GKN plc, the global engineering business that serves the aerospace and automotive markets, today issues a trading update for the period since 1 January 2017.
Overall in the first quarter, the Group achieved good organic sales growth as well as continuing to benefit from currency translation, with the automotive market performing better than expected and growth in aerospace being slightly slower than planned.
Group trading margin has moved ahead of last year primarily due to an increase in GKN Driveline, although it and GKN Powder Metallurgy are seeing an impact from higher raw material costs. GKN Aerospace is tracking in-line with plan. Operating cash flow was similar to the equivalent period last year.
GKN Aerospace sales in the first quarter increased modestly on an organic basis. As expected in commercial aerospace, the production ramp-up of new aircraft is slightly more than offsetting cuts in the A380, Boeing 777/747 and business jets. Military sales were up compared to the prior year, reflecting the ramp-up of the F-35 Lightning II and stable production levels in older programmes.
GKN Driveline delivered good first quarter sales ahead of global industry production rates that were up 6%. External forecasts continue to expect full year global auto production to increase by only 2%, with Europe and North America down in the second quarter. China continues to experience robust demand.
GKN Driveline’s constant velocity joints (CVJ) business has made a strong start to the year across all geographies. We continue to make good progress in winning new all-wheel drive (AWD) business particularly in China and the US, although strong demand for the programme in the US that caused additional costs in 2016 is slowing our ability to make all the changes necessary to fully eliminate those costs. We continue to invest and make progress across our eAxle development programmes.
GKN Powder Metallurgy
GKN Powder Metallurgy’s organic sales growth was in line with global auto production rates and it also benefited from currency translation and the acquisition of the powder manufacturer in China, in 2016. The growth included the direct pass through of higher raw material prices which also had the effect of reducing margins slightly.
On 17 April 2017, GKN Powder Metallurgy announced that it has agreed to acquire Tozmetal Ticaret Ve Sanayi AS (“Tozmetal”). Tozmetal is a Turkish sinter metal component manufacturer with 2016 sales of €24 million. Completion of the acquisition is subject to approval from the relevant merger control authorities.
Nigel Stein, Chief Executive, GKN plc, commented:
"GKN delivered a good performance in the first quarter. The encouraging growth rate achieved to date may not be sustained as the year progresses and comparators get tougher, nevertheless, we expect 2017 to be another year of growth."
Half year results announcement
The first half results will be announced on 26 July 2017.
Trading update call
There will be a call for analysts and investors at 08:15 am today (26 April). Dial in details are:
Direct dial: +44 (0) 203 139 4830
Conference ID: 28403856#
Participants joining the call from outside the UK can find a local number in the following file:
Conference ID as above.
A replay of the conference call will be available on the Group’s website:
GKN plc LEI: 213800QNZ22GS95OSW84
(1) The financial information set out in this announcement unless otherwise stated, is presented on a management basis which aggregates the sales and trading profit of subsidiaries with the Group’s share of the sales and trading profit of equity accounted investments. References to trading margins are to trading profit expressed as a percentage of sales. Where appropriate, reference is made to organic results which exclude the impact of acquisitions/divestments as well as currency translation on the results of overseas operations.
Investor Relations Director
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Head of Group Communications
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This announcement contains forward-looking statements which are made in good faith based on the information available at the time of its approval. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of risks and uncertainties that are inherent in any forward-looking statement which could cause actual results to differ materially from those currently anticipated. Nothing in this document should be regarded as a profits forecast.
Notes to Editors
GKN plc is a global engineering group. It has three divisions; GKN Aerospace, GKN Driveline and GKN Powder Metallurgy, which operate in the aerospace and automotive markets. Over 58,000 people work in GKN companies and equity accounted investments in more than 30 countries. GKN plc is listed on the London Stock Exchange (LSE: GKN) and recorded sales of £9.4 billion in the year to 31 December 2016.