GKN Aerospace owner Melrose holds outlook despite supply chain challenges
Melrose Industries said it is on track to hit looming profit targets despite the industry-wide supply chain challenges plaguing the aerospace sector.
The Birmingham-based manufacturer said this morning it expects adjusted operating profit of between £550m and £570m this year and £700m in 2025.
In an update to markets, Melrose flagged a seven per cent year-on-year rise in revenue, driven by a 17 per cent jump in its Engines division.
Aerospace manufacturers, particularly the major planemaker’s Airbus and Boeing, have struggled to meet a significant ramp-up in post-Covid demand from their airline customers, as a result of long-running supply chain problems.
Shares in Melrose are down 12.46 per cent to date.
“It’s encouraging that we remain on track to deliver on our full year expectations, despite the industry-wide supply chain challenges,” chief executive Peter Dilnot said in a statement.
“This reflects the strength of our businesses and the balanced position we have with our aftermarket offsetting original equipment headwinds.”
Melrose on Monday said it expects its cash flow position to “improve significantly” next year, as a result of the completion of several restructuring programmes and the resolution of a major manufacturing issue stemming from the powdered metal used in some of its geared turbofan (GTF) engines.
Dilnot added: “As we move into 2025, we enter a period of significant and sustained growth in our cash flow for many years ahead. I am confident that Melrose’s established capabilities, technology leadership, and unique position on the world’s leading aircraft and engines will create substantial value in the future.”
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, noted Melrose’s Structures division, which deals with building the body and wings of planes, had taken “some shine off performance,” as revenue edged just one per cent higher over the period.
“This side of the business has been held back by the planned exit of non-core work and customer destocking in the period.
He added: “Production troubles at Airbus and quality issues at Boeing have also dented timelines. There’s not a great deal Melrose can do about this – supply chain issues have been a challenge for the whole industry and the problem’s likely to persist for some time.”