FOR a firm best-known for building engines to make things go forward fast, Rolls-Royce appears to have stopped dead in its tracks. On July 6th, the day after a new boss, Warren East, started work, it was forced to issue another profit warning—the fourth in 18 months. Having made £1.6 billion ($2.5 billion) of pre-tax profits last year, it now expects £1.4 billion, give or take £75m, this year. Unsurprisingly, investors’ and analysts’ grumbles about the firm’s strategy are getting louder.
Under Mr East’s predecessor, John Rishton, Rolls had been trying to diversify away from making aircraft engines. Building other equipment for use on land or sea, it was hoped, would help maintain profits, even in lean years for aviation. It was also hoped that shifting investment into these areas—which have produced greater returns on capital than jet engines—would boost the firm’s profitability.
But analysts fear that this strategy is no longer working. The various profit warnings have revealed that all areas of the business are underperforming. At first the firm blamed defence cuts for a fall in demand for its military-jet engines...
from The Economist: Business http://ift.tt/1LYv5xs
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