Rolls-Royce Holdings has anticipated the fall of its revenues after trade sanctions would begin implementation against Russia. The engineering company gave an update about their recent trades and stated that its customers of nuclear, energy and power systems have delayed their orders. Some of their customers even cancelled major orders. Because of this, Rolls-Royce predicts a lower income for the year 2014, with 3.5% – 4% less than initially estimated. However, Rolls-Royce expects its underlying profit to remain flat, because of cost savings which counterbalanced its decreasing revenues. The United States and European Union have imposed an impressive array of sanctions on Russia and various Russian politicians, public figures and businessmen, as well as entire businesses. The sanctions come as a response after the sudden annexation of Crimea and the following crisis in the eastern part of Ukraine. The European Union imposed even harsher sanctions after 298 innocent people died on board of the Malaysia Airlines planes, which was destroyed over eastern Ukraine on July 17.
Rolls-Royce Holdings declared “Since our interim results, the economic outlook for 2015 has become more challenging”, mainly because most of its most important customers were faced with difficult market conditions, which interfered with their investment decisions. The good news is that the revenues for its civil aerospace, defense aerospace, marine division and power systems divisions remained the same. It is however, estimated that the nuclear and energy revenues might report a decrease of 5%. Rolls-Royce Holdings expects profit in its civil aerospace division to be higher that initially estimated. John Rishton, chief executive of Rolls-Royce Holdings declared: “While the short term is clearly challenging, reflecting the economic environment, the prospects for the group remain strong, driven by the growing global requirement for cleaner, better power”.
Rolls-Royce has 12,000 employees in East Midlands. A spokesperson for the company said that the sale of its compressor business and gas turbine business to Siemens would most likely be conducted by the end of this year. Once the sale is finalized, the company would begin its planned £1bn share buy-back. Rolls-Royce registered a 7.5% fall in shares, because the market did not react well to the news about their dropping revenues.