Strong automotive markets bolster GKN
MIDLANDS engineering group, GKN has continued to be bolstered by strong demand from global automotive markets.
The Redditch-based company said its automotive businesses were continuing to outperform the market.
In a trading update for the period January 1, 2015 to May 5, 2015, the company said its principal markets had performed in line with the expectations set out in its February results announcement.
“Our automotive businesses continue to outperform the market and our aerospace business has traded in line with our expectations. Land systems’ principal market remains tough,” it said.
Management sales for the three months ended March 31, 2015 were £1,943m (2014: £1,915m). This represented a 1% organic increase, with beneficial currency translation being broadly offset by disposals.
The group said the strengthening of the US dollar against sterling had had a positive impact on the results, especially in aerospace, while the weakening of the Euro had had a negative impact, particularly in its Driveline and Land Systems divisions.
Group trading margin is said to be slightly ahead of last year benefitting from currency, in spite of a decline in Land Systems.
Operating cash generation is lower than the comparable period last year because of the timing of investment programmes to support growth, it added.
GKN Aerospace sales in the first quarter were £589m (2014: £546m), which it said was in line with expectations. The planned ramp-up of production of new aircraft is helping commercial sales while military demand is marginally down and it warned production cutbacks by Airbus to its A330 programme could pose challenges during the second half.
Birmingham-based GKN Driveline had a strong Q1 with sales increasing 3% to £912m (2014: £885m). Organic sales increased 4%, against a very strong comparable period in 2014 and global industry production rates were only 1% higher over the period.
It said there had been good organic growth in Europe – despite the economic challenges in the Eurozone – and China while Brazil and Japan were weak. North American sales were flat due to the greater weighting towards cars and SUVs and a decline in the pick-up truck segment, which had been strong.
Margins were similar to last year’s equivalent period although pricing remained a downward pressure.
GKN Powder Metallurgy also saw a strong Q1, with sales up to £244m (2014: £237m). Organic sales growth was 3%, despite the negative impact on powder sales of a direct pass through of lower raw material prices.
Margins were a little higher than those achieved in Q1 last year, while the period also saw the disposal of operations in Argentina.
The tough agricultural climate was reflected in a decline in Land Systems’ sales to £187m (2014: £217m). This included a 10% organic decline due to weaker demand for farming equipment and a 4% fall due to adverse currency translation. The Agricultural market, particularly in North America, remains soft and it said it did not anticipate any improvement in 2015.
Sales in the quarter for GKN’s other businesses fell to £11m (2014: £30m), which it said reflected the disposal in 2014 of the group’s share of the Emitec joint venture.
Nigel Stein, Chief Executive, GKN, said: “Our organic performance overall in the first quarter was in line with our expectations, with growth above our markets in GKN Driveline and GKN Powder Metallurgy, slight growth in GKN Aerospace, while GKN Land Systems was weaker. Looking ahead, we continue to expect 2015 to be another year of growth.”
The company will announce its first half results July 28, 2015.
