LONDON: Engine maker Rolls-Royce said it was on track to meet forecasts for the year, as it reported an expected 20 percent drop in first-half profit due to shrinking government defence spending and currency headwinds.
Rolls, the world's second-largest maker of aircraft engines behind U.S. group General Electric, on Thursday posted pretax profit of 644 million pounds ($1.09 billion) in the six months to the end of June, compared to a consensus forecast of 607 million pounds.
The company said in May that it would generate around two-thirds of its annual profits, currently forecast by analysts to come in at 1.65 billion pounds according to Thomson Reuters data, in the second half of the year due to the costs of a restructuring plan falling in the earlier period.
Rolls alarmed investors in February by announcing there would be a pause in profit growth in 2014, ending a decade of continuous rises, as the company absorbed the impact of declining U.S. and European military budgets.
The improvement in the second half would be driven by higher revenues and cost reductions, Rolls said.
"While there are challenges, we maintain our full-year guidance for the Group," Chief Executive John Rishton said in a statement.
Amongst those challenges are difficulties in its marine business, which supplies power systems to ships, where profit was seen down a further 15 percent to 25 percent this year but would be compensated at the group level by improvements elsewhere.
Rolls also increased its interim dividend by 5 percent to 9 pence per share. (Reuters)