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11 Apr 11. GKN plc, the global engineering business that serves the automotive, aerospace and land systems markets, today issues the following Interim Management Statement covering the period since 1 January 2011. Market conditions in the first quarter have been broadly as expected at the time of our March statement, although the tragic events in Japan have had some impact on the automotive sector. The GKN Group has continued to make strong progress and sales for the three months ended 31 March 2011 totalled £1,487m, a 14% increase over the comparable period in 2010. Adverse currency translation reduced sales by £7m and acquisitions increased sales by £5m. Trading profit increased to £119m, representing a 42% increase, with a margin of 8.0%. Profit before taxation was £107m, up 51% compared with the prior year. Net debt at 31 March 2011 was £169m (31 December 2010: £151m), reflecting some seasonal increase in working capital.
GKN Markets and Performance
Automotive
Global light vehicle production increased by around 4% in the first quarter to 19.4m vehicles, with good growth in the European premium vehicle segment and the Indian, North American and Chinese markets.
Production in Japan was severely impacted by the earthquake and tsunami and some disruption has also been experienced in Europe and North America as a result of component supply problems from Japan. Japanese OEMs are planning to resume volume production through April and May, although it will be some time before the industry is in a position to catch up on production lost through the first half.
Driveline
Driveline’s first quarter sales increased by 16% to £673m (2010: £580m). Trading profit was £50m (2010: £37m), with disruption in Japan impacting profits by around £3m. Driveline’s trading margin was 7.4%. During March, Driveline sold its 49% share of the Japanese driveshaft sales and distribution joint venture GTK to its JV partner JTEKT Corporation for 1.1bn Yen (£8m), paid in cash. This action will reduce management sales by around £30m per year, with only a small impact on reported profit. Although slightly reducing driveshaft market share in the short term, the transaction will give Driveline freedom to compete independently in the Japanese market and build even stronger direct relationships with Japanese vehicle manufacturers.
Powder Metallurgy
Powder Metallurgy’s first quarter sales increased 21% to £217m, benefiting from good growth in North American automotive production and new programme launches in North America and Europe. Trading profit was £20m and the trading margin moved forward strongly to 9.2%.
Aerospace
Aerospace markets continued to perform in line with expectations. Revenues at £352m were broadly flat and reflected the normal seasonal activity levels. Trading profit was £32m (2010: £32m) and the trading margin was 9.1%.
Land Systems
Land Systems markets have continued to improve, with solid demand for mining and construction equipment and the European agricultural equipment market now recovering strongly. Land Systems sales were up 27% at £220m (2010: £173m). Trading profit was £18m (2010: £6m), with a substantial improvement in the trading margin to 8.2%.
Outlook
Overall, the outlook for GKN’s markets remains in line with our March statement, although we expect some continuing short term impact from disruption in the Japanese automotive market and from supply chain shortages to our customers outside of Japan. Notwithstanding this, we expect GKN to continue to make good progress. The strength of our market positions and healthy order books give confidence in our prospects for 2011 and beyond.
Sir Kevin Smith, Chief Executive, GKN plc, commented: “GKN made good progress in the first quarter and I expect this to continue. GKN has excellent new products and technologies which are aligned with our customers’ desire to have smaller, lighter and stronger components and systems, offering improved efficiency, lower fuel consum

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