UPDATE 2-Rolls-Royce profit up on fuel-efficient jet demand

Thu Jul 26, 2012 4:30am EDT

* H1 pretax profit 637 mln stg vs consensus of 615 mln stg

* Revenue up 5 pct to 5.8 bln stg

* Interim dividend 10 pct up to 7.6 pence/share

* Shares up 4.8 pct

By Rhys Jones

LONDON, July 26 (Reuters) - Rolls-Royce posted a better-than-expected 7 percent rise in first-half profit, driven by increased production at planemakers Airbus and Boeing who are responding to growing demand from airlines for new fuel-efficient planes.

Rolls, the world's second-largest maker of aircraft engines behind U.S. group General Electric, on Thursday reported an underlying pretax profit of 637 million pounds ($985.66 million) for the six months to the end of June on revenues 5 percent higher at 5.8 billion pounds.

Europe's Airbus and U.S. rival Boeing are ramping up output and are targeting more than 1,100 deliveries this year.

The company, whose website says a Rolls-Royce powered aircraft takes off or lands every 2.5 seconds, raised the interim dividend by 10 percent to 7.6 pence per share and said it expected to deliver further growth in 2012 in spite of global economic uncertainty.

"For the full year, we continue to expect good growth in underlying profit with cash flow around breakeven," chief executive John Rishton told reporters.

"The volatility of the economic environment -- whether it's in Europe, a slowdown in China or the U.S. -- does have an impact and none of us are immune to this. But the diverse range of products we produce and the geographic spread we have helps protect us."

The group sells aero, defence, marine and energy products to businesses and governments in more than 100 countries.

Rolls was expected to post an average pretax profit of 615 million pounds for the first six months of 2012, according to a Thomson Reuters analyst poll, which predicts it will deliver 1.43 billion pounds of profit in the full-year.

Shares in Rolls-Royce, which have risen 14 percent in 2012, were 4.8 percent up at 869.50 pence by 0824 GMT, valuing the company at around 16 billion pounds.

"We view these as positive results in the key aerospace area, which for us remains the major driver of the stock," said RBC analyst Rob Stallard.

SOARING DEMAND

Global airlines will buy $3.5 trillion of aircraft over the next 20 years to meet demand for travel to and from emerging markets - especially in Asia - and renew ageing fleets in the West, according to the world's big two planemakers. Airlines are investing in new lightweight planes to lower fuel costs, which are soaring.

The predictions underscore soaring demand for narrowbody or single-aisle jets. Analysts forecast that 20,000 narrowbody planes will be produced in the next 20 years.

Rolls, which has more than 5,000 engines worth some 50 billion pounds on order, said revenues at its main civil aerospace unit rose 17 percent in the last six months. Around 60 percent of the unit's revenues come from aftermarket services.

A new joint venture between Rolls and U.S. rival Pratt & Whitney to develop the next generation of engines for the mid-sized aircraft market would be cleared in the "foreseeable future", said Rishton.

The company said its order book rose 4 percent to 60.1 billion pounds during the period, while net cash roughly quadrupled to 869 million pounds, helped by last year's sale of its stake in the International Aero Engines consortium.

"I haven't got any immediate plans to spend that cash - having cash in the bank is very helpful for me because I can sleep well at night and not worry too much," said Rishton, adding that the group would focus on delivering the benefits from last year's acquisition of Tognum before making more deals.

Earlier this week Rolls said it had been forced to replace a component on a number of its Trent 1000 engines which power Boeing's new 787 Dreamliner after Japan's All Nippon Airways grounded part of its 787 fleet following tests which revealed a risk of engine corrosion.

Rishton said the company would not take a significant financial hit from the incident.

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