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Melrose spin-off Dowlais cheers rising vehicle production


Melrose spin-off Dowlais cheers rising vehicle production

Melrose spin-off Dowlais cheers rising vehicle production 

  • Dowlais revealed first-half adjusted operating profits climbed by 40% to £177m
  • Profitability was driven by a strong performance from the GKN Automotive arm
  • The company was recently spun off by turnaround specialist Melrose Industries

Dowlais Group has maintained its annual guidance after its debut first-half performance exceeded forecasts, thanks to increased vehicle manufacturing output.

Adjusted operating profits at the engineering company, which recently demerged from turnaround specialist Melrose Industries, climbed by 40 per cent to £177million for the six months ending June.

Profitability was driven by a strong performance from the London-based firm’s GKN Automotive segment, where it earns the overwhelming bulk of revenues.

Growth: Dowlais Group saw first-half adjusted operating profits climb by 40 per cent thanks to a strong performance from its GKN Automotive segment

The division saw turnover expand by £280million to £2.3billion following record production levels at its Mexican and American eDrive component plants.

It also achieved a record number of bookings worth more than £3billion in forecast lifetime revenue, with over three-quarters of them connected to electric vehicle platforms. 

Although GKN Automotive was impacted by greater inflationary pressures, it still boosted operating margins through, among other things, ‘purchasing efficiencies,’ price hikes and plant productivity.

Consequently, Dowlais has kept full-year expectations the same, although it warned that trading could be hit by potential industrial action in the United States.

The UAW union is threatening to call a strike should it fail to reach an agreement with the ‘Big Three’ carmakers – Ford, General Motors and Stellantis – on pay increases, benefits and job protection measures.

Current contracts between the union and the three auto giants are set to expire on Thursday evening.

Dowlais makes equipment, including sideshafts, engine systems and suspension springs, for approximately 90 per cent of the world’s car manufacturers.

‘Irrespective of the potential UAW action, the board is excited by the future prospects for the group, as it remains on track to achieve its margin target as the market recovers and continues to be at the forefront of the industry transition to electrification,’ the firm told investors.

Nevertheless, Dowlais Group shares were 7.2 per cent, or 9.2p, down at 118.9p on early Tuesday afternoon, about 18 per cent below their starting price of 145p.

Named after an ironworks in Wales, Dowlais also has a budding hydrogen business and a powder metallurgy arm focused on developing powders from recycled scrap metal.

Melrose spun off the company in April in order to concentrate on the GKN aerospace operation, which it bought as part of a highly acrimonious £8.1billion deal five years ago.

The FTSE 100 business subsequently embarked on a major restructuring of GKN, cutting hundreds of jobs after closing a manufacturing plant in Birmingham and reorganising it into three divisions.

Last week, its chief executive, Simon Peckham, told the Mail that the takeover had been a ‘fabulous story.’

He said: ‘We’ve taken what was a fading UK industrial icon and we revitalised it, we’ve sorted it out, or we’re well on the way to sorting it out. And it’s given birth to two UK companies which should have great futures, so we’re very proud.’

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