Kennametal Q2 Beats on Tungsten-Driven Buy-Ahead Demand, Margins Rise

Tungsten Pricing Spurs Buy-Ahead Demand at Kennametal

Volume and Pricing Propel Second-Quarter Upside

Kennametal Inc. posts stronger-than-expected fiscal second-quarter results as buy-ahead demand tied to rising tungsten prices and steady end-market improvement lift sales and margins. The Pittsburgh-based tooling and industrial materials maker reports sales of $530 million for the quarter ended Dec. 31, 2025, up 10% from $482 million a year earlier, with organic growth accounting for the full gain and currency and divestiture effects roughly offsetting. Management says volume gains in Metal Cutting and timing benefits from pricing versus raw material costs — about $17 million in the Infrastructure segment — drive the outperformance.

Profitability expands materially, with operating income rising to $53 million (9.9% margin) from $32 million (6.6%) a year earlier and adjusted operating income at $56 million (10.5%) versus $33 million (6.9%). Reported diluted earnings per share come in at $0.44 and adjusted EPS at $0.47, increases of 92% and 89% year-on-year respectively. Kennametal attributes the margin improvement to higher volumes, pricing and tariff surcharges, and roughly $8 million of incremental restructuring savings, while noting some offsets from higher compensation, tariffs and general inflation.

The company raises its sales and adjusted EPS guidance for the full fiscal year after the quarter exceeds the high end of prior outlooks. CEO Sanjay Chowbey says the quarter validates the focus on above-market growth, cost-structure improvement and portfolio optimisation as the route to sustainable value creation. Executives highlight the mix of tactical pricing actions and operational efficiencies as key to sustaining momentum amid cyclical demand swings.

Working Capital Strain and Cash Flow Dynamics

Despite the profit rebound, Kennametal reports year-to-date operating cash flow of $73 million, down from $101 million a year earlier, and free operating cash flow of $38 million versus $57 million previously. The declines are driven primarily by working capital shifts, notably an increase in inventory, which management says partially offsets higher net income and lower capital spending.

Near-term headwinds include the nonrecurring prior-year insurance benefit of about $3 million that does not recur and an incremental $2 million of restructuring-related charges. Kennametal emphasises continued discipline on cost actions and portfolio moves to navigate inflationary pressures and tariffs while supporting manufacturing and supply-chain continuity.