Rolls Royce Withdraws 2020 Financial Guidance Cites Coronavirus Pandemic

British based engineering and aero-engine manufacturer Rolls-Royce Holding PLC (RR) announced on Monday that it has dropped its financial target for the first quarter of the year and a very high possibility of dropping entire targets for the entire year.

Additionally, Rolls Royce also suspended dividend for the first quarter of the year making it the first time since 1987 to take such a move.

The company officially withdrew from earlier announced financial guideline for the year 2020 following a resolution from the company’s board to reverse its earlier decision of paying dividend of 137 million pounds for 2019.

The company is responsible for supplying Airbus Group SE (AIR) and Boeing Co (BA) with aero engines. According to data provided by an aviation industry data provider Cirium, currently both firms are having over 60% of their aircrafts grounded.

Rolls Royce receives payments from these companies based on the hours their aircrafts fly, this clearly explains why the company’s business hasn’t been as usual since a majority of its client’ aircrafts are grounded.

In the past one and half months, Rolls Royce says it has lost in excess of over 300 million pounds since aircrafts were flying 50% less normal flying hours due outbreak of deadly coronavirus.

The company expects the situation to worsen further.

Rolls Royce CEO Warren East, said the main task at hand now is reinforcing the weakening financial outlook of the company. Among measures the company is taking to arrive at this includes; scaling down employees’ salaries globally by 10% for entire 2020, reducing on expenditures deemed less necessary at the moment.

The salary cuts and scale down on expenditures is estimated to save the company around 750 million pounds.

During the Monday’s announcement, CEO East confirmed securing loan amounting to 1.5 billion pound ($1.8 billion) from a financial institution to add as cushion during this pandemic period.

Following this loan the company now has a total liquidity of 6.7 billion pounds ($5.6 billion).

 

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