GKN looks to U.S., Asia to offset weak European car demand in 2013
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LONDON (Reuters) -- UK partsmaker GKN predicted another gloomy year for Europe's recession-hit car markets, saying the company would have to rely on the United States and Asia for growth again this year.
The company beat forecasts on Tuesday with a 19 percent rise in 2012 pretax profit helped by demand for luxury cars from automakers such as Jaguar Land Rover and Audi in China, the world's biggest autos market.
"I don't see the European small car market recovering this year, the best we can expect is flat sales," CEO Nigel Stein told reporters, adding that profits in the first half of this year would be hit by a 21-million-pound ($32 million) charge to help lower costs at its autos businesses. "But the U.S. and Asia should continue to grow and more than offset softness in Europe," he added.
Demand for new cars has slumped in Europe as governments drive through austerity measures to reduce their debts. Asian and U.S. markets, in contrast, have bounced back strongly from the global financial crisis. U.S. car sales rose 13.4 percent last year to their highest level since 2007, while European sales slumped to a 17-year low. Car sales in the United States are forecast to grow 4.9 percent in 2013 while European sales are expected to decline 1.7 percent, according to industry data.
"In 2013, GKN will have to take the rough with the smooth. We envisage most of the rough in the first half and the smoother part in the second half," said Jefferies analyst Sandy Morris.
Beating forecasts
GKN, which makes about 55 percent of profits from its Driveline autos business, said group pretax profits climbed to 497 million pounds ($751 million) last year, beating analysts' average forecast of 475 million in a Reuters poll. Revenues rose 13 percent to 6.9 billion pounds, while the company increased the total dividend for the year by 20 percent to 7.2 pence per share. Profits at Driveline, which makes products such as driveshafts, chassis and axles, rose 21 percent, helped by demand for vehicles outside Europe.
Margins at the division, whose customers include Europe's Volkswagen and Renault as well as U.S. carmakers General Motors and Ford Motor Co., improved to 7.3 percent from 7 percent a year earlier.
GKN said its aerospace unit, which makes airframes for Airbus and Boeing, delivered a 2 percent rise in 2012 profit, helped by the ramp-up of several civil aerospace programs, which have offset falling military sales, and last year's purchase of Volvo's aerospace unit.
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