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Rolls-Royce says won't return to profit growth in 2015

Friday, October 17, 2014 - 14:57
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British engineer Rolls-Royce warned that it would not return to growth next year, having previously said that it would, as economic conditions have deteriorated and customers were delaying decisions. -- PHOTO: AFP

[London] British engineer Rolls-Royce warned that it would not return to growth next year, having previously said that it would, as economic conditions have deteriorated and customers were delaying decisions.

Rolls said on Friday it now estimated that underlying profit would be flat to 3 per cent lower next year compared to the expected outcome for this year, with underlying revenue in the range of 3 per cent higher to 3 percent lower.

The company also said that its results this year would be affected, guiding that underlying revenue would be between 3.5 per cent and 4 percent lower, against earlier expectations for flat revenue.

This year's annual underlying profit, however, would still be flat compared to 2013, excluding adverse foreign exchange movements and a one-off charge in its marine business, due to improved cost performance.

Rolls, the world's second-largest maker of aircraft engines behind US group General Electric, blamed worsening economic conditions and tightening Russian trade sanctions for hitting next year's results. It said orders were being cancelled and delayed in its nuclear and energy and power systems businesses.

The profit warning for next year is the second blow to investors in the company in 10 months.

The group disappointed the market in February when it said US and European spending cuts in defence would result in flat profits in 2014, bringing over a decade of profit growth to an end.

Until then the company had enjoyed 11 years of strong profit and revenue growth as soaring demand for more fuel-efficient engines for passenger planes made by Airbus and Boeing boosted its civil aerospace unit, which accounts for about half of its sales.

The company also on Friday issued medium-term guidance, saying it expected group return on sales of 13.5 per cent to 14.5 per cent. REUTERS

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