Melrose Industries, the parent company of GKN Aerospace, is facing substantial financial repercussions following a chemical leak scare at its Garden Grove facility in California. The company has announced it will incur a hit of between £25 million and £30 million in the second half of the year due to the incident, which includes exceptional costs and the financial impact of operating at reduced capacity. Additionally, Melrose is pausing its £175 million share buyback program as it assesses the full financial impact, including potential regulatory and legal proceedings.
The incident, which involved a pressurized tank containing toxic chemicals used for aircraft windows, led to the evacuation of approximately 50,000 residents. The Orange County District Attorney's office has since announced a $100 million claims program for residents and businesses affected by the evacuation. This comes after multiple class-action lawsuits were filed against GKN Aerospace, alleging negligence in maintaining the facility and seeking compensation for displacement costs, living expenses, and diminished property values.
While Melrose's pre-tax profit fell to £89 million in the first half of the year from £379 million a year earlier, revenue increased 10% to £1.87 billion. The Garden Grove incident specifically reduced first-half revenue by £16 million and adjusted operating profit by £9 million. The company expects the site, which manufactures F-35 canopies and windows for commercial aircraft, to operate at around half its normal capacity until full production resumes. Analysts have highlighted GKN Aerospace's critical role as a sole mass supplier for certain proprietary aerospace parts, such as F-35 canopies and Boeing passenger cabin windows, raising concerns about potential supply chain disruptions across the aerospace industry.
