Kennametal reports strong financial results for FY 2022
August 2, 2022
Kennametal Inc, Pittsburgh, Pennsylvania, USA, has announced its fourth quarter and fiscal 2022 results, with FY22 sales increasing 9% to $2 billion from FY21, up 11% on an organic basis. Fourth quarter sales saw an increase of 3% year over year to $530 million, up 7% on an organic basis.
“We posted solid results this year with strong full-year operating leverage delivering over 300 basis points of year-over-year adjusted operating margin improvement,” stated Christopher Rossi, president and CEO. “These results demonstrate continued success in executing our operational and commercial excellence initiatives, including timely pricing actions to cover inflationary pressures.”
Fourth Quarter FY2022
Operating income was $63 million compared with $61 million in the same quarter last year. The increase in operating income was said to be due primarily to organic sales growth, favourable pricing, lower incentive compensation costs and restructuring and related charges of $2 million compared to $5 million in the prior year quarter, partially offset by higher raw material costs of approximately $22 million and certain manufacturing inefficiencies, including higher depreciation. Adjusted operating income was $65 million, or 12.3% margin, compared with $66 million, or 12.8% margin, in the prior year quarter.
Metal Cutting sales of $316 million increased 1% from $312 million in the prior year quarter due to organic sales growth of 7%, partially offset by an unfavourable currency exchange effect of 6%. Operating income was $34 million, or 10.8% margin, compared to $33 million, or 10.6% margin, in the prior year quarter. The increase in operating income was due primarily to organic sales growth, favourable pricing, lower incentive compensation costs and restructuring and related charges of $1 million compared to $4 million in the prior year quarter, partially offset by certain manufacturing inefficiencies including higher depreciation and higher raw material costs of approximately $6 million. Adjusted operating income was $36 million, or 11.3% margin, compared to $37 million, or 11.7% margin, in the prior year quarter.
Fiscal Year 2022
Sales of $2,012 million increased from $1,841 million in the prior year. Operating income was $218 million, or 10.8% margin, compared with $102 million, or 5.5% margin, in the prior year. The increase in operating income was said to be primarily due to organic sales growth, restructuring and related charges of $4 million compared to $40 million in the prior year, favourable pricing, lower incentive compensation costs, favourable product mix and approximately $14 million of incremental simplification/modernisation benefits, partially offset by higher raw material costs of approximately $49 million, certain manufacturing inefficiencies including higher depreciation and approximately $25 million due to the restoration of salaries and other cost-control measures that were taken in the prior year. Adjusted operating income was $224 million, compared with $143 million, in the prior year.
Net cash flow provided by operating activities in fiscal 2022 was $181 million compared to $236 million in the prior year. The change in net cash flow provided by operating activities was driven primarily by working capital adjustments, in part, due to increased safety stock for potential supply chain disruptions and higher raw material costs, partially offset by higher net income. Free operating cash flow (FOCF) was $85 million compared to $113 million in the prior year. The change in FOCF was driven primarily by working capital adjustments in part due to increased safety stock for potential supply chain disruptions and higher raw material costs, partially offset by higher net income and lower capital expenditures.
In fiscal 2022, Kennametal continued its focus on delivering shareholder value by returning $152 million to the shareholders through $85 million in share repurchases and $67 million in dividends, while investing $96 million in net capital expenditures.
Rossi continued, “Given our demonstrated ability to operate successfully in an uncertain macroeconomic environment, while maintaining a strong balance sheet, returning cash to shareholders and investing in the business, I am confident our strategic initiatives will continue to drive growth and improved profitability over the long-term.”
