Kennametal's CEO to retire at yearend
Kennametal Inc. said on Tuesday that CEO Carlos Cardoso will retire at the end of the year, surprising some analysts who said he is doing a good job and was instrumental in the company's rebound from the recession.
But Cardoso, who has led the company for almost nine years, said he felt the timing was right. He said that he has worked regularly with the board to put a “complete and effective management team in place” and to position the cutting-tool maker for a smooth leadership transition.
“I've often said to our employees, and publicly, that seven to 10 years is the optimum time period for a chief executive to manage most effectively,” Cardoso said in a statement.
The Unity-based company said it will consider internal and external candidates, and expects to complete the search by year's end. Analysts said Chief Financial Officer Frank P. Simpkins, 51, a well-known and respected executive, is a strong internal candidate for the post.
“It's been a tough road back since the economic downturn,” said Eli Lustgarten, an analyst at Longbow Research in Independence, Ohio. “Because of acquisitions and other actions, whoever takes over will have a much better company than when Carlos took over.”
Kennametal's stock rose 4.5 percent to close at $45.25, up $1.95. The stock has declined 13.1 percent this year.
Cardoso, 56, became CEO and president in January 2006 and chairman two years later. He joined Kennametal in 2003 as president of its metalworking services group and later rose to chief operating officer.
In an email response to questions, Cardoso cited “the recession in 2009” as the most difficult challenge leading the company. “Yet, we ultimately emerged as a stronger company,” he said.
Kennametal annual revenue has grown to nearly $3 billion from $2.2 billion when Cordoso became CEO in 2006. The company has 14,000 employees, including 1,200 in Pennsylvania, mostly in Westmoreland County.
Walter Liptak, an analyst at Global Hunter Securities LLC, Chicago, said that while there's room for improvement, “we believe that Cardoso is exiting Kennametal with the company in a good position.”
Cardoso simplified the company's cutting-tool portfolio, created a program to improve manufacturing efficiency, and beefed up its business through acquisitions. The biggest deal was the $605 million purchase of the tungsten production business from Allegheny Technologies Inc.
“The timing of Cardoso's departure, however, is somewhat clouded by the recent industrial slowdown and decline in operating margins,” Liptak said in a report.
Despite increases in revenue the past three years, net income declined to $158.4 million in 2014, from $203.3 million in 2013 and $307.2 million in 2012. Analysts said profit margins were squeezed by the slowdown, but now are improving.
Rudolf Hokanson, analyst at Barrington Research in Chicago, said he continues to recommend Kennametal with an outperform rating and a price target of $57 a share.
William R. Newlin, Kennametal's lead director, said Cardoso “has served well, as a strong leader, through an important time in the company's history.”
John D. Oravecz is a Trib Total Media staff writer. Reach him at 412-320-7882 or firstname.lastname@example.org.