Kennametal's Q2 2025 Earnings Call: Unpacking Contradictions in Demand, Pricing, and Operational Strategy

These are the key contradictions discussed in Kennametal's latest 2025 Q2 earnings call, specifically including: General Engineering demand trends, Pricing Strategy, and Footprint Optimization:



Sales Decline and Market Challenges:
- Kennametal's sales decreased 3% year-over-year in Q2 2025, with Infrastructure down 4% organically and Metal Cutting by 7%.
- The decline was mainly due to worsening market conditions in EMEA and soft industrial production in the U.S., impacting Transportation and General Engineering.

Plant Closures and Cost Reduction:
- Kennametal announced closures of a facility in Greenfield, Massachusetts, and consolidation in Barcelona, Spain, expected to deliver annualized run rate pre-tax cost savings of $15 million by year-end 2025.
- These actions align with long-term competitiveness goals and aim to address current market conditions.

Leadership Changes and Strategic Focus:
- Faisal Hamadi replaced Franklin Cardenas as President of the Infrastructure segment, emphasizing the importance of business experience and strategic focus.
- The change is part of ongoing efforts to improve operations and continuous improvement initiatives across the company.

Financial Performance and Guidance:
- The company's adjusted EBITDA margin was 13.9%, and adjusted EPS decreased to $0.25, despite lower sales expectations.
- For fiscal 2025, Kennametal anticipates sales between $1.95 billion and $2 billion, reflecting worsening market conditions in EMEA and continued low industrial production in the U.S.

Rayon and Aerospace Growth:
- Aerospace and Defense grew 14%, driven by strategic initiatives and improved build rates, despite challenges in EMEA.
- Energy grew 1%, primarily due to project volumes, offsetting lower U.S. land-based rig counts.