Q4 2025 Kennametal Inc Earnings Call
If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star. Then the number 2, please note that this event is being recorded. I would now like to turn the conference over to Michael PC vice president of investor relations. Please go ahead.
Thank you, operator, welcome everyone. And thank you for joining us to review. Canon Metals, fourth quarter and fiscal 2025 results. This morning, we issued our earnings press release and posted our presentation slides on our website. We will be referring to that slide deck throughout today's call. I'm Michael PC vice president of investor relations.
Joining me on the call today or Sanjay Chow Bay, president and chief executive officer and Pat Watson vice president and Chief Financial Officer.
After Sanjay and Pat's prepared. Remarks, we will open the line for questions.
At this time, I'd like to direct your attention to our forward-looking disclosure statement. Today's discussion contains comments that constitute forward-looking statements and as such involve a number of assumptions risks and uncertainties that could cause the company's actual results performance or achievements to different material League from those expressed in or implied by such statements.
These risk factors and uncertainties are detailed in Canada's SEC filings.
In addition, we will be able to discuss some non-GAAP financial measures on the call today. Reconciliations to GAAP financial measures that we believe are most directly comparable can be found at the back of the slide deck and on our Form 8-K on our website. With that, I'll turn the call over to Sanjay.
Thank you, Mike. Good morning, and thank you for joining us.
I'll begin the call today with a brief overview of the full year.
And then from End Market commentary.
From their Pat will cover the quarterly Financial results.
As well as the fiscal 26 Outlook.
Finally, I'll make some comments reflecting on my first year as CEO.
And provide an update as to our plans moving forward.
Then we'll open the line for questions.
Turning to slide 3.
Let me Begin by highlighting some of the accomplishments the team delivered despite Market headwinds.
During the fourth quarter, our infrastructure, team secured, a 25 million multi-year Award with the US defense customer.
In metal cutting, we secured winds in Aerospace and defense as well as project wins in power generation supporting AI data centers within the energy and Market.
These key events position as well.
Moving forward in markets that are benefiting from long-term secular growth trends.
We successfully executed tariff mitigation actions to address the impact of trade policies on our business.
Where appropriate we read outed internal supply chain, as well as leverage, our Global footprint to optimize product flow.
We also implemented search charges and while we experienced an impact in the quarter as anticipated, we remain committed to fully upsetting the impact moving forward.
On the cost front in January. We announced plans to lower structural costs by reducing employment costs and consolidating Manufacturing operations.
During the fourth quarter, we seized operations in Greenfield, Massachusetts and we Consolidated facilities in Spain to advance our footprint. Rationalization efforts,
We also recognized 6 million dollars in restructuring savings, this quarter.
And we have achieved rendered Savings of approximately 65 million Inception to date for all cost out actions at the end of fiscal 25 and expect approximately 90 million by the end of fiscal 26.
We made modest progress on portfolio optimization by completing the sale of our Goan facility in early June.
I want to thank the team for their support and while we have made Headway on our structural costs and portfolio actions, we have much more to do.
I will provide some additional comments on this later in the call.
The results, reflect the continued broad Market weakness, that has impacted our end markets for the past 8 quarters.
Weak Global Production volume.
Declining U.S. land-based recounts are slowing. Light vehicle production, especially in EMIA.
Continue to pressure, our performance.
And continued uncertainty around tariffs.
And the potential effect tariffs have on Global Production.
Now, turning to the full year.
in addition, to Market softness, in several end markets,
Foreign exchange, headwinds pressured. Our Top Line, as sales decline 4% organically.
On a segment basis, metal cutting declined by 5%, and infrastructure declined by 2%.
Most of our end markets experienced mid-single-digit declines on a constant currency basis.
Though Aerospace. And defense was a bright spot with mid single-digit growth.
Energy was flat.
All regions, on a constant currency basis, experienced low single-digit declines.
Adjusted EPS was $1.34 as several 1-time items and restructuring savings offset, the lower sales and production volumes.
Cash flow from operating activities for the year, was 208 million.
Finally, we return 122 million to shareholders through shared repurchases, of 60 million and dividends of 62 million.
In summary our performance, reflected Market softness in our continued efforts to get the best results possible in that environment.
We know, we have lot more to do here, which I'll speak to more in a moment.
Please like 16 in the appendix for additional details on our full year results.
now, I want to provide some color around the end market conditions reflected in our fiscal 26 Outlook at the midpoint of our range
In Aerospace and defense overall, we expect low double digit growth, reflecting higher, OEM bill rates as production and supply chain conditions improve.
Defense continues to experience growth from increased spending and project wins.
Transportation is expected to decline, mid single digits, based on IHS Global Production forecasts.
which have been specially volatile as customers are working through product mix evolution,
And supply chain reconfiguration due to trade policies.
General engineering is expected to be down, low single digit, AS Global Production metrics, continue to remain stagnant.
We anticipate the energy and Market to be flagged.
Finally Earthworks is projected to be down, mid single digit.
Page 17 in the appendix for additional detail on our end markets.
Now let me turn the call over to Pat who will review the fourth quarter financial performance and the fiscal 26 Outlook.
Thank you, Sanjay, and good morning, everyone.
I will begin on slide 4 with a review of the Q4 operating results.
Our results for the quarter, reflect the continued broad-based Market. Softness affecting all of our end markets and regions.
the sales in the quarter came in slightly below our expectations, as a result of modest, shortfalls in general engineering from continued Market softness, mining pressures in Earthworks, and supply chain disruptions in Aerospace and defense
On an organic basis. In Q4 sales decreased year-over-year. At 5% with metal cutting declining 4% and infrastructure. Declining 5%.
Regionally, on a constant currency basis, we experienced low to mid-single digit declines.
Similarly, by End Market. We experience low to mid single digit declines in all of our end markets.
Skin energy. The decline was due to lower energy activity in Amia in a lower, rig counts in the Americas.
Transportation within metal cutting was impacted by continued, OEM production softness mainly in Amia.
We experienced an unusual decline in Aerospace and Defense sales in the Americas. We missed a large order delivery and infrastructure last year and had a temporary supply chain disruption at one of our metal cutting customers this year.
These discrete items were partially offset by growth in the media from OEM build rates.
Lower industrial production continues to affect General, engineering across both segments.
And lower mining activity in asia-pacific, and the Americas was partially offset by higher construction and Earthworks.
Adjusted EBA margin was 14.8% versus 17.7% in the prior year quarter.
The decline in adjusted EBA margin was primarily due to lower volumes across the business.
As well as the expected unfavorable effect of tariffs, net of the search charges we implemented.
These unfavorable items were not offset by the higher prices, restructuring benefits and the positive, net effect from the tornado, which occurred in the prior year.
Approximately $6 million in savings from the restructuring program. We announced in January
Additionally, we have increased this program and now expect approximately $35 million in annualized savings, up from the $15 million.
At year end, we achieved 65 million of run rate savings against the hundred million dollar Target. We set at our last investor day,
Adjusted EPS declined to 34 cents compared to 49 cents in the prior year quarter. And finally, as part of our Capital, allocation strategy, we continued to share repurchase program with 5 million of shares, bought back and 15 million in dividends paid.
The bridge on slide 5 shows the effect on EPS of operations, including all the factors. I just discussed plus currency, taxes and share count.
The year-over-year effect of operations this quarter was negative. This reflects lower sales and production volumes, higher wage and general inflation, and higher raw material costs.
Pricing and incremental year-over-year restructuring savings of approximately $6 million.
The 7 Cent net, benefits related to the tornado. That occurred last year includes a 4 Cent benefit from the charges, incurred on the prior year. And 3 cents from the net insurance proceeds received this year
Currency impact of 4 cents. Which reflects transaction gains including a preferential, Bolivia exchange rate.
As discussed last quarter, unmitigated tariff costs. Were -4 cents of eps.
You can also see the effects of the tax rate which was positive 2 cents.
Other reflects lower, share count, and interest expense, which was neutral.
Blind, 6, and 7 detail the performance of our segments for this quarter.
Metal cutting reported in organic sales declined 4% compared to the prior year quarter regionally excluding the effects of currency exchange asia-pacific was down. 1%, the America's declined 4% and a media declined, 5%.
Looking at sales by end market on a constant currency basis, Aerospace and Defense grew 1% year-over-year, driven by higher OEM production in AMIA. This growth was partially offset by prior year OEM project timing and a customer supply chain disruption in the Americas this quarter.
Transportation declined, 4%, mainly due to lower volume in Amia.
General engineering, declined 5% with the weakness due to lower industrial activity in Amia in Prior your indirect Channel order timing in the Americas and lastly energy declined 6%. This quarter from lower activity due to weak Energy prices,
Metal cutting adjusted operating margin is 7.9%, decreased 550 basis points, year-over-year. Due to lower volumes higher wages, inflation and net tariff costs of approximately dollars partially offset by price and restructuring Savings of Millions.
Turning to slide 7 for infrastructure.
Organic sales decreased by 5% year-over-year with unfavorable business days, and the effect of the destitute at negative 1%. Each
Foreign exchange contributed to 1% Tailwind.
Regionally on a constant currency basis, asia-pacific, decline, 4% and media declined 5% in the Americas declined 7%.
From an end market perspective, energy grew 1%, mainly from project timing in AMIA, partially offset by lower U.S. land rig counts and drilling activity in the Americas.
General engineering declined 5% with lower demand, in the Americas, and Amia partially offset by Modest growth in Asia Pacific.
Earth Works declined 7% from lower mining activity, due to lower call prices in the Americas and Asia Pacific partially offset by higher America's construction activity.
Lastly Aerospace and defense declined 16% due to a large prior year order in the Americas.
A adjusted operating margin declined. Year-over-year to 6.8% primarily from lower sales and production volumes including certain plant shutdowns and higher raw material costs, partially offset by the 7 million. Net effect of the tornado price and restructuring Savings of Millions.
Now, turning to slide 8 to review our free operating cash flow and balance sheet.
Our full year free operating cash flow was 121 million compared to 175 million reported in the prior year.
The declining cash flow is primarily the result of lower net income versus the prior year, and an increase in inventory from higher tungsten costs compared to a reduction in inventory in FY24.
Net, capital expenditures were 87 million compared to 102 million in the prior year.
To shareholders through our share repurchase and dividend programs. This quarter
During the quarter, we were purchased 232,000 shares or 5 million under our million dollar authorization. And as we have every quarter, since becoming a public company, over 50 years ago, we paid a dividend to our shareholders.
We remain committed to returning, cash to shareholders, while executing our strategy to drive growth and margin Improvement in this challenging environment.
We continue to maintain a healthy balance sheet and debt maturity profile, with 840 million of cash and revolve are availability at quarter end.
The full balance sheet can be found on slide 21 in the appendix.
Attorney to slide 9 regarding our full year outlook. We are providing a range for both the full year and the first quarter beginning. Now, with the full year,
we expect FY 26 sales to be between 1.95 billion and 2.05 billion with volume ranging from negative 5% to flat.
Price and tariff search charge realization of approximately 4% combined.
And an approximate 2% Tailwind from foreign exchange.
As a point of information, the recent A vesture represented approximately 1.5% of FY 2025 sales.
On an operating income basis for an exchange, is expected to be an 8 million tailwind and non-cash. Pension expense, is expected to be a headwind of 5 million.
Approximately $35 million of restructuring savings has been included.
From a timing perspective, we expect these restructuring benefits to be 40-60, weighted toward the first half and the second half.
We expect adjusted EPS to be in the range of 90 cents to $130.
On the cash side, the full-year outlook for capital expenditures is approximately $90 million, and free operating cash flow is approximately 120% of adjusted net income.
The bridge on slide, 10 highlights, the main drivers, impacting Epps at the midpoint of our Outlook.
The year-over-year effect of operations is positive. This reflects higher prices and restructuring savings, partially offset by lower sales and production volume.
Higher, raw material and tariff, costs, higher wages, and general inflation.
The outlook includes approximately $0.15 of headwinds. From the prior year, we have one-time items related to IRA manufacturing credits and the net insurance proceeds from the impact of the FY24 tornado.
You can also see the effects of the X-ray and currency on EPS with taxes of -$0.06 and currency neutral. As the weaker U.S. dollar is offset by favorable transactional FX related to Bolivia recorded in the prior year.
Other reflects lower interest income partially offset, by lower share count.
Turning to slide 11 regarding our first quarter outlook, we expect Q1 sales to be between $465 million and $485 million, with volume ranging from negative 7% to negative 3%.
Price and tariff have realized approximately 4% and 2% positive impacts from foreign exchange. Our Q1 range reflects a volumetric decline that is generally in line with our historical norms and also includes a sequential step-up from foreign exchange and price.
We expected just a DPS in the range of $0.20 to $0.30. The other key assumptions for the quarter are noted on the slide, and with that,
I'll turn it back over to Sanjay.
Thank you, Pat. Turning to slide 12.
I want to take a moment to reflect on my first year as CEO.
And provide a framework for the future.
During the year, I spent a lot of time with customers and employees across both segments.
My focus was to learn about the broader Enterprise and continue to identify opportunities for improvement.
Which I'll talk about in a moment.
We continued our focus on growth, winning key projects in defense and AI power generation, among others.
We made progress on a $100 million fiscal 2027 cost. Our target is to exit fiscal 2025 with approximately $65 million of annualized savings.
We strengthen our capabilities in lean tools.
But conducting over 35 kaen events companywide.
And strategic growth projects.
Such as our digital customer experience initiative.
By expanding our Partnerships with the investment in tool path.
Building upon our existing relationships with Autodesk and module works.
Additionally, in line with the plants we laid out at investor day in 2023. We executed footprint, actions that included 2 site closers.
I also strengthened our executive bench.
Bringing in Dave, barcelli to lead the metal cutting team and promoting fasal hammadi to run infrastructure.
One of the things that I have realized during this first year is...
it just how much opportunity for improvement can a metal has
In order to unlock that value, we must fix the structural cost issues. Holding back our performance.
Additionally, it has become apparent.
That modernization.
While necessary to upgrade our operational and technical capabilities.
Resulted in more capacity than current market conditions support.
These factors drove us to look at our strategy and long-term goals differently.
And while we remain committed to our value creation pillars,
We are prioritizing rightsizing capacity and our cost structure to set the company up for long-term success.
Let me elaborate here.
Previously, we committed to 3 to 5 plant, consolidations.
Based on a set of assumptions that included 1% to 2% market growth.
Frankly, that assumption is no longer relevant.
Due to continued Market pressure.
As it is a result capacity optimization remains 1 of our top priorities.
With the goal to reduce our Global footprint across both businesses.
This includes consolidation of operations in maximizing the efficiency and utilization rates of all locations.
The plan is to complete this in 2 phases.
Phase 1.
Complete four closures by the end of fiscal 2027, with an updated cost savings of $125 million.
Exceeding our original target by $25 million.
We now expect this program to incur cash, restructuring costs of 125 million,
Phase 2 will result in the reduction of 2 additional facilities by the end of fiscal 28.
Together these 2 phases. Reflect 6, total consolidations.
Which exceeds our previous target of 3 to 5 at Investor Day?
Increases the overall timeline by 12 months.
These actions are complex.
We'll take time to complete and need to be thoughtfully executed to minimize customer disruption.
We believe these actions will enable us to operate efficiently in the current environment.
And still maintain flexibility for a more robust recovery.
When that does occur.
This is an important step.
Toward addressing our structural costs.
And should help ease the margin pressures caused by current low volumes.
In addition.
We will continue to advance our initiatives focused on above-market growth and continuous improvement.
While also evaluating opportunities to enhance our portfolio.
By taking this discipline approach.
We can advance our near-term priorities.
While also moving forward with our full value creation strategy for the long term.
And with that operator, please open the line for questions.
Thank you. And ladies and gentlemen, if you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad.
If you would like to withdraw your question, please press star. Then the number to
In our first question today will come from on Hill. Castillo with Morgan Stanley. Please go ahead.
Thanks and good morning. Um, I just wanted to maybe—hi—uh, just a quick question, maybe on the fiscal year 2026 outlook. Um, can you provide just a little bit more color on kind of what you're seeing, maybe fiscal Q1 today, and just how that kind of informs your views on the segment outlook for the full year.
Uh like I've said before, mid single digit declines in transportation, all in gas and Earthworks Aerospace and defense uh growing into low double digit. Uh, so I think we are kind of seeing similar uh you know, start to the year like what we are projecting here for the full year.
So at this point, we're pretty much on track to, uh, what I will say is midpoint.
Got it. That's helpful. And then I wanted to touch, um, on just the, the discussion about the shift in strategy to maybe more kind of portfolio optimization. I guess the way I'm kind of reading that and correct me if I'm wrong, but just the changes and and maybe more focus on cost and and production. Uh, footprint seems to maybe screen is a little less uh, conservatism given near-term demand and more of kind of a structural, um, you know, challenges that need to be kind of fixed. Can you, can you maybe talk about maybe 2 sides of that? Like, how much of that is just kind of metals, positioning, um, given I kind of thought you would probably be a better position for the domestic Market, uh, versus competitors and, and so maybe how much of it is just specific to, um, kind of metal versus maybe more macro, you know, factors where you're seeing just overall kind of slow down and, and production or, uh, that that you think will persist longer than kind of the near-term. Um, kind of dislocations. We've seen,
Thank you. Yeah, sure. Yeah. Angel, I think it will be combination of both. Uh, I do think that, you know, we have seen 2 years of uh, slowdown in the market and now you know, we are projecting even volume decline in fiscal 26. So of course, there are a lot of different factors out there. Uh, it's very difficult to project calendar year 26 at this point. But based on what we have available at this point, we have taken, uh, you know, a balanced approach on that. However, we also know that the things that we are doing with respect to right sizing capacity and cost structure. These are going to be sustainable changes. We're making changes, structurally, and we are also prepared, you know, for volume to come back and we do believe volume will come back because we do participate in a lot of end markets that still have you know good long-term prospects.
Awful. Thank you.
And our next question will come from Julian Mitchell with Berkeley. Please go ahead.
Hi. Good morning. Um maybe I just want to good morning maybe I just wanted to start with the fiscal. 26 outlooks, maybe help us if you can with any kind of seasonality of earnings you know first half second half and and what's embedded on the the top line. And and also when I'm looking at that slide 10, which is very helpful on the Epps Bridge.
Um, maybe put a finer point on. I'm not sure maybe tariff, headwinds because it looks like your guidance embeds. No, operating margin expansion or perhaps operating margins down in fiscal 26.
Um you know perhaps tariffs are a part of that. I think that was a 4 Cent headwind In the June quarter and maybe help us understand what's embedded for the full year ahead.
Yeah, so, uh, maybe the best place for us to start. I think, uh, I'll hit all of your kind of questions here. Julian is. You know, we just think about the business I'll say, starting from a sales volume perspective, you know, as you think about where we ended Q4 at about 516 million dollars worth of Revenue, you know, kind of have to normalize that for the domestic that we had during the quarter and you do that you'll get to a number that's closer to a 510. And then from that point, right? We would see, I would say normal seasonal, sequential development volumetrically. And you know, we generally talk about being down 8, to 10%, q1 to Q2, or excuse me, Q4 to Q uh, 1 and so we expect that volumetric decline but layered in on top of that, right? You know, we're going to have some Tailwinds coming from uh, you know, pricing and tariff, uh, search charges as well as favorability from an fx perspective. And so that kind of sets you up for from a seasonality perspective.
Q1 and on that basis, you kind of roll forward. You know, we're anticipating the year, pretty much rolling out in a normal sequential pattern throughout the year.
60% of eps in the back half. And so while you got a lot of touring and throwing going on here from some big things going on, I'd say at the top level, it looks like a pretty normal pattern for the entire year.
Getting back to your question, with respect to tariffs. You know, we did have a 4 Cent headwind as we expected. I think we had talked about a potential 5-cent headwind in Q4, moving into, uh, q1 and then for the balance of the year, you know, either through operational ways, uh, or through our search charge, we are covered on tariffs. You know, as they stand right now at the beginning of August, uh, in terms of what's been announced and in place at this point in time. And so obviously that's uh, that's a coverage issue. So yes, you're going to see a little bit of margin compression. Uh, relative to the Tariff, uh, situation.
Thanks a lot and then just my second question. Um, you know, maybe confirming is the the margins in your EPS guide midpoint are operating margins sort of down a bit. It just wanted to confirm that in fiscal 26 and Sanjay. You know, I think people on this call and and investors, they've heard half a dozen restructuring programs at Kenya metal in the last.
You know, a couple of decades. Um, you know, for various reasons, those haven't generated sustainable margin expansion. Um, maybe any pointers from you as to how you think. This plan is different in in the the confidence of it being able to deliver some kind of sustained margin expansion. Thank you.
Yeah sure I think Julia first part again Pat can jump in on that 1 too but on the operating margin if you look at the bridge we are projecting operating margin improving uh in 26 uh there are other factors that you can see in the aps bridge. Now coming to your question, very good, you know obviously valid question, uh what I can speak to is from the time of investor day. What we have said, you know about the hundred million dollar Target and now you know, we have implemented 65 and then projecting, you know, all the way to 125.
Based on the details that we are managing. Uh, I'm very confident that we are taking the actions which are very structural. Uh whether it's a footprint related or organizational structure changes or our material cost sourcing related Improvement projects productivity which are sustainable. So I feel very confident that these uh you know improvements are sustainable.
And when the volume does come back, you know, we'll see the bigger impact of that. Obviously, over the last, you know, 2 2 and a half years, we have seen a huge negative impact of volume. So it's not showing up in our overall performance but I'm confident that what we're doing is going to stick, okay? Just to clarify on the operating margin there Julian, um, you know, Sanjay referenced it up. That's if you pull out some of the positive 1 timers, we had in fiscal 25, relative to the tornado effect and the tax credit on the tungsten, I think, once you normalize those things out, that's up. If you keep them in it will be modestly down.
That's very helpful. Thank you.
And our next question will come from Steven Bulman with Jeffrey's, please go ahead.
Uh great good morning guys. Um see if maybe this is a pet question, you know, tungsten is obviously uh up actually a lot here recently. Um normally that's pretty strong positive correlation with your margins but it doesn't seem like you're really factoring that in for FY 26. Am I thinking about it the right way?
Yeah, I would say, if we think back, let's call it. Talk about a normal cycle. Steve, we would see tungsten prices, positively correlated with higher. I would just say industrial production or activity in our end markets. And so 1 of the things that's unique at the moment is we are seeing a, pretty significant ramp up in tungsten costs. Uh, we will be able to absolutely pass that on to our customers but we're not getting the added benefit at the moment, uh, that in terms of the additional volume in the End Market. So this situation is just a little bit different. Now, you think about that from a margin perspective? I would say absolutely as we think about infrastructure, margins specifically in the first half of 26, we will see some lift in the margins. As we always get that price starts coming up. Raw material costs, remain subdued. As you know, we'll get as we get to the back half of the year, uh, we'll get more neutral and So based on where tungsten sits right now, and the reason,
You know, we'll know more as with the weeks go along in terms of what the development from a Tungsten price perspective. It is here out
Okay, thank you and then maybe 1 for Sanjay. Um, you know, it doesn't seem like your competitors or your Distributors are getting, you know, quite as much of the headwinds as you are. And I'm curious uh as you've done your first year review, um are there just pieces of this business that you shouldn't be in that are sort of its time to 8020? This thing rather than just shut factories and actually exit certain low performing businesses. Um, so you can kind of clear the decks for for growth when that comes back.
Yeah, thank you, Steve, good question. Uh, look, first of all, uh, I think our competitors and others, you know, have only talked about the calendar year 25. Um, at this point, I believe that there is alignment on when you look at the next 6 months, I do think that transportation. We look at the oems, you know, they have come out in the US, you know, mid single digit, kind of decline for second half of this year. When you look at the oil and gas Majors, uh, you know, they have also talked about that. They are not really planning to, you know, really invest a lot more on new old Rigs and things like that.
And then when you look at the artworks and Mining. So I think if you look at these 3 Industries, Transportation oil and gas and Earthworks, we are very similar in what we're seeing from our customers and Aerospace defense, you know, including space, uh, and defense, you know, we are doing quite well there. You know, we will expect uh, to, you know, take advantage of the market growth. But also on top of that, you know, our, uh, winning a little bit, uh, bigger share of the wallet.
So I think that our outline for next 6 months will be very similar. We are taking it next, you know, following 6 months at this point. Yes. You know, there could be some argument that we may, you know uh who knows what's going to happen in calendar year 26, but we believe that we have taken a balanced view, you know, overall projection.
Now, coming to your other question, should we exit some of the business? Uh, of course, you know, we have, uh, spoken about that, you know, a year ago, I talked about portfolio optimization. So, we are looking at our product and business mix and making sure that we are improve our performance. And we have taken some actions, uh, and the actions. You know, we continue to work on things. Many of those will include organic actions to improve performance of those uh, areas where we think we need to do more.
Okay, thanks.
And our next question will come from Tammy Zakaria with JP Morgan. Please go ahead.
Hey, good morning.
Um, morning, Tammy.
My question is on the energy and market outlook. I think you're expecting flattish for this fiscal.
Uh, does that embed any?
Uh, pick up and recounts in North America or or or essentially what's driving that flat is.
Outlook for energy.
Yeah, good question. Uh, Tammy, I think it's kind of better than our information, their overall recount. You know, we do expect it to come down by mid-single digits. One of the, you know, reasons again, you know, we are projecting flat because material cost with higher apt price and all that. And a lot of our products that go into oil and gas applications are very heavy on material content. So as a result, you know, at this point from a revenue perspective, we're saying flat, but we know that from a piece volume perspective, it will be down.
Understood. That's very helpful and then similarly for Aerospace and defense. I Think You're Expecting up high single digit is the expectation that it's stable High single digit growth, throughout the fiscal year or do you start out slow but then get better any seasonality to think about for that end Market.
I think besides the normal seasonality that happens, you know, we are basically expecting at this point Aerospace and defense to continue to get better as the supply chain constraints, have gotten better and also OEM production have improved, uh, at this point, you know, definitely the, you know, Boeing production has been continuously improving. I think there are some challenges with um, European based OEM in terms of supply chain and the strike and things like that they mentioned in their earnings call. So I do believe those things should be resolved as the year progresses. So at this point, our projection on Aerospace defense. Tammy is low double digit growth?
Got it. Okay, thank you.
And once again, if you would like to ask a question, please press star, then 1. Our next question will come from Steve Barger with keybanc capital markets please go ahead.
Thanks. Uh,
Billion dollar, Rev.
Hey, good morning. Um, the 2 billion dollar Revenue guide is the fifth year, at this level plus or minus about 50 million. And as you noted volume, has consistently Been Under Pressure. The last couple of years, despite the new wins you talk about.
Has competitive pressure increased? Or are you seeing a structural decline in cutting tool demand in some of your end markets?
Yeah, Steve, uh, overall I think volume decline in transportation oil, and gas, you know, over the last couple of years in is very popular, right? I mean, you can see it uh in all different data points.
uh, and I think that's what we're seeing as far as
If there is a competitive pressure or things like that, we have also demonstrated in the last 2 and a half years, you know, where we have the public fear, you know, data available that we are able to compete and outperform and at the minimum, you know, match the performance. So we don't think that we're losing any share. In fact, we believe that we are winning share and at this point, the way we are also positioning ourselves, you know, in Aerospace defense, you know, going forward. We will, uh, we expect to win more share there. So, I think that it is a broader Market situation, and as far as, you know, overall the, uh, addressable Market situation by Nature, this business does have some of that built because our job is to improve our customers improve performance from tooling. So that will put some pressure, but there is plenty of opportunities out there for us to maximize. And I think overall, uh, you know, last 2 and a half 3 years, we have not seen a cycle up.
Cycle generally Cycles last, you know, 6 to 8 quarters. This is very unusual, what's going on, but of course, we all know a lot of different factors including now, you know, trade policies and other things. So long term, we still feel positive about Outlook but near-term, we do, we do know that there are challenges out here.
Okay. And
The structural cost changes you're facing aren't new. This has been a restructuring story for years. So I wanted to ask a question about the board.
Can you talk about their sense of urgency around these challenges? What's been the tone of the last few meetings and with the average, tenure of the board being about 10 years, is it maybe time to get some new thinking in the room?
Yeah, there is a very high sense of urgency, uh, Steve in that regard. Uh, and that's why, you know, when we talk about unlocking the future value, you know, my last slide we are we know that we need to do more on, you know, above market growth, and lean transformation, and also, you know, uh, improving our overall portfolio. But we're emphasizing right sizing capacity and structural cost actions because of that sense of urgency so management. Team and board are very much aligned. We are taking a very balanced but also very, uh, you know, with high sense of urgency these actions,
See, I only add to that that, you know, just from a board composition perspective, right? Uh, you you noted the tenure there, I would just simply note as well, you know, we've got a couple of new, uh, new people on the board here as well. So there has been some recent additions to the board bringing in New Perspectives and experiences too.
Okay, thanks.
And this will conclude our question and answer session. I like to turn the conference back over to Sanjay for any closing remarks.
Thank you, operator.
And thank you everyone for joining the call today.
As always, we appreciate your interest and support.
Please don't hesitate to reach out to Mike. If you have any questions, have a great day. Thank you.
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