Rolls-Royce shares dive as soaring costs squeeze profits
Rolls-Royce shares plunged this morning after the firm reported a cocktail of snarled supply chains and soaring inflation had squeezed profits in the first six months of the year.
The engineering giant said that revenues had jumped £5.6bn in the period, up from £5.16bn last year, but underlying profits slumped to £125m, down from £307m in the same period last year.
Shares fell nearly 4.5 per cent in early trading after the trading update.
Outgoing boss Warren East said the firm was focused on stripping out costs as the macroeconomic situation deteriorated, and creating a “leaner and more agile” civil aerospace business.
“We are actively managing the impacts of a number of challenges, including rising inflation and ongoing supply chain disruption, with a sharper focus on pricing, productivity and costs,” he said in a statement today.
The firm said it was “tightly controlling costs” and had consolidated its supply chain to focus on the best performing suppliers, with long-term agreements and in place to provide a buffer against short-term price hikes.
The aerospace giant, which counts Boeing and Airbus among its customers, has been hampered by a lack of flying hours in the past two years and dampened demand for aircraft servicing.
The firm said its Power System had a record quarter for order intake however, which helped buoy its cash position. Bosses reported £1.1bn free cash flow improvement due to commercial discipline and increased flying hours.
Bosses doubled down on near financial targets of low-to-mid-single digit underlying revenue growth, with unchanged operating margin.