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Rolls-Royce's marine business sees 94% drop in profit in 2015

Rolls-Royce's marine business sees 94% drop in profit in 2015
Underlying profit before financing for Rolls-Royce’s marine business fell by 94% in 2015, hit by the weak offshore market.

Rolls-Royce said its marine business reported an underlying profit before financing of GBP15m last year compared to GBP138m in 2014. Revenues were down 16% year-on-year at GBP1.32bn in 2015.

At the end of 2015 its marine orderbook stood at GBP1.1bn, 10% of Rolls-Royce’s total orders.

The company said the outlook for 2016 was “challenging” led by reduced demand in oil and gas markets.

Last year the company announced two separate restructurings of its marine business cutting some 1,000 staff worldwide.

Overall group underlying profit before tax was down 11% at GBP1.49bn. Rolls-Royce chief executive Warren East commented: “Our performance in 2015 was broadly in line with our early expectations, with marine markets causing most of the weakness.”

The result is that Rolls-Royce is cutting its dividend payment by 50% compared to 2014. Joshua Raymond of CFD and FX broker commented to Seatrade Maritime News: "Rolls-Royce is cutting its dividend for the first time in 24-years after a series of five profit warnings in two years which has eroded the UK engine maker’s profits and share price significantly. The root of the problem derives itself from the complete deterioration of their marine division, which is now lost at sea, dropping almost 94% to GBP15m.

"The outlook for 2016 isn't any better with many analyst’s expecting further losses across its marine and aerospace divisions. With falling defence spending and oil prices plunging to record lows, this presents a very challenging time for Rolls-Royce and a concern for shareholders."