Kennametal Inc.

Why raw-material timing matters

The company can adjust selling prices before the cost of newly purchased material reaches the income statement. That timing can support profit during a period of rising prices, even as purchases and inventory absorb cash. It can also change as material costs work through inventory.

In the quarter ended September 30, 2026, Kennametal estimated a $323 million raw-material timing benefit. It reported $379.3 million of operating income and a $201.3 million operating cash outflow. Both reported and adjusted earnings include the timing benefit.

Financial position and the next test

At September 30, 2026, cash and cash equivalents were $272.8 million and inventory was $1.616 billion. Current debt was $40.0 million and long-term debt was $1.094 billion, compared with $32.2 million and $685.3 million at the June 2026 year-end.

The $500 million term loan was arranged in May 2026 and fully drawn by September. Quarterly interest expense rose to $11.5 million from $6.2 million a year earlier, mainly because of that loan and the refinancing of older notes. The company had $850 million available on its undrawn revolving credit facility and was meeting its borrowing covenants at September 30.

Share repurchases are paused. Management says it will reassess the program as operating cash flow improves.

Fiscal 2027 guidance calls for adjusted earnings of $5.00 to $6.00 a share and sales of $3.33 billion to $3.45 billion. The approximately 20% free-operating-cash-flow conversion forecast is a separate measure of whether earnings become available cash.

Read our analysis of Kennametal's earnings and cash flow.