GKN upbeat as civil aerospace and foreign markets drive growth

RELATED QUOTES

SymbolPriceChange
GKN.L388.76-8.04
BA130.63+3.08

GKN (LSE: GKN.L - news) , the car and aircraft parts maker, is expecting a strong 2013 driven by civil aerospace and international growth markets.

The FTSE 100 engineering group beat City expectations for 2012, reporting record profits across its business despite a weak car market in Europe.

Shares rose 4pc after group sales rose to £6.51bn last year from £5.75bn in 2011, while pre-tax profit jumped to £503m from £306m.

The company is forecasting further progress in 2013 as a whole from its automotive business, but cautioned that lower market demand in Europe would likely have an impact on first-half results.

“The European market is soft and we don’t expect that to change in the short term,” said Nigel Stein, chief executive.

He added: “The [global] automotive sector is expected to grow this year by about 2-3pc. We expect to do slightly better than that as we’re strong in growth areas like China, North America, Mexico, India.”

The European car market shrank by 5pc in 2012, but grew by 17.6pc in North America as recovery continued, and by 5.8pc in China.

Sales within GKN’s Driveline business - its largest - rose 16pc to £3.2bn in 2012.

The company was also upbeat about the prospects for its aerospace business, where it said it is benefiting from the rise in production of aircraft among its civil customers Airbus (Paris: NL0000235190 - news) and Boeing (NYSE: BA - news) . Commercial aircraft is expected to be around 70pc of GKN’s aerospace business this year.

That affords the company some protection from the military side which is under pressure from shrinking defence budgets, and which GKN expects to decline this year.

The company said it continued to produce parts for Boeing’s 787 Dreamliner, even though the aircraft were grounded in January and new deliveries suspended after faults with the lithium ion battery used were detected by two Japanese airlines.

GKN’s aerospace division is expected to benefit in 2013 from the first full year of Volvo Aero, the aerospace components business it bought from the Swedish industrial group in October 2012.

The board recommended a final dividend of 4.8p a share, taking the total dividend for the year to 7.2p a share, up 20pc. The final dividend will be paid on May 20.