Rolls-Royce has issued its third profit warning in just over a year.
The company, which is best known for its luxury cars and aircraft engines, last issued a profit warning in February. At that time, it claimed that a steep drop in the cost of oil had "increased uncertainty for many of our markets and customers."
The firm said demand for some of its aircraft engines was weak. Falling commodity prices also hurt the company's marine division, which makes engines for merchant vessels as well as systems for oil rigs.
New profit outlook
Previously, Rolls-Royce had predicted its 2015 profit to be between £1.4 billion and £1.55 billion. However, on Monday (July 6th), the company lowered those numbers to between £1.33 billion and £1.47 billion. The marine division is expected to see underlying profit between break even and £40 million.
The company's aviation division could also take a £300 million hit has it goes through the process of phasing out its Trent 700 engine. This piece of engineering is being replaced by the next-generation Trent 7000 – but the company as reported demand for business jet engines has been lower than expected.
Commenting on the revised profit predictions, Rolls-Royce chief executive Warren East said: "I am clearly disappointed by today's announcement and the impact this will have on our investors and employees."
Mr East, who was installed as boss of the company last week, added: "Notwithstanding the market developments, it is our responsibility to build a business that is sustainable and resilient no matter what is thrown at us and this will be my fundamental priority for the next few years."
Rolls-Royce said that revenue for 2015 would be unchanged, but that continuing weakness in offshore markets would lower profit in the marine division by around £85 million in 2015 and 2016. In addition, plans to cut costs and restructure the division would also result in a charge of £70 million to £100 million.
On Friday, Rolls-Royce shares closed at 856.50 but on Monday morning were down 9.05 per cent to 779.00.
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.