Melrose says cancellations hitting auto unit due to chip shortage

Aerospace and motoring engineer Melrose said it expected the global shortage of semi-conductors to hit its automotive division after a sharp rise in customer cancellations in the first quarter.

“At present the timing and duration of these constraints is uncertain, but recently the consensus view is that they have lengthened. There are a number of scenarios possible, but it is likely these are below previous expectations,” the company said on Tuesday.

Strong demand in automotive was “being heavily constrained by customers due to their supply chain issues”, it added.

“This is best illustrated by 'in month cancellations' from customers rising from a normal rate of 1% each month experienced in the first quarter this year to a current rate of approximately 20% to 25%,” Melrose said.

“A similar theme is impacting Powder Metallurgy. These industry supply issues are very difficult to plan for, or predict, and both businesses are working with their customers to best manage this challenging situation.”

However, Melrose said it was seeing improvement in aerospace end markets with revenue in the three months to September 30 up 16% from 2020 driven by restructuring and forecast “the pace of this to further pick up during the second half”.