20th Apr 2016 09:24
LONDON (Alliance News) - Shares in engineer GKN PLC rose Wednesday after the group said trading in the first quarter met its expectations, though it has taken a hit to its trading margin from a shift in the revenue mix of its aerospace arm.
Shares in the company were up 2.8% to 304.00 pence, one of the best performers in the FTSE 100.
GKN said sales in the three months to the end of March hit GBP2.18 billion, up from GBP1.94 billion a year before. Organic sales grew 1.0% and the group got a 3.0% boost from beneficial currency moves, but the majority of the rise was driven by acquisitions.
But GKN said its trading margin in the quarter was weaker year-on-year due to a hit taken in its Aerospace business, which makes airframe and engine structures for planes. The weakness in the margin was driven by lower military sales in the quarter, reflecting a continued decline in sales from mature programmes, mainly the Boeing F/A-18 Super Hornet fighter jet and the UH-60 Black Hawk helicopter.
The Aerospace margin also took a hit from costs related to the integration of Fokker Technologies, the Dutch aerostructures business GKN bought last year. The integration of Fokker is on track, GKN said, and the acquired business performed in line with expectations.
Fokker was the main contributor to sales growth in Aerospace in the quarter, which rose to GBP767.0 million from GBP589.0 million, providing GBP159.0 million in sales. Revenue was also helped by planned production ramp-ups for new aircraft in GKN's commercial aerospace franchise offsetting cuts on the Airbus A330 programme.
GKN Driveline, which makes automotive driveline systems, saw sales grow 7.0% in the first quarter to GBP976.0 million from GBP912.0 million.
GKN said it saw good organic growth in Driveline sales in Europe thanks to new programme launches and the continued strength of the premium vehicle market. Trading in the Americas was mixed, with South America trading benefiting from the export of parts to other areas, but North America hindered by an adverse mix of vehicles sales towards light trucks.
Driveline sales in China underperformed the wider Asian region, GKN said, amid a continued shift towards domestic brands and smaller vehicles, though its Thailand business saw strong growth thanks to sales of all-wheel drive components.
Sales for GKN's Powder Metallurgy unit, which comprises metal powder manufacturing used in making precision components, were broadly flat in the quarter, with organic sales down due to the pass-through of lower material prices, though this did contribute to better margins. Sales growth in the business was led by a good performance in Asia, GKN said.
The main area of weakness of GKN continues to be its Land Systems business, which makes power-management products for the agricultural, construction and mining industries. Revenue declined to GBP181.0 million from GBP187.0 million, with organic sales sinking due to poor demand for agricultural equipment and the end of a chassis contract. This was partially offset by a currency gain, GKN said.
"Our overall performance in the first quarter was in line with our expectations. With end markets delivering as forecast and customers continuing to award us good levels of new and repeat business, we expect to grow in 2016 and beyond, helped by the contribution from Fokker, whose performance and integration is on track," said GKN Chief Executive Nigel Stein.
By Sam Unsted; [email protected]; @SamUAtAlliance
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