Reuters logo
UPDATE 2-GKN profit rise driven by luxury auto demand
July 31, 2012 / 6:30 AM / 5 years ago

UPDATE 2-GKN profit rise driven by luxury auto demand

* H1 pretax profit 266 mln stg vs forecast 259 mln

* Group sales up 16 pct to 3.46 bln stg

* Interim dividend up 20 pct to 2.4 pence

* Profit at driveline autos unit up 29 pct, aero up 8 pct

* Shares rise 1 pct

By Rhys Jones

LONDON, July 31 (Reuters) - British car and plane parts maker GKN Plc said first-half profit rose by a third, driven by strong growth at its automotive business on the back of robust luxury car sales.

The group’s Driveline unit, which makes products such as driveshafts, chassis and axles, reported a 29 percent rise in profit in the six months to the end of June.

The division, whose biggest customers include Audi , BMW and Volkswagen, accounts for around half of group sales and has been boosted by the contribution of Getrag Driveline Products, which it bought last year, and continued growth in luxury car sales.

“The premium end of the market is the area that is doing better, especially in China and Europe, though in south Europe small cars are still not doing so well,” GKN’s chief executive Nigel Stein told reporters.

European car sales fell almost 7 percent in the first half of the year. However, sales at Fiat, Seat, Renault , Opel and its British equivalent Vauxhall have all tumbled by about 15 percent.

Luxury car makers such as Britain’s Jaguar Land Rover have benefited from robust sales growth in China, the world’s largest auto market, where demand for premium vehicles has continued to surge despite fears over slowing economic growth.

“In China the market is up about 6 percent but premium has done much better than that,” said Stein. “Between 6 and 8 percent is where growth in China is running and we don’t see that changing this year.”

GKN said global light vehicle production rose by around 9 percent during the period but it expects this to fall slightly in the second half.

The FTSE 100 company on Tuesday said group pretax profit rose 33 percent to 266 million pounds in the six months to the end of June, while revenues rose 16 percent to 3.46 billion pounds.

GKN was expected to report an average first half pretax profit of 259 million pounds and is forecast to deliver annual profit of 491 million pounds, according to Thomson Reuters data.

“We sense that sentiment towards GKN is still being heavily swayed by caution about global light vehicle production, but GKN is likely to be able to generate at worst a robust performance in the second half of 2012 and 2013, in our view,” said Jefferies analyst Sandy Morris.

Shares in GKN, which have risen 14 percent in 2012, were 1 percent up at 212.75 pence by 0800 GMT, valuing the business at around 3.4 billion pounds.

GKN, which earlier this month bought Volvo’s aerospace division for $990 million, increased the interim dividend by 20 percent to 2.4 pence.

The company said its aerospace unit, which makes airframes for Airbus and Boeing, delivered an 8 percent rise in profit during the period, helped by the ramp-up of several civil aerospace programmes, which have offset falling military sales.

Europe’s Airbus and U.S. rival Boeing are ramping up output to meet a surge in demand for fuel-saving jets and are targeting more than 1,100 deliveries this year, in response to growing demand from airlines for new fuel-efficient planes.

Airbus last week announced a three-month delay to the A350 following a glitch in wing production.

“On the A350 we have overcome difficulties and are doing well,” said Stein. “We are able to satisfy Airbus’ demand on the A350. The effect is minimal in terms of the slight delay they announced last week and I don’t think the financial impact will be large.”

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below