For fiscal 2010, sales decreased 8%
Kennametal reported today that sales in its 4th quarter totaled $539 million, compared with $386 million in the same quarter last year. Sales increased 40 percent due to organic growth of 39 percent and a 1 percent favorable impact from foreign currency effects. Sales improved sequentially from the March quarter by 9 percent, representing the fourth consecutive quarter of sequential sales growth.
For fiscal 2010, the metalworking manufacturer recorded sales of $1.9 billion compared to $2.0 billion in the previous fiscal year. Sales decreased 8 percent on an organic basis, partially offset by a 1 percent favorable impact from foreign currency effects and a 1 percent increase from a business acquisition made in the prior fiscal year.
The company also said it expects organic sales growth to rise between 14 and 17 percent in fiscal 2011.
"Our fiscal 2010 fourth quarter performance clearly reflects that we are realizing continuing sales growth and higher incremental margins," said Carlos Cardoso, Kennametal's Chairman, President and Chief Executive Officer.
The company’s Metalworking Solutions & Services Group (MSSG) sales increased by 44 percent from the prior year quarter, driven by organic growth of 43 percent and favorable foreign currency effects of 1 percent. On an organic basis, sales in Latin America, Asia Pacific and India increased 66 percent, 65 percent and 64 percent, respectively. North America and Europe reported organic sales increases of 42 percent and 34 percent, respectively, compared with the prior year quarter. Sequentially, sales increased by 8 percent as global industrial production continued to improve. This represents the fourth consecutive quarter of sequential sales growth for MSSG.
Its Advanced Materials Solutions Group (AMSG) sales increased 34 percent from the prior year quarter, driven by 33 percent organic growth and 1 percent favorable foreign currency effects. The organic increase was primarily driven by higher sales of mining and construction products, as well as increased demand for energy related and engineered products. Sequentially, sales increased by 11 percent, driven by better performance in all AMSG end markets.
The company's outlook for fiscal 2011 assumes that the global economy and worldwide industrial production will continue to gradually improve and that overall economic trends will remain in positive territory. As a result, the company expects to experience positive growth during the fiscal year in all geographies, albeit more modest growth in its European markets.
Here is the outlook for fiscal 2011 , according to a company press release:.
Global industrial production is anticipated to be in the mid single digits for the full year with higher growth in the first half of the fiscal year.
Sales volumes and related capacity utilization are expected to yield strong incremental margins and offset year-over-year cost increases for salary restoration and merit increases as well as for pension and incentive compensation.
The company's restructuring programs remain on track to deliver annual ongoing savings of $155 million to $160 million.
Based on current exchange rates, foreign currency may negatively impact results primarily due to the relationship of the U.S. dollar to the Euro.
Seasonal earnings are expected to revert back to historical patterns with approximately 40 percent of earnings occurring in the first half and 60 percent in the second half of the fiscal year.
Under these assumed conditions, Kennametal expects organic sales growth to be 14 percent to 17 percent higher than in fiscal 2010 and total sales growth to be higher by 11 percent to 14 percent. This is in line with the company's goal of growing at least two times the rate of increase in global industrial production.
The company expects EPS for fiscal 2011 to be in the range of $1.85 to $2.15 per share, excluding charges related to previously announced restructuring actions
Kennametal also announced its implementation of a new operating structure at the start of its new fiscal year that began on July 1, 2010.
The new structure provides for an enhanced market sector approach coupled with a more customer-centric focus for the sales organization and other key market-facing functions such as customer service, marketing, product management, engineering and product development.
The new structure also involves the formation of a single, global integrated supply chain and logistics organization that unleashes additional opportunities to achieve higher customer satisfaction and realize lower costs to serve.
A key attribute of the new structure is the establishment of two new operating segments by market sector which replace the previous two operating segments that were based on a product focus. The two new reportable operating segments are named Industrial and Infrastructure. The Industrial business is focused on customers within the transportation, aerospace, defense and general engineering market sectors. The Infrastructure business is focused on customers within the energy and earthworks industries.