okay, can you and for with remarks for comment I I the Europe a pretty what is little if expecting bit you Europe. still I about trends. up? some of inventories they vaccines reopen And about going recent wonder out, talk in production

-- current start would would to I at aerospace stay see could to sort Walt. flat transportation to we of there, from doesn't through we general EMEA, it, flat. But at energy and see like expect that QX. uptick levels. QX but flat will kind be potential in but to think shutdowns. I said, there increase still be maybe general QX engineering, as of happen, things recover uncertainty about an start think engineering, hit overall, if And an is their least In There’s that you

you. All Okay. great. right, Thank

Ronny question comes next Sachs. Please of Scardino The go ahead. Goldman from

for Thanks the guys. taking questions. morning, Good Hi.

heard XQ. you the question. So margin clarifying comment or I mentioned an just correctly, a XQ you that of in neighborhood Was EPS a comment? If

Margin comment.

you. then cost should Thank outlined keep side? XQ you temporary already And puts mind outside there in of any and what takes are and we it. inflation versus just material in Got XQ on

No.

as to. up alluded we'll pick the that I incremental volume said, think he's related EBIT Chris to

So the at second the mid costs overall but offset of end temporary cost you actions adjust directionally digits single by improving FX, again, these for as have be off EBIT, rolled speaking the the in that increase when sequential would the now quarter.

Got it. Thanks, guys.

Please of from Dillon Morgan comes The Stanley. next ahead. go Cumming question

the guys. morning, Thanks Good question. Great. for

to made around frame wanted just the for fit comments you kind of some I purpose. First, of

positive channel. to You tangibly, more But I guess competitors. of on managed your you've looks versus growth mentioned it organic feedback gap like actually the the distributor larger from the one narrow

a of other if the fit there? you So I'm for purpose of result efforts that's on there's whether kind some just going or share some wondering dynamics think of

Yes.

you're it move any look when fit I of XX% metal to it those towards especially Kennametal you look longer of and our at inside said, customers, we've when which right up turn period performance had we at coming fit of think are the on It situation. there about of for high cutting they even time. of given kind lot us in of kind applications type especially inside think I a never looking existing happens share though market to sort to our got of at over purpose out around, for opens that basically sort But really you customers. focused segmentation that factories, this for of of quarter, segment, tooling. be this can really on they And these focused us. same before, were didn't purpose tooling, A the buying being

see that that They're brand organizations never put it, things base, So, we're together to came application they before. broad if we've we we've WIDIA coming to as and and we business. can lot us us the selling repositioned starting entire their now of for win two are cover the a that to

very the very, things of by are We seen. encouraged some that we've

Spain out this existing roll and giving where globally, France seen applications. purpose us they're now with in we've opportunities we fit some these for As good customers,

stuff, wins early looked as customers, for said, for the us with previously had During I the fit not but performance to purpose. high

So we see we're share those wallet. getting know we when types a larger things, of of

way a actually you're that's to picking so And pretty share. definitely indicate up then easy

As know, share with gained particular we that customer. we've

So very good feedback from our distributors.

net a for the clearer customers. portfolio customers win actually for we positioning strategy our that their to think -- net-net, it's it's full and Kennametal win and I this the channel and brand a brings

traction getting I we're in about traction good organic growth come very it's absolutely purpose. reflect would feel to to as we more in, the So going this even for say that that we're getting. the fit start numbers

Maybe market Chris. Thanks, just wrap color. question helpful It’s end to it. got an here. Okay, up

and is earthworks have you're wanted underground to where out. mining to to what your of seeing between more construction business shake going customers set feels like of in positive level construction. Just It some on bit started sound kind a calendar the 'XX

within is efforts you've of there. acute wanted to wondering pressure mining where you the update earthworks. then international of before triangulate getting more it's kind kind in onto to And just first into the you mentioned if So the on all, can start I'm of more your side. us that, opportunities one

by be broadly, all and just budgets flat just of from across to state but be the start regions road be Like and flat regions. all construction. with expected comments continues I sort across flat But to me mining I would of basically affected some deeper to production we QX let on to said, make sort QX expect maybe COVID-XX.

sort of the projects. that putting some road So, is of damper on a

physically of get running out on site are or can't budget. states You the

kind Americas in and as metallurgical the and EMEA persist by And But going rebounded somewhat on think U.S., than that's market be But XX% think least that's expected some there from bottom. And COVID. there mining, in it's seem year-over-year. and Regionally, is we global to to mining. stable recover conflict an QX. know, fairly there stable thermal. this in [ph]. around at China's you coal uptick area. through think rebounded terms of QX of I was Australia we off trade with which tied does is that Appalachian will of has And what's coal, is dynamics. down more surface to affecting So we're the

as where into suited tooling we get such coal, trying good is traction starting our mining continue high good you So traction that's that And in similar to some well expanding were traction, we materials to adjacencies to are for then Africa and like regard. those to wanted we move with potash some in on sort to said, business. you then, And internationally get places if levels will, that of current and as South actually use the also get also the we're there. portfolio

great. Thanks the for Okay, guys. time,

of Cleveland Adam Uhlman The is ahead. from Research. go Please next question

Hi, guys. morning. Good

morning. Good

in share of as use has company second recovery, go that, the half with the given a processes, made any working I should in to modestly. mentioned investments discussion working get cash the Earlier of about to the into back the us beyond be capital. how that factories a you the could kind along wanted you lines? we think all capital revenue metrics think to But in that it’s sustainable further of I year we going about those

is still somewhere I to say target would ballpark the XX%. of be in our

said, to is a As use of expected half be modest second Damon the cash.

XX%. probably of ways And But for the return, that is until further. primary one ways those be So going footprint. looking constantly to we're capital buyers we're above our to to boost working rationalize

ramp help. up to become still lot reduction we So as up and factories. a the modernized as -- is And also those those ramping footprint that time working on an these only think it the manufacture the -- less us that not but process. working to capital particular impact because also more we're actually have on finished in in takes going things, will And processes in goods we efficient, of become inventory,

do we we’re able with So that’s XX% and the levering factories, than believe target, to should be that but better I do. what to modernized is

lines. kick remind those I'm next us can on of I updated the But we big along you. going you chunk -- Okay, there's then And you to of know how should the two? year volume. to or thoughts have a be curious in got to savings share dependent modernization over any that's cadence if expect

Yes.

we've back year-over-year. over year-to-date. here we XX around What is million half XX So I just -- done think, Adam, XX in another said just the about be we’ll

how plant numbers and based would specific of that that by savings say the XXX. on year haven't as this an the certain incremental a big given this XXX in closure revenue. are volumes numbers going actions to but beyond. that to put place or year more be point specific we will City we of FY currently we happen we’ll of we're that part you incremental we to and the But where the this bottom any to range at in the of are place contribute have up in there we Johnson latter And place. beyond for given what drive from just haven't to any closures We other your are as actions drive today, or put And year, 'XX, to line, given will that there like other ramp FY have savings is yet end in XXX than that to 'XX

see volumes you to savings there's that that FY come continue will beyond. So to as probably start and more here can 'XX up hopefully in pick

you. Thank Okay.

Please question Fisher is next The go of ahead. Steven UBS. from

that a that’s morning. of seems of automotive us you big engineering been market within the you're that Great. market to guys broadening Thanks. out any here. just demand Good and general remind of which general how the driver automotive engineering? just end like It seeing broadening automotive? by and nice recovering much has Is really versus Can driven is extent

You're driven we've part we increase in general The large is that right. think in engineering transportation. seen absolutely by is

pre-COVID starts in It's been our absolutely GDP what governing that as with most saw general the largely a to sense. transportation the from we improve, little going by right. returned especially to haven't happens QX levels of of and you're the have see We'll continuing that's in and driven some hopeful still the But kind QX. it's timing But transportation. Steven, for is QX broader what's manufacturers seen that there QX. they’ll increase part engineering. economy probably quite to space of to nice We're vaccine. sort And of starts expectations of return the bit see stay recovery trickledown But so return So uncertain. sort yet. We’ll and broader normal a that effect a have to actually far, for of to in to

longer it. are your a very term, obviously just volumes And bigger then Got model. here factor to critical picture

revenues that as upside, initiatives you to you're drives of really or company going potential perspective relying level do on think about do you billion so on kind the for? from to a just X.X margin for be So market much specific we growth that getting the think what high growth can versus of how

Yes.

share the But sort cycles. thing gain. of as ourselves to our come pick businesses think control up got when of thinking and as markets is the all how the do of out market I how would piece this depends look recover. these we can't -- way these on we challenging really it models We're strategic kinds we to at it of I of quickly we're course, planning,

a have split is and and share up the and that work really simply while wouldn't happy we're the every down. surprise timeframe focused we're talking the coming gain to to follow after. the we're if day on just about share me pick that's and gain market depending to. on up That's markets going that So it's rebound, markets we're XX-XX the not what It do follow

business markets Now, cyclical the obviously, a and move. do it is

what affect point to a in up regardless help our But at. going cycle that's we So the by dampen numbers. we we're higher can making that effect share, sure share taking have that of

Very you. Thank helpful.

next Capital go Steve Markets. KeyBanc ahead. The of from comes Barger Please question

Hi. Good guys. morning,

Good morning.

kind XX%, markets what's know people in the thinking we your under end XX% should about revenue XQ call on when context just January, seeing, sequential you XQ of of Just you to the of be thought at I in the to it's it's comp and look improvements XX%, here that? but are tough you're growth? how calibrate, over help thinking negative

The growth you’re talking growth? revenue about

Revenue comp XQ yes, growth from year. last XX% in year-over-year, the against negative

it. got Yes,

in we what might to are would look markets normally QX at now. the growth staying bunch see a X% range. from to of seasonality would of think helpful right X% I maybe QX be way is they This business sort the to largely the

think normal X% want that seasonality make you want, going But I to you'd want about whatever you the at X%. is recovery assumptions take think because if that, of least can would think accelerate. that to to higher You than you it to

Sequential?

sequential. Yes,

Understood.

be huge just know and quarters really about And gauge over factor I'm revenue a it's Okay. I the thinking hard But to swing to as is going the versus two conversation $X.XX few margin next a back, case, above that two thinking Kennametal simplification/modernization EPS as earned you that today, coming the this half had we've year 'XX? is that half in just are cost base that.

EPS giving not a specific We’re guidance.

about absorption we volume. different We're the As QX. even we lot you and said, of -- trying a thinking there's haven't given variables the

historical would As what Chris like. you look we're giving an of said, seasonality indication

the that best given think I right coupled the tax in now. you we fluctuation can rate, we've with the So,

given that we're any haven't full level uncertainty guidance of We dealing with. of given sort the year

it and So, at I give to right -- keep just think now you the we're going that

up it back would one volume? the incremental $XX not rolling million have margin XQ, way. expect the in looks I'll you more you XQ operating even or guess of likely a if I better $XX million just step in a Understandable. costs If because try significant similar XQ of to that's to

sequential from Well, a back think to QX significant see cost to that costs. again, Steve, incremental from we a XQ goes headwind sequentially is volume the we're XQ incremental or to I it don't to in going see QX, going material what from

So equal, if I flat you all cost think QX. increases year-over-year XX Again, some relatively revenue Sequential see line. to relatively is generally growth EBIT of be to an QX speaking, growth, would else the headwind that muted expect cost a sort million be top sequentially. to million should being would XX I comment. from related

much. Got Thanks it. so

is next Joel Capital go ahead. of BMO Please question The Tiss from Markets.

about of at them but at talked about levels to are if me their on levels you’ve distribution the about staying in. now? in the side or and kind missed to know all I they guys I where little beginning, inventory inventory you appreciate squeeze any I increase keep bit customer wanting color a don't

talked made and that much cautious. customers was think I Yes, about activity. remarks I But question. Joel, remaining was then I that had there said pretty we my what opening in some restocking are modest a

seeing. maybe of yet kind -- which because really side. Otherwise, indication -- nothing restocking surprise that in little increase the we're in most the did ahead you a that the the a recovery. doesn't of they're and a on not see little on in curve China, area bit maybe meaningful the probably So meaningful We EMEA Americas was

go sorry. ahead, -- And

What’s other of Joel. ahead, part Go the question? the

a to about when XXXX, normalized it are cash -- how free or guys your and you should about thinking past kind us was this just it? fiscal I we I we give say just just wondering sort all be how you wanted some maybe flow of a in maybe noise thinking if get of -- could

sort call I for and more the XXXX, the we we'll lot as a a not, there through in give heavy to Joel, net AR, we recover, of long-term into investment move goal. XXXX Whether said as are with would uncertainty expect going the how moved capital working these an But expenditures capital the to we're to we or ongoing have cash back that's expectations. in markets again, here. are of That's range not we've going depend basis. now get of But through about with markets because, on our what XXX, work XXX think this our flow specific rebuild on to here income our will is, how sort what simplification/modernization we markets XXX% lot of longer-term normalized recover. be of the

helpful. you. Okay, Very all right. Thank

The next Chris question ahead. is Longbow go Please of Dankert from Research.

can I fitting that it's morning, whether know just see in. for back just what or a it's still outside track we circling that is Is early traction days, Hi. per bidding a on sales metric order forward to national just kind for difficult metric guys. be but me apart? look it's level? of guess whether to I peel Thanks will going at kind Good of signings, purpose, fit there there is the to account average we too it that can

report to we'll triangulate perspective, something I that said, I own. outside externally. inside -- figure hard an that inside it Because From guys have that you the we like it's out current be segments think on already it's to of for will your

on space, purpose how we're rate against ourselves market a ourselves versus engineering, I it in be fit overall will rate can certain and think plan is measure largely at growth lot looking is basically for the to growing. then And we the end markets. what in that growth we're measure do we way which we're with the probably general commenting seeing the actually has to

one necessarily have So a that that indication. ability then better not of specifically indication And is us we externally. that will share discuss what -- is, understand something by we indication the better wallet and the But us. would give a though to sort customer, that's of have also for we

I from look we're growing versus said, to that fast measuring we're engineering at you guess continue commentary index. external space in we’ll what IPI can perspective, how time. So the sort a general and guys which doing client an of to this is one maybe I how IPI relative at you market But give on of sort

guess just very guess last guys Got driving it. thing in infrastructure you deck, from could those the of be you initiatives growth would if initiatives the And me. helpful. maybe highlight also share growth That's really I that the slide inside are, what helpful? mentioned gains. are within I infrastructure

has on commercial brought increasing a on the to a really about in there's things lot leader number of a customer brought few discipline He particular selling Yes, of We're process, going selling ago. infrastructure. and year there. We in value new a focused interactions. excellence the

coverage, more just that with process finding we're on And simplification/modernization we've -- get we're to we're on them we So of our customers by also are their focused what a larger and who starting really haven't that going we're in inside proposition a time, selling. value being called we that doing sales and reminding that increased to long disciplined is value and infrastructure. been then with wallet share great

better with So and quality, leveraging on our time ship we're ability that. ship to

got just of you’re result the that on that's the all U.S. because quality. gave they order And us from can right we a huge business, ship on said they order the and supporting supplier government we fact, count simplification/modernization. large a a customer time a basically with In a

I and in spaces of helping and potash we say commercial excellence expand would So things, operational said, as those are to I such us leveraging adjacent And and excellence there. some traction. then continue as type we're to to grow trying

gain do. still we're for true growing markets share business those maybe the not markets, right come grow to day what it and opportunity we processes infrastructure that's and work operational to excellence around is That's fast as down in are every to us spaces but commercial as doing. is there and that and So, other with excellence why

of the it. Chris, Got much luck, so best Thanks for and color, guys.

Thank you.

Chris. Thanks,

This closing concludes conference to our question-and-answer for I like to any session. back Chris remarks. turn over Rossi the would

your you joining today. We for call and support the Thanks, and Kennametal. thank appreciate certainly operator, interest for everyone

QX throughout permanently our we You well downturn well this recover is initiatives. will entire to benefits incremental markets market as improved the by Improvements really cycle. from the transformation higher these that us under We will cost demonstrated prior downturns. Remember results, as can increase, tell our serve get our way. continue structure profitability volumes versus as from levels

Kelly. If call, on follow-up Have you hesitate have Thanks. to today's a day, don't any everyone. please questions call great

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