Japan disaster impacts on GKN profits

The Redditch-based company said that profits increased by 42 per cent to £119m in the first quarter of 2011 as it benefited from buoyant car markets in North America, India as well as China, while sales rose 14 per cent to £1.5bn.

Its Driveline business, which makes driveshafts for almost half of new cars, saw profits increase by 35 per cent to £50m despite the disruption from the earthquake and tsunami in Japan a month ago costing it £3m.

GKN signalled that the catastrophe would cause further disruption for its business because it had severely impacted car manufacturing in Japan, which had caused knock-on effects in Europe and North America because of a shortage of parts.

The company also said it had sold its share of a joint-venture driveshaft sales and distribution business in Japan for £8m, which would hit sales by about £30m in the short term.

However, it claimed there would only be a small impact on profits and the deal will allow Driveline to build its business as an independent operator in the country in the future.

The group’s powder metal technology arm, which provides components for manufacturers, saw sales increase by 21 per cent to £217m, while its Land Systems arm, which supplies products to heavy industry and agriculture, was up 27 per cent.

But sales at its aerospace arm, which makes fuselage, fan blades and cockpit windshields from sites including Yeovil, Luton, Derby, Portsmouth and the Isle of Wight, were flat.

However, this represents an improving trend on 2010 when sales at the division declined by 2 per cent.

GKN said it had made strong progress in the quarter, as it built on last year’s performance when it returned to the black after being badly hit by the global economic meltdown.

The group has stripped out costs with a major redundancy programme since November 2008, which saw 15 factory closures and 7,000 of its 42,000 staff leave, including 560 in the UK – although employee numbers have since climbed to 40,000.

GKN, which also operates sites at Sutton Coldfield, Telford and Edgware in Middlesex as well as in 30 other countries, added to its UK personnel in 2008 after buying Airbus’s Filton site and it now has 6,000 UK employees.