Rolls-Royce shrugs off threat of US alliance

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ROLLS-ROYCE yesterday shrugged off the threat of closer co-operation between its two US aero-engine rivals as it posted record profits and promised five years of double-digit earnings growth.

Sir Ralph Robins, the Rolls chairman, said he would relish a merger between General Electric and Pratt & Whitney since he said the two would "row like hell". It would also leave Rolls as the only alternative to complete American domination of the civil engine market.

Sir Ralph said that consolidation of Europe's engine manufacturers was not essential in the way that it was for airframe companies since Rolls was already a dominant force, but he did not rule out the possible integration of MTU, Daimler-Benz's engine division.

Shares in Rolls rose 7 per cent to 252.5p as the company reported a 17 per cent jump in underlying profits last year to pounds 276m and said it expected approval to raise the limit on foreign shareholdings to 49.5 per cent in the next two to three weeks.

Sir Ralph also painted a bullish picture of Rolls prospects, saying the Asian downturn would only cause a moderate slow-down in orders intake this year while the order book now stood at a total of pounds 10.1bn.

Rolls is gearing up for a further 20 per cent increase in output this year after lifting engine deliveries by 50 per cent to 1,400 last year and seeing high-margin spares sales rise 15 per cent. The group is expected to invest a further pounds 230m building up its capacity at Derby and Bristol.

Last year Rolls took 34 per cent of all civil engine orders against only 13 per cent for Pratt & Whitney and dominated the market for engines for the new wide-bodied twins the Airbus A330 and Boeing 777, the Trent capturing 80 per cent of all orders.

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