Sales rise 16% for GKN on strong demand
ENGINEERING group GKN has seen sales rise 16% in the past six months based on strong global demand for its products and a solid performances from new acquisitions.
Interims results for the six months ended June 30, 2012 show revenue rose to £3.46bn (2011: £2.98bn), while pre-tax profit rose 33% to £293m (2011: £224m).
Nigel Stein, GKN chief executive, said: “GKN has continued to make good progress both in terms of financial performance and implementing our strategy to build a global market-leading business. First half trading has seen sales increases and margin progression for each of our four divisions and our new acquisitions, Stromag and Getrag Driveline Products, are performing well.”
He said as a result of the strong performance and confidence in the future, the board had decided to increase the interim dividend by 20% to 2.4p per share.
Mr Stein added that while the macroeconomic environment continued to be uncertain, with increasing headwinds in European auto markets, the group remained in good shape.
“With the benefit of a good first half and the group’s broad exposure to global markets, our expectations for 2012 remain unchanged. We expect 2012 to be another good year of progress for GKN and, in addition, we look forward to welcoming our new acquisition, Volvo Aero, into GKN when the transaction completes in the next few months,” he added.
Part of the optimism revolves around the performances of German acquisitions Getrag Driveline Products and Stromag. Both are affiliated to the group’s Driveline division and have made their first full year contributions to the group.
The solidity will be important because suggestions are that the automotive sector in Europe could be in for a difficult second half. External forecasts suggest that global light vehicle production in H2 will be lower than the first half, but should reach approximately 81m vehicles for the whole of 2012, an increase of nearly 5%.
The strongest annual growth is expected in Japan and North America with a decline in Europe.
“Against this background, GKN Driveline is expected to show good year-on-year improvement, although the rate of growth will slow slightly due to stronger second half 2011 comparators as the effects of the Japanese tsunami unwind,” said the group in its interims statement.
The GKN Powder Metallurgy division expects H2 sales to be lower than the first half reflecting “normal seasonality and weaker European markets”.
In aerospace, the group is expected to benefit from rising civil aircraft production, with both Airbus and Boeing increasing output. The group is hoping the civil pick-up will help to offset the effects of lower production of US military aircraft.
The performance of the Land Systems division should continue to show an improvement, the group added. This is due to benefits from the expected on-going strength in European and North American agricultural equipment markets, partially offset by weaker European industrial markets. H2 sales are expected to show a reduction when compared with the first half, due to normal seasonal patterns.
“For the year as a whole, free cash flow is expected to exceed 2011’s £147m, before the impact of the Volvo Aero acquisition which is expected to complete around the end of the third quarter.
“In the final quarter of 2012, Volvo Aero is expected to achieve a profit from its trading activities but have a negative impact on the group’s reported profit due to integration costs and acquisition accounting adjustments. In 2013, the first full year of ownership, Volvo Aero’s contribution is expected to be earnings enhancing,” it added.
