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Business News/ Companies / Rolls-Royce eyes profit growth and Tognum deal
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Rolls-Royce eyes profit growth and Tognum deal

Rolls-Royce eyes profit growth and Tognum deal

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London: British enginemaker Rolls-Royce said it was on course to deliver higher 2011 profit and was still keen to secure a joint deal to acquire German peer Tognum.

“The global markets that we address are starting to recover as expected and our view of the full year trading performance remains consistent with the guidance issued at our preliminary results in February 2011," Rolls-Royce said on Friday.

Earlier this year, the company predicted profit would grow thanks to strong demand in emerging economies, which would offset subdued growth in many developed countries.

Emerging markets now account for around half of Rolls’s £60 billion ($96 billion) order book.

Rolls, the world’s second-largest maker of aircraft engines behind US group General Electric, said economic recovery was fragile and markets remained volatile.

Its £4.6 billion offer with German carmaker Daimler to buy Tognum was knocked back last month. Rolls suggested it was keen on reviving a deal which, it said, would significantly accelerate growth of its marine and energy businesses.

Rolls, which makes engines for planemakers Airbus and Boeing , said it was confident in its ability to grow sales, with or without any deal.

“We remain confident in our ability to double revenues in the coming decade through organic growth alone," chief executive John Rishton said in his first trading statement since taking over from John Rose.

Rolls shares, which have risen 2% in 2011, were up 0.4% by 0825 GMT, valuing the company at around £12 billion.

“The implication is that profits will more than double in the coming decade, in our view," RBS analyst Sandy Morris said.

“New aircraft programmes like the Boeing 787 and the Airbus A350 will transform Rolls’s manufacturing operations, which may help earnings as a whole," he said.

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.

However, rising oil prices and unrest in the Arab world could wipe out airline profitability in 2011 and hinder the industry’s recovery, airline body IATA said earlier this month.

Rolls recently said most of the costs related to technical setbacks it suffered in 2010 were now behind it.

Last year one of its Trent 900 engine failed 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.

Rolls was expected to report 2011 pretax profit of £1.1 billion, up from last year’s 955 million, according to a Thomson Reuters.

The company said it expected to see a modest cash inflow over the full year but a cash outflow was likely in the first six months.

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Published: 06 May 2011, 02:49 PM IST
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