British engineer Rolls-Royce has warned profits this year could fall by as much as 13% on top of an 8% drop last year, saying the low oil price had increased uncertainty for many of its markets and customers.
Rolls-Royce had already cut its 2015 forecasts in October/2014, when it shocked the market by warning there would be no growth in 2015.
Rolls-Royce said the market for its main aircraft engine business would strengthen but customers in the oil and gas, mining, construction, industrial and agricultural sectors were cancelling or delaying orders.
In widening the range for its profit forecast for this year the company reiterated it was also seeing lower demand for propulsion systems and related services in its marine business which supplies the offshore oil and gas industry, as well as cutbacks from customers who use its equipment in power generation, construction and mining projects.
Additionally the company said that past delays in some aircraft development projects, the 2 biggest being Boeing's 787 and Airbus's A350 widebody jets, has meant new engine production capacity which Rolls-Royce has already put in place is being underutilized.
"We're clear about how to address the short-term challenges and we're taking decisive action that will make us a stronger company and return us to profitable growth," said Chief Executive John Rishton.
The company is already in the throes of a rationalization program to improve profitability in its aerospace division, which accounted for almost half of 2014 revenues and has benefited from soaring demand for more fuel-efficient engines for passenger jets but has lagged market leader General Electric on profit margins.
Based on the article “Rolls-Royce warns profits could fall further this year” published in Reuters.