GKN (LON:GKN) has updated investors on its first-quarter performance this morning.
Highlights from the company statement:
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 on 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."