Melrose Industries PLC (LSE:MRO, OTC:MLSPF, FRA:27MA) has warned that chip shortages and supply problems are getting worse and will affect this year’s trading.
Automotive and metallurgy are the worst hit divisions, with no visibility of when the situation will ease said the GKN (LSE:GKN) owner but “recently the consensus view is that they have lengthened.”
In particular, the shortage of semiconductors has led to automotive order cancellations rising to between 20-25% from 1% earlier in the year with powders similarly affected.
Profitability has improved in both divisions which has offset some of the problems, said Melrose, and margins should still be twice last year if light vehicle production remains at the 2020 level of 76mln units.
Aerospace has also started to recover with revenues 16% higher than the comparable period between 1 July and 30 September a year ago.
Simon Peckham, Melrose chief executive, said: “Tightened supply of semiconductors to the automotive industry are frustrating and difficult to plan for, but whilst they affect current trading, they don't impact long-term value, particularly as cash is well controlled and debt reduced."
Otherwise, "all internal management actions are on track, and many are ahead of plan", he said.