Engineering group Melrose Industries (MRO) slumped 3.5% to 165p as it warned on supply constraints hitting margins and volumes in its automotive arm.
More positively, in a trading update covering the three months to 30 September, the company revealed a 161% rise in aerospace revenue.
‘The aerospace business continues to improve its performance through restructuring, and we expect the pace of this to further pick up during the second half,’ the company said.
However, it reiterated that supply constraints were hurting its automotive and powder metallurgy divisions.
‘At present the timing and duration of these constraints is uncertain, but recently the consensus view is that they have lengthened,’ Melrose said.
‘There are a number of scenarios possible, but it is likely these are below previous expectations.’
DELIVERIES CONSTRAINED
Melrose noted underlying demand from automotive customers was strong, but deliveries were being constrained by supply chain issues caused by the global shortage of semiconductors.
In-month cancellations from customers had risen from a normal rate of around 1% each month experienced in the first quarter to a current rate of about 20% to 25%.
‘Both the automotive and powder metallurgy businesses are fully on track to achieve their margin targets once supply constraints are resolved,’ the company said.
‘As an inflationary environment returns, all of the businesses are focused on the recovery of their costs and will take whatever actions are necessary to do so.’
