Dowlais reports solid Q1, warns of US tariff-related impacts
By Josh White
Date: Thursday 08 May 2025
(Sharecast News) - Dowlais Group said in an update on Thursday that trading in the first quarter was in line with expectations, but it warned that its full-year performance was now expected to come in at the lower end of guidance, citing weaker auto production forecasts and the delayed recovery of tariff-related costs.
The FTSE 250 company said adjusted revenue for the quarter fell 2.5% year-on-year in constant currency to £1.3bn, as macroeconomic volatility and phasing in customer programmes weighed on volumes.
Reported revenue declined 3.9% after accounting for £19m of foreign exchange headwinds.
The group said its adjusted operating margin improved by 80 basis points to 6.6%, helped by restructuring and other performance initiatives.
In the automotive division, which generated £1bn in adjusted revenue, growth in ePowertrain and a strong contribution from the China joint venture were offset by a 6.6% decline in Driveline revenue.
The drop was attributed to adverse customer mix and timing effects, as older platform phase-outs were not yet fully replaced by new ramp-ups.
ePowertrain revenue rose 3.9%, while the group's China JV delivered 11% revenue growth, aided by one-off ePowertrain gains.
Powder metallurgy revenue meanwhile declined 5.7%, impacted by softer demand in Europe and North America.
While the business slightly outperformed the market in those regions, operating margin in the segment dropped 150 basis points to 8.3%, driven by reduced volumes.
Dowlais reiterated that it did not expect current US tariffs to have a material direct financial impact, noting its historical ability to recover cost increases through commercial actions.
However, the group acknowledged that tariffs had negatively affected consumer sentiment, with S&P now forecasting a 3.3% decline in 2025 light vehicle production ex-China and a 1.7% decline globally.
As a result, Dowlais said it now expected full-year performance to land at the low end of its guidance range, which calls for flat to mid-single digit revenue decline and an adjusted operating margin of 6.5% to 7%.
Free cash flow was also expected to be below the prior year due to weaker volumes and higher restructuring costs.
Management anticipated a stronger second half, with tariff cost recovery weighted towards that period.
"Performance in the quarter was in line with expectations, with the results reflecting our geographically diversified portfolio, continued focus on executing against our global footprint restructuring programmes and ongoing performance initiatives," said chief executive officer Liam Butterworth.
"Looking ahead, we expect to fully recover the direct impact of current tariffs, however, based on the latest industry forecast and continued market volatility, we now anticipate delivering towards the lower end of our full-year guidance for both adjusted revenue and margin.
"Our proposed combination with American Axle is progressing well and will create a stronger, more resilient business, better positioned to navigate the changing dynamics of the industry."
Dowlais said its interim results were scheduled for 7 August.
At 1002 BST, shares in Dowlais Group were up 3% at 64.38p.
Reporting by Josh White for Sharecast.com.
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