Dowlais shares are rising as the group shakes off a volume drop

Dowlais Group shares rose Wednesday as the company maintained its full-year guidance despite weaker volumes.

The automotive engineering specialist reported that its adjusted sales fell 6.1 percent year-on-year to £4.2 billion in the ten months ending October.

The company attributed about three-quarters of this decline to “continued weakness” in its electric powertrain product line, amid volatility in battery electric vehicle production.

Dowlais also said sales were hit by marginally lower volumes in the powder metallurgy business due to an “unfavorable customer mix” in North America.

However, sales of the Driveline branch only fell by 2.4 percent, while total car production outside China fell by 3 percent.

Meanwhile, the FTSE 250 company’s adjusted operating margins were 6.1 percent, up 20 basis points on the first half of the year.

This helped bring overall performance in line with expectations and allowed it to keep full-year expectations unchanged.

On an adjusted basis, the company expects revenue declines in the mid- to high-single digits, as well as an operating margin of between 6 and 7 percent at constant exchange rates.

As a result, Dowlais Group shares rose 14 percent in early trading before retreating in late afternoon to be 8.8 percent higher at 52.3p.

Liam Butterworth, CEO of Dowlais, said: ‘Continued restructuring and performance initiatives, together with good progress in our commercial recovery program with customers, continue to mitigate the impact of lower volumes.’

He added: ‘Over the medium term, our strategy to accelerate our transition to a powertrain-independent portfolio, which is better positioned to withstand market volatility, will support sustainable, profitable growth and cash generation.’

Dowlais was founded in April last year when aerospace manufacturer Melrose Industries decided to spin off the automotive, hydrogen and powder metallurgy businesses of components manufacturer GKN.

After acquiring GKN in 2018, Melrose undertook a major overhaul of the business, including the closure of an automotive engineering scheme in Birmingham, with the loss of 500 jobs.

It named the recently demerged company after a famous ironworks founded in a south Wales village in 1759 at the dawn of the Industrial Revolution.