Rolls-Royce profit beats estimates on cost cuts, Airbus boost

Pretax profit fell 49% to £813 million from £1.4 billion a year earlier, Rolls-Royce said in a statement


Rolls-Royce last month agreed to pay £671 million in fines to the US, UK and Brazilian fraud agencies to settle bribery charges. Photo: AFP
Rolls-Royce last month agreed to pay £671 million in fines to the US, UK and Brazilian fraud agencies to settle bribery charges. Photo: AFP

London: Rolls-Royce Holdings Plc’s annual earnings fell less than expected as Europe’s biggest aircraft-engine maker deepened cost cuts and a late production surge at Airbus Group SE boosted revenue.

Pretax profit fell 49% to £813 million ($1.02 billion) from £1.4 billion a year earlier, London-based Rolls-Royce said in a statement Tuesday. Analysts had forecast a figure of £685 million, the average of 11 estimates compiled by Bloomberg.

Chief executive officer Warren East has eliminated hundreds of office jobs and shuffled senior management in a bid to make Rolls-Royce more responsive to changes such as the oil-price slump, which stifled demand for marine turbines. Earnings got a late boost as full-year deliveries of the Airbus A350, for which it is the sole engine supplier, surged to 49 from just 12 in the first half.

“We have made operational progress and performed ahead of our expectations for the year as a whole,” East said in the statement. “While we have made good progress in our cost cutting and efficiency programs, more needs to be done to ensure we drive sustainable margin improvements.”

Revenue increased 9% to £15 billion, Rolls said, while cash flow reached £100 million after the company had previously suggested that an outflow of minus £100 million to minus £300 million was likely.

The CEO warned soon after taking charge at Rolls in 2015 that 2016 earnings would be hit by a 650 million-pound headwind stemming from the slump at its marine division, slowing regional- and corporate-jet demand, a drop in sales of the original Airbus A330 ahead of the introduction of a re-engined model, and reduced maintenance revenue from older wide-body jets.

Rolls-Royce last month agreed to pay £671 million in fines to the US, UK and Brazilian fraud agencies to settle bribery charges. The company said at the time that early indications were that 2016 profit and cash had come in higher than forecast. Bloomberg

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