LKQ profit rises despite scrap, economic headwinds

Market: Metals
31/10/19

US-based auto parts recycler LKQ expects lower ferrous scrap prices and European economic headwinds to weigh on second half 2019 earnings even as third quarter profits climbed.

LKQ's average realized ferrous scrap prices dropped by 26pc to $124/t compared with a year earlier. The company acknowledged the declining prices would have an impact on fourth quarter earnings.

The company's continuing plan of divestments and acquisitions and increased salvage business revenues lifted acquisition revenue growth by 0.8pc and organic revenue growth by 2.2pc.

LKQ's US operations divested its aviation parts business AeroVision in August and acquired a diagnostic and calibration business on 1 October.

Despite weak economic conditions weighing on the European market, the company witnessed organic growth in all markets besides Germany and Italy.

LKQ's spare parts subsidiary Auto Kelly Bulgaria merged with Elit Kar on 1 October as part of the company's continuing divestment strategy.

Total aftermarket procurement spending decreased by 4.6pc to $1.62mn compared the third quarter 2018.

Purchases of wholesale salvage cars and trucks rose by 6.8pc to 78,000 units on the year, while self-service and crush-only vehicle purchases increased by 11pc to 151,000 units.

European wholesale salvage car and truck purchases dropped by 16.7pc to 5,000 units as the company restricted inventory in Europe because of weaker economic conditions brought on by trade war uncertainty and the continuing Brexit conflict.

LKQ's profit for the third quarter rose to $152mn from $134mn in the third quarter a year earlier.

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