GKN Automotive owner Dowlais Group has announced it is exploring a potential sale of its powder metallurgy unit, after “volatility” in battery electric vehicle (BEV) production dented half-year profit.
Pre-tax profit decreased by 32 per cent to £95m in the six months ended 30 June, alongside a 9.2 per cent fall in revenue to £2.6bn.
Such a fall in revenue was driven by “weakness in the ePowertrain product line” and “volatility” in battery electric vehicle production, which significantly impacted the London-listed firm’s Automotive business. The automotive segment reported a 6.3 and 13 per cent drop in adjusted revenue and profit, respectively.
Dowlais, which was demerged from Melrose Industries last year, also revealed it had commenced a “strategic review” of its Powder Metallurgy business and was considering a range of options, including a potential sale. The board had previously committed to considering the future ownership of the subsidiary in January 2023.
Shares dropped over five per cent in early trading.
In a statement to shareholders, chief executive Liam Butterworth said: “In the first half, our market leading Driveline business, China joint venture, and Powder Metallurgy business, totalling more than 75 per cent of Group’s revenues, all outperformed their markets, while volatility in BEV production significantly impacted our ePowertrain business, leading to a 5.1 per cent adjusted revenue decline.
Butterworth said the company had adopted to a “relentless” focus on cost control and a “comprehensive programme” of commercial recovery initiatives in order to limit a dip in forecasted revenue over the second half.
Industry forecasts now predict a 3.6 per cent decline in the second part of 2024, leading to a two per cent decline in light vehicle production. Ongoing BEV volatility is also expected to continue, Dowlais Group said.
“Consequently, we expect a mid to high single-digit adjusted revenue decline for 2024 and an adjusted operating margin between six and seven per cent at constant currency, given the benefits of commercial recoveries, restructuring savings and performance initiatives.”
Shares are down over 40 per cent this year to date.