Bloomberg News

GKN Says Softening Automotive Demand to Affect Fourth Quarter

October 16, 2012

GKN Plc (GKN), the British maker of car drive shafts, said fourth-quarter profit will be impacted by weakening demand in some European automotive and industrial markets.

“Macroeconomic conditions have deteriorated in recent weeks and some softening in order books is now evident,” Redditch-based GKN said today. “The fourth quarter is anticipated to show the usual seasonal improvement, although the softening markets are expected to have some impact.”

Suppliers of components and materials to Europe’s car industry are feeling the pinch as an economic slowdown dents purchases. For GKN, the wane in demand is partly being offset by a rebound in the U.S. and growth in Asia, as well as a “solid” aerospace market, it said. The company this month completed the purchase of Volvo Aerospace to increase its exposure to the civil aviation market.

Third-quarter pretax profit of 99 million pounds ($160 million) was little changed from a year-earlier result that was adjusted for a one-time charge. GKN reported an 8.4 percent increase in sales to 1.6 billion pounds.

GKN shares dropped 3.8 percent to 203 pence at the open of trading in London.

“The group’s global footprint, with its exposure to the strong markets of North America and China, as well as civil aerospace, allowed us to offset weaker European markets,” Chief Executive Officer Nigel Stein said in a statement.

The company’s automotive Driveline unit reported an 8.7 percent drop in quarterly trading profit, as sales rose 15 percent to 773 million pounds. By contrast, aerospace earnings advanced 8 percent to 42 million pounds.

Restructuring and other costs at Volvo Aerospace will result in a 15 million-pound loss at the unit.

To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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