Rolls-Royce says to cut 2,300 jobs

(Adds more detail, analyst comment, background)

By Dan Lalor

LONDON, Jan 11 (Reuters) - British engine maker Rolls-Royce Group Plc (RR.L: Quote, Profile, Research) plans to cut 2,300 jobs at home and abroad in an efficiency drive to help offset rising costs, such as higher prices for speciality metals, and the effect of a weak dollar.

"Costs associated with this exercise in 2008 will largely be balanced by savings achieved in the course of the year," Rolls-Royce said on Friday, adding the restructuring would affect managerial, professional and clerical staff.

It will not hit its 2007 results which are due on Feb. 7.

Rolls-Royce said the job cuts "will extend to the UK, United States, Germany, the Nordics and other countries where the relevant functions are located... In the UK, the group will seek to secure the headcount reductions, wherever possible, through voluntary redundancy".

Numis Securities analysts, who rate Rolls-Royce stock an "add" with a 605 pence price target, said: "Essentially Rolls-Royce has become more efficient from ongoing productivity initiatives in recent years and needs to employ less admin and support staff. Note, this is not engineers which continue to be recruited as production expands rapidly." Rolls-Royce is best known for aero engines, and booming demand for commercial airlines last year left it with a record order book. But it also has sizeable business making gas turbines for ships and power generation markets, and in 2006 got half its turnover from contracts to service engines.

By 1115 GMT, Rolls-Royce shares, which have performed in line with other London-listed aerospace and defence companies .FTASX2710 over the past 12 months, were down 3.2 percent at 508 pence to value the business at 9.3 billion pounds ($18.14 billion).