KENNAMETAL INC SEC 10-K Report

Kennametal Inc., a global leader in industrial technology with over 85 years of expertise in materials such as tungsten carbides, ceramics, and super-hard materials, has released its annual 10-K report. The report provides a comprehensive overview of the company's financial performance, business operations, strategic initiatives, and the challenges it faces in the current market environment.

Financial Highlights

• Sales: $1,966.8 million, reflecting a 4% decrease from the previous year due to an organic sales decline and unfavorable currency exchange effects.
• Gross Profit: $598.1 million, a decrease from $627.1 million in the prior year, primarily due to lower sales and production volumes, and unfavorable foreign currency exchange.
• Operating Income: $143.1 million, with a margin of 7.3%, down from $170.2 million and an 8.3% margin in the previous year, impacted by lower sales, higher wages, and inflation.
• Net Income: $93.1 million, compared to $109.3 million in the prior year, affected by restructuring charges and a loss on divestiture.
• Diluted EPS: $1.20, down from $1.37 in the previous year, influenced by restructuring charges and a loss on divestiture.

Business Highlights

• Business Overview: Kennametal Inc. serves diverse end markets including General Engineering, Transportation, Earthworks, Energy, and Aerospace & Defense.
• Business Segments: The company operates in two main segments: Metal Cutting and Infrastructure. The Metal Cutting segment focuses on high-performance tooling and metal cutting products, while the Infrastructure segment produces engineered tungsten carbide and ceramic components, earth-cutting tools, and advanced metallurgical powders.
• Geographical Performance: In 2025, 60% of Kennametal's sales were generated outside the U.S., with significant operations in Western Europe, China, and India. The company also has manufacturing and distribution facilities in Israel, Latin America, South Africa, and Vietnam.
• Sales Units: The Metal Cutting segment experienced a 5% organic sales decline, while the Infrastructure segment saw a 2% decline. Aerospace & Defense end market sales increased in both segments, with notable growth in EMEA and the Americas.
• New Product Launches: The company continues to focus on innovation and customer service, leveraging advanced manufacturing capabilities and customization to address customer challenges and improve productivity.
• Future Outlook: Kennametal plans to continue growing its business through investment opportunities within its core businesses, including potential acquisitions. The company is also focused on mitigating the effects of global trade uncertainties, inflation, and foreign currency exchange challenges through strategic pricing and sourcing strategies.

Strategic Initiatives

• Restructuring Program: Kennametal undertook a restructuring program aimed at delivering annualized run rate pre-tax savings of approximately $35 million by the end of fiscal 2025. This included the closure of a facility in Greenfield, MA, and the consolidation of facilities in Barcelona, Spain.
• Tariff Mitigation: The company focused on mitigating tariff-related cost increases through pricing and sourcing strategies, including the implementation of surcharges on certain product sales and rerouting internal supply chains.
• Capital Management: Kennametal's capital management activities included a $200 million, three-year share repurchase program authorized in February 2024, under which the company repurchased 2.5 million shares for $60 million during 2025. The company also returned $62 million to shareholders through dividends, maintaining a dividend of $0.20 per share each quarter. The company managed its liquidity through a revolving credit facility with $700 million of availability and no outstanding borrowings as of June 30, 2025. Capital expenditures for 2025 were $89 million, primarily for equipment upgrades.
• Future Outlook: Looking ahead, Kennametal plans to continue its focus on cost containment and productivity improvements to counter inflationary pressures. The company expects to meet its planned capital expenditures of approximately $90 million and dividend payments in fiscal 2026 through cash generated from operations. Kennametal will also assess the impact of the One Big Beautiful Bill Act (OBBBA) on its business and continue to monitor macroeconomic conditions to mitigate potential negative effects on its operations.

Challenges and Risks

• Operational Risks: Kennametal faces significant operational risks due to its international operations, which account for 60% of its sales. These operations are subject to risks such as currency exchange rate fluctuations, trade barriers, and regional economic uncertainties.
• Geopolitical Risks: Global operational risks are heightened by geopolitical conflicts, such as the Middle East conflict and Russia's invasion of Ukraine, which could disrupt supply chains and increase cybersecurity threats.
• Public Health Threats: Pandemics could adversely affect operations.
• Economic Risks: Economic downturns and the cyclical nature of the business pose risks to sales and profitability.
• Regulatory Risks: Potential changes in environmental, health, and safety regulations could increase compliance costs. Climate change and related regulations could impact production capabilities and demand for products.
• Product Liability and Cybersecurity: Product liability claims and cybersecurity threats are additional risks that could materially affect the business.
• Market Risks: Kennametal is exposed to market risks, including fluctuations in raw material prices and availability, particularly tungsten and cobalt. The company relies on international sources for these materials, making it vulnerable to geopolitical and economic changes. Additionally, changes in interest rates and currency exchange rates pose financial risks that could impact the company's operations and profitability.

SEC Filing: KENNAMETAL INC [ KMT ] - 10-K - Aug. 12, 2025