GKN (GKN) has proved adept at offsetting patches of weakness with strong growth elsewhere, and the third quarter was no exception. Demand from military programmes and for spares may be down, but the classy engineer’s commercial aerospace business is generating strong organic growth. Its automotive division is outperforming underlying markets, too, and analysts have upgraded earnings forecasts as a result.
Underlying operating profit accelerated by 35 per cent during the third quarter to £152m, driven by a 16 per cent rise in sales and 120 basis-point increase in margins to 8.2 per cent. True, the £21m contribution from the Volvo Aero acquisition helped, but the existing businesses did well, too. Yet, despite rapid growth at the aerospace unit, GKN’s automotive business impressed most. We reported in July that Driveline, the driveshafts operation, would improve; and it has. Sales rose 9 per cent during the three months, twice as fast as global light vehicle production, and a 150 basis-point increase in margins keeps the company on track to hit its 8-10 per cent target as soon as next year. Fellow automotive business Powder Metallurgy beat expectations, too.
