Third Quarter Results 2012
16 October 2012
Overview
Since H1 results in July, demand has remained broadly in line with expectations
− More challenging European automotive and industrial markets being offset by strong automotive
demand in the US and China and continued growth in civil aerospace
Sales up 8%, including organic growth of 4% but currency proving a headwind
Trading margin reduced to 7.1% largely as a result of lower profitability in Driveline
− Expected seasonality in Getrag all-wheel drive and costs associated with fluctuations in demand
Management basis (1)
Sales
Trading Profit *
Trading Margin * (%)
Profit before Tax *
2012
Q3
£m
2012
9m
YTD
£m
2011
Q3
£m
2011
9m
YTD
£m
1,608
5,067
1,483
4,471
114
407
113
360
7.1%
8.0%
7.6%
8.1%
99
365
100
323
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Q3 2012 – THREE MONTHS ENDED 30 SEPTEMBER 2012
* Excluding Gallatin cost impact of
£34m in 2011 (£11m in Q3).
Automotive markets
Global light vehicle production increased by c.2% - strongest markets include North
America and China while Europe and India fell
15
+12%
% change
10
+8%
+7%
+5%
5
-5%
0
North
America
China
South
America
-5
-8%
Japan
India
Europe
-10
Strong growth still evident in North America
Japanese comparators now tougher following disruption caused by earthquake/tsunami in
March 2011
Production in China more positive for non-domestic OEMs
Europe getting weaker with some premium vehicles reducing production
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Q3 2012 – THREE MONTHS ENDED 30 SEPTEMBER 2012
Divisional performance
GKN Driveline
Sales up 15% to £773m, organic sales up 4%
GKN Driveline
Trading profit reduced to £42m with trading
margin of 5.4%
Sales
Getrag Driveline Products business affected by
expected summer shutdowns
Additional costs associated with demand
fluctuations in India, Europe, Japan
2012
Q3
£m
2012
9m YTD
£m
2011
Q3
£m
2011
9m YTD
£m
773
2,437
672
2,005
42
163
46
140
Trading Margin (%)
5.4%
6.7%
6.8%
7.0%
GKN Powder
Metallurgy
2012
Q3
£m
2012
9m YTD
£m
2011
Q3
£m
2011
9m YTD
£m
208
673
210
645
20
67
16
55
9.6%
10.0%
7.6%
8.5%
Trading Profit
September margin returned to more than 7%
GKN Powder Metallurgy
Sales down 1% due to adverse translational
currency more than offsetting 4% organic
growth
Trading profit increased 25% to £20m
Sales
Trading Profit
Margin improved to 9.6%
Trading Margin (%)
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Q3 2012 – THREE MONTHS ENDED 30 SEPTEMBER 2012
Divisional performance
GKN Aerospace
GKN Aerospace
2012
Q3
£m
2012
9m YTD
£m
2011
Q3
£m
2011
9m YTD
£m
392
1,162
360
1,083
42
128
39
119
Trading Margin (%)
10.7%
11.0%
10.8%
11.0%
GKN Land Systems
2012
Q3
£m
2012
9m YTD
£m
2011
Q3
£m
2011
9m YTD
£m
216
728
213
657
18
70
17
56
8.3%
9.6%
8.0%
8.5%
Aerospace markets performed as expected
Ramp-up in a number of civil programmes more
than offsetting the decline in military sales
Sales up 9% to £392m and trading profit
increased 8% to £42m
Sales
Trading Profit
GKN Land Systems
Performance affected by weaker European
industrial demand and automotive aftermarket,
although agricultural sector remained strong
Sales up 1%. Organic decline of 2% and adverse
currency more than offset by Stromag
Trading profit of £18m; trading margin of 8.3%,
reflecting normal seasonality
Sales
Trading Profit
Trading Margin (%)
Other Businesses
Sales 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 the commercial vehicle market
Trading loss of £2 million (2011: trading profit of £1 million)
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Q3 2012 – THREE MONTHS ENDED 30 SEPTEMBER 2012
Outlook
Macroeconomic conditions have deteriorated in recent weeks and some softening in GKN’s
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.
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.
GKN
Delivering Sustainable Growth
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Q3 2012 – THREE MONTHS ENDED 30 SEPTEMBER 2012
Net debt and financing
New 10 year £450m bond with coupon 5.375% issued as part of Volvo Aerospace
acquisition funding
Net debt at 30 September 2012 of £478m (30 June 2012: £590m)
− Reflects the net proceeds from the £140 million equity placing in July to part fund the £633 million
Volvo Aerospace acquisition which completed 1 October 2012
7
Q3 2012 – THREE MONTHS ENDED 30 SEPTEMBER 2012
Financial Summary
Management Basis (1)
2012 H1 £m
Driveline
2012 Q3 £m
2012 9M YTD £m
1,664
773
2,437
Powder Metallurgy
465
208
673
Aerospace
770
392
1,162
Land Systems
512
216
728
48
19
67
3,459
1,608
5,067
121
42
163
Powder Metallurgy
47
20
67
Aerospace
86
42
128
Land Systems
52
18
70
Other Businesses
1
(2)
(1)
Gallatin
2
--
2
Central Costs
(16)
(6)
(22)
Total trading profit
293
114
407
Interest
(22)
(13)
(35)
(5)
(2)
(7)
266
99
365
Other Businesses
Total sales
Driveline
JV interest and tax
Profit before tax
Management Basis (1) – please see press release for definition
http://www.gkn.com/media/News/Pages/Interim-Management-Statement.aspx
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Q3 2012 – THREE MONTHS ENDED 30 SEPTEMBER 2012