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Rolls-Royce has had its rating lowered by Moody’s on concerns over its cash flow, a week after the UK-based aero-engine group reported an extra charge to cover costs for its engine programme and said it has spent £100m preparing for a no-deal Brexit. The rating company on Tuesday said it had downgraded the long-term senior unsecured debt rating of Rolls-Royce to Baa1 from A3 and changed its outlook to stable from negative. Moody’s change reflects the “expectation that target free cash flow in 2019 will include working capital gains, which are not considered sustainable” and that it will be similarly supported in 2020, the agency said in a report.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Rolls-Royce Holdings Plc’s cash outflow ballooned in the first half as a bottleneck in plane deliveries at Airbus SE and Boeing Co. reduced engine revenue and stockpiling for a no-deal Brexit led to a build up of parts.Europe’s biggest jet-engine maker posted negative underlying free cash flow of 429 million pounds ($522 million) for the six months, almost six times the level of a year earlier. The shares fell as much as 2.3%.Rolls currently has about 50 turbines awaiting delivery, compared with the usual 15 or so. Chief Executive Officer Warren East predicted “significant improvements” in the second half and said the company should reach its full-year cash goal as the inventory build up unwinds.Rolls earnings show the ripple effects on suppliers as planemakers grapple with their highest-ever order backlogs amid a surge in air travel. Production setbacks spanning poor-quality seats to engine glitches have held back output, forcing Airbus and Boeing to keep plants operating over the Christmas holidays last year in order to meet delivery targets.787 ChargeThe U.K. company was hit with its own manufacturing issues when faults were found in engines powering the Boeing 787 model. East announced a further charge for repairs to the jet, and another for Airbus’s early termination of the A380 superjumbo, as well as higher restructuring costs. He cited a near one-third jump in operating profit on higher margins on A350 turbines and gains at defense and power-systems arms as indicating a healthy underlying business.The power unit, which makes marine, land and industrial engines and power-generation products, accounted for about half of the inventory build up. The company has spent close to 100 million pounds to smooth its supply chain in the event of a no-deal Brexit, including additional shipping capacity and extra warehouse space in the U.K. and mainland Europe, as well as stockpiling parts.Across the group, the value of inventory held should decrease by 500 million pounds through the second half, aided by reduced 787 groundings, Rolls-Royce forecasts. The company is targeting full-year free cash flow of 700 million pounds, plus or minus 100 million pounds.Shares of Rolls, which doesn’t make engines for Boeing’s grounded 737 Max, were trading 0.8% lower at 807.80 pence as of 9:40 a.m. in London, taking the stock’s decline this year to 2% and valuing the group at 15.5 billion pounds.Earnings Highlights:(Updates with planemaker delivery issues in fourth paragraph, predicted inventory rundown in seventh.)To contact the reporter on this story: Benjamin Katz in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Tara Patel at email@example.com, Christopher JasperFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Britain's Rolls Royce said it was prepared to cope with the fallout from a disorderly Brexit after the aero-engine maker spent around 100 million pounds to increase inventory among other preparations, its chief executive said.
Indian federal police have opened an investigation into Rolls-Royce Holdings Plc, alleging the UK-based engine maker and its Indian arm improperly used a third-party to conduct business with three Indian state-owned companies. In a report published on Tuesday, India's Central Bureau of Investigation (CBI) also said officials from the Indian companies - Hindustan Aeronautics Limited (HAL), ONGC and GAIL - may have been involved in improper procurement from Rolls-Royce. Rolls-Royce provided engine spare parts to HAL for servicing gas turbines used by GAIL and ONGC, both of which are involved in the oil and gas sector, the report said.
The Central Bureau of Investigation (CBI) has opened an investigation into Rolls-Royce Holdings Plc, alleging the UK-based engine maker and its Indian arm improperly used a third-party to conduct business with three Indian state-owned companies. In a report published on Tuesday, the CBI also said officials from the Indian companies - Hindustan Aeronautics Limited (HAL), ONGC and GAIL - may have been involved in improper procurement from Rolls-Royce. Rolls-Royce provided engine spare parts to HAL for servicing gas turbines used by GAIL and ONGC, both of which are involved in the oil and gas sector, the report said.
According to Rolls-Royce, by late February 35 787s had been grounded globally due to engine blades corroding or cracking prematurely. "This blade deterioration is a known issue but it is occurring faster than we expected on some engines," Chris Cholerton, Rolls-Royce President for Civil Aerospace, said on Wednesday. The accelerated inspection regime will allow Rolls-Royce to confirm the health of the more than 180 engines in service over the next few months.