UPDATE 1-Deepening Trent 1000 woes will hit profit at Rolls-Royce

British aerospace engineer Rolls-Royce said its full-year operating profit and free-cash-flow would come in at the lower end of guidance as to the cost of tackling problems with its Trent 1000 engine rise ever higher.

It said it expected to take an exceptional charge of about 1.4 billion pounds ($1.80 billion) in 2019 on Trent 1000 due to customer disruption and future contract losses. Chief Executive Warren East said his top priority was improving customer confidence in the Trent 1000.

"We are today announcing additional action to further expand our maintenance capacity and increase our stock of spare engines," he said on Thursday. Rolls-Royce increased the in-service cash costs of fixing the problems with the engine that powers the Boeing 787 to 2.4 billion pounds between 2017-2023, 800 million pounds more than it previously guided, with 400 million of the extra spending coming from normal program contingency.

There was one major design fix on the Trent 1000 TEN turbine blades still to be addressed, it said, adding it was prudently assuming it would not be ready before the first-half of 2021. Rolls-Royce had forecast underlying operating profit and free cash flow of 700 million pounds plus or minus 100 million pounds at its half-year results in August.

It said free-cash-flow for 2020 would be at least 1 billion pounds, in line with previous guidance, and it was still confident it could achieve 1 pound per share of free cash flow in the medium term as the Trent 1000 costs subsided. ($1 = 0.7789 pounds)

Also Read: Rolls-Royce sees operating profit at lower end on Trent 1000 issue