Rolls-Royce profit boosted by civil aero growth

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British aero enginemaker Rolls-Royce Holdings Plc posted a 28 percent rise in first-half profit, helped by a growth in engine servicing revenue and continued demand from planemakers working through hefty order backlogs.

Rolls, the world’s second-largest maker of aircraft engines behind U.S. group General Electric Co , on Thursday reported an underlying pretax profit of 595 million pounds ($972 million) on revenue up 4 percent at 5.46 billion.

The company, whose order book jumped 4 percent to a record 61.4 billion pounds, said it would increase its interim dividend 8 percent to 6.90 pence, Reuters reports.

Rolls, which makes engines for planemakers Airbus and Boeing , said it was on course to deliver higher 2011 profit, also helped by its many long-term contracts to service the engines it sells to airlines and the military.
“For the full year, we continue to expect good growth in underlying profit,” Chief Executive John Rishton told reporters on a conference call, adding that its joint $4.8 billion acquisition of German diesel engine maker Tognum AG with Daimler AG would boost the company further.
“We believe that by using our understanding of the services and aftercare markets we can help grow the revenues of Tognum significantly,” said Rishton.

Rolls-Royce was on average expected to post a first-half pretx profit of 530.5 million pounds, according to Thomson Reuters I/B/E/S data. It is expected to report a full-year pretax profit of around 1.1 billion pounds.

Shares in the company, which have risen 5 percent in 2011, were flat at 636 pence by 0840 GMT, valuing the company at around 12 billion pounds.

SIGNIFICANT VALUE
“Rolls have significantly beaten our expectations for the first half,” said analyst Guy Brown at brokerage Evolution, who has a “buy” recommendation on the stock. “We continue to see significant value in the long-term growth of this business.”

Revenue at its civil aerospace business grew 14 percent, reflecting the strength in international air traffic, which has, according to industry body IATA, grown 8 percent so far this year. Long-haul journeys require the use of wide-body aircraft, to which Rolls is heavily exposed.

Rolls’ Trent XWB will be the exclusive engine for Airbus’ new A350 jetliner, which is due to enter service in 2013. Rolls-Royce also recently won a contract to build a new engine to further beef up the A350.
“The A350 is really important for Rolls-Royce,” said Rishton. “We have orders for over 1,100 aircraft, which is about the same as we have sold on the Trent 700 engine that has been in service for many many years — that’s a good indicator of how significant the deal is for us.”

Rolls expects full-year profit at its civil aerospace business to grow by up to 25 percent due to growth in services revenue, a better exchange rate on the U.S. dollar and improved productivity.

The company, which also builds and tests nuclear devices for the UK navy, said profit at its defence business grew thanks to services deals with the UK, while its marine and energy business were largely flat.