Rolls-Royce blames pandemic supply chain woes and hit to aviation for £111m loss
Rolls-Royce chief executive Warren East has warned of supply chain problems and inflation in his final results announcement, saying the jet engine maker is suffering “post-Covid indigestion”.
The share price of the FTSE 100 manufacturer slumped by 10% on Thursday morning to near its low point earlier this year after it missed analysts’ forecasts for profitability. Rolls-Royce said it made an underlying loss of £111m in the first half of 2022, compared with a profit for the same period in 2021.
East’s stint at the top of one of Britain’s most prominent industrial names has been dominated by crisis-fighting, first with engine problems and then with the pandemic. He is due to be replaced by former BP executive Tufan Erginbilgic in January.
Coronavirus is still making its mark on the company, which East said had been affected by delays in the supply of semiconductor computer chips used to control its engines.
It has also been forced to find alternative sources of titanium used in strong but lightweight aircraft parts after it pledged to cut ties with Russia over its invasion of Ukraine. However, it is still sourcing some titanium from Russia.
Concentrating orders with fewer, larger suppliers, has allowed it to cut costs, East said.
Rolls-Royce has been particularly hard hit during the pandemic because its revenues are closely tied to the number of hours its engines are airborne. It provides engines for aircraft such as Airbus’s A350 that are used primarily for long-haul travel which has not recovered as quickly as shorter journeys.
East said that in the first half of 2022 Rolls-Royce engines flew about 60% of the hours they flew in 2019, before the pandemic, and are now at about 65% of that level. He expects that to pick up to 70%
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