British engineer Rolls-Royce warns that its profits will not rise next year as previously forecast. As David Pollard reports, the revised outlook sent the company's shares to their lowest level in almost two years.
After this week's sell-off, it may be the last thing stock markets want. But here it is: another warning on global growth. This time, it's the British engineering icon, Rolls-Royce. Deteriorating economic conditions, it says, means profits will not rise next year as previously forecast. It's the second blow to investors this year after an earlier profits warning in February. Mike Ingram, market analyst at BGC. (SOUNDBITE) (English) MIKE INGRAM, MARKET ANALYST AT BGC PARTNERS, SAYING: ''If you look at what's happened in the global economy since then, and particularly in terms of consumption of capital goods, which of course is where Rolls-Royce is coming from, you know, we've seen a lot of investor uncertainty, these are big-ticket items, that's deferred activity quite a lot. The revised outlook, released three days earlier than expected, sent shares in the company down to their lowest since December 2012. Chief Executive John Rishton said wherever you looked there were signs of economic slowdown. He pointed to the fall in oil and iron ore prices, an absence of growth in Europe and a slowdown in China. And blamed Russian trade sanctions for hitting its results. Profit next year will be unchanged from 2014 or up to 3 percent lower. Results this year will also be affected - revenues likely to fall by around four percent. (SOUNDBITE) (English) MIKE INGRAM, MARKET ANALYST AT BGC PARTNERS, SAYING: ''In a way, I think, Rolls-Royce is like the DAX in microcosm. You've got Germany, and then the DAX very heavy on capital goods producers, that's been hit, the DAX has been hit, and now, belatedly, Rolls-Royce is being hit.'' The company disappointed the market in February when it said U.S. and European defence spending cuts would mean flat profits this year. That warning brought an end more than a decade of profit growth - much of it carried by demand for fuel-efficient engines for passenger planes made by Airbus and Boeing.