Engineering powerhouse expects revenue drop from battery EV market
Automotive and power metallurgy group Dowlais is expecting a revenue decline after high volatility in the battery electric vehicle (BEV) market.
Growing uncertainty around the pace and scale of BEV adoption led to a 5.1% decline in adjusted revenue to £2.5bn in the first half of 2024.
The position is expected to remain the same, with industry forecasts predicting a 3.6% decline in the second half, resulting in a 2% drop in light vehicle production in 2024.
Dowlais now expects a mid-to-high single-digit adjusted revenue decline for 2024 and an adjusted operating margin between 6% and 7%.
A sale of the GKN Powder Metallurgy is being considered after Dowlais launched a strategic review of the business.
The move would make Dowlais a standalone automotive firm after the recent disposal of its GKN Hydrogen business to Langley Holdings, an engineering and industrial manufacturing group headquartered in Nottinghamshire.
Dowlais has made a loss of £18m on the transaction of which £10m was incurred in the first half of 2024, and will eliminate future cash losses associated with the funding of the hydrogen operations which were £7m in this period. In the 12 months ended 31 December 2023, Hydrogen operations contributed £5m of revenue, £15m of operating losses and £23m of cash losses.
Adjusting operating profit dropped by 9% to £151m, after foreign exchange headwinds were £10m higher than the previous year and £7m of losses came from hydrogen operations.
Liam Butterworth, Chief Executive Officer, said: “In the first half, our market leading Driveline business, China joint venture, and Powder Metallurgy business, totalling more than 75% of Group’s revenues, all outperformed their markets, while volatility in BEV production significantly impacted our ePowertrain business, leading to a 5.1% adjusted revenue decline.
“In this challenging market environment, we focused on what we can control and took several decisive actions to mitigate the impact from lower volume as well as unlock value from our portfolio.
“First, we implemented a relentless focus on cost control, limiting the impact on adjusted operating profit and mitigated the margin decline to 30bps.
“Second, we initiated a comprehensive programme of commercial recovery initiatives with our customers which, together with the ongoing restructuring programmes and performance initiatives, will limit the impact from expected lower revenues in the second half of the year.
“Finally, today’s announcement of a strategic review of Powder Metallurgy and the disposal of our Hydrogen operations underscores our commitment to unlocking value from our portfolio and delivering shareholder returns.
“We continue to execute on our strategy to accelerate the transition to a powertrain agnostic business model which is better positioned to navigate market volatility and deliver sustainable, profitable growth and cash generation in the medium term.”
