Coronavirus pandemic worsens Rolls-Royce’s 2020 prospects

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Coronavirus pandemic worsens Rolls-Royce’s 2020 prospects

UK engineering firm Rolls-Royce downgrades its cash outflow forecast for this year and warns of a tough outlook as air travel continues to decline.

The company stuck to its forecast to increase cash flow in the second half of next year, saying its plans to significantly cut costs are being implemented and will help change the rate of cash burn.

The company, whose engines are used in Boeing 787 and Airbus A350 planes, has been hit by a travel slump due to the coronavirus pandemic and raised £ 2bn ($ 2.7bn) from shareholders in November to survive..

Coronavirus pandemic worsens Rolls-Royce's 2020 prospects

Just a few weeks later, Rolls-Royce lowered its forecast for this year’s cash outflow on Friday, saying it is now expected to be £ 4.2bn, worse than the £ 4bn that the company had targeted in October..

The company also warned that the recovery in engine hours, a key indicator of how much they pay airlines, has slowed as a second wave of coronavirus infections sweeps the planet..

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Rolls-Royce shares fell 7% to 118.5p at 08:34 GMT, which compares with an 80% gain since the positive news about vaccines emerged in early November..

CFO Stephen Daintit (Stephen Daintith), attracted by shareholders to raise funds and taking on a new £ 3bn debt last month, told reporters that Rolls-Royce «enough liquidity to survive 2021».

Executive Director Warren East (Warren East) said it is confident Rolls-Royce will meet its cash flow target by 2021, but its timing will depend on the recovery of flight hours.

Engine hours in 11 months were approximately 42% of the previous year, meaning Rolls-Royce is likely to fall short of its baseline forecast in October and 45% engine hours for 2020..

To weather the pandemic, the company plans to sell £ 2 billion in assets to pay off debt and is cutting costs by £ 1.3 billion by cutting 9,000 jobs and closing factories. The company said that the plan is currently still  performed.

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