DEF: Kennametal Inc. Sets Annual Meeting, Details Executive Pay & Board Nominees

Kennametal Inc. announces its 2025 Annual Shareholders Meeting, outlines executive compensation, and proposes the re-election of eight directors, alongside reporting Fiscal 2025 financial performance.

Summary

• The Annual Shareholders Meeting is scheduled for October 28, 2025, to be held virtually via live audio webcast.
• Shareholders will vote on the election of eight directors, the ratification of PricewaterhouseCoopers LLP as the independent auditor for Fiscal Year 2026, and a non-binding advisory vote on executive compensation.
• Sales for Fiscal Year 2025 were $2.0 billion, consistent with Fiscal Year 2024.
• Net income attributable to Kennametal for Fiscal Year 2025 was $93.1 million, a decrease from $109.3 million in Fiscal Year 2024.
• EBITDA for Fiscal Year 2025 was $285 million (14.5% margin), and Adjusted EBITDA was $299 million (15.2% margin), both lower than Fiscal Year 2024 figures of $300 million (14.7% margin) and $313 million (15.3% margin) respectively.
• Return on Invested Capital (ROIC) for Fiscal Year 2025 was 6.2%, down from 7.0% in Fiscal Year 2024; Adjusted ROIC was 6.8%, down from 7.6%.
• Primary Working Capital as of June 30, 2025, was $638 million, an increase from $626 million as of June 30, 2024, while Primary Working Capital as a Percent of Sales (PWCPS) slightly decreased from 32.0% to 31.9%.
• Executive Annual Incentive Plan (AIP) payouts for Fiscal Year 2025 were below target, with Corporate NEOs at 63.2%, Metal Cutting Segment President at 59.2%, Infrastructure Segment President at 66.7%, and the former Infrastructure Segment President at 70.5% of target.
• An ESG modifier reduced NEO AIP payouts by 10% due to achieving only one of four established ESG goals.
• Performance Stock Units (PSUs) tied to Adjusted ROIC for the Fiscal Year 2025 tranche achieved 81.1% of target, and the Average Adjusted EBITDA Margin for Fiscal Years 2023-2025 achieved 92.4% of target, resulting in a cumulative 91.5% payout for the 2023 PSUs.
• The CEO Pay Ratio for Fiscal Year 2025 was 65:1, with the CEO's total annual compensation at $4,694,633 and the median employee's at $72,021.
• Three directors (Cindy L. Davis, William J. Harvey, and Steven H. Wunning) are retiring, and two new directors (Douglas T. Dietrich and Shelley Bausch) were appointed to the Board in Fiscal Year 2025.

Sentiment

Score: 4

Explanation: Financial performance metrics such as net income, EBITDA, and ROIC declined year-over-year. While the company maintains strong corporate governance and a pay-for-performance philosophy, the actual financial results for FY2025 were weaker than the prior year, and ESG goals were largely missed, leading to reduced executive payouts.

Positives

• The Board of Directors is committed to exceptional corporate governance, including a declassified board, separation of CEO and Chairman roles, and majority voting in director elections.
• The company maintains strong stock ownership guidelines for directors and executive officers, aligning their interests with shareholders.
• Policies prohibiting hedging, pledging, and shorting company securities without prior approval are in place.
• The CEO's realizable compensation demonstrated strong alignment with company performance compared to peers over the past three fiscal years (2022-2024).
• Shareowners overwhelmingly approved the compensation paid to named executive officers in Fiscal Year 2024, with approximately 99% of votes cast in favor.
• The Primary Working Capital as a Percent of Sales (PWCPS) slightly improved from 32.0% in Fiscal Year 2024 to 31.9% in Fiscal Year 2025.
• The voluntary turnover rate decreased from 7.9% in 2024 to 7.7% in 2025, indicating improved employee retention.
• The company reported positive results in proactive risk identification and closure programs within its Environmental, Health and Safety (EHS) initiatives.

Negatives

• Net income attributable to Kennametal decreased by 14.8% from $109.3 million in Fiscal Year 2024 to $93.1 million in Fiscal Year 2025.
• EBITDA decreased from $300 million in Fiscal Year 2024 to $285 million in Fiscal Year 2025, and Adjusted EBITDA decreased from $313 million to $299 million.
• Return on Invested Capital (ROIC) declined from 7.0% in Fiscal Year 2024 to 6.2% in Fiscal Year 2025, with Adjusted ROIC also falling from 7.6% to 6.8%.
• Primary Working Capital increased from $626 million in Fiscal Year 2024 to $638 million in Fiscal Year 2025.
• Executive AIP payouts were significantly below target (ranging from 59.2% to 70.5% of target) for Fiscal Year 2025.
• An ESG modifier reduced NEO payouts by 10% because only one of four ESG goals was achieved, indicating underperformance in key environmental, social, and governance areas.
• The total recordable incident rate (TRIR) increased to 0.42 in 2025 from 0.35 in 2024, suggesting a decline in safety performance.
• Employee engagement scores showed an immaterial decrease in the most recent survey (April 2025).

Risks

• Cyclicality, commodity exposure, and other external factors can significantly impact performance goals and actual payouts for incentive arrangements.
• Rapidly changing economic conditions may render performance goals either not challenging enough or unachievable, potentially leading to retention risks and the need for separate retention awards.
• The company faces the risk of executives or other employees taking inappropriate risks if compensation policies are not adequately designed to mitigate such behavior.
• Potential for significant business disruption due to illness among executives, although an executive physical program is in place to address this.
• Non-compliance with non-competition and non-disclosure provisions by executive officers post-termination could pose a risk to the company's competitive position and proprietary information.
• Allegations of fraud or misconduct by employees or officers could lead to investigations, termination, legal proceedings, and recoupment of compensation.
• Tax implications under Section 162(m) of the Internal Revenue Code may limit the deductibility of executive compensation exceeding $1 million.

Future Outlook

Adjusted ROIC performance goals for Fiscal Year 2026 and Fiscal Year 2027 will be determined near the beginning of each subsequent fiscal year. The Average Adjusted EBITDA Margin goal and related payouts for the three-year period ending June 30, 2027, will be approved at the July 2025 meeting. For Fiscal Year 2026, the executive compensation program will see changes including the removal of the ESG modifier from the Annual Incentive Plan (AIP), a reduction in Corporate PWCPS weighting to 20%, and the addition of a 10% weighted nonfinancial component (enterprise FSI and individual performance rating goals). Segment Presidents will have their Corporate Adjusted EBITDA weighting reduced to 25%, while Segment Revenue and Segment Adjusted EBIT weightings will increase to 25% and 20% respectively. The long-term incentive program for Fiscal Year 2026 will balance Adjusted ROIC and three-year average Adjusted EBITDA Margin with a 50% weighting each. The next Say on Pay vote is expected at the 2026 annual meeting, and the next advisory vote on the frequency of Say on Pay will occur no later than the 2029 annual meeting.

Management Comments

• Our Board of Directors is committed to exceptional corporate governance, compliance and ethical conduct, promoting the best interests of our shareholders. (William Lambert, Chairman of the Board)
• We believe every shareholders vote is important so if you cannot attend the virtual meeting live, please see the Notice of Annual Meeting of Shareowners for details on voting. (William Lambert, Chairman of the Board)
• We believe that this delivery process will reduce our environmental impact, and over time, lower the costs of printing and distributing our proxy materials. (Regarding internet availability of proxy materials)
• The Committee believes that this high level of support for the compensation paid in Fiscal 2024 illustrates our shareowners support of our pay-for-performance philosophy, which is designed to link the compensation paid to our NEOs to the Companys financial performance and shareowner value. (Compensation and Human Capital Committee)
• The Committee expects to continue to review and present the alignment of compensation with the Companys financial performance, including as required to comply with regulations issued by the Securities and Exchange Commission. (Compensation and Human Capital Committee)
• The Board believes that the combination of the various qualifications, skills and experiences of the Director nominees will contribute to an effective and well-functioning Board and that, individually and as a whole, the Director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to the Companys management. (Board of Directors)
• The Board believes an effective risk management system will (1) timely identify the material risks that the Company faces; (2) communicate necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant Board committee; (3) implement appropriate and responsive risk management strategies consistent with the Companys risk profile; and (4) integrate risk management into Company decision-making. (Board of Directors)

Industry Context

The company operates in an industry characterized by cyclicality and volatility, which directly influences its executive compensation design, such as the use of half-year performance periods for Annual Incentive Plan (AIP) metrics. Kennametal's peer group for compensation benchmarking comprises manufacturing and general industrial companies, indicating its competitive landscape. The company's Corporate Responsibility Report aligns with global benchmarks like the Sustainability Accounting Standards Board (Industrial Machinery and Goods Sustainability Accounting Standard), the Task Force on Climate-related Financial Disclosures, and the Global Reporting Initiatives standards, reflecting broader industry trends in ESG reporting and transparency.

Comparison to Industry Standards

• The CEO's realizable compensation ranked below the median (13th percentile) of the peer group, which includes The Manitowoc Company, Inc., Astec Industries, Inc., Columbus McKinnon Corporation, Crane Company, ITT Inc., Woodward, Inc., Curtiss-Wright Corporation, ESAB Corporation, Carpenter Technology Corporation, Nordson Corporation, Simpson Manufacturing Co., Inc., Graco Inc., Franklin Electric Co., Inc., Watts Water Technologies, Inc., SPX Technologies, Inc., Alamo Group Inc., Zurn Elkay Water Solutions Corporation, Barnes Group Inc., Mueller Water Products, Inc., and Enpro Inc.
• The company's composite performance (average ranking of EBITDA margin, EBITDA growth, ROIC, and TSR) also ranked below the median (17th percentile) of the peer group for Fiscal Years 2022-2024.
• The company aims to offer compensation competitive with similar-sized manufacturing companies, targeting the median level for executive positions.
• The company's Corporate Responsibility Report is prepared in accordance with the Sustainability Accounting Standards Board (Industrial Machinery and Goods Sustainability Accounting Standard), the four pillars of the Task Force on Climate-related Financial Disclosures, and with reference to the Global Reporting Initiatives standards for sustainability reporting, demonstrating alignment with global ESG reporting benchmarks.

Management Changes

Corporate Governance

Related Party Transactions

• In Fiscal Year 2025, there were no related party transactions that required Board and/or Nominating/Corporate Governance Committee approval or disclosure in this proxy statement.

Stakeholder Impact

• Shareholders: Will vote on key governance matters including director elections, auditor ratification, and executive compensation, directly influencing company leadership and oversight.
• Employees: Affected by executive compensation programs, inclusion and belonging initiatives, health and safety programs, and development/training opportunities. The voluntary turnover rate decreased, but engagement scores showed an immaterial decrease.
• Customers: The company's focus on increasing market share, customer service, and proper pricing of products (as reflected in AIP metrics) aims to benefit customers.
• Suppliers: Kennametal acts as a supplier to other companies where some of its directors hold board positions (e.g., Minerals Technologies Inc. and Enerpac Tool Group).

Next Steps

• Hold the Annual Shareholders Meeting on October 28, 2025, to vote on director elections, auditor ratification, and executive compensation.
• PricewaterhouseCoopers LLP will serve as the independent auditor for the fiscal year ending June 30, 2026.
• Adjusted ROIC performance goals for Fiscal Year 2026 and Fiscal Year 2027 will be determined near the beginning of each subsequent fiscal year.
• The Average Adjusted EBITDA Margin goal and related payouts for the three-year period ending June 30, 2027, will be approved at the July 2025 meeting.
• The next Say on Pay vote is expected at the 2026 annual meeting.
• The next advisory vote on the frequency of Say on Pay will occur no later than the 2029 annual meeting.
• Shareowners wishing to submit a proposal for inclusion in the 2026 proxy statement must do so by May 18, 2026.
• Shareowner nominations for directors to be elected at the 2026 Annual Meeting must be submitted between May 1, 2026, and June 30, 2026.

Key Dates

Recommendation

While Kennametal demonstrates strong corporate governance and a commitment to pay-for-performance, the decline in key financial metrics for Fiscal Year 2025 (net income, EBITDA, ROIC) and the failure to meet most ESG targets are concerning. The alignment of CEO pay with performance, though below median, suggests a disciplined approach to compensation. However, the overall financial performance indicates headwinds. An investor should hold to observe if the company can reverse the negative financial trends and improve its ESG performance in the upcoming fiscal year, especially with the changes to the FY2026 compensation program.

Keywords

Kennametal, Proxy Statement, Corporate Governance, Executive Compensation, Board of Directors, Financial Performance, EBITDA, ROIC, PWCPS, Shareholder Meeting, Audit Committee, Compensation Committee, Nominating Committee, Stock Ownership, ESG, Risk Management, Industrial Manufacturing, Metal Cutting, Infrastructure