- Sales and margins increased
- Auto sector growing strongly
- Charge for Powder Metallurgy unit
Automotive products group Dowlais (DWL) posted a steady increase in sales and earnings last year and announced a £50 million share buyback.
However, the good news was overshadowed by a large impairment charge for the powder metallurgy business which pushed the group to an operating loss of £450 million.
The shares dropped 4% to 86.5p leaving them close to their recent 12-month lows.
FIRST YEAR AS A PLC
Although Dowlais only started trading as a separate company in April 2023 after its demerger from Melrose Industries (MRO), it reported full-year sales of £5.5 billion, an increase of 6.3% on 2022 driven by volume growth in the Automotive division and price rises – or ‘inflation recovery’ as the company put it – across the group.
Underlying operating profit excluding £32 million of costs associated with being a stand-alone plc rose 20% to £355 million while the operating margin improved by 90 basis points or 0.9% helped by volume growth, higher prices and operational efficiencies.
Automotive revenue and operating profit grew 7% and 27% respectively, while Powder Metallurgy reported growth of 3.5% and 3.1% although the operating margin was higher at 9.2% against 7.3%.
Adjusted earnings per share were 13.8p, but after £449 million of non-cash goodwill impairments the firm recorded a 36p per share loss.
The impairment comes after Dowlais management undertook a full review of the medium-term prospects for the Powder Metallurgy business as it’s new ‘owner’ since last April.
2023 A ‘BANNER YEAR’
2023 was ‘a banner year for the UK automotive sector’ said Neil Shah, director of research at Edison, after production levels rose by 16.3% to 1.025 million vehicles.
The easing of pandemic-related challenges, from chip shortages to lockdowns, and increasing electrified model production, combined to drive annual output above one million for the first time since 2019.
SMMT (the Society of Motor Manufacturers and Traders) reported strong December performances for both car manufacturing, up 20.7% year on year, and commercial vehicle volumes, up 80.3%.
There were eight new models entering production in 2023, including at the newly reopened Ellesmere Port EV-only plant, and around £24bn was invested in plant, including manufacturing plants, gigafactories and research facilities according to SMMT.
