(Reuters) - Melrose Industries (MRON.L), the turnaround specialist that owns British engineer GKN, plans to cut jobs as it grapples with the coronavirus-led downturn that drove it to a second quarter loss.
Shares in the FTSE 100 company fell as much as 20% on Wednesday after it also said it would not pay an interim dividend and analysts cut their profit forecasts.
Melrose, which employs about 53,000 people globally, did not say how many jobs would go, nor in which businesses.
However, it said a “substantial” reduction of costs in its aerospace division - a big revenue contributor with 50 manufacturing sites in 15 countries - was underway.
Melrose specialises in buying and improving underperforming businesses and has operations in the aerospace, autos and industrial sectors, which have been battered by the pandemic.
Two years ago, it clinched an 8 billion pound ($10 billion) takeover of GKN, which supplies parts to carmakers such as Volkswagen, components to aircraft including the Eurofighter Typhoon and made Spitfires during the Second World War.
The company has been cutting costs and expects to save about 100 million pounds ($127 million) in 2021, it said.
It did not give a figure for its second-quarter loss, but said it was “likely” to make a small adjusted operating profit in the first half.
“It is clear that our, and consensus, expectations on the impact of COVID-19 were too optimistic,” JPMorgan analysts said, cutting their 2020 forecast for adjusted earnings before interest, tax and amortisation by 38% to 223 million pounds.
Melrose said it had generated about 200 million pounds of free cash flow, reducing its debt pile by 90 million. It had liquidity headroom of over 1.1 billion pounds as of June 30, the London-based company added.
JPMorgan said the cash position should remove any lingering balance sheet concerns.
Reporting by Yadarisa Shabong in Bengaluru; Editing by Krishna Chandra Eluri and Mark Potter