Rolls-Royce recently raised its targets to cut costs in its efforts to slash £150 million to £200 million in its budget. The maker of aero engines said that the expected savings would be worth in the middle of tough times ahead. The group says that it is forecasting difficult times ahead due to the changing conditions in its markets.
The company said that its engine demands for aircrafts with extra wide bodies had remained unshaken. Despite that, the company is said to have been losing its ground in the aviation business, while looming problems in offshore gas and oil markets means that its orders are dwindling.
In an update, Rolls-Royce retained its viewpoint for reduced revenues and profits in 2016. “Up to date, we have achieved a steady growth in 2016, offering huge performance in the production of large engines and executing the first phase of our makeover program”, said Warren East, the company’s Chief Executive. “Meanwhile we’ve also managed varied markets for our power systems and marine business”, he added.
Long journey ahead
The group plans to make a change to a new method of accounting in 2018. Hargreaves Lansdown equity analyst, George Salmon said that the group’s move would result in restatement and adjustment of profits of last year by up to £900m. “The five profit alarms in the last 20 months till November 2015 is an indication that the shareholders of Rolls-Royce have experienced nothing but a smooth ride lately”, he said.
“In terms of operations, Rolls-Royce is experiencing major transformations. Investors can hope that the group will emerge as a more transparent and leaner company. Conversely, the company’s journey ahead is likely to be tough.”
Rolls-Royce shares recorded a decline of 2.7 percent to 734p, which made it among those biggest losers on FTSE 100.