📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

Rolls-Royce's turnaround delivers fivefold increase in profit

Published 08/03/2023, 02:18 AM
Updated 08/03/2023, 05:16 AM
© Reuters. FILE PHOTO: A BR700-725 jet engine is seen at the assembly line of the Rolls-Royce Germany plant in Dahlewitz near Berlin, Germany, February 28, 2023.   REUTERS/Nadja Wohlleben/File Photo
RR
-
RYCEY
-

By Paul Sandle

LONDON (Reuters) -Aero-engineer Rolls-Royce (OTC:RYCEY) on Thursday reported a strong recovery in profit as its new CEO's turnaround plan gathers pace, helped by better pricing for maintaining the engines that power long-haul aircraft like the Airbus A350 and Boeing (NYSE:BA) 787.

The British company reported first-half underlying operating profit of 673 million pounds ($854 million), more than five times the level of a year ago.

It said last week its profit would be more than twice market expectations, and its full-year outcome would be 1.2-1.4 billion pounds, up from previous guidance of 800 million-1 billion pounds.

Chief Executive Tufan Erginbilgic, who joined the company in January, said the jump in profit and cash generation reflected "greater productivity, efficiency, and improved commercial outcomes.

"We have tightly managed our cost base to offset inflationary cost pressures," he said on Thursday.

Erginbilgic said the 16 point improvement in civil aerospace margin to 12.4% - the highest for at least 15 years - had been achieved despite engine flying hours recovering to 83% of pre-pandemic levels and supply chain challenges persisting.

The company had increased the price of shop visits - when engines are removed from aircraft for maintenance - by 12%, he told reporters, which along with commercial optimisation had flowed through to the bottom line.

Operating profit in its defence unit, which provides the engines that power Britain's nuclear submarines, grew by a third, driven by strong revenue growth and higher margin.

Power systems - its third major business unit - reported broadly flat profit at a lower margin. Erginbilgic said price increases would deliver a significant improvement in the second half.

© Reuters. FILE PHOTO: A BR700-725 jet engine is seen at the assembly line of the Rolls-Royce Germany plant in Dahlewitz near Berlin, Germany, February 28, 2023.   REUTERS/Nadja Wohlleben/File Photo

Shares in Rolls rose to the highest level since March 2020 after it updated its forecasts last week. They were broadly flat in morning deals on Thursday.

($1 = 0.7878 pounds)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.