GKN Plc (GKN), a supplier of jetliner structures to Airbus Group NV (AIR) and Boeing Co. (BA), said it has doubled production rates for the European planemaker’s A350 model as the newest wide-body aircraft nears service entry.
GKN makes 27-meter (89-foot) rear wing spars that hold key parts such as the A350’s main landing gear. Shipments of the high-value composite structures are surging with the jet nearing its commercial debut with Qatar Airways Ltd. in late 2014.
“We’ve shipped more in the first half of this year than we shipped in the whole of last year,” Nigel Stein, Redditch, England-based GKN’s chief executive officer, said today on a conference call. “It will step up further in the second half.”
GKN bolstered its status as a primary contractor to Airbus with the 2008 purchase of the planemaker’s Filton wing-parts plant in the U.K., doubling the airliner-structures order book to $10 billion and guaranteeing work through the lifetime of models including the A350. The company’s aerospace unit boosted its profit margin to 11 percent in the first half as gains in commercial revenue offset military declines, GKN said today.
GKN rose as much as 7.5 percent, the biggest intraday gain since July 30 last year, after the company said in a statement that underlying operating profit advanced 6 percent in the six months to 340 million pounds ($578 million). The stock was trading 6.8 percent higher at 366.50 pence as of 9:58 a.m. in London, valuing the company at 6 billion pounds.
Aerospace sales advanced to 1.1 billion pounds, spurred by the 2012 acquisition of aircraft-engine maker Volvo Aero for 633 million pounds. The company’s automotive division, which supplies driveline systems, posted the fastest underlying sales growth at 11 percent, boosting revenue to 1.76 billion pounds.
Group sales dipped 1 percent, clipped by a 247 million-pound currency translation. The strong pound reduces the value of dollar-denominated contracts, with a 1 cent movement having a 2 million-pound effect on GKN profit.
“We go and invest and build businesses where the long-term markets are strongest,” Stein said. “We operate in these countries and we’re exposed to the translation of our results. I don’t think there’s much you can really do about it.”
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