15th Apr 2014 06:50
LONDON (Alliance News) - GKN PLC, the engineering company that makes parts for vehicles and aircraft, Tuesday reported higher sales and profit for the first quarter, although the strength of sterling capped the gains and it said growth would moderate in the rest of the year.
The company reported a pretax profit of GBP145 million for the three months to end-March, up from GBP119 million in the first quarter of 2013, as sales rose to GBP1.92 billion, from GBP1.89 billion.
Its trading profit rose to GBP166 million, from GBP139 million in the first quarter of 2013 when it had booked GBP23 million of restructuring charges, and its trading margin increased to 8.7%, from 7.4%. The comparative figure was 8.6% excluding the restructuring charges. GKN said sterling's strength knocked GBP9 million off its trading profit.
In a statement, the company said organic sales growth was 7%, but the strength of sterling against most major currencies knocked 6% off the sales increase, meaning sales were overall up just 1%.
Like peers, the company has been hit by the downturn in defence markets as the US and UK governments have reduced spending after the end of recent conflicts in the Middle East. However, GKN, which makes wings for some Airbus planes among other components, has been doing well on the back of the booming commercial aerospace markets and the recovery in global car markets.
The company said the situation continued in the first quarter, with the commercial aerospace market staying strong, military aerospace demand declining, and global light vehicle production increasing. It said construction and industrial markets were broadly flat, while demand for agricultural equipment fell.
"We have delivered a strong performance in the first quarter despite adverse currency translation impacting the reported sterling results. Looking forward to the rest of the year, tougher prior year comparators mean that organic growth is likely to be more modest," Chief Executive Nigel Stein said in the statement.
It said its overall outlook remains in line with the one it gave back in February when it reported its 2013 results. At that time it had predicted that 2014 sales would be slightly higher in its aerospace division, its driveline and powder metallurgy divisions would grow faster that the broader market, and the performance of its land division would be broadly flat.
On a divisional basis, sales were flat overall in its aerospace division in the first quarter, while trading profit rose 4%. Sales rose at both its driveline and powder metallurgy units, while trading profit was up 30% or more in both divisions thanks to the lack of restructuring that had hit last year's result. Sales and trading profit fell at its land systems unit.
The company will release its results for the first half of 2014 on July 29.
By Steve McGrath; [email protected]; @SteveMcGrath1
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