Rolls-Royce is predicting a greater drop-off in deliveries of engines for the Airbus A330 than previously forecast, contributing to a £300 million ($470 million) impact on its finances next year.
The engine manufacturer, in a first-half update, says it expects the underlying full-year profit for its civil aerospace division to be £800-900 million – within the guidance range it disclosed earlier this year.
But it says that a reduction in deliveries of Trent 700 engines, which power the A330, will be “greater than initial estimates”.
Airbus is cutting its monthly rate of A330 production to six aircraft in order to cope with a slump in orders for the type ahead of its transition to the re-engined A330neo – to be powered exclusively by the new Rolls-Royce Trent 7000 – in 2017.
Rolls-Royce’s Trent 700 has the greatest market share of the A330 powerplant market. The type is also offered with Pratt & Whitney PW4000 and General Electric CF6 engines.
The UK manufacturer says the effects of the fall in demand for engines and spares, and the associated impact on pricing, will hit profits in 2016.
Rolls-Royce is forecasting a net £300 million “headwind”, generated not only by the Trent 700 situation but reduced demand for business-jet engines and a “softer” regional aftermarket.
But it adds that the aftermarket for its large engines is “improving” and the company is expecting a £90 million benefit next year arising from its restructuring efforts.
Rolls-Royce also says it will gain from reversing a balance-sheet provision on the Trent 1000 for the Boeing 787. The company states that this results from an “expected significant improvement in operating performance”.
Combined with better retrospective profitability from TotalCare engine maintenance, the provision and contract benefit will be “somewhat more than previously expected” at around £200 million.
Rolls-Royce points out that its new large-engine programmes – the Trent 1000, 7000 and XWB – will “drive significant revenue growth” over the next decade and the company is aiming for a 50% share on the long-haul passenger aircraft market.
New chief executive Warren East says he is “clearly disappointed” by the profitability forecast, and adds that the company’s “immediate priority” is to find the performance improvements necessary to manage its Trent 7000 transition – as well as its Trent 1000 and XWB lines – effectively.
Airbus says that the recent agreement from China to take up to 75 A330s will be sufficient to avoid a further cut in production rates on the type. While engines have not been selected for the aircraft, the Trent 700 is fitted to almost all of the A330s operating with Chinese carriers.
Source: Cirium Dashboard
