LONDON—Rolls-Royce Holdings PLC Chief Executive Warren East is
promising to inject a greater sense of urgency into the British
engine maker's turnaround effort as the company reported a fall in
sales and profit.
The maker of jetliner engines for Boeing Co. and Airbus Group SE
planes reported first-half net profit of £ 360 million ($561.41
million), down from £ 532 million a year earlier. The company's
more closely watched underlying pretax profit slipped 32% to £ 439
million, slightly ahead of the £ 390 million to £ 430 million range
Rolls-Royce gave earlier this month.
Underlying sales slumped 3% to £ 6.3 billion, the London-based
company said.
Mr. East, in the job less than a month, said he would seek to
add "pace and simplicity" to the company's efforts to cut costs and
become more efficient. He has begun a review of the entire
business, with results before year-end.
"I've received quite a lot of feedback about ways we can
improve," he said, by "doing things faster and reducing some of the
complexity we have."
Rolls-Royce's earnings have been repeatedly hit by deteriorating
conditions in key markets that caused the engineering company to
halt its first ever share repurchase. A slowdown in sales of its
profitable Trent 700 aircraft engines that power Airbus A330
widebodies is weighing on its aerospace business, which is also
struggling with sales for regional jet and business aircraft.
Low crude prices have caused sales in the marine sector to
stall. Mr. East said low commodity prices were also a headwind for
the business.
Rolls-Royce said from the start of the year that it would make
the bulk of its profit in the second half. "Despite the
disappointment of our recent update, our second half outlook
remains positive," Mr. East said.
Rolls-Royce maintained its full-year outlook. The company
earlier this month cut its outlook for underlying pretax profit to
a range of £ 1.33 billion to £ 1.48 billion. It also lowered its
cash flow expectation.
Most of the deals to achieve full-year targets already booked.
"The focus is now is on delivery, to turn those orders into
profit," Mr. East said.
The engine maker also remains in talks with Airbus about new
projects. The European plane maker is exploring an upgrade to its
A380 superjumbo with new engines. Rolls-Royce Chief Financial
Officer David Smith said the company is considering providing an
engine, though the development costs would have to be below those
for a brand-new turbine. An engine for the A380neo, as the plane
has been dubbed, "needs to make a business case at a lower volume,"
Mr. Smith said.
Rolls-Royce also would be willing to work with Airbus on
powering a further evolution of the A350, Mr. Smith said.
Rolls-Royce is the sole engine supplier on that long-range
plane.
Write to Robert Wall at robert.wall@wsj.com
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