Dowlais flags top-end performance as US tariff concerns ease

(Sharecast News) - Dowlais Group said in an update on Tuesday that it expects its full-year performance to come in towards the top end of prior guidance after strong operational execution and continued cost discipline helped offset market volatility and tariff headwinds.

The FTSE 250 automotive engineering group reported adjusted revenue of £3.7bn for the nine months ended 30 September, up 1.1% year-on-year at constant currency, though translational foreign exchange headwinds of £84m led to a reported decline of 1.2%.

Its adjusted operating margin improved by 120 basis points to 6.6%, driven by commercial recoveries, restructuring benefits, and other performance initiatives, which more than offset inefficiencies at two North American plants.

Automotive revenue rose 1.6% to around £3bn, supported by a 10.4% increase in the ePowertrain division, reflecting a full year of production from a major US all-wheel drive platform and one-time commercial recoveries.

Driveline revenue declined 2.4% for the period but recovered 2.5% in the third quarter amid an improved market backdrop and new platform launches.

The group's China joint venture posted 1.5% revenue growth, lagging local vehicle production due to adverse customer mix.

Automotive's adjusted operating margin rose 160 basis points to 7.2%.

In powder metallurgy, adjusted revenue fell 1.1% as gains from the acceleration platforms line were offset by weaker demand in sinter and powder products.

The segment's adjusted operating margin slipped 50 basis points to 8.2%.

Dowlais said macroeconomic uncertainty related to US automotive tariffs had eased, with industry forecasts for light vehicle production now slightly improved.

The group reiterated that it expected to recover the £22m tariff impact through "commercial recoveries and other performance initiatives", although the timing may extend into 2026.

Full-year performance was now expected to be towards the top end of its previous guidance range of flat to a mid-single-digit decline in adjusted revenue, with an adjusted operating margin between 6.5% and 7.0% at constant currency.

Adjusted free cash flow is projected to be slightly ahead of the prior year.

"We delivered a quarter of solid execution in a volatile environment, with performance supported by our diversified portfolio, strong cost discipline, and continued execution of our global restructuring programme," said chief executive Liam Butterworth.

"We also remain confident in our ability to fully recover the cost of current tariffs through commercial initiatives over time."

He added that looking ahead, while industry conditions remained mixed, the firm now expected full-year performance to be towards the top end of its guidance range.

"At the same time, our proposed combination with American Axle continues to progress well, with only two regulatory approvals outstanding, and represents a transformational opportunity to accelerate our strategy and create a more resilient and competitive global business with significant scale."

At 0906 GMT, shares in Dowlais Group were up 0.3% at 83.25p.

Reporting by Josh White for Sharecast.com.