Rolls-Royce’s chief executive has raised concerns about prospects for the company’s diesel engine business as he grapples with the group’s weak financial performance and unwieldy structure.
Warren East, who took over at the aerospace company in July, said he felt uneasy about trading conditions for the division, which supplies power systems for miners and the marine industry. Both sectors have been hit hard by the fall in commodity prices and are slashing spending.
“If you look at our competitors in our reciprocating engines part of the business, there have been some fairly serious downgrades on next year,” East told the Financial Times (£). “When I look at that I do have a feeling of a little bit of disquiet … I’ve got to say that’s a risk area.”
East said last month that he could not rule out a further profit warning after five since early 2014, including two in his five-month tenure. Analysts have more than halved their estimates for the company’s 2016 earnings and East has declined to give profit guidance because Rolls-Royce’s business is too convoluted.
East told the FT that the power system unit also served sectors faring relatively well such as rail and defence and that this diversity gave him reasons to be more confident than his competitors.
East, the former boss of microchip maker Arm Holdings, has sought to make Rolls-Royce more open about how its business works and the risks facing its divisions. Last week he shook up the company’s top management and scrapped its divisional structure as a first step to making Rolls-Royce simpler and less bureaucratic.
[Source:- the gurdian]