Underlying profit for Rolls-Royce’s civil aerospace division was down by more than 90%, to just £31 million ($41 million), over the first half as revenues slipped by 5% to £3.2 billion.
Civil aerospace counted for half of Rolls-Royce group revenues over the six-month period, but the division has been affected by price and volume reduction in Trent 700 engine activity for the Airbus A330 programme.
Both original equipment and aftermarket revenues were down in the first half. Rolls-Royce delivered 312 engines compared with 326 last year.
It says the transition from the A330 to the A330neo has resulted in a profitability impact “in line” with earlier estimates, and adds that this effect has been “exacerbated” by the shift towards unlinked accounting in engine sales.
But the company points out that it will hold an exclusive position on the A330neo through the Trent 7000 powerplant, while it stands to benefit from ramp-up of the A350 for which its Trent XWB is the sole engine.
Rolls-Royce says that “softening” markets in the business-jet sector, and fewer overhauls of large engines on mature programmes, have contributed to the first half civil aerospace decline. It has also experienced higher technical costs on large engines including its Trent 1000.
Large engine sales increased by 3.6%, partly lifted by Trent 900 deliveries under the Emirates A380 contract as well as Trent XWBs for the A350 and more Trent 1000s for the Boeing 787.
But service revenues for large engines were down by 6%, following lower utilisation of the Trent 800 on the Boeing 777 and the Trent 500 on the Airbus A340.
Rolls-Royce is forecasting “positive” long-term market trends for the division, despite uncertainties over business-jet volumes and servicing activity on larger engines in the next couple of years.
“We continue to expect that strong widebody airframe demand – driven by the need for newer, more fuel-efficient aircraft – should provide resilience to manufacturing schedules over the next few years as the industry undergoes a strong replacement cycle,” the company states.
Rolls-Royce still expects full-year civil aerospace underlying profits, before finance and tax, to fall below last year's figure by £550 million, although it forecasts higher large-engine deliveries in the second half, cost improvements from TotalCare maintenance contracts, and restructuring benefits.
Source: Cirium Dashboard
