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GKN confident as auto-unit growth offsets currency hit

The GKN headquarters in Redditch, Worcestershire.

British engineering company GKN said it was confident regarding the rest of 2014 after first-half profit at its car parts supply division helped offset a strong currency hit.

GKN posted a 6 percent gain in pretax profit to £296 million ($502 million) for the six months to June 30, in line with expectations.

GKN said a stronger pound had a £24 million impact on profit in the period.

The company warned in February that the strengthening of the pound against the dollar — sterling gained almost 2.5 percent against the U.S. currency in the first half — would have a negative impact on its bottom line, but it was confident it could offset it.

The offset was led by its Driveline business, which supplies carmakers such as Volkswagen Group with components and which accounts for almost half of group sales. That unit delivered organic sales growth of 11 percent, ahead of global auto production, as the company increased its content per vehicle.

CEO Nigel Stein said in the second half he expected GKN to continue to outperform in its key markets and post good underlying financial results despite sterling’s strength.

“Growth in the second half in autos [is seen] very slightly down on the first half, but not much, so it looks to us a repeat of the first-half with just that currency factor to take in,” Stein told reporters on a call.

Analysts expect GKN to post a pretax profit of 591 million pounds in 2014 according to a Thomson Reuters consensus forecast.