Market Intelligence Center  Oct 5  Comment 
MarketIntelligenceCenter.com's patented trade-picking algorithms have identified an attractive covered-call trade on Kennametal Inc. (KMT). Look at the Jan. '16 $25.00 covered call for a net debit in the $23.93 area. This trade has a duration of...
Financial Times  Aug 31  Comment 
Beijing takes steps to recognise KMT veterans who fought Japan
newratings.com  Aug 27  Comment 
WASHINGTON (dpa-AFX) - Kennametal Inc. (KMT) announced the appointment of Jan Kees van Gaalen as vice president and chief financial officer or CFO, effective September 1, 2015. In this role, he will lead the company's finance function...
The Hindu Business Line  Aug 20  Comment 
Shares of Kennametal India and Premier Energy and Infrastructure will remain in focus, as these firms declare their quarterly numbers on Friday. With the market in a punishing mood, those...
Market Intelligence Center  Aug 19  Comment 
MarketIntelligenceCenter.com's option-trade picking algorithms have identified an attractive covered-call trade on Kennametal Inc. (KMT). Look at the Oct. '15 $30.00 covered call for a net debit in the $28.74 area. This trade has a duration of 58...
Financial Times  Jul 20  Comment 
Ruling KMT and opposition DPP both appoint women candidates for January poll
newratings.com  Jul 9  Comment 
WASHINGTON (dpa-AFX) - Kennametal Inc. (KMT) Thursday announced a sharp fall in fourth quarter net income attributable to the company to $21.146 million from $45.455 million in the prior year. Earnings per share declined to $0.26 from $0.57 last...


Kennametal Inc. (NYSE:KMT) is an industrial equipment manufacturer, particularly metal-cutting tools, drill bits, and other pieces of equipment where resistance to wear is required. These products are used in many end markets, primarily industry and construction. KMT operates in an oligopoly, and produces niche industrial products with few competitors, giving it pricing power in the market. Being an industrial supplier, however, means that the company's success depends on the health of industrial end markets. Any economic shocks in an industry using machine tools directly affects KMT returns, so when oil prices rise, for example, the expansion of the oilfield services industry leads to increased demand for KMT's tungsten-carbide tools. The company earned $2 billion in sales but incurred a net loss of $120 million in 2009.[1]

End markets often reflect the state of the economy they operate in, so KMT has made several acquisitions and divestments to shift some of its dependence away from the U.S. economy and towards more international markets, in order to reduce its risk. Rising costs for materials like steel and tungsten affect the entire machine tools industry, and force Kennametal to raise prices or cut costs to avoid shrinking margins.

Company Overview

Kennametal operates two main segments:[2]

  • Metalworking Solutions and Services Group (MSSG) (62% of sales) -- The MSSG segment produces metal-cutting tools and tooling systems and sells them to industrial manufacturing companies and distributors, including Updike Supply.
  • Advanced Materials Solutions Group (AMSG) (38% of sales) -- The AMSG segment manages the production and sale of cemented tungsten carbide products used in mining, highway construction and engineering applications requiring wear and corrosion resistance. AMSG's most renowned product, tungsten carbide tooling, is sold to engineering firms, construction firms, and industrial suppliers, including Greenfield Industries.

Business Growth

FY 2009 (ended June 30, 2009)[1]

  • Net sales decreased 22% to $2 billion. The company attributes fall to a decline in global demand levels which caused organic sales to decrease in all major metalworking markets.
  • The company incurred a net loss of $120 million compared to a gain of $168 million in the previous year.

Trends and Forces

End markets determine Kennametal production

Since Kennametal is primarily an industrial supplier, the health of the economy's end markets are crucial to Kennametal's success. Increased global industrial production will directly affect Kennametal's product manufacturing by causing demand for its industrial tools to rise. The general engineering end market is KMT's main buyer (43% of sales). This end market involves KMT selling its tungsten carbide tooling and advanced materials to various manufacturing businesses, from waste water treatment to animal food processing. The automotive industry affects Kennametal's second-largest end market, on-highway vehicles (28% of sales). KMT sells axles and bearings to the automotive industry. Every market trend affects the outcome of Kennametals' business strategies. High oil prices, for example, have caused increased exploration for new energy taps, which in turn increase demand for KMT's earth-drilling tools.

Kennametal has Dumped Big Subsidiaries for Niche Acquisitions to Expand Internationally

Since Kennametal products are sold to several end markets, the state of an economy drives Kennametal's success; the strength of an economy is an indicator of the strength of its end markets. KMT believes the U.S. is entering a recession, and hopes that international expansion will reduce revenue loss by causing the company to be less dependent on the U.S. economy. To this end:

Some of Kennametal's past acquisitions include

  • Camco
  • Sintec
  • International Specialty Alloys, Inc.
  • KENCI, S.A.
  • Federal Signal's cutting tools business

Some of the company's divestments include

  • Full Service Supply
  • J&L Industrials

Kennametal Adjusts to Changing Raw Material Costs

Steel, Cobalt, and Tungsten are the three main raw materials used in Kennametal product manufacturing. Tungsten APT prices have increased 160% in the last five years. Since 2004, Cobalt prices have decreased 22%. Both have seen price increases thanks to the economic growth of emerging markets and rising demand for industrial equipment. To offset these increases in cost, Kennametal has increased net product prices.[3]


Machine Tools & Accessories

  • Stanley Works (SWK)- SWK is manufactures consumer and industrial tools.
  • Timken Company (TKR)- TKR is the world's largest manufacturer of tapered roller bearings and a U.S. producer of steel alloy.
  • Kaydon (KDN)- KDN is a manufacturer of specialty bearings, and also manufactures machine parts and steel alloys.
  • CompX International (CIX)- CIX manufactures security products and precision ball bearing slides.
  • Hardinge (HDNG)- HDNG produces machine tools in Western Europe.
  • Thermadyne Holding (THMD)- THMD produces gas and electric arc cutting and welding products for the Americas.
  • RBC Bearings (ROLL)- ROLL manufactures bearings; 90% of its sales are from the U.S. and it has the second-highest return on equity in the past year.
  • Flow International (FLOW)- Flow produces high-pressure waterjet cutting tools and had the highest revenue growth of machine tools companies in the past quarter.

Metal Cutting Tools

  • Sandvik (STO:SAND)- This Sweden- based company is the highest global manufacturer of metal cutting tools.
  • Iscar Metalworking- Iscar is a Berkshire Hathaway-owned machine tools company located in Israel.


  1. 1.0 1.1 KMT 2009 10-K " Selected Financial Data" pg. 12
  2. KMT 2009 10-K "Business Segment Review" pg. 1-2
  3. KMT 2009 10-K "Raw Materials and Supplies" pg. 3
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