Rolls-Royce has finally delivered some good news for the City as it landed a $5 billion (£3.2 billion) airline contract that will help alleviate the impact of global defence spending cuts.
The FTSE 100 engine maker has lost a third of its value in the past 12 months after shocking the City with its first profits alert in a decade in March.
Then it admitted last month that tough global economies and tighter Russian trade sanctions meant as well as posting flat profits this year, it won’t return to growth in 2015.
Chief executive John Rishton admitted: “it is going to be bumpier than we expected,” and revealed plans to slash 2600 jobs over the next 18 months as well as axing finance boss Mark Morris after nearly three decades with the company.
But the outlook on Rolls’ order book was brighter today, when the manufacturing giant won a $5 billion order for its Trent engines to power 50 new Delta Airlines planes, as well as lucrative long-term support and servicing packages.
The order includes Rolls’ Trent XWB engines to run 25 Airbus A350 aircraft, and Trent 7000 engines to power 25 Airbus A330 neo jets. That plane order was a closely fought battle between European Airbus and US plane giant Boeing, and will see Delta replace a string of Boeing 747 jumbo jets.
Video: The latest business news
Rolls-Royce’s civil aviation arm has become increasingly important as governments around the world trim their defence budgets; its Trent XWB has become the fastest-selling wide-body engine, with more than 1500 sold.
Rishton said today’s deal was “further evidence of the success of the Trent XWB in the market and represents a powerful vote of confidence in our newly launched Trent 7000”.
But it hasn’t put the plans for massive job cuts on ice: the 2600 redundancies are thought mostly to affect managerial and engineering roles at Rolls-Royce’s plants in Derby and Bristol, in the aerospace division.
Axing the posts will cost Rolls £120 million over the next two years, but it reckons the short-term pain is worth it as annual costs will be £80 million lower after that.
Shares in Rolls-Royce rose 5p to 828.5p.Reuse content