Melrose spin-off Dowlais welcomes rising car production

Dowlais Group has maintained its annual guidance after first-half performance exceeded expectations, thanks to increased car production.

Adjusted operating profit at the engineering company, which recently spun off from turnaround specialist Melrose Industries, rose 40 percent to £177 million for the six months ended June.

Profitability was driven by strong performance from the London-based company’s GKN Automotive segment, where it generates the vast majority of revenue.

The division saw sales increase by £280 million to £2.3 billion following record production levels at its Mexican and US eDrive component factories.

It also achieved record bookings worth more than £3 billion in expected total revenue, more than three-quarters of which were connected to electric vehicle platforms.

Although GKN Automotive was hit by increased inflationary pressures, the company still boosted operating margins through ‘purchasing efficiency’, price increases and factory productivity, among other things.

As a result, Dowlais left full-year expectations unchanged, although it warned that trade could be hit by potential industrial action in the United States.

The UAW union is threatening a strike if it fails to reach an agreement with the “Big Three” automakers – Ford, General Motors and Stellantis – on wage increases, working conditions and job protection measures.

The current contracts between the union and the three car giants expire on Thursday evening.

Dowlais makes equipment, including side axles, engine systems and suspension springs, for about 90 percent of the world’s automakers.

“Regardless of any potential UAW action, the board is excited about the future prospects for the group as it remains on track to achieve its margin target as the market recovers and continues to lead the industry’s transition to electrification,” the spokesperson said . the company told investors.

Anyway,Dowlais Group shares were 7.2 percent, or 9.2 cents, lower at 118.9 cents on Tuesday afternoon, about 18 percent below their starting price of 145 cents.

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

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

The FTSE 100 company then embarked on a major restructuring of GKN, with hundreds of jobs lost after closing a factory in Birmingham and reorganizing it into three divisions.

Last week, CEO Simon Peckham told the Mail that the takeover had been a “fantastic story”.

He said: ‘We’ve taken a fading British industrial icon and revived it, we’ve solved it, or we’re well on the way to solving it. And two British companies have been born that should have a great future, so we are very proud.”