GKN prepares ‘strong action’ to weather downturn

Trading for the nine months to 30 September saw sales 7% ahead of last year and pre-tax profit also showing a slight improvement. GKN said car and light vehicle sales had fallen globally, which would adversely impact 4th quarter production schedules. Sales and profits in the automotive businesses were slightly down on 2007 but aerospace markets had remained robust with revenues up 10% and profits showing a strong improvement. OffHighway markets also generally remained solid and our business has continued to perform well, with a double digit increase in revenues and a strong profit contribution. GKN’s agreement in September to acquire Airbus’ Filton wing component manufacturing plant remained on track for completion in January 2009 and the company had secured orders for wing components on the A350 XWB, which would provide an estimated £1.2 billion of revenues over the life of the programme. Looking forward for the year as a whole, GKN said it was now experiencing significant further deterioration in demand in automotive markets globally and it expected 4th quarter sales to be around 15% lower than last year with activity levels 20% below those in the first half year. In Aerospace, although the overall market remained robust, the ongoing Boeing machinists strike, if its effects continued through to year end, would reduce expected revenues in the quarter by around 8%. Market turbulence in automotive led to cancellation of a small number of expansion projects and these, together with the potential 4th quarter impact of the Boeing strike, will lead to a profit reduction of £10m to £12m in the period. GKN concluded that: “Overall, therefore, pre-tax profit for the 4th quarter and the year as a whole are likely to be materially below our mid-year guidance. We now expect group profit before tax for the year to be around 20% lower than 2007. With the outlook for 2009 uncertain, GKN said: “We are now finalising detailed plans to reposition our businesses to deliver acceptable profitability and cash generation through this difficult period. “The major restructuring and repositioning of our businesses in recent years and the strategy to build leadership positions in diversified end markets gives GKN confidence in these difficult times.”