Dowlais considers sale of GKN Powder Metallurgy business
Dowlais Group plc, the UK-based parent company of GKN Automotive and GKN Powder Metallurgy, has published its half year 2024 results. In the report, the company confirmed it has commenced a strategic review of the Powder Metallurgy business, as it eyes a potential sale of the division.
GKN Powder Metallurgy noted a good start to the year, with adjusted revenues growing by 0.2%, ahead of the market, while adjusted operating profit increased by 6.0%, resulting in an adjusted operating margin expansion of 50 bps, to 9.5%.
The company stated that proactive management of the cost base had enabled GKN Powder Metallurgy to offset inflationary increases through operational efficiencies. This led to restructuring activities continuing in the first half of the year, with one site closed in the US and another set to close by the end of the year. The location of the second site closure was not stated, but this was expected to further optimise the manufacturing footprint, Dowlais stated.
It was added that GKN Powder Metallurgy continued to advance its EV transition, winning new EV-specific contracts and identifying additional growth areas for propulsion-agnostic products.
For the group as a whole, Dowlais reported adjusted revenue of £2,571 million the six months ending June 30, 2024, a reduction of 5.1% on the prior year, said to be driven by weakness in the ePowertrain product line of the Automotive business. Driveline, China and Powder Metallurgy, totalling more than 75% of the group’s revenues, were reported to be performing above their markets.
The group posted adjusted operating profit of £151 million, including £7 million of operating losses from Hydrogen operations, a decline of 9.0% compared to prior year, said to be driven by lower volumes.
“In this challenging market environment, we focused on what we can control and took several decisive actions to mitigate the impact from lower volume as well as unlock value from our portfolio,” stated Liam Butterworth, Chief Executive Officer.
“First, we implemented a relentless focus on cost control, limiting the impact on adjusted operating profit and mitigated the margin decline to 30 bps. Second, we initiated a comprehensive programme of commercial recovery initiatives with our customers which, together with the ongoing restructuring programmes and performance initiatives, will limit the impact from expected lower revenues in the second half of the year. Finally, today’s announcement of a strategic review of Powder Metallurgy and the disposal of our Hydrogen operations underscores our commitment to unlocking value from our portfolio and delivering shareholder returns,” Butterworth added.
