LONDON (AFP) – British engine maker Rolls-Royce announced on Friday that it was slashing its earnings forecasts partly as result of Western trade sanctions against Russia, sparking a collapse in its share price.
Rolls said underlying profit in 2015 would be flat at best compared with 2014 but could fall by as much as three per cent. The company had previously predicted earnings would grow next year.
“In the last few months economic, conditions have deteriorated and Russian trade sanctions have tightened, leading a number of customers to delay or cancel orders particularly in our Nuclear & Energy and Power Systems businesses,” said Rolls.
“At the same time we have made good progress on cost, which has limited the impact of these adverse trading conditions on the group,” it added in a trading update.
The West has imposed a series of economic sanctions against Moscow over its role in the Ukraine crisis, cutting Russia’s access to Western money markets and forcing its biggest state companies to appeal for massive financial assistance.
Rolls, meanwhile, said that next year would be worse than expected for the group after it was forced to change its guidance on underlying revenues for 2014. It now sees revenue at 3.5-4.5 per cent lower than last year, rather than flat.
In reaction, Rolls-Royce slumped to the bottom of London’s benchmark FTSE 100 index, as its share price tumbled 11.54 per cent to close at 832 pence.
The FTSE meanwhile finished 1.85 per cent higher at 6,310.29 points, amid easing worries over the economic outlook in the eurozone.