Kennametal FY 1Q15 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Mixed trends in customer demand. Taking cost reduction actions

“For Kennametal, September quarter results reflect somewhat mixed trends related to customer demand. Those growth was largely driven by the demands in industrial markets such as transportation and general engineering. However, sales related to the infrastructure markets were lower than the prior year. This was due to weakness in underground mining and road construction, partially offset by increased drilling in the oil and gas sector. Due to a more modest growth environment, we are taking some cost reduction actions for the current fiscal year. For example, those measures include hiring freezes, as well as limiting certain expenses.”

Revised guidance driven primarily by Europe

“I want to point out that the decrease is mainly driven by the weakening of the European area, especially Germany. So I would say that we see some strength in the U.S., but we see a very relatively weakness to continue in Europe, and primarily in Germany.”

Infrastructure driven by what our sales force is telling us

“as far as the Infrastructure, given some of the softness we’re seeing with some of the commodity prices and feedback we’re getting from our sales force as well as customers, we expect that to be a little bit softer than we had anticipated.”

Europe is trending in the wrong direction

“I think we saw it towards the end of Q4, a little bit, primarily in Germany. And that continued through the quarter, so nothing significant month-to-month, but trending in the wrong direction. So for us, as you know, Germany’s a very big component of our European sales. And given the transportation and a couple of other end markets we serve there very well, we felt it was prudent to factor that in.”