British carmaker Rolls Royce had a black year in 2016, with a record loss of 4 billion pounds this year. The luxury company founded by Frederick Henry Royce and Charles Stewart Rolls suffered from the biggest loss in its history.
Rolls-Royce, which had generated more than 84 million pounds in 2015, experienced a tough year marked by a 671 million pound fine in a corruption case in China, Nigeria, Indonesia and Brazil. Moreover, the fall of the pound resulting from the vote in favor of the Brexit weighed in the balance sheet of the British company.
The loss of 4 billion pounds is a record deficit for the British firm. Worse, it is the first dividend decline in 24 years and a single change of direction.
After a 49% decline in its current profit in 2016, which excludes adjustments to currency hedging positions to 813 million pounds, Rolls-Royce said it had to further cut costs.
This morning, the Rolls-Royce title plunged at 4.9% in London. According to brokers, this decline is due to investors’ concerns about the group’s balance sheet and prospects. Revenues dropped by 2% to 13.78 billion pounds.
Rolls-Royce suffers from a slowdown in demand for its aircraft engines, which have high margins. This is due in particular to the lower use of older equipment. In its marine division, still in difficulty, the group has incurred a depreciation charge of 200 million pounds to take into account mixed prospects, with demands remaining low.
Kevin Velasco, IEJ 3D