By Paul Sandle and Sarah Young
LONDON (Reuters) -British aero-engineer Rolls-Royce raised its full-year operating profit forecast by around 45% on Wednesday after military spend and a recovery in long-haul flying delivered a stronger-than-expected first half.
The company said it now expected profit to come in between 1.2 billion to 1.4 billion pounds, up from its previous guidance of between 0.8 billion and 1 billion pounds this year. The market had been forecasting 934 million pounds.
Chief Executive Tufan Erginbilgic, who joined the company in January, said his turnaround had started well, with progress already evident across the company.
“Despite a challenging external environment, notably supply chain constraints, we are starting to see the early impact of our transformation in all our divisions,” he said on Wednesday.
The company, whose engines power the Airbus A350 and Boeing 787, said underlying operating profit for the first six months would come in at just over twice the market expectation of 328 million pounds.
A large part of Rolls-Royce’s revenue is tied to the hours flown by its engines, a model that plunged it into crisis when planes were grounded during the pandemic.
A rebound in flying, however, is now benefiting the company, as is increased defence spending due to the war in Ukraine, and it shares have risen by 64% this year.
The group said it would produce up to 360 million pounds of free cash flow for the six months to end-June, soundly beating the 50 million pounds forecast, and it could produce as much as 1 billion pounds of cash in the full year.
It will publish its first-half results on Aug. 3.
($1 = 0.7755 pounds)
(Reporting by Paul Sandle and Sarah Young; Editing by Kate Holton)
