Technicians check a Rolls-Royce aircraft engine at the Airbus factory in Toulouse, France. File/Agence France-Presse
British engine-maker Rolls-Royce plunged to a worse than expected 4 billion pound ($5.6 billion) loss in 2020 as the pandemic stopped airlines flying, but stuck to its forecast to burn through less cash this year.
Rolls’ model of charging airlines for the number of hours its engines fly meant much of its income dried up last year when travel stopped. In 2020, it secured a total of 7.3 billion pounds in debt and equity to help it survive.
Last year’s cash burn of 4.2 billion pounds was in line with analysts’ expectations, and Rolls guided that would reduce this year to 2 billion pounds, turning positive in the second half when travel is expected to pick up. Rolls’ civil aerospace arm accounts for just over half of group revenue in a normal year.
On an underlying pretax basis, Rolls posted a loss of 4 billion pounds, worse than the 3.1 billion pound loss forecast by analysts.
Despite that, the company said on Thursday its liquidity position was strong and it could cope with even in a severe downside scenario.
Its shares opened up 2.6% at 116 pence.
After taking on 5.3 billion pounds of debt last year, Rolls is planning to repair its balance sheet by selling assets worth 2 billion pounds, the major part of which will be Spain-based ITP, which is currently on the block.
“Our planned sale of ITP Aero is progressing well with ongoing conversations with a number of potential buyers,” Rolls said.
But its asset sale plan ran into problems this week when Norway suspended the 150 million euro sale of Rolls’ Norwegian unit, Bergen Engines, on security grounds.
Jefferies analyst Sandy Morris said Rolls had “much to do”, but it was feasible. “The possibility of reaching modest net debt by end 2023 is alive,” he said.
Rolls’ cash flow improvement depends on airlines flying 55% of 2019 levels during 2021. The company said its assumption is for travel to gradually improve this year, accelerating in the second half as vaccine programmes progress.
Rolls-Royce, the British maker of plane engines, will cut at least 9,000 jobs and slash costs elsewhere, as the coronavirus hammers the aviation sector.
Airbus flew back into profit in the first three months of the current year as cost-cutting and restructuring measures began to pay off, but it warned that the crisis caused by the coronavirus pandemic was not yet over.
PARIS: Airbus on Wednesday posted stronger-than-expected core second-quarter earnings, led by the switch to efficient new single-aisle jets, and maintained its profit forecast for the year while warning of delivery challenges in the second half. Europe’s largest aerospace group said second-quarter adjusted
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