Kennametal ended fiscal 2026 with inventory of approximately $1.11 billion, more than double the $538.2 million held a year earlier, as unprecedented tungsten price increases and efforts to secure raw-material supply absorbed substantial working capital. At the same time, the industrial technology company is targeting fiscal 2027 sales of as much as $3.45 billion following 42% organic growth in its fiscal fourth quarter.
Kennametal reported Q4 sales of approximately $736.6 million, up 43% from $516.4 million in the prior-year period. Organic sales increased 42%, while foreign currency and an additional business day each contributed another percentage point of growth, partially offset by a one-point divestiture impact.
The quarter also produced unusually strong profitability. Operating income increased to approximately $303 million from $31 million, while operating margin reached 41.1% compared with 6.1% a year earlier. Adjusted operating income was $306 million, representing a 41.5% adjusted operating margin.
A major contributor was approximately $252 million of favorable timing between raw-material-related pricing and costs. Kennametal also benefited from non-raw-material pricing, Metal Cutting tariff surcharges, increased sales and production volumes, and approximately $5 million of incremental restructuring savings.
That same raw-material environment created a substantially different picture on the balance sheet and cash-flow statement. Inventory reached $1.108 billion at June 30, compared with $538.2 million a year earlier, while cash and cash equivalents declined to $95.8 million from $140.5 million. Accounts receivable also increased to $408.4 million from $295.4 million.
Kennametal said working-capital requirements were driven in large part by increased inventory values resulting from unprecedented tungsten price increases. The company also made advance payments to certain suppliers to secure raw-material supply.
As a result, fiscal 2026 operating cash flow swung to negative $4 million from positive $208 million in fiscal 2025. Free operating cash flow fell to negative $79 million from positive $121 million despite the substantial improvement in earnings.
For the full fiscal year, sales increased 20% to approximately $2.36 billion, including 19% organic growth. Operating income increased to $472.5 million from $143.1 million, while adjusted operating income reached $484 million and adjusted operating margin expanded to 20.5% from 8%.
Kennametal’s Infrastructure segment was a particularly significant contributor during Q4. Sales increased 73% to $338.8 million, including 74% organic growth, while operating income reached $197.4 million and operating margin climbed to 58.3%. The segment benefited from approximately $198 million of favorable raw-material pricing-versus-cost timing.
Metal Cutting sales increased 24% to $397.8 million, including 22% organic growth. Operating income increased to $106.2 million from $21.1 million, while adjusted operating margin expanded to 27.3% from 7.9%.
Kennametal is now projecting fiscal 2027 sales of $3.33 billion to $3.45 billion, with adjusted EPS of $4.15 to $5.15. The company expects approximately $85 million of capital spending and free operating cash flow equal to roughly 20% of adjusted net income.
For fiscal Q1 2027, sales are expected to reach $745 million to $775 million and adjusted EPS is projected at $2.50 to $2.80.
The outlook therefore pairs a strong demand environment and rapid recent organic growth with a significant working-capital challenge. Kennametal’s ability to convert higher sales and earnings into cash will depend in part on how tungsten pricing, inventory values and raw-material supply conditions develop during fiscal 2027.
KEY QUOTES:
“Our team delivered strong fiscal 2026 results, reflecting volume from improving market conditions and our strategic growth initiatives. We achieved record adjusted EPS this quarter through decisive pricing actions in an unprecedented tungsten environment, volume growth and cost improvement efforts.”
“Looking ahead, we are encouraged by the volume trends we have seen across several end markets and expect those improving conditions, along with our strategic initiatives, to continue to drive sales growth throughout fiscal 2027. Recent wins in the Aerospace & Defense, Energy and Earthworks end markets showcase the ability of our team to take share in any market condition. I am confident that our commitment to above market growth and continuous improvement will unlock long-term value for shareholders.”
Sanjay Chowbey, President and CEO of Kennametal
