GKN plc Interim Management Statement
7 May 2009
GKN plc, the global engineering business that serves the automotive,
industrial, offhighway and aerospace markets, today issues the following
Interim Management Statement covering the period since 1 January 2009 and holds
its Annual General Meeting.
In extremely challenging automotive and offhighway markets and with a strong
contribution from Aerospace, GKN has continued to make good progress in
re-adjusting its operations to the current market environment.
Group sales (including subsidiaries and joint ventures) in the three months
ended 31 March 2009 (the "quarter") totalled £1,085 million, an 8% decrease on
the first quarter of 2008. Currency translation and the Filton acquisition
provided a benefit of £389 million. Excluding Filton, Group sales at constant
currency reduced by 33%.
In the quarter, the Group incurred a trading loss of £13 million and a loss
before tax(*) of £29 million. The Group returned to profitability(*) in March
after a particularly difficult first two months in the automotive sector. In
Aerospace, the Filton acquisition was completed in January and its integration
and performance to date has met expectations. Strong management of working
capital across the Group helped significantly to curtail the normal seasonal
cash outflow and, together with the achievement of planned reductions in
capital investment, resulted in net debt below £900 million at 31 March 2009.
The restructuring plan announced in February was accelerated with around 1,800
people leaving the Group during the quarter.
GKN Markets and Performance
Global light vehicle production has been severely depressed in the first
quarter, with volumes down around 35% compared with 2008, and all OEMs have
implemented a strong drive to reduce inventory of vehicles and components.
Global light vehicle sales were down around 20% in the same period. Government
incentives to encourage vehicle sales have been implemented in a number of
countries, mainly directed at the small car segment and most notably in Western
Europe and China.
GKN's Automotive sales at constant currency (including Powder Metallurgy) were
down 49% in the first two months of the year and 36% in March.
In Europe, GKN's driveshaft market share for small cars is not as strong as for
other segments and in China, much of the increased demand is for
unsophisticated vehicles, many with rigid axles rather than independent rear
suspension which uses constant velocity joints. GKN Driveline has, therefore,
seen only a small benefit from the short-term impact of Government incentive
programmes. In Japan, GKN's major customers are Mitsubishi and Nissan both of
whom have reduced production by over 60% in the quarter and GKN's Driveline
Japanese revenues were down by a comparable amount. Elsewhere, GKN's Automotive
sales have been broadly in line with the market.
Sales to Chrysler and General Motors in North America amounted to some £
8 million in March and GKN has applied to join the supplier payment guarantee
scheme with both companies.
The Automotive businesses incurred a trading loss of £47 million in the
quarter, £42 million of which occurred in January and February.
OffHighway markets declined rapidly during February and March and GKN's sales
at constant currency were down over 20% in the quarter. OffHighway produced a
small trading profit in the quarter.
Aerospace markets performed in line with expectations and GKN's Aerospace
business continued to make good progress. The Filton acquisition has performed
well, contributing around £90 million to revenues, operating margin within the
5 to 7% guidance range and strong positive cash flow. Aerospace organic sales
at constant currency grew by 4%, with US defence revenues continuing to show
good growth. GKN Aerospace delivered £34 million of trading profit in the
Funding and Liquidity
Net borrowings at 31 March 2009 were £889 million. The Group had drawn £277
million from its available UK bank facilities, leaving headroom of £348
Considerable uncertainty remains in GKN's end markets.
Global light vehicle production is likely to increase during the second quarter
as sales and production start to re-align. We expect Offhighway markets to
remain weak, with agricultural, mining and construction equipment demand down
between 30 and 40% until at least the half year. Aerospace production rates
should remain stable in the second quarter.
Against this background and with the increasing benefits of restructuring,
Driveline and Powder Metallurgy are expected to continue to make progress in
the second quarter and Aerospace will continue to perform strongly.
GKN's first half results announcement is on 4 August 2009.
* Note: In this statement references to profit or loss before tax are before
pension financing charges, restructuring and impairment charges, amortisation
of non-operating intangible assets and other non-cash charges arising on
business combinations, profits and losses on sale or closure of businesses,
changes in the value of derivative and other financial instruments and other
net financing charges.
There will be an analyst and investor call at 0930 today on the following
Standard International Dial In: +44 (0) 203 300 0097
UK Freecall Dial In: 0800 4961091
A replay of the conference call will be available for 14 days at the following
UK Freecall Dial In: 0800 4961091 reservation # 21424474
USA Access Number: +1 402 977 9140 reservation # 21424474
For further information:
Director, Investor Relations and External Communications
T: +44 (0)207 463 2382
M: +44 (0)7739 778 187
T: +44 (0)20 7269 7113
M: +44 (0)7775 641 807
This press release 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 mainly the automotive,
industrial, off-highway and aerospace markets. It has operations in more than
30 countries, nearly 40,000 employees in subsidiaries and joint ventures and
had sales of £4.4 billion in the year ended 31 December 2008. GKN plc is listed
on the London Stock Exchange (LSE: GKN).