Dowlais Group plc – the parent company of GKN Powder Metallurgy, GKN Automotive and GKN Hydrogen, formed following the demerger of these companies from Melrose Industries PLC in April this year – has issued a trading update for the four-month period ending October 31, 2023.
“Following a strong first half, we have continued to execute well on our strategic priorities and leverage the strength of our operating businesses,” stated Liam Butterworth, CEO of Dowlais. “We have delivered strong growth and continued to expand margins as well as fully absorbing the impact of the UAW strike. Thanks to the outstanding quality of our market-leading businesses, we remain confident of delivering sector leading financial performance, regardless of the speed of electrification transition.”
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The group reported profitable growth for the period, with adjusted revenues of £1.8 billion delivering 4.7% growth compared to the same period in the prior year. Adjusted operating margin of 6.8% was recorded, excluding central costs, representing an increase on the equivalent prior year of 100 bps and of 90 bps versus H1 2023.
It was stated that the group is continuing to generate healthy free cashflow and remains on track to reduce net debt at year-end, whilst continuing to invest in organic growth, expanding its best-cost-country manufacturing footprint and executing ongoing restructuring programmes.
Impact of UAW strike action in North America
The full-year financial impact of the UAW strike action on the group is expected to be in the range of £30-45 million of adjusted revenue and £10-15 million of adjusted operating profit. Despite this, the group’s ability to meet its full year expectations reportedly were said to remain unaffected due to strong operational execution within the businesses. This is based on the assumption that union members will ratify the proposed terms and production at the impacted customer plants will smoothly ramp up.
GKN Powder Metallurgy
GKN Powder Metallurgy recorded a growth of 4.2% in adjusted revenues during the period. Its adjusted operating margins of 9.0% matched the previous year’s equivalent period and the first half of the year. Powder Metallurgy has continued to expand its Electric Vehicle (EV) portfolio, securing profitable new business in the period that sets up the company for medium-term growth. In October, it announced commercial agreements for the supply of magnets with Schaeffler, which were outlined in the interim results. This represents a significant milestone for future growth opportunities.
During this period, GKN Automotive’s adjusted revenues increased by 4.8%, leading to adjusted operating margins of 7.6%. This is an increase of 120 bps from the equivalent prior year period and 110 bps compared to H1 2023. The market-leading Driveline and ePowertrain portfolios in automotive both experienced growth slightly exceeding the market. New business bookings remain strong, with the business already setting a new full-year lifetime booking record of £5.4 billion by the end of October. Importantly, the balanced nature of these bookings is said to demonstrate the business’ capability to achieve profitable growth, irrespective of vehicle electrification rates.