Strong aerospace and automotive markets drive profit growth for GKN
BUOYANT automotive and aerospace markets have enabled Midlands-based engineering group GKN to announce strong sales and profits growth.
The Redditch company has also forecast continued progress in 2014 with the civil aerospace sector continuing to grow and the car industry – driven by growth in China, North America and Europe – following suit.
For the full year to December 31, 2013, group sales were up 10% of the previous at £7,594m (2012: £6,904m), pre-tax profit rose 17% to £578m (2012: £493m). Earnings per share increased 9% to 28.7p (2012: 26.3p) and it has recommended a 10% increase in dividend to 7.9p (2012: 7.2p).
Across the group, GKN Aerospace Engine Systems, in first full year of ownership, achieved margin, return on average invested capital (ROIC) and cash flow ahead of expectations, despite sales being slightly lower than forecast.
It has forecast continuing growth in commercial aerospace, which is expected to offset a decline in the military and aftermarket sectors. New work packages awarded to the division exceed $1bn.
Birmingham-based GKN Driveline saw continued growth ahead of global auto production. Trading margin improved, before restructuring charges and its expansion into Mexico continued. Its Chinese joint venture was also broadened to include all-wheel drive (AWD) products.
In the Powder Metallurgy division there was growth ahead of global auto production and trading margin increased to 10.1%. It said there was continued strong product development and a growth in new business.
The Land Systems division struggled by comparison with the rest of the group. Organic sales were down 6% due to challenging end markets and chassis contracts ending.
In outlook, it said: “Aerospace, commercial aircraft production should continue to grow whereas military demand is forecast to decline. GKN Aerospace’s 2014 sales are expected to be slightly higher than the prior year, due to our presence on new commercial programmes and despite lower military sales and the full year impact of the previously announced transfer of a supply chain contract back to Airbus.
“In automotive, external forecasts suggest that global light vehicle production should grow around 3% with increases in China, North America and Europe but Japan decreasing. Against this background, GKN Driveline and GKN Powder Metallurgy are expected to continue to grow above the market.”
European industrial and construction markets are forecast to show a slight improvement while agricultural equipment markets in Europe and North America are expected to soften. The performance of GKN Land Systems is expected to be broadly flat for 2014, before adjusting for the ending of two chassis contracts.
“Overall, 2014 is expected to be another year of continued progress. Whilst adverse currency could provide a significant translational headwind, this should be outweighed by the benefits of the group’s diverse exposure to global markets, strong customer positions and healthy order books,” it added.
Chief executive Nigel Stein said he was pleased with the progress the group had made during 2013, which was in-line with a strategy to grow a market-leading global engineering business.
“Although some of our end markets were challenging, we continued to show growth and are reporting good underlying financial results, helped by our 2012 acquisition of GKN Aerospace Engine Systems, which performed strongly. We expect the group’s progress to continue in 2014,” he said.
