Kennametal (KMT) 7 Feb 232023 Q2 Earnings call transcript

Good morning. I would like to welcome everyone to Kennametal's Second Quarter Fiscal 2023 Earnings Conference Call. [Operator Instructions].

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

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

call. that deck to referring be will throughout We today's slide

I'm Kelly Boyer, President of Investor Relations. Vice

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

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

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

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

us. make over Good game-changing recent well questions. a thank and innovation Kelly. I'll for we start comments the financial summary quarterly example the go of and Pat to and results you outlook. our then an with as Thanks, are call call finally, some bringing before will the the strategic And today customers. for opening review joining quarter morning, the as of I'll some wins the

digits the despite macroeconomic COVID-related of at foreign high foreign X%. XX% X% in offset sales negative exchange posted we our headwinds, such double of strong China. strategic the organically, business year-over-year and initiatives Beginning organic ongoing on Slide presentation, and of the exchange in quarter increased continued days and execution X Sales by growth as disruptions inflation, successful of year-over-year

increase. the a continues significant to sales As part be expected, price of

was all that regions double-digit grew of year-over-year, Russia our basis, noting Americas both includes in currency growth quarter constant and EMEA points however, Pacific XXX approximately and approximately QX the in to from rates, negatively countries COVID effect the markets due the rate the Asia a On Asia was and XXX Pacific worth of year. China. posted by in The affected exit strong. from basis rate other EMEA X% growth It's in in The points basis end last remained disruptions all growth. growth negative

general high-single market, aerospace, By and and digits. reported mid- grew all energy transportation end to growth, engineering earthworks, while double-digit

despite So continued end environment, demonstrate overall, we fiscal markets to this resiliency our year through continue 'XX. and the expect unpredictable to macroeconomic

there global recognize still economy. risks we are course, in Of the

are However, challenges. uncertainties said we as positioned despite in last believe I well markets and end short-term quarter, our all we

electric leadership the continue traditional already demand chain evident supply tooling again was the aerospace and from to It the expect we for have in position see Our to strong quarter, was benefit immediate hybrid take strength and to a position for establishing from continues continue digits nice double share build quarter, strengthen believe this and to as this aircraft as we will market end at we improve. rates will vehicles. to in disruptions We coal. are improve. Earthworks transportation benefit and and transportation

grid and road including from and the government electric increased expansion also and for and bridge trenching We rehabilitation construction. and to energy Internet benefiting on see from for it green projects, spending conversion infrastructure

feedback. with reach platform. remain And new tooling despite customers trend We digital moderation quarter managed our is production with year-end, we expect a improved fiscal as customer slowed significantly are some that growth experience the inventory of industrial finally, general levels in growth as engineering slightly on our optimistic while their to trajectory the this portfolio for we and steady long-term customers fit-for-purpose our underway functionality in based energy, customer

to us solutions positions serve increased renewables markets, benefit energy both. and products traditional which and both Our demand from in well

So ensure that all the we right quite perform while And in macro scenarios. long-term markets there in are underlying and positioned our we still to feel are environment, drivers working in now, we well the well some end in good uncertainties current about are growth believe we each.

profitability quarter. to now Turning the in

through into year-over-year on year-over-year. this in basis. business significant and earlier, flat cuttings portion operating I leverage. price at detail segments however, his headwind volume will Metal by the in forms actions metal came both substantially As increase FX inflation and effect mentioned margins covered The on was operating sales on taken a section. a dollar the of pricing go more Pat expected remained margins the leverage, all was cutting the of masked

we Remember, The January. Infrastructure margin expected, over to in in operations extensions was plants. provide for extend decline as accounts the the The our raw the the driver segment, planned company for into carried of principal these operating those and our of year-over-year. decline material action intentional powder operations our production December, feedstock powder of many shutdowns

reduce to stock following materials supply essential to last other that QX and to inputs stocks. action news and the the is safety extended we safety raw such year-over-year, was variance pandemic of comfortable supply carry This of a are year, The we production. that it of absorption times sufficient lead uncertain stocks. building were taking drove to cover reliability safety delivery are large So during as improving good action and

in significantly to abate and to will his on year-end, QX the detail in of margins effect expect We go section. infrastructure and more into infrastructure Pat improve by under-absorption the margins

it And ease to good for to news of commercial percentage supplier portfolio. continue as visits. a the XX.X% this them our this demonstrate latest our as for entire engineering affords and expense to across teams partner restrictions product is COVID quarter. Customers brand innovations decreased opportunity sales Operating our

of this slide returns increased expense these growth a we examples the And While getting as on costs investment some in on share. and an see discuss an obviously, year-over-year, gaining we're I'll later investment.

with quarter in million quarter in driven the $X.XX primary year from flow $X.XX favorable I stock. largely by the $XX declined despite tax cash driven increased prior compared the by and increase year to Free $XX EPS mainly higher in Adjusted safety factors rate. this and year-over-year million quarter discussed costs decline a to working the capital, prior a material raw significantly to

finally, since continue to the this million. And the $XX bringing million program of we share beginning repurchase total back, program repurchased bought of $XXX quarter shares amount with the the

ability program macroeconomic repurchase to headwinds have confidence in for share our despite uncertainties. Our value execute quarterly the creation our long-term initiatives strategic reflects we and

a let's to growth of for map. road summary our Now Slide turn X

it I'm before, slide this to in seen You've so not detail. cover going

summary to highlight such our and technical and digitalization megatrends I'd align like that electric and as expertise ESG hybrid a exposure. However, level, at vehicles, with well market

share of with add have addition, as and reach In existing customers geographies to opportunity a we we new spaces. wallet application increase underserved into customers significant and markets,

from X review fit-for-purpose secured a And manufacturer pipe increased customer's our that this by that in application to a commercial great we global by win up business execution new show resulted to solution WIDIA this delivered space. a application, successful in let's Now facility. road recent Slide growth Xx. map. On structural in with We some to wins turn additional the the of outperforming slide, life tool we a

to secured a that this a we a a had business in petrochemical this XX% parts generation, by customer, share benefit win secure aerospace, expect delivering the the major for engineering. manufacturer win future. customer's produces to and power with large and We We also general of

by large with to A for and a great win secure X%. a flexible is corrosion-resistant example with reducing in position business defects consumption food of food paddles by the market industry, outperforming business status at ability sole-source customer's leading entrenched supplier renewal our mixer company. sustain competitor, the chemical by a We furthered energy the won U.S.-based packaging. our and we In leader the of materials the our packaging global XX%

vehicle in position finally, growing furthered leading growth manufacturer aluminum further application of We and customer status preferred the in on battery fast-growing by supplier with U.S.-based And tooling we win for an electric position with transactional our us manufacturing housing this we will a this auto secured the space. platform, global rapidly space. the expect leadership partnering hybrid

larger customers. as are examples wins some our gain business that These of as just new a share to ability customers' well our of demonstrate existing

a net leveraging improvement and the result reduction weight, in and Now housing a investment. hold that This Each a investments Kennametal looking tool on are of our housing can part tool yield customer us standard our needed in a achieves example XX% paying on examples the hybrid in additive rigidity and used standard capital hybrid to several highlight we electric is machine machine enables manufacturing productivity shows XX% is confidence customers. on like tools this a be a the for types a usage. making I'd The single bringing game-changing and our in these by and proprietary slide to with innovation off. the techniques. tight customer machine which tolerances uses to solution inserts electric XX% give on we're are minimize In energy vehicle vehicles. commercial lightweight an It's pass innovation a to to case, Slide tooling existing typical the productivity that and consumable tool proprietary used X, of excellence exceptional solution in run reduction that the for and for

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

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

current year-over-year please did prior Before for are record the will Therefore, discussion, adjustments not adjusted any comparisons quarter results. not quarter, be I non-GAAP we that last for against adjusted and today's numbers the begin, quarter. year's note like presented this

and and the results Sales COVID of our foreign respectively. with China. effects The by X% to of in from inflation, currency workdays exchange X% of year-over-year execute and by significant XX% continue organic show that offset growth, X%, the headwinds face to quarter's foreign in due increased headwinds we initiatives

to out, the On portion sales X%. QX, with pointed Chris our pattern X% numbers. of sales approximately price from to seasonal a line QX large basis were in remains of normal sequential a QX As

EBITDA prices. flowing XX.X% XX.X% First, year-over-year discussed decreased factors: however, of year material margins In X.X% of the Infrastructure quarter, due now and as of reflecting P&L. The in aggressively for decrease cost tungsten quarter. respectively, effect is we in negligible were favorability following current expense QX, is a the prior and experiencing percentage material as Operating the year-over-year costs was X.X%, last to over segment, market sales cost full to versus ahead and operating raising mainly of the basis operating as the higher prior margin were the XX points in through price the year prices raw the XX.X%.

steady costs raw to expect year. balance for material fiscal be relatively the the We of

mandated higher-than-anticipated pricing for inflation bonus overall general raw the costs, metal offset cutting substantially and cost million, metal affected industries Further, higher was inflation, in higher which material and the primarily inflation in total electrical a segment. Germany quarter. workers in of $X Versus all there the wage approximately

decided it production As material supply carry to to planned our we extend production has of in sufficient feedstock December. post Chris the raw uncertain and Since operations operations the inputs to to essential other our of provide powder our extended safety shutdowns of and many powder for been mentioned, plants, cover materials stock pandemic.

has approximately us these our quarter, $X it As chains Infrastructure aggressively in the million to resulting segment. manage the more unfavorable the of stocks supply of absorption safety in enabled reliability in has improved,

from planned minimize those we the effect temporary remains to supply added in decision majeure, financial challenges at of shutdowns which benefit, faced supplier. our a chain extend the an force helped quarter, last us the including key effect As

expect fourth quarter. under-absorption by abate We to the this

this still drivers the exchange decreased due in main expected period. are The XX.X%, of to mid-XXs. million. regional to a headwinds foreign year-over-year rate to and tax year strong EPS the mix. of final were is Lastly, versus ruling The be U.S. quarter share Earnings adjusted $X.XX per $X Slide primarily in performance in our reform X. Swiss full-year the quarter were tax highlighted effective the on rate the prior EPS $X.XX on bridge dollar The from tax effective

discussed. year-over-year this quarter The the that to I factors $X.XX operations just negative of was due effect

Please and tax see EPS taxes on clearly pension and currency rate, in reduced each of market also the affecting income This driven and respectively. our that overfunded is and pension assumptions by noncash in the contributing can income reduction the pension and effects positive U.S. pension $X.XX fiscal You year. in this is $X.XX, foreign $X.XX the remains exchange plan income factors. negative in quarter contributing is with note change change

year-over-year Foreign is headwind year-over-year exchange each a although remain recent spot is expected expected based throughout fiscal this to quarter. rates, on to year, decline headwind the

currency a sales performance of were 'XX by growth, XX% Reported X%. end and days organic of metal and this the business currency quarter and headwind to basis. compared detail points growth XX% markets cutting a and Americas fiscal you growth XX%, EMEA second quarter this from Asia flat regions consider offset achieved our By of in led at particularly X%. of X a followed quarter. Slides constant it in Pacific approximately year. at by X the foreign last segments our was with affected all exit that We the strong Russia at basis was the on region, negatively third when to XXX impressive year-over-year EMEA's quarter decision by X%

growth, Asia negatively China. affected by other countries growth was in We achieved Pacific's as in Chris in Asia noted, strong COVID Pacific.

supply X% Transportation customer grew business mostly a wage inflation offset on strong X.X% their increases property. chains cost year-over-year by sales such engineering from inventory that in income on the hybrid headwind sales operating Germany. scrap growth the year-over-year, required EMEA. certain that despite assets in quarter basis and sales higher-than-anticipated at we expense dollar. U.S. XX% Operating XXX the to offset from from EV held to grew were business. from win continue as the and benefiting Pricing constant Adjusted an the again at was were also led constant quarter aerospace inflationary Energy improving new XX% point customers the as General of Looking this sale end gain productivity strong margins bonus fiscal with a focused by at includes margin this at on decision despite year-over-year. flat flat quarter in remained year-end. relatively market,

days Turning by improvement general energy XX% oil earthworks XX% exchange at increased U.S. Pacific the U.S. double-digit year-over-year market achieved Asia mainly with regions as year-over-year, growth leading followed was gas X%. Organic sales infrastructure. and the growing markets, at business sales in of count. by at grew in at to rig energy Americas headwinds Slide all continued offset All X driven We with and for in The by land-only by in XX%, XX% end X%. XX%. X% and engineering strength EMEA foreign of in and and seen the increase

underway. regions driven inventory in mining. positive the mainly despite a we was mentioned, strong managing strength, engineering growth heading trend Chris by EMEA feedback, their strength based As customer see general fiscal into in did are driven we some But long-term customers year-end. components. on In levels that is underground Earthworks was optimistic all by were

factors. Operating to margin declined year-over-year X.X%, primarily due X to

First, material be expect been as the of raw year. over relatively the call, negligible reflecting the earlier are is through in favorability costs costs for discussed the costs to Again, have flowing of raw market current we now fiscal experiencing price P&L. we the balance costs as the steady material material

chain actively the affecting the reliability supply stock was factor this under-absorption managing discussed significant improves. second levels as The margin quarter from previously safety

QX QX. return fiscal operating We the to through expect such level will that 'XX second under-absorption the to half, improve the margin by

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

reflecting from On operating quarter increased to our prior year the to basis, capital higher supply On percentage costs XX.X%. associated increased $XXX year-over-year increased capital of raw higher a safety and working sales $XX flow cash million dollar million working basis, an primary in $XX a year-over-year with free working million, mainly increase despite second in to quarter extended material primary capital. primary stock Our chains.

we inventory supply inventory decrease levels expect manage half is to beginning to now in that second the as down chain our improve. We levels

$XX paid million quarter company inception returned of shares shareholders In the approximately X and for $XX our repurchase total, $XX million We Net dividend or repurchased since a in our representing approximately XX through to of programs. have we million the And X% outstanding QX becoming expenditures of public the year. million shares of we program. the capital $XXX total dividend years as over million, as prior shares, to every same since a were we share a shareholders. ago,

returning reflects in to commitment margin our to Our strategy our drive confidence growth improvement. and to execute to ability cash shareholders

cash to availability financial quarter can revolver approximately Slide in balance and sheet and profile. had within At full balance we're appendix. the and well combined on $XXX XX covenants. end, continue of debt maintain be we The We a sheet our healthy found maturity million,

let's with outlook. Now the the XX Slides review outlook XX to third Starting and for turn to the quarter.

increase. million X%. approximately headwind sales USDXXX normal and X% to X% effect to basis a million with seasonality USDXXX dollar $XX We slightly the pricing year-over-year currency On be sequential range in weaker considering a million, assumes between line to expect on which our actions a basis, and of of the sales of after a U.S. is

We our underlying And continues. improve. QX, Our forecast we and strength this economy have disruptions in by customers COVID-related the demand energy. sales meaningful quarter the to cautious to the that of assumes will begin do in for remain at assumed second markets China restocking continue expect Regionally, time. that European remains all relatively unaffected in that manufacturing end like environment in destocking or believe this not

to continuing but year-over expected continue raw work and expected second headwinds from Sequentially, as be strong is quarter, in not to $XX material only income reflects actions and flat, due headwinds cover general Pricing shutdowns operating inflation. costs actions under-absorption we pricing of are continued remain million, at also the a infrastructure to January. extending be raw our minimum to million. higher material but approximately which cost wages Adjusted headwind, the powder this $XX into production against inflation

year-over-year in pension lower QX. Lastly, continues income

full regarding XX the Slide year. to Turning

million. This significant X%, volume to energy We as a to COVID demand USDX.X that approximately there improves with sales exchange from up that be $XXX and outlook EMEA. realization second and and no be abates assumes half disruptions will 'XX expect throughout in flat of the sales the effect X% headwind fiscal China billion approximately billion, between price of in USDX.XX foreign

On to on million a total Lower headwind $XXX quarter expected USDX.XX. basis, income EPS Depreciation cost we general the is wage USDX.XX pension year. to for full $XX is a offset for an a million to each will headwind $XXX exchange foreign to year a raw and dollar material, on million unchanged expect at remains sales outlook basis. and $XX increases for approximately approximately be million, our The basis. into and income translate of expected amortization be operating

USDXXX and XX%. On to XX% the million, working million outlook unchanged at USDXXX at outlook is capital side, the capital for cash for to unchanged full remains primary year expenditures the

we expect flow line with net operating Taken adjusted to long-term XXX% continue cash together, approximately income, free in at target. of our

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

Thanks, Pat.

to Slide Turning XX.

Let me free pleased and take with the to strong a summarize. we're operating in growth the few cash flow minutes organic Overall, quarter.

look operating continued inventory supply the challenging, end materials, are half safety And by that in down the environment we quarter. as reduction took our to which remains of of we in us resiliency margin stocks. seeing the actions past Although the we in second the draw we and forward we're move the improvements improvement encouraged markets to allows the

'XX, end while position. cash profitability our the our from and improvement. fiscal our initiatives investments, and strategic shareholders encouraged and markets to we're megatrends continue year ability greater our affecting in growth beyond We're strong confident operational we benefit in from our efficiency Looking poised to to investing we're extract have return for to by market to the opportunity even modernization

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

[Operator Instructions].

Jefferies. Stephen Volkmann from question comes from first Our

to year have second start here. into Maybe thought maybe the Maybe is so there. for and might what has bottom bit talk a pretty the your just picture. the I how get the you that have there. as to on just have half. is about level can to What top broad, that guidance little just might and the But range end, to of right maybe of ends to happen go think have what guys to we big would end get about you view we narrowed sort to book get the set The

we some the expecting China. is a need more We're would say end, of at I at high our very recovery recovery would Steve. strong kind what midpoint. Sure, in

lot need the operating end, risk of China. And of say I'd our And at a now we'd sure. I it for greater sort of recovery And sort to of also Chinese have kind certainly the be a the view FX even There's the of sheer the areas, we don't there So think with just one low then, we'd number stay of our pick could could it's then have Year, it to end to on of knows middle-of-the-road recovery. possible to anybody weaker. absenteeisms, is. And a we that sequentials. absenteeisms. stronger of know. high tried just a in and also of we uncertainty end be but it could given course, naturally be low at that, of about just China where sequentials. We've New is weaker our normal of have sort don't be

at it. So that's how I look would

Okay. you sequentially? quarter. think by to we back we of kind maybe started fourth talked margins where I about of the getting And metal margins kind cutting How think about the interest should

some I cost about exposure. there. QX, going think, of see you see just structure. volume stabilization a quarter-over-quarter. into our obviously, positive cutting of be pickup should also, metal foreign off to And And coming QX, the has in some metal Steve, we'll when cutting, currency you're most currency help think moving

So overall, should quarter-to-quarter, be up slightly.

Julian Our question Barclays. from from Mitchell next comes

versus aware to of the I QX This QX. step-up other for improving guide just QX fiscal items we be for versus of infrastructure in ask wanted swinging a a is looks year. And margins there's any I like Are in the It QX? that get on QX on there's terms there. and should Julian. with step-up there

mix away A a in in into about quarter. about profitable QX one, more QX. the absorption of would generally I going margins, that's say, the things couple when Yes. infrastructure QX, terms think then And normally, go fourth think of you drag to there. that for Number better, absolutely, to quarter will us

the portion you for a back so quarter. said of of in just for price QX, the price one me. And know helpful. then was you I what's of breakdown large volume organic half. have volume we in just kind Do That's realization it. see can embedded for versus Got sales follow-up the

-- was QX question? a QX That

it was think I QX

QX, our in the versus came in, terms outlook. of on QX we're our price expectations where in

from Tami comes Our from question next JPMorgan. Zakaria

to guidance for So wanted a bit I EBIT the little understand quarter the better.

going million-ish. to So for call But your least it, up. $XX up, at million then $XX EBIT, guiding sequentially, are sales you're and to your XX

me from So sort help why sort by million? would go XQ Like bridge about XQ of for you can only EBIT to the of understand what's up $X the EBIT guide?

Yes.

So of if volume. to a Number we think QX will we about uptick work from an QX, is couple one there. things to have in

We FX have in to in coming favorability QX some from QX.

of think could million price range. additional $XX the will cost will well. some number be, You probably bit little in of realization, as up structure that go a that the course, just of Part

those elements So bridging your QX QX. main are to between

it. Got

Okay.

do a Okay. seeing And in growth then Or year currently question, still the the than previous China of you are just up does year-over-year? Understood. at China following negative expect on expecting? be slower end but guide the for assume you pace low could your what

The down total where low what our back number China in would guidance you quarter, low China positive, growth think to that's volume from chunk negative a there for end perspective the for negative from And a year in that the the of is terms of that a significant too. perspective the and the Yes. from about the assume guide half if that year-over-year. end is of a

question of Feniger Our from comes Bank America. next Mike from

inventory us at help comments customer made you you about adjustments year-end. some understand, can Just

know I inventory was broad-based flesh was on there out verticals, the if think you but you're hoping of comment. it with energy seeing more that other of don't adjustment. what kind I it kind

Yes.

destocking. we're since They in about fiscal oil they we there, gave believe continue our anyway, are them. shutdowns services they broadly, to we inventory us doing those year-end S&OP extend to stocks sort process. our planning think, us restocking back related their opportunity the us and the talk we which bit, but inventories But this or planned leadership gave their still little on think pull They as were, and we to I down. trends and to really support they remarks that it in talked down, quarter. what do their impetus to these part of and and long-term seeing believe in still draw were managing it's company. the safety want doing to general, opening was certainly to anyway, of a I it and not did are just on much But And gas try

And inventory how with maybe and be on your the Are you in Kennametal its with currently distribution own do distributors some own side how today? feels producing about company line you to level curious inventories? feel to going down to producing your than I'm of position the demand? with levels lower you Are at demand try about just draw there?

Yes.

their think I to not cautious inventory think get from they've I over particular, in out skis. a customer perspective, they've been been distributors,

why to destocking or in a So going stocking. be increase there's think we don't that's significant

based the demand. hit bleed the more because feel expecting But to plants. a on outlook, cutting, we normally kind stock supply because disruptions. we literally we thing that's down see for a us, our example, and kind we in down, current in like of just largely shut that can a in infrastructure bit of we carry chain believe line safety can produce metal And beyond with on did processing that, based did not For outlook we of we little major we're just absorption

comes question Capital next KeyBanc from Barger Steve Markets. from The

XQ volume versus share Or in happening, securing is with says which X% if off? volume existing basically other X% guidance flat to to but driving the is, the does geographies. why winning new growth of customers are that's start rolling want you're the customers, it underserved year share flattish, with for more all question year? up My of than isn't for mean wallet I recap, volume ones and unit

is. and just think probably to growth X Russia the more talk where full of XXX points about those outlook think, some basis based drags, for China. X year If on we think on our I are Steve, again, we fiscal about, current those drags alone

kind got X to idiosyncratic. to of you have things about because are Chris, anything So you those relatively add? that think

as also lot quite Yes. the do is we I a on There I pointed would And have uncertainty. think there. out question, large range that a Steve of say first

And demand so we do the may range be sales of a little have there. in and the Americas bit EMEA. conservative low on moderating We the end

can't some uncertainty ourselves at be cover those still is for conservative low we and around could things. end, there control, things to some there the just Steve, So that really

it. Got

changes versus the direct sales wallet are for there success trying you unit versus having the become other where to and distribution where different units growing customers growth? just share, or understand new and I'm in that's there's happening parts are So less if of can you through digital that's unit business what's meaningful? compare volume where more you channels

Yes.

the to EV of force, project some think that to no strong, the unit bids, where on these we sort volume. sales targeted driving especially channels, continues because surprise focus is growth is that in that's be and aerospace, for transportation, the And direct I initiative have a also which distribution there.

are there. in We volume seeing increase

many think and we've a business the have from are time think stuff happening But the companies and world. of kind to it's relationships of in that still more coming Kennametal, have even both, that good part service X also focused there's oilfield a gain project now of regions U.S. as customers, those mostly with different but of the in a Saudi is oilfield in example, a And then activity but in we the presence in for infrastructure a our business, share and definitely is of start aerospace. been there we're in traction in to I I share U.S. The long service even that leveraging transportation lot to So animals. global customers Arabia, effort,

follow-up. I can get guess a quick if I

I up think lack better team scaling of Where of a opportunity. it transformation understand target process? in where you was process have maximize part sales areas maybe the are word, that or your to the you for them helping

Yes.

was effort. I think the part that simplification definitely of

start people. with XX of, Steve, than of say, weren't half done a deeper less see And example, not much we But And that found we And shops, those few improving folks, that is in starting a And that. XX the to companies done lot that certainly general investment the of over digital to the customer we're business we've years, so our what and reaching for and investments fruits sales. of platform, was last that necessarily with small we've platform. is and make segmentation our in we're still dive impetus let's direct to machine over to engineering. distribution

investment, for also, we've resources And focus sales on detailed target of to force needs as my tell capital investment metal think lot generate best we infrastructure, opportunity return. is proper profitable a an analysis where it where always at it each of look it's cutting to and got growth. I a sales and an quarter, we both like because and strategic presidents a growth marketing those lot a I the just training and done expense to the of

So that's business. the running way that we're

I terms I'm our think my now of And journey, year here. so in in sixth

innings that late of I revved processes in future. analogy, to in organization if the And we're I I of sort a baseball growth more the could generating up of and in sales that. terms sort forward look use think

John from comes Our BMO. Joyner from next question

right. All

my expanded helpful. of what initiatives? your top So lot detailed and be just and journey has potential how following you talked head. Any guess mean, wrap But embarking Chris, I would examples. line since market up I it a I around longer gains can't gave guess, addressable nice and these I excellent color mean modernization on I for wins Kennametal's share your question. definitely kind commercial term? do Steve's these on maybe there margin mean about

Yes.

I making where, transportation, example, cautious growth. the old bit of some the we for for were think came business And when not up little of I company, share, that was a that Kennametal, sure that of into we just much sake think in there I'm at. the about picking I money in taking we're but business remember very I were

So right we're we profitability. very careful that about taking the are business got that's the

production not are in comment Just projects, full of to yet. some EV customers on these

a these of of sort projects lot So prove the and out. setup are initial

now up generate production And spend after to So ramp as year they a then maybe a certainly, their that. consumable more they'll generate from revenue lines. start tooling they

a is more aerospace effect. little So immediate

and on production more look those large Boeings as machining coming of win means and ramp their that to these more it percentage share projects, chain up the and growth we constraints their As Airbuses world abate, the forward from opportunities. to we greater supply start

these as pick kind customers' setting of some we're certainly then And like it's stage So volumes the with be going to of for the major wins. up, that's us. a benefit

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

call today. and us everyone, on joining operator, for thanks, the Thanks,

I is year I and position market-leading demonstrates full point position. phone, that am still that we out think and confident that be the got quarter data ability future there. is on And as the we've and the initiatives we to good strategic about There definitely in for ourselves we're able to out outlook. But another ranges the secure that advance there, our to to I this going outlook. feel talked think proper execute uncertainty growth

have with So with great if a have Kelly, any you please that, up questions, and follow day.

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