LONDON — Rolls-Royce posted a better-than-expected 7 per cent rise in first-half profit, driven by increased production at planemakers Airbus and Boeing who are responding to growing demand from airlines for new fuel-efficient planes.
Rolls, the world’s second-largest maker of aircraft engines behind US group General Electric, yesterday reported an underlying pretax profit of £637 million ($985.66 million) for the six months to the end of June on revenues 5 per cent higher at £5.8 billion.
Europe’s Airbus and US rival Boeing are ramping up output and are targeting more than 1,100 deliveries this year.
The company, whose website says a Rolls-Royce powered aircraft takes off or lands every 2.5 seconds, raised the interim dividend by 10 per cent to 7.6 pence per share and said it expected to deliver further growth in 2012 in spite of global economic uncertainty.
“For the full year, we continue to expect good growth in underlying profit with cash flow around breakeven,” chief executive John Rishton told reporters.
“The volatility of the economic environment — whether it’s in Europe, a slowdown in China or the US — does have an impact and none of us are immune to this. But the diverse range of products we produce and the geographic spread we have helps protect us.”
The group sells aero, defence, marine and energy products to businesses and governments in more than 100 countries.
Rolls was expected to post an average pretax profit of £615 million for the first six months of 2012, according to a Thomson Reuters analyst poll, which predicts it will deliver £61.43 billion of profit in the full-year.
Shares in Rolls-Royce, which have risen 14 per cent in 2012, were 4.8 per cent up at 869.50 pence, valuing the company at around £16 billion.
“We view these as positive results in the key aerospace area, which for us remains the major driver of the stock,” said RBC analyst Rob Stallard.
Global airlines will buy $3.5 trillion of aircraft over the next 20 years to meet demand for travel to and from emerging markets — especially in Asia — and renew ageing fleets in the West, according to the world’s big two planemakers. Airlines are investing in new lightweight planes to lower fuel costs, which are soaring.
The predictions underscore soaring demand for narrowbody or single-aisle jets. Analysts forecast that 20,000 narrowbody planes will be produced in the next 20 years.
Rolls, which has more than 5,000 engines worth some 50 billion pounds on order, said revenues at its main civil aerospace unit rose 17 per cent in the last six months. Around 60 per cent of the unit’s revenues come from aftermarket services.
A new joint venture between Rolls and US rival Pratt & Whitney to develop the next generation of engines for the mid-sized aircraft market would be cleared in the “foreseeable future”, said Rishton.
The company said its order book rose 4 per cent to 60.1 billion pounds during the period, while net cash roughly quadrupled to 869 million pounds, helped by last year’s sale of its stake in the International Aero Engines consortium.
“I haven’t got any immediate plans to spend that cash — having cash in the bank is very helpful for me because I can sleep well at night and not worry too much,” said Rishton, adding that the group would focus on delivering the benefits from last year’s acquisition of Tognum before making more deals.
Earlier this week Rolls said it had been forced to replace a component on a number of its Trent 1000 engines which power Boeing’s new 787 Dreamliner after Japan’s All Nippon Airways grounded part of its 787 fleet following tests which revealed a risk of engine corrosion.
Rishton said the company would not take a significant financial hit from the incident. — Reuters
