GKN's profits hit by slump in machinery sales
Farmers' reluctance to splash out on new machinery led to a slump in profits at GKN's Telford operation last year.
The company, which employs about 800 people at its base at Hadley Park, achieved sales of £776 million in its Land Systems division, after a 10 per cent fall in its performance over 2014.
Its profit took a 38 per cent hit over the same period, and clocked in at £44 million.
Chief executive Nigel Stein said the figures reflected a "difficult year" due to tough markets.
"Agricultural markets softened across the board," he said. "Demand for larger, more sophisticated tractors which use many of our products was down by 15 to 20 per cent. Land Systems' markets are cyclical but large, and customers want what GKN offers. When the market returns we are optimistic the division can show rapid improvement."
GKN warned that it was planning to cut its cost base in the division in response to the tough environment, and would face an £8 million restructuring charge in 2015, mainly affecting continental Europe.
Mr Stein added: "We cut our costs with lay-offs, short-time work and other payroll reduction measures. We have gone further, pushing ahead with more structural actions to take out fixed costs, mainly in Europe."
The group also expects sales in Land Systems will be lower in 2015 than last year, as lower agricultural sales will offset a slight improvement in industrial markets.
The Telford-based division makes parts such as brakes and gearboxes for cars and heavy machinery including tractors.
It is also the home of the newly acquired hybrid power division, which it bought from the Williams F1 team last April, and whose energy-saving technology is now set to be fitted to 750 buses.
The group as a whole – which also includes divisions focused on the automotive and aerospace sectors – reported a four per cent rise in pre-tax profits for the year to December to £601 million. However, when taking into account the impact of currency fluctuations, statutory pre-tax profit fell 54 per cent to £221 million.
Mr Stein added: "We have continued to outperform our key markets and report good underlying financial results in spite of sterling's strength and some end market weakness, particularly in Land Systems.
"Looking forward we expect 2015 to be another year of growth."
Shares fell three per cent following the announcement, with brokers pointing at the company's cautious outlook.
