Russian sanctions could hit Rolls-Royce revenue

<p>Rolls-Royce has warned Russian sanctions could affect its revenue.</p>

Rolls-Royce has warned that sanctions imposed on Russia could potentially affect its revenue.

Releasing its latest trading update, ahead of its Marine Capital Markets Day in Norway, the company noted that a number of customers in its Nuclear & Energy and Power Systems businesses have delayed or cancelled orders in the wake of the sanctions. As a result it has revised its profit guidance for the sector to a drop of between five and ten per cent, a significant change on the previous estimate of +5 per cent and +10 per cent.

It is not just the Nuclear & Energy division that could suffer if Rolls-Royce continues to lose customers as the company said its group underlying revenue for 2014 would be 3.5 per cent to four per cent lower than previously expected. However, it said that it has been making good progress on cost which has limited the impact of some tough trading conditions felt across its operations.

Looking ahead it noted that the economic outlook for 2015 has become more challenging due to "external factors". It said that it will be combating these issues by accelerating progress on its "4Cs" – customer, concentration, cost and cash. It will be focusing on its cost section with headcount, footprint and sourcing identified as priorities.

John Rishton, chief executive of Rolls-Royce, said: "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.

The European Union and US issued new sanctions against Russia in September, in response to the country backing separatists in eastern Ukraine. Russia responded by imposing an import ban on food from the nations that had levied these restrictions.

BP was one major company that noted concern over the latest sanctions as it held a 20 per cent stake in Russian energy giant Rosneft.

Find up to date information on the FTSE 100 and spread betting strategies at City Index.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.