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25 Nov 02. GKN Plc said today that it expects 2003 to be challenging, as the outlook for its major markets is uncertain. In a pre-closing update, it also said it will meet market forecasts for 2002.

Its shares fell on the outlook for 2003 and at 1030 GMT, were trading down 12.5 pence, or 5.5% lower at 213 pence.

For 2003, the company forecast market uncertainty, lower activity levels in its helicopter joint venture project AgustaWestland and increases in interests and pension costs. GKN said that it was preparing for a weakening in the North American automotive market and forecast continued subdued European vehicle production. It said aerospace military markets are expected to remain strong and civil markets will probably stay weak.

GKN said it hoped to meet the challenges posed by market uncertainty saying 2003 should be a “solid” year, helped by restructuring this year and continued organic growth.

One analyst noted that GKN’s caution on its 2003 prospects had been known for some time and added that “overall I reckon investors will be comforted by the fact things haven’t deteriorated.” He said the shares could soften on initial reaction to the downbeat statement but should recover.

The company also reported it would meet market forecasts for 2002.GKN told investors that, so far in 2002, profit before items was at a similar level to 2001 and second-half profits were expected to remain ahead of last year. During 2001, GKN had posted adjusted pre-tax profit of £245m. During the current year, GKN took an £11m restructuring charge related to AgustaWestland. It also estimated its pension liability for 2002 at £343m.

Specifically, GKN said Monday that 2002 automotive driveline demand has remained steady but cautioned it had seen signs of reducing output in the fourth quarter. AgustaWestland continues to do well, GKN added, and aerospace services are trading steadily.

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