Kennametal Inc. (NYSE:KMT) Q4 2016 Earnings Conference Call - Final Transcript

Aug 02, 2016 • 08:30 am ET


Kennametal Inc. (NYSE:KMT) Q4 2016 Earnings Conference Call - Final Transcript


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Good day and welcome to the Kennametal Fourth Quarter and Fiscal Year 2016 Financial Results Conference Call and Webcast. All participants will be in listen-only mode. (Operator Instructions) After today's presentation there will be an opportunity to ask questions. (Operator Instructions)

Please note today's event is being recorded. I would now like to turn the conference over to Kelly Boyer, Vice President Investor Relations, please go ahead.

Kelly Boyer

Thank you, Rocco. Welcome everyone and thank you for joining us to review Kennametal's fourth quarter and fiscal 2016 year-end results. We issued our quarterly earnings press release yesterday evening and it's posted on our website at This call is being broadcast live on our website and a recording of the call will be available for replay through September 2. I'm Kelly Boyer, Vice President of Investor Relations.

Joining me on the call today are Ron De Feo, President and Chief Executive Officer; Jan Kees van Gaalen, Vice President and Chief Financial Officer; Marti Fusco, Vice President Finance and Corporate Controller; Chuck Byrnes, President Industrial Business Segment; and Pete Dragich, President Infrastructure Business Segment.

Ron and Jan Kees will discuss our June quarter and total year of operating and financial performance as well as our outlook for fiscal year 2017 and will be referring to the slide deck posted on our website. After their prepared remarks we will be happy to answer your questions.

(Forward-Looking Cautionary Statements)

With that I would now like to turn the call over to Ron.

Ron De Feo

Thank you, Kelly, and hello everyone and thank you for your interest in Kennametal. I am going to begin with some overview comments which are on page 3 of the presentation. Jan Kees is going to discuss the specific financial results, and then I'll provide a summary of our outlook and strategy before taking your questions.

The management team is here today to support me on those questions, as Kelly noted. With the management team we now have in place, we've confirmed substantial opportunities to improve our Company, despite, quite frankly, the challenging times that we are operating in.

Simply stated, we've not grown and we have costs that are too high. Both of these issues are being addressed. To grow, we need to improve our commercial acumen and our sales execution. We relied too heavily on products alone. We have great products and we do have great brands. We need to add great service, pricing, availability, a balanced channel strategy and better sales execution to our mix. We're making progress in these areas today with more intensity than ever but this is going to take time.

On the cost side, the opportunity to lower costs and improve productivity is immense around here. This will mean substantial improvements to margins, even without growth. Today, nearly 70% of our costs are labor and material based, split about two-thirds/one-third. So for us to succeed we have to do more with less of these cost components, and these changes are also underway. In fact, it started