GKN PLC Trading Statement

 
TIDMGKN 
 
NEWS RELEASE 
 
GKN plc 
 
Trading update 
 
25 October 2016 
 
GKN plc, the global engineering business that serves the aerospace and 
automotive markets, today issues a trading update for the nine months ended 30 
September 2016; management sales increased 21%, including organic sales growth 
of 2%, in line with expectations. 
 
Group Results(1) 
 
The Group's principal markets performed in line with the expectations set out 
in our July results announcement. Management sales for the nine months ended 30 
September 2016 were GBP6,895 million (2015: GBP5,683 million). This 21% increase 
comprised GBP151 million (2%) organic growth, acquisitions of GBP587 million and 
beneficial currency translation of GBP474 million. 
 
Sales in the Automotive businesses continue to perform well against the market 
and the Aerospace division grew in line with our expectations. Land Systems' 
markets remain tough. 
 
As expected, the Group trading margin was lower than the equivalent period last 
year. This was due to the commencement of the Group-wide GBP35 million 
restructuring programme, launch related costs in GKN Driveline, the absence of 
last year's one-off benefits in GKN Aerospace and the inclusion of Fokker 
Technologies ("GKN Aerospace Fokker"). 
 
Operating cash flow was similar to the equivalent period last year. 
 
Divisional Performance(2) 
 
GKN Aerospace 
 
GKN Aerospace sales in the nine months were GBP2,496 million (2015: GBP1,756 
million), up 2% on an organic basis and beneficial currency translation of GBP126 
million. Commercial sales were helped by the ramp-up in production of the A350, 
A320 and Boeing 737 which more than offset lower A330, A380 and Boeing 777 
sales. Military sales were lower than the prior year, reflecting the continuing 
decline of mature programmes, mainly the F/A-18 Super Hornet and UH-60 Black 
Hawk helicopter. 
 
GKN Aerospace Fokker, acquired on 28 October 2015, added GBP580 million of sales 
in the nine months. The integration plans are progressing well and GKN 
Aerospace Fokker performed in line with expectations. 
 
For GKN Aerospace overall, the mix of new and mature programmes, together with 
slower than expected customer ramp-ups, restricted our ability to offset last 
year's one-off benefits. This and the inclusion of Fokker, led to lower margins 
than the same period last year. 
 
GKN Driveline 
 
GKN Driveline sales in the nine months were GBP3,075 million (2015: GBP2,665 
million). Organic sales increased 6%, against global industry production rates 
that were up 4%, and beneficial currency translation of GBP238 million. External 
forecasts continue to expect full year global auto production to increase by 
3%. 
 
Strong organic growth above the market continued in Europe due to new programme 
launches and the strength of premium vehicles. GKN Driveline performed above 
the Americas market, helped by new programme launches in North America. Within 
Asia, sales growth in China was above the market as new programmes and customer 
mix more than offset GKN Driveline's lower exposure to domestic brands and 
smaller vehicles. 
 
GKN Driveline's margin was below last year's equivalent period due to 
significant launch costs on a US all-wheel drive programme, as previously 
reported. These additional costs are now on a downward trend, although the 
second half is likely to see a similar impact to the first half. 
 
GKN Powder Metallurgy 
 
GKN Powder Metallurgy sales in the nine months were GBP762 million (2015: GBP694 
million). Beneficial currency translation was GBP64 million. Organic sales were 
flat, reflecting slower demand in North America, offset by improved sales in 
Europe and Asia. There was also a negative impact on powder sales from the 
direct pass through of lower raw material prices and this helped GKN Powder 
Metallurgy report slightly higher margins than the comparable period last year. 
 
 
GKN Land Systems 
 
GKN Land Systems sales in the period were GBP534 million (2015: GBP535 million). 
Organic sales declined 8%, principally due to demand weakness for agricultural 
equipment and the ending of two chassis contracts, offset by a GBP44 million 
benefit from currency translation. 
 
On 21 October 2016, the Group announced that it had agreed to sell the Stromag 
business for an enterprise value of EUR198million (GBP177 million), with completion 
expected in the first quarter of 2017.  From 1 January 2017, GKN Land Systems 
will no longer operate as a division, with Shafts and Services being reported 
within GKN Driveline and Wheels and Structures moving to Other businesses. 
 
Other businesses 
 
Sales for GKN's Other businesses fell to GBP28 million (2015: GBP33 million) 
reflecting the scale back of GKN Hybrid Power, which caused this segment 
overall to report a small loss in the period. 
 
Summary 
 
Nigel Stein, Chief Executive, GKN plc, commented: 
 
"GKN has continued to make progress. Organic growth was 2%, whilst we also 
benefitted significantly from the successful acquisition and integration of GKN 
Aerospace Fokker as well as from favourable currency translation due to the 
weakness of sterling. As expected, our organic profit performance was down 
primarily due to one-off items, including the costs of the restructuring, which 
will position us better for the years ahead. 
 
In line with the global economic outlook, we see growth rates easing in our 
major markets. The automotive market is now forecast to see a 1% increase in 
light vehicle production in the final quarter. New commercial aerospace 
programmes continue to ramp-up, although at a slower rate than expected. Our 
military aerospace programmes and agricultural equipment markets look set to 
continue their decline. Despite the slightly tougher macro-economic 
environment, the Group continues to expect 2016 to be another year of growth." 
 
Final Results Announcement 
 
The Group will issue its 2016 full year results announcement on 28 February 
2017. 
 
Trading update call 
 
There will be a call for analysts and investors at 08:30am today (25 October). 
Dial in details are: 
 
Direct dial:                   [phone] 
 
UK toll-free:                 0808 237 0030 
 
Conference ID:            11947180# 
 
Participants joining the call from outside the UK can find a local number in 
the following file: 
 
http://events.arkadin.com/ev/docs/NE_FEL_Events_International_Access_List.pdf 
 
Conference ID as above. 
 
A replay of the conference call will be available on the Group's website: 
 
http://www.gkn.com/investorrelations/Pages/results-and-presentations.aspx 
 
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 equity 
accounted investments. References to trading margins are to trading profit 
expressed as a percentage of sales. Where appropriate, reference is made to 
organic results which exclude the impact of acquisitions/ divestments as well 
as currency translation on the results of overseas operations. 
 
(2)        Divisional profitability comments are before any share of the GBP35 
million Group-wide restructuring programme announced in July, which will be 
included in Management trading profit. 
 
Further information: 
 
Analysts/Investors: 
 
Guy Stainer 
Investor Relations Director 
GKN plc 
T: [phone] 
M: [phone] 
E: [e-mail] 
 
Media: 
 
Chris Fox 
Group Communications Director 
GKN plc 
T: [phone] 
M: [phone] 
E: [e-mail] 
 
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 aerospace, automotive and 
land systems markets. It has operations in more than 30 countries, around 
56,000 employees in subsidiaries and equity accounted investments and had sales 
of GBP7.7 billion in the year ended 31 December 2015. GKN plc is listed on the 
London Stock Exchange (LSE: GKN). 
 
 
 
END 
 

(END) Dow Jones Newswires

October 25, 2016 02:00 ET (06:00 GMT)