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| Rolls-Royce shares plunge on 2016 'headwinds' | |
| (35 minutes later) | |
| Shares in aerospace group Rolls-Royce have plunged 16% after it warned that profits in 2016 will be hit by £650m of "headwinds" as a result of "sharply weaker demand". | |
| The company said the main areas where demand was weaker were "selected aerospace and offshore marine markets". | The company said the main areas where demand was weaker were "selected aerospace and offshore marine markets". |
| In July, it said a reduction in deliveries of its Trent 700 engine would affect profits in 2016 and 2017. | In July, it said a reduction in deliveries of its Trent 700 engine would affect profits in 2016 and 2017. |
| It added its profits this year would be at the "lower end" of expectations. | |
| It has previously forecast profits in 2015 would be between £1.325bn and £1.475bn. | It has previously forecast profits in 2015 would be between £1.325bn and £1.475bn. |
| Structural review | |
| Warren East, who was appointed as chief executive of Rolls-Royce in April, said: "The speed and magnitude of change in some of our markets, which have historically performed well, has been significant and shows how sensitive parts of our business are to market conditions in the short-term." | |
| Mr East, who is carrying out a structural review of the business, added Rolls-Royce carried "too much fixed cost" and was "inflexible in managing this in response to changes in market conditions". | |
| He is looking for annual cost savings of between £150 and £200m of which £115m cost savings are expected to come from the company's aerospace and marine division in 2016. | |
| More details on the structural review of the company will be announced later in November, Rolls said. | |
| Demand for corporate jets powered by Rolls-Royce engines is expected to be sharply lower in 2016, Rolls said. | |
| In addition, it predicted weaker demand for corporate jet aftermarket services, and weaker demand for aftermarket services for its engines on 50-70 seat regional jets. | |
| Rolls also said it would put its shareholder payments policy under review, signalling the possibility that dividend payments could be cut or even suspended. |