NEWS RELEASE
GKN plc
Interim Management Statement
16 October 2012
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
1st July 2012.
Markets
Since GKN’s Half Year Results announcement in July, demand has remained broadly in line with
expectations with more challenging European automotive and industrial markets being offset by
strong automotive demand in the US and China and continued growth in civil aerospace.
Group Results
Group sales in the three months ended 30 September totalled £1,608 million, an 8% increase over
the comparable period in 2011, half of which was organic growth. Third quarter trading profit
increased slightly to £114 million (2011: £113 million) although trading margin reduced to 7.1%,
largely as a result of lower profitability in Driveline. This arose due to the expected seasonality in
the Getrag all-wheel drive business and costs associated with fluctuations in demand. In
September, the Group’s margin returned to a level comparable to the first half.
(1)
Management basis
Sales
Trading profit*
Trading margin* (%)
Profit before tax*
2012
Q3 9m YTD
£m
£m
1,608
5,067
114
407
7.1%
8.0%
99
365
2011
Q3 9m YTD
£m
£m
1,483
4,471
113
360
7.6%
8.1%
100
323
*Excluding Gallatin cost impact of £34m in 2011 (£11m of which was in Q3)
Outlook
Macroeconomic conditions have deteriorated in recent weeks and some softening in order books is
now evident, particularly regarding European automotive and industrial markets. Other automotive
markets and the civil aerospace market are expected to remain solid. The fourth quarter is
anticipated to show the usual seasonal improvement, although the softening markets are expected
to have some impact on performance.
Summary
Nigel Stein, Chief Executive, GKN plc, commented:
"In the third quarter, the Group’s global footprint with its exposure to the strong markets of North
America and China, as well as civil aerospace, allowed us to offset weaker European markets.
Profit was affected by expected seasonal factors and operational issues in Driveline. Looking
forward, European markets seem to be softening further. We continue to focus on driving
performance, keeping close control of our cost base."
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Divisional Markets and Performance
Automotive
Global light vehicle production in the third quarter of around 19.3 million vehicles, was around 2%
ahead of the comparable period in 2011 with declines in Europe (-8%) and India (-5%) being offset
by increases in North America (+12%), China (+8%) and Japan (+5%).
GKN Driveline
Sales
Trading profit
Trading margin
2012
Q3 9m YTD
£m
£m
773
2,437
42
163
5.4%
6.7%
2011
Q3 9m YTD
£m
£m
672
2,005
46
140
6.8%
7.0%
GKN Driveline’s third quarter sales increased by 15% to £773 million (2011: £672 million), due to
the inclusion of the Getrag Driveline Products acquisition. Organic sales were up 4% although this
was offset by adverse currency translation. Trading profit was lower at £42 million (2011: £46
million) and trading margin was 5.4% (2011: 6.8%). Around half of the decline in margin was due
to the expected summer seasonal pattern in the acquired Getrag business. The remainder arose
through costs associated with demand fluctuations in India, Europe and Japan. In September,
GKN Driveline’s margin returned to more than 7%.
GKN Powder Metallurgy
Sales
Trading profit
Trading margin
2012
Q3 9m YTD
£m
£m
208
673
20
67
9.6%
10.0%
2011
Q3 9m YTD
£m
£m
210
645
16
55
7.6%
8.5%
GKN Powder Metallurgy’s third quarter sales reduced 1% to £208 million (2011: £210 million), due
to adverse currency translation more than offsetting organic sales growth of 4%. Trading profit
increased 25% to £20 million (2011: £16 million) at a margin of 9.6% (2011: 7.6%).
GKN Aerospace
Sales
Trading profit
Trading margin
2012
Q3 9m YTD
£m
£m
392
1,162
42
128
10.7%
11.0%
2011
Q3 9m YTD
£m
£m
360
1,083
39
119
10.8%
11.0%
GKN Aerospace continued to perform in line with expectations with strong growth in civil
programmes more than offsetting the decline in military sales. Sales in the third quarter increased
9% to £392 million (2011: £360 million). Trading profit was £42 million (2011: £39 million) and the
trading margin was 10.7%.
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GKN Land Systems
Sales
Trading profit
Trading margin
2012
Q3 9m YTD
£m
£m
216
728
18
70
8.3%
9.6%
2011
Q3 9m YTD
£m
£m
213
657
17
56
8.0%
8.5%
GKN Land Systems’ performance was affected by weaker European industrial demand and
automotive aftermarket, although the agricultural sector remained strong. Sales were up 1% at
£216 million, with 2% organic decline and adverse currency translation being more than offset by
the year on year impact of the Stromag acquisition. Trading profit was £18 million and the trading
margin was 8.3%, reflecting normal seasonality.
Other businesses
Sales in the quarter for GKN’s other businesses fell more than 30% to £19 million (2011: £28
million) due to a fall in sales from Emitec, a 50% joint venture, which was adversely impacted by a
decline in sales to the commercial vehicle market. Other businesses reported a quarter trading loss
of £2 million (2011: trading profit of £1 million).
Volvo Aerospace
The acquisition of Volvo Aerospace completed on 1 October 2012. As previously described, Volvo
Aerospace is expected to generate sales of around £170 million in the fourth quarter with a trading
profit of around £15 million. Including restructuring, transaction and interest costs, the Group
expects to report a loss before taxation for Volvo Aerospace of around £15 million, before fair value
accounting and pension adjustments, which have yet to be fully determined.
Net Debt and Financing
During the period a 10 year £450 million bond with a coupon of 5.375% was issued as part of the
Volvo Aerospace acquisition funding. Net debt at 30 September 2012 was £478 million (30 June
2012: £590 million), reflecting the net proceeds from the £140 million equity placing that took place
in July to part fund the £633 million Volvo Aerospace acquisition which completed after the quarter
end, and £25 million normal seasonal outflow.
Final Results Announcement
The Group intends to issue its 2012 full year results announcement on 26 February 2013.
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 joint
ventures. References to trading margins are to 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/divestments as well as currency translation on the results of overseas operations.
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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 automotive, aerospace and land systems
markets. It has operations in more than 30 countries, around 50,000 employees in subsidiaries
and joint ventures and had sales of £6.1 billion in the year ended 31 December 2011. GKN plc is
listed on the London Stock Exchange (LSE: GKN).
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