Rolls-Royce maintains forecast, but warns about supply chain

Thursday, November 7, 2024 7:33 am
| Updated:

Thursday, November 7, 2024 7:54 am

Rolls-Royce shares were up 3.14 percent by mid-morning, rising to the top of London’s main index after falling 6.5 percent on Monday.

Rolls-Royce conducted a year of leadership as the engineering giant continues benefit from rising demand for aircraft engines and increased defense spending.

In a trading update released this morning, the FTSE 100 company said it expects underlying operating profit to be between £2.1bn and £2.3bn for the current year and free cash flow of between £2.1bn and £2.3bn. £2 billion, unchanged from the previous forecast in August.

He noted continued strong demand in the civil aerospace industry, where large engine flight hours increased 18 percent year-on-year to 102 percent, exceeding levels seen before the pandemic devastated passenger numbers.

Flight hours are expected to be available in 100 to 110 percent of pre-pandemic levels for the full year, with about 500 to 550 births.

Defense demand also remained strong after years of government spending booms sparked by Vladimir Putin’s invasion of Ukraine and conflict in the Middle East.

The stock is up a whopping 91 percent this year.

Rolls-Royce warns about prospects

However, Rolls-Royce warned of ongoing problems in the aerospace supply chain. The firm was accused of canceling a number of British Airways flights last month due to problems with the Trent 1000 engines fitted to the airline’s Boeing 787 aircraft.

Challenges are plaguing the wider sector in the wake of the pandemic. The world’s two largest plane makers, Airbus and Boeing, are struggling to meet rising global travel demand, causing significant supply delays for the world’s largest airlines.

However, the engineering giant still expects to reinstate shareholder dividends by the end of the year, starting with a 30 percent payout ratio to underlying after-tax profits. and with a constant payout ratio of 30 to 40 percent in each of the subsequent years.

CEO Tufan Erginbilgic, who has achieved a noticeable change in the company’s share prices since joining the company in January 2023, said: “Our transformation of Rolls-Royce into a high-performing, competitive, sustainable and growing company continues at a rapid pace and intensity.

“The continued strong performance since the start of the year gives us further confidence in meeting our 2024 guidance, although the supply chain situation remains challenging. We have also made good progress towards our medium-term targets, driven by profitability and improved cash flow early on.”