Rolls-Royce posts $7 billion loss as crisis roils jet demand

Rolls-Royce Holdings Plc suffered a record half-year loss after the coronavirus crisis grounded jetliner fleets and said it plans to sell assets to help weather the downturn.

The pretax loss of 5.4 billion pounds ($7 billion) was swollen by a charge for curbing currency hedges as sales shrink, Rolls-Royce said Thursday, together with a writedown of the value of its main jet-engine arm.

The company said it wants to raise at lease 2 billion pounds from disposals within 18 months, identifying Spanish unit ITP Aero, a maker of aircraft and industrial engines and parts, as the asset most likely to be offloaded.

Rolls is also closing sites and cutting jobs as it grapples with a slump that’s expected to depress demand for the wide-body engines in which it specializes for years to come. Chief Executive Officer Warren East, who had already warned that the airliner-engines business could emerge a third smaller, said 4,000 posts have been eliminated so far out of a potential 9,000 that may need to go.

“We have made significant progress with our restructuring, which includes the largest reorganization of our civil aerospace business in our history,” East said in a statement, adding that the “difficult decisions” will significantly reduce the group’s cost base.

Rolls-Royce fell as much as 7.7% and traded 6.5% lower as of 8:06 a.m. in London, taking the stock’s decline this year to 65% and cutting its market value to 4.57 billion pounds.

The CEO said on a call that he doesn’t see engine flying hours getting back to 2019 levels even by 2022, and that the timing and shape of the eventual recovery remains very uncertain.

East will have to carry through the transformation without Chief Financial Officer Stephen Daintith, who has been appointed to the same role at grocery-delivery firm Ocado Group Plc. Rolls said that he’ll be staying on to support the transition and that the search for a successor is underway.

Rolls-Royce reported a 2.6 billion-pound non-cash loss from the revaluation of currency hedges. The company is paring back its dollar hedging by 10 billion pounds, or 27%, through 2026 to reflect the likelihood of greatly reduced revenue. Most jetliner sales are priced in the U.S. currency.

The engineer also recorded 1.1 billion pounds of impairment charges and write-offs and 400 million pounds of exceptional restructuring charges.

Rolls reiterated that it expects a cash outlflow of 1 billion pounds in the second half, lower than in the first, reiterating that the full-year figure will be a negative 4 billion pounds.