Kennametal Completes Emura Acquisition

Zacks

Kennametal Inc. (KMT), within a few days after releasing its fourth quarter and fiscal year 2013 results, announced the successful completion of the acquisition of operating assets of Comercializadora Emura S.R.L. and certain related entities (Emura). The deal was originally announced in May, 2013.

Addition of Emura will enable Kennametal to diversify and balance its tungsten sourcing capabilities. The acquisition is expected to be immediately accretive to earnings. Financial terms have been kept under wraps.

Kennametal has over time preferred accretive acquisitions and dispositions of non-core assets as its primary tool as it progresses on a growth strategy of shifting its business portfolio toward favored growth markets.

Prior to Emura, the acquisition of Deloro Stellite Holdings in 2012 deserves special mention. The acquired assets have been integrated into Kennametal’s Infrastructure segment and have strengthened the company’s product portfolio offered under the segment. In fiscal 2013, the Stellite acquisition contributed roughly 6% to total revenue growth and $0.03 per share accretion to earnings.

A little discussion on Kennametal’s recently reported quarter results has been provided below:

Considering both the top-line and the bottom-line, results have been weak for Kennametal in the fourth quarter and fiscal year 2013 due to considerable decrease in organic revenue and negative impacts from foreign currency translation. Major operating areas including Americas, Europe and Asia exhibited revenue declines. Talking of the company’s long-term debt which currently stands at $704 million, further increase will likely raise the company’s financial obligations and, hence, prove detrimental to the company’s profitability.

In the last 30 days, the Zacks Consensus Estimate for Kennametal has been revised down by 6.5% to $3.01 for fiscal 2014 and lowered by 4.3% to $3.57 for fiscal 2015.

Kennametal Inc. currently has a market capitalization of $3.5 billion. The stock carries a Zacks Rank #5 (Strong Sell). Other stocks in the same space include Lincoln Electric Holdings Inc. (LECO) — reported adjusted earnings of 91 cents per share, up 12% year over year and ahead of the Zacks Consensus Estimate of 90 cents, Blount International Inc. (BLT) — is expected to release its figures on Aug 7, 2013, and Hardinge Inc. (HDNG) — with earnings figures expected to release on Aug 8, 2013.

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