Rolls-Royce says supply-chain disruptions remain key concern

Supply-chain disruptions remain the “key operational challenge” at Rolls-Royce Holdings Plc as the UK maker of aircraft engines echoes comments from manufacturers like Airbus SE and Boeing Co. that have struggled to ramp up output from the pandemic-induced slump.

The maker of the engines for the Airbus A350 wide-body aircraft reiterated its full-year projections for underlying operating profit of £800 million ($1 billion) to £1 billion and free cash flow of £600 million to £800 million. Free cash flow generation will be weighted toward the second half of the year, Rolls-Royce said in a regulatory filing ahead of its annual general meeting on Thursday. 

Rolls-Royce fell as much as 6.85% to 145.6 pence in London, clipping this year’s advance to about 57%. The stock is the second-best performer on the FTSE 100 Index this year.

Chief Executive Officer Tufan Erginbilgic has initiated a transformation program at the biggest UK manufacturer, including some key management changes. The global aviation industry is struggling with output amid a lack of spare parts and skilled labor, coupled with disruptions brought by sanctions against Russia, which supplies components like titanium for aircraft engines.

While Rolls-Royce doesn’t expect disruption to impact its financial forecast for 2023, the company’s debt was “still too high” and the company was “proceeding with a sense of urgency,” Erginbilgic said at the AGM.