Rolls-Royce's FY Caution Clouds Long-Term Outlook

April 30, 2010

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British engine-maker Rolls-Royce's caution on its short-term growth prospects sent its shares lower, despite its prediction that new aircraft projects would help it double revenues over the next decade.

"Whilst we are seeing signs of stabilisation and modest improvement in some parts of the global economy, to which our businesses are exposed, the overall environment remains challenging," chief executive John Rose said on Wednesday.

"We continue to expect underlying revenue, underlying profits and average net cash balances to be broadly similar to those achieved in 2009 despite a modest cash outflow in 2010," Rose said.

Rolls-Royce, the world's second-largest maker of aircraft engines behind General Electric, reported 2009 profit of GBP£915 million pounds on sales of GBP£10.4 billion.

Like other engine suppliers, Rolls-Royce has been affected by delays in production of new Airbus and Boeing planes, crimping revenues from engine deliveries and prompting a build-up in inventory.

Despite its bearish short-term outlook Rolls expects to double its sales over the next decade, driven by new projects such as Boeing's 787 Dreamliner.

"The significant number of new programmes that will come to market over the next few years... underpin our long-term growth and give us confidence that our revenues can double over the next decade," said Rose.

The International Air Transport Association last month said airlines were climbing out of recession, while UK plane parts maker GKN on Tuesday said the aerospace supply sector was improving.

(Reuters)