GKN
Finding Another Gear
Interim Management Statement for the three months ended 30 September 2010
Overview
2010
Management basis
Sales
Trading profit
Trading Margin (%)
Profit/(los) before tax
2009
H1
£m
Q3
£m
9m YTD
£m
H1
£m
Q3
£m
9m YTD
£m
2,701
1,336
4,037
2,165
1,101
3,266
202
100
302
25
52
77
7.5%
7.5%
7.5%
1.2%
4.7%
2.4%
175
88
263
(6)
37
31
Strong progress in third quarter and expect solid close to the year
Third quarter sales up 21% to £1,336m
Trading profit up 92% to £100m
Trading margin of 7.5% (2009: 4.7%)
Profit before taxation of £88m (2009: £37m)
Net debt at 30 September 2010 was £212m (30 June 2010: £202m)
Interim Management Statement for the three months ended 30 September 2010
2
Automotive (Driveline and Powder Metallurgy)
Third quarter sales similar to second quarter
European seasonal decline less than normal and strong demand in
North America and Asia
2010
Sales
H1
£m
Q3
£m
9m YTD
£m
H1
£m
Q3
£m
9m YTD
£m
1,567
800
2,367
1,040
598
1,638
108
55
163
(50)
14
(36)
6.9%
6.9%
6.9%
(4.8)%
2.3%
(2.2)%
Trading profit/(loss)
Trading Margin
2009
Sales increased 34% to £800m (2009: £598m)
Trading profit was £55m (2009: £14m)
Automotive trading margin was 6.9%
Powder Metallurgy at 7.9%
Driveline at 6.6% - additional temporary labour costs in Europe to meet higher
than expected customer demand and increased raw material costs which
should largely be recovered.
Interim Management Statement for the three months ended 30 September 2010
3
Driveline
Restructuring in final phase – additional benefits in
2011
Major driveshaft capacity expansion programme
launched
China vehicle sets increase by 3.0m to 7.0m
India vehicle sets increase by 2.0m to 4.0m
North America vehicle sets increase by 1.8m to 7.0m
North American market share from 33% (2007) to 45% (2014)
Share of Ford business to more than double
Interim Management Statement for the three months ended 30 September 2010
4
Driveline
Excellent performance in securing new business
80% win rate on new and replacement driveshafts programme
New electronic couplings with Nissan and Mitsubishi
Hybrid and EV transmissions for Japanese, Chinese and
North American customers
Ford the fifth customer secured for differentials
GKN EV
Transmission
Driveline emerging strongly into a
sustainable growth phase
Interim Management Statement for the three months ended 30 September 2010
5
Powder Metallurgy
Strong Sinter Metals new business wins - £60m in annualised
sales
Two applications of Sinter forged gears in progress
GM differential through Driveline - Ford large SUV transmission
New applications for fuel efficient engines, transmissions and
soft magnetics to account for 25% of revenue in 5 years’ time
PM Differential Gears
Variable Valve Train
Components
Powder Metallurgy to deliver strong revenue growth and
steadily improving margins
Interim Management Statement for the three months ended 30 September 2010
6
Land Systems
2010
Sales
Trading profit/(loss)
Trading Margin
2009(3)
H1
£m
Q3
£m
9m YTD
£m
H1
£m
Q3
£m
9m YTD
£m
359
165
524
329
127
456
19
8
27
1
(3)
(2)
5.3%
4.8%
5.2%
0.3%
(2.4)%
(0.4)%
Normal seasonal patterns returned with third quarter sales
11% lower than the second quarter
Sales increased 30% to £165m (2009: £127m)
Trading profit of £8m (2009: trading loss of £3m) and trading
margin of 4.8%
Interim Management Statement for the three months ended 30 September 2010
7
Land Systems
Innovation securing new business wins
ICVD business secured with JCB and Dieci for telehandlers based on
a 15% fuel efficiency improvement
Fan clutch retrofit programme delivering significant energy savings
Integrated driveline system win on latest John Deere 4x4 tractor
Propshaft business for the UK Warrior military vehicle upgrade
Warrior Infantry Fighting Vehicle
Telehandler
Land Systems already attracting significant attention from
existing and new customers
Interim Management Statement for the three months ended 30 September 2010
8
Aerospace
2010
Sales
Trading profit
Trading Margin
2009(3)
H1
£m
Q3
£m
9m YTD
£m
H1
£m
Q3
£m
9m YTD
£m
734
349
1,083
770
361
1,131
80
39
119
79
43
122
10.9%
11.2%
11.0%
10.3%
11.9%
10.8%
Markets broadly in line with expectations - although third quarter
seasonal decline in Europe greater than normal. It is expected
that this shortfall will be caught up by the year end
Sales down 3% at £349m (2009: £361m)
Trading profit was £39m (2009: £43m) and the trading margin
11.2% (2009: 11.9%)
Interim Management Statement for the three months ended 30 September 2010
9
Aerospace
Strength in US Defence Programmes
C130J - current multi year production through 2013; further multi year in
submission
Blackhawk H60 and V22 – production through 2012; follow-on multi years under
discussion
C17 – production through 2011; proposal to Boeing for extension through 2014
F18 – 4 year multi year approval
Joint Strike Fighter and CH53K provide substantial growth
Good content on three US contenders for international fighter competitions
Airbus and Boeing Commercial backlog provides over $9bn of revenues
Significant success in aero engine segment
Multi year contracts for metallic engine structures with all three majors – c.$1bn
Successful market penetration of composites for engines continues
Rolls-Royce fan blade JV extended for fan casings
First development units on Pratt & Whitney geared turbo fan
Improving outlook for Aerospace in 2011 and return to growth thereafter
Interim Management Statement for the three months ended 30 September 2010
10
Net Debt
Net debt at 30 September 2010 was £212m (30 June
2010 : £202m)
Interim dividend payment (£23m)
Pension deficit contribution (£11m)
Emitec’s acquisition of Grundfos NoNOx (£8m) all being met in
the period.
Net debt is expected to be below £200m at the year
end
Interim Management Statement for the three months ended 30 September 2010
11
Outlook
The outlook for GKN’s markets in the fourth quarter remains
positive with Group sales expected to be at a similar level to the
third quarter
In Automotive, production schedules support another solid
quarter for Driveline and Powder Metallurgy
Land Systems sales are expected to be broadly flat
Aerospace - strong fourth quarter as sales delayed during the
summer shut down period are recovered over the balance of the
year
GKN continues to make excellent progress through 2010 and
the strength of our market positions and healthy order books
give confidence in our prospects for 2011 and beyond
Interim Management Statement for the three months ended 30 September 2010
12