GKN growth squashed by strong sterling - UPDATE

- 7.0 per cent sales growth before FX- Headline sales growth of 1.0 per cent- Margin up 1.3 points, PBT up 22 per cent- Tough comparators imply more modest growth for 2014Engineer GKN continued to battle mixed markets, with a thrusting commercial aerospace market making up for a military aerospace sector stuck in reverse gear. Further on the upside, light vehicle production was up nearly 5% thanks to good growth in Japan, China, North America and Europe while markets in India and Brazil declined. Construction and industrial markets were broadly flat while demand for agricultural equipment fell. The FTSE 100 group's 7% rise in sales to £1.9bn in the three months to end-March was largely negated by 6% of adverse currency headwinds due to the strong pound. However, the 1% top growth led to trading profits increasing 19% to £166m, with organic trading profit increased by £35m helped by the absence of £23m of restructuring costs in the prior period, while the adverse currency translation impact was £9m. Trading margins were up to 8.7% from 7.4% the year before, or 8.6% excluding restructuring charges. Chief Executive Nigel Stein said: "Looking forward to the rest of the year, tougher prior year comparators mean that organic growth is likely to be more modest. However, our market leading positions, advanced technology and extensive global footprint should make 2014 another year of progress."Looking at the results in more detail, the aerospace arm saw sales good organic growth of 5% in the first quarter offset by 5% adverse currency translation, with trading margins up slightly.Strong sales in commercial aerospace were partly offset by the loss of a £15m supply chain contract taken back in-house by Airbus in the second quarter of 2013, while military sales were flat and are expected to decline over the year.Global light vehicle production rose nearly 5% in the quarter to 22.1m, with Abenomics-inspired Japan producing the strongest growth, with 14%, and India the largest decline, with a 10% fall. "External forecasters expect this rate of growth to slow to 3% in 2014, with a reversal in growth in Japan, due to the ending of government incentives, being the largest factor," the company said.Broker Numis pointed out that, having drifted in recent weeks, GKN's shares are "the cheapest in the FTSE350 engineering sector but positive updates such as today can only add to investor confidence in forecasts which should continue to assist in re-rating the shares over the medium term".The broker predicts £7.58bn sales, £585m pre-tax profit and 28p earnings for the full year.Results for the first half will be announced on July 29th.Shares in GKN were up 2.9% to 384.9p at 08:50 on Tuesday.OH