Jet engine maker Rolls-Royce Holdings Plc (L:RR). lowered its profit forecast for the year and announced a major restructuring program Thursday, according to a company statement. The statement also included a review of operations by CEO Warren East, following which the company's stock sank by nearly 21 percent.
The company said earnings for the second half of the year would be at the lower end of its earlier forecast, citing a sharp drop in demand for its engines that power corporate jets, while demand for spares and after-sales services also weakened. The company also announced it would downsize its aero-engine business, which accounts for nearly half of the company’s profits, and lay off some of its senior-level executives.
“We carry too much fixed cost and are inflexible in managing this in response to changes in market conditions. This is unacceptable ,” East said Thursday.
Rolls Royce has cut its profit forecast for 2016 twice since July and also announced job cuts in its marine equipment business last month, dashing the hopes of investors waiting to see an uptick in the company’s fortunes. In July, the company said profit for the first half of the year, before adjusting for special items, was down by over 50 percent over the previous year.
The 131-year old company said it expects the downturn to persist as profits in 2016 would be over 30 percent below analyst estimates, which have already been lowered to reflect July’s warnings, according to Reuters.