London: British enginemaker Rolls-Royce Plc predicted an uplift in 2011 profit and said most of the costs related to last year’s engine blowout on a Qantas A380 were behind it.
Announcing full-year results on Thursday, the world’s second-largest maker of aircraft engines behind General Electric Co. said it had taken a £56 million hit on the Qantas incident and saw only modest charges relating to the event in 2011-12.
“The view for 2011 is that we’ll continue with good growth in underlying profit, supported by services growth in the civil aerospace and marine sectors,” chief executive John Rose told reporters on a conference call in his last results presentation before retirement.
“The rise in profit comes after provisions for the Trent 900 incident, which illustrates the resilience of the business.”
Underlying pretax profit grew 4% to £955 million ($1.5 billion), beating expectations and driven by solid growth in its defence and marine units.
The company had on average been expected to report a pretax profit of £939 million, according to a poll of 22 banks and brokerages by Thomson Reuters.
Rolls suffered technical setbacks on two programmes in 2010.
Last year one of its Trent 900 engine failed mid-flight on a Qantas Airbus A380, forcing it to make an emergency landing. On Boeing’s 787 programme, engine failure during ground testing led to further delays for its entry into service.
Former Ahold boss John Rishton will replace Rose when he retires next month after 15 years.
Rolls said underlying profit at its civil aero unit fell 20% in 2010 due to the A380 charge but that the division would deliver a profit uplift of around 25% in 2011-12.
Shares in Rolls-Royce, which have risen more than a third in the past year, were down 1% at 649 pence by 0930 GMT, valuing the company at around £11.7 billion.
“Civil aero trends are encouraging and this division will be the main driver of growth and potential outperformance over the next couple of years,” said Investec analyst Andrew Gollan, who mainatins a “buy” rating on the stock.
“However, for now we do not anticipate material upgrades and after a reasonable run, we think the shares are unlikely to significantly outperform in the near term.”
Rolls said future growth would be subdued in many developed countries but this would be offset by strong demand in emerging economies, which account for around half of its £59.2 billion order book.
“Half of our revenue comes from services, which is driven by history and is biased towards the traditional markets of Europe and the Americas, but over time there will be a transition towards a revenue base that has the same sort of shape as our order book,” said Rose.
Plans by Airbus and Boeing to raise prices and production in 2011 come on the back of rising demand as airlines recover more quickly than expected from recession.
Rising oil prices could wipe out airline profitability in 2011 and hinder the industry’s recovery, airline body Iata said earlier this month.
Rolls said revenue grew 6% to £11.08 billion in 2010 and said it would raise its final dividend by 6.7% to 9.60 pence per share, giving a total of 16p.