Rolls-Royce CEO Pledges to Speed Turnaround Efforts

Rolls-Royce CEO Pledges to Speed Turnaround Efforts

The FINANCIAL -- Rolls-Royce Holdings PLC Chief Executive Warren East is promising to inject a greater sense of urgency into the British engine maker's turnaround effort as the company reported a fall in sales and profit.

The maker of jetliner engines for Boeing Co. and Airbus Group SE planes reported first-half net profit of £ 360 million ($561.41 million), down from £ 532 million a year earlier. The company's more closely watched underlying pretax profit slipped 32% to £ 439 million, slightly ahead of the £ 390 million to £ 430 million range Rolls-Royce gave earlier this month, according to Nasdaq.

Underlying sales slumped 3% to £ 6.3 billion, the London-based company said.

Mr. East, in the job less than a month, said he would seek to add "pace and simplicity" to the company's efforts to cut costs and become more efficient. He has begun a review of the entire business, with results before year-end.

"I've received quite a lot of feedback about ways we can improve," he said, by "doing things faster and reducing some of the complexity we have."

Rolls-Royce's earnings have been repeatedly hit by deteriorating conditions in key markets that caused the engineering company to halt its first ever share repurchase. A slowdown in sales of its profitable Trent 700 aircraft engines that power Airbus A330 widebodies is weighing on its aerospace business, which is also struggling with sales for regional jet and business aircraft.

Low crude prices have caused sales in the marine sector to stall. Mr. East said low commodity prices were also a headwind for the business.

Rolls-Royce said from the start of the year that it would make the bulk of its profit in the second half. "Despite the disappointment of our recent update, our second half outlook remains positive," Mr. East said.

Rolls-Royce maintained its full-year outlook. The company earlier this month cut its outlook for underlying pretax profit to a range of £ 1.33 billion to £ 1.48 billion. It also lowered its cash flow expectation.

Most of the deals to achieve full-year targets already booked. "The focus is now is on delivery, to turn those orders into profit," Mr. East said.

The engine maker also remains in talks with Airbus about new projects. The European plane maker is exploring an upgrade to its A380 superjumbo with new engines. Rolls-Royce Chief Financial Officer David Smith said the company is considering providing an engine, though the development costs would have to be below those for a brand-new turbine. An engine for the A380neo, as the plane has been dubbed, "needs to make a business case at a lower volume," Mr. Smith said.

Rolls-Royce also would be willing to work with Airbus on powering a further evolution of the A350, Mr. Smith said. Rolls-Royce is the sole engine supplier on that long-range plane.