GKN forecasts strong 2013 but warns European decline will trigger £21m cost-saving
MIDLAND-based engineering group GKN has forecast a strong 2013 as full year results for 2012 show record performances across the company’s four operating divisions.
However, reduced demand in the Eurozone will trigger a £21m cost-saving initiative during the first half of this year, the group has said.
During 2012 the group saw a 13% rise in sales from £6,112m in 2011 to £6,904m, with a subsequent rise of 19% in pre-tax profit to £497m.
Much of the performance was due to strong automotive markets, where the group has forecast that global light vehicle production should grow around 2% this year with increases in Asia and North America but down in Europe.
Against this background, Birmingham-based GKN Driveline and GKN Powder Metallurgy are both expected to show further improvement in 2013 overall.
However, it has warned that first half results will be impacted by lower market demand in Europe and a recognition that the market is unlikely to recover for some time. Due to this it is implementing contingency plans to reduce the fixed cost base. Restructuring charges, primarily in the first quarter, are expected to be £16m in GKN Driveline and £5m in GKN Powder Metallurgy.
In aerospace, commercial aircraft production is expected to continue to grow, as both Airbus and Boeing increase production, whereas US military aircraft demand is expected to decline. GKN Aerospace’s commercial aircraft sales growth is broadly expected to offset lower military sales and the impact of the ending of the £100m supply chain contract with Airbus.
The integration of Volvo Aero, which it acquired last year, is progressing well. The group said it remained confident of meeting its guidance on first year sales, margin and returns.
The performance of GKN Land Systems is expected to be broadly flat for 2013 as a whole, with the first few months more challenging due to weaker European industrial and passenger vehicle markets. European and North American agricultural equipment markets are expected to remain robust.
Nigel Stein, chief executive, GKN, said: “2012 was another strong year for GKN with record profits in all four divisions. The group has continued to make good progress financially and in implementing our strategy to build a market-leading global business, with excellent technology, a focus on operational excellence and above-market growth.
“GKN operates in global markets and has the capabilities needed to take advantage of the growth opportunities that those markets bring. With the benefit of a full year contribution from Volvo Aero, we expect 2013 to be a year of good progress for the group.”
