By Robert Wall
LONDON-- Rolls-Royce Holdings PLC on Friday further cut its
profit forecast for the year amid economic headwinds that
contributed to a sharp drop in profit for 2014.
The engine maker reported a full-year net profit of just GBP69
million ($106.1 million), compared with GBP1.37 billion in the
prior-year period, on revenue down to GBP13.74 billion from
GBP14.64 billion.
Chief Executive John Rishton said "2014 has been a mixed year
during which underlying revenue fell for the first time in a
decade, reflecting reduced spending by our defense customers,
macroeconomic uncertainty, and falling commodity prices."
The sharp drop in net profit reflects the revaluation of its
currency hedging, Chief Financial Officer David Smith said. The
more closely watched underlying pretax profit figure was GBP1.6
billion.
Rolls-Royce for a second time cut profit guidance for the year,
saying pretax profit could come in at GBP1.4 billion to GBP1.55
billion, from GBP1.62 billion in 2014. Free cash flow will fall,
while sales could come in between GBP13.4 billion to GBP14.4
billion.The company, which a year ago still forecast a return to
profit and sales growth, in October said profit could contract as
much as 3%.
"The external environment has deteriorated in some of our major
markets. In particular, oil prices have halved over this period,
creating increased uncertainty for many of our markets and
customers," Rolls-Royce said in the statement. Its offshore marine
business was hit particularly hard, it said.
Rolls-Royce has been struggling to meet earnings targets as cost
cutting efforts at its aerospace unit, the company's largest
division, fell short. Global economic headwinds, including the
slump in crude prices, are weighing on the performance of other
divisions.
Write to Robert Wall at robert.wall@wsj.com
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