Rolls-Royce issues profit warning due to weaker demand

Shares in the engine maker plunged more than 20 per cent in early Thursday trading after it forecast profit next year would now be more than 30 per cent below a current consensus estimate, which analysts had already slashed after a warning in July.

Rolls-Royce, the 131-year-old company based in Derby, England, shocked investors in July when it said profits from its aero-engine business, its biggest unit which accounts for about half of profits and which it is counting on for future growth, would shrink in 2016.

The downgrade, plus news the board would put the company’s shareholder payments policy under review, shows the extent of the challenge facing new CEO Warren East who started in July.

Releasing the findings of an operating review two weeks early, East said he had already highlighted a number of areas where Rolls-Royce could make “fundamental changes”, as he launched a restructuring programme to save between 150 million pounds and £200m a year, streamline senior management and improve decision making.