Aerospace & Defense

Rolls-Royce sinks on 4th profit warning in a year

British engine-maker Rolls-Royce downgraded its profit forecast for 2016, its fourth warning in just over a year, and warned it could cut its dividend due to sharply weaker demand for spares and services to existing aero-engines.

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Rolls-Royce on Thursday forecast that profit next year would now be more than 30 percent below a current consensus forecast, which analysts had already slashed after a previous warning in July.

Rolls-Royce, the 131-year-old company based in Derby, England, shocked investors in July when it said profits from its aero-engine business, its biggest unit which accounts for about half of profits and which it is counting on for future growth, would shrink in 2016.

The downgrade plus news that the board would put the company's shareholder payments policy under review shows the extent of the challenge facing new CEO Warren East who started in July.

Releasing the findings of an operating review two weeks early, East said he had already highlighted a number of areas where Rolls-Royce could make "fundamental changes", as he launched a major restructuring programme to save between 150 million pounds and 200 million pounds a year.

But the company's fourth profit warning in just over a year and its second on 2016's outcome could intensify questions about the shape of the group itself, which supplies engines to aeroplanes, as well as ships and for industrial use.

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