Rolls-Royce shrugged off the impact of Boeing's decision to terminate the 717 regional twinjet as it last week unveiled higher than expected profits for 2004. The UKaeroengine manufacturer was boosted by strong sales growth in its aftermarket businesses and posted underlying pre-tax profits of £345 million ($650 million) for the year, up 21% on 2003.
The company says the cancellation of the 717 - for which its German subsidiary Rolls-Royce Deutschland supplies BR715 engines - will have a limited effect.
"It was a relatively small programme,"says Mike Terrett, president civil aerospace. "We're disappointed, but it is not a significant portion of Rolls-Royce Deutschland's work. Because we have a broad portfolio we're fully able to absorb the termination of the 717 programme."
R-R expects between 25 and 30 years of servicing and overhaul activities on the BR715 engine and says it is looking out for other applications for the engine, but at the moment has no near-term plans for other programmes.
Overall, the company says it "benefited from a better than expected cyclical recovery in the civil aerospace sector", and group revenue from after market services grew by 12% to £3.8 billion.
The company won a record 40% of civil engine orders announced in 2004, worth £8.7 billion and increased its firm orderbook by 9% to £18.9 billion at the end of 2004. Underlying profits before interest in the civil aerospace division rose from £131 million in 2003 to £170 million in 2004, and from £147 million to £155 million in the defence sector.
Average net debt across the group fell 41% to £560 million on "tight control of working capital" and efforts to cut costs and increase efficiency and productivity.
The group's gross margin rose to 19% in 2004, compared with 17.4% for the previous year following "continuing improvements in operational efficiency and a 5% reduction in product unit costs."
R-R expects to see further consolidation of the supply chain in 2005, as it seeks further risk- and revenue-sharing agreements and long-term commitments with smaller suppliers.
Civil engine servicing revenues grew by a quarter, to £1.8 billion, which represents 59% of civil aerospace sales.
HELEN MASSY-BERESFORD / LONDON
Source: Flight International
