By Christopher Jasper / Bloomberg
Rolls-Royce Holdings Plc said it will spend more to carry out fixes for engines it makes to power Boeing Co.’s 787 Dreamliner, a move that will eat into full-year earnings and cash flow.
An improved blade for the latest version of its Trent 1000 turbine won’t be ready until 2021, Rolls said in a statement Thursday. That will force the U.K. manufacturer to stock up on spares and expand maintenance facilities for Dreamliners that require temporary fixes to keep flying.
The 400 million-pound ($515 million) expense, combined with costs of customer disruption and provisions against future losses on contracts, means the London-based company faces a one-time charge of 1.4 billion pounds against 2019 operating profit.
The extra spending will allow Rolls-Royce to meet a target of returning groundings of 787s equipped with its engines to normal levels in the second quarter of next year, Chief Executive Officer Warren East said on a conference call. Dreamliner operators affected by groundings have included British Airways, Norwegian Air Shuttle ASA and Virgin Atlantic Airways Ltd.
All told, cash costs for in-service work on 787 engines is now expected to total 2.4 billion pounds through 2023. Design glitches have plagued the Trent program since 2016, eating into Rolls-Royce’s share of turbines for 787 jets against rival engine maker General Electric Co.
Last year, Rolls-Royce said the intermediate pressure turbine blades, which had already been flagged for replacement, weren’t lasting long enough to meet maintenance schedules. Rolls said in September that it was facing additional delays to replace components.
While overall trading has improved since the half year, Rolls-Royce’s power-systems arm has also deferred some projects, with sales growth for the year now set to be in the low- to mid-single-digit range.
Shares of Rolls-Royce fell as much as 3.9% before trading 1.2% lower at 767.40 pence as of 9:56 a.m. in London. The stock has declined 7.5% this year.