Posts Tagged ‘Trent 900 costs’

Rolls Royce profits down 76% as Trent 900 costs start to kick in

February 10, 2011

BBC reports:

Manufacturing giant Rolls-Royce has said the mid-air failure of one of its Trent 900 engines on a Qantas superjumbo had led to costs of £56m. The explosion in the engine forced an emergency landing of the A380 in November last year. The one-off cost contributed to annual pre-tax profits dropping 76% to £702m in 2010 from £2.96bn. Foreign exchange costs and interest rate and fuel hedging contracts also contributed to the profit fall.

But the Derby-based company said that underlying pre-tax profits – which strip out one-off costs – were up by 4% to £955m in 2010 and were a better indication of its performance.

Rolls Royce say that the may face further “modest costs” but this seems to be far too optimistic considering that all the engine servicing costs have yet to show up and all the various compensation claims from Qantas, Airbus, Lufthansa, and Singapore Airline will take some time to work their way through. Once all the claims are presented there is an even chance that some will need arbitration before settlement which will take some time.

Jorn Madslien also writes:

Investors will be scrutinising Rolls-Royce’s financial figures to try to find out how the recent engine failure that led to the grounding of six Qantas Airbus A380 aircraft affected the company. ……..

….. The long-term effects of the engine failure, for instance a potential fall in new orders over the months and years ahead, cannot be measured at this stage. Consequently, the final impact on the company’s bottom line is not yet known.

It does not seem as if Rolls Royce have made any provision for further costs which is a little worrying and I stay with my estimate of around $300 million as the total hit that Rolls will have to swallow for the Trent 900 for the A380 in addition to any impact on engine sales.

Judging from the delays the development cost of the Trent 1000 for the Dreamliner is also likely to be significantly more than budgeted or expected.

It will be at least 2012 before the full financial impact is known though some residual impacts will continue for many years.

The wrecked engine after QF32 landed in Singapore in Nov. 2010:Photo: AFP



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