Melrose spin-off Dowlais celebrates increasing vehicle production

Dowlais Group has maintained its full-year forecast after its first half-year performance beat forecasts thanks to increased vehicle production.

Adjusted operating profit at the engineering firm, which recently split from turnaround specialist Melrose Industries, rose 40 per cent to £177 million in the six months to June.

Profitability was driven by strong performance from the London-based company’s GKN Automotive segment, where the company generates the majority of revenue.

Growth: Dowlais Group reported a 40 percent rise in adjusted operating profit in the first half thanks to a strong performance from its GKN Automotive segment

The division reported a £280m increase in sales to £2.3bn after hitting record levels of production at its Mexican and American eDrive component plants.

In addition, a record number of bookings were achieved in total forecast sales of more than £3 billion, with more than three quarters of these linked to electric vehicle platforms.

Although GKN Automotive was hit by greater inflationary pressures, the company still increased operating margins, including through “purchasing efficiency,” price increases and asset productivity.

As a result, Dowlais maintained full-year expectations but warned that trade could be hit by possible industrial action in the United States.

The UAW union is threatening a strike if it fails to reach an agreement with the Big Three automakers – Ford, General Motors and Stellantis – on wage increases, benefits and job protections.

The current contracts between the union and the three auto giants expire on Thursday evening.

Dowlais manufactures equipment, including side shafts, engine systems and suspension springs, for approximately 90 percent of the world’s automobile manufacturers.

“Regardless of the UAW’s potential actions, the board is enthusiastic about the group’s future prospects as it remains on track to achieve its margin target as the market recovers and continues to be at the forefront of the industry’s transition to electrification,” said the The company told investors.

Still Dowlais Group shares were down 7.2 percent, or 9.2 pence, to 118.9 pence early Tuesday afternoon, about 18 percent below their starting price of 145 pence.

Named after an ironworks in Wales, Dowlais also has an emerging hydrogen business and a powder metallurgy arm focused on developing powders from recycled scrap metal.

Melrose spun off the company in April to focus on the GKN aerospace division, which it bought five years ago in a hugely acrimonious £8.1bn deal.

The FTSE 100 company then launched a major restructuring of GKN, cutting hundreds of jobs after closing a production facility in Birmingham and restructuring it into three divisions.

Last week, chief executive Simon Peckham told the Mail the takeover had been a “fabulous story”.

He said: “We’ve taken what was once a fading British industrial icon and we’ve revived it, we’ve fixed it, or we’re well on the way to fixing it.” And there are two British ones Companies have been created that have a great future ahead of them, so we are very proud.”