By Alex MacDonald and Robert Wall
LONDON--Rolls-Royce Holdings PLC Thursday swung to a first-half
net profit and reaffirmed that its weaker operational performance
is set to improve by the end of the year.
Net profit was 544 million pounds ($921 million) compared with a
loss of GBP385 million last year, when it incurred a GBP1 billion
charge due to the mark to market effect of its hedge book on the
back of a strong dollar.
Underlying profit dropped 20% to GBP644 million, reflecting the
expected reduction in its defense business, weaker profitability
from its Marine division and the adverse impact of currency
fluctuations.
"We expect significant improvement in profit for the second half
driven by higher revenue and cost reduction. While there are
challenges, we maintain our full-year guidance for the group," said
John Rishton, Rolls-Royce's Chief Executive.
The company said in May it expects two-thirds of profit to be
secured in the second half with 2014 returns little changed from
the previous year.
Sales in the first half fell 9.7% to GBP6.63 billion. Sales for
the full year should be similar to the GBP15.5 billion seen in
2013.
Rolls-Royce in June announced its first share repurchase as it
ruled out big acquisitions. The buyback will start once the company
completes the sale of its industrial gas-turbine business to
Siemens AG (SIE.XE) for GBP785 million in cash. Mr. Rishton has
also embarked on a push to improve profitability on a par with such
rivals as General Electric Co.
Rolls-Royce should benefit from becoming the only engine
offering on an upgrade of Airbus Group NV's (AIR.FR) A330 widebody
jet. The Trent 7000 engine will be chiefly responsible for
delivering the 14% fuel savings Airbus is promising customers, the
Toulouse-based company said.
Rolls-Royce, however, suffered two contractual set-backs for its
commercial jet engine activities in recent weeks. Emirates Airline,
the largest carrier by international traffic, voided a deal for 70
Airbus Group NV A350 long-range jets. The twin-engine plane is
powered by Rolls-Royce turbines.
Airbus on Tuesday also said Airbus had cancelled a deal with
Japan's Skymark Airlines for six A380 superjumbos using Rolls-Royce
engines. The cancellation has crimped the engine maker's orderbook
by GBP351 million.
Write to Alex MacDonald at alex.macdonald@wsj.com and Robert
Wall at robert.wall@wsj.com
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