Volatile battery EV market fuels revenue drop at Dowlais
Engineering group Dowlais has seen revenues drop by 6.4%, after high volatility in the battery electric vehicle (BEV) market.
A decline in adjusted revenue to £4.9bn was driven by a weakness in the ePowertrain product line, which accounted for 70% of the drop.
The group, which was formed via Melrose Industries’ demerger of its GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen arms, announced plans to merge with American Axle Manufacturing (AAM) in a £1.16bn ($1.44bn) deal.
The cash-and-share agreement will create a “leading global manufacturer” with 51,000 employees, projected annual revenues of $12bn and cost synergies of $300m by the end of the third year after completion.
New York-listed AAM is a Detroit-based global supplier with 75 facilities across 16 countries. The manufacturer specialises in driveline and metal-forming technologies for electric, hybrid, and internal combustion vehicles, with around 21,000 employees across the world.
Despite the growing uncertainty around the pace and scale of BEV adoption, Dowlais said its goal remains to transition into a powertrain-agnostic business model.
Investment in the eDrive systems line will be cut by a third to £60m by the end of 2025 to “right size” the spend. Dowlais said the move will ensure the group is better positioned to navigate the increasing volatility in the BEV market.
Its driveline division outperformed the market outside China, offsetting lower volumes in H2, particularly in the US and a 2.7% revenue drop in the Power Metallurgy business.
Dowlais reported a 4.2% decline in adjusted operating profit to £324m, driven primarily by lower volumes and a £9m loss from the sale of its Hydrogen operations.
Liam Butterworth, Chief Executive Officer said: “In 2024, strong execution enabled us to navigate a challenging environment and deliver on our updated guidance. Our market-leading Driveline business slightly outperformed the market outside of China, whereas our ePowertrain product line faced significant headwinds due to ongoing volatility in BEV production schedules, contributing to the majority of the Group’s 6.4% adjusted revenue decline year-on-year. Proactive cost management and commercial recoveries enabled us to improve our adjusted operating margin by 10bps, demonstrating our disciplined approach to protecting margins.
“In response to these challenges, we took several decisive actions including the strategic decision to right size our eDrive systems business, a comprehensive review of Powder Metallurgy, the disposal of our Hydrogen business, and continued execution of our restructuring programs. These initiatives underscore our commitment to strengthening the Group’s financial resilience and unlocking shareholder value.
“Our focus remains on accelerating the transition to a powertrain-agnostic business model, to enable sustainable profitable growth and robust cash generation over the medium term. The proposed announced combination with American Axle & Manufacturing Holdings Inc. represents a significant opportunity to accelerate the execution of our strategy by leveraging scale, capabilities, and the outstanding management teams of both companies. We are confident that these actions, combined with the significant synergies and benefits of this transaction, will continue to drive value for our shareholders and create a stronger foundation for the future.”
