Kennametal Achieves Record 2012 Results;
Increases Dividend By 14%
Set annual records in sales, operating income, EPS and ROIC
- Achieved 15 percent EBIT and 15 percent ROIC objectives, one year early
- Board increases quarterly dividend 14 percent to $0.16 per share
- Expands repurchase authorization to 12 million shares
- Fiscal 2013 EPS expected to range from $4.10 to $4.40
LATROBE, Pa., (July 26, 2012) – Kennametal Inc. (NYSE: KMT) today reported fiscal 2012 full-year and fourth quarter results, noting annual performance records in sales, profitability and returns. For fiscal 2012, the company reported earnings per diluted share (EPS) of $3.77 on $2.7 billion in sales, compared with EPS of $2.76 earned on $2.4 billion in sales during the prior year. The current-year earnings included acquisition-related dilution of $0.09 per share, while the prior year comparison included restructuring and related charges of $0.22 per share.
For the fiscal fourth quarter, the company reported EPS of $1.06 on $739 million in sales, compared with EPS of $1.04 on $694 million in sales reported in the same period last year. The current-quarter results included acquisition-related dilution of $0.02 per share, while the prior-year results included $0.07 per share in restructuring and related charges.
“Fiscal 2012 was an excellent year for Kennametal,” said Chairman, President and Chief Executive Officer Carlos Cardoso. “We outperformed our markets, set new records, and delivered 15 percent earnings before interest and taxes (EBIT) margin and 15 percent return on invested capital (ROIC), a full year ahead of schedule. This performance marks our second straight year of record profitability and returns. Consistent with our strategies, we established clear goals, realized ongoing improvements in operational efficiencies and successfully managed multiple headwinds.”
Cardoso added, “The June quarter represented our 10th consecutive quarter of organic growth, reflecting successful execution of our strategies across the diverse markets and geographies we serve. In addition, we further increased sales and strengthened our core business as a result of the recent Stellite acquisition. Our company specific initiatives continue to position Kennametal to achieve significant margin and earnings expansion. We remain committed to delivering shareowner value."
Fiscal 2012 Fourth Quarter Key Developments
- Sales were $739 million, compared with $694 million in the same quarter last year. The sales increase reflected a 10 percent acquisition contribution, 1 percent organic growth and 1 percent from more business days in the 2012 quarter, partially offset by a 5 percent unfavorable effect from currency exchange.
- Operating income was $117 million compared with $115 million in the same quarter last year. Operating income included $1 million of net acquisition-related loss, while the prior year’s operating income included restructuring and related charges of $7 million. Operating income increased as a result of higher sales volume, pricing and lower employment and restructuring costs, all of which offset higher raw material costs. Operating margin excluding the impact of the acquisition of Stellite was 17.6 percent, compared to an adjusted operating margin of 17.5 percent in the prior year.
- Reported EPS were $1.06, compared with the prior year’s reported EPS of $1.04. The current year EPS included the acquisition-related dilution of $0.02 per share, while the prior year’s EPS included $0.07 per share in restructuring and related charges.
- Adjusted ROIC was 16.3 percent at fiscal year-end, reflecting a new record for the company’s June quarter.
Segment Developments for the Fiscal 2012 Fourth Quarter
- Industrial segment sales of $421 million declined 4 percent from $437 million in the prior year, reflecting 2 percent organic growth offset by 6 percent in unfavorable currency effects. On an organic basis, sales growth was led by aerospace and defense with growth of 14 percent and transportation growth of 6 percent, while general engineering sales were down 4 percent. On a regional basis, sales increased approximately 7 percent in Europe and 3 percent in the Americas, while sales in Asia declined 9 percent from the prior year’s strong comparison.
- Industrial segment operating income was essentially flat year over year, at $76 million. Industrial operating income in the fiscal fourth quarter of 2012 benefited from higher sales volume, pricing and lower employment and restructuring costs, offset by higher raw material costs. Operating income in the prior-year comparison included $5 million in restructuring and related charges. Industrial operating margin was 18.2 percent, compared with adjusted operating margin of 18.7 percent in the prior year.
- Infrastructure segment sales of $318 million increased 24 percent from $257 million in the prior year, driven by 26 percent growth from the Stellite acquisition, partially offset by unfavorable currency effects of 2 percent. In earthworks, sales modestly increased, reflecting somewhat lower production rates in North American underground mining and a slow start in construction activity. Sales were slightly lower in energy, due to a decline in natural gas prices, high storage levels, and reduced drilling activity resulting from these influences. On a regional basis, sales increased approximately 11 percent in Asia and 3 percent in Europe while sales in the Americas were 5 percent lower, off strong prior-year comparisons.
- Infrastructure segment operating income was $42 million, compared with $38 million in the same quarter of the prior year. Infrastructure operating income included $1 million of net acquisition-related loss, versus $2 million in restructuring and related charges in the prior year. Operating income benefited from higher sales volume, pricing and lower employment and restructuring costs, partially offset by higher raw material costs and acquisition-related costs. Infrastructure adjusted operating margin was 17.0 percent compared with adjusted operating margin of 15.6 percent in the prior year.
Fiscal 2012 Key Developments
- Sales were $2.7 billion, up 14 percent from $2.4 billion last year. The sales increase reflects 9 percent organic growth, a 4 percent acquisition contribution and 1 percent from more business days in 2012.
- Operating income was $416 million compared with $322 million last year. Before net acquisition-related costs in the current year of $5 million and costs associated with restructuring in fiscal 2011 of $21 million, operating income was $422 million and $343 million, respectively. Adjusted operating margin was 15.9 percent for fiscal 2012, compared with adjusted operating margin of 14.3 percent last year.
- Kennametal reported EPS of $3.77 in 2012, compared with $2.76 in the prior year. The current-year EPS included acquisition-related dilution of $0.09 per share, while the prior year’s EPS included $0.22 per share in restructuring and related charges.
- Cash flow from operating activities was $290 million in fiscal 2012, compared with $231 million in the prior year. Net capital expenditures were $96 million and $74 million, respectively for fiscal years 2012 and 2011, and the company generated full-year free operating cash flow of $193 million in the current year, compared with $157 million last year. Reconciliations of all non-GAAP financial measures are set forth in the tables attached, and corresponding descriptions are contained in the company’s report on Form 8-K, to which this news release is attached.
Kennametal Inc. (NYSE: KMT) delivers productivity to customers seeking peak performance in demanding environments by providing innovative custom and standard wear-resistant solutions. This proven productivity is enabled through our advanced materials sciences and application knowledge. Our commitment to a sustainable environment provides additional value to our customers. Companies operating in everything from airframes to coal mining, from engines to oil wells and from turbochargers to construction recognize Kennametal for extraordinary contributions to their value chains. In fiscal year 2012, customers bought approximately $2.7 billion of Kennametal products and services – delivered by our approximately 13,000 talented employees doing business in more than 60 countries – with more than 50 percent of these revenues coming from outside North America.