Kennametal (KMT) 4 May 212021 Q3 Earnings call transcript

Good morning. I would like to welcome everyone to Kennametal's Third Quarter Fiscal Year 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 Relations. Kelly like to conference over turn the Boyer, would now Director of Investor go ahead. Please

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

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

forward-looking involve Officer; and me and President Risk statements. attention Executive results, I Joining actual those your will materially to direct in that Kennametal's the and as Chief for and and expressed time, and are call 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 Rossi, Chris could These the such, Damon uncertainties or our from Factors detailed Financial on today 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

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

of modeling expectations. and quarterly then comments and more results begin QX the thank the Thanks, review Kelly. general in call joining today's financial assumptions morning, with you us for brief QX review some for detail. Damon and quarter I'll purposes And everyone. will Good a today.

a mid third questions. driving and I'll X, organic year-over-year our on our expectations, challenged, end-markets reflects to year-over-year the saw both sequentially year-over-year generation. results, Slide of quarters the some a encouraged XX positive comments decline and for increased to prior-year. call grow, Getting a summary X% growth reflecting Asia-Pacific growth engineering sales we are while the operating flow before continue are in aerospace and Americas of first declined lead top sales Regionally, make leverage be presentation, the XX% respectively. but Transportation improvement. returned in Energy QX to solid market by continue with signs to basis, time high both negative quarter improvements the general for I'm and which on EMEA sales XX% still our in opening Finally, outpacing On cash the from seven initiatives. showing on and single-digit and basis. strategic strong

regions However, improved sequentially. all

structural as come sequentially the savings to to the Operating costs as business. sales detail. simplification Our XX%, control of a made we've more Damon at through modernization. but up temporary stronger margins cost continue into remained flat a which points year-over-year back improved lifting manufacturing XXX margins improved is actions, basis and continued cost the in Improvement of on despite in discuss testament will sequentially productivity was percentage sales and sequentially really expense

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

throughout we the share recovery, and focused But of temporarily have improved, and and gain shape trajectory our suppress challenges we'll markets strengthening, COVID-XX our we're aimed customer from growth these conditions profitability effects uncertainties, recovery at excellence overall, our So sales chain recognizing as commercial these pleased saw of execution, QX. the regardless Therefore, market however the on in do may because in strengthen continue uncertainties supply more initiatives if cycle. restrictions operational estimated even may with the mid-single-digits, we have sequential the stay in driving to what end-markets materialize. of the that QX, we not regions and in of expect some improving executing

$XX we $XXX year-to-date with since is excellence, fiscal continue for savings operational year, sales target this million a much simplification, to For which million million set execute in program monetization, inception, posting and spite lower in track volumes. on $XX line originally incremental

encouraged For COVID-XX further. commercial initiatives, excellence, restrictions will of markets recover quarter lifted, our results believe I'm accelerating other again by this and are as progress and and growth the fit-for-purpose continue

pricing In a well based continue costs. process changes as in as we on addition, added, execute pricing disciplined value reflect to to commodity

costs segments material year So the increases markets changes cost expect recover. both business raw until reflecting pricing in We XXXX. expected in quarter, fourth the us fiscal do recent material our planning to as teams in not early are in affect raw actions the

you As do an expect for material with demonstrated to cost and raw have economic ability offset price so current historically, know, increases we cycle. this to

income, call, Finally, the operating this to net lower of as I mentioned outset at and reflecting quarter, management, capital strong productivity, was capital compared improved free the working adjusted cash particularly when spending. flow strong

to turn on for have Slide past downturn to performed how let's Now we an downturns. X relative update this

last at one the chart. hovering Great is Starting the and XXXX. with in that The Recession level adjusted billion a current we've during to sales slide shows was chart two and see level the the right time the been around is sales of $X.X corresponding the operating on current margin Also for elongated billion and downturns. the close company XX-months left XX-months more the that is similar quarters. XXXX reminder, experienced $X.X the the trailing downturn decline As for on of trough the sales the the approximately left trailing chart, note current

we profitability been the significantly this on levels have you to chart maintain higher downturn. that the profitability of right, throughout see can able at looking Now

by margin and compared Damon operating to improvements adjusted detail XXX we've QX to recover due positioned With provide last there's will on more which who the and expect to roughly actions of adjusted that, quarter, outperform summary, this later. I'm cost This over higher and both because modestly executed control third demonstrated markets of structural will downturn more the Damon In XXXX timely improve taken the encouraged underlying maintained basis year-over-year year. profitability last and turn operating I'll years. With we QX are margin initiatives to quarter QX improvement over the the review in points to made, the call the results, to several as aggressive We've well leverage margins, regard our quarter. detail. we levels further our outlook the sequentially, and

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

the in Year-over-year essentially margin the flat, pandemic, difficult temporary the declining last sales QX year, sales approximately the contributing with and timing the given the are Year-over-year were expectations. effects X% quarter. of basis, cost and total ongoing outpaced on end-markets actions comparisons like mentioned, organically X% energy. Chris in negative and As sequential stays aerospace of performance our X% our FX business

of expenses adjusted in profit continued percent these as was gross XXX basis up are basis sales business. a Although XXX not down and of margin points, improvement adjusted underlying reflective the were XX.X% the operating points year-over-year, of

basis economic low performance volume environment. reflect evaluate from last our of current performance a as Slide a Given business better sequential COVID-XX more shown of our walk pace decline the the Sequential it’s to on X. recovery although underlying and still in year better the on magnitude normal,

$XX adjusted foreign the you million sequentially, As on bridge, and exchange, million income million. improved improved including sales see $XX from operating can $XX

more associated expect lifting margin see a operations of gives is commercial improved with reflective continue $XX but the reflected It's type and headwind as is grow. of and to the profitability and actions would going approximately us temporary The that and performance of cost sales, under Continued that in well representative excellence this of was bar million, higher normalized as our sales to we what as working, sequential productivity, conditions. QX are fully manufacturing confidence operational we'll initiatives continue that forward.

the related in see to to drivers changes quarter. amounted the affecting X, primary $X.XX the were $X.XX comparing last in markets year-over-year in you resulted to lower less aerospace making lifting and cost year-over-year of of the The and pandemic in contributing effects negative temporary like to onset mix Remember, factors year positively of basis. the favorable effect several can energy, adjusted EPS control comparison Turning more year-over-year negative a the this the quarter compensation, were The effective on $X.XX, the Slide that operations last prior-year to software year. main timing end the production, actions challenging.

the the year, First, reset year; reduction headwind of in simplification the of pandemic in benefits full levels of quarter; quarter not our finally, until production not creating This program due gas fully quarter was savings last did and the the was in higher $X.XX, at $XXX cumulative voted year total monetization lower this last until year-over-year the were totaled were reflect to of the cost severity quarter to and or the fourth QX, our pandemic. the million. starting third this not oil quarter. QX still felt third as fully bringing million Incremental second, the $XX majority factories effect aerospace evident year-over-year a variable last activity compensation

million year third this As and for be X cutting flat $XX were of quarter quarter. despite Slide Chris program organically savings prior-year the from our a with decline the in the which and approximately that approximately end X original is of million be our this XX% to benefits target total year, line in $XXX lower in volumes. the fiscal segments mentioned, our cumulative will period. by performance the Metal of simplification versus sales expectation monetization details continues

flat from in pandemic timing the to onset The COVID-XX this operations quarter cutting plants. despite first other increasing and the the challenges, the of in XX%. escalation led cases operations despite were grew end-market like down over year-over-year, the strong metal Asia-Pacific reflects and performance was customers growth all XX% global the year. that the we up Note closely monitoring high-teens Sequentially, performing recovery buying performance year-over-year last the in positive lockdowns. with in EMEA their in potential year-over-year. increased activity sales of India, engine quarter India, in consistent sales assembly end-market consumer on nine which improvement the the supply Americas by recent and a a China chain best of up sequentially, basis, economic in relative Transportation on the XX%, saw and sales activity more effects On returned transportation, regions. also XX% quarters. resulting had Asia-Pacific in effect were greater we're the increase the regions on X% to which

However, we the increased stabilize of momentum to dampened chain expect in their from able disruption are temporarily until the level this be to the customers end-market supply. challenges, supply given semiconductor

with market growth, also year-over-year, other Aerospace challenging XX%. up to end-markets, continues levels engineering sales year-over-year affect continues as XX% X% redemption with returned air down the general to to COVID-XX For travel. be declining energy sales and and the most

Although X% still at of low basis improve operating improved year-over-year, X.X% points levels, was from sequentially. we Adjusted aerospace but in QX. sequentially down see did XXX X.X% margin

As by production, partially cost decrease the by benefits. numbers, other increased controls, and prior-year mix, with lower simplification of lifting consolidated was driven year-over-year primarily the compensation, temporary offset incremental monetization

total Sales and earthworks by X% regions offset associated Turning X% with year-over-year sales prior-year again X% was margin energy growth declines by end-market Americas and follows disruptions declined EMEA foreign Knowing, were a last X% prior-year decline COVID-XX on that to basis was cutting across with performing quarter. improved for respectively. X% the declined the in of metal this all effect partially Adjusted sales the both the negative from engineering a drove XXX positive and infrastructure. points days. a negative factors X%, XX% growth company Slide driven year-over-year, a declined period. benefit China, organically to Asia-Pacific of at increase with similar business fewer Year-over-year, in from sequentially. of XX% in infrastructure rebound in negative of year-over-year Sales led easing China, the Other declines and exchange XX%. best to down offset figures. X XX% due by general operating of in of end-markets and XX% top XX.X% the affecting factors

per year-over-year FY the we Since remain of $XXX sequentially. tungsten will of us As in this Increase has affect and raw effectively calendar the metric begin expected, costs raw price quarter materials around and in a mentioned, as fourth early both ton. cost period confident approximately price quarter, these were increased XXXX, to Chris material neutral XX% of tungsten the year, material start the time pricing modest for more sold offset correlated prices increases as will in the actions. to over costs in margin create of goods to sales our a benefit tungsten lower market we In ability time. with continue certain infrastructure recognize to to

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

to that to financial We and refinancing successfully Having completed is of profile conservative a our continue to the appropriate XXXX continue liquidity the debt strategy. notes repayment believe our US$XXX $XXX our million to quarter, execute third XXXX, and of ability XXXX. XXXX ensure matures two well profile in the is up in as new million as and that maturing revolver made in a notes,

Consistent of year-over-year Given capital target repaid, inventory. Primary prior-year expected, $X to XX% one in expect million $XX But cash the this year we $XX due $XX sales the complete. Slide prior $XXX we cash million. and expense expenditures as getting increase. due quarters, working balance a simplification/modernization and sales CapEx. of we given new continued rate flow recently the versus availability $XX sheet the improved expect $XX profitability. the versus expenditures as bond combined working for million. we've paid This prior-year the interest period were Capital capital year-over-year of focus quarter revolver historical sales lower Full to spending interest last quarter million management $XX is free $XXX from lower on operating capital rate improved this quarter Free million from $XXX approximately remain the spent on down in had remain operating quarter of level the the levels. capital to to approximately million above annualized depressed to back from committed of can the substantially year-over-year and on to for quarter-end, be our around run be with million, at On $XX up to million. to as we At dividend cash and million decreased we is primary percentage of flow million our Sequentially, million found XX.X%. $XX increased be million. improved Appendix. basis, Year-to-date, given to working the the approximately XX

to and Before Slide purposes. I assumption we slide I flow. turn on summarizes modeling operating back QX to our Turing factors cash expect Chris, over to spend call to the want key XX. how affect minutes EPS free few This a for QX

savings approximately FY leverage As expected of to already related within of sales in sequentially, Simplification/modernization in million fourth expect and business million the temporary confident up will will continue we which underlying to the $XX $XX incremental expected are mid-single-digits the be approximately mentioned, Sequentially, the our there range. is actions. control that operating year-over-year XXXX no quarter. implies of be headwinds lifting to cost the be

a $XX in headwind on be reflecting the control took compensation, and million year to control actions actions last a will we cost temporary of year-over-year incentive of aggressive the of $XX basis, million the furloughs. significant form However, cost elimination

XX.X% this effective tax full-year. be expect compared to the approximately XX% for We adjusted our QX XX% quarter rate approximately to and

geographic expect items and that to not of which upon tax expect mix which rate raw slightly depreciation to and fluctuate earnings. year-over-year. However, sequentially the slide higher itemized amortization, on are the materials, individually materially do or ultimate be include we not different we depending QX sequentially the be could Other

in Chris the mentioned, FY and As us initiating fourth increases ability business these confident segments begin will with material pricing raw not to until offset costs in to rising actions we're both early our affect quarter. XXXX

the is million, of cash free terms year spending implies operating around $XX be flow QX. approximately in capital drivers, for to which $XXX million In expected

approximately continue be cash spent full-year $XX expect higher to to the million. restructuring by We for

restructuring million QX. the year-over-year, payments approximately $XX lower be million paid around higher will in around As cash and such, versus million $X $X

over continued and use modest to back And conditions, a I'll our strong a inventory to at sequential level, capital cash cash market improving working the QX, be expect turn we positive Free year-to-date, operating slightly remain and sequentially. call year-over-year in QX. Chris. both to of with in lower flow Given expected albeit reductions is that,

Damon. Thanks,

importantly, XX, is just cash few Slide to We minutes leverage strong summarize. Turning and range. by sales, encouraged results a underlying And manufacturing this operating posted quarter. most our the performance expected our I'm operating me flow. to within free let take

billion. well Our gain, share profitability, are which focus achieve ago, us as excellence to $X.X to are economic from progressing cycle. commercial these the three while sales flow us share the benefits will future optimize improving benefits the margin of that initiatives, of throughout EBITDA volume growth, as And when XX% on profitability. please expectation capital years we operational questions. drive to increases. $X.X strength XX% more The margin to shown chart our the in and our range of confidence operator, in gives and to initiatives with evident improved customer billion adjusted gain continuing market allow allocation, for began reach balance the to and come and to line open with sheet And service, cash This

you. the ahead. [Operator at Thank begin from session. Instructions]. Please We'll And Jefferies. today's first comes Volkmann Steve now go question question-and-answer

taking it's Hey, guys. okay, I'll good here. Maybe Chris, question. for the Thanks short-term start of morning, kind just if

You and intimated bit, I relative give you don't things can in could Thanks. they I'm the you? are those your or to that and operations? uncertainties sort sort those us operations on little uncertainties? just of a fourth for talked where Are better guess can those your for own uncertainties wondering And of customer a some out us number flush maybe quarter of if about little what color you that happen. if a be things

Steve, principally Yes, with our customers.

EMEA, we and And that's there, these the chip And buying obviously seen have seen accordingly. in that driving has dampen transportation and especially remarks they'll India been temporarily depress the that's demand. had transportation, and think Damon going recovery behavior, area. nice that situation could that. that consumer those COVID prepared and lockdowns things it. are driving that's lockdowns and his -- so some potentially driven adjust in production some a demand, to That's a to by issues recovery transportation perspective, the also from issue are a then, mentioned as the really So really has that schedules And nice two also they which it's

Steve, in And had our these other basis QX. some didn't some forecast about that. we that anticipated these effects of of really we fact, we and than the effects, know that's especially for We in the So anticipated supply of India -- and much really seen in could may expecting because QX, worse. have that didn't chain but see in for it the actually automotive we may gotten in situations have of it we QX that did are QX happen

Great. quick follow-up. And a then just

the fourth You mentioned in then then how XXXX? does the bit like quarter, back first, Is that times get the play expecting you the a out in remarks, longer-term that? about a a a cost it you're headwind of of the it perhaps or first And in it price how are you tailwind headwind that's a somewhat bit sounds in half? a in second like half little prepared number of and thinking in little

you fiscal to bit know, for the price XXXX, cover at XX-month or way we at in behind. think look and cycle, you year will I period, of is as it little think And, point little any any a the a be sort Steve, ahead the us. can any that

the running material adjust, certain Damon that said, materials our but and contracts we lower So customers, of through cost infrastructure, the certain as P&L. we some still price on for because have example, see

the has you So provide the of reverse in as price situation tailwind then and changes, little And that a can of the have bit regard. down, come that. that a

our second think just plays out outlook. year, of or have would wait not way comments really half headwind So about frankly, And half I tailwind, FY I part much first QX. the be of that's see the it guess for a I of going we'll make to -- material or those kind XXXX to for a there's and next and would I is, it how as of think

ahead. question Please next today go from our And Julian of Mitchell comes Barclays.

morning. Maybe quarter the margins. the first fourth Hi, good on question just

rest about around is we're that sequential So a looking should operating quarter, incremental year-on-year, I sequentially or level margin was but leverage and there's sequentially, and QX, above? of that think about we When of the way is sequential same think that so in at cost it, roughly headwinds fully the understand it? the expect, XX% maybe right to all the third mix temporary touch the

margins. When that. you of that on But have sort about some that we said also said, of absorption Julian be fixed costs top expect that's and you talked Yes. XX% that would see is to we before, what incremental that there'll we number on

around So for you used phone on us. seems the the to incremental models. of sales of XX% your model have on And the that some reasonable

think about that's the incremental sales. on leverage way So the would we

the you. of neutral we XXXX, assume can Thank very temporary net That's and to sort of modernization at helpful. And look relative kind then savings, costs. if simplification full-year that we

a that about assume so operating base, to of whatever sort And for tungsten year, of function then, next thinking that? of when we beyond really want from we're margins raw it's sort including And XX%. materials number of leverage

think, I Yes, Julian.

we up. specific half wrapping to point, given this of actions $XX affect about the next So in simplification/modernization, outlook us first million we haven't your will cost temporary year. is for of that have But a

things fourth inflation some I there would on two. this City, still I to in other incremental have wage the there with the though we will at would that in be we the between things look be deal we I year, year-over-year coupled inflation and actions quarter with the caution is think top probably cost. regard to done actual to you of that Johnson close executed temporary as to of remember, have say related

not simplification/modernization sure And by temporary so fully plus that would inflation the offset savings. be I'm

the that have looking modeling, as XXXX technical all fiscal to said. something of at team we're I management look those But so that a to modernized seeing terms things we factories. mean Damon our the kind in I as as factor forward Julian, of run volumes year through

this year operate the able going equipment. that to to be up ramping in year XXXX. processes really are still new first we're with But to we be it's even Now, going fiscal

profitability, so about opportunity to improved better and the customer really we're And gain for leveraging share. that excited footprint service

a it's that from So of clean you year kind will. like perspective, if

from Ann with next our J.P. Duignan ahead. question today Please Morgan. And go comes

a just heard both Thank terms you've in the remind how business is most unique. one Can pronunciations infrastructure, important it if my cutting, us that dollars for size that please know different of cutting us? of of you. big revenue metal and up infrastructure, I've India called of lot if I but was name probably you is you it metal but in

we India what a overall don't, And Asia-Pacific Yes. we We've specific quarter, country be China it's that, so the plus, than is biggest is the it about behind XX% have of than not about again that said country, in our and broken revenue. as percentage. there, for was or out India XX% said so, revenue. two call have or overall slightly of number directionally, we our would the China smaller

quite still sizable. But

Yes. Yes.

And facing? supply tungsten Okay, chips, could are issues facing today, you're spoken you days saying you say what that's rank they other the about last them chain talk CEOs the labor can than shortages? of And seen. you helpful. number the couple that's you of something. issues who then, other Thank you. and in have and if worst Are any And I've to this ever seeing is a as order

you're they're what issues all both from about chain And other a us side. perspective, a the on from just materials, guys So supply labor that seeing talk the little trying from is to how raw to could are if about and from cost; bad deal with? bit you you your

first think supply prices script. And, cost Yes. issue, which ability the have to that And but driver material, you supply in APT. as adjust to not we addressed we the well is accordingly. ability the know, the a perspective from And the is I the

those that's seeing the delivery probably guess But that's small things second kind not we our the it's perspective. material. is second So is is offset. but do pricing part again, of that APT. steel of driver we're important from that We cobalt. a really price that's to but issues, do we a the again, believe And have a overall also escalated. in of a biggest really materials, structure, can our proper all spiked, cost steel, really terms then such distant And case material perspective And in cost of not second; raw I

labor do. experienced as far in perspective, were shortages, As anything we more would than our from we not normally

small competing with you we because sometimes back they're we to As or on or to have they're can't want plants a But other not all they it's situation, get know, come in companies. and don't towns, workers off work. unemployment something,

So in was of there fact people. the operators machine for not our as is And always high that's terms of customers always; matter and of a technical were our sort situation. demand customers, experienced tool

towards companies don't automation. of are current have the moving like dynamics kind I been So that lot challenge. think that always situation, by COVID more been It's that's of the a created affecting one of ours reasons why a

So they experiencing we're and their thing not that really supply chain there are types they're can't we're Kennametal. of another seeing, company supply seeing or really there that chain issues steel, the the of not where get is shortages from of board I on in sit issues, of material suppliers, because type

Okay, those out; geographically some having helpful. spread guess I small I'm that's occasions. factories, helps in

rate could remind just Thank Just for there. you seasonal for I leave us modeling the what would versus QX you. purposes, normal it growth QX and be

X%. consolidated to sort Yes, the of seasonality be X% typical would on basis, a

our BMO. question Joel comes go Please ahead. today from And next Tiss with

how's it guys, going? Hey,

Good Joe, how you? are

All right.

cost, that know not of of of ready just to all lot price XXXX. simplification, some little pieces the a So I when that. us give and you're a clarifying other And But us about at gave more coming you can and you the, sort costs guidance won't incrementals And that coming sense help you look or maybe do you you second are to in about a that? half sort do we be us of through? how more a give back? see Can the of first we clean year, kind guys think going the it'll just half;

Yes.

material think to that temporary I when or about to we'll excuse think to, as overly We Chris we we to that will continue give continued will year, Everything But if Chris actions million fourth the about talked to here, first year, this we as updated price timing lot I point alluded guys quarter again, be we saw our depend current quarter. as look me. Joel, about expect more in volume continue think, you be information cost see $XX you concerned to QX. see see year-over-year related did your a And we've to as today. improvement, million at To $XX there materials. don't so of we're alluded last third optimistic get around we'll on half, I another the the that in start though, the have headwinds in to the raw we'll to of see we're fourth else quarter a versus in not we call. the it as leverage

And in to you that kind sort million same depend all year flow, $XXX $XXX free else first think a to going flow of rate we'll normal kind operating free of in a million cash the at on uncertainties? or clean of or vein, still everything cash sort run the how about a see run that's of on

a else $XXX in heavy what going see, year. not I the primary of to next maybe relatively obviously, behind on you this how call XXXX, yet, we're job year side. job, to is that has working done great a out, don't at from going inventory cash, as the done influenced with we're around slight it again for uses this team material Everything receivables would is year, AR to in by just give XXXX related recover, be neutral, phenomenal assuming markets million difference behind see expect capital trending you a I but we'll a Again, is a use tell top-line. we're and the an Joel, outlook lifting pan simplification/monetization payables us, capital, we've

you. some that or Okay. way And the a last seeing that us and then Chris, of you much the give you're passing other forecast things one you you Thank not can kind any were just color the trends so oil little some give bottom, of mentioned little about one, that just of for sort confidence? aerospace

Yes.

on in were as not in the to side, expected, that was energy was be our count year-over-year think as it wasn't QX. really much QX. the I view surprised what positive in And should picked think pleasantly up or going fact, I has rig that we turn that

hit and gas, far the infrastructure and the And noticed considerably down strengthen. thing see the when as did that that The think other cutting, in forecast was but still that's and few metal is as customers, side, everyone their months, that levels it something okay, to down, and out, to our to So noticed year-over-year, we its two or And I've that come a sort it years how of still that's of is for to of sequential back? Damon mentioned as Americas trying when aerospace long COVID-XX is get or maybe XX we've to going going improvement. were course, first at they some went is we oil going predict but that continue to pre-COVID take to back less. aerospace years now predicting maybe

So both faster. that, on even could basis, aerospace. moving optimism think from right to news it encouraging gas starting that an and energy pick-up it's good there's that to But And the and recover in it's I some see sequential oil it is direction. a the was

by So we're encouraged that.

Dillon today Morgan our ahead. And Stanley. Cumming go next question with comes from Please

guess, performance A&D question, Thanks of holding and back mentioned and company. of want And piggyback of targeted off Are those next to of I that some saving initiatives guys. of have you you towards kind of Joel’s Great, like kind with the capacity margin kind excess good markets mix comfortable still terms holding negative for actually just question those kind job in rationalization was more you recover? that footprint energy Damon, there think feel the still thinking kind impacts or the the end until the morning given and year, of of end-markets? do I of you some about manufacturing

that I for factories facility we part are Dillon. Yes, these end-markets sort don't make the that any end-markets. many products as of to of serve rationalization. will of our expect do Many

it's rather deal that than up. us, an that more being factory And itself we within so the for absorption tied with, facility

the here Again, as footprint operationalizing we're expect recover. to of So leverage at XXXX, to I simplification/modernization, we're the that significant Chris as related the said we've end anything we're don't said, equipment, in volumes ready facilities.

update can the reopening get just kind it, you're now got you of of to Okay, bit, that's initiatives, Damon. helpful. then able are wondering maybe on things customers if And progress us maybe that different front Thanks in a out bit a more.

few progressing? kind of of I quarters for breaking now of kind a consider guess forward, how of seeing revenues out So kind now, would measure of you're the going that you get initiatives are kind ever out been you’ve fit-for-purpose kind there. just a just what And of to of those kind curious, traction

very to talk convert would fit-for-purpose that Yes, I COVID-XX point tooling. that how traction this good any Whether customers getting also your question the interact going, them. Kennametal other it to restrictions think with becomes just brand with in space. to your or lifted, to is are as we about that were answer be easier customers, And

if as getting to, get continue restrictions even the So to that's better lift. we're traction we COVID going now, good should traction

In terms I the measure general, and that as think competitors of of to general about jeopardizing area, let a in question competitive of where out how without But we separate lot say of to market me can out engineering like sort sales you granularities would we're talk our that because it of just the appreciate that your you about separately, is fit-for-purpose that I some that actually, we're at sold. at information is look sort going information, break if But item. can think relative stages early don't to performance thinking breaking it about, you a of have.

is customers a growth the wallet. is attitude of believe their were So target larger do the growing. that account area. have market fit-for-purpose. we're one performance is we at we how largest of And it's of And markets the that that far, again, things our thus versus one for market look outpacing want then we this in that we process, and the thing, approaching targeted with share And this our we other we

understand And in this our we then as measure customers existing from that of today. so spend future. also what look then and we're much is that we share. application believe tooling customers their And in well again, space that, we're at can we new we called getting gaining the And fit-for-purpose, complete adding how

two are that feel indicators to traction for allow comfortable we're this that those getting fit purpose So good in us directional space.

And our next question with today Please ahead. comes Fisher from go UBS. Steven

a Good headwind it that my calculations? follow-up headwind that of mix from really some somewhere mix around calculations, you my the $XX million just impact in much confirm year-over-year, year-over-year volume to lower the what assuming of by if there was from about you Is of Thanks. related sort impacts, right morning, the wasn't could year-over-year. profit you your had understanding just wanted on had

breakout Yes. you, would I in comments. alluded to Steve, we tell or my I it disclose don't mix, as

factories level of that infrastructure, as coupled year QX That in getting that significant all you're than of with So again, cutting, so through they then this were effect overall and aerospace profitability, a at. you some delta the obviously sort richer as energy on looking together, year. the in the metal the and to That and on issues coming mix mix saw were you at last loaded year. higher a had this

getting as year-over-year we've a the And on basis? you Okay. the gotten into fourth quarter, headwind seen mix already smaller have

end-market. lap effects in I do we say start energy, on a the see, example, basis coming and bottom, aero I headwind indicating the the sequential Yes. and think is Well, they're the growth both regionally as was as off COVID-XX for is year-over-year near going that, bottom. we the mentioned, to Especially to you then and by

you So be less it'll I of less think going and a if conversation, will. forward,

volumes, in volumes and yet positive in or to the the that year-over-year is still come? and you call was lower that did flipped quarter, February And March, you the in Okay. entirely that inflection January see that

I'm understanding question, he's what asking? the know Not you sure,

Yes, break seen growth. I saw be as production. you a it. think to I I sales or don't the giving improvement; have quarter sequential we alluded out as more through Steve; to, look mid-single-digit we're think would of the Chris way at move that But really we monthly we an We given guess outlook

next with America. Bank comes And Gilardi from question our Please today Ross ahead. go of

or have done refinancing, allocation. on your think of bottomed, essentially think you guys I markets does away have too. that something that. capital And a with be dividend lot FY seem how M&A, the something potentially is or the on that your you're thoughts influence allocation. reduction question capital debt like mean had to have and just markets increases, a follow-up you a from then you more and done I on year dividend restructuring, to buybacks And shift XXXX, protecting it offensive really I as

Ross look take XXXX we're us, still we alluded on Chris said FY XXXX on the past, for I to, at feeling approach we're going allocation. we're very capital so focused in the as as in think If Yes, we've obviously, to market is FY holistic here a good. continuing, liquidity

against to Now simplification/modernization, have that at to not their continue these return, look be size. that. standalone smaller look some of at to would these in projects improve you've and smaller before, scale But efficiencies, high us we're may returns at we say we'll backend own heard will part the have simplification/modernization of

We at opportunities. have inorganic said that look we will

feel we look know businesses looking look can or we sort in we the footprint will how on indication can that value the I likely it. the the where new yet. either our things we're But XXXX. leverage those, if know think for we're don't the and buyback, directly; to a of And And in FY share price the plan returns going access that's we're We'll at the returns dividend back increasing either be we find we shareholders. size I direct we bring indexed going more the where customers. that's our to more of we're form our build as of to in to whether bolt-on markets type meet that don't right for that to under the

$X.X I to I unflinching that Okay, margins, implies are your EBITDA great. just to at margin guys then fiscal even just to the XXXX think longer-term fiscal year. margins this have XX% Damon. peak. XXXX that will your I XXXX though seem the restructuring fiscal ask do and $X.X just saying to a billion in commentary finish forth. XXXX, you numbers those in on over EBITDA so back did been incremental at billion mean XX% we in And you actions for, substantially want likely do and math, did you Thanks, I mean, to if But revenue under still sales. you you you be can in mean, XX% about $X.X completed you billion

those billion revenue XXXX know are from when the even number, first I the it just is envisioned mentioned, get to the whatever mining want they is, periods? $X.X you if is How question just is incremental peak I that unlikely And a to where margin just then the So we do than markets to if whatever here, given don't initially hypothetical mix to $X.X number call in you peak, about time back of portion but sort late back would came we the with that next XXXX end up or just have or were XXXX, fiscal assume. a aerospace, you of think smaller should think realistic how and billion in you it energy seem targets?

let terms the sort and I'll comment in profitability, probability the of on the assumptions. revenue things of underlying Damon of couple a say I'd So

been XX well something XX-year you, years, expectation kept we oil view billion, years I such set aero recover doesn't demand that aero when $X.X even billion, $X.X watch for, XX our the is over moving that affect to time. Ross, you don't of it's our -- next in for to to reading recover, the maybe I it $X.X that that's at peak I've $X.X horizon, not that out is for I doesn't it business think right, going we energy, about going may that in did know have a but a and have and was about you're Now, billion to aero think the on focus billion. I

do need out and oil some into with type that as as we're what's these get of of we and of I even the as still part conservative have an billion estimates on is, fact you is more look And told is that timeframe offset, infrastructure as expanding, increase. mining billion actually think green reasonable going can we build for So of And that the other we of for to we five gas. machines, we matter think happening that $X.X minerals, mining years, I adjacencies. with, range, $X.X we think to

So energy we $X.X and prevent going that are areas feel this like sort you to from are not going aerospace getting us mentioned, billion. and of -- not those to billion $X.X

what reiterated had of you we could I and as I what we of I is, previous need XXXX, expectations see it, We thought could do I a on thing separate we are a our think figure then of do setup. profitable might business don't wasn't that and what we light sort I sort of to December set so other developed. fit-for-purpose with fit-for-purpose that a of that for the we space, in into even grow. kind came segment that, the under greater The when Day wanted it company is to more And -- accomplish fully guidance up as think our way that our and at plan Investor back segment, if sort the videos of shine for than out to remember think kind separate was make

can think our revenue a perspective, I And I'll we profitability from on there. get comment again, So let Damon assumptions.

productivity there's I’ll think And if confidence in I still within comments, may sort we're potential low two top-line offset going productivity I incremental modern you a the significant Yes, hopefully talked that long-term grow have extent not opportunities the opportunities think a us Ross, to see so comment, you looking operational margin outlook we're I perspective, what still that driving issue about there. again, fairly mix make from we're this when to us what new to think aerospace. to gives wave gave and remember, there, least that growth that that market, talking about now market incremental right, excellence. hear a the it's with think of the we in next we some in in also gain, XXXX, us a we We're on is share the is aerospace for be simplification/modernization, slower about today, I of for was in equipment us standpoint, from and there seeing, is December But at other even forward.

long-term calls we get affirm when because is feel opportunity we look from us. XX%, as still for why XX% the achievable opportunity it our So an which do to we we at see it plan, to see that to the to

Sachs. comes go today with ahead. Goldman Please next Ritchie Our question from Joe

implied question So great. you've end your both would in on the near-term the quarter. and your maybe first, provide have the about and business the for your out maybe for fiscal it longer-term little there a business, in fourth sequential what's portfolio, quarter, constraints a being auto the rates around mid-single-digits, a if India just And talked market you entire growth I you I got then auto guidance could for and bit strongest just the more guess color supply third growth chain that near-term a be

then, -- COVID are EMEA the EMEA. For going wave the And as shortage transportation, as also to potentially. in well metal cutting, been hit by of COVID the affect of the of course, has impacts sort Americas again chip

right, sort going of a activity. that it of So in down of buying the lockdowns India, be on is effect to I continue of should in and think and kind get China for for reasons bit, consumer the offset all can in about effects. Americas the with transportation because QX actually those sort while of talked And, we to potential transportation, EMEA -- stronger, by from see we QX, it's terms factoring to be little

QX say transportation the from is of it. kind all flat, we're consider will. So you to looking I way at QX [Indiscernible]. That's if would things for Asia-Pacific,

Okay.

your question And maybe really transportation, it's positioned just numbers, understand, know Chris. right helpful, just just guys to ICE, curious you CapEx going just like and think in if for longer-term look I'm provide maybe next are market the that just you examples. if that's of to on longer-term hear I EVs. some could helpful you for trying kind to yes, five a cutting Okay, how be end is a traditional like to the perspective how don't XX metal years? you for it'd content per of on EVs intensity vehicle, or versus

cars the I mix Sure. this around internal no there's combustion is be think greater going towards something question vehicle production going of Well, the over just in there's to of And today. produced cars move course, of changes decade. are over produced, XX% to next the engines

that shift think be However that initially systems. propulsion a greater to electric combustion which engine there'll have the hybrid we we And you internal vehicles expect and as know motor both on will the in count internal than years. hybrid more hybrids cutting about current tools actually XX% the to as or XX the engines. you alluded vehicles market mentioned, And combustion for consume of

the that to cutting may view there actually vehicles. during tool in uptick be we an transition metal demand electric So

still is or the underlying I globe demand think less it's metal the hybrids, produce all vehicles while the growing. EV require vehicles also worthwhile noting in that cutting to than ICE the for

sort to of of X% all demand our these long-term to of expect variables, of in That's we view cutting So tools XX and over that. range next grow of this sort net for X% kind transportation for the to years.

Steve Markets. go from comes ahead. Barger today KeyBanc question next our Please Capital And with

This Ken everybody. on Hey, is good morning, Newman for Steve.

Ken. Hi,

your supply this was think in just if you first from the the for get my about to of channel And I'm to you've from potential ahead customers? pull to just levels seen XQ better chain of your So guys or visibility do orders a guide? I if trying how inventory Specifically, broad restock that question, within think that you any talk you curious customers have could quarter. issues kind sense, you pull ahead in

a and cash still from are a in seeing Well, care burning stocking bit say stronger. and much too But exercising orders. demand the I curves that I customers gradual improvement little until would metal are signals a like; we're about perspective, little distributors think cautious

in So Americas But of on QX, in And ahead. still that areas, is with that the to think those ahead we're break possible. loose so to most and that that think But upside. two that clear suppose in it's through that our not some price EMEA. the it's increase going orders QX. is in lead putting current that's I part, for We're that significant pull the distributors could commenting not potential restocking I that I that, guidance,

and end be we levels, the customer would In gas. inventory infrastructure, say to across normal to all including appear terms markets, oil of low

So but part, levels. holding for the normal, still are some lower that most they're there inventory are

still, could infrastructure there's tailwind there the So I that on a come think side.

that margins from a difficult think both just guiding perspective given in modeling both you're And up Understood. the sequentially margins up comp then segments how operating should sequentially year? the just comp fourth was how of in for kind and or XQ obviously, are the quarter, year-over-year, tough of last we

infrastructure also be a slight infrastructure, of there. recognize focused because don't tungsten Ken I that they're a from raw a may material their Year-over-year, amount I labor cost them for metal products to you is, that increase. are see benefit versus pricing mean, I they we're year-over-year a on again, with there'll the way headwinds little of they that what amount significant probably of deal temporary more tell the as given price starting saying with cutting benefit of wise bit you the costs, that

bit would metal negative I probably cutting year-over-year more tell so a infrastructure. little And versus you versus to disproportionately metal

obviously, the right Would for EMEA And one Asia-Pac up in you all three regions double-digits, last the was growth XX%, notwithstanding positive kind and me, Americas quarter? within down Got expect going it. all this were coming now. within issues India of both then of infrastructure, on

the good Yes, say other we little what's a see. with is with in that and India. have happen kind it’s exception wait will But India regions. that, of thinking of to to going positive growth of a are the hard bit we

question-and-answer like the I'd the closing remarks. over Chris conference to Rossi session. gentlemen, And for ladies and concludes turn this to back

drive modernization, benefits We've to call not returns Thanks, ability the improvements we're demonstrate today. our made our opportunity improve service higher the everyone for investment the to for share. your really of in about these And really only customer the appreciate further fundamental facilitate the improvements ability also interest operator. take and We and for to excited to Thanks but investors, joining support. company. and

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

Thank be the replay XXXXXXXX, conference will the you you dial XXX-XXXX sir. A ID to to XXXXXXXX, free replay, this pound (XXX) will may To United the event after then enter XXX-XXXX. the States, prompted approximately of (XXX) conclusion. dial of you be symbol. once Outside hash one you, hour again of this toll United available may States access within that's or

You concluded you now and will and name attending thank your conference has record all be company. asked today's presentation. Today's to we for

disconnect and your have wonderful lines You may a now day.