Engine maker Rolls-Royce sinks into net loss

LONDON, Feb 23, 2023, British engine maker Rolls-Royce on Thursday logged a large 2022 loss on a huge accounting charge linked to foreign exchange contracts, but revenue and operating profit jumped on rising orders.

Rolls posted a net loss of almost £1.3 billion ($1.5 billion), after a profit after tax of £120 million the previous year, it said in a statement.

Turnover however soared by more than a fifth to £13.5 billion and operating profit leapt 63 percent to £837 million, driven by rising orders for civil aviation and defence divisions.

The company also lifted its earnings guidance going forward, sending its share price up 18 percent in early London trading.

Rolls added that it would announce the outcome of a strategic review in the second half.

“While our performance improved in 2022, we are capable of much more,” said new chief executive Tufan Erginbilgic.

“Our transformation programme will improve our efficiency and commercial outcomes, and deliver a sustainable reduction in working capital.

“Our success will enable us to reward investors for their support and invest in future growth,” added Erginbilgic, who replaced long-serving CEO Warren East at the start of the year.

The aviation sector was slammed by the Covid-19 pandemic which grounded aircraft, slashed travel demand and sparked thousands of job cuts.

However, demand has since recovered sharply after lockdowns and other restrictions were lifted.
Rolls-Royce said the “recovery in international travel continued” last year and boosted demand for jet engines, and forecast “a steady and ongoing recovery of trading towards pre-pandemic levels”.

Former CEO East decided to step down after a tumultuous eight years at the helm.

Under his tenure, the group axed more than 9,000 jobs and launched a major divestment programme in 2020 to navigate pandemic fallout.

Erginbilgic, a dual UK and Turkish national, earlier this month named an executive from his former employer BP, Nicola Grady-Smith, to help overhaul the aerospace giant.

“The announcement of a strategic review of all the businesses should go some way to indicating how he (Erginbilgic) intends to steer the company,” noted CMC Markets analyst Michael Hewson.

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