July 25, 2007 -- Kennametal Inc. today reported fiscal 2007 fourth quarter EPS of $1.57. This represents a decrease of 62 percent from the prior year quarter reported EPS of $4.11, and a 26 percent increase compared with prior year adjusted EPS of $1.25. Prior year quarter EPS special items totaled $2.86 per share and related primarily to the gain on the sale of J&L Industrial Supply (J&L) of $3.31 per share.
Fiscal 2007 reported EPS decreased 31 percent to $4.44, compared with prior year reported EPS of $6.48. Fiscal 2007 adjusted EPS were $4.56, compared with prior year adjusted EPS of $3.95, an increase of 15 percent.
Carlos M. Cardoso, Kennametal's President and Chief Executive Officer said, "Once again, we demonstrated our ability to deliver solid sales growth and strong performance in EBIT margin, EPS and ROIC. During fiscal year 2007, we completed five acquisitions: Sintec, Camco, Federal Signal's cutting tool business, International Specialty Alloys and Kenci. We have strategically redeployed our cash to acquire businesses that both complement our existing portfolio and offer additional opportunities for sales growth and margin expansion."
Cardoso added, "We attribute our successes to the strength of our operations, as well as to our proven strategy of balancing our business mix, geographic presence and end markets. As always, we continue to implement our strategy under the disciplines of the Kennametal Value Business System, our management operating system that serves as the foundation of our company. As we move forward, we will further capitalize on our strengths and opportunities to drive our operating and financial performance to even higher levels."
Metalworking Solutions & Services Group (MSSG) continued to deliver top- line growth in the June quarter, led by year-over-year expansion in the distribution, aerospace and machine tool markets, and the effects of acquisitions. The European market continued to be favorable. Asia Pacific and India delivered strong growth, while the North American market declined slightly.
In the June quarter, MSSG sales were higher by 15 percent as a result of 5 percent organic growth, 6 percent net impact of acquisitions and divestiture and 4 percent favorable foreign currency effects. Europe sales increased 9 percent. Asia Pacific and India sales grew by 31 percent and 8 percent, respectively. North America sales decreased by 2 percent.
MSSG operating income increased by 17 percent, and the operating margin increased over the same quarter last year. The current quarter results benefited from top-line growth and ongoing cost containment. The prior year quarter results included a loss on the sale of Presto of $1 million.
Advanced Materials Solutions Group (AMSG) also continued to deliver top- line growth in the June quarter, driven by favorable international market conditions and the effects of acquisitions. Strong growth in the energy and mining markets continued to contribute to AMSG's results.
AMSG sales grew 18 percent as a result of 8 percent organic growth, 9 percent impact of acquisitions and 1 percent favorable foreign currency effects. Energy product sales were up 17 percent, mining and construction product sales were higher by 4 percent, and engineered product sales increased 1 percent.
AMSG operating income was up 11 percent driven by top-line growth while the operating margin was lower than the prior year due primarily to higher raw material costs in the current quarter.
Worldwide market conditions support Kennametal's expectations of continued top-line growth during fiscal 2008. Based on global economic indicators, the company believes that the moderation in the North American market will continue to persist in the near term. The company also believes that the European market will continue to be favorable, and that business conditions will continue to be robust in developing economies. While there remain some uncertainties and risks related to the macro-economic environment, fundamental drivers for global demand appear to be stable.
The company anticipates that many of its end markets will continue to operate at favorable levels for the fiscal year, with moderating growth rates for some regions and market sectors.
Kennametal expects sales growth in the range of 8 to 10 percent for fiscal 2008, continuing the trend of consistently outpacing worldwide industrial production rates by two to three times.
The company expects fiscal 2008 EPS to be in the range of $5.30 to $5.50, excluding the effect of a non-cash tax charge that will be recorded in the September quarter of fiscal 2008. This charge is estimated to be in the range of $5 million to $6 million, or $0.12 to $0.15 per share, to reflect the impact of a German tax reform bill enacted on July 6, 2007. The fiscal 2008 guidance midpoint represents 18 percent growth, compared with fiscal 2007 adjusted EPS. Consistent with historical seasonal patterns, the company expects approximately 65 percent of the forecasted EPS to be realized in the second half.
In the first quarter of fiscal 2008, Kennametal expects sales growth to be in the range of 9 to 10 percent, and EPS to be in the range of $0.95 to $1.00, excluding the effect of the non-cash tax charge related to the recently enacted German tax reform bill.
Kennametal anticipates cash flow from operating activities of approximately $275 million to $285 million for fiscal 2008. Based on anticipated capital expenditures of $140 million, the company expects to generate between $135 million to $145 million of FOCF for fiscal 2008.
Source: Kennametal
