Rolls-Royce civil aerospace profit down 20% in 2010

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Rolls-Royce's civil aerospace division has reported a 20% fall in underlying profit in 2010, as its earnings were dented by last November's Trent 900 failure on a Qantas Airways Airbus A380.

The uncontained failure on 4 November 2010 and its related costs totalled £56 million, says the engine manufacturer, which expects "a modest level of additional costs" in 2011.

Underlying revenues of the division in 2010 rose 10% to £4.9 billion, says Rolls-Royce. Its order book totalled £48.5 billion, up 3% from 2009.

Engine deliveries for the year remained flat at 846, up from 844 in 2009.

Last November's Trent 900 failure "generated considerable scrutiny of the aircraft and engine programme", says the manufacturer.

"The costs provided for this failure, including incremental service and support costs, uncontracted settlements to all affected customers and the impact on the group's operational activity totalled £56 million," says Rolls-Royce.

Referring to the incident as "regrettable", the manufacturer adds: "Uncontained disc failures happen with a frequency of about once a year on the world's large civil aircraft fleet. However this was the first time an event of this nature had occurred on a large civil Rolls-Royce engine since 1994."

In 2010, the engine manufacturer received orders worth £7.5 billion, including orders for more than 300 Trent and 188 V2500s.

"The outlook for the [Trent 700] programme remains particularly strong with the Trent 700 order book at record levels, despite having delivered 139 engines in 2010," says the manufacturer.

Orders for more than 150 engines were also received for the Trent 1000 and Trent XWB, which make up 1,700 engines in Rolls-Royce's order book.

In total, its civil order book has more than 5,100 engines, which is equivalent to more than 35% of today's installed fleet delivered over more than 25 years, says Rolls-Royce.

On the deliveries front, the manufacturer delivered a record number of V2500s, helping to offset lower deliveries of Trent engines.

Service revenues grew 15% to £3 billion from 2009 as a result of better foreign exchange rates and benefits from a distribution services agreement with supply-chain services provider Aviall.

Looking ahead, Rolls-Royce expects underlying profit to grow 25% in 2011 due to higher service revenues, better foreign exchange rates and increased productivitiy.

These factors will help offset programme costs and higher research and development charges, it says.