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UK's Melrose expects aerospace unit to shine in 2023

By Muhammed Husain

(Reuters) - British engineer Melrose Industries on Thursday forecast a better-than-expected performance at its aerospace business in 2023 on pent-up demand in civil aviation and increasing defence budgets, sending shares up as much as 5%.

Melrose is shifting focus to aerospace, serving companies such as Airbus and Rolls-Royce, as it plans to spin off its GKN automotive arm and a smaller powder metallurgy division this year.

The group, which supplies airframe structures and engine components to the aerospace sector, said it expected double-digit growth in revenue for the aerospace unit this year.

Meanwhile, the demerger of the group's automotive and powder metallurgy units is on track and is expected to be completed on April 20, Melrose said.

The company's shareholders will vote on the separation at a general meeting on March 30.

The owner of British engineering firm GKN added that its profit, sales and cash generation last year were ahead of expectations.

Melrose's profits plummeted during the COVID-19 pandemic, which wrought havoc on its aerospace division, while chip shortages that forced carmakers to cut production hit its automotive division, which supplies parts to carmakers such as Volkswagen AG.

Supply chain issues in the group's automotive sector have been easing from 2021, when unprecedented demand for chips used in digital products led to shortages.

Melrose said the automotive business to be spun off, which together with its powder metallurgy unit made up more than 60% of group revenue last year, was well-placed to benefit from the market recovery and transition to electric vehicles.

Melrose's adjusted full-year pre-tax profit came in at 384 million pounds ($460.2 million), compared with 194 million pounds the previous year.

The London-listed group's shares rose as much as 5.1% to 162 pence.

($1 = 0.8344 pounds)

(Reporting by Muhammed Husain in Bengaluru; Editing by Sonia Cheema, Robert Birsel)