Melrose Industries Q1 Revenue Surges Despite Freight-Cost and Middle East Risks
Melrose Industries Reports Strong First-Quarter Performance
Revenue Growth Driven by Aerospace Sector
April 29 (Reuters) - GKN Aerospace owner Melrose Industries reported an 11% jump in first-quarter revenue on Wednesday, supported by the strong performance of wide-body jets, engines, and its repairs and military businesses.
Impact of Freight Costs and Inflationary Pressures
The company, which supplies engine and airframe components to civil and defence customers, said it was seeing some inflationary pressure from higher freight costs, though it has no operating footprint in the Middle East and minimal direct supply chain exposure.
Geopolitical Risks Affecting the Industry
Middle East Conflict and Energy Supply Concerns
Air travel, global shipping, and energy costs have sharply increased since U.S. and Israeli airstrikes on Iran began late in February, and Iran's near-closure of the Strait of Hormuz, a choke point for global energy supplies.
Potential Impact on Civil Aviation
Melrose, which supplies parts to aircraft makers Boeing and Airbus, cautioned about the potential impact on civil flying hours from reduced jet fuel availability and higher prices, noting it was uncertain and would depend on the duration of the conflict.
Market Reaction and Share Performance
The aerospace supplier's shares fell 3% by 0834 GMT, with analysts expecting the Middle East conflict to drive shares in the near term. Its stock has fallen 16% since the Iran conflict started.
Diplomatic Efforts and Ongoing Tensions
Efforts to end the Iran conflict were at an impasse on Tuesday, with U.S. President Donald Trump unhappy with Tehran's latest proposal.
Outlook and Analyst Commentary
2026 Revenue and Profit Expectations
The company reiterated its outlook for 2026, expecting revenue of between 3.75 billion pounds ($5.06 billion) and 3.95 billion pounds, with adjusted operating profit of 700 million pounds to 750 million pounds.
Brokerage Perspective
Brokerage RBC Europe said that it continues to see an "attractive structural growth story, despite near-term worries around the Middle East."
($1 = 0.7410 pounds)
(Reporting by Neeshita Beura in Bengaluru; Editing by Rashmi Aich)
