Toolmaker posts second-consecutive annual loss, plans to proceed with substantial cost cuts
- 600 job cuts, 400 voluntary separations
- FY ’15 revenues $2.1 billion, loses $226 million
- $40-$45 million annualized savings to date
New orders for cutting tools have been in decline more than a year, as buyers have managed their own declining orders for machined parts, all of this stemming from declining manufacturing output.
Toolmaker Kennametal Inc. reported a Q4 2015 loss of $66.5 million, capping a fiscal year in which it posted revenues of posted revenues of $2.1 billion and losses of $226 million. While the loss was lower that analysts forecast, it was the second consecutive year of losses for the Pittsburgh-area firm, which now plans to cut 1,000 jobs and increase cost-cutting “substantially.”
Kennametal reportedly has 12,700 workers worldwide. Reports indicate that about 600 of the 1,000 job cuts will be achieve by layoffs. About 400 employees have accepted voluntary separations since the company initiated its cost-cutting efforts this year.
New orders for cutting tools have been in decline more than a year, as the buyers (machine shops and other manufacturers) have managed their own declining orders for machined parts, mainly stemming from reduced demand in energy, mining, heavy equipment, and construction sectors.
Kennametal is pursuing a more general program of cost cuts, an effort that has been in progress since earlier this year. The company announced it had achieve annualized savings of $40-$45 million during the past quarter, in what it called Phase 1 of its restructuring program. It added that it has identified additional actions to adjust its cost structure, estimated to achieve $15-$20 million more of annualized savings. These initiatives are expected to improve the alignment of our cost structure with the current operating environment through rationalization of certain manufacturing facilities and through headcount reductions.
CEO Ronald M. De Feo stated: "As we look to fiscal year 2017, we expect to see some improvements in certain end markets. We have a solid plan, and even without a modest upturn in our end markets, we believe our improving cost position in combination with a more robust and proactive commercial strategy will produce improved margins. I am optimistic about the future for Kennametal as we concentrate our efforts on highly relevant products, applications, and solutions positioned properly in the marketplace for our global customers."