GKN Powder Metallurgy secures new business with 23% year-on-year increase in bookings
April 16, 2024
Dowlais Group plc, the parent company of GKN Powder Metallurgy, GKN Automotive and GKN Hydrogen, has released its 2023 Annual Report. The report states that adjusted revenues for GKN Powder Metallurgy in 2023 were £1,047 million, 3.5% ahead of 2022. Adjusted operating profit for the year was £96 million, at an adjusted operating margin of 9.2%. This compares to an equivalent margin of 9.4% in 2022 and reflects the dilutive effect of inflation recoveries in the year.
It was stated that GKN Powder Metallurgy had been heavily focused on inflation recovery throughout the year, and successfully recovered around 100% of commodity and energy inflation for the full year through pricing initiatives and surcharge pass-through agreements. The business offset other inflationary increases through operational adjustments.
Commercial progress and EV transition
GKN Powder Metallurgy made commercial progress in the year, securing new business wins with a 23% year-on-year increase in bookings when measured by forecast peak annual revenues. The business has a broad and stable customer base, with over 3,000 customers in automotive and other industrial markets.
A key priority noted for the business is navigating the EV transition, as a significant proportion of its sales are currently from products used in ICE vehicles. It was added that progress continues to be made, with approximately 72% of the value of its new business wins in 2023 for EV or propulsion source agnostic product groups, by forecast peak annual revenue. This was a material step-up from the prior year and reflects that the new products the company has developed over recent years are gaining commercial traction.
The business continues to identify new areas in which its Powder Metallurgy expertise can be applied to EV-specific products. This includes areas such as battery connectors and packs; components for high-voltage cables, electric motors and thermal management systems; e-pumps; x-by-wire components and differential gears. Multiple business wins in EV-specific products were secured in the year, including the single largest contract the business has ever secured, for the supply of sintered differential gears for a leading US vehicle manufacturer, with production due to commence in 2025.
New markets for its metal powders
GKN Powder Metallurgy’s strategy to successfully navigate the EV transition is based not only on adapting its core sinter metals business but also on identifying new markets for its metal powders. The business reported it has had success this year in selling high-quality iron powder to produce cathodes for Lithium Iron Phosphate (LFP) batteries. LFP batteries are becoming more widely used and are gaining share in the growing EV battery market due to their lower cost and thermal stability. The business is already supplying customers with this material and working with vehicle and battery manufacturers (and their suppliers) on several potential opportunities involving localised supply across Europe, North America, and China.
Permanent magnets for electric motors
An additional potential growth area that the business is pursuing is the manufacture and supply of permanent magnets for electric motors for EVs and other applications. Progress was made during the year, including the first commercial agreement for the manufacture of magnets for Schaeffler. The business reportedly continues to see interest in these products from multiple customers (both OEMs and Tier 1 suppliers) aiming to diversify their supply chains for these critical components. Commercial negotiations and advanced technical qualifications have continued with several potential customers, and the business is said to be working on establishing a robust and sustainable supply chain for critical raw materials as part of its ‘Mine-to-Magnet’ supply chain strategy.
Construction of a new low-scale production line capable of producing up to 400 tonnes of permanent magnets a year has commenced and is expected to be operational in Q1 2025. Investment in the manufacturing of magnets totalled £2 million in the year, and appropriate investment in full-scale production facilities will be considered as and when contractual demand reaches the required threshold, and returns meet its financial criteria.
While primarily an automotive-focused business, GKN Powder Metallurgy supplies a wide range of products to other industrial markets, including: consumer white goods; heating, ventilation and air conditioning (HVAC); and lawn and garden products. These markets represent approximately 20% of the business’ revenue, and advancing non-automotive opportunities, in particular into high-growth sectors such as medical, advanced computing and renewable energy, will continue to be a strategic target for the business. As an example, during the year the company won a substantial order for the supply of isostatic tubes for a renewable energy project in China.
Sustaining transformation
GKN Powder Metallurgy added that it is committed to offering sustainable solutions to its customers. The business has continued to invest in sustainability projects throughout the world. As a result of these, energy usage was reduced by 80 GWh, more than 10,000 tonnes of waste was diverted from landfill, and consumption of water was reduced by 25 million litres.
The business obtained a Platinum EcoVadis sustainability medal for its 2023 submission, placing it in the top 1% of businesses assessed, an award that recognises the very positive sustainability progress it has made in recent years. GKN Powder Metallurgy also submitted its first science-based targets to the SBTi for validation, targeting a 42% reduction in absolute Scope 1 and 2 emissions by 2030 from a 2022 base year, a 25% reduction in absolute Scope 3 emissions by 2030 from a 2022 base year and reaching net zero emissions by 2050.
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