Rolls-Royce shares crash

Shares in Rolls-Royce tumbled more than 15% after the British engineering firm warned it would not return to profit growth next year, blaming worsening economic conditions and tighter Russian trade sanctions.

The shares fell 143.5 pence to 797 pence, making them the biggest faller on the FTSE 100 index.

The company said this had led a number of customers to delay or cancel orders, particularly in its nuclear and energy and power systems businesses. “In the last few months economic conditions have deteriorated and Russian trade sanctions have tightened,” Rolls-Royce said.

It stuck to its forecast of “flat” profits this year but no longer expects to return to growth in 2015. Its current “best estimate” is that underlying profit will be flat to 3% lower next year, with revenues in the range of 3% higher to 3% lower.

Rolls-Royce, the world’s second-largest aircraft engine maker behind General Electric, also cut its revenue forecast for this year. It now expects revenues to be 3.5% to 4% lower, rather than flat as previously thought. That excludes a negative currency impact of £500m, which had been flagged up before.

In June, Rolls-Royce lost jet engine orders worth £2.6 billion after Emirates airline canceled a planned purchase of 70 A350 aircraft from Airbus. Rolls-Royce is the sole manufacturer and supplier of the engines for the A350, seen as Airbus’ answer to Boeing’s Dreamliner.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “Despite the fact that a downgrade in fortunes had been largely expected, today’s profit warning from Rolls-Royce comes at a time when investors are taking no prisoners, and has resulted in an 8% dip in the share price in early trade.

“The stock has been under pressure as general defense spending is under scrutiny, with the shares having dropped 15% over the last year.”

This article originally appeared on guardian.co.uk

- Source: http://www.businessinsider.com