GKN sees strong Q1 but warns of Japan earthquake legacy
ENGINEERING group GKN made strong progress in the first quarter with pre-tax profits rising 51% but it warned the after effects of the Japanese earthquake and tsunami could impact on its automotive operations.
The Redditch based company said sales during Q1 had risen 14% to £1.5bn compared with the same period last year although this had been pegged back slightly by adverse currency translations.
However, acquisitions during the period had helped bolster the performance, contributing an additional £5m.
Pre-tax profits rose to £107m from £71m in Q1 2010, while net debt at March 31 was £169m, up from £151m at December 31, 2010 reflecting some seasonal increase in working capital.
In an interim management statement today, the firm said: “Market conditions in the first quarter have been broadly as expected at the time of our March statement, although the tragic events in Japan have had some impact on the automotive sector.”
The group said global light vehicle production increased by around 4% in the period to 19.4m vehicles, with good growth in the European premium vehicle segment and the Indian, North American and Chinese markets.
Production in Japan was severely impacted by the earthquake and tsunami and it said some disruption was now being felt in Europe and North America as a result of component supply problems from Japan.
In the UK last week, both Nissan and Toyota announced production cuts due to this problem.
“Japanese OEMs are planning to resume volume production through April and May, although it will be some time before the industry is in a position to catch up on production lost through the first half,” said GKN.
Its Driveline operation saw a 16% increase in Q1 sales to £673m but its trading profit of £50m took a £3m hit because of the events in Japan.
During March, Driveline sold its 49% share of the Japanese driveshaft sales and
distribution joint venture GTK to its JV partner JTEKT Corporation for £8m (1.1bn Yen) (GBP8 million).
Powder Metallurgy’s Q1 sales increased 21% to £217m, benefiting from good growth in North American automotive production and new programme launches in North America and Europe, while Aerospace markets continued to perform in line with expectations. Revenues at £352m were broadly flat and reflected the normal seasonal activity levels.
Land Systems markets continued to improve with sales up 27% to £220m, with solid demand for mining and construction equipment, while the European agricultural equipment market is now recovering strongly, it said.
Overall, the group said its outlook remained in line with its March statement, although it expected continuing short term impact from the Japanese automotive market and from supply chain shortages to customers outside of Japan.
Notwithstanding this, it said progress was good and the strength of its market positions and healthy order books gave rise to confidence for 2011 and beyond.
