IN spite of difficult markets, Rolls-Royce was able to raise its
profits by #9m in the first half of this year to #40m before tax helped
by increased efficiency.
Sales were #250m lower at #1500m. The aerospace market continues to be
sluggish although Rolls is winning its fair share of what small amount
of business there is around. Ninety per cent of the Boeing 757s
delivered this year and next contain Rolls' RB211-535 engines.
Rolls-Royce's current market share in civilian aircraft is around 18%
and it hopes to raise this closer to 30% with the help of its new
products. Interest has been expressed in its aeroengines by Saudi
Arabia, South Korea and Singapore.
Although passenger miles were up about 5% last year the airlines are
still mostly unprofitable and so are still not spending on new aircraft
and the spares market remains flat.
Demand on the military side continues to be weak but Rolls-Royce has
scaled down its operations to take account of the halving in the market
since the late 1980s.
Within the industrial division the company is seeing growing demand
for its low NOx burners in the US and has won its first power station
order, in Indonesia, for a new type of combined cycle gas turbine the
RB211. Further orders in South-east Asia are expected. This division is
seen as a steady and reliable profit contributor.
All three of Rolls' divisions were said by chairman Sir Ralph Robins
to be difficult, however there are some encouraging prospects for the
future. Good progress has been made with the Trent aeroengine. The Trent
700 engine will be in action at next week's Farnborough airshow.
Rolls-Royce also has many collaborative contracts around the world
such as its involvement with American manufacturers in developing a
replacement for the Harrier jump jet. It has also had a successful run
in the UK with its WR-21 marine engine, developed jointly with
Westinghouse, and destined for the US Navy.
Sir Ralph believes that the company's collaborations provide it with
''a very competitive platform'' for the second half of this decade. He
foresees a worldwide market for civilian aeroengines of around $300
billion and a military aeroengine market of $100 billion in the next 10
years.
The benefits of its three-year restructuring programme, which will see
a 6500 reduction in the workforce by next year, have yet to feed through
to the bottom line. Annualised cost savings of #100m-#150m are envisaged
eventually.
The balance sheet remains strong and the board has decided to maintain
the interim dividend at 2.0p. The profits were in line with City
expectations but even so the shares dropped 8p
to 180p, reflecting the company's cautious short-term outlook.
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