12th November 2015
Rolls-Royce shares plunged by 20% this morning after the company warned that its profits would be impacted by a significant drop in demand.
In an update today the aerospace company said that, while its guidance remains unchanged, profits are “expected to be at lower end of range”.
It said this “negative outlook reflects sharply weaker demand in 2016” and that “profit headwinds” will “increase to around £650m”.
It is carrying out a review of its business, which it said was likely to involve job losses among its 2,000 senior managers.
Rolls-Royce previously announced 3,600 job cuts across the group, according to the BBC.
The company also said it would review shareholder payments policy, which points to a possible cut to dividends.
In morning trade, the shares were down 134p at 533p. Their value has nearly halved since April.
Chief executive Warren East says: “While 2015 remains broadly as expected, the outlook for 2016 is very challenging. The speed and magnitude of change in some of our markets, which have historically performed well, has been significant and shows how sensitive parts of our business are to market conditions in the short-term.
“At the same time I remain very confident about the opportunities before us and convinced that our long-term outlook is positive. Our industrial transformation is proceeding well and our core large engine business remains on track to gain significant market share and build a strong, cash generative platform for the future.
“The next few years are going to be important in laying the foundations for our long-term profitable growth. Therefore it is important to ensure we are financially stronger, more resilient to short-term shocks and more flexible to take advantage of growth opportunities.
“My operating review has already highlighted a number of areas where I believe Rolls-Royce can make fundamental changes to its structure and ways of working that can generate material improvements to the business. Rolls-Royce is already undergoing significant change, but I am convinced these new actions are vital if we are to invest sensibly and grow, well into the next decade and beyond.”