Strong automotive sector bolsters GKN
THE strong automotive sector has helped to bolster the first half performance of West Midland engineering group GKN but even this could not stop the company from experiencing a 2% dip in sales during the six-month period.
The Redditch-based company reported sales for the six months to June 30, 2014 of £3,565m (2013: £3,647m). Despite this, operating profit grew 59% to £259m (2013: £163m), with pre-tax profit up 76% to £224m (2013: £127m) – however, these figures have been restated to take into account the firm’s acquisition of Volvo Aerospace last year.
Birmingham-based GKN Driveline, which is the world’s leading supplier of automotive driveline systems, saw organic sales rise 11% to £1,765m (2013: £1,728m) with trading profit up 35% at £142m (2013: £117m).
The division serves the leading vehicle manufacturers. It develops, builds and supplies an extensive range of automotive driveline products and systems – for use in the smallest low-cost car to the most sophisticated premium vehicle demanding complex driving dynamics.
The adverse effect of currency translation was £135m (8%) and the impact from disposals was £7m, the latter coming after a wholly owned business in China was transferred into the company’s Shanghai joint venture.
Strong growth was achieved in North America, China, Japan and Europe while sales in Brazil fell sharply. The overall market outperformance reflected market share gains, strong demand for premium vehicles and GKN Driveline’s broadening product mix, particularly within all-wheel drive (AWD) systems.
During the period, around £300m of new business was secured and a number of important milestones achieved, including the expansion of facilities in Mexico and AWD capacity in Newton, USA. The period also saw the expansion of the AWD facility in China with new wins Europe and North America.
Its other leading division, GKN Aerospace, saw organic sales grow 3% to £1,100m (2013: £1,123m), with trading profit up 6% to £121m (2013: £118m).
The division is a global tier one supplier of airframe and engine structures, components, assemblies, transparencies, ice protection systems and fuel and flotation systems for a wide range of aircraft and engine prime contractors and other tier one suppliers. It operates in three main product areas: aero structures, engine components and sub-systems and special products.
GKN said the overall aerospace market remained positive in 2014 driven by a growing commercial aircraft market partly offset by a declining military market. The division has increased its proportion of sales to commercial aerospace to 74%, with military representing 26%.
Commercial aircraft production continues to grow strongly. Both Airbus and Boeing continue to benefit from increasing deliveries and a record order backlog, and both have announced plans to increase production levels for single aisle aircraft in the future. It said there is also increasing demand for strong global suppliers to support their expansion plans.
GKN chief executive Nigel Stein said: “This is another good performance, particularly in GKN Driveline which delivered 11% organic sales growth. We have continued to outperform our key markets and report good underlying financial results in spite of sterling’s strength and some end market weakness – we expect these trends to be maintained in the second half. GKN is continuing to make encouraging progress against its strategy.”
