LONDON (Reuters) - British engineering company Rolls-Royce (LON:RR) stuck to its guidance to turn cash flow positive during the second-half of next year, despite downgrading this year's forecast and warning the outlook remains challenging.
The company, whose engines power Boeing (NYSE:BA) 787s and Airbus A350s, has been hit by the travel slump during the coronavirus pandemic and in November raised 2 billion pounds ($2.7 billion) from shareholders and took on 3 billion pounds of debt to help it survive COVID-19.
In a trading update on Friday it downgraded its cash outflow outlook for this year, saying it now expected that to be 4.2 billion pounds, worse than the 4 billion pounds it was guiding to in October.
It also said the recovery in engine flying hours, a key measure of how much it is paid by airlines, had slowed due to a second wave of infections in some geographies.
"The outlook remains challenging and the pace and timing of the recovery is uncertain," chief executive Warren East said in a statement.
Over the 11 months to November, engine flying hours were approximately 42% of their prior year level, meaning Rolls will likely miss the base case forecast it gave in October for engine flying hours to come in at 45% for 2020.
For October and November, engine flying hours came in at about 33% compared to last year, improving on the 29% seen in the three months ended September.
To ride out the pandemic, the company plans to sell assets worth 2 billion pounds to pay down debt and is cutting 1.3 billion pounds in costs, a plan it said on Friday is on track.
That includes axing 9,000 jobs and closing factories to adjust to lower demand from airlines that fly its engines. Rolls said more than 5,500 roles would have been cut by the end of 2020.