Automobile business drove up GKN’s 2011 profit by 15%

Article by Christian A., on February 28, 2012

Plane and vehicle parts manufacturer GKN disclosed that a strong performance in its auto operations contributed to a 15% boost in its 2011 profit, thanks to the continuous strong demand in China as well as the increase in sales of premium vehicles. The company posted pretax profit of 417 million pounds or $660.57 million on revenue 13 percent higher at 6.11 billion pounds.

 According to GKN CEO Nigel Stein, the demand for the luxury vehicle remained strong and they feel that it will be the same this year. He also acknowledged that China is the "biggest driver" of that demand, but North America has "come back strongly too." He further stated that worldwide vehicle production "should" increase around 5% in 2012 and they anticipated delivering more growth "on the back of that."

The automobile business of GKN manufactures chassis, driveshafts, lighter auto components and axles, among other related products. The revenue of this unit comprises nearly two-thirds of group sales. It increased by 10% to 2.68 billion pounds last year.  Audi, Volkswagen and BMW are among the largest customers of GKN. These automakers revealed that 2011 sales increased due to the demand for premium vehicles in China and they expect this trend to continue.

BMW anticipates that the worldwide market for luxury vehicles will increase at more than 8% this year, which is at least twice as quick as the general vehicle market. GKN shares, which increased 13% last month, were 3% lower at 223 pence by 0840 GMT, valuing the company at about 3.5 billion pounds.

Analyst Sandy Morris at Jefferies commented "there may well continue to be quite different assumptions made about global light vehicle production" next year but added that the growth of sales in its automotive units surpasses that in worldwide light vehicle production (3 percent) in 2011, which "should continue to work in GKN's favor in 2012."

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