Kennametal (KMT) 1 Nov 222023 Q1 Earnings call transcript

Good morning everyone. I would like to welcome everyone to Kennametal's First Quarter Fiscal 2023 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] Please note that this event is being recorded.

to of conference Investor like Boyer, to now President Vice Relations. would turn over the Kelly I Please go ahead.

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

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

President and and Chris are Financial Joining me questions. Pat President Chief and Watson, Executive call Vice we the Chris on After Rossi, Officer; remarks, will Chief and Officer. today prepared line the Pat's open for

number results, uncertainties the forward-looking this disclosure Kennametal's by assumptions, uncertainties detailed implied performance achievements to statement. cause like direct risks constitute I in those and contains to forward-looking discussion a such our that SEC comments from to as could of At company's Today's factors differ and, are time, expressed risk forward-looking and or materially that your or filings. would in statements statements. attention involve These actual such,

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

And with call turn now over the to that, I'll Chris.

headwinds first successful offset as EMEA macroeconomic of and X the strategic finally, and recent call on opening the outlook. start Thanks, our and strategic review continuing Kelly. regional some some foreign Good growth the I'll morning such Then of growth China. in call and Beginning before everyone execution quarterly make Slide for summary highlight on go factors joining with over a today's inflation, and roadmap results quarter, and today. the I'll the presentation, Pat thank And results questions. exchange us financial quarter you high the initiatives by will our comments for wins.

led exchange than constant QX X% foreign better total the due by X%. end organically grew. slightly line sequential by expectations in all lockdowns in affected rates the in last market a Americas increased Ukraine by crisis increase Pacific, to Pacific season of COVID transportation European but trends. sales remains QX affected double-digit X% a on offset as Russia currency of On from QX sales digits. due mid-single a earthworks negatively to to from In end aerospace, China, seasonal X% decreased Sales The decline year. and negative year-over-year with for EMEA, energy XX% sales and and other basis growth. with normal seasonal summer engineering By Year-over-year all double-digit markets well regions to reported the and and And construction strong. holiday X% basis, as disruptions rolling Asia exit our countries in Asia were and growth general grew growth

end through direction the whatever economy the the are fiscal we holding we the the is The know global short-term demand to up we markets that all XXXX. end are on in believe well So good long-term. beyond and global that overall positioned news take XXXX. looking may when direction I said fiscal market year there views of especially That economy, diverging expect continue our is for year in well

a as share and have build to aerospace aircraft We position take strong continue to expect in improve. rates

of needed and be that renewable traditional the both take to will demand. markets in positioned well advantage investments growing energy meet energy to are We

energy. meet activity Our the required construction and benefit earthworks to conversion elevated from longer mining for support to will government coal and demand support immediate increasing term the for business to green

tooling for short-term, at we leadership supply benefit establishing and but are from lower in levels position remaining production improving transportation the see to gradually We and we the constrain with electric expect vehicles.

from benefit the to strategy. expect production we in continuing our engineering industrial growth Lastly, fit-for-purpose and general

while in good positions. and quite growth end about acknowledge longer the in we markets term the drivers underlying feel leading uncertainty, secure our market So we our term shorter ability to

for Now the looking quarter. to profitability

our by the factors on getting macroeconomic underlying assets. operational changes offset call, discussed leverage pension this was we in and non-cash volume we In focus are benefit return on assumption headwind including macroeconomic which are volume a masking factors piece modernization our primarily decrease excellence. FX significant a to QX, the last is income, from on in As related on and leverage due simplification,

we experienced will provide which disruptions, more on addition, temporary Pat In supply color chain later.

we disruptions the resulting and years, have that last pandemic. over from been meantime, to managing the I everyone supply at the remind successful several numerous chain In want operational other

end So we the I'm confident by year. these fiscal of challenges most mitigate recent this will fully

expense As quarter expected percent of this a being the increased sales to as salary annual increases one operating with XX.X% drivers. of

for trials driver product and major travel affords our as it engineering Another and is increased customers opportunity demonstrate product our This partner visits. to customer is brand them as innovations news entire our restrictions sites for to commercial the good COVID-XX portfolio. latest teams supplier eased across

we And by a the an some slide the examples to later obviously discuss mix. and decline investment of in majority the XX.X% I'll in declined compared with regional investment. Taxes Adjusted macroeconomic the increased see I slightly prior quarter these $X.XX getting $X.XX year growth costs this quarter the EPS due of we discussed. on the driven to in as expense, factors on returns year-over-year and to While gaining to mainly are share.

this and affecting increase increased in consistent raw stocks safety to flow compensation. cash costs material supply use cash by mainly our related higher cash driven chain Our mitigate flow free performance to based quarter capital, inventory this due an working with of was QX in typical is quarter disruptions. of Also payment

the million. program was $XX of amount $XXX Finally, another to of bought back brings cash use since total the of million shares, inception which buyback

macroeconomic the strategic headwinds. Our current value share to the reflects long-term our we despite confidence repurchase program for on have execute initiatives creation

turn Now roadmap. our to review growth to X let's Slide

initiatives, As excellence mega you share commercial areas that can outlines and growth other our the comprise see, trends the strategy. gain roadmap

First, we our business. share of of current are base on course, focused growing the

made investments the are customers. years ongoing wallet us share best-in-class we larger In of new modernization support, with to enabling initiatives few customer a our over addition excellence and existing to and operational drive innovative the last products, on

are that base such digital business, for ESG. opportunities aligned therefore are segments our aerospace, there exposure creating the also with in vehicles, well and megatrends market Beyond and expertise technical and market as electric growth

and digital platform are shops, as applications. medium as customer we within digital supporting medical platform. providing and that of still to and due supporting experience now opportunity small serve. customer application Examples and for the our unable of growth have were to focus, reach and This to to finally, we through end micro that Also is our machining tooling of able include to markets organic manufacturers our historically And acquisitions. targeting organic we segments effectively cost the areas well simplification modernization supplement initiatives sized fit-for-purpose device growth job spaces

examples wins supplier. for tooling wins we this providing executing Again, Now are some success to in great aerospace commercial for recent our of please on in aerospace had engine turn X large quarter that significant including a Slide roadmap. this

door this business. Solving the additional technical opened for challenges customer's has

customer specialized for We for also had of performance stations components high space astronaut in the with and aerospace creation win an tooling used backpacks. a

capability This including supplier our applied customers nozzle customer competition become manufacturing manufacturing services gained an manufactured and where OEM material oil using wallet again and we field process to expertise the larger cannot and customer's technical plastic design, dye delivery, the quarter existing we industry additive sole a in in science new which technical a And be with for of to with collaborated and traditional leveraged share techniques. that extrusion support. our outperforms an manufacturing performance the the segment, significantly we provide source

production. some that a the to infrastructure we of a have – in excellence growing metal in are the we win where confidence we examples are off. and expense segment, gain demonstrate electric share and battery in And making paying are investments commercial a vehicle by us just our established that our ability leadership segment impressive innovation broadened give wear solution our rapidly in These wins finally, position used reach with cutting, providing in

financial Now let to call turn first will Pat, the and outlook. review quarter performance the me over who the

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

did begin, non-GAAP any I this are numbers please not adjusted that therefore not record presented. quarter, adjustments Before note we

The For from seasonal and increased Sales slightly from headwinds which China, year-over-year today's organic adjusted results QX discussion, sales show our to largely X% year-over-year results. foreign we comparisons better disruptions. X% growth decline. fourth supply sequential basis headwinds. On offset is normal declined X%, exchange, quarter's QX a quarter, of that X% initiatives currency continue lockdowns with in our the year's disruptions to execute than will chain by be EMEA the against temporary face prior the inflation, in in foreign

sales as year-over-year to and and XX.X% increased margins a Chris basis demonstration XX travel Adjusted operating XX.X% X.X% adjusted and noted, of growth. to As higher were support expense points respectively. operating EBITDA sales and to down salaries percentage tooling from

higher chain to headwinds. $X margin million and general including as offset material pricing by The manufacturing raw year-over-year operating supply higher was exchange performance costs temporary costs due well inflation, foreign higher disruptions of as

a supplies including our at incur to required labor experienced us couple inefficiency business, supply and the majeure infrastructure use and locations. higher a During from disruptions materials chain in our cost supplier we a to few key quarter, which some force a

to disruptions these end of abate the expect fiscal year. the We by

of offset to dollar wage We material increased $X.XX cost to year raw due a mix. per period. share basis. regional and continue general adjusted of EPS mainly to on effective the Pricing The earnings XX.X% actions rate prior tax inflation versus in $X.XX reported

just EPS the that quarter of $X.XX this year-over-year X. on operations our are The I on to drivers The factors negative discussed. due the main effective Slide performance highlighted was bridge

the negative see pension pension on income and and can You currency EPS clearly $X.XX reduction foreign in income negative with contributing also of $X.XX. exchange the effects the reduced

quarter in non-cash change income factors is the is pension This this pension that U.S. plan. note will change in each market Please by our driven affect year. and

Our headwind we U.S. too. exchange pension remains based And plan the foreign the remain on spot rates, recent to expect overfunded.

sales EMEA headwind offset led quarter. XX% of Americas in organically X%. region, by basis. of and the regions We end and all foreign year-over-year the X X increased detail Asia-Pacific at Slide X%. achieved and constant a followed By performance Metal X% currency by on currency segments at X% at growth a our this markets Cutting

affected lockdowns quarter. by was noted, COVID-XX growth Chris in Asia this China Pacific’s As

the strong growth year-over-year basis approximately year. achieved we exit strong Russia points in of countries decision aerospace in affected with negatively year-over-year. led By other our growth XX% to growth last from However, market was EMEA’s this Asia-Pacific. quarter quarter by end third XXX in

year-over-year were which year The foreign mix, X.X%. to sales margin higher primarily decrease mid-single basis in higher from and than points engineering quarter and General raw more normal pricing, was favorable energy grew prior to volumes and product digits. temporary material operating at XX and exchange higher grew margin disruptions. chain decreased costs, Adjusted due including operating offset X% transportation leverage headwinds by favorable costs supply the

was the improvement in in energy and land again, digits for to up X%. Infrastructure. XX% market, as followed XX% driven Turning market The the by Organic energy EMEA at strength sales count. year-over-year. U.S. by by Americas X All year-over-year rig end increase at and XX% in increased at in at gas Slide double positive regions U.S. the was the flat. continued were Asia-Pacific oil exchange X% By year-over-year by seen leading strong with only mainly foreign offset

decline in Asia-Pacific as Earthworks strength the not engineering year broad was result general in project the offset all Americas repeat. in and in strength and flat EMEA of a up orders prior was did regions that with a with by XX%

and on partially basis material costs increased Operating and XX.X% margin by plus temporary year-over-year offsetting price the a basis. supply mix dollar and declined disruptions In price points leverage to inflation normal continued material, in cover wage raw higher exchange. foreign raw including QX, costs volume, to on with XXX chain general

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

approximately sheet and well maintain continue financial and a We end, our $XXX we cash were availability revolver balance to combined of covenants. debt maturity quarter and within million healthy had profile. At

working primary million $XXX higher to a basis, primary additional increased decreased stock On year-over-year dollar XX.X%. extended with a On working safety associated capital percentage material costs sales to capital chains. of basis, supply and raw reflecting

of increase but and from million of of year million. prior capital $XXX the expectation line full spending our with year, a million $XX were expenditures million to $XXX capital $XX approximately in Net

quarter. consistent free with quarter was $XX prior first the negative Our quarter seasonal first the payments. sales incentive but year the million million, a patterns timing from decrease usual in cash of to due Paid quarter, operating dividend flow $XX in our is compensation outflow

a during confidence growth we inception, under repurchase for as million of repurchased repurchased quarter our $XXX finally, of Since improvement. noted, This Chris and $XX reflects million in our And margin program. stock. shares our we strategy previously announced have

balance in A can sheet be appendix. on XX Slide full the found

XX the be and sales basis between to Now the in let’s exchange X% expect and line $XXX be Slides to we with headwinds excluding with of $XXX review a XX to our sequential foreign to quarter, additional on million turn to outlook. second seasonality million, Starting X%. normal would which

year-over-year actions Sales approximately range and of pricing million headwinds currency $XX assumes X%. of

strength and We or this time. at this continue in end we from not energy EMEA. customers to We are and meaningful China environment expect underlying no COVID cautious in in significant all uncertainty markets will in restocking assuming believe demand our expect remain lockdowns disruptions do in

material reflects which Sequentially this remain then over the at are the quarters, have $XX for raw of fiscal effect is operating prices. continued headwinds is minimum of increased level to been full by tungsten ahead from and our note year. balance we a last inflation actions. the higher prices expected the pricing against to million, approximately important five the $XX of experiencing aggressively expected It quarter, raising Adjusted that income costs to approximately first million strong be of

as In segment. through the flows market price over raw and normal current material favorability P&L. QX, now affects Infrastructure the over material costs is This primarily the negligible reflecting of this price is cost timing cost cost material

abate Lastly, the supply we second then to discussed year. chain end quarter by the and the of continue we expect disruptions fiscal the fully earlier in

year. full the regarding XX, Slide to Turning

EMEA. to Price sales that We energy sales X%. will This $X headwind there expect X% from be to from or of no XXXX flat billion be approximately and outlook billion volume to realization with of in between and approximately COVID-XX up lockdowns X% $XXX assumes significant $X.XX disruptions currency million. FY disruptions a

be $X.XX We expect and adjusted to earnings share between per $X.XX.

on projects $XX and million $XXX price excellence exchange basis. cost environment, sales our and foreign expected million Even inflationary result in a operational wage a continue general to this offset increases income realization material to productivity in will operating raw is headwind. headwinds dollar

outlook Additionally, be and remain headwind operational year capital expect strong results Depreciation our working lower to our to execution compelling income commercial $XX remains approximately to total capital for unchanged. amortization each for will million. driving initiatives be and roadmap. and is see continue to and committed quarter pension of expected a a on We this from growth million expenditures our $XXX and excellence

with progress the year, cash expect over demonstrating operating long-term approximately we adjusted full the target net flow our at finally, of And free company. XXX% income our transforming in further line

And turn with over Chris. back to that, I’ll it

Thanks, Pat.

Turning to Slide XX.

Let deep a to inflation from initiatives growth our growth wins pleased our economy quarter strategic innovation execute with demonstrate leading outlined our on on industry this our our progress our and quarter roadmap each continue as and applications. understanding uncertainty and our demonstrate customer’s the of minutes take in to The I’m despite initiatives, to few results summarize. foreign headwinds me and exchange. ability

Our year investing our repurchases. flexibility to operating allocation also total flow in us balance cash the sheet share initiatives. dividends, capital to is strong acquisitions, and bolt-on continue allows free It and gives us strategic including the optimize expected

the we program underlying As in paying evidence a have our repurchase York done our quarter being of of a long listed XXXX. dividend, confidence of on in every a history reminder, company. having is share Exchange value since the so Stock the New further And consistently intrinsic

good confident we our follow we limits longer term in sequential about markets and our environment the underlying uncertainty, despite full growth patterns drivers Although short-term for positioning. in to economic quarterly end current our competitive normal our any the And visibility, year. economic expect the sales feel

for line that questions. with open operator, And please the

you. Thank

begin comes now first Please question-and-answer question Instructions] from Volkmann We session. go ahead. will Steven [Operator Jefferies. Our with the

bit you Hi, good I morning of we Thank get leverage. the volume guys. wondering kind was you can for if little where just taking question. I since guess a focus that's your on

maybe in of quarter to price that if the Sorry volume up was it, out? I but and well just as what round missed sort

a would Steve, at year-over-year have effect been it operating positive. we said on volume income Yes, $X was what up million at

modeling think around to at leverage most are that $X I of analysts that that volume on be about XX%, So million so increase a based equal model. what

what was ahead. – I go sorry, Okay. That's

Second Is your that's Pat, realization, price? to was it question? piece that. was that Price Steve? on that

Please.

Yes.

million So, would those on overall, be in FX got look $X and of you there if price we back you numbers. to two in volume of the of X% into approximately at where that, terms and then based to kind

right, All Okay. great.

been I have I around engineering volume this, sort I'm EMEA as at just on kind look on Can of your So you're general a some as there? end you where with must what basis down this guess, and well. commentary of going seeing comment of as markets

Yes, of say that metal QX. through what stayed for in the strong and I QX EMEA level around Americas would sort for QX weaken continue to at that a the slightly same. AP stay of and cutting sort forecast will did our

still QX remain our that all at full was as et increase through stable, that's Aerospace and on you energy but regions, chips, did levels of for know environment kind waiting continue that levels for kind these QX it's we lower Steve, current stable are actually higher still transportation they the expect cetera. year. to higher in QX that as of pretty And part at the levels. of then forecast will and For

be was to that strength for So continues us. a – that

the eng, conflict. and factors that U.S. was mentioned gen Ukraine-Russian side, had Pat steady the of infrastructure was EMEA, affected the On which the some

conflict then is expected mining, orders with the repeating and we number course, an of generally would strong increasing, to at the they're Pacific the Asia exception due pretty had with mining for underground of EMEA, the Ukraine business strong. that stay underlying aren't that say, sequentially strong AP and would elevated seasonality. the Energy, some was was down levels. remains maybe and construction steady there. And are to infrastructure distorted But say, projects at then course, minuses Americas, China. and of higher not of pluses sort at large the I level. level, but really, And flat is I in was

Great. that That's Thank pass on. just helpful. clarification I'll very then and it And you, I'm curious one Chris.

Or you prepared chain unusual by these expected You talking Are you mitigate your that with all just about the on sort be and the the of said pension of remarks of end by end headwinds supply the expecting and done of sort little the fiscal in detail year? things? of kind some this fiscal a these maybe what to of year. to you're

Yes, about we talking supply the temporary were issues. chain really

were were I'm also I'll they a guidance temporary used that so Steve, FX a our because we're then gave strategies. first obviously the to We putting even is turns the what those actually of chain. from in sure the temporary or a happen supply on certainly not going see cost supplier environment, mitigation pandemic the coming and just stronger saw supply result with we frankly to disruptions, new chain to a And started than And we for there. thought. But they what's the had to direct Majeure But which you this out – actions year, Force it's full it yes, their we and pension one quarter. current supplier, in throughout – slides in to those

the to cost to continue normal the have we will alternative to got of can in of obey through we've suppliers year, which would I be our positive mix. find plans and is as half And return supply, place then place we're right – to move a mitigation reason implementing us suppliers supply second plan that allow plan that the in so the they'll would that as less say the source we keep them now. that and And the

So chaotic current we're end because it year. by kind we're in, result environment of the it's abate it's that a of operating those – calling will temporary of the but the

just would I Steve, Yes, add-on…

it pass I'll Super, on.

set the bench, of the in terms parameters beginning to add-on that the going Steve, of assumptions those I'm the year. we Yes, at

$XX those million of So the year for in in for the $X headwind locked million we pretty full have year. – numbers the are terms

guys. you Thank

comes question Julian with Barclays. Please go ahead. Mitchell next Our from

morning. terms starts how year-on-year second two about two half out that the in $XX guidance on for Hi, year up full items good raw supply just million in you to sequentially you $X as year-on-year thinking second help items that the of on that follow understand wanted I steered kind around call us the the half raw Maybe us? second we're quarter. materials steer and just two million in of up into those understand to Slide just those for the of would chain went headwinds what stabilize, materials but for year-on-year XX

the somewhere model magnitude. the about expected $X the the Yes, And supply $X the abate end for think raws covering year, the then you it's talk on and… of and I say And order of first the half chain year, maybe million about back would could of you still to million of million half I it's subject year, so Julian. by between price $XX don't in the why Pat, to

Yes.

So the rest year material, kind our level to is at our inflation we second it us a from basically a the price level On the of but of the that rest sequentially. cost Julian, raw you're here a for quarter, year. raw of get be the material that headwind covering year-over-year basis this the net full should inside Once be at year the in correct. realization that for for expectations perspective, of for will our on

it. Got

so is sort okay, the headwind, as material that something in – that raw that half like million is $XX second number, So of whole it's QX, a it?

inside but curve. again the it's covered price entire Yes. that Yes, Yes.

Yes.

the in sort called of of the Thank sort Perfect. When sort of at seasonality, that sequentially. looks would up And main my trends thinking you normal thought some assuming I as is the when volume of you like any follow would question point sharply more I saw markets expected through year think, might of be guess balance the you're year-on-year at steady you. just one have it year. to than just volume then I as be outlook, go about looking moving what we're out up we're transportation end fiscal around pieces, QX. the change you anything

I morning, lot looking I the for transportation. digits sales are companies now example. selling at a vehicle double Eaton as think right Their of into up this

calling wondering swings the on of in just you're anything any market of end parts for out year balance transportation. So kind the main moving and particular

where Yes, but I think on they an were their are that it we've for we transportation and just sort for as to Ford, opportunity I quarter are stay us, because, as GMs issue be quarter. baked that was, frankly we've wasn't example going things kind chip of Julian in I may this to but switched listened got of – in big effect, think and last around steady

that's think but for best us. some could upside be I So that estimate, our

If that the I is then year would in the COVID drivers – underlying in couple billion $X.XXX there China. U.S. continued energy of baseline assumption course there think $X is you base. for issues then our And the to is of way EMEA the full risks, range and production industrial Pat about look the significant the lockdowns highlighted at still potential billion of that, energy a the in resilience

opposed some of is they – regional markets. or actually worse drivers it. I Those say the be move the on about probably specific improve. us end end the whether from going that would as think to may So what's of kind the they to big in That's end some I low become cases to would way that high range these factors, would

much. very Thanks Great.

Fisher from comes Steve UBS. go question with next ahead. Please The

to those the sorry quarter. raw Is materials raw material then costs? if that to Thanks. pickup in come from raw I Good that message back that. misunderstood sure longer morning I the the want the prices have the and step that are down first not? And second understand to it, covering make just the Is so, dynamic. no I I'm message? I the – mean, why quarter may

you pricing a think Yes, material to a want look raw take longer dynamic at term basis. over I versus that

last of aggressive remarks, about we've and costs As those five price going quarters and price the of prepared front we've P&L. in we up our realization material in that out been getting some showing the experienced very in talked

that from as material material we're for quarter our what's cost say so perspective terms is we're basis same a in simply And costs here charging and are. happening I'll the second on of customers into the where moving the

but again rest so get here, as headwind with material And we cost, successful will as where not that headwind, price. the that's covering forward been about second that of quarter we the we always And once move a year. that overall we sequential the think be see for into we've the again,

programs looking going I run to aerospace. works I the to just the suggests extent that be think some what terms is a extent half, of in Okay. should here. the on I just and in And then that mean, you're maybe second revenue you puts are of guess rate, takes the in know a you of up guess know things investors any little giving at for To of in potential some new what XX I bit like ISM orders make coming I have kind revenues. Or that it there's new said below lower difference? you upside

to and how indicators how what the trying of factored about that's – revenue second think year. you think Just conceptually these the half of about outlook leading into rate some daily for and run your of kind

going follow forward. point that seasonality gave we're Steve, sort this our of to Yes, guidance I think, the from normal we

what IPIs – things seasonality if of move unless with So happen that IPIs significantly suggest going north would that or regardless the south. that that is do, the to that equal, being all

– we continues for U.S. XX our get as resilience. its we're XX% driver the is in been end in at and where you PMI and the the hovering somewhere we forward know, that'll defined the that mark the high outlook as might U.S. – And kind that IPI the outlook our lower it where sort the whether improve So to at stays of or Q that the as – things the of world of have – world are going be worse. are or things assuming PMIs kind around But the end world our and

Okay. Thank very much. you

comes J.P. question Tami go next ahead. Zakaria Please The with Morgan. from

my Hi. morning. question. taking for Good Thanks

Good morning

So curious, as the segments? is this pricing X% for all are to it uniform the two you're X% to across that across And well? fiscal, X% X% I about expecting the was regions? regions Is how

Yes. Tami, for kind probably there different Cutting start it think and think customer pricing But but that there’s is customer-to-customer. even the of based about general. We're disclose the to not between within Metal Every is going from with Infrastructure is of those in sure. information, the way to and course. no differences answer businesses, differences we value can And I be

So But average that’s it really to businesses. a price if I an butter just will. kind want want for make sure, point I you to spread the both peanut make of of wasn’t

Got super or two same, so? the pressures Are then And up one they supply new very it. or points helpful. or the they chain what anything quickly, were, are the the ago, let’s continuing, two popped quarter last say, main That’s quarters pressure now? in has

some if maybe a we had that about see supply easing better. a conversation chains in perspective, gets your customer I Yes, general. in is just guess from We that question transportation

customers. supply could our it We’re easing some be, expecting chain But improve. to on but of there not is potentially it pressures

materialize were about that Although we think hasn’t And already it then into significant disruptions, on yet, talking – some we been seen we covered haven’t not – increase talk substantial temporary orders. questions. our if it’s course, it and a that previous I of you in

it. Got

Okay. Thank much. you so

comes America. Feniger ahead. go with Bank of Please Michael from next Our question

to has your flagged my curious how your building or taking inventories Inventories quarter questions. And your the over positive that last how year based do for the two? outlook? absorption with thanks on some see up, the you’re you through I’m safety Yes, stock. you inventory your and progressing just margin build, was been demand

Yes, I good think, Michael. it’s question, a

First didn’t of sure place there. sure customers levels. and to put wanted we Especially all, inventory opportunity miss we we in the that we coming maintain to right customer can service the pandemic, our as make out make that were an

think I cutting higher start to inside would issue the content inventory our based I our of there. a baked And for have where labor have their primary to terms general, in more we so down. expect it’s in of think working would on current come subject metal that a in I But in capital, forecast cost. we more think absorption outlook, to be start

And reduces, But the it’s have half was course. of so don’t better profitability. to inventory second substantial a a effect I little absorption of that build sort think there profitability half versus of driving going as first the inventory bit on

what a Is from curious working going further there’s even if Just hit price but pricing? Thank that. or from maybe you anything to you your the with competition to for Is you. pressure? customers on side of the you get is, there on I is curious guess I’m pricing, playing is a above the foreign cost, trying competition? And some increasing the let with X% preventing Thank with intensity any factor Not are further? I’m the there it the ceiling starting to currency guys intensity that are it competition, there competitors? that just cost? just that under won’t you guys

have. got to differently. we with environment. we we want good would limits there is price be much to inflationary the this there larger the with question commensurate – is a a a – normally Michael, folks. our this and – I magnitude is is price conversation every And But of the think have to increase than sales And understandable that’s that’s It because and Yes, industry balance. certainly treated have customer’s

approaching So that’s we’re the way it.

the the ultimately And can more bringing price value In start more some with on value looking we to we are cases, what we’re customer? have, at, we we the be. aggressive

cover value even and that necessarily the on has – to So We we limitations. but some price based just cost. don’t try

And suggest, to you balance much like questions between that that? then how and we’re can is trying add Pat, balance. anything way a volume the strike your price the So get there trying you’d ultimately effect. we’re got to right you do to to

have just perspective. I region, want to an from say, Yes, do strategy in a four-region production we

we’re produce So serving. trying of for the to when in region translational is since our about think currency we exposure, our currency customers we’re much simply exposure

Michael, done your you with questions? are

Yes. Thank you.

Thank you.

KeyBanc go Capital ahead. Barger question Markets. from Steve next Our comes with Please

morning. Good Thanks.

morning. Good

commercial the ask I is that? in of growth to team How with cycle just tell on excellence share indices wanted then line performing top guess the how can if you I What against? you Or the you about that? are market and the measure taking initiatives. are measuring

sort calculate What an a think detailed of – process Yes, customer, have entitlement very particular a that we good we whereby what that’s a customer. for question. we is

basis. certainly know, that for their their of example, a we then can And we’ll So getting on business sort current of level business. how per of tell we’re customer much

Steve, way gain. sort is – how to customer that’s per it just to fly you is look much you higher find much on hard it’s a market if the level, if it. to But it’s how a at and try basis of So share measure we actually

how particular on channel there’s total of that The us we our we growth other case, obviously, regional get. which targets our has look where, do And say for trying would we with Because manufacturing. different indices than distribution that gives in a thing they’re customers. dealing at distribution that in about thousands those our And comfort have much tens to actually can distributor we’re with do channels, is with based of that indices us. of pickup growth greater for we been

that’s – look how the are at try couple examples to a those it. of So we

in measured there’s the good should Do to think taking share you’ve you gains what like be you what been are? customers progress feel they the relative as

a application us. on can – OEMs don’t a fit-for-purpose, those before. of maybe kind types that’s because, is WIDIA their again, we than on metal we we’re And we growth engineering in repositioned they’re can that tooling. faster and that kind general have the been suppliers what business, of shops. of just to now direct that aerospace with job I many medium rate and of were share Yes, the that which low tell didn’t even tell now, small starting sized of we a example, certain do, business of the have for for space, we and one even in that and you to tier starting lot see – share and we rebranded portfolio where is fit-for-purpose The some the the quite in that of actually huge growth for

all share we’re that with are customers. up those picking directional So indicators these

I follow specific there? markets function Slide was that up, questions back just job quick initiatives that and growth shops? incentivizing supporting do if internal medium underserved to and on your a that, group can drive a own have one the of you sales sales Well of new X do small Is from my with distributors? Or

are they’re cases, those of job combination it’s small, not some both. Yes, think even by some distributors. shops small a covered I of so In

direct ultimately So customers. we through they cases, partners, have we’re may distribution targeted those the our in to But we’re sure together, small part, through digital marketing – it through pick through or it many our towards our our working channel those partners us. back channel. reaching they chain their inquiries distribution And channel supply matter may website with we whether and comes up doesn’t It the make And organization. through sales whether comes companies. to inside inquirer our directly

to still tooling. going We’re sell

is it channel. team a distribution the definitely So effort with

Thanks. Understood.

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

morning, Thanks. everyone. Good

Joe. morning, Good

got in the you still or to on expect see stimulus obviously, the that package question, from growth a November, pretty to last calendar is just are starting still in or lot all curious, year XXXX? first come Americas. you my infrastructure do that, benefit strong be So at that passed any remains the here I’m of

of it seen seen translated you year see come, XXXX, or said inquiries think business. we XXXX I’m of see business. sure into more I calendar over because Yes, it’s sure me, think any just – that’s no change. even of to it a lot that and we the six might still year that eight in we’ve excuse – I a I inquiries, might haven’t but XX not calendar really – we’re on going going to next our And months it lot we hasn’t not fiscal quotes, I’m in the year or – months, the trend but

inflation seems pressure And for projects also, are dealing a this, on with taking issues. So into of temporary longer some these supply to companies be bit these be chain it because frankly, that could to still these putting some of projects. little turn is

subject. a So for it’s going XXXX more think year fiscal us, of to I be

components were is maybe little Chris, know I helpful. bit more That’s you around you it. call any specifics And curious maybe we’ve you it I’m guess just just – a specific little supply What talked I a like they on into, provide would be other helpful? a the this referenced referenced that chain, majeure Got force bit and it that just like already. since supplying very customer that? that about can issue? earlier, a much just Is it color particular the

raw a producing Yes, I it’s material say infrastructure of to powder – one that our plants. would to our

in to material use specific really not infrastructure it’s business products raw any that addition infrastructure. inside to feeds to So the cutting make the because that inserts we customer and tools

on plants. affecting that applies one across So not effect that it’s but limited permeates it’s but to of couple definitely plant a little whole sort a – only not there’s of disruption it’s bit infrastructure, of knock not supply of feeding is we’ve kind the alternate see really about, a any business, through It’s And a of into also it we’ve that’s cutting, supplier supply but production put that in, are disruption. is mitigate to really disruption. another faster the actually we going that customers customer. to any the emphasize managed would And I our and This expensive can avoided better. though more source metal

Got That’s helpful. Thank it. you.

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

thanks Thanks, everyone operator, the for call. and joining

to said is I ability believe our report, as a reminder, market demonstrate ESG I secure website. also was our annual just posted what quick on to leading strategic third really positions. I also, As another quarter, point it’s our data I our published to in our ability encourage is this which think review everyone advance September And initiatives and and to

hesitate your reach Kelly to and appreciate day. great As a questions. Everyone please interest have to don’t you have always in Kennametal. out support if Thanks. And any

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