Last-minute orders set to lift Rolls profits

ENGINEERING and aerospace giant Rolls-Royce is tipped to beat analysts’ profits expectations this week following a huge boost to its order book at the end of the year.

According to consensus, the company is expected to post pre-tax profits of 868 million for the 12 months to 31 December – down from 880m last year.

But Andrew Gollan, of Investec Securities, said he is “increasingly convinced” that these predictions are too low and has pencilled in a surplus of 892.2m Overall, half-year pre-tax profits rose 9 per cent to 445m – ahead of expectations.

While the firm has a multi-dimensional business, making everything from jet engines to products for nuclear power plants, it has been battered by the global economic downturn and a decline in travel and air freight.

Huge oil price rises in 2008 have also been blamed for the delayed take-up of Airbus A380 and Boeing 787 widebody programmes in the year. The firm’s order book stood at 57.5bn at the end of June, with the aerospace division accounting for around 46.7bn.

In June, the firm said underlying profits will be lower across the year in this division, compared to 2008.

But Rolls announced a major boost to its order book in November, with deals for new engines with Air China and Ethiopian Airlines worth a combined $2bn (1.3bn).

Gollan predicts a decline in volumes for business and regional jets next year, as well as lower narrow-body engine production. Engine aftercare is also expected to be flat.

He said the firm would benefit from cost saving measures, increased currency improvements and the likely robust performances of its other divisions – defence, marine, energy and nuclear.