Dowlais forecasts revenue decline, considers sale of Powder Metallurgy

(Sharecast News) - Dowlais said on Tuesday that it was considering a potential sale of its Powder Metallurgy business and that it now expects a decline in full-year revenue. In the six months to the end of June, pre-tax profit declined to £95m from £139m in the same period a year earlier, with adjusted operating profit down to £151m from £177m. Dowlais, which owns GKN Automotive, said this includes £7m of operating losses from the hydrogen operations.

Meanwhile, adjusted revenue fell 5.1% on the prior year to £2.57bn. This was driven by weakness in the ePowertrain product line of the automotive business, it said. Driveline, China and the Powder Metallurgy segment, which make up more than 75% of the company's revenue, performed above their markets, it said.

Dowlais said industry forecasts no longer expect the second half of the year to improve. Instead, they now predict a 3.6% decline in the second half, leading to a 2% drop in light vehicle production in 2024, with ongoing battery electric vehicle (BEV) volatility expected to continue to affect the ePowertrain business in the second half.

As a result, Dowlais expects a mid to high single-digit adjusted revenue decline for 2024 and an adjusted operating margin between 6.0% and 7.0% at constant currency, "given the benefits of commercial recoveries, restructuring savings and performance initiatives".

Dowlais said it had disposed of GKN Hydrogen in July. In addition, it has begun a strategic review of Powder Metallurgy and is considering a range of options including a potential sale.

Chief executive Liam Butterworth said: "In this challenging market environment, we focused on what we can control and took several decisive actions to mitigate the impact from lower volume as well as unlock value from our portfolio.

"First, we implemented a relentless focus on cost control, limiting the impact on adjusted operating profit and mitigated the margin decline to 30 basis points. Second, we initiated a comprehensive programme of commercial recovery initiatives with our customers which, together with the ongoing restructuring programmes and performance initiatives, will limit the impact from expected lower revenues in the second half of the year.

"Finally, today's announcement of a strategic review of Powder Metallurgy and the disposal of our hydrogen operations underscores our commitment to unlocking value from our portfolio and delivering shareholder returns."