Rolls-Royce Holdings Vows to Boost Cash Flow Even as Repair Costs Rise
June 15 2018 - 3:05AM
Dow Jones News
By Robert Wall
LONDON--British aircraft-engine maker Rolls-Royce Holdings PLC
(RR.LN) on Friday pledged to boost cash flow even as it grapples
with the rising costs of fixing one of its flagship engines
powering Boeing Co. (BA) 787 Dreamliners.
Rolls-Royce has been struggling with its so-called Trent 1000
engine, with excessive wear and tear on some parts requiring urgent
repairs. Fixing the engines has forced airlines to idle planes and
rent replacement aircraft to operate their services, raising their
costs and disrupting passenger travel plans.
Rolls-Royce on Friday said the repair costs have risen another
100 million pounds ($132 million) in recent weeks as new problems
were discovered. It previously said the costs to fix that engine,
as well as another model used on Airbus SE (AIR.FR) A380
superjumbos, reached GBP170 million last year and will rise to
GBP340 million this year.
The company said belt tightening will allow it to maintain
full-year guidance of between GBP350 million and GBP550 million in
free cash flow before restructuring costs.
Rolls-Royce on Thursday said it would incur GBP500 million in
restructuring costs through 2020 associated with 4,600 job cuts,
the biggest staff reduction in more than a decade, as it tries to
close a profitability gap to rivals such as General Electric Co.
(GE)
Rolls-Royce said it will meet a long-promised 2020 target for
cash-flow generation. Chief Executive Warren East previously said
the company would deliver about GBP1 billion in free cash around
2020 and Rolls-Royce now says it is "well-placed" to exceed the
figure at that time.
Ahead of an investor briefing on Friday, the company said it
will work to boost cash generation from GBP0.15 a share last year
to more than GBP1 in the mid-term, without giving a fixed deadline.
Cash flow return on invested capital should rise to 15% from 9%
last year, the company said.
In a statement, Mr. East said that "after a decade of
significant investment we are committed to delivering significantly
improved returns."
Write to Robert Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
June 15, 2018 02:50 ET (06:50 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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