RYCEY Rolls Royce Holdings PLC (PK)

   By Robert Wall 
 

LONDON--Rolls-Royce Holdings (RR.LN) ​shares surged Wednesday after the British blue-chip ​stuck to a closely watched 2020 earnings target despite problems with two of its highest-profile plane engines powering Boeing Co. (BA) and Airbus SE (AIR.FR) airliners.

The company also reported a swing to net profit in 2017.

Rolls-Royce has been struggling with component flaws on engines powering some Boeing 787 Dreamliners and Airbus A380 superjumbos. The blades are breaking more quickly than expected, forcing the company to repair them more frequently than expected and resulting in airline operators idling planes.

"This is causing significant disruption to some of our customers and obviously we regret that disruption," Chief Executive Warren East told reporters.

He said the company is making "good progress" on devising fixes for the parts on the Trent 1000, used by some carriers on Boeing 787 Dreamliners, and the Trent 900 engines powering some Airbus A380 double-deckers.

Rolls-Royce on Wednesday said the cash costs associated with the problem will double this year compared with the 170 million pounds ($235.8 million) free cash-flow impact recorded in 2017. Despite this, Mr. East said the company is sticking to its free cash-flow target of delivering about GBP1 billion around 2020.

Shares in Rolls-Royce rose 8.20% in early London trading.

Rolls-Royce has made a big bet on powering long-range airplane after exiting the market to power more numerous single-aisle planes six years ago. It expects to power about half the world's long-haul planes by 2020.

Rolls-Royce, which is no longer affiliated with the luxury car maker, reported GBP4.2 billion net profit in 2017 compared with a GBP4 billion loss, reflecting non-cash accounting adjustments to its currency hedges. The more closely watched underlying pretax profit, a figure that strips out one-time items and currency fluctuations, rose 31% to GBP1.07 billion.

Rolls-Royce said it will take until 2022 for the Trent 1000s and Trent 900s to be fully upgraded with more durable components.

Mr. East said the company will continue restructuring plans and will shed white-collar jobs after a previous round of cuts saw 600 managers exit the company. The company hasn't set a cost savings target or defined, yet, how many jobs may go, he said.

"There is more simplification we need to do to make ourselves truly competitive and fit for the future," Mr. East said.

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

(END) Dow Jones Newswires

March 07, 2018 04:27 ET (09:27 GMT)

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