Rolls-Royce sees FY profits at lower end after Trent repair costs blowout

By Frank Prenesti

Date: Thursday 07 Nov 2019

Rolls-Royce sees FY profits at lower end after Trent repair costs blowout

(Sharecast News) - Rolls-Royce forecast full year profits at the lower end of expectations as the cost to fix its troubled Trent 1000 engine blew out by another £800m and a final fix date was delayed until 2021.
The company on Thursday said the costs of repairing faulty blades on the Trent would result in an exceptional charge of £1.4bn to operating profit in FY 2019. Profits would now be at the lower end of a £600m - £800m range.

It added that it would have to use an existing £400m contingency fund and find a further £400m in maintenance, repair and compensation costs.

"This represents the additional near term costs of customer disruption and remediation shop visits...and provisions against future losses on a small number of contracts due to our new estimate of high pressure turbine durability," Rolls-Royce said in a trading statement.

Rolls said it still forecast expected 2020 free-cash flow of at least £1bn and was still confident it could achieve £1 per share of free cash flow in the medium term as Trent 1000 costs subside and inventory was reduced.

Chief executive Warren East said improving customer confidence in the Trent was his "top priority".

"We are today announcing additional action to further expand our maintenance capacity and increase our stock of spare engines. We deeply regret the ongoing disruption caused to customers. These steps, which build upon progress made to date, will further reduce disruption to our airline customers and give them the certainty that they need."

"We have completed a detailed technical evaluation of our work on an improved high pressure turbine blade for Trent 1000 TEN, the last major redesign activity required for the issues which we have identified with the engine. Although we regret that the blade will not be ready when we had originally planned, our understanding of the technical issues has significantly improved."

The Trent 1000 engine was designed for Boeing's 787 Dreamliner and finding a fix has left airlines with grounded aircraft and diminishing patience for Rolls.

During the summer the Trent engine on a Norwegian Air 787 exploded soon after take-off, raining debris over a Rome suburb.


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