Kennametal Inc. (KMT) swung to a net profit for the quarter ended Dec. 31, 2016. The company has made a net profit of $7.26 million, or $ 0.09 a share in the quarter, against a net loss of $169.23 million, or $2.12 a share in the last year period. On the other hand, adjusted net income for the quarter stood at $19.45 million, or $0.24 a share compared with $12.68 million or $0.16 a share, a year ago.
Revenue during the quarter dropped 6.96 percent to $487.57 million from $524.02 million in the previous year period. Gross margin for the quarter expanded 341 basis points over the previous year period to 30.28 percent. Operating margin for the quarter period stood at positive 4.93 percent as compared to a negative 44.65 percent for the previous year period.
Operating income for the quarter was $24.01 million, compared with an operating loss of $233.96 million in the previous year period.
However, the adjusted operating income for the quarter stood at $35.80 million compared to $18.50 million in the prior year period. At the same time, adjusted operating margin improved 381 basis points in the quarter to 7.34 percent from 3.53 percent in the last year period.
"The second quarter results reflect positive performance from our growth and cost reduction initiatives," commented Ron De Feo, Kennametal president and chief executive officer. "Total company organic sales in the quarter grew 2 percent, marking the first quarterly consolidated organic growth in over two years. Organically, Industrial grew 4 percent, Widia 5 percent, and Infrastructure was flat versus prior year. Adjusted gross profit margin increased 260 basis points and adjusted operating expense decreased 90 basis points, resulting in adjusted operating margin improving 350 basis points. We are pleased to see these improvements during a quarter where end markets were still relatively quiet."
For fiscal year 2017, Kennametal Inc. expects diluted earnings per share to be in the range of $1.20 to $1.50 on adjusted basis.
Working capital declines
Kennametal Inc. has witnessed a decline in the working capital over the last year. It stood at $581.59 million as at Dec. 31, 2016, down 12.94 percent or $86.41 million from $668.01 million on Dec. 31, 2015. Current ratio was at 2.49 as on Dec. 31, 2016, down from 2.69 on Dec. 31, 2015.
Cash conversion cycle (CCC) has decreased to 84 days for the quarter from 148 days for the last year period. Days sales outstanding went up to 70 days for the quarter compared with 64 days for the same period last year.
Days inventory outstanding has decreased to 61 days for the quarter compared with 123 days for the previous year period. At the same time, days payable outstanding went up to 47 days for the quarter from 40 for the same period last year.
Debt comes down marginally
Kennametal Inc. has recorded a decline in total debt over the last one year. It stood at $696.59 million as on Dec. 31, 2016, down 1.42 percent or $10.06 million from $706.65 million on Dec. 31, 2015. Total debt was 30.89 percent of total assets as on Dec. 31, 2016, compared with 28.96 percent on Dec. 31, 2015. Debt to equity ratio was at 0.75 as on Dec. 31, 2016, up from 0.61 as on Dec. 31, 2015.
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