UPDATE 2-GKN profit rises on global jump in plane production

Tue Jul 30, 2013 5:30am EDT

By Rhys Jones

LONDON, July 30 (Reuters) - British car and plane parts maker GKN posted a better-than-expected 5 percent rise in first-half profit on Tuesday, led by a strong performance from the group's expanding aerospace business, sending its shares to an all-time high.

Pretax profit of 278 million pounds ($427 million) in the six months to July topped the average analyst forecast of 272 million pounds, aided by the impact on the firm's bottom line of the purchase of Volvo Aero last year.

GKN's aerospace business, which makes airframes for Airbus and Boeing, delivered a 37 percent rise in first half profit, as the rival planemakers ramped-up production to record levels.

Global airlines will buy $3.5 trillion of aircraft over the next 20 years to meet demand for travel to and from emerging markets and renew ageing fleets in the West, according to Airbus and Boeing, helping suppliers such as GKN.

Shares in GKN, which have risen 20 percent in the last three months, rose as much as 6.8 percent in early trade to hit an all-time high of 349.4 pence. The stock was 5.5 percent up at 345.25 pence by 0850 GMT, valuing the group at around 5.6 billion pounds.

Jefferies analyst Sandy Morris said GKN's trade had been "significantly better" in the first half of the year than he had expected and he said he believed the company has "ample room for manoeuvre" if it is mulling a sizeable acquisition.

GKN made no comment about recent press reports linking it with a takeover bid for U.S. group Spirit Aerosystems or a move for Spirit's wing factory in Tulsa, Oklahoma.

The company, whose net debt rose 6.5 percent to 928 million pounds during the period, largely down to the Volvo Aero purchase, is in a good position to do deals if it so wishes, said GKN chief executive Nigel Stein.

"What I can say is, we like to keep our balance sheet in a strong position ... and considering the size of our business I would say we have a well-positioned balance sheet," he said.

The company expects the aerospace unit, which accounts for around 40 percent of group profits, to make further progress in the second half, helped by the ramp up of new programmes - such as the Airbus A350 jet - and synergies with Volvo Aero, now known as GKN Aerospace Engine Systems.

Profits at another unit, Driveline, which makes driveshafts, chassis and axles for carmakers such as Volkswagen and General Motors, fell 3 percent after being hit by weak demand, especially in continental Europe.

GKN increased the interim dividend by 8 percent to 2.6 pence and said first-half revenues grew 12 percent to 3.87 billion.

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