British engine manufacturer Rolls-Royce said it was well-positioned to achieve positive financial results in 2022, citing cost reductions, recovery from the COVID-19 pandemic, and strong demand in defense.
In its trading update for the first four months of 2022, the company reiterated that its financial performance was in line with expectations and financial guidance for 2022, “despite ongoing risks around macroeconomic uncertainties” and supply chain bottlenecks.
“We are confident that we have positioned the business to achieve positive profit and cash this year, driven by the benefits of our cost reductions and increased engine flying hours in Civil Aerospace together with a strong performance in Defense and Power Systems, and balanced by our commitment to invest in technology and systems that are critical to the leading sustainable solutions we are delivering now and, in the future,” CEO of Rolls-Royce, Warren East said.
In the first four months of 2022, Rolls-Royce’s large engine long-term service agreement (LTSA) flying hours were 42% higher compared to the same period in 2021. The increase was attributed to recovering passenger demand, especially in Europe and the Americas.
Meanwhile, the defense sector is expected to reflect a lower operating margin than in 2021. However, Rolls-Royce is confident on “revenue, profit and cash conversion against the headwinds of inflation and supply chain risk”.
“Governments are increasing their long-term budget allocations towards defense activities, underpinning the long-term growth outlook we hold for Defense,” Rolls-Royce said in the trading update.