Dowlais Group profits hit by slowdown in electric vehicle production

The Dowlais Group could put a business unit up for sale after the engineer’s profits fell in the first half of 2024, following problems in the production of electric vehicles.

The company, which was spun off from Melrose Industries last year, revealed its adjusted pre-tax profit fell 26 per cent to £95m in the six months to June.

Its automotive business saw the biggest drop in operating profit, falling 13 percent to £122 million, as its epowertrain technology line was hit by lower production on certain battery electric vehicle platforms.

Many automakers have scaled back or delayed their electric vehicle plans this year amid rising interest rates and raw material costs, slowing demand growth and the removal of subsidies.

While electric vehicle production in China continues to grow, Dowlais noted that production outside the country plummeted 9 percent, driven largely by Europe and Japan.

He also said consumer demand for electric vehicles continued to be weighed down by high prices, insurance costs, weak residual values ​​and a shortage of charging infrastructure.

With industry forecasts not expecting an improvement in production during the second half of 2024, Dowlais believes that the “current volatility in electric vehicles” will hurt the performance of its electric train business.

As a result, the London-based company expects its adjusted annual revenue to decline by a “mid- to high-single-digit” figure.

Dowlais also announced on Tuesday that it was carrying out a strategic review of its powder metallurgy business, including an option to put it up for sale.

The company recently sold its hydrogen division to Langley Holdings, having posted operating losses of £15m on the business last year.

Liam Butterworth, Dowlais chief executive, said: “We continue to execute on our strategy to accelerate the transition to a powertrain-agnostic business model that is better positioned to navigate market volatility and deliver sustainable, profitable growth and cash generation over the medium term.”

Dowlais Group Shares fell to a record low on Tuesday morning but recovered to fall 1.2 per cent to 62.15p just before midday.

Russ Mould, investment director at AJ Bell, said: ‘Investors may be attracted to corporate demergers as these new entities are less constrained than within a wider group and are better able to make decisions in their own interest.

‘However, automotive engineer Dowlais is an example of a split that, at least so far, has been a bit of a car crash.’

Dowlais, named after an ironworks built in 1759, contributed about 60 percent of Melrose’s total annual revenue before its delisting last year.