Redditch-based engineering giant GKN yesteday cheered investors by announcing better-than-expected profits and strong aerospace markets.
While pre-tax profits fell two per cent to £42 million in the six months to June 30, analysts said the results were marginally ahead of what they had expected from GKN, which announced a ten per cent fall in profits in February.
The group, which is involved in the aerospace, defence and automotive markets, described the figures as solid given the current turbulence in automotive markets.
It said all its major businesses had made progress, with particularly encouraging results in aerospace and its driveshaft division.
Global raw material prices would continue to affect the group's automotive operations, but their performance was expected to improve.
Chief executive Kevin Smith said the outlook for the rest of the year in its major markets remained unchanged.
"We see no reason at this stage for changing our expectations for the group's trading performance for the year," he said.
As well as parts for civil airliners, including the new Airbus A380 superjumbo, GKN is involved in military aircraft, with contracts to make parts for the F-35 Joint Strike Fighter, a nextgeneration jet fighter designed for the US Air Force, Marine Corps and Navy and for the Royal Air Force, and the F-15 jet fighter.
GKN said its aerospace division, which makes components for civil and military aircraft, had doubled its profits to £24 million.
The company said it expected the military market to remain steady in both 2005 and 2006 before dipping slightly in 2007.
Airbus and Boeing had both forecast year on year increases in aircraft deliveries in the civil market.
GKN said its powder metallurgy unit within automotive moved back into profitability while its Driveline business, which makes parts for vehicle driveshafts, produced " resilient" first half results with sales of £1.02 billion, a six per cent increase over the £964 million in the same period last year.
The group said the restructuring programme in Driveline and other parts of GKN announced in March last year was well underway and on track to deliver the benefits originally anticipated.
However, it added: "Global raw material prices will continue to be a major influence on the performance of the group's
"Recent decreases in steel surcharges have been encouraging although the cost of other raw materials and energy continues unfortunately to be high."
The company said negotiations with customers had helped cut a £31 million jump in costs for scrap steel and other raw materials used by its auto components divisions.
The interim dividend increased to 4p from 3.9p.