Rolls-Royce issues fresh profit warning

GMT 19:55 2014 Friday ,17 October

Arab Today, arab today Rolls-Royce issues fresh profit warning

Rolls-Royce slumped to the bottom of London's benchmark FTSE 100 index
London - AFP

British engine maker Rolls-Royce announced on Friday that it was slashing its earnings forecasts partly as result of Western trade sanctions against Russia, sparking a collapse in its share price.
Rolls said underlying profit in 2015 would be flat at best compared with 2014 but could fall by as much as three percent. The company had previously predicted earnings would grow next year.
"In the last few months economic, conditions have deteriorated and Russian trade sanctions have tightened, leading a number of customers to delay or cancel orders particularly in our Nuclear & Energy and Power Systems businesses," said Rolls.
"At the same time we have made good progress on cost, which has limited the impact of these adverse trading conditions on the group," it added in a trading update.
The West has imposed a series of economic sanctions against Moscow over its role in the Ukraine crisis, cutting Russia's access to Western money markets and forcing its biggest state companies to appeal for massive financial assistance.
Rolls, meanwhile, said that next year would be worse than expected for the group after it was forced to change its guidance on underlying revenues for 2014. It now sees revenue at 3.5-4.5 percent lower than last year, rather than flat.
In reaction, Rolls-Royce slumped to the bottom of London's benchmark FTSE 100 index, as its share price tumbled 11.54 percent to close at 832 pence.
The FTSE meanwhile finished 1.85 percent higher at 6,310.29 points, amid easing worries over the economic outlook in the eurozone.
"Rolls Royce is very much at the foot of the index ... after news that it doesn't expect to see a return to growth next year, despite earlier claims to the contrary," said Tony Cross, market analyst at traders Trustnet Direct.
In May, Rolls-Royce shocked investors when it issued a profit warning at its marine division, which has been beset by production problems, and had forecast flat earnings for 2014.
Rolls added on Friday that it was maintaining that forecast as it keeps a control on costs.
The group has also been hit hard by adverse foreign exchange movements.
"Weakness due to FX (foreign exchange) exposure hitting profit margins, sanctions in Russia and the general civil aviation slowdown has led them to cut guidance," said Atif Latif, director of trading at Guardian Stockbokers.
"This is a common theme across many companies and Rolls-Royce has somewhat been affected negatively by things out (of) their control."
On the upside, Rolls said it is benefiting from demand for its fuel-efficient Trent aircraft engines.
"While the short-term is clearly challenging, reflecting the economic environment, the prospects for the group remain strong, driven by the growing global requirement for cleaner, better power," added chief executive John Rishton in Friday's statement.
Earlier this year, Rolls outlined plans to return £1.0 billion ($1.6 billion, 1.26 billion euros) to investors via a share buyback after the sale of its energy production arm to Germany's Siemens.

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