Japanese Prime Minister Naoto Kan speaks during an emergency disaster measures meeting in Tokyo

GKN autos still disrupted by Japan earthquake

GKN expects 'continuing short term impact' in its auto component business due to the Japan earthquake.

Automakers have been disrupted by the 9.0 magnitude earthquake which damaged equipment, cut off electricity and caused supply chain shortages in the automotive market.

"We expect some continuing short term impact from disruption in the Japanese automotive market and from supply chain shortages to our customers outside of Japan," said GKN chief executive Kevin Smith.

Japan's largest carmarkers including Nissan and Toyota have been forced to suspend work at most factories, while overseas manufacturers relying on Japanese-made parts have also felt the impact of slow restarts to production and power shortages.

"Production in Japan was severely impacted by the earthquake and tsunami and some disruption has also been experienced in Europe and North America as a result of component supply problems," said Smith.

"Japanese Original Equipment Manufacturers are planning to resume volume production through April and May, although it will be some time before the industry is in a position to catch up on production lost through the first half."

GKN, which produces auto components as well as airframes for planemakers Airbus and Boeing, said its first-quarter pretax profit rose 51 per cent to £107m, largely driven by a strong performance at its powder metallurgy unit.

It expects continued strong trade from its land systems business, which supplies the agriculture, mining and construction sectors, while its metals and aero divisions should mitigate the disruption at its automotive division.

Shares in GKN, which have fallen 12 per cent in the last three months largely due to Japan, climbed four percent to 210.4, valuing the company at about £3.24bn.

"Japan took three million off driveline (auto component) profits which is two to three million pounds less than we expected," said UBS analyst Stephen Swanton.

"This may become more severe in the second quarter given UBS expects auto production to be down nine per cent but self-help and cost control should mitigate some of the impact and production should improve again in quarters three and four."

GKN's first-quarter sales have risen 14 per cent to £1.48bn, and its aero business is expected to perform well in the second half of the year as Airbus and Boeing ramp up production rates.

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