Stronger than expected automotive demand boosts Q1 for GKN

A better-than-expected performance in the global automotive sector has helped boost West Midlands engineering group GKN.

In a first quarter update, the Redditch-based group said automotive demand had helped offset slower-than-planned growth in the aerospace sector.

Overall, the group said it had achieved good organic sales growth in Q1, while continuing to benefit from currency translation.

Group trading margin moved ahead of last year primarily due to an increase in GKN Driveline, although it and GKN Powder Metallurgy were impacted from higher raw material costs.

GKN Aerospace sales in the period saw a modest increase. As expected, in commercial aerospace, the production ramp-up of new aircraft was slightly more than offsetting cuts in the A380, Boeing 777/747 and business jets programmes. Military sales were up compared to the prior year, reflecting the ramp-up of the F-35 Lightning II and stable production levels in older programmes.

GKN Driveline saw sales ahead of global industry production rates, that were up 6%. External forecasts continue to expect full year global auto production to increase by only 2%, with Europe and North America likely to be down in Q2. China continues to experience robust demand.

GKN Powder Metallurgy’s organic sales growth was in line with global auto production rates and also benefited from currency translation and the acquisition of a powder manufacturer in China, in 2016.

Earlier this month, the division agreed to acquire Tozmetal Ticaret Ve Sanayi, a Turkish sinter metal component manufacturer with 2016 sales of €24m. Completion of the acquisition is subject to approval from the relevant merger control authorities.

Nigel Stein, chief executive, GKN, said: “GKN delivered a good performance in the first quarter. The encouraging growth rate achieved to date may not be sustained as the year progresses and comparators get tougher, nevertheless we expect 2017 to be another year of growth.”