REFILE-UPDATE 3-Rolls-Royce bullish on long-term as FY profit up

(Removes extraneous word in first paragraph, adds sub-heading)

* Full-year sales 10.4 billion pounds, vs 9.08 bln stg

* CEO says air travel, freight still at subdued levels

* Raises dividend 5 percent

* Shares rise 7.1 percent

(Adds company, analyst comment, details; updates shares)

By Rhys Jones

LONDON, Feb 11 (Reuters) - British engine-maker Rolls-Royce's (RR.L) bullish long-term outlook overshadowed its caution on the civil aerospace market as it reported a rise in 2009 profit, boosted by growth at its defence and marine units.

Rolls-Royce, the world's second-largest maker of aircraft engines behind General Electric Co (GE.N), on Thursday posted a 4 percent rise in underlying 2009 pretax profit to 915 million pounds ($1.43 billion) on sales 14 percent higher at 10.4 billion and said it saw no immediate recovery in aviation markets.

"Although there are some signs of improvement in traffic, the sustainability of these trends is uncertain," Chief Executive John Rose told reporters on a conference call.

Despite this Rose said he expected the company to double its revenues over the next decade.

"We have the ability to access the world's faster growing markets, where there continues to be demand for investment in transport and infrastructure," he said.

Rolls' net profit for the year, which includes the impact of its hedge book and other financial instruments, was 2.2 billion pounds compared with a loss of 1.3 billion in 2008 when earnings were hit by exchange-rate losses.

Shares in Rolls-Royce, which have risen 4 percent in the last three months, were up 7.1 percent at 524.00 pence at 1151 GMT, valuing the group at around 9 billion pounds.

The company was expected to report a pretax profit of 868 million pounds for 2009 and is tipped to post a pretax profit of 876.15 million for 2010, according to a poll of 20 analysts by Thomson Reuters I/B/E/S.

"In 2010 revenues and profits will be broadly similar to those achieved last year," said Rose.

"The tone is still generally cautious but whilst we are not expecting a uniform and quick recovery to the global economy, we think there is enough positive momentum coming through from operational improvements, currency benefits and the changing mix of the business, with a higher percentage of service revenues," said Investec analyst Andrew Gollan.

ORDER BOOK UP

Rolls-Royce, which split from the luxury car maker of the same name in 1971, said its order book at the end of last year rose to 58.3 billion pounds from 55.5 billion a year earlier and that it had increased the final dividend payment by 5 percent to nine pence per share.

CEO Rose sees revenue from aftercare service -- the maintenance and repair of aircraft engines -- growing by 10 percent in 2010 and predicts they will continue to rise in the years ahead.

Rolls, which makes engines and turbines for passenger planes, fighter jets, ships and power stations, said it expected civil aerospace markets to remain difficult in the short-term after the unit's profit fell 13 percent in 2009 and total engine deliveries for the year fell to 844 from 987 in 2008.

Analysts believe Rolls' civil aerospace business has yet to be fully hit by the recession because the lag between the downward trend in airline traffic and the decline in deliveries is about two to three years, meaning the civil engine downturn will likely hit Rolls in the second half of 2010.

Like other engine suppliers, Rolls-Royce has been affected by delays in production of two airliners, the Airbus (EAD.PA) A380 and Boeing (BA.N) 787, crimping revenues from engine deliveries and prompting a build-up in inventory.

A drop in global passenger demand means Airbus and Boeing are struggling as airlines cancel and defer orders, weighing on the whole aerospace supplier sector.

However, Air China (601111.SS) (0753.HK) on Thursday said it had agreed to buy 20 A320 aircraft from Airbus, offering hope that growth in Asia and the Middle East would boost the sector. [ID:nTOE6190CB]

The International Air Transport Association, an industry body, recently said the aviation sector was far from returning to profit and forecast that airlines would lose $5.6 billion this year after $11 billion in 2009. [ID:nLDE61210N]

Rival U.S. engine maker Pratt & Whitney, a unit of United Technologies (UTX.N), said last month it expected the effect of the global aviation slump to ease this year, while General Electric Co (GE.N), the world's biggest maker of jet engines, said demand had been sluggish but predicted better times ahead. [ID:nN27160800] [ID:nN22235838]

Profit at Rolls' marine and defence divisions rose 43 and 13 percent on new contract wins and growth in emerging markets, respectively.

The company, whose TP400 engine powers Airbus' troubled A400M military transporter aircraft, said there was "continuing uncertainty about the A400M programme" but that the outlook for its defence business was good despite expected cuts in UK and U.S. defence spending.

Airbus on Thursday said it would start trimming its exposure to the A400M programme if intensive funding talks failed to make tangible progress soon. [ID:nLDE61A0V2] (Editing by Victoria Bryan, Sharon Lindores and Karen Foster) ($1=.6393 Pound)