However, it also warned that slowing growth rates in automotive and aerospace would curb the group’s overall growth.
GKN’s business is split into four divisions: Aerospace, Driveline, Powder Metallurgy and Land Systems. Aerospace and Driveline (which supplies driveline technology to the automotive industry) are the biggest parts to GKN’s business and represent 78% of sales. During the recent announcement chief executive Nigel Stein said that global demand for light vehicles is expected to fall to 1% growth for the last three months of the year, compared with previous expectations of 2% growth. At the same time aircraft manufacturers are also expected to face slower growth and are facing delays in production.
Despite the cautious outlook for two of GKN’s major sectors, management are not adjusting their earnings expectations. Margins were slightly down due to the impact of restructuring costs, but the company has benefitted from a currency headwind. Over the first nine months of the year organic sales grew in the aerospace business by 2%.
Management are confident that, even though the aerospace and automotive industries are going to be growing at a slower rate, they will continue to be able outperform the general sectors. Over the nine months to 30 September, for example, GKN’s sales to the automotive industry grew 6% compared with an industry average of 4%. This is a good indication that the business has a strong competitive position compared to its competitors, although interest in the shares may remain muted whilst the outlook is cautious.
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