Rolls-Royce profit forecasts hit by sliding oil prices

The company now expects pre-tax profits of between £1.4bn to £1.55bn

Rolls-Royce has decreased its profit forecasts again as it bears the brunt of sliding oil prices and global economic turmoil.

The company, which shocked the City with two profit warnings last year, saw revenues fall for the first time in a decade last year as customers, including governments and oil and gas companies, cut back on spending.

Rolls-Royce now expects pre-tax profits of between £1.4 billion to £1.55 billion this year, compared with £1.62 billion in 2014.

Last year, it had forecast profits would be, at best, unchanged and, at worst, 3 per cent lower.

The fresh update means profit is expected to be between 4 per cent and 14 per cent lower.

John Rishton, chief executive, said 2014 was "a mixed year when underlying revenue fell for the first time in a decade, reflecting reduced spending by our defence customers, macroeconomic uncertainty, and falling commodity prices".

He added: "Although the short term is clearly challenging, reflecting the economic environment, the prospects for the Group remain strong, driven by the growing global requirement for cleaner, better power.

"The operational efficiencies already achieved will put us in a better position to benefit from these growth drivers."

 

In recent months, the group has cut 2600 jobs and unveiled plans  to overhaul its Aerospace and Land & Sea divisions.

Shares fell 6p to 898.64p. Sash Tusa at Edison Investment Research said: “Rolls has beaten the guidance that the company issued in October and the consensus compiled and released last week.

"After the annus horribilis of last year this should be a relief to investors. But the company’s guidance for this year suggests that it remains stuck on the runway."

Rolls-Royce also announced the retirement of James Guyette, head of its North American business, and the appointment of former HSBC banker Irene Dorner as a non-executive director.

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