Kennametal Inc (KMT)

Short-term

Turnover ratios

The analysis of Kennametal Inc.'s activity ratios over the specified periods reveals several trends and insights into the company's operational efficiency during the years ending June 30, 2021 through June 30, 2025.

Inventory Turnover:
The inventory turnover ratio experienced fluctuations within this period. It decreased from 2.71 in 2021 to a low of 2.39 in 2022, indicating a slowing down in the frequency of inventory sales relative to inventory levels during that year. Following this, the ratio increased to 2.57 in 2023, and further to 2.76 in 2024, suggesting an improvement in inventory management and sales efficiency. However, it slightly declined to 2.54 in 2025, indicating a marginal slowdown once again. Overall, the trend reflects a recovery after a dip in 2022, with the ratio remaining relatively stable in the subsequent years.

Receivables Turnover:
This ratio shows a generally positive trend, rising from 6.08 in 2021 to a peak of 6.81 in 2022. The ratio then remained relatively stable in 2023 and 2024 at 6.76, before experiencing a slight decline to 6.66 in 2025. The higher receivables turnover in 2022 suggests improved collection efficiency or a faster sales cycle, while the slight decrease thereafter may indicate a minor slowdown in receivables collection efforts or changes in credit policies.

Payables Turnover:
The payables turnover ratio exhibited variability, decreasing from 7.26 in 2021 to 5.99 in 2022, which indicates a lengthening of the payables period and possibly more favorable credit terms or delayed payments to suppliers. The ratio then increased to 7.04 in 2023 and 7.41 in 2024, signifying an improvement in payment efficiency and shorter cycles of settling accounts payable. However, it declined slightly in 2025 to 6.99, although still remaining above the 2022 level, indicating a return toward shorter payment cycles but not fully reverting to earlier levels.

Working Capital Turnover:
This ratio increased from 3.25 in 2021 to a peak of 3.73 in 2022, reflecting a more efficient use of working capital to generate sales. Subsequently, it decreased to 3.51 in 2023, then slightly further to 3.49 in 2024, and finally to 3.19 in 2025. The downward trend suggests a gradual reduction in the efficiency of working capital utilization, which could be due to an increase in working capital tied up in inventory or receivables, or a slowdown in sales growth relative to working capital levels.

Summary:
The activity ratios indicate periods of operational optimization followed by slight regressions. The inventory turnover improved after a decline in 2022, suggesting better inventory management. Receivables turnover improved in 2022, with stability thereafter, pointing to generally effective receivables collection despite minor fluctuations. Payables turnover demonstrates variability but shows a trend toward shorter payment cycles in recent years, implying a shift toward more timely payment practices. The working capital turnover exhibits a peak in 2022, followed by a declining trend, reflecting potential challenges in efficiently utilizing working capital in later years. Overall, the ratios depict a company experiencing fluctuations in operational efficiency, with signs of recovery and marginal declines that warrant ongoing attention to optimize working capital and operational processes.

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Average number of days

The analysis of Kennametal Inc.’s activity ratios over the period from June 2021 to June 2025 reveals specific trends and shifts in operational efficiency.

Days of Inventory on Hand (DOH):
The company experienced fluctuations in inventory holding periods. In June 2021, the DOH was approximately 134.89 days. This increased notably to 152.70 days by June 2022, indicating a longer duration of inventory held, which could suggest slower inventory turnover or increased inventory levels. Subsequently, the DOH decreased to 142.16 days in June 2023, and further declined to 132.30 days in June 2024, approaching levels seen at the start of the period. Slightly increasing again to 143.53 days in June 2025, the inventory days exhibit variability but generally suggest a trend towards improved efficiency in inventory management in recent years, particularly after 2022.

Days of Sales Outstanding (DSO):
The receivables collection period remained relatively stable throughout the period, fluctuating narrowly between 53.57 days and 60.05 days. In June 2022, the DSO decreased to roughly 53.57 days from 60.05 days in June 2021, indicating improved receivables collection efficiency. This trend persisted, with DSO marginally rising to 54.82 days by June 2025. Overall, the company's receivables management has remained fairly consistent, with minor improvements in collection timeframe observed during this period.

Number of Days of Payables:
The accounts payable period varied throughout the timeframe. In June 2021, payables were settled over approximately 50.31 days. The period extended significantly to 60.96 days in June 2022, suggesting a strategic extension of payment terms possibly aimed at conserving cash. After this peak, the payables period decreased to approximately 51.84 days in June 2023, then further reduced to 49.24 days in June 2024. By June 2025, the payable period increased slightly to 52.25 days. These fluctuations reflect active management of the company's payment policies, with an overall tendency towards lengthening the payables cycle, especially evident in 2022, then stabilizing.

Summary:
Overall, Kennametal Inc. demonstrated improvements in inventory turnover efficiency over the analyzed period, as evidenced by the decreasing DOH from its peak in 2022. The consistency in DSO suggests steady receivables collection practices. The company's accounts payable cycle has experienced strategic adjustments, with periods of extension aimed at optimizing cash flows, though recent years show a stabilization relatively close to initial levels. These activity ratio trends collectively indicate ongoing efforts at operational efficiency and cash management, with notable responsiveness to evolving market or internal conditions during this timeframe.

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Long-term

The analysis of Kennametal Inc.'s long-term activity ratios reveals notable trends over the specified period. The Fixed Asset Turnover ratio increased consistently from 1.75 as of June 30, 2021, to 2.01 on June 30, 2022, and further to 2.14 by June 30, 2023. This upward trajectory indicates an improved utilization of the company's fixed assets to generate sales, reflecting more efficient asset management during this period. However, a slight decline is observed in the ratio to 2.08 as of June 30, 2024, suggesting that the efficiency in utilizing fixed assets plateaued or slightly diminished in that fiscal year.

Similarly, the Total Asset Turnover ratio shows a steady upward trend from 0.69 on June 30, 2021, to 0.78 on June 30, 2022, and 0.82 on June 30, 2023. The ratio remains stable at 0.82 for June 30, 2024, before decreasing slightly to 0.77 in the subsequent period. This pattern suggests that the overall efficiency in employing total assets to generate sales improved from 2021 through 2023, but experienced a slight decline in 2024, which could indicate either increased asset base without proportional sales growth or operational efficiencies affected by external or internal factors.

In summary, Kennametal Inc. demonstrated strengthening asset utilization efficiency over consecutive years, particularly between 2021 and 2023. The uptick in both fixed and total asset turnover ratios implies enhanced operational efficiency and possibly strategic investments or improvements in asset management. The slight reductions observed in 2024 indicate a possible stabilization or minor setbacks in asset utilization effectiveness.