Dowlais shares climb as group shrugs off volume decline

Dowlais Group shares jumped on Wednesday as the firm upheld its annual outlook despite weaker volumes. 

The automotive engineering specialist reported its adjusted revenue shrank by 6.1 per cent year-on-year to £4.2billion in the ten months ending October.

It attributed around three-quarters of this decline to ‘continued weakness’ in its electric powertrain product line amid volatility in battery electric vehicle output.

Dowlais also said sales were hit by marginally lower volumes in its powder metallurgy business due to an ‘unfavourable customer mix’ in North America.

However, revenues at its Driveline arm only fell by 2.4 per cent, while total vehicle production outside China dropped by 3 per cent.

Meanwhile, the FTSE 250 company’s adjusted operating margins were 6.1 per cent, a 20 basis points increase on the first half of the year.

This helped its overall performance align with expectations and enabled it to keep its full-year guidance unchanged.

On an adjusted basis, the firm anticipates a ‘mid-to-high single-digit’ drop in sales as well as an operating margin of between 6 and 7 per cent at constant currency levels.

Consequently, Dowlais Group shares climbed by 14 per cent in early trading before retreating to be 8.8 per cent higher at 52.3p by the late afternoon.

Liam Butterworth, chief executive of Dowlais, said: ‘Ongoing restructuring and performance initiatives, along with good progress on our commercial recovery program with customers, continue to mitigate the impact of lower volumes.’

He added: ‘In the medium term, our strategy to accelerate our transition to a powertrain agnostic portfolio, which is better positioned to navigate market volatility, will support sustainable, profitable growth and cash generation.’

Dowlais was set up in April last year when aerospace manufacturer Melrose Industries decided to spin off the automotive, hydrogen, and powder metallurgy operations of components maker GKN.

After acquiring GKN in 2018, Melrose undertook a major overhaul of the business, which included the closure of an automotive engineering plan in Birmingham, with the loss of 500 jobs.

It named the newly demerged company after a famous ironworks founded in 1759 in a South Wales village at the start of the Industrial Revolution.

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