Rolls-Royce On Track to Deliver Expected Cost Savings
May 05 2016 - 03:40AM
Dow Jones News
LONDON—British aircraft engine maker Rolls-Royce Holdings said
earnings this year could benefit from currency effects even as it
signaled that first-half results would only be "close to
break-even."
Rolls-Royce, which makes engines for Boeing Co. and Airbus Group
SE long-range jetliners, said Thursday that if currency exchange
rates remain at the level seen to date, reported revenue would
improve by £ 450 million ($654 million) and reported profit before
tax by around £ 50 million. Many of Rolls-Royce's sales are dollar
denominated. The weakness of the British currency against the
greenback could help to move earnings higher.
The company's outlook, which strips out the currency effect, it
said ahead of the company's annual shareholder meeting.
Rolls-Royce is recovering from a series of profit warnings that
led it to cut its dividend for the first time since 1992 after
profits slumped. The company has seen lower demand for some of its
most profitable products and struggled with the impact on demand
from low crude prices on its marine and power-systems
operations.
"Despite steady market conditions for most of our businesses,
2016 continues to be a challenging year overall as we sustain
investment and start to transition major products in Civil
Aerospace, and tackle weak markets in Marine," Chief Executive
Warren East said.
The company, which previously warned profit would primarily come
in the second half of this year, reported that profit before
financing charges and tax would be near break-even in the first six
months. Free cash flow would also be higher in the second half of
2016.
The shareholder meeting, Mr. East's first as CEO at Rolls-Royce,
comes after months of turmoil for the company that has seen the
departure of top executives and U.S. activist investor ValueAct
Capital Management LP becoming the company's largest investor. In
March, Rolls-Royce appointed Bradley Singer, ValueAct's chief
operating officer, to join the board.
ValueAct, which owns more than 10% of Rolls-Royce shares, has
pledged not to battle the company until at least the 2018
shareholder meeting.
Restructuring measures, including layoffs, should start
bolstering the bottom line, Rolls-Royce said. "We are well on track
to delivering the expected cost savings in 2016," the company said,
estimated a £ 30 million to £ 50 million benefit by year-end.
Write to Robert Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
May 05, 2016 03:25 ET (07:25 GMT)
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