Engine manufacturer rolls-royce wants to sell off its subsidiary

Engine manufacturer rolls-royce wants to sell off its subsidiary

British engine manufacturer rolls-royce plans to raise money by selling off parts of its business following a billion-dollar loss in the corona crisis.

The sale of investments such as the spanish manufacturer ITP aero could bring in more than two billion british pounds (2.2 billion euros), the company announced in london on thursday. Recovery of business to pre-crisis levels may take several years, management estimates.

In view of the severe crisis into which the pandemic has plunged the entire aviation industry, rolls-royce boss warren east is trying to strengthen the group’s balance sheet. Including unused credit lines, rolls-royce had liquidity of 6.1 billion pounds at the end of june. Since then, the company has secured a further loan of over 2 billion pounds.

In the first half, sales slumped by more than a quarter to 5.8 billion pounds. Having been in the red a year earlier, the company’s net loss has now swelled from 909 million to 5.4 billion pounds. In addition to a loss in the current business, this was mainly due to an impairment loss on businesses to hedge exchange rates.

The group’s hardship also affects the workforce. In total, up to 8,000 jobs are to be cut in the commercial aircraft business, around one-third of the workforce from before the pandemic. In administration, a further 1,000 jobs are on the cut list. More than 4,000 employees had already left rolls-royce, it has now been announced.

The slump in global air traffic and the plight of many airlines threaten to hit rolls-royce even harder than other engine manufacturers. In contrast to general electric of the u.S., saffron of france, the u.S. Company pratt& whitney and the german MTU, the british company has shifted its focus entirely to engines for boeing and airbus wide-body aircraft used on long-haul routes.

Airline managers and aircraft manufacturers expect that the remote business will be the last to recover from the crisis. Boeing and airbus have slashed their production schedules for the next few years. The shortfalls for widebody jets such as the boeing 787 "dreamliner" and the airbus A350 are even more pronounced than for medium-haul jets such as the airbus a320neo and the boeing 737 max. As a result, thousands of jobs are also on the list to be cut at aircraft manufacturers.

Rolls-royce management is correspondingly gloomy about the business outlook. For the current year, management expects sales to decline by 25 to 30 percent on a like-for-like basis. According to current plans, the group will deliver around 250 new engines in each of the years 2020 to 2022, just under half as many as in 2019. For the period thereafter, the head of rolls-royce expects the business to gradually recover. Deliveries allowed to remain below 2019 levels until mid-decade.

The fact that many airlines are currently hardly using long-haul jets is also costing rolls-royce sales. This is because the group often pays for the engines in full service contracts based on the number of flight hours completed. However, the number of operating hours in the current year may not even be half as high as in 2019, estimates the group’s top management. And the old level could not be reached again before 2023.

The rolls-royce power systems subsidiary based in friedrichshafen also reported poorer business in the face of a slump in demand. In the first half of the year, the drive systems and coarse engine manufacturer posted a pre-tax profit of only 22 million pounds (around 25 million euros) after adjusting for currency translation differences and special items. According to the company, this was 79 percent less than in the same period of the previous year. The company did not provide any information on net profit. Adjusted sales fell by 11 percent to 1.25 billion pounds (around 1.4 billion euros). Chief financial officer louise ofverstrom explained the slump as being due to "noticeable restraint" on the part of customers as a result of the corona pandemic.