UPDATE 2-GKN eyes aerospace recovery as Q1 profit rises

* Q1 pretax profit 71 mln stg vs 28 mln stg loss

* Q1 sales up 22 pct to 1.3 bln stg

* Cuts pension funding liabilities by 80 mln stg

* Shares 2 pct down on raw material cost worries

(Recasts, adds analyst comment, shares, details)

By Rhys Jones

LONDON, April 27 (BestGrowthStock) – British airplane parts maker
GKN (GKN.L: ) said the aerospace supply sector was improving after
it swung to a first quarter profit (Read more your timing to make a profit.), shrugging off falls in
global passenger demand which dented orders in 2009.

GKN, which produces airframes, engine structures and
components for planemakers Airbus (EAD.PA: ) and Boeing (BA.N: ), on
Tuesday reported a pretax profit of 71 million pounds ($109.8
million) in the first three months of 2010 compared with the 28
million pound loss it made in the same period last year.

GKN said sales rose 22 percent to 1.3 billion pounds and
that the outlook for its major markets was mainly positive.

“In aerospace, the U.S. defence market should remain solid
and recent commercial aircraft customer schedule increases have
removed uncertainty around second half demand,” said GKN’s Chief
Executive Kevin Smith.

“GKN Aerospace is expected to deliver another strong
performance, with margins improving steadily from the first
quarter and reaching double digits for the year as a whole.”

It also said sales at its automotive and off-highway units
were improving steadily after a tough couple of years.

Shares in GKN, which have risen by a quarter in the last
three months, were 2.36 percent down at 149 pence by 0818 GMT,
valuing the business at around 2.3 billion pounds.

“While GKN is upbeat, it is cautions on rising raw material
prices, especially steel,” said Arbuthnot analyst Xavier Gunner.
“Although this is ultimately passed through to customers, there
is a lag effect, which could have a negative impact on margins.”

Last year’s slump in global passenger demand meant Airbus
and Boeing recorded their worst annual order tally in 15 years
as airlines shelved orders, hitting the aerospace supply sector.

However, the start of production on Boeing’s 787 Dreamliner
is expected to underpin GKN’s medium-term revenues.
[ID:nN26190974]

The International Air Transport Association, an industry
body, last month said airlines were climbing out of recession
and forecast their losses would fall by two-thirds to around $3
billion this year. [ID:nLDE62T0N1]

GKN is, on average, expected to post a pretax profit of 208
million pounds for 2010, up from 83 million pounds in 2009,
according to a Thomson Reuters I/B/E/S poll of 11 analysts.

GKN also said it had implemented actions to improve the
funding position of its UK pension scheme and had reduced future
scheme funding liabilities by 80 million pounds.

It will pay 30 million pounds a year to the fund for 20
years after agreeing an asset-backed payment plan with trustees.

Stock Market Advice

(Editing by Paul Sandle and Sharon Lindores)

($1=.6469 Pound)

UPDATE 2-GKN eyes aerospace recovery as Q1 profit rises