Rolls-Royce's turnaround delivers jump in H1 profit
AERO-ENGINEER Rolls-Royce on Thursday (Aug 3) reported a strong recovery in profit as its new chief executive officer’s turnaround plan gathers pace, helped by better pricing for maintaining the engines that power long-haul aircraft like the Airbus A350 and Boeing 787.
The British company reported first-half underlying operating profit of £673 million (S$1.1 billion), more than five times the level of a year ago.
It said last week its profit would be more than twice market expectations, and its full-year outcome would be £1.2 billion to £1.4 billion, up from previous guidance of £800 million to £1 billion.
CEO Tufan Erginbilgic, who joined the company in January, said the jump in profit and cash generation reflected “greater productivity, efficiency, and improved commercial outcomes”.
“We have tightly managed our cost base to offset inflationary cost pressures,” he said on Thursday.
Erginbilgic said the 16-point improvement in civil aerospace margin to 12.4 per cent – the highest for at least 15 years – had been achieved despite engine flying hours recovering to 83 per cent of pre-pandemic levels and supply chain challenges persisting.
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The company had increased the price of shop visits – when engines are removed from aircraft for maintenance – by 12 per cent, he told reporters, which, along with commercial optimisation, had flowed through to the bottom line.
Operating profit in its defence unit, which provides the engines that power Britain’s nuclear submarines, grew by a third, driven by strong revenue growth and higher margin.
Power systems – its third major business unit – reported broadly flat profit at a lower margin. Erginbilgic said price increases would deliver a significant improvement in the second half.
Shares in Rolls Royce rose to the highest level since March 2020, after it updated its forecasts last week. REUTERS
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