NEWS RELEASE
GKN plc
Trading update
25 October
2016
GKN plc, the global engineering business that serves the
aerospace and automotive markets, today issues a trading update for
the nine months ended 30 September
2016; management sales increased 21%, including organic
sales growth of 2%, in line with expectations.
Group Results(1)
The Group’s principal markets performed in line with the
expectations set out in our July results announcement. Management
sales for the nine months ended 30 September
2016 were £6,895 million (2015: £5,683 million). This 21%
increase comprised £151 million (2%) organic growth, acquisitions
of £587 million and beneficial currency translation of £474
million.
Sales in the Automotive businesses continue to perform well
against the market and the Aerospace division grew in line with our
expectations. Land Systems’ markets remain tough.
As expected, the Group trading margin was lower than the
equivalent period last year. This was due to the commencement of
the Group-wide £35 million restructuring programme, launch related
costs in GKN Driveline, the absence of last year’s one-off benefits
in GKN Aerospace and the inclusion of Fokker Technologies (“GKN
Aerospace Fokker”).
Operating cash flow was similar to the equivalent period last
year.
Divisional
Performance(2)
GKN Aerospace
GKN Aerospace sales in the nine months were £2,496 million
(2015: £1,756 million), up 2% on an organic basis and beneficial
currency translation of £126 million. Commercial sales were helped
by the ramp-up in production of the A350, A320 and Boeing 737 which
more than offset lower A330, A380 and Boeing 777 sales. Military
sales were lower than the prior year, reflecting the continuing
decline of mature programmes, mainly the F/A-18 Super Hornet and
UH-60 Black Hawk helicopter.
GKN Aerospace Fokker, acquired on 28
October 2015, added £580 million of sales in the nine
months. The integration plans are progressing well and GKN
Aerospace Fokker performed in line with expectations.
For GKN Aerospace overall, the mix of new and mature programmes,
together with slower than expected customer ramp-ups, restricted
our ability to offset last year’s one-off benefits. This and the
inclusion of Fokker, led to lower margins than the same period last
year.
GKN Driveline
GKN Driveline sales in the nine months were £3,075 million
(2015: £2,665 million). Organic sales increased 6%, against global
industry production rates that were up 4%, and beneficial currency
translation of £238 million. External forecasts continue to expect
full year global auto production to increase by 3%.
Strong organic growth above the market continued in Europe due to new programme launches and the
strength of premium vehicles. GKN Driveline performed above the
Americas market, helped by new programme launches in North America. Within Asia, sales growth in China was above the market as new programmes
and customer mix more than offset GKN Driveline’s lower exposure to
domestic brands and smaller vehicles.
GKN Driveline’s margin was below last year's equivalent period
due to significant launch costs on a US all-wheel drive programme,
as previously reported. These additional costs are now on a
downward trend, although the second half is likely to see a similar
impact to the first half.
GKN Powder Metallurgy
GKN Powder Metallurgy sales in the nine months were £762 million
(2015: £694 million). Beneficial currency translation was £64
million. Organic sales were flat, reflecting slower demand in
North America, offset by improved
sales in Europe and Asia. There was also a negative impact on
powder sales from the direct pass through of lower raw material
prices and this helped GKN Powder Metallurgy report slightly higher
margins than the comparable period last year.
GKN Land Systems
GKN Land Systems sales in the period were £534 million (2015:
£535 million). Organic sales declined 8%, principally due to demand
weakness for agricultural equipment and the ending of two chassis
contracts, offset by a £44 million benefit from currency
translation.
On 21 October 2016, the Group
announced that it had agreed to sell the Stromag business for an
enterprise value of €198million (£177 million), with completion
expected in the first quarter of 2017. From 1 January 2017, GKN Land Systems will no longer
operate as a division, with Shafts and Services being reported
within GKN Driveline and Wheels and Structures moving to Other
businesses.
Other businesses
Sales for GKN’s Other businesses fell to £28 million (2015: £33
million) reflecting the scale back of GKN Hybrid Power, which
caused this segment overall to report a small loss in the
period.
Summary
Nigel Stein, Chief Executive, GKN
plc, commented:
"GKN has continued to make progress. Organic growth was 2%,
whilst we also benefitted significantly from the successful
acquisition and integration of GKN Aerospace Fokker as well as from
favourable currency translation due to the weakness of sterling. As
expected, our organic profit performance was down primarily due to
one-off items, including the costs of the restructuring, which will
position us better for the years ahead.
In line with the global economic outlook, we see growth rates
easing in our major markets. The automotive market is now forecast
to see a 1% increase in light vehicle production in the final
quarter. New commercial aerospace programmes continue to ramp-up,
although at a slower rate than expected. Our military aerospace
programmes and agricultural equipment markets look set to continue
their decline. Despite the slightly tougher macro-economic
environment, the Group continues to expect 2016 to be another year
of growth.”
Final Results Announcement
The Group will issue its 2016 full year results announcement on
28 February 2017.
Trading update call
There will be a call for analysts and investors at 08:30am today (25 October). Dial in details
are:
Direct dial:
+44 (0) 203 139 4830
UK toll-free:
0808 237 0030
Conference ID:
11947180#
Participants joining the call from outside the UK can find a
local number in the following file:
http://events.arkadin.com/ev/docs/NE_FEL_Events_International_Access_List.pdf
Conference ID as above.
A replay of the conference call will be available on the Group’s
website:
http://www.gkn.com/investorrelations/Pages/results-and-presentations.aspx
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 certain subsidiary
businesses sold and closed) 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.
(2) Divisional
profitability comments are before any share of the £35 million
Group-wide restructuring programme announced in July, which will be
included in Management trading profit.
Further information:
Analysts/Investors:
Guy Stainer
Investor Relations Director
GKN plc
T: +44 (0)207 463 2382
M: +44 (0)7739 778187
E: guy.stainer@gkn.com
Media:
Chris Fox
Group Communications Director
GKN plc
T: +44 (0)1527 533238
M: +44 (0)7920 540051
E: chris.fox@gkn.com
Cautionary
Statement
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 business serving the aerospace,
automotive and land systems markets. It has operations in more than
30 countries, around 56,000 employees in subsidiaries and equity
accounted investments and had sales of £7.7 billion in the year
ended 31 December 2015. GKN plc is
listed on the London Stock Exchange (LSE: GKN).