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Alessandra Galloni
London, Aug 26: Aero-Engines and industrial power group Rolls-Royce Plc on Thursday announced a $1 billion deal to supply gas turbines for a fleet of US super-fast ships, its biggest marine engine deal to date.The news came as the company posted first half pre-tax profit of 159 million pounds ($252.5 million) and said its order book remained strong as it continues to seek double digit earnings growth.
Analysts had been expecting pre-tax profit of about 153 million pounds, from 135 million last year. ``It's encouraging that they're still winning business...The earnings are a little bit stronger than expected; we don't see any negative points,'' said Andrew Crispin at SG Securities, who is a buyer of the stock.
``There's a little bit of concern about the cash outflow but they are talking about reversing it in the second half. They are talking about a similar level of deliveries for the second half which is encouraging.'' Rolls Royce, its engines used by 30 navies around the world, said in a statement thatits new marine engine deal with US company Fastship Inc was another step forward as it expands into the commercial marine sector.
Fastship, based in Philadelphia, will contract for 25 marine Trent gas turbines, five in each vessel and five spares, together with a 20-year support package throughout the life of each engine.
``This agreement represents further evidence of the company's successful strategy to exploit the proven performance and reliability of its gas turbine technology,'' said Marine Power Managing Director Bob Sunerton. ``This contract is a significant win for the marine division. It demonstrates the quality of fast ferry markets,'' said Credit Lyonnais analyst Will Mackie.
He questioned the results, however. ``The market will remain sceptical about the makeup of the earnings growth with questions hanging over the loss in the industrial division after R&D, underlying spares profits and the confidence with which the company can project double digit earnings growth,'' said Mackie.
Detailingresults, Rolls Royce said its order intake remained strong, matching sales in the first half. It added that aftermarket sales - a crucial factor for the group's future profitability - now represented 38 percent of group sales.
Rolls shares rose almost seven percent last week ahead of the results. Confidence returned after the firm was dealt a big blow in July by Boeing's decision to name General Electric as the sole engine supplier for its 777X long-range jet.
That decision intensified the costly three-way competition between Rolls-Royce, GE and Pratt & Whitney, a unit of United Technologies. Analysts said they would also be looking closely at profitability in the spare parts market.
The spare parts market is particularly important as intense competition has forced manufacturers to sell engines at lower prices in order to secure later contracts for spare parts.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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