Strong sterling hits British aerospace firms Rolls-Royce and BAE systems
The pound’s strength yesterday continued to strike a blow to the profits of major British companies. Huge aerospace and defence firms Rolls-Royce and BAE systems, as well as engineering company Weir Group all announced that their profits had taken a hit from the currency’s rise.
Both BAE and Rolls-Royce also said they had suffered from lower defence demand, as the US and UK governments had imposed more significant cuts on their military budgets.
Rolls-Royce saw its underlying profit fall 20 per cent in the first half of 2014 to £644m, as underlying revenue also fell seven per cent to £6.8bn.
While Rolls-Royce expects improvement in the second half from higher revenue and cost reduction, chief executive John Rishton said the group would “experience growing pains”.
BAE also took a hit, with underlying profit down nearly eight per cent in the first half to £802m, as sales fell 10 per cent to £7.6bn.
Ian King, BAE chief executive, said: “Excluding the impact of exchange translation, the group remains on track to deliver earnings in line with our expectations for the full year.”
Meanwhile, engineering firm Weir said the negative impact of currency translation had knocked £23m off operating profits, as they fell seven per cent to £201m in the first half.
Keith Cochrane, Weir chief executive, said strong growth in its oil and gas business was slightly offset by long strikes in South Africa hitting mining.