Profits increase at GKN’s Powder Metallurgy division

July 29, 2015

UK-based GKN plc has reported a solid performance in its half-year sales figures ending 30 June 2015. Overall six-month sales were reported as £3,853 million, up 1% on the same period in 2014.

GKN’s Powder Metallurgy division, which comprises GKN Sinter Metals and metal powder producer Hoeganaes, achieved first half organic sales of £474 million, £6 million higher (1%), after the £8 million pass through to customers of lower scrap steel prices. There was no impact from currency translation and there was a £3 million decline as a result of a disposal.  It was stated that good growth was achieved in North America, China and Europe but sales in Brazil fell due to weaker automotive and industrial markets.

The organic increase in profit was £2 million and there was a £1 million gain on currency translation. The divisional trading margin was 11.8% (2014: 11.3%) reflecting the move towards higher value “design for Powder Metallurgy” parts and a small margin benefit from lower raw material prices passed through to customers.  Return on average invested capital was 22.0% (2014: 21.0%), reflecting the improvement in profitability.

During the period, GKN Powder Metallurgy continued to achieve a number of important milestones, which included continuing strong product and development activities in engines and transmissions and a strengthening of its position in China following the announcement of a new joint venture to produce metal powders. The company has also developed a new range of technically enhanced titanium powders at its Powder Innovation Centre in the US.

Commenting on the results, Nigel Stein, Chief Executive of GKN, stated, “This was another solid performance, particularly in our automotive businesses, with GKN Driveline delivering 4% organic sales growth and an 8.3% trading margin while GKN Powder Metallurgy achieved an 11.8% margin. GKN Aerospace delivered in line with expectations and won some important new contracts for the future. We have continued to perform well against our key markets and report good results in spite of some end market weakness, particularly in GKN Land Systems. We expect these trends to continue in the second half and for 2015 to be another year of growth. The acquisition of Fokker Technologies, also announced today, supports our strategy, brings excellent technology, an expanded geographic footprint and additional content on high growth aerospace programmes.”

Looking ahead, GKN stated that in the automotive industry external forecasts predict growth in global light vehicle production of around 2% with increases in India, China, North America and Europe offsetting a decline in Japan and Brazil. “Against this background, GKN Driveline and GKN Powder Metallurgy are expected to continue to grow organically above the market,” the company stated.

Although some markets remain challenging, 2015 is expected to be a year of further growth. Beyond 2015, we are well positioned to outperform in our large global markets.


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