By Paul Sandle and Sarah Young
November 28, 20237:31 AM PSTUpdated 13 days ago
LONDON, Nov 28 (Reuters) - Rolls-Royce (RR.L) aims to quadruple profit in the next five years by boosting the performance of its jet engines and bearing down on costs in boss Tufan Erginbilgic's masterplan for Britain's most prestigious engineering company.
Setting out a strategy that has been almost a year in the making, the chief executive said on Tuesday he would deliver up to 2.8 billion pounds ($3.5 billion) in annual operating profit by 2027, four times 2022's outcome and double its guidance for up to 1.4 billion pounds this year.
That would be driven by surge in profit margins at its civil aerospace business to 15-17% from 2.5% last year.
Erginbilgic, a former BP executive who took over in January, said he would tackle Rolls-Royce's inefficiencies by focusing on the widebody plane sector, where it is Airbus's exclusive supplier, business aviation, defence and power systems.
Its electrical-powered aircraft business will be sold in a drive to raise up to 1.5 billion pounds from selling non-core assets, he said, while the company could re-enter the single-aisle jet market through a partnership, leveraging its next-generation UltraFan technology.
The biggest driver of profit will be a step change in margins in an engine business that powers nearly half of long-haul aircraft, including all Airbus (AIR.PA) A330neo and A350 models and some Boeing (BA.N) 787 planes.
The margin target would bring Rolls-Royce closer to rivals such as General Electric (GE.N), its major competitor in widebodies.
Erginbilgic said it would be achieved by extending the "time on wing" of its engines between maintenance, reducing the costs of manufacturing and repairs, a new pricing strategy and tackling previous low-margin contracts.
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