ROLLS-ROYCE: 2016 looks terrible

Engineering firm Rolls-Royce said 2015 profits would be at the lower end of estimates in an update on its performance on Thursday.

The company had previously set profit guidance for 2015 at £ 1.325 billion to £1.475 billion.

The picture looks even worse for next year, with profits in 2016 hit by £650 million of “headwinds” — lower demand for its services.

CEO Warren East said: “While 2015 remains broadly as expected, the outlook for 2016 is very challenging.”

“The speed and magnitude of change in some of our markets, which have historically performed well, has been significant and shows how sensitive parts of our business are to market conditions in the short-term,” he said.

Rolls-Royce said it would seek cost-savings of up to £250 million every year, taking effect from 2017, and signalled it could change its shareholder dividend policy.

Rolls-Royce has been hit by low oil prices and a drop in investment in the energy industry. The company said in September it would slash 400 jobs from its marine division, following 600 factory job cuts earlier this year. The new round of redundancies will reportedly hit factory managers.

Rolls-Royce is struggling. The group had its fourth profit warning in 18 months in July and investors are concerned that a strategy to diversify away from making aircraft engines isn’t paying off.

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