World Economy

Rolls-Royce Affected by Russian Sanctions

Rolls-Royce Affected by Russian Sanctions
Rolls-Royce Affected by Russian Sanctions

Engineering firm Rolls-Royce Holdings has warned of falling revenues as trade sanctions against Russia begin to bite.

Customers of its nuclear, energy and power systems businesses have delayed or cancelled orders, the company said in a trading update, according to a BBC report.

As a result, group underlying revenue for 2014 would be 3.5%-to-4% lower than expected, it said.

But Rolls-Royce, which specializes in turbines for the aerospace and marine industries, expected underlying profit to remain flat as cost savings counterbalanced the falling revenue.

“Since our interim results, the economic outlook for 2015 has become more challenging,” the company said, with many of its customers experiencing “worsening market conditions” affecting their investment decisions.

Guidance on revenues for its civil aerospace, defense aerospace, marine and power systems divisions, remained unchanged, the company said.

But nuclear and energy revenue guidance would fall from 0%-to-5%, down from 5%-to-10%.

 Revenue Weak

However, Rolls-Royce expected underlying profit in its civil aerospace division to be higher than previously thought.

“While the short term is clearly challenging, reflecting the economic environment, the prospects for the group remain strong, driven by the growing global requirement for cleaner, better power,” said chief executive John Rishton.

Rolls-Royce, which has 12,000 employees in the East Midlands, said the sale of its gas turbine and compressor business to Siemens was likely to be concluded “by the year end”.

The company would begin its planned £1b ($1.6b) share buy-back once the sale had been completed, the company said.

Rolls-Royce’s share price fell 7.5% in early morning trading as the market reacted negatively to the revenue warning.