Driveline and aerospace supplier GKN said demand since it announced half year results in July has “remained broadly in line with expectations with more challenging European automotive and industrial markets being offset by strong automotive demand in the US and China and continued growth in civil aerospace”. 

Group sales for the three months to 30 September rose 8% year on year to GBP1,608m. Third quarter trading profit increased slightly to GBP114m from GBP113m) although trading margin reduced to 7.1%, largely as a result of lower profitability in driveline business.

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“This arose due to the expected seasonality in the Getrag all-wheel drive business and costs associated with fluctuations in demand. In September, the group’s margin returned to a level comparable to the first half,” GKN said in a trading statement.    

It added that “macroeconomic conditions have deteriorated in recent weeks and some softening in order books is now evident, particularly regarding European automotive and industrial markets.  Other automotive markets and the civil aerospace market are expected to remain solid. The fourth quarter is anticipated to show the usual seasonal improvement, although the softening markets are expected to have some impact on performance.”

CEO Nigel Stein said: “In the third quarter, 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.  Profit was affected by expected seasonal factors and operational issues in driveline. Looking forward, European markets seem to be softening further. We continue to focus on driving performance, keeping close control of our cost base.”  

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Global light vehicle production in the third quarter of around 19.3m vehicles, was around 2% ahead of the comparable period in 2011 with declines in Europe  (-8%) and India (-5%) offset by increases in North America (+12%), China (+8%) and Japan (+5%).    

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GKN Driveline’s third quarter sales increased 15% to GBP773m due to the inclusion of the Getrag driveline products acquisition. Organic sales were up 4% although this was offset by adverse currency effects. Trading profit was lower at GBP42m (2011: GBP46m) and trading margin was 5.4% (2011: 6.8%).  Around half of the decline in margin was due to the expected summer seasonal pattern in the acquired Getrag business.  The remainder arose through costs associated with demand fluctuations in India, Europe and Japan. In September, GKN Driveline’s margin returned to more than 7%.