Rolls-Royce profits soar

March 7, 2002 Posted: 1441 GMT

LONDON (CNN) -- Rolls-Royce said on Thursday profits rose 34 percent last year as sales increased and the world's second-largest civil jet engine maker cut costs.

The London-based group said 2001 net income increased to £106 million ($151 million), or 6.56 pence a share, from £79 million, or 5.04p, a year earlier. Sales in 2001 rose 8 percent to £6.3 billion, while orders increased 10 percent to £14.4 billion.

The results were better than expected, sending Rolls-Royce (RR) shares up 5.3 percent to 179 pence at midday in London on Thursday.

In October, Rolls-Royce announced a restructuring program and warned it faced tougher times in 2002 as aircraft manufacturers cut production to meet falling demand due to the crisis in the airline industry following the September 11 attacks.

"The full brunt of the September 11 effect will be felt in 2002," Howard Wheeldon, an analyst at Prudential Bache, told CNN. "The amount of civil engines they deliver will be way down... and revenue will be halved."

But Wheeldon said he expected the company to get back on track in 2003. "I think brighter times are ahead."

Rolls-Royce also announced on Thursday that Chairman Ralph Robins would retire within the next 12 months.

In addition to its aerospace business, Rolls-Royce also produces parts for the marine, energy and defence sectors, as well as providing financial services.

"This balance enabled the company to mitigate the immediate effects of the events of September 11, which were further offset by the prompt management action taken to reduce costs," the company said.

Rolls-Royce said it expects to complete 5,000 job cuts, announced as part of the restructuring programme, by the first quarter of this year. Together with other cost-cutting measures, the company said staff reductions should save £250 million.

Meanwhile, the effect of the September 11 have also had an impact on the profits of GKN, the British automotive and aerospace engineering group.

The company said on Thursday that 2001 pretax profits fell 37 percent to £245 million ($349 million), slightly worse than analysts' forecasts of about £240 million.

GKN, which makes components for aircraft engines, helicopters and automobiles, said profits were also down because of the demerger of its industrial services unit into a dual-listed company with Australia's Brambles Industries Ltd.

Last year, the company announced 1,200 job cuts throughout its operations in an effort to reduce costs as demand slumped. In January, it said another 950 jobs would go at its AgustaWestland helicopter joint venture

"Lower demand in most of our markets, together with the cost of the consolidation of UK helicopter operations announced in January this year, will adversely affect results in the first half," the company said in a statement.

GKN (GKN) shares rose 2.2 percent to 310 pence at midday in London.