Rolls-Royce profits soar 21%

The manufacturer had a great 2011, driven by orders from airlines. Although defence cuts muted things somewhat.

by Emma Haslett
Last Updated: 06 Nov 2012
By all accounts, 2011 was a mixed year for manufacturers. Not Rolls-Royce, though: the company has just posted stonking figures for last year, with pre-tax profits jumping by 21% to £1.16bn, while revenues rose by 4%. Given the fact that the purchasing managers’ index (which measures the number of orders manufacturers receive) was all over the shop last year, that’s pretty good going. At least it’s managed to shrug off all the hoo-hah about one of its engines blowing up on an Airbus A380 in late 2010…

The manufacturer said that part of that revenue rise was down to an increase in ‘after-market sales’, aka companies wanting it to service their engines. And its future looks bright, too: its order book has risen by 5%, to £362bn. That includes a 70% rise in orders from civil aerospace companies, a sector which represents more than 80% of its business. Part of that is the exclusive deal it’s signed to build engines for Airbus’s A350-1000 aircraft. Not bad.

The company also reckons it’ll do well out of airlines’ desires to move to more efficient aircraft – partly because that gives them kudos from the green movement, but mainly because the high cost of jet fuel is making older, dirtier models unmanageable. Airlines in emerging markets are also becoming more enthusiastic about Rolls-Royce: presumably as business flows into their economies, airlines are working hard to compete with their western rivals.

The company wasn’t without its problems last year, though: its defence order book fell by 7% to £6bn as governments cut back on their defence expenditure. Although it did get a nice little one-off payment of £60m from the Ministry of Defence after it cancelled some of its contracts. Which can’t have gone down badly.

Part of Rolls-Royce’s profit rise was also driven by German engines group Tognum, which it acquired with German car group Daimler last year. And Daimler (which owns Mercedes) didn’t do too badly, either: this morning, it reported a 29% in net profits to €6bn (£5bn). Vehicle sales rose by 11% to 2.11m, with the company adding that Mercedes had ‘never performed better than in 2011’, while fourth-quarter net profits jumped by 57% to €1.79bn. Which just goes to show that not all manufacturers are having a bad time…

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