Engine manufacturer Rolls-Royce believes a recovery in civil aerospace is further off than earlier predictions after the slump in the company's civil aerospace engine business forced sales and profits down for the first half of the year. The manufacturer has reported £2.8 billion ($4.2 billion) sales and £88 million profit before interest, resulting in just £16 million net profits. The result reassured investors, however, who were expecting massive debts and pension liabilities.
The company's core civil business was hit by airliner sales remaining low. The company has revised its estimated deliveries down from 900 civil engines to 870 in 2002 - 36% below 2001. In the first half it managed only 405 deliveries, compared with 670 last year, and it now seems unlikely that it will meet an earlier profit target of around £160 million before interest for the civil sector. Civil profit for the half year was only £55 million, from revenue of £1.3 billion, 23% lower than last year. The military, marine and energy sectors all improved sales and income, but civil sales represent the bulk of sales and profit - 47% and 35%.
However, debts have been kept under control, rising £22 million to £770 million net, and the company took a £35 million pensions accounting charge - analysts had expected total pension liability to be up to £1.2 billion.
Some 4,500 jobs, including 1,000 contract staff, have gone, of 5,000 R-R said would be cut after 11 September. R-R reiterates that it expects profits to grow next year. In the long-term, it is banking on its aftermarket service business to drive growth in both sales and profits. Analyst Chris Avery of JP Morgan forecasts net profits of £111 million on £5.8 billion sales this year, rising to £186 million and £6.2 billion in 2003.
Source: Flight International