GKN Plc (GKN), a supplier of parts to Boeing Co. (BA) and Airbus SAS jetliners, said it’s open to further purchases as last year’s 633 million-pound ($962 million) takeover of Volvo AB’s aerospace unit begins to lift earnings.
The Volvo Aero acquisition, which closed on Oct. 1, contributed fourth-quarter sales of 191 million pounds and is on course to meet first-year revenue and profitability targets, Redditch, England-based GKN said today.
“If we felt something good were to come along in the not too distant future we would be ready,” Chief Executive Officer Nigel Stein said on a conference call, adding that a 62 percent jump in net debt to 871 million pounds is no bar to expansion.
GKN’s adjusted pretax profit rose 19 percent to 497 million pounds in 2012 and the manufacturer will rely on aerospace growth to sustain earnings as its automotive unit comes under pressure. A drop in European light-vehicle output will weigh on the car-parts business in the first half, GKN said today, sending the stock down the most in four months.
CEO Stein said that production of components for Boeing’s 787 Dreamliner continues even after the model was grounded on Jan. 16 over battery faults. GKN has around 100 million pounds in annual sales linked to the aircraft.
Development glitches with a major wing structure that GKN is supplying to Airbus for the A350 long-range jet are in the past and should not impact the plane’s first flight, which is due midyear, or first deliveries planned next year, Stein said.
Group-wide revenue advanced 13 percent to 6.9 billion pounds last year. Analysts had predicted a pretax profit of 468 million pounds, on average.
Sales growth at the aerospace business, which had a trading profit of 170 million pounds in 2012, should broadly offset the end of a supply contract with Airbus worth 100 million pounds a year that GKN had inherited with the 136 million-pound takeover of the planemaker’s Filton site in 2008, the company said.
With the European autos market unlikely to recover for some time, GKN will restructure its Driveline and Metallurgy units in the first quarter at a cost of 16 million pounds and 5 million pounds respectively, with job cuts in Germany and Japan.
GKN fell as much as 5 percent, the biggest intraday drop since Oct. 16, before recovering to trade 0.4 percent lower at 251.40 pence as of 9:59 a.m. in London. The stock has gained 9.8 percent this year, valuing the business at 4.1 billion pounds.
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