Rolls-Royce wins airline contracts worth $2bn after 'annus horribilis'

Rolls is also being investigated by the Serious Fraud Office over allegations of corruption in Indonesia and China

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The Independent Online

Rolls-Royce’s weary investors were given a respite from bad news yesterday after the company announced it had won two lucrative contracts worth more than $2bn (£1.3bn).

A fortnight on from its third profit warning in less than 18 months, the FTSE 100 giant said it had been selected by the Saudi Arabian airline Saudia to provide engine maintenance and servicing for its Trent 700 engines on 20 A330 aircraft in a long-term deal worth $1.3bn.       

It has also completed a tie-up with International AirFinance Corporation to provide Trent 700 engines for 20 of the same planes in a separate $930m deal.

Eric Schulz, the president of Rolls-Royce’s large engines unit, said: “We welcome our customer’s continued confidence in the Trent 700 as the best solution for fuel burn, emissions and noise performance as well as delivering unrivalled reliability for Middle East operations.”

Rolls-Royce shares edged up 3p to 783p having been hit by the profit warning on 6 July, which came two days after Warren East replaced John Rishton as its chief executive. At the time, the company blamed weak oil prices and lower engine demand – stemming largely from Airbus’s decision in February to cut production of its long-haul A330 workhorses – for the latest downgrade, in which it cut forecasts for 2015 and warned of further headwinds in 2016.

Mr East said he was “disappointed” by that announcement and “the impact this will have on our investors and employees”. He is planning to undertake his own review of the company over the coming weeks and had not ruled out further job cuts or a dividend cut.

The third profit warning rounded off an eventful 18-month period for the group, during which it has been hit by a number of setbacks, including job cuts – 2,600 of which were announced last November to end what analysts described as an “annus horribilis”. 

Rolls is also being investigated by the Serious Fraud Office over allegations of corruption in Indonesia and China, and was dragged into a bribery scandal involving Brazil’s state oil producer, Petrobras, in February, amid allegations that it had used backhanders to win a contract worth $100m. Rolls-Royce denies the allegations.

Brenda Kelly, the head analyst at London Capital, said: “Despite the latest contract wins, a large gap will still need to be filled … The majority of brokers are bearish [but this] development may change some views.”

Experts at Killik added: “With the recent profit warning having focused on the lower than expected demand for the Trent 700 engine, these announcements will provide some comfort to investors.”