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Melrose reports challenging 2019 for GKN Powder Metallurgy Melrose Industries PLC, UK, has announced its financial results for the year ended December 31, 2019, reporting that the group was comfortably ahead of the board’s expectations for both profit and cash generation. Adjusted diluted earnings per share (EPS) were 14.3 pence, up 13% on last year, and adjusted free cash flow was £591 million, up 72% on an annualised like-for-like basis. However, it was reported that in 2019 GKN Powder Metallurgy experienced its most challenging market conditions for some years, most notably in the automotive sector. Whilst the business largely outperformed the market in Europe, China and Brazil, in its largest market of North America the combination of a weaker domestic automotive market, the impact of industrial action at
certain customers, such as the General Motors strike, and reduced exports to China proved challenging. As a result, GKN Powder Metallurgy sales were down by 10% and its adjusted operating margins down to 10.5%. Although sales performance was impacted by macro events, the business was largely able to protect margins through investment and efficiency programmes that are said to be part of a wider renewed strategic plan for the business. Further automation initiatives were reportedly deployed throughout the GKN Powder Metallurgy production footprint during 2019, supported by increased shop floor digitisation. The harnessing of additional activity data points has enabled more detailed and targeted mapping of future improvement initiatives in
Showa Denko announces $8.8 billion bid for Hitachi Chemical Showa Denko K.K., a chemical engineering company headquartered in Tokyo, Japan, has agreed to pay more than double its own market value to purchase its larger rival Hitachi Chemical Co., Ltd. The move will reportedly scale up Showa Denko’s lithium-ion battery and advanced materials businesses, maintaining pace with Chinese rivals. The company states that it has offered ¥964 billion ($8.8 billion) for all shares of the chemicals unit of Hitachi Ltd., one of Japan’s largest
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industrial conglomerates. The tender offer is expected to start around February at ¥4,630 a share. The purchase would be Showa Denko’s largest on record and would boost the company’s revenue from lithium-ion automotive batteries and related materials - segments that are growing fast as carmakers compete to make more electric-powered vehicles. “Chinese material manufacturers have developed a business that takes advantage of the economies of scale
Spring 2020
process efficiency, quality control and supply chain management, with a view to further bolstering GKN Powder Metallurgy’s technological and operational leadership. In the group’s GKN Automotive division, sales were reported to have declined by 6% over the year, due to the global downturn in the automotive sector continuing into 2019. However, the business was able to improve its adjusted operating margins in the second half to just under 8%, and adjusted operating profit for the same period rose by 14% compared to 2018. The GKN Aerospace division was reported to benefit from a strong sector, seeing sales grow by 7% in 2019, with adjusted operating margin rising to 10.6%. Continuing efficiency and productivity programmes also saw a return to profitability for the division’s previously troubled North American sites. www.melroseplc.net www.gkn.com
and Middle East material manufacturers have also been increasing cost competitiveness,” Showa Denko said in the statement. The company reported that it needed a top market share and more scale to remain a major global manufacturer. To pay for the purchase, Showa Denko explains that it is seeking a ¥295 billion loan from Mizuho Bank and will sell preference shares to the bank and to the Development Bank of Japan. Showa Denko’s bid is among several major deals announced by Japanese companies as the year comes to a close. www.sdk.co.jp www.hitachi-chem.co.jp
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