Rolls-Royce On Track to Deliver Expected Cost Savings

By Robert Wall

LONDON--British aircraft engine maker Rolls-Royce Holdings said earnings this year could benefit from currency effects and confirmed full-year targets ahead of the company's annual shareholder meeting later in the day.

Rolls-Royce, which makes engines for Boeing Co. and Airbus Group SE long-range jetliners, said Thursday that if currency exchange rates remain at the level seen to date, reported revenue would improve by GBP450 million ($654 million) and reported profit before tax by around GBP50 million. The company's outlook, which strips out the currency effect, is unchanged.

Rolls-Royce is recovering from a series of profit warnings that led it to cut its dividend for the first time since 1992 after profits slumped. The company has seen lower demand for some of its most profitable products and struggled with the impact on demand from low crude prices on its marine and power-systems operations.

"Despite steady market conditions for most of our businesses, 2016 continues to be a challenging year overall as we sustain investment and start to transition major products in Civil Aerospace, and tackle weak markets in Marine," Chief Executive Warren East said.

The shareholder meeting, Mr. East's first as CEO at Rolls-Royce, comes after months of turmoil for the company that has seen the departure of top executives and U.S. activist investor ValueAct Capital Management LP becoming the company's largest investor. In March, Rolls-Royce appointed Bradley Singer, ValueAct's chief operating officer, to join the board.

ValueAct, which owns more than 10% of Rolls-Royce shares, has pledged not to battle the company until at least the 2018 shareholder meeting.

The company said its profit would be second-half loaded this year and that Rolls-Royce would be "close to break-even" in the first six months.

Restructuring measures, including layoffs, should start bolstering the bottom line, Rolls-Royce said. "We are well on track to delivering the expected cost savings in 2016," the company said, estimated a GBP30 million to GBP50 million benefit by year-end.

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

May 05, 2016 02:47 ET (06:47 GMT)

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