Engineering news
Rolls-Royce is to implement a “wide-ranging” restructuring plan next year as it issued a new profit warning.
The company said the restructure, which it hopes will result in cost savings of £150-200 million a year from 2017, would “simplify its organisation model, streamline senior management, reduce fix costs and add greater pace and accountability to decision making”.
Rolls-Royce warned its full-year profits would be about 30% lower due to weakness across aerospace and offshore marine markets.
In aerospace, the company is experiencing lower volumes of corporate jets being powered by Roll-Royce engines, further weakness in demand for corporate jet aftermarket services, and further significant declines in aftermarket service demand for our engines on 50-70 seat regional jets.
It added that offshore marine markets have continued to deteriorate throughout the year.
The company said the combined effect of these “headwinds” will hit profits by about £650 million.
Rolls-Royce chief executive, Warren East, said: "The speed and magnitude of change in some of our markets, which have historically performed well, has been significant and shows how sensitive parts of our business are to market conditions in the short-term.
"The next few years are going to be important in laying the foundations for our long-term profitable growth. Therefore it is important to ensure we are financially stronger, more resilient to short-term shocks and more flexible to take advantage of growth opportunities," he added.
"My operating review has already highlighted a number of areas where I believe Rolls-Royce can make fundamental changes to its structure and ways of working that can generate material improvements to the business. Rolls-Royce is already undergoing significant change."
Rolls-Royce's share price fell 17.8% to 548.5p on the news.