Juho Lahdenpera at Nomura indicated that poor first half 2013 European auto demand would be likely to drive a cautious outlook for GKN.

"The GKN share price is up 5% relative to the sector in the last month, which signals to us positive expectations by the market heading into the results," he said.

"Although we are in-line with consensus for fiscal year 2012 and weakness in European auto demand has been well-flagged previously, the share price momentum is a slight concern to us, as car sales in Europe declined a further 9% year-on-year in January of this year, which we think will prompt a cautious outlook by GKN's management. We take a cautious view on the shares heading into the numbers."

He added: "Our focus for the results is on management's outlook. Jan 2013 car sales in Europe declined 9% year-on-year to all-time lows and we now expect FY13 the total regional auto production to decline -4% year-on-year(from -2 % year-on-year earlier). We believe GKN's management have already implemented most of its available cost saving measures in Europe and we look to understand how management plan to offset the likely further leg down in European demand on Driveline's and Powder Metallurgy's margins

"In addition, the progress of restructuring in Aerospace to integrate Volvo is of interest to us. Consensus, like us, looks to give management full credit for its integration plans and any delays would be a downside risk to estimates. The ongoing safety reviews on Boeing's Dreamliner aeroplane are unlikely to have impacted Aerospace production to date, as we understand that Boeing has asked GKN to maintain production rates."

MF

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