Update on explosion at Hoeganaes facility, Gallatin, USA

June 16, 2011

In a trading statement of June 16 2011, GKN plc gave an update on the impact of the May 27 explosion at its Hoeganaes facility in Gallatin, USA. The statement follows as published.

On Friday 27 May 2011, there was an explosion at the GKN Hoeganaes Corporation plant in Gallatin, Tennessee, USA. Gallatin produces atomized metal powders for use in manufacturing sintered metal products and has revenues of around $250 million per year from sales to sinter metals customers.

Five employees were hurt in the incident, two of whom have sadly died of their injuries and a third remains in a critical condition. Two employees were slightly injured and were released from hospital the same day. The Company is providing the families with every means of comfort and support at this difficult time.

GKN has implemented a full plant safety review, supported by two independent organisations, to ensure that it fully understands the cause of the incident and implements appropriate measures to prevent a recurrence. We are also co-operating with the relevant authorities (US Chemical Safety Board and Tennessee OSHA) to establish the cause and, although investigations continue, initial indications suggest a hydrogen gas leak.

Production at the Gallatin facility has been suspended since the incident on 27 May 2011. It is expected that limited production will recommence next week, with the plant being brought back to full production over the next several weeks as the safety review and any remedial works from the incident are completed.

In the meantime, to ensure continuity of supply, customer orders are being met from a combination of powder inventory and shipping of product from the Company’s other operations as well as product sourced from other metal powder producers. We are working closely with customers to ensure as little disruption as possible to their operations until activities at Gallatin return to normal. We are grateful for the support we have received from Höganäs AB of Sweden and QMP (Rio Tinto) and for the excellent co-operation of our customers as we work through this difficult period.

In total, the additional costs of shipping, purchasing and plant closure and remedial works costs are expected to lead to an exceptional one-off charge to profits spread over June and July, of around £30 million prior to any potential recovery from insurance claims. The Company carries business interruption insurance and is in discussion with its insurance brokers about potential claims, the first £10 million of which would be self insured through its captive insurance arrangements.

Trading in the rest of the Group continues to be in line with expectations expressed in the Interim Management Statement released on 11 April 2011.

www.gkn.com 

www.hoeganaes.com 

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