1st May 2008 07:00
For immediate release
Interim Management Statement 1 May 2008
GKN plc today issues the following Interim Management Statement covering the period 1 January to 30 April 2008 and confirms its previous outlook for the year ending 31 December 2008.
Markets and Environment
Conditions in our major markets in the first quarter have been broadly as anticipated at the time of our February Outlook Statement.
In the Group's major automotive markets (Europe, North America, Japan, Brazil, China and India), car and light vehicle production was approximately 3% higher than the first quarter of 2007 and, for the year as a whole, external forecasts show an increase of around 2.5%.
OffHighway markets have been strong in the first quarter and are expected to remain so through the year, with continuing healthy demand for agricultural, mining and heavy construction equipment.
Aerospace markets continue to be buoyant, with strong demand in both the defence and civil sectors.
Prices for scrap steel, which is surcharged on our steel purchases and forms the base raw material for Powder Metallurgy, have risen to record levels in recent months and look likely to remain both high and volatile for the balance of the year.
Since the beginning of the year Sterling has weakened against most currencies and significantly against the Euro. Currency translation has therefore provided a benefit to results in the quarter.
GKN Businesses' Performance
Against this background, first quarter sales and profits for the Group as a whole have shown good growth by comparison with the same period last year.
Strong underlying sales growth has been delivered in Driveline, Aerospace and OffHighway and trading profits have also improved in all three divisions, with benefits of currency translation offsetting unrecovered input cost increases.
Powder Metallurgy in the US has been held back by increases in scrap steel prices and plant shut downs as a result of the American Axle strike. The European business has continued to perform strongly. Overall sales and profits for the division in the quarter are slightly ahead of the 2007 equivalent period.
The Group's balance sheet remains strong with the only change in the financial position since 31 December 2007 arising from normal movements in working capital.
Business Development
During the period we have continued to make good progress in our discussions with Airbus regarding the acquisition of the wing structures manufacturing facility at Filton and a potential significant work package award for the A350. We have also again seen strong order intake for Aerospace with, in particular, two new business engine nacelle programmes awarded with estimated revenues of $1.4 billion through their production life, and a new multi-year contract secured for C130J nacelles valued at $400 million.
We have continued with the rapid development of our Driveline business in emerging markets, with driveshaft production commencing in our newest Indian facility and differential manufacture commencing in a new Chinese plant. In addition, on 22 April we announced plans to open a major new driveshaft production facility in Wuhan, China, in 2009 with our joint venture partner SAIC. The plant is expected to provide more than 600 jobs and will have an annual production capacity of more than 1 million vehicle sets.
Outlook
Looking forward for the year as a whole, market conditions remain generally supportive and our order books are strong. We expect 2008 to be another year of solid progress for the Group with performance in line with our earlier expectations.
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