Kennametal (KMT) Q2 2025 earnings summary

Executive summary

• Q2 FY25 sales were $482M, down 3% year-over-year with a 6% organic decline, driven by weaker EMEA and U.S. markets, partially offset by Aerospace & Defense growth and favorable business days.

• EPS was $0.23 (adjusted $0.25), both below prior year; margins improved due to cost actions, lower raw material costs, and insurance recoveries.

• Announced plant closures and workforce reductions targeting $15M annualized pre-tax savings by FY25 end, with $25M in related pre-tax charges.

• Returned $31M to shareholders in Q2 via $15M in share repurchases and $16M in dividends.

• Full-year outlook lowered due to continued market softness, especially in EMEA.

Financial highlights

• Q2 sales were $482M, down 3% reported and 6% organic year-over-year; gross profit was $145M (30.1% margin), up from $139.6M (28.2%).

• Adjusted EBITDA margin rose to 13.9% from 12.4% year-over-year; adjusted EPS fell to $0.25 from $0.30.

• Operating income was $32M (6.6% margin), up from $28M (5.7% margin); adjusted operating income was $33M (6.9% margin).

• Operating cash flow YTD was $101M, up from $88M; free operating cash flow YTD increased to $57M from $36M.

• Capital expenditures for the six months were $44M, down from $57.5M year-over-year.

Outlook and guidance

• Q3 sales expected at $480M–$500M, with adjusted EPS forecasted at $0.20–$0.30 and a 3% FX headwind.

• FY25 sales outlook revised to $1.95B–$2.0B; adjusted EPS expected at $1.05–$1.30; free operating cash flow projected to exceed 125% of adjusted net income.

• Capital spending for FY25 expected at $100M; adjusted effective tax rate for FY25 expected at 27.5%.

• End-market outlook: Aerospace & Defense to see slight growth; all other segments expected to decline or be flat.

• Ongoing cost reduction initiatives to address softer market conditions, especially in EMEA.