With its cost-cutting and restructuring measures well established, tooling products maker Kennametal reported its 2021 first quarter fiscal results on Monday, showing that business impacts from the COVID-19 pandemic are still taking a sizeable toll on year-over-year sales, though not as harsh as in Q4 2020 and showing sequential improvements.
The Pittsburgh-based company reported sales of $400 million for the July-September period, down 23 percent year-over-year (YoY), with organic sales down 21 percent. Those figures compare with Q4 2020's declines of 37 percent YoY and 33 percent organic. Sequentially, Q1 sales improved 6 percent, which the company said outpaced the typical first quarter seasonal decline.
Kennametal's Q1 operating loss was $17 million on a -4.3 percent margin, compared to a $16 million operating profit a year earlier on 3.2 percent margin. The company said the loss was driven by an organic sales decline and unfavorable labor and fixed cost absorption due to lower volumes, restructuring costs of $29 million and related charges. Q1 adjusted adjusted operating profit was $11 million, compared to $24 million a year earlier.
Part of Kennametal's recent restructuring involved combining its former Industrial and WIDIA business segments to form one Metal Cutting business segment effective July 1, which is reflected for the first time in the company's Q1 fiscal report.
By business segment in Q1:
- Metal Cutting sales of $248 million decreased 24 percent YoY, with organic sales down 23 percent. Sequentially, sales improved 9.3 percent from Q4. Q1 operating loss was $24 million on -9.5 percent margin, compared to a $19 million operating profit a year earlier.
- Infrastructure sales of $152 million fell 21 percent YoY, with organic sales down 18 percent. Sequentially, sales were identical to Q4. Q1 operating profit was $7 million on 4.8 percent margin, compared to a $3 million operating loss a year earlier.
"Our results demonstrate effective execution on several fronts despite low levels of industrial activity," commented Christopher Rossi, Kennametal president and CEO. "Benefits from our simplification/modernization initiatives increased, as we move into the final stages of footprint rationalization, positioning us well for the economic recovery. Furthermore, we continue to gain traction on our growth initiatives, including a recent win in the fit-for-purpose market segment with a major machine tool builder. Our first quarter sales outpaced typical seasonal trends, indicating that the economic recovery may be gaining momentum, although still down year-over-year. This is especially true in our General Engineering and Transportation end-markets, which total more than 60 percent of our sales. That said, the exact trajectory of the recovery remains difficult to predict."
Looking forward, Kennametal said it expects Q2 sales expected to be up low to mid-single digits sequentially from Q1, while total year capital spending will be in the range of $110 million to $130 million, slightly weighted to the first half of the fiscal year.