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DALLAS - Rolls-Royce has announced an underlying loss of £111m before tax for the first half of 2022. The company blamed pressures from soaring inflation brought on by the war in Ukraine and supply chain issues, which it believes will continue throughout the year.
Shares in the FTSE 100 company fell by 10.5% to 82 pence in Thursday's mid-morning trade in London. The company shares have lost over 35% since the start of 2022.
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Still on Track
But Warren East, who will soon step down as the boss of one of the world's leading engine makers, has insisted that the company remains on track to meet its full-year targets.
"We have progressed well in the first half of the year, with more than a £1bn improvement in free cash flow, strong order intake in Power Systems, increased engine flying hours and commercial discipline in Civil Aerospace, and targeted investment to support longer-term growth in Defence and New Markets," East explained.
"We are actively managing the impacts of a number of challenges, including rising inflation and ongoing supply chain disruption, with a sharper focus on pricing, productivity and costs."
Turbulent Tenure
Former BP Executive Tufan Erginbilgic will replace East in January 2023. His tenure with the company has been turbulent, to say the least, dealing with the coronavirus pandemic and various issues with its power plants. However, East stated that he would leave the company "a leaner, agile organisation with a more modern culture."
"As a result of the actions we have taken over the last few years, our Civil Aerospace business is becoming leaner and more agile, and we are executing on the levers of value creation we shared at our investor event in May. This is setting us up to deliver on our commitments this year and in the future. We are making choices to manage the current challenges, deliver better returns, reduce debt, and generate long-term sustainable value," East added.
External Issues
The pandemic is still causing a headache for Rolls-Royce, which has caused delays in sourcing the computer chips known as semiconductors which control its engines. Meanwhile, it has also struggled to source titanium after it chose to cut ties with Russia over its invasion of Ukraine.
Revenues are expected to recover during the year's second half as flying hours increase. This will increase the number of visits needed to maintain its engines. Mr. East stated that in the first half of 2022, their engines flew about 60% of the hours they operated in the same period in 2019. This is expected to increase to up to 70% moving forward.
Featured Image: 'Testbed 80' at the Rolls-Royce factory in Derby, UK is "the world's largest and smartest indoor aerospace testbed." Photo: Rolls-Royce plc.
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