This morning’s news feed included another casualty reporting yet another horrible year. Rolls Royce, famed for the car, is a maker of jet engines and oil service marine engines, both of which are not in demand courtesy of the “Saudi America” crude oil dynamic, which helped carriers and jet owners put off replacing jets with newer engines and with oil service demand for new ship engines getting capsized. I recall reading value investor analysis months ago claiming Rolls’ earnings would also be hedged by its jet engine maintenance business but that has also failed. With almost a billion dollar hit to earnings in this morning’s report, dashing expectations for rescue from its ‘Trent’ engine line, the stock dived with a kind of crash not seen in 15 years.
I know most of us won’t be trading this in the ‘States but CEO Warren East’s observation about how a small change to the top line crashed into heavy fixed costs reminded me that Rolls Royce is NOT alone when it comes to this problem.
