Engines, Aftermarket Demand Drive Melrose Industries’ Brisk Growth

The UK’s Melrose Industries, the parent company of GKN Aerospace, posted 11% annual revenue growth in 2024 on the back of brisk demand for its engines and aftermarket businesses.

Revenue for the year reached £3.47 billion ($4.48 billion), while adjusted operating profit jumped 42% to £540 million.

“At a headline level ... while both [engines and aftermarket] divisions delivered revenue growth, our performance is very much driven by the continued strong performance of the Engines Division, which was up 26%,” CFO Matthew Gregory said in an earnings call.

Regarding the financial impact on Melrose of the Pratt & Whitney geared turbofan (GTF) engine powder metal problem, Gregory said it was about £40 million in 2024. “This is a little over half the amount that we guided to at the start of the year but it does reflect the direct activity from Pratt & Whitney,” he said.

The powder metal issue impact on Melrose is expected to be £70 million this year and should total about £200 million, lasting into 2027.

Melrose’s aftermarket revenue rose 32%, driven by a strong performance in the company’s Swedish military business, given the higher level of support required for the Gripen RM12 engine upgrade.

Melrose’s aftermarket repair business expanded 18% year-on-year thanks to the higher number of certified parts of both the CFM International Leap and GTF engines able to go through its facilities as well as a full year’s operation of its Malaysia plant.

The UK company expects this growth to continue given that it has opened a new repair facility in San Diego, Gregory said.

With its earnings call coming two days after the U.S. imposed 25% tariffs on its top trading partners Canada and Mexico—crucial players in the aerospace supply chain—Gregory addressed the expected toll on Melrose’s business. He spoke before the U.S. on March 6 announced a reprieve until April 2 on goods covered under the three countries’ trade agreement signed during President Trump’s first term. It was not immediately clear how the reprieve would affect Melrose.

“We do have a product that now attracts a higher rate of tariffs on imports into the U.S., particularly from Mexico ... The overall impact on the group for this year would not be material,” he said.

Gregory noted it is unclear how long the tariffs will be in place and whether they will continue to apply to all of its aerospace products, as well as who will pay for the additional costs due to the levies. Because Melrose sees the situation as “dynamic,” it has not factored the effect of tariffs into its 2025 guidance, he explained. Further, the impact has been reduced given that certain contracts require the customer to pay any duties and the fact that Melrose has a “distributed global footprint,” he added.

For 2025, Melrose is projecting revenue of £3.55-3.70 billion. This guidance includes the “anticipated impact of further supply chain challenges, particularly in Structures,” Robert Stallard of Vertical Research Partners said in a March 6 client note.