GKN plc, the global engineering business that serves the automotive, aerospace and land systems markets, today issues the following Interim Management Statement covering the period since 1 January 2011.
Overview
Market conditions in the first quarter have been broadly as expected at the time of our March statement, although the tragic events in Japan have had some impact on the automotive sector.
|
2011 |
2010 |
|
2010 |
Management basis(1) |
Q1 |
Q1 |
Change |
FY |
|
£m |
£m |
(%) |
£m |
|
Sales |
1,487 |
1,306 |
14 |
5,429 |
|
Trading profit |
119 |
84 |
42 |
411 |
|
Trading margin (%) |
8.0% |
6.4% |
1.6pts |
7.6% |
|
Profit before tax |
107 |
71 |
51 |
363 |
The GKN Group has continued to make strong progress and sales for the three months ended 31 March 2011 totalled £1,487 million, a 14% increase over the comparable period in 2010. Adverse currency translation reduced sales by £7 million and acquisitions increased sales by £5 million.
Trading profit increased to £119 million, representing a 42% increase, with a margin of 8.0%. Profit before taxation was £107 million, up 51% compared with the prior year.
Net debt at 31 March 2011 was £169 million (31 December 2010: £151 million), reflecting some seasonal increase in working capital.
GKN Markets and Performance
Automotive
Global light vehicle production increased by around 4% in the first quarter to 19.4 million vehicles, with good growth in the European premium vehicle segment and the Indian, North American and Chinese markets.
Production in Japan was severely impacted by the earthquake and tsunami and some disruption has also been experienced in Europe and North America as a result of component supply problems from Japan.
Japanese OEMs are planning to resume volume production through April and May, although it will be some time before the industry is in a position to catch up on production lost through the first half.
Driveline
|
2011 |
2010 |
|
2010 |
Driveline |
Q1 |
Q1 |
Change |
FY |
|
£m |
£m |
(%) |
£m |
|
Sales |
673 |
580 |
16 |
2,433 |
|
Trading profit |
50 |
37 |
35 |
169 |
|
Trading margin (%) |
7.4% |
6.4% |
1.0pts |
6.9% |
Driveline’s first quarter sales increased by 16% to £673 million (2010: £580 million). Trading profit was £50 million (2010: £37 million), with disruption in Japan impacting profits by around £3 million. Driveline’s trading margin was 7.4%.
During March, Driveline sold its 49% share of the Japanese driveshaft sales and distribution joint venture GTK to its JV partner JTEKT Corporation for 1.1 billion Yen (£8 million), paid in cash. This action will reduce management sales by around £30 million per year, with only a small impact on reported profit. Although slightly reducing driveshaft market share in the short term, the transaction will give Driveline freedom to compete independently in the Japanese market and build even stronger direct relationships with Japanese vehicle manufacturers.
Powder Metallurgy
|
2011 |
2010 |
|
2010 |
Powder Metallurgy |
Q1 |
Q1 |
Change |
FY |
|
£m |
£m |
(%) |
£m |
|
Sales |
217 |
180 |
21 |
759 |
|
Trading profit |
20 |
11 |
82 |
54 |
|
Trading margin (%) |
9.2% |
6.1% |
3.1pts |
7.1% |
Powder Metallurgy’s first quarter sales increased 21% to £217 million, benefiting from good growth in North American automotive production and new programme launches in North America and Europe.
Trading profit was £20 million and the trading margin moved forward strongly to 9.2%.
Aerospace
|
2011 |
2010 |
|
2010 |
Aerospace |
Q1 |
Q1 |
Change |
FY |
|
£m |
£m |
(%) |
£m |
|
Sales |
352 |
353 |
(0) |
1,451 |
|
Trading profit |
32 |
32 |
0 |
162 |
|
Trading margin (%) |
9.1% |
9.1% |
0pts |
11.2% |
Aerospace markets continued to perform in line with expectations. Revenues at £352 million were broadly flat and reflected the normal seasonal activity levels.
Trading profit was £32 million (2010: £32 million) and the trading margin was 9.1%.
Land Systems
|
2011 |
2010 |
|
2010 |
Land Systems |
Q1 |
Q1 |
Change |
FY |
|
£m |
£m |
(%) |
£m |
|
Sales |
220 |
173 |
27 |
699 |
|
Trading profit |
18 |
6 |
200 |
37 |
|
Trading margin (%) |
8.2% |
3.5% |
4.7pts |
5.3% |
Land Systems markets have continued to improve, with solid demand for mining and construction equipment and the European agricultural equipment market now recovering strongly.
Land Systems sales were up 27% at £220 million (2010: £173 million). Trading profit was £18 million (2010: £6 million), with a substantial improvement in the trading margin to 8.2%.
Outlook
Overall, the outlook for GKN’s markets remains in line with our March statement, although we expect some continuing short term impact from disruption in the Japanese automotive market and from supply chain shortages to our customers outside of Japan.
Notwithstanding this, we expect GKN to continue to make good progress. The strength of our market positions and healthy order books give confidence in our prospects for 2011 and beyond.
Sir Kevin Smith, Chief Executive, GKN plc, commented:
"GKN made good progress in the first quarter and I expect this to continue. GKN has excellent new products and technologies which are aligned with our customers’ desire to have smaller, lighter and stronger components and systems, offering improved efficiency, lower fuel consumption and greater environmental benefits. Our four divisions are well placed to achieve a period of sustainable growth and margin improvement."
Capital Markets Day
The Group is hosting a Capital Markets Day on 12 April 2011, which will include a visit to the new Aerospace A350 facility in Bristol followed by presentations from each of the four divisions. The presentations will provide an overview of each division and will focus upon their growth opportunities and technology innovations.
No material new information or update on trading will be provided.
A copy of the slides used in the presentations will be available on the Group's website (
www.gkn.com/investorrelations) from 12.30 p.m. 12 April 2011 and a recording of the presentations will be available shortly after the event.
Half Year Results Announcement
The Group intends to issue its half year results announcement on 2 August 2011.
Notes
(1) 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 (excluding subsidiary businesses sold and closed) with the Group’s share of the sales and trading profit of joint ventures. Trading margin is trading profit expressed as a percentage of sales. Management profit or loss before tax is management trading profit less net subsidiary interest payable and receivable and the Group’s share of net interest payable and receivable and taxation of joint ventures. These figures better reflect performance of continuing businesses. Where appropriate, reference is made to underlying results which exclude the impact of acquisitions as well as currency translation on the results of overseas operations.
For further information:
Guy Stainer
Director, Investor Relations and External Communications
T: +44 (0)207 463 2382
M: +44 (0)7739 778 187
E:
guy.stainer@gkn.com
Andrew Lorenz
Financial Dynamics
T: +44 (0)20 7269 7113
M: +44 (0)7775 641 807
Cautionary Statement
This announcement contains forward looking statements which are made in good faith based on the information available to 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.
Notes to Editors
GKN plc is a global engineering business serving the automotive, aerospace and land systems markets. It has operations in more than 30 countries, around 40,000 employees in subsidiaries and joint ventures and had sales of £5.4 billion in the year ended 31 December 2010. GKN plc is listed on the London Stock Exchange (LSE: GKN).