Melrose reports return to profitability for Powder Metallurgy business
November 25, 2020
Melrose Industries PLC, UK, which includes GKN Powder Metallurgy, GKN Aerospace and GKN Automotive, has published a trading update for the four months from July 1, 2020, to October 31, 2020. Melrose states that the performance of the group in the period reflected a faster than expected recovery in automotive markets, first seen over the summer; continued strong performance in its Nortek Air Management business; and more challenging, although currently stable, market conditions in the Aerospace business.
“Trading in the period has been encouraging in a number of our end markets and we are seeing the benefits of actions taken by management in our businesses’ performance,” stated Justin Dowley, chairman of Melrose Industries PLC. “While short-term uncertainty remains, we are confident that our businesses can substantially improve their margins from today over the medium-term even without the need for full end market recovery.”
Both the Automotive and Powder Metallurgy businesses are reported to have seen an improvement in trading during the period. Automotive revenue was down 3% and Powder Metallurgy 7% lower when compared with the same period last year. There has, in both cases, been an improving trend through the period, although it was noted that these stronger trends were boosted by the impact of the General Motors strike in the latter part of the same period last year.
Melrose reports that both businesses quickly returned to profitability, with operating margins over 6% for the period in Automotive and over 7% in Powder Metallurgy, said to reflect the increasing benefits arising from the significant management actions taken.
The Aerospace business did not see a recovery in its trading conditions, however, with sales declining by 37% in the period compared to the same period last year, a similar trend to that seen since mid-March this year. The benefits of significant restructuring and cost-saving actions are starting to feed through, the company explains, and it is expected that the business will broadly break even for the full year.
Overall, the Melrose group is said to be currently trading at the top end of the Board’s expectations for 2020. Although encouraged by this, the Board states that given the global uncertainty, caution is required on any predictions for next year.