Record Earnings, Negative Cash

On August 5, 2026, Kennametal reported a fourth-quarter operating margin of 41.1 percent. The same quarter a year earlier had produced 6.1 percent.

That is not a margin improvement. That is a different company wearing the same name.

Sales for the quarter came in at $737 million against $516 million, up 43 percent. Operating income went from $31 million to $303 million. Fiscal 2026 closed at $2,357 million of sales, up 20 percent, with earnings per diluted share of $4.42 and record adjusted earnings per share of $4.57. Sanjay Chowbey, president and chief executive since June 1, 2024, had the best profit year in the company's 85-plus-year history.

Further down the same release sat one line running the other way. Net cash flow from operating activities for fiscal 2026: negative $4 million. The prior year: positive $208 million.

What Tungsten Did

Both numbers have the same cause, and Chowbey named it. "We achieved record adjusted EPS this quarter through decisive pricing actions in an unprecedented tungsten environment, volume growth and cost improvement efforts."

Kennametal makes cutting tools and wear-resistant parts out of tungsten carbide. When the price of tungsten runs, a company that prices its output off replacement cost while still consuming cheaper inventory books the gap as profit. The release quantifies it without euphemism: the favourable timing of raw material-related pricing compared with costs contributed approximately $252 million in the fourth quarter and approximately $316 million across the year.

The effect was most extreme in Infrastructure, the segment selling into earthworks and energy. Fourth-quarter sales of $339 million rose 73 percent; operating margin went from 5.5 percent to 58.3 percent. The release attributes roughly $198 million of that segment's operating income increase to raw-material pricing timing - and notes the gain was partially offset by lower sales and production volumes. The margin tripled and then some while the segment shipped less.

Which raises the question every industrial chief executive eventually has to answer about a commodity year: how much of this did you do?

He Arrived In The Downturn

The record is that he did not inherit it.

Kennametal announced on March 14, 2024 that Chowbey, then vice president and president of the Metal Cutting segment, would succeed Christopher Rossi as president and chief executive effective June 1. Rossi retired after nearly seven years. The board's appointment was unanimous. "I am honored and excited to serve as the next CEO of Kennametal," Chowbey said, and described what he was taking on: "We have a proud 86-year legacy of helping customers make products that touch everyday life and enable people to drive, fly, power and build."

He had joined Kennametal in 2021 to run Metal Cutting, arriving from Flowserve, where he was president of a $1.2 billion Services and Solutions business, with earlier President and General Manager roles at Danaher and Arvin Meritor. He holds a bachelor's degree in mechanical engineering from B.I.T. in Sindri, India, a master's in mechanical engineering from Tennessee Tech University, and an MBA from Kellogg.

What he took over was shrinking. In the third quarter of fiscal 2025 Kennametal reported sales of $486 million, down 6 percent year over year. "During the quarter we demonstrated continued progress on our growth and cost initiatives despite weak market conditions, primarily in EMEA and the Americas," Chowbey said that May. He had already acted: in January 2025 the company announced restructuring actions expected to deliver roughly $15 million of annualised pre-tax savings against about $25 million of charges. On tariffs he was blunter - "Like many companies, the recent uncertainty regarding tariff policies has affected Kennametal, however we intend to mitigate the direct effect of tariffs on our business and will pursue new opportunities to take share."

Those cuts compounded. Fiscal 2026 carried approximately $27 million of incremental year-over-year restructuring savings. When the commodity turned, it turned on a lower cost base.

The Cash Went Backwards

The complication is not hidden in a footnote; the company states it plainly. The collapse in operating cash flow was driven primarily by working capital requirements, including increased inventory values resulting from unprecedented tungsten price increases, as well as advance payments made to certain suppliers to secure raw material supply.

Read that twice. The tungsten spike that inflated the income statement also inflated the inventory Kennametal had to carry, and pushed the company to pay suppliers ahead of delivery to keep the material coming at all. Free operating cash flow finished fiscal 2026 at negative $79 million, against positive $121 million the year before.

Record adjusted earnings per share. No cash from operations. Both true, both audited, both consequences of the same metal.

He Rebuilt The Board Around It

His answer, so far, has been to change who is in the room when the next commodity decision is made.

On July 28, 2026, Kennametal announced that William M. Lambert would retire as chairman at the annual meeting on October 27 and that Joseph Alvarado, the retired chairman and chief executive of Commercial Metals Company, would succeed him the following day. "Joe is the right leader to serve as our next Chairman," Chowbey said, citing "He brings deep industrial experience, strong public company leadership and a practical understanding of manufacturing, operations and capital allocation."

Three weeks later, on August 18, the board elected two more directors: Dawne S. Hickton, chair and chief executive of Cumberland Additive and formerly chief executive of the titanium producer RTI International Metals, and Richard J. Harshman, who spent more than four decades at the specialty metals group ATI and ran it from 2011 to 2018. "Dawne and Rich bring outstanding executive leadership, public company board experience and deep knowledge of the industrial, materials, and aerospace and defense markets to our Board of Directors," Chowbey said.

Steel, titanium, specialty metals. Inside eight weeks, a chairman and two directors whose careers were spent in the pricing of hard materials.

The Promise Is Cash

The fiscal 2027 outlook Kennametal issued alongside the record year asks to be read as a correction. Sales of $3.33 to $3.45 billion. Adjusted earnings per share of $4.15 to $5.15 - a range whose bottom sits below the year just reported. And a single explicit commitment on the line that broke: free operating cash flow of approximately 20 percent of adjusted net income.

Chowbey pointed at volume rather than price for what comes next: "Recent wins in the Aerospace & Defense, Energy and Earthworks end markets showcase the ability of our team to take share in any market condition."

The margin that reached 41.1 percent was, on the company's own arithmetic, mostly a timing difference. Timing differences reverse. The first quarter of fiscal 2027 closed on September 30.