February 26, 2013 / 7:45 AM / 5 years ago

UPDATE 2-Parts maker GKN sees no recovery in European car demand

* FY pretax profit 497 mln stg vs forecast 475 mln

* Revenues up 13 pct to 6.9 bln stg

* Total dividend up 20 pct to 7.2 pence/share

* CEO sees 2013 European auto sales flat at best (Adds CEO, analyst comment, further detail)

By Rhys Jones

LONDON, Feb 26 (Reuters) - Car and plane parts maker GKN predicted another gloomy year for Europe’s recession-hit autos market, saying the company would have to rely on the United States and Asia for growth again this year.

The British firm beat forecasts on Tuesday with a 19 percent rise in 2012 pretax profit helped by demand for luxury cars from makers such as Jaguar Land Rover and Audi in China, the world’s biggest autos market.

“I don’t see the European small car market recovering this year, the best we can expect is flat sales,” Chief Executive Nigel Stein told reporters, adding that profits in the first half of this year would be hit by a 21-million-pound ($32 million) charge to help lower costs at its autos businesses.

“But the U.S. and Asia should continue to grow and more than offset softness in Europe,” he added.

Demand for new cars has slumped in Europe as governments drive through austerity measures to reduce their debts. Asian and U.S. markets, in contrast, have bounced back strongly from the global financial crisis.

U.S. car sales rose 13.4 percent last year to their highest level since 2007, while European sales slumped to a 17-year low.

Car sales in the United States are forecast to grow 4.9 percent in 2013 while European sales are expected to decline 1.7 percent, according to industry data.

“In 2013, GKN will have to take the rough with the smooth. We envisage most of the rough in the first half and the smoother part in the second half,” said Jefferies analyst Sandy Morris.

Shares in GKN, which have risen 17 percent over the last three months, were flat at 252 pence by 1025 GMT, valuing the business at around 4.1 billion pounds.


GKN, which makes about 55 percent of profits from its Driveline autos business, said group pretax profits climbed to 497 million pounds ($751 million) last year, beating analysts’ average forecast of 475 million in a Reuters poll.

Revenues rose 13 percent to 6.9 billion pounds last year, while it increased the total dividend for the year by 20 percent to 7.2 pence per share.

Profits at Driveline, which makes products such as driveshafts, chassis and axles, rose 21 percent, helped by demand for vehicles outside Europe.

Margins at the division, whose customers include Europe’s Volkswagen and Renault as well as U.S. carmakers General Motors and Ford, improved to 7.3 percent from 7 percent a year earlier.

GKN said its aerospace unit, which makes airframes for Airbus and Boeing, delivered a 2 percent rise in 2012 profit, helped by the ramp-up of several civil aerospace programmes, which have offset falling military sales, and last year’s purchase of Volvo’s aerospace unit.

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 the world’s big two planemakers, helping suppliers such as GKN.

GKN said it did not expect last month’s worldwide grounding of the 50 Boeing Dreamliner jets in commercial service to dent profits. GKN makes many structures and systems for the Dreamliner, including its thermal wing ice protection system and cabin windows.

“There is no impact from that (grounding) and we continue running the line and getting parts out,” said Stein.

$1 = 0.6618 British pounds Editing by Christine Murray and Mark Potter

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