Company also raises guidance for remainder of fiscal 2011
Kennametal Inc. today reported record third quarter fiscal sales of $615 million, a 25 percent increase compared to the same quarter last year.
Carlos Cardoso, Kennametal's Chairman, President and Chief Executive Officer said, "March quarter results continue to demonstrate that our global team is successfully executing our established strategies. We realized organic sales growth of 25 percent year-over-year, despite strong comparisons from the prior year. This growth reflected higher customer demand in both our served end markets as well as geographic regions. Even at a sales level that is lower than prior peak, we achieved a record operating margin for the March quarter. In addition, we again increased our guidance for sales and earnings per share for the current fiscal year. We continue to outperform the forecasted industrial production rate and expect to maintain our strong operating leverage."
Cardoso added, "Our long-term strategies remain consistent -- we continue to balance our served end markets, business mix and geographic presence. Kennametal is a 'Breakaway' company that has demonstrated its ability to be profitable throughout the economic cycle."
Here is a breakout of Kennametal’s segments for the quarter:
• Industrial segment sales of $392 million grew 28 percent from $306 million in the prior year quarter, driven by organic growth of 29 percent and a 1 percent favorable foreign currency impact, partially offset by an unfavorable impact due to fewer business days. On an organic basis, sales increased in all served market sectors led by strong growth in general engineering and transportation sales of 34 percent and 29 percent, respectively. On a regional basis, sales increased by approximately 32 percent in Asia, 29 percent in Europe and 23 percent in the Americas.
• Industrial segment operating income was $54 million compared with $11 million for the same quarter of the prior year. Absent restructuring and related charges recorded in both periods, Industrial operating income was $56 million compared with $26 million in the prior year quarter. The primary drivers of the increase in operating income were higher sales volume and price realization, improved capacity utilization and incremental restructuring benefits. These benefits were partially offset by higher raw material costs and the restoration of temporary cost reductions. Industrial adjusted operating margin increased to 14.3 percent from 8.6 percent in the prior year.
• Infrastructure segment sales of $223 million increased 19 percent from $187 million in the prior year quarter due to organic growth. The organic increase was driven by higher sales in the energy and earthworks markets of 21 percent and 17 percent, respectively. On a regional basis, organic sales increased by approximately 20 percent in the Americas, 15 percent in Asia and 11 percent in Europe.
• Infrastructure segment operating income was $36 million, compared with $19 million in the same quarter of the prior year. Absent restructuring and related charges recorded in both periods, Infrastructure operating income was $37 million in the current quarter compared with $26 million in the prior year quarter. Operating income improved primarily due to higher sales volume and price realization, increased capacity utilization and incremental restructuring benefits, partially offset by higher raw material costs and the restoration of temporary cost reductions. Infrastructure adjusted operating margin increased from the prior year quarter to 16.5 percent from 13.8 percent.
Kennametal executives in a press release said global economic conditions and worldwide industrial production continues to remain positive. As such, Kennametal expects its fiscal 2011 organic sales growth to be 24 percent to 25 percent. This is in line with our 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 $2.75 to $2.85 per share, excluding charges related to previously announced restructuring programs, increased from the previous range of $2.50 to $2.65 per share, excluding charges related to restructuring.
Kennametal also announced that its Board of Directors declared a regular quarterly cash dividend of $0.12 per share. The dividend is payable May 25, 2011 to shareowners of record as of the close of business on May 10, 2011.