Kennametal Inc. has cut more than 800 people from its global workforce under a restructuring program meant to reduce costs as sales to energy companies plummet.
CEO Don Nolan said Thursday that the Unity-based tooling company eliminated 6 percent of its 13,500 employees. The company also has closed six plants, sold one and is consolidating two others as it shrinks its manufacturing footprint and tries to increase profitability.
“We’ve been working hard to improve the business and we’re beginning to see some of the benefits,” Nolan told analysts on a conference call to discuss earnings for the April-June period, the fourth quarter of the company’s fiscal year.
Nolan, who became CEO in November, selling off less-profitable parts of the company to concentrate on its core business of making drilling and cutting tools for a range of industries. He said he expects the divestitures to represent about $150 million to $250 million of the company’s annual sales, though he declined to provide specifics.
“It’s not clear which will be sold and at what time,” he said.
Investors cheered the cost cutting. Kennametal shares were trading up $1, or 3 percent, to $33.67 at noon Thursday.
While Nolan’s work is aimed at improving the company’s performance in the future, its most recent quarter showed substantial weakness, with profit dropping 54 percent.
Kennametal said it had net income of $21.1 million, or 26 cents a share, in the last quarter of its fiscal year. The results compared with net income of $45.5 million, or 57 cents a share, in the same quarter last year.
Sales fell 17 percent to $637.7 million, down from $772.2 million.
Oil and gas companies are buying fewer of Kennametal’s products as they cut back on drilling activity to deal with low energy prices.
Despite the weak financial performance, Nolan said the company’s results were better than expected because efforts to cut costs are working. Operating expense declined 15 percent to $130.9 million.
And the company hit a record level of free operating cash flow of $267 million in the quarter, up from $156 million last year.
This article was written by Alex Nixon from The Pittsburgh Tribune-Review and was legally licensed through the NewsCred publisher network.