Kennametal Q1 Earnings Drop: EPS Falls to $0.28 Despite Strong Cash Flow Growth | KMT Stock News

Kennametal reported fiscal 2025 first quarter results with sales of $482 million, down 2% from $492 million in the prior year. Earnings per share were $0.28, compared to $0.37 last year, while adjusted EPS was $0.29 versus $0.41. The company generated strong cash from operations of $46 million, up from $26 million year-over-year. Operating income decreased to $36 million (7.5% margin) from $45 million (9.2% margin). The company returned approximately $31 million to shareholders through $15 million in share repurchases and $16 million in dividends.

Kennametal ha riportato i risultati del primo trimestre fiscale 2025 con vendite di 482 milioni di dollari, in calo del 2% rispetto ai 492 milioni dell'anno precedente. Gli utili per azione sono stati di 0,28 dollari, rispetto a 0,37 dollari dell'anno scorso, mentre l'EPS rettificato è stato di 0,29 rispetto a 0,41. L'azienda ha generato un forte flusso di cassa dalle operazioni di 46 milioni di dollari, in aumento rispetto ai 26 milioni dell'anno scorso. L'utile operativo è diminuito a 36 milioni di dollari (margine del 7,5%) rispetto ai 45 milioni di dollari (margine del 9,2%). L'azienda ha restituito circa 31 milioni di dollari agli azionisti attraverso 15 milioni di dollari in riacquisti di azioni e 16 milioni di dollari in dividendi.

Kennametal informó los resultados del primer trimestre fiscal 2025 con ventas de 482 millones de dólares, una disminución del 2% en comparación con los 492 millones del año anterior. Las ganancias por acción fueron de 0,28 dólares, en comparación con 0,37 dólares el año pasado, mientras que el EPS ajustado fue de 0,29 frente a 0,41. La compañía generó un fuerte flujo de efectivo de las operaciones de 46 millones de dólares, un aumento respecto a los 26 millones del año anterior. Los ingresos operativos disminuyeron a 36 millones de dólares (margen del 7,5%) desde 45 millones de dólares (margen del 9,2%). La empresa devolvió aproximadamente 31 millones de dólares a los accionistas a través de 15 millones de dólares en recompra de acciones y 16 millones de dólares en dividendos.

케나메탈은 2025 회계연도 1분기 실적을 보고하며 판매액이 4억 8천2백만 달러로, 이전 해의 4억 9천2백만 달러에서 2% 감소했다고 전했습니다. 주당 수익은 0.28달러로, 작년의 0.37달러에 비해 감소했으며, 조정 주당 수익은 0.29달러로 0.41달러에서 하락했습니다. 회사는 4천6백만 달러의 강력한 운영 현금을 창출했으며, 이는 지난해의 2천6백만 달러에서 증가한 수치입니다. 운영 이익은 7.5%의 이익률로 3천6백만 달러로 감소했으며, 이는 9.2%의 이익률로 4천5백만 달러에서 하락한 것입니다. 회사는 1천5백만 달러의 자사주 매입과 1천6백만 달러의 배당금을 통해 주주에게 약 3천1백만 달러를 반환했습니다.

Kennametal a rapporté les résultats du premier trimestre de l'exercice 2025 avec des ventes de 482 millions de dollars, en baisse de 2 % par rapport à 492 millions de dollars l'année précédente. Le bénéfice par action était de 0,28 dollar, contre 0,37 dollar l'année dernière, tandis que l'EPS ajusté était de 0,29 dollar contre 0,41 dollar. L'entreprise a généré un flux de trésorerie solide provenant des opérations de 46 millions de dollars, en hausse par rapport à 26 millions de dollars d'une année sur l'autre. Le revenu d'exploitation a diminué à 36 millions de dollars (marge de 7,5 %) contre 45 millions de dollars (marge de 9,2 %). L'entreprise a restitué environ 31 millions de dollars aux actionnaires par le biais de 15 millions de dollars en rachats d'actions et de 16 millions de dollars en dividendes.

Kennametal berichtete über die Ergebnisse des ersten Quartals des Geschäftsjahres 2025 mit einem Umsatz von 482 Millionen Dollar, was einem Rückgang von 2% gegenüber 492 Millionen Dollar im Vorjahr entspricht. Der Gewinn pro Aktie betrug 0,28 Dollar im Vergleich zu 0,37 Dollar im letzten Jahr, während das bereinigte EPS 0,29 Dollar gegen 0,41 Dollar betrug. Das Unternehmen erzielte einen starken operativen Cashflow von 46 Millionen Dollar, ein Anstieg gegenüber 26 Millionen Dollar im Jahresvergleich. Der operative Gewinn sank auf 36 Millionen Dollar (Marge von 7,5%) von 45 Millionen Dollar (Marge von 9,2%). Das Unternehmen gab etwa 31 Millionen Dollar an die Aktionäre zurück, darunter 15 Millionen Dollar durch Aktienrückkäufe und 16 Millionen Dollar in Dividenden.

Kennametal's Q1 FY2025 results show mixed performance with concerning trends. Sales declined 2% to $482 million, while EPS dropped to $0.28 from $0.37 year-over-year. The operating margin contracted significantly to 7.5% from 9.2%.

Key concerns include:

The FY2025 outlook suggests continued challenges with adjusted EPS guidance of $1.30-$1.70, reflecting ongoing market uncertainties and margin pressures.

PITTSBURGH, Nov. 6, 2024 /PRNewswire/ -- Kennametal Inc. (NYSE: KMT) (the "Company") today reported results for its fiscal 2025 first quarter ended September 30, 2024, with sales of $482 million compared to $492 million in the prior year quarter, and earnings per diluted share (EPS) of $0.28 compared to $0.37 in the prior year quarter. The current quarter pre-tax results include a net benefit of $4 million, consisting of insurance proceeds offset by additional costs, related to the tornado that struck the Company's Rogers, Arkansas facility late in fiscal 2024, as well as certain tax-related items amounting to a benefit of approximately $3 million. Adjusted EPS was $0.29 in the current quarter compared to $0.41 in the prior year quarter.

"While we continue to generate strong cash flow from operations, softer market conditions in a number of our end markets have led sales to come in on the lower end of our expectations," said Sanjay Chowbey, President and CEO. "We do, however, anticipate second quarter results in line with our historical sequential performance and we remain focused on the continued execution of the Value Creation Pillars we outlined last quarter: Delivering Growth, Continuous Improvement and Portfolio Optimization."

Fiscal 2025 First Quarter Key Developments

Sales of $482 million decreased 2 percent from $492 million in the prior year quarter, reflecting an organic sales decline of 2 percent and an unfavorable currency exchange effect of 1 percent, partially offset by a favorable business days effect of 1 percent.

During the quarter, the Company achieved incremental year-over-year restructuring savings of approximately $5 million from the previously announced action to streamline its cost structure. This action has delivered annualized run rate pre-tax savings of approximately $35 million. Restructuring and related charges of $1 million were recognized during the quarter in connection with the execution of this initiative compared to $4 million in the prior year quarter.

Operating income was $36 million, or 7.5 percent margin, compared to $45 million, or 9.2 percent margin, in the prior year quarter. The decrease in operating income was primarily due to lower sales and production volumes within the Metal Cutting segment, higher wages and general inflation, and certain manufacturing costs within the Infrastructure segment, including temporary plant shutdowns for maintenance and process improvements. These factors were partially offset by lower raw material costs, incremental year-over-year restructuring savings of approximately $5 million, a net benefit of $4 million consisting of insurance recoveries of $5 million received during the quarter, offset by charges of $1 million related to the tornado that struck the Rogers, Arkansas facility late in fiscal 2024, lower restructuring charges of approximately $3 million compared to the prior year quarter and higher sales volumes within the Infrastructure segment. Adjusted operating income was $37 million, or 7.6 percent margin, in the current quarter, compared to $49 million, or 9.9 percent margin, in the prior year quarter.

The reported effective tax rate (ETR) for the quarter was 25.2 percent compared to 21.0 percent in the prior year quarter. The increase in the ETR year-over-year was primarily driven by prior year adjustments including a benefit of approximately $6 million from a change in unrecognized tax benefits that was partially offset by a $3 million settlement related to tax litigation in Italy. The current year quarter also includes a benefit of $1 million due to the favorable resolution of a tax dispute in India and geographical mix. Adjusted ETR was 25.1 percent in the current quarter, compared to 21.0 percent in the prior year quarter.

Year-to-date net cash flow from operating activities was $46 million compared to $26 million in the prior year period. The change in net cash flow from operating activities was driven primarily by working capital changes and $5 million received from the favorable resolution of a tax dispute in India, partially offset by lower net income compared to the prior year period. Year-to-date free operating cash flow (FOCF) was $21 million compared to negative $3 million in the prior year period. The increase in FOCF was driven primarily by working capital changes, $5 million received from the favorable resolution of a tax dispute in India and lower capital expenditures, partially offset by lower net income compared to the prior year period.

The Company paid $16 million in cash dividends to Kennametal shareholders during the quarter. The Company has a long history of consistently paying dividends to shareholders since its listing on the New York Stock Exchange in 1967.

During the quarter, the Company repurchased 600 thousand shares of Kennametal common stock for $15 million under its current $200 million, three-year share repurchase program.

Outlook

The Company's expectations for the second quarter of fiscal 2025 and the full year are as follows:

Quarterly Outlook:

Annual Outlook:

The Company will provide more details regarding its Outlook during its quarterly earnings conference call.

Segment Results

Metal Cutting sales of $297 million decreased 4 percent from $308 million in the prior year quarter, reflecting an organic sales decline of 4 percent and an unfavorable currency exchange effect of 2 percent, partially offset by a favorable business days effect of 2 percent. Operating income was $24 million, or 8.0 percent margin, compared to $32 million, or 10.4 percent margin, in the prior year quarter. The decrease in operating income was primarily due to lower sales and production volumes, higher wages and general inflation, and unfavorable foreign currency exchange of approximately $2 million. These factors were partially offset by lower raw material costs, incremental year-over-year restructuring savings of approximately $4 million, lower restructuring charges of approximately $2 million compared to the prior year quarter and pricing. Adjusted operating income was $24 million, or 8.2 percent margin, in the current quarter, compared to $35 million, or 11.2 percent margin, in the prior year quarter.

Infrastructure sales of $185 million increased 0.4 percent from $184 million in the prior year quarter, driven by organic sales growth of 1 percent, partially offset by an unfavorable business days effect of 1 percent. Operating income was $13 million, or 6.9 percent margin, compared to $14 million, or 7.4 percent margin, in the prior year quarter. The decrease in operating income was primarily due to certain manufacturing costs, including temporary plant shutdowns for maintenance and process improvements, and higher wages and general inflation. These factors were partially offset by a net benefit of $4 million consisting of insurance recoveries of $5 million received during the quarter, offset by charges of $1 million related to the tornado that struck the Rogers, Arkansas facility late in fiscal 2024, the favorable timing of pricing compared to raw material costs, incremental year-over-year restructuring savings of approximately $1 million, lower restructuring charges of approximately $1 million compared to the prior year quarter and higher sales volumes. Adjusted operating income was $13 million, or 6.9 percent margin, in the current quarter, compared to $15 million, or 8.0 percent margin, in the prior year quarter.

Dividend Declared

Kennametal announced that its Board of Directors declared a quarterly cash dividend of $0.20 per share. The dividend is payable on November 26, 2024 to shareholders of record as of the close of business on November 12, 2024.

The Company will host a conference call to discuss its first quarter fiscal 2025 results on Wednesday, November 6, 2024 at 9:30 a.m. Eastern Time. The conference call will be broadcast via real-time audio on Kennametal's investor relations website at https://investors.kennametal.com/ - click "Event" (located in the blue Quarterly Earnings block).

This earnings release contains non-GAAP financial measures. Reconciliations and descriptions of all non-GAAP financial measures are set forth in the tables that follow.

Certain statements in this release may be forward-looking in nature, or "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements that do not relate strictly to historical or current facts. For example, statements about Kennametal's outlook for sales, interest expense, adjusted EPS, FOCF, primary working capital, capital expenditures and adjusted effective tax rate for the second quarter and full year of fiscal 2025 and our expectations regarding future growth and financial performance are forward-looking statements. Any forward-looking statements are based on current knowledge, expectations and estimates that involve inherent risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, our actual results could vary materially from our current expectations. There are a number of factors that could cause our actual results to differ from those indicated in the forward-looking statements. They include: uncertainties related to changes in macroeconomic and/or global conditions, including as a result of increased inflation and Russia's invasion of Ukraine and the resulting sanctions on Russia; the conflict in the Middle East; other economic recession; our ability to achieve all anticipated benefits of restructuring, simplification and modernization initiatives; Commercial Excellence growth initiatives, Operational Excellence initiatives, our foreign operations and international markets, such as currency exchange rates, different regulatory environments, trade barriers, exchange controls, and social and political instability, including the conflicts in Ukraine and the Middle East; changes in the regulatory environment in which we operate, including environmental, health and safety regulations; potential for future goodwill and other intangible asset impairment charges; our ability to protect and defend our intellectual property; continuity of information technology infrastructure; competition; our ability to retain our management and employees; demands on management resources; availability and cost of the raw materials we use to manufacture our products; product liability claims; integrating acquisitions and achieving the expected savings and synergies; global or regional catastrophic events; demand for and market acceptance of our products; business divestitures; energy costs; commodity prices; labor relations; and implementation of environmental remediation matters. Many of these risks and other risks are more fully described in Kennametal's latest annual report on Form 10-K and its other periodic filings with the Securities and Exchange Commission. We can give no assurance that any goal or plan set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. We undertake no obligation to release publicly any revisions to forward-looking statements as a result of future events or developments.

About Kennametal

With over 85 years as an industrial technology leader, Kennametal Inc. delivers productivity to customers through materials science, tooling and wear-resistant solutions. Customers across aerospace and defense, earthworks, energy, general engineering and transportation turn to Kennametal to help them manufacture with precision and efficiency. Every day approximately 8,400 employees are helping customers in nearly 100 countries stay competitive. Kennametal generated $2 billion in revenues in fiscal 2024. Learn more at www.kennametal.com. Follow @Kennametal: Instagram, Facebook, LinkedIn and YouTube.

FINANCIAL HIGHLIGHTS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended September 30,

(in thousands, except per share amounts)

2024

2023

Sales

$ 481,948

$ 492,476

Cost of goods sold

330,939

329,578

Gross profit

151,009

162,898

Operating expense

111,653

111,649

Restructuring and other charges, net

611

3,086

Amortization of intangibles

2,718

3,045

Operating income

36,027

45,118

Interest expense

6,312

6,601

Other (income) expense, net

(1,657)

89

Income before income taxes

31,372

38,428

Provision for income taxes

7,906

8,059

Net income

23,466

30,369

Less: Net income attributable to noncontrolling interests

1,343

312

Net income attributable to Kennametal

$ 22,123

$ 30,057

PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL SHAREHOLDERS

Basic earnings per share

$ 0.28

$ 0.38

Diluted earnings per share

$ 0.28

$ 0.37

Basic weighted average shares outstanding

78,067

80,025

Diluted weighted average shares outstanding

78,657

80,699

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

September 30, 2024

June 30, 2024

ASSETS

Cash and cash equivalents

$ 119,588

$ 127,971

Accounts receivable, net

282,464

302,810

Inventories

543,427

514,632

Other current assets

58,390

57,179

Total current assets

1,003,869

1,002,592

Property, plant and equipment, net

942,114

938,063

Goodwill and other intangible assets, net

356,616

352,988

Other assets

219,330

210,115

Total assets

$ 2,521,929

$ 2,503,758

LIABILITIES

Revolving and other lines of credit and notes payable

$ 1,426

$ 1,377

Accounts payable

201,908

191,541

Other current liabilities

195,052

223,043

Total current liabilities

398,386

415,961

Long-term debt

596,182

595,980

Other liabilities

209,398

203,218

Total liabilities

1,203,966

1,215,159

KENNAMETAL SHAREHOLDERS' EQUITY

1,277,173

1,249,875

NONCONTROLLING INTERESTS

40,790

38,724

Total liabilities and equity

$ 2,521,929

$ 2,503,758

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)

Three Months Ended September 30,

(in thousands)

2024

2023

OPERATING ACTIVITIES

Net income

$ 23,466

30,369

Adjustments to reconcile to cash from operations:

Depreciation

30,839

30,461

Amortization

2,718

3,045

Stock-based compensation expense

7,937

8,696

Restructuring and other charges, net

611

3,087

Deferred income taxes

(1,253)

(104)

Gain on insurance recoveries

(5,000)

—

Other

1,742

5,623

Changes in certain assets and liabilities:

Accounts receivable

26,605

17,937

Inventories

(17,455)

(20,266)

Accounts payable and accrued liabilities

(22,270)

(32,555)

Accrued income taxes

1,976

(11,676)

Accrued pension and postretirement benefits

(1,195)

(2,925)

Other

(2,975)

(5,981)

Net cash flow provided by operating activities

45,746

25,711

INVESTING ACTIVITIES

Purchases of property, plant and equipment

(24,748)

(31,799)

Disposals of property, plant and equipment

93

3,048

Proceeds from insurance recoveries

4,693

—

Other

9

27

Net cash flow used in investing activities

(19,953)

(28,724)

FINANCING ACTIVITIES

Net increase in notes payable

—

7,212

Net increase in revolving and other lines of credit

—

23,400

Purchase of capital stock

(15,030)

(13,725)

The effect of employee benefit and stock plans and dividend reinvestment

(5,768)

(7,013)

Cash dividends paid to Shareholders

(15,582)

(15,935)

Other

26

9

Net cash flow used in financing activities

(36,354)

(6,052)

Effect of exchange rate changes on cash and cash equivalents

2,178

(1,858)

CASH AND CASH EQUIVALENTS

Net decrease in cash and cash equivalents

(8,383)

(10,923)

Cash and cash equivalents, beginning of period

127,971

106,021

Cash and cash equivalents, end of period

$ 119,588

$ 95,098

SEGMENT DATA (UNAUDITED)

Three Months Ended September 30,

(in thousands)

2024

2023

Sales:

Metal Cutting

$ 296,900

$ 308,229

Infrastructure

185,048

184,247

Total sales

$ 481,948

$ 492,476

Sales By Geographic Region:

Americas

$ 237,727

$ 246,742

EMEA

145,934

148,709

Asia Pacific

98,287

97,025

Total sales

$ 481,948

$ 492,476

Operating income:

Metal Cutting

$ 23,822

$ 32,117

Infrastructure

12,734

13,644

Corporate (1)

(529)

(643)

Total operating income

$ 36,027

$ 45,118

(1) Represents unallocated corporate expenses.

NON-GAAP RECONCILIATIONS (UNAUDITED)

In addition to reported results under generally accepted accounting principles in the United States of America (GAAP), the following financial highlight tables include, where appropriate, a reconciliation of adjusted results including: operating income and margin; ETR; net income attributable to Kennametal; diluted EPS; Metal Cutting operating income and margin; Infrastructure operating income and margin; FOCF; and consolidated and segment organic sales growth (all of which are non-GAAP financial measures), to the most directly comparable GAAP financial measures. Adjustments for the three months ended September 30, 2024 include restructuring and related charges and differences in projected annual tax rates. Adjustments for the three months ended September 30, 2023 include restructuring and related charges and differences in projected annual tax rates. For those adjustments that are presented 'net of tax', the tax effect of the adjustment can be derived by calculating the difference between the pre-tax and the post-tax adjustments presented. The tax effect on adjustments is calculated by preparing an overall tax calculation including the adjustments and then a tax calculation excluding the adjustments. The difference between these calculations results in the tax impact of the adjustments.

Management believes that presentation of these non-GAAP financial measures provides useful information about the results of operations of the Company for the current and past periods. Management believes that investors should have available the same information that management uses to assess operating performance, determine compensation and assess the capital structure of the Company. These non-GAAP financial measures should not be considered in isolation or as a substitute for the most comparable GAAP financial measures. Investors are cautioned that non-GAAP financial measures used by management may not be comparable to non-GAAP financial measures used by other companies. Reconciliations and descriptions of all non-GAAP financial measures are set forth in the disclosures below.

Reconciliations to the most directly comparable GAAP financial measures for the following forward-looking non-GAAP financial measures for the second quarter and full fiscal year of 2025 have not been provided, including but not limited to: FOCF, adjusted operating income, adjusted net income, adjusted EPS, adjusted ETR and primary working capital. The most comparable GAAP financial measures are net cash flow from operating activities, operating income, net income attributable to Kennametal, EPS, ETR and working capital (defined as current assets less current liabilities), respectively. Primary working capital is defined as accounts receivable, net plus inventories, net minus accounts payable. Because the non-GAAP financial measures on a forward-looking basis are subject to uncertainty and variability as they are dependent on many factors - including, but not limited to, the effect of foreign currency exchange fluctuations, impacts from potential acquisitions or divestitures, gains or losses on the potential sale of businesses or other assets, restructuring costs, asset impairment charges, gains or losses from early extinguishment of debt, the tax impact of the items above and the impact of tax law changes or other tax matters - reconciliations to the most directly comparable forward-looking GAAP financial measures are not available without unreasonable effort.

THREE MONTHS ENDED SEPTEMBER 30, 2024 (UNAUDITED)

(in thousands, except percents and per share data)

Sales

Operating income

ETR

Net income(2)

Diluted EPS

Reported results

$ 481,948

36,027

25.2 %

$ 22,123

$ 0.28

Reported operating margin

7.5 %

Restructuring and related charges

—

626

22.2

487

0.01

Differences in projected annual tax rates

—

—

(22.3)

14

—

Adjusted results

$ 481,948

$ 36,653

25.1 %

$ 22,624

$ 0.29

Adjusted operating margin

7.6 %

(2) Attributable to Kennametal.

THREE MONTHS ENDED SEPTEMBER 30, 2024 (UNAUDITED)

Metal Cutting

Infrastructure

(in thousands, except percents)

Sales

Operating income

Sales

Operating income

Reported results

$ 296,900

$ 23,822

$ 185,048

$ 12,734

Reported operating margin

8.0 %

6.9 %

Restructuring and related charges

—

646

—

(20)

Adjusted results

$ 296,900

$ 24,468

$ 185,048

$ 12,714

Adjusted operating margin

8.2 %

6.9 %

THREE MONTHS ENDED SEPTEMBER 30, 2023 (UNAUDITED)

(in thousands, except percents and per share data)

Sales

Operating income

ETR

Net income(2)

Diluted EPS

Reported results

$ 492,476

45,118

21.0 %

$ 30,057

$ 0.37

Reported operating margin

9.2 %

Restructuring and related charges

—

3,694

9.5

3,391

0.04

Differences in projected annual tax rates

—

—

(9.5)

(444)

—

Adjusted results

$ 492,476

$ 48,812

21.0 %

$ 33,004

$ 0.41

Adjusted operating margin

9.9 %

(2) Attributable to Kennametal.

THREE MONTHS ENDED SEPTEMBER 30, 2023 (UNAUDITED)

Metal Cutting

Infrastructure

(in thousands, except percents)

Sales

Operating income

Sales

Operating income

Reported results

$ 308,229

$ 32,117

$ 184,247

$ 13,644

Reported operating margin

10.4 %

7.4 %

Restructuring and related charges

—

2,539

—

1,155

Adjusted results

$ 308,229

$ 34,656

$ 184,247

$ 14,799

Adjusted operating margin

11.2 %

8.0 %

Free Operating Cash Flow (FOCF)

FOCF is a non-GAAP financial measure and is defined by the Company as net cash flow provided by operating activities (which is the most directly comparable GAAP financial measure) less capital expenditures plus proceeds from disposals of fixed assets. Management considers FOCF to be an important indicator of the Company's cash generating capability because it better represents cash generated from operations that can be used for dividends, debt repayment, strategic initiatives (such as acquisitions) and other investing and financing activities.

FREE OPERATING CASH FLOW (UNAUDITED)

Three Months Ended September 30,

(in thousands)

2024

2023

Net cash flow provided by operating activities

$ 45,746

$ 25,711

Purchases of property, plant and equipment

(24,748)

(31,799)

Disposals of property, plant and equipment

93

3,048

Free operating cash flow

$ 21,091

$ (3,040)

Organic Sales Growth (Decline)

Organic sales growth (decline) is a non-GAAP financial measure of sales growth (decline) (which is the most directly comparable GAAP measure) excluding the effects of acquisitions, divestitures, business days and foreign currency exchange from year-over-year comparisons. Management believes this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis. Management reports organic sales growth (decline) at the consolidated and segment levels.

ORGANIC SALES (DECLINE) GROWTH (UNAUDITED)

Three Months Ended September 30, 2024

Metal Cutting

Infrastructure

Total

Organic sales (decline) growth

(4) %

1 %

(2) %

Foreign currency exchange effect (3)

(2)

—

(1)

Business days effect (4)

2

(1)

1

Sales decline

(4) %

— %

(2) %

(3) Foreign currency exchange effect is calculated by dividing the difference between current period sales and current period sales at prior period foreign exchange rates by prior period sales.

(4) Business days effect is calculated by dividing the year-over-year change in weighted average working days (based on mix of sales by country) by prior period weighted average working days.

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SOURCE Kennametal Inc.