Rolls-Royce has suffered its worst losses on record owing to the coronavirus pandemic's ravaging of the travel sector though the company did manage to stick to its forecast of minimising cash loss throughout the year.
Rolls Royce IFS
The engine company burned through £4.2 billion (€4.89 billion) as revenues for its airliners crashed. The company expects to lose a further £2 billion for 2021 as it may be a while before the sector bounces back from the pandemic.
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Rolls-Royce was particularly hard-hit by the pandemic, as its primary source of revenue comes from supplying engines to passenger jets, which saw a significant decline during the crisis.
The company's civil aerospace arm usually makes up nearly half of its revenue, seeing £8 billion (€9.3 billion) in operating profits for 2019, shrinking to £5 billion in 2020.
On an underlying pre-tax basis, Rolls-Royce lost £4 billion (€4.6 billion) compared with a profit of £583 million the year before - far exceeding the £3.1 billion loss forecast by analysts.
Losses before taxes were £2.9 billion (€3.38 billion) for 2020, including £1.2 billion in write-offs and nearly £500 million in redundancies.
On Thursday the engine company announced that, despite its losses, its liquidity position remains strong and it should be able to cope with severe pitfalls.
Rolls-Royce initiated a number of cost-cutting techniques for the pandemic, including cutting 7,000 of its 19,000 jobs in its civil aerospace division.
It also shut down factories for two weeks during the summer in a bid to save more money.
The company is also planning to sell £2 billion worth of assets in order to deal with the £5.2 billion (€6.06 billion) in debt it took on last year.
However, this plan has run into some hitches after Norway suspended the sale of Rolls-Royce's Norwegian unit, Bergen Engines.
The engine developer saw active airtime for 2020 plummet, with the hours flown by planes with Rolls-Royce engines slumping to 43% of 2019 numbers. Bounce-back for 2021 is expected to be gradual, and the company is anticipating a peak of 55% on 2019 numbers for the year.
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The company previously warned of the danger of new virus strains, and doesn't expect capacity to return to normal until beyond 2022.
It has also warned that deliveries of its engines are not expected to see significant returns for "a few years" at least.
Rolls-Royce has announced their January 2021 earnings report is expected to be worse than anticipated, owing to the tightening of lockdown restrictions over the Christmas period.
It is expected to burn through even more cash for at least the first half of the year.
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