Dowlais shares rise as group shrugs off falling volume

Dowlais Group Shares jumped on Wednesday as the company maintained its full-year outlook despite weaker volumes.

The automotive engineering specialist reported that its adjusted revenue fell 6.1 percent year-on-year to £4.2 billion in the ten months ending in October.

It attributed about three-quarters of this decline to “continued weakness” in its electric powertrain product line amid volatility in battery electric vehicle production.

Dowlais also said sales were affected by slightly lower volumes in its powder metallurgy business due to an “unfavorable customer mix” in North America.

However, revenue from its Driveline division only fell 2.4 percent, while total vehicle production outside China fell 3 percent.

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

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

On an adjusted basis, the company anticipates a sales decline in the “mid-to-high single digits,” as well as an operating margin of between 6 percent and 7 percent at constant currency levels.

As a result, Dowlais Group shares rose 14 per cent in early trading before falling a further 8.8 per cent to 52.3p by late afternoon.

Liam Butterworth, chief executive of Dowlais, said: “Ongoing restructuring and performance initiatives, together with good progress on our business 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 an independent powertrain portfolio, which is better positioned to address market volatility, will support sustainable, profitable growth and cash generation.”

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

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

He named the newly demerged company after a famous hardware store founded in 1759 in a south Wales village at the beginning of the Industrial Revolution.