Salem Radio Network News Sunday, September 26, 2021

Business

Rolls-Royce sticks to 2021 forecasts, says slow travel recovery to hurt 2022

LONDON (Reuters) -British engine-maker Rolls-Royce said it was on track to meet its forecasts for 2021 as its cost-cutting and disposal plans helped it weather the slow return of long-haul travel, although it warned 2022 targets could be hurt.

At the height of the pandemic last year, revenues at Rolls’s civil aviation business, its biggest unit, tumbled as airlines stopped flying, resulting in a perilous few months for the company before it raised new cash and secured loans.

Raising 2 billion pounds from disposals is key to repairing its finances, and Rolls said on Wednesday that it was in exclusive talks with a buyer for its Spain-based ITP Aero unit, for a reported 1.6 billion euros.

For 2021, Rolls-Royce stuck to guidance for free cash outflow to improve to 2 billion pounds, and for cash flow to turn positive in the second half of this year, but it warned that the slow aviation recovery would affect its 2022 target.

The group had said it could reach free cash flow of 750 million pounds as early as 2022, but it said on Thursday that the pace of the travel recovery meant that this was now likely to happen later.

Rolls-Royce is also counting on a cost-cutting programme in its civil aviation business to help its cash flow position while international flying continues at low levels, and said it was on track to make 1 billion pounds of savings this year.

With its engines powering A350s and 787s, Rolls said large engine flying hours came in at 43% of pre-pandemic levels in the January-June period, only a slight improvement from the 40% recorded in the first few months of the year.

During the first-half, the group was buoyed by its resilient defence arm which makes engines for military jets and powers Britain’s nuclear submarines, plus a recovery in its power systems unit, which makes engines for boats, trains and other vehicles.

($1 = 0.7200 pounds)

(Reporting by Sarah Young; editing by Guy Faulconbridge and Paul Sandle)

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