Kennametal Inc (KMT)

The liquidity position of Kennametal Inc. from September 2020 through June 2025 demonstrates a generally stable trend with moderate fluctuations across the key ratios.

The current ratio, which measures a company's ability to meet its short-term obligations with its current assets, consistently remains above 2.0 throughout the period. It starts at 2.25 in September 2020 and shows a slight upward trajectory, reaching a peak of approximately 2.53 in December 2024 before settling at approximately 2.46 in June 2025. This indicates that the company maintains a solid liquidity cushion, suggesting sufficient current assets relative to current liabilities, and reflects a conservative approach to short-term financial management.

The quick ratio, which refines the current ratio by excluding inventory from current assets, exhibits more variability but remains below 1.0 for most of the period, indicative of a reliance on inventory for liquidity. It begins at 0.84 in September 2020, gradually rising over time to hover around 1.03 in June 2025. Notably, the quick ratio achieved a peak of 1.04 in June 2024, suggesting enhanced liquidity limited to more liquid assets during that period. The consistent below-1.0 figures across most periods reveal that the company's immediate liquidity position often depends on inventory turnover.

The cash ratio, representing the most conservative measure of liquidity by considering only cash and cash equivalents, remains relatively low, fluctuating between 0.13 and 0.35 across the timeline. It starts at 0.24 in September 2020, with some increases up to 0.33 in June 2025, indicating that cash holdings constitute a modest proportion of short-term liabilities. Despite variability, this ratio's relatively low level underscores the company's limited reliance solely on cash for immediate obligations and aligns with typical manufacturing industry standards where inventory and receivables form a significant portion of current assets.

In summary, Kennametal Inc.'s liquidity ratios suggest a stable overall liquidity profile with a strong current ratio, moderate quick ratios that generally improve over time, and a consistently low cash ratio. These ratios collectively imply prudent liquidity management, with a comfort level in meeting short-term obligations through a broad base of current assets, predominantly inventory, while maintaining conservative cash holdings.

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Additional liquidity measure

The cash conversion cycle (CCC) for Kennametal Inc. has exhibited fluctuations over the analyzed period from September 30, 2020, to June 30, 2025. Initially, in September 2020, the CCC was approximately 158.56 days, indicating the duration it took for the company to convert its investments in inventory and receivables into cash, after considering its payables.

Throughout 2020 and into early 2021, the CCC experienced a general upward trend, reaching a peak of approximately 169.67 days at the end of December 2020. This increase suggests a lengthening in the time taken to convert inventories and receivables into cash, potentially due to slower collections, increased inventory holding periods, or both.

However, starting in mid-2021, a downward trend became evident. By June 2021, the CCC decreased to approximately 144.63 days, and it continued to decline more significantly by September 2021 to about 143.97 days. This reduction indicates an improvement in operational efficiency, possibly through faster receivables collection, inventory management, or extended payment terms with suppliers, thereby shortening the overall cycle.

In subsequent quarters, the CCC showed periods of minor fluctuations but generally maintained a range between approximately 143 and 156 days through 2022. It reached a high of about 156.48 days in December 2022 and hovered around similar levels into 2023. Despite these fluctuations, the overall trend remained relatively stable, reflecting a consistent cycle duration in that period.

From the second quarter of 2024 onwards, a notable decreasing trend resumed. The CCC reduced to approximately 136.72 days by June 2024, signaling further efficiency gains in working capital management. This downward trajectory persisted into September 2024, with the CCC at approximately 137.99 days, and by December 2024, it further declined to approximately 133.49 days, reaching its lowest point within this period.

However, in the first half of 2025, there was a slight reversal, with the CCC increasing to around 149.80 days in March 2025 and 146.10 days in June 2025. Overall, the longer-term analysis indicates periodical improvements in working capital efficiency in recent years, particularly from the second half of 2023 through mid-2024, followed by a modest rebounding trend.

In summary, Kennametal Inc.'s cash conversion cycle has demonstrated periods of both elongation and shortening, with recent trends indicating an overall reduction in the cycle duration, pointing toward improved operational efficiencies in managing receivables, inventories, and payables.